About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Durban Labour Court, Durban
SAFLII
>>
Databases
>>
South Africa: Durban Labour Court, Durban
>>
2013
>>
[2013] ZALCD 34
|
|
South African Recycling Equipment (Pty) Ltd v Leleux and Another (D519/13) [2013] ZALCD 34 (13 November 2013)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, DURBAN
JUDGMENT
Reportable
Case no: D519/13
SOUTH
AFRICAN RECYCLING EQUIPMENT (PTY)
LTD Applicant
and
ARNAUD
HENRI
LELEUX First
Respondent
WASTE
RECALL (PTY)
LTD Second
Respondent
Heard:
12 September 2013
Delivered:
13 November 2013
Summary:
Restraint of trade agreements: - Principles restated. Restraint of
trade agreement reasonable and
enforceable where an ex-employee found
to be in breach before even leaving the employ of the ex-employer.
Requirements of final
interdict met. Rights enshrined in Section 22
of the Constitution not a license to trample on the rights and
obligations contained
in restraint clauses
JUDGMENT
– REASONS FOR ORDER
TLHOTLHALEMAJE,
AJ
Introduction:
[1]
On 13 November 2013, a final order in the following terms was issued;
1.1
The first respondent is interdicted and
restrained from carrying on or being interested in, directly or
indirectly, the business
of waste management, dealing in scrap metal,
recycling waste metal and other materials and the supply of waste
recycling equipment
for a period of 2 years from 25 May 2013 for the
whole of the Republic of South Africa.
1.2
The first respondent is interdicted and
restrained from divulging any confidential information of the
applicant he had obtained
during his period of employment with
the applicant, which information shall include, but will not be
limited to, the identity and
contact details of the applicant’s
customers, suppliers, service providers, pricing and discount
structures of the applicant
and its suppliers and the identity of the
applicant’s trade connections, to any trade rival of the
applicant and/or any third
party that may have an interest in the
information or would benefit from the confidential and proprietary
information of the applicant;
1.3
The first respondent is interdicted and
restrained from using any confidential information as set out in
paragraph 1.2 hereinabove
either directly or indirectly for the
purposes of canvassing the applicant’s customers and/or trade
connections or soliciting
the business of the applicant’s
customers or trade connections;
1.4
The first respondent is interdicted and
restrained from soliciting or seeking any business whatsoever from
any person, firm or company
who was a customer of the applicant
during his term of employment.
1.5
There is no order as to costs
[2]
What follows are the full reasons for the above order.
This
application was initially brought to court on the basis of urgency.
It was set-down for 14 June 2013 and was postponed to 24
July 2013.
It was again postponed to 12 September 2013 when it was finally
heard. Since then, the applicant only seeks a final
order against the
first respondent (the employee). By bringing this application, the
applicant aimed to enforce a written covenant
in restraint of trade,
concluded with the employee on 21 November 2011, that is embodied in
the contract of employment of the employee
and secondly, an
undertaking by the employee as recorded in the contract of employment
that he will preserve the integrity of the
confidential information
obtained by him from the applicant in the course of his employment.
Background:
[3]
The applicant operates in scrap recycling and processing market in
the Republic of South Africa and parts of Africa. It specialises
in
the import, distribution and sales of general and sophisticated scrap
recycling equipment. It has interests in the general waste
recycling
market, and operates a waste recycling yard in Cape Town and a cable
granulation plant in Kwazulu-Natal. Significantly,
the applicant
recycles waste on behalf of the South African National Defence Force
and BHP Billiton.
[4]
According to the applicant’s Director and Acting Chief
Executive Officer, Robert McClelland, the company was registered
in
2007 and within a year, became one of the leading suppliers of
recycling equipment and plant to South Africa’s recycling
market. It has preferred supplier agreements with international
recycling equipment brand leaders such as Guidetti and Sierra.
McClelland further stated that the applicant was set to pioneer a
process in South Africa to separate plastic and foil used in
food
packaging. He lamented the fact that the employee, with whom he has
been friends since 2007 had hijacked this idea, and was
pursuing it
under the applicant’s competitor, the second respondent (Waste
Recall).
[5]
The employee had joined the applicant in 2008 in a sales capacity. On
the employee’s own version, his further knowledge
and
experience in the recycling industry was gained largely whilst
performing his duties and responsibilities at the applicant,
and to
some extent, directly from McClelland. McClelland’s contention
was that when the employee joined the applicant, he
had no knowledge
or experience of the recycling industry or of a business like the
applicant’s as he was a professional diver
at the time.
McClelland had taught the employee the trade, introduced him to the
market leaders and suppliers and trade connections
of the applicant,
the major role players in the South African and African scrap
recycling industry, and had developed him into
a proficient sales
person.
[6]
The employee had worked at the applicant for two distinct periods.
The first was between 2008 to November 2012, and the second
between
February 2013 to May 2013. During the currency of the first period
employment, the parties had signed a contract of employment
in
November 2011 which
inter alia
confirmed the employee’s
position as sales director. His responsibilities entailed developing
a business plan and sales strategy,
preparing an action plan for
effective research of new prospects and sales leads, import of
equipment, initiate action plan to
penetrate markets, maintain
regular contact with the client base via e-mail, phone and personal
visits, development and implementation
of marketing plan, control
expenses and stay within budget guidelines, maintain records of
quotes and record sales and activities
of the sales team. The
employee had resigned in November 2012 in order to go back into the
diving industry but his sojourn into
that area was short- lived. He
came back and continued to work for the applicant in December 2012 as
head of its sales staff, until
his final resignation in May 2013.
The
Restraint of Trade Clause:
[7]
Clause 19 of the contract of employment entered into between the
applicant and the employee provides that;
“
19.1
The employee, or his agent, shall not at any time during his
employment with the employer nor within three (3) years after
he
shall cease to be employed by the employer;
19.1.1 directly or
indirectly use know-how, products, which belong to the employer, its
associates or its clients, or have been
developed by the employer,
its associates or its clients for any purpose whatsoever other than
normal company business.
19.2 The employee shall
not, without the express written consent of the directors of the
employer, at any time during his employment
with the employer, nor
within three (3) years after he shall cease to be employed by the
employer;
19.2.1 be interested or
engaged whether as a proprietor, partner, director, shareholder,
employee, member of a syndicate or otherwise
howsoever, and whether
directly or indirectly in any business, form or undertaking which
conducts the business of waste management
as dealers in scrap metals
and recycling waste metal and materials within the Republic of South
Africa; and;
19.2.2 be employed by a
firm or company who was a customer of the employer during the term of
his employment and with whom he was
directly involved whether in the
course and scope of this employer with the employer or otherwise; and
19.2.3 solicit or seek to
obtain orders in respect of products or services similar to those
marketed by the employer from any person,
firm or company who was a
customer of the employer during the terms of his appointment
19.2.4 the employee
acknowledges and agrees that the terms of this clause 19 are
reasonable in all respects and in particular as
to the extent
duration and area.”
The
employee’s salient arguments:
[8]
The employee’s contention was that the restraint clause was not
enforceable on four grounds. These were that;
8.1
There was an agreement between the parties for him to pursue his
intended business venture,
which agreement was struck with the
directors of the applicant.
8.2
the applicant did not have a protectable interest.
8.3
the first respondent’s venture does not breach the restraint
(if it is found to be
enforceable)
8.4
the right to be economically active and to compete in a free market
(with no unfair advantage
at the expense of the applicant, or anybody
else)
“
The
agreement to be released from the restraint clause”:
[9]
The question whether the employee’s resignation in November
2012, and his second stint between December 2012 and May 2013
put an
end to the first contract of employment was mentioned almost in
passing by both Mr. Brassey and Mr. Seery. It does not however
appear
to have been made an issue by the employee, and to the extent that he
relied on the second “agreement” in this
regard, the
issue will be determined in the context of answering the question
whether this second “agreement” existed.
[10]
The employee’s reliance on an agreement releasing him from his
restraint followed upon an AGM meeting held on 2 November
2012 at
Salt Rock Hotel. He contended that during a lunch break, he had met
with the applicant’s McClelland, A Fabing (Director),
D Simpson
(Managing Director), S Bloem (Sales), D Appleby (Director) and M du
Plessis (Secretary), and the following issues were
orally agreed
upon;
10.1
That he would purchase specialised plant (designed to separate
laminated plastic and aluminium waste), and
sell the separated
product (this would be on his own account, and unrelated in any way
with the applicant).
10.2
That he would continue to work for the applicant (although he would
not draw a salary) and market and sell
recycling equipment for it.
10.3
Due to the fact that he would no longer be earning a salary, he had
suggested a new commission structure
for himself.
[11]
The employee’s further contention was at that meeting, no
issues were raised over the restraint of trade that formed
part of
his employment contract and McClelland never advised him that the
restraint would be enforced. In January 2013, he had
met with Fabing
on a number of issues, and he had reminded him of the November 2012
meeting. Fabing had requested that he reduce
the agreement in
writing. He had done so and sent the agreement to both McClelland and
Fabing on 10 January 2013. Only Fabing had
acknowledged receipt of
the e-mail.
[12]
In support of the contention that there was an oral agreement that
released him from the restraint, the employee had also relied
on the
confirmatory affidavits deposed to by the applicant’s
directors, Susan Bloem and Delia Appleby, who were present at
those
meetings. This agreement according to the employee was also confirmed
telephonically and in meetings. He further contended
that it was only
when the parties’ relationship broke down that the applicant
denied the existence of the consent to waive
the restraint clause.
The employee further contended that what the applicant had done in
response was merely to deny the existence
of the agreement, and
relied on an unsigned affidavit deposed to by Fabing.
[13]
McClelland had acknowledged that the employee had sent an e-mail on
10 January 2013 and had made the proposals. Fabing in response
had
advised the employee on the same date that the matter was to be
discussed and that they would revert to him. McClelland denied
that
he had granted the employee permission, and that any permission in
that regard would have required the endorsement of the
applicant’s
other directors. His further contention instead was that it was
decided to refuse the request since its grant
would essentially mean
that the employee was entering in direct competition with the
applicant.
[14]
McClelland’s contention was that the idea that the employee
sought to pursue was developed by him and was also shared
with other
employees and directors of the applicant long before the employee’s
departure towards the end of 2012. He denied
that the employee was at
any stage given permission to pursue those interests, and what he had
told him was that the matter was
to be discussed further.
Evaluation:
[15]
Where there are disputes of facts in motion proceedings, it is trite
that such disputes should be resolved in accordance with
the test set
out in
Plascon-Evans
Ltd v Van Riebeeck Paints (Pty) Ltd
[1]
.
The test found further elucidation in
Thebe
Ya Bophelo Healthcare Administrators (Pty) Ltd and Others v National
Bargaining Council for the Road Freight Industry and
Another
[2]
where the Court held that;
“…
..
where an applicant in motion proceedings seeks final relief, and
there is no referral to oral evidence, it is the facts as stated
by
the respondent together with the admitted or undenied facts in the
applicants' founding affidavit which provide the factual
basis for
the determination, unless the dispute is not real or genuine or the
denials in the respondent's version are bald or uncreditworthy,
or
the respondent's version raises such obviously fictitious disputes of
fact, or is palpably implausible, or far-fetched or so
clearly
untenable that the court is justified in rejecting that version on
the basis that it obviously stands to be rejected”.
[16]
It is further trite that a party that relies on an agreement bears
the onus of not only proving its existence, but also the
parties’
common intention to enter into that agreement, and its specific
terms
[3]
. Mr. Brassey in his
written heads of argument had submitted that where there is a dispute
surrounding the alleged oral agreement,
this should be resolved by
the terms of the restraint clauses themselves and the employee’s
contract. In this regard, it
was contended that clause 19.2 of the
agreement precluded the employee from competing with the company in
the absence of “
express
written consent of the directors of the employer”
.
In addition, it was contended that the agreement contained a number
of non-variation clauses that deny validity to modifications
of the
agreement or waivers of the right it embodied that are not reduced to
writing and signed.
[17]
I am in agreement with the submissions made by Mr. Brassey. To the
extent that the employee based his case on correspondence,
e-mails,
meetings and telephonic conversations which do not in any manner or
form qualify as a written variation or written consent
of the
applicant’s directors as contemplated in clauses 19.2 and 28.2
of the agreement, he is indeed precluded from relying
on the alleged
oral agreement. Furthermore,
insofar as the
oral agreement could be said to constitute a relaxation of the
employee’s obligations, that again does not
assist him as
clause 28.3 of the agreement expressly states that the relaxation
“
shall not be deemed a waiver
or in any way prejudice the employer’s rights in terms hereof”.
[18]
In the light of the above conclusions, it follows that the employee’s
second stint with the applicant after his first
resignation cannot be
seen to have terminated the first agreement, and more pertinently, to
have released him from the restraint
clause and the concomitant
obligations in that regard. To that end, any dispute which the
employee raised in respect of the existence
of any other agreement,
or that the restraint clause was no longer enforceable is obviously
fictitious, and his version in that
regard stands to be rejected.
The
legal framework in respect of restraint of trade clauses
:
[19]
In
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[4]
,
it was held that restraint of trade agreements are enforceable
unless, and to the extent that they are contrary to public policy
because they impose an unreasonable restriction on the former
employee’s freedom to trade or to work.
As
the Labour Appeal Court in
Trevlyn
Ball v Bambalela Bolts (Pty) Ltd and Another
[5]
recently
held:
‘…
.
The effect of the Magna Alloys’ decision was to place an onus
on the party, sought to be restrained, to prove, on a balance
of
probabilities, that the restraint was unreasonable (See
Magna
Alloys: Reddy v Siemens Telecommunications (Pty) Ltd
2007
(2) SA 486
(SCA) at para 14 at 498E-499). However, because the right
of a citizen to freely chose a trade, occupation, or profession, is
protected
in terms of section 22 of the Constitution and a restraint
of trade constitutes a limitation of that right, the onus may well be
on the party who seeks to enforce the restraint to prove that it is a
reasonable, or justifiable limitation of that right of the
party
sought to be restrained. (See
Fidelity
Guards Holdings (Pty) Ltd t/a Fidelity Guards v Pearman
2001
(2) SA 853
(SE) at 862;
Canon
KwaZulu-Natal (Pty) t/a Canon Office Automation v Booth
2005
(3) SA 205
(N).’
[20]
The test for determining the reasonableness or otherwise of the
restraint of trade provision was set out in
Basson
v Chilwan & Others
[6]
in
the following terms:
(a)
Does the one party have an interest that deserves protection after
termination of the agreement?
(b)
If so, is that interest threatened by the other party?
(c)
In that case, does such interest weigh qualitatively and
quantitatively against the interest of the other party not to be
economically
inactive and unproductive?
(d)
Is there an aspect of public policy having nothing to do with the
relationship between the parties that requires that the restraint
be
maintained or rejected?
In
Reddy
v Siemens Telecommunications (Pty) Ltd
[7]
,
a fifth factor was considered, viz whether the restraint goes further
than is necessary to protect the interest
[8]
.
[21]
Since the applicant seeks a final order, it has to show a clear
right; the absence of an alternative remedy; and that, if the
interdict should not be granted, that it will suffer irreparable
harm.
In order to establish a clear right,
the court has to consider whether there is an interest deserving of
protection. Once that has
been established, the next enquiry would be
whether the employee is in a position to threaten those interests.
These interests
must then be weighed up against the interest of the
employee to be economically active and productive.
Protectable
interest:
[22]
Coppin AJA in
Trevlyn
Ball
[9]
held that a restraint would not be regarded as reasonable and
enforceable in the absence of a
proprietary
interest deserving protection. This principle was also expressed by
Steenkamp J in
Continuous
Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes and Another
[10]
when held that;
“
As
I pointed out in Esquire Technologies (citation omitted) a restraint
is valid if there is a proprietary interest which justifies
protection. Those interests are usually in the nature of trade
secrets, know-how, pricing or customer connections. Therefore, a
restraint would be an enforceable restriction on the activities of an
employee who (for example) had access to the company’s
customers and could use his/her relations with the company’s
customers to the advantage of a competitor and to the detriment
of
the company.”
[23]
In regards to the kinds of interests that can be protected by a
restraint covenant, Mr. Brassey on behalf of the applicant
had
referred to
Experian
South Africa (Pty) Ltd v Haynes & another
[11]
where
Mbha J had stated the following;
“
[17]
It is well established that the proprietary interests that can be
protected by a restraint agreement, are essentially of two
kinds,
namely:
‘
17.1
The first kind consists of the relationships with customers,
potential customers, suppliers and others that go to make up what
is
compendiously referred to as the “trade connection” of
the business, being an important aspect of its incorporeal
property
known as goodwill;
17.2 The second kind
consists of all confidential matter which is useful for the carrying
on of the business and which could therefore
be used by a competitor,
if disclosed to him, to gain a relative competitive advantage. Such
confidential material is sometimes
compendiously referred to as
“trade secrets”.’
See Sibex Engineering
Services (Pty) Ltd v Van Wyk and Another
1991 (2) SA 482
(T) at
502D-F.”
[24]
From the pleadings and the main submissions made, the crux of what
the applicant seeks to protect, other than the protection
contained
in the restraint clause is its interests in the “NAMPAK
project”. McClelland’s contention was that
the employee
had actively developed and pursued a project with NAMPAK, which was
identical to the one that the applicant had initiated,
and for that
purpose, opened up a line of communication for the acquisition of the
same Italian machine that the applicant intended
to use. McClelland
had further averred that he had negotiated with NAMPAK to recycle
their tinned products since 2011. He had made
first contact with
NAMPAK and the company was on the verge of concluding a deal where
the applicant would recycle NAMPAK waste
of hundreds of tons per
month.
[25]
In pursuance of this NAMPAK project and its interest therein, the
applicant had also send NAMPAK’s foil and plastic laminated
samples overseas to the company supplier, Guidetti, to test on their
recycling machinery. The applicant was also in the process
of setting
up a recycling plant for this purpose. Since then, the employee and
Waste Recall were in the process of purchasing machinery
from
Guidetti, which according to McClelland, was the very same that he
had discussed with the employee. It was this conduct which
McClelland
contended was in direct competition with the applicant, and that the
applicant deserved protection against in the light
of the restraint
clause.
[26]
Mbha J in
Experian
South Africa
[12]
had dealt with the question of onus in the following terms;
“
The
position in our law is, therefore, that a party seeking to enforce a
contract in restraint of trade is required only to invoke
the
restraint agreement and prove a breach thereof. Thereupon, a party
who seeks to avoid the restraint bears the onus to demonstrate
on a
balance of probabilities, that the restraint agreement is
unenforceable because it is unreasonable”
.
[27]
The employee in an endeavour to show that the restraint clause was
unenforceable had contended that the applicant is not involved
directly in recycling and mainly trades in recycling machinery. He
further contended that the applicant had no plans to be involved
in
recycling any product.
[28]
In regards to the “NAMPAK project”, Mr. Seery on behalf
of the employee had submitted that the latter had come
out clean on
his aspirations in that regard, and to his knowledge, the applicant
had either not done much in pursuing that project
or alternatively,
had abandoned it in view of protracted ongoing negotiations. It was
conceded on behalf of the employee that the
idea surrounding that
project might have been that of the applicant, but that the latter
had done nothing about it.
[29]
From the facts, it is my view that the applicant has not only
demonstrated that the employee is in breach of the restraint
agreement, but also that it has a proprietary interest, which is
worthy of protection. My conclusions are based on the following;
When the employee
rejoined the applicant in November 2012, he had set up his mind to
ultimately set up a competition in the form
of Waste Recall. This is
evident from his request to be released from his covenant of
restraint, which request he had formalised
by way of his e-mail of 10
January 2013 to McClelland and Fabing. Despite not having the
go-ahead, he had whilst still employed
by the applicant, actively
pursued the interests of the Waste Recall by firstly registering the
latter as a limited liability company,
and in due course, had
secured his appointment as one of its two directors. The other
director is Alfred Hany. This was despite
the fact that he was also
the applicant’s minority shareholder at the time. Secondly he
had set up a second e-mail address
on the applicant’s website
that diverted customer enquiries to him. When this conduct was
discovered after investigations,
the employee had referred a dispute
to the Commission for Conciliation, Mediation and Arbitration and
alleged that he was unfairly
dismissed. In pursuit of the interests
of Waste Recall, the employee had also made contact with the
suppliers of Guidetti, Sierra
and Savino. He had also communicated
with a number of prospective customers including JMC recycling,
Kytopresse, UB Tech and Mushwana.
A pursuit of these activities can
hardly be construed as being in the interests of the applicant, and
it was clearly in breach
of his restraint clause even then. It is
apparent that the employee had set his eyes on his new venture with
Waste Recall, which
he was fully aware was in direct competition with
the applicant, and in this regard, the applicant was clearly within
its rights
to invoke the provisions of the restraint.
[30]
The applicant had rejected the employee’s contention that it
had at any stage abandoned the NAMPAK project. Its contention
was
that there was no reason it having embarked upon such a lucrative
initiative, it would elect to abandon it. It has every intention
of
pursuing this project, and that any delays in this regard was not
evidence of its abandonment. On the other hand, the employee
had
conceded that the “NAMPAK project” was the initiative of
the applicant. It was not in dispute that whilst still
employed, the
employee also attended to this project in various ways. It is not
known on what basis the employee had concluded
that the applicant had
abandoned that project, in view of the fact that the applicant had
been pursuing it since 2011. In effect,
it should be concluded that
the employee had contrary to his obligations in terms of the
restraint agreement, and shamelessly so,
used the know-how of
the applicant’s business and its relationships with its
Guidetti and NAMPAK, to set up and pursue
the interests of Waste
Recall in direct competition with the applicant. In the process, he
had usurped the applicant’s ideas
and initiatives, and abused
its goodwill in direct conflict with the provisions of his covenant
of restraint.
[31]
It was not in dispute that the employee in his capacity as sales
director and an employee knew the interests, aspirations and
workings
of the applicant, its strength and weaknesses. His responsibilities
as already mentioned elsewhere in the judgment entailed
inter
alia
,
developing a business plan and sales strategy, preparing an action
plan for effective research of new prospects and sales leads,
import
of equipment, initiating action plans to penetrate markets, and
maintaining regular contact with the client base. His
responsibilities
and insight of the applicant gave him an advantage
in setting up Waste Recall in direct competition with the applicant.
By all
accounts, the applicant is clearly entitled to protection
against abuse of its trade connections, as it had become clear during
the employee’s employment and after he had resigned that he had
come into a position where he already had, build his own
relationship
with the applicant’s trade connections
[13]
.
[32]To
conclude on the issue of the first kind of proprietary interests as
identified by Mbha J in
Experian
South Africa
[14]
,
it follows that the employee’s role in the applicant over the
years in various capacities, has given him access to intricate
knowledge of the applicant’s proprietary information. On
his own version, he had over time, developed good relationships
with
representatives of suppliers and customers. His contention that he
has no influence over these suppliers and customers, and
that he
would not be able to persuade them to work with him to gain any
unfair advantage over the applicant deserves to be treated
with
scepticism in the light of his conduct thus far. He had used this
access to information and trade connections built by the
applicant to
forge a particular relationship with NAMPAK and suppliers of the
applicant, including Guidetti so that when he left,
he could easily
induce these business contacts to follow him to Waste Recall. The
applicant is indeed entitled to a protection
of its interest in this
regard.
Confidential
information:
[33] The employee had
submitted that the information or documents that the applicant
claimed are confidential were in the public
domain. Examples of such
information include the applicant’s customer list, its supplier
agreements with Sierra and Guidetti,
(the international recycling
equipment brand leaders) and minutes of its directors’
meetings. Furthermore, much of the information
about companies (both
international and local) in the recycling industry that is also
claimed to be confidential was readily available
over the internet
and other publications. McClelland’s contention on the other
hand was that the list of the applicant’s
client base which
might be in the public domain did not refer to contact persons,
service level agreements, terms of contract and
information
pertaining to customer requirements
[34]
A perusal of the customer listing
[15]
merely shows account numbers and names of customers. Even if this
list is in the public domain, it would not be useful to anyone
unless
that person understood what those account numbers and other codes
meant. The employee by virtue of his insight, connections,
relationship with those customers and knowledge of the applicant’s
workings is in a position to utilise that list to the
disadvantage of
the applicant in pursuance of his interests in Waste Recall or any
other competitor. A further point that needs
to be made is that the
fact that part of this information which the applicant regards as
confidential and seeks to protect is in
the public domain, does not
imply that the employee is absolved from his obligations in
accordance with his restraint clause. This
much was captured by Mbha
J in
Experian
South Africa
,
when he stated the following;
“…
..It
follows that first respondent’s contention that this
information to which he had access whilst employed by the applicant
is not confidential cannot be sustained. In any event, the contention
is legally untenable in that it is clear from several reported
judgments on this issue, that irrespective of whether or not
information is in the public domain, the fact that the first
respondent
has obtained such information within the context of a
confidential relationship means that it in fact is protectable”
[16]
[35]
It further needs to be pointed out that the information pertaining to
customers which the employee alleges to be in the public
domain is
not the only information that the applicant seeks to protect. For
example, the employee was involved in the NAMPAK project,
including
its specifics involving the foil and plastic laminated samples which
the applicant had sent to Guidetti to test on their
recycling
machinery. The employee had also conceded
[17]
that the applicant’s pricing was not common knowledge, and was
largely something in his control whilst employed by the applicant.
That information cannot be in the public domain and the applicant is
entitled to its protection. In view of the fact that the employee
had
already utilised the information he gained whilst employed by the
applicant to his own advantage in pursuing the interests
of Waste
Recall, it cannot be left to chance that he would act honourably and
not use the confidential information to the further
detriment of the
applicant. All that the applicant needed to show in this regard, and
which it had succeeded in doing, was that
the employee was indeed in
possession of confidential information, and not that he had used it,
but only that he could potentially
use it to its disadvantage.
Is the employee’s
intended venture with NAMPAK or in selling recycling equipment in
breach of the restraint?
[36]
This question becomes moot in the light of the conclusions reached
insofar as the employee’s involvement in the NAMPAK
project is
concerned. The project was the initiative of the applicant, and
McClelland had been pursuing it since 2011. As indicated
earlier, the
employee took advantage of his involvement in the project whilst
employed by the applicant. On his own version, his
co-director, Hany,
has already travelled to Italy to meet with Guidetti, and Waste
Recall has already sent 1.5 ton test sample
to Guidetti
[18]
.
The employee and Waste Recall intend to set up a pilot recycling
project in KwaZulu-Natal (using plant supplied by Guidetti) and
raw
material supplied largely by NAMPAK. The employee and Waste Recall
have clearly not wasted any time in usurping the applicant’s
initiative and making it their own. This conduct in my view goes
against the grain of any form of good faith. It is gross abuse
of the
applicant’s goodwill and shows flagrant disregard and
disrespect of binding agreements.
[37]
The fact that the NAMPAK project has not been patented nor signed and
sealed by the applicant does not imply that it is up
for the taking.
To the extent that this project might have been merely an idea, it
deserves protection. It was borne out of the
knowledge, expertise and
efforts of the applicant. I fail to appreciate how this project in
its current form cannot be construed
as a proprietary interest which
the applicant is entitled to protect. Any venture into that project
as evident from the conduct
of the employee and Waste Recall as
things stand, clearly falls foul of the restraint clause, and there
can never be justification
for the employee’s conduct either
from a legal or business ethics point of view.
The right to be
economically active:
[38]
The employee’s contention was that he had a right to earn a
living; that the sale of recycling equipment is the only
industry he
knows and which he has been part since 2001 with a break in 2007. He
contended that the restraint could not prevent
him from competing
with the applicant and from trading with suppliers of recycling
machinery that also supply the applicant, and
that he needed to make
a living even if competing with the applicant like other companies in
the same business. The employee had
submitted that the industry was
competitive with very few reputable dealers in equipment in the world
to compete, and he must be
free to deal with these suppliers.
[39]
The applicant’s contention on the other hand was that the
employee’s submissions in regard to his right to be
economically active amount to saying that the restraint was too broad
to warrant enforcement. To this end, it was submitted that
the
validity and enforceability of the restraint was not seriously
contested. In the light of the employee’s contentions,
it was
submitted on behalf of the applicant that the market for waste
refining and the attendant machinery was manifestly nation-wide,
and
that opportunities outside of KwaZulu-Natal where the applicant
operated principally would not go begging.
[40]
In enforcing restraint of trade agreements, the Court has to strike a
balance between the interests of both the employer and
the employee.
Other than constitutional considerations, the balancing act which the
Court has to undertake in considering the enforceability
or otherwise
of the restraint of trade is that of having to weigh between
avoidance of restricting or even preventing healthy competition
and
the sanctity of contracts. Bearing these considerations in mind, it
needs to be stated that inasmuch as the employee like any
other
citizen has a right in terms of section 22 of the Constitution to
freely choose a trade, occupation, or profession, at the
same time,
he has concomitant obligations in terms of the covenant of restraint
which he had willingly entered into. It cannot
be correct that his
constitutional right gives him the right to go on with his life and
to completely ignore his obligations in
terms of the restraint
agreement. If every employee were to enter into a restraint of trade
agreement, and cried “constitution!”
every time they
moved on in competition against their ex-employers, such clauses
would ultimately be rendered redundant.
[41]
In this case, in balancing the employee’s constitutional rights
and the rights of the applicant to enforce the restraint,
a number of
factors have been taken into account. These include the employee’s
conduct of breaching the restraint clauses
at the time when he
was still employed and even after he had left the applicant’s
employ. Secondly, there was no undertaking
that the employee would
desist from his conduct and show some good faith. On the contrary, he
is bent on pursuing an idea initiated
by the applicant to the
latter’s disadvantage, including using the applicant’s
trade connections. He has made his intentions
clear that he would
disregard the rights and interests of the applicant relating to the
NAMPAK project. To put it bluntly,
he stole the idea from the
applicant, and is unapologetic about his conduct. His attitude
appears to be that that even if he was
not released from his
restraint clause he would dare the applicant in any event. To that
end, it would be a travesty if the employee
in these circumstances
would be allowed to be freed from the restraint clause. To the extent
that he may have alleged that the
industry in question is the only
one he knows, it is in line with consideration of this factor that
the period of restraint is
reduced by a year as evident from the
order already granted. There is however no justification in the light
of his conduct as to
why the area of the restraint should be
interfered with.
Does
the order sought by the applicant go beyond the scope of the
restraint clause?
[42]
Mr. Seery on behalf of the employee had submitted that the order
sought by the applicant went beyond the scope of the restraint
clause. Firstly, he indicated that contrary to what was being sought,
there was no clause in the restraint outlawing the employee
in
dealing in recycling equipment, and selling it on to
persons/institutions who were not customers of employee. The
applicant’s
business entails the import, distribution and sales
of general and sophisticated scrap recycling equipment, and has
interests in
the general waste recycling market and operates a
recycling yard in Cape Town and granulation plant in KwaZulu-Natal.
It follows
from clause 19.1.1 of the restraint that the employee is
prohibited from directly or indirectly using the know-how, products,
which
belong to the employer, its associates or its clients, or have
been developed by the employer or its associates or its clients.
In
my view, reference to “
products
” is sufficient to
cover “recycling equipment”, whilst any reference to
“associates” is sufficient
to cover “
customer
”.
It is not a requirement that the applicant must have mentioned who
its customers are, more specifically since the employee
knew who they
are in any event.
[43]
Secondly, it was submitted on behalf of the employee that customers
are not suppliers and that the employee cannot be restrained
from
dealing with suppliers such as Guidetti and Sierra, and selling on
equipment sourced from these suppliers. Again the employee
fails to
appreciate that it is this very interests, i.e., the applicant’s
relationship with its suppliers that the applicant
seeks to protect
as envisaged in the restraint clauses. These clauses are broad enough
to cover the loopholes he sought to exploit.
Guidetti and Sierra are
some of the main trade connections which the applicant seeks to
protect, and it would be illogical for
the employee to choose amongst
these connections, which ones the restraint clause should not be
applicable to.
Conclusion:
[44]
In the light of all of the above, I am satisfied that the applicant
has discharged its onus of proving the existence of the
contract in
restraint of trade. This contract is valid, enforceable and
reasonable. Any disputes surrounding the reasonableness
of the
restraint agreement is resolved further by its clause 19.2.4, which
provides that the employee acknowledges and agrees that
the terms of
this clause 19 are reasonable in all respects and in particular as to
the extent duration and area.
[45]
It is apparent that the employee, even on his own version is in
breach of the contract in restraint of trade in that he has
not only
been instrumental in the setting up of Waste Recall which he knew to
be in direct competition with the applicant, but
has also taken up
directorship with that entity. He used the applicant’s trade
connections to pursue the interests of that
entity even whilst still
employed by the applicant, and for all intents and purposes, he will
continue to pursue that course with
that entity unless the provisions
of the restraint are strictly invoked. In addition, the
applicant has shown that the employee
has contacted its suppliers in
the form of Guidetti and others and has accordingly demonstrated the
need for the relief that it
seeks. I am further satisfied that the
applicant is entitled to final relief as sought. It has demonstrated
a clear right which
is being infringed by the employee in having set
up and taking directorship position with Waste Recall in breach of
the agreement.
An injury therefore has been committed, and continues
to be committed through the employee’s blatant disregard of his
obligations
in terms of the restraint agreement, and the applicant
has no other satisfactory remedy available to it.
Costs:
[46]
An order of costs is generally at the discretion of this Court,
having taken into account considerations of law and fairness.
The
Labour Appeal Court in
Trevlyn
Ball
[19]
had cautioned against making cost orders in matters pertaining to
enforcement of a restraint in the light of constitutional issues
involved in such matters. The rationale behind this approach is that
any cost orders may dissuade employees who genuinely challenge
the
enforceability or reasonableness of their restraint agreements. In
the light of the conclusions as above, I am not convinced
that the
employee’s challenge to the restraint agreement was
bona
fide
.
Notwithstanding, I am inclined to follow the approach in
Trevlyn
Ball
and thus make no order as to costs.
Tlhotlhalemaje, AJ
Acting Judge of the
Labour Court of South Africa
Appearances:
For
the Applicants:
Adv. MSM Brassey SC with Adv.
Hein Groenewald
Instructed
by:
CW Prinsloo Attorneys
For
the Respondent:
Adv. T Seery
Instructed
by:
De Wet Leitch Hands INC
[1]
[1984] ZASCA 51
;
[1984]
(3) SA 623
(A)
[2]
[2009]
(3) SA 187
(W) at para 19
[3]
See
Cotler v Variety Travel Goods (Pty) Ltd and Others 1974 (3) SA 621
(A)
[4]
[1984] ZASCA 116
;
[1984]
(4) SA 874
(A) at 891 B-C
[5]
[2013]
(9) BLLR 843
(LAC) at para 13
[6]
[1993] ZASCA 61
;
[1993]
(3) SA 742
(A) at 767 G-H
[7]
[2007]
(2) SA 486
SCA
[8]
See
also Kwik Kopy (SA) (Pty) Ltd v Van Haarlem & another
1999 (1)
SA 472
(W) at 484E
[9]
Supra.
At para 16
[10]
(J
2073/11) [2011] ZALCJHB 150
[11]
[2013]
(1) SA 135 (GSJ)
[12]
at
para 14
[13]
See
also Den Braven S.A. (Pty) Limited v Pillay and Another
2008 (6) SA
229
(D) at para 6
[14]
At
para 17.1
[15]
Annexure
“X” to pleadings bundle
[16]
At
para 44
[17]
At
para 16 of answering affidavit
[18]
At
para 98-99 of answering affidavit
[19]
At
para 30