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[2014] ZALCJHB 354
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FMW Admin Services CC v Stander and Others (J2126/2014) [2014] ZALCJHB 354; (2015) 36 ILJ 1051 (LC) (16 September 2014)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case no: J 2126 / 2014
In the matter between:
FMW ADMIN SERVICES CC
Applicant
and
JAKOBUS MARTHINUS
STANDER
First Respondent
WYNAND DU
PLESSIS
Second Respondent
DANIE
JONES Third
Respondent
JONES & DU
PLESSIS Fourth
Respondent
Heard:
11 September 2014
Delivered:
16 September 2014
Summary:
Restraint of trade
–
principles
stated – application of principles to matter – issue of
protectable interest and public interest considered
Restraint
of trade – nature of confidential information – no
evidence of employees having confidential information –
no
protectable interest with regard to confidential information shown
Restraint
of trade – nature of customer connections – no
protectable interest with regard to customer connections shown
–
business of applicant contrary to public interest
Practice
and procedure – requirement to make out case in founding
affidavit – issue of determining factual disputes
in restraint
applications
Interdict
– no protectable interest shown – business of applicant
contrary to public interest – interdict refused\
JUDGMENT
SNYMAN,
AJ
Introduction
[1]
This matter came before me as an urgent application brought by the
applicant in terms of which the applicant sought to enforce
a
restraint of trade covenant against the four respondents. The
application is opposed by the respondents, with the fourth respondent
being the new business of the second and third respondents. The
applicant seeks final relief, and thus the applicant must
satisfy
three essential requisites to succeed, being (a) a clear right; (b)
an injury actually committed or reasonably apprehended;
and (c) the
absence of any other satisfactory remedy.
[1]
[2]
There are a number of factual disputes in this matter. Principally,
the respondents dispute that they have been privy to any
confidential
information which could substantiate the existence of a protectable
interest in this regard. The respondents also
dispute that there are
trade connections worthy of protection in favour of the applicant.
In addition, the respondents contend
that the weighing off of
interests in this matter also favour them. Finally, the respondents
have also raised an issue of public
interest.
[3] In
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[2]
it
was held that:
‘
Acceptance
of public policy as the criterion means that, when a party alleges
that he is not bound by a restrictive condition to
which he had
agreed, he bears the onus of proving that the enforcement of the
condition would be contrary to public policy.'
This same approach was followed in
Dickinson
Holdings Group (Pty) Ltd and Others v Du Plessis and Another
[3]
,
Bridgestone
Firestone Maxiprest Ltd v Taylor
[4]
,
Rectron (Pty) Ltd v Govender
[5]
,
David
Crouch Marketing CC v Du Plessis
[6]
and
Experian
South Africa (Pty) Ltd v Haynes and Another
.
[7]
In the judgment of
Jonsson
Workwear (Pty) Ltd v Williamson and Another
[8]
,
I accepted that the correct position in law was that the respondent
party seeking to defeat the application of the restraint of
trade had
the onus to prove the restraint of trade is unreasonable and not
enforceable, and I shall follow the same approach in
this matter.
[4] Although the
respondents do bear the onus, I equally accepted in
Jonsson
Workwear
[9]
that the question of the onus does not affect the approach on how
factual disputes in motion proceedings should be determined,
and once
again I shall apply the same approach
in
casu
.
In
Reddy
v Siemens Telecommunications (Pty) Ltd
[10]
the Court said that ‘…. A final order can only be
granted in motion proceedings if the facts stated by the respondent
together with the admitted facts in the applicant's affidavits
justify the order, and this applies irrespective of where the onus
lies.’ The Court in
Reddy
went further and said:
[11]
‘…. For in the present case the facts concerning the
reasonableness or otherwise of the restraint have been
fully explored
in the evidence, and to the extent that any of those facts are in
dispute that must be resolved in favour of Reddy
(these being motion
proceedings for final relief). If the facts disclosed in the
affidavits, assessed in the manner that I have
described, disclose
that the restraint is reasonable, then Siemens must succeed: if, on
the other hand, those facts disclose that
the restraint is
unreasonable then Reddy must succeed. What that calls for is a value
judgment, rather than a determination of
what facts have been proved,
and the incidence of the onus accordingly plays no role.’
This is the approach I will
apply.
[5]
The normal principles to resolve factual disputes in motion
proceedings where final relief is sought was enunciated in the now
regularly quoted judgment of
Plascon
Evans Paints v Van Riebeeck Paints.
[12]
In
Thebe
Ya Bophelo Healthcare Administrators (Pty) Ltd and Others v National
Bargaining Council for the Road Freight Industry and
Another
[13]
the Court held as follows in apply this age old test: ‘The
applicants seek final relief in motion proceedings. Insofar as
the
disputes of fact are concerned, the time-honoured rules …. are
to be followed. These are 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.’
[6]
I
shall now set out the background facts that properly would form the
factual matrix for the purposes of the determination of this
matter,
in accordance with the principles as I have set out above.
Background facts
[7]
The applicant conducts business as a payroll service provider and
labour consultancy. The applicant states that it also
specializes in the administration of independent contractors for
various of its clients, which was an important component of its
business. Under ‘independent contractors’, the applicant
explained that these were individual persons contracted to
its
clients on an individual contract basis by the applicant.
[8]
I must immediately say that I have some concerns about the lack of
particularity in some parts of the applicant’s founding
affidavit, especially where it concerns the issue of confidential
information. The applicant in essence simply says that information
is
confidential and then leaves it there. I will deal with this,
and the consequences of such failure to provide sufficient
particularity, hereunder.
[9]
According to the applicant, it started business in 1996, and its
business evolved over the years. The applicant states
that it
took it 18 years to compile its existing customer base, and has
provided a list of its current active clients at annexure
“TR17”
to the founding affidavit. The respondents have not disputed
that this list of clients are indeed the
applicant’s existing
clients. It is clear that the majority of these clients are in
the private security services sector.
[10]
In dealing with its products and services, the applicant has
contended that it has what it calls a ‘custom designed computer
program’ that electronically calculates (inter alia) the hours
per week worked by an employee and the payments due to the
employee.
No further particulars of any kind are provided with regard to this
program. The applicant then further contends
that it has custom
designed contracts and agreements which is sold to clients and
administered by the labour consultants.
The applicant has
provided an example of such a contract attached to its founding
affidavit.
[11]
I intend to immediately deal with the issue of the purported custom
contract. I have had detailed consideration of this contract.
There is nothing custom about it. I find it hard to believe
that it can even be said that such a contract has been designed
over
years as the applicant wants me to believe. The contract
provided as an annexure to the founding affidavit is a stock
standard, for want of a better description, service agreement where
services are provided by an independent contractor to a client,
coupled with an invitation to tender for work. Worse still, I
have my doubts about the legitimacy of this kind of contract
and
modus operandae, which I will address hereunder.
[12]
Turning then the computer program, and as I have said, the complete
lack of proper particularity is disturbing. There
is no
description of what exactly this program does and why it is unique
and custom. If one reads the founding affidavit, the only
impression
that can be gained from what is set out is that this is normal
payroll administration software that can be bought off
the shelf.
In fact, and annexed to the founding affidavit is a business profile
of the applicant that in my view clearly
indicates nothing else but a
standard payroll outsourcing service. There is simply nothing custom
and unique in a program automatically
calculating hours worked and
payments due, and this is simply what any payroll program at the very
least must do.
[13]
What however is true is that the applicant, through the labour
consultants employed by it, provides labour and employment consulting
services to its various clients. In this regard, the labour
consultants service specific clients of the applicant allocated
to
them. They are required to build and maintain their client base
and maintain a close service relationship with the clients.
The
labour consultant is also required to regularly visit and call on
clients, and keep them updated of developments. It
is in fact
through the labour consultant that the applicant provides
professional consulting services to its clients. The
respondents, in their answering affidavit, do not dispute any of
this.
[14]
Then, and where it comes to the respondents themselves, the first,
second and third respondents were all employed by the applicant
as
labour consultants. The first respondent commenced employment
on 10 November 2008 and resigned on 22 June 2014, effective
date 31
July 2014. The second respondent commenced employment on 1
October 2007 and resigned on 30 June 2014, effective date
31 July
2014. Finally, the third respondent commenced employment on 5
May 2008 and resigned effective 1 April 2014. It is
therefore clear
that all these respondents were long serving employees of the
applicant, as labour consultants.
[15]
On 14 March 2014, the first respondent signed a restraint of trade
agreement with the applicant. The second and third
respondents
signed identical agreements on 18 March 2014. The salient terms
of this agreement, in simple terms, were:
15.1
The respondents undertook not to have any interest in, which included
direct or indirect
interest, any business competing with that of the
applicant. Interest also included being shareholders or
partners in such
a business or being employees of such a business;
15.2
The respondents would not solicit the custom of the applicant’s
existing clients,
or any client that been a client of the applicant
one year prior to such respondent(s)’ termination of service;
15.3
These restraint undertakings would apply for a period of 12 months’
calculated form
date of termination of employment of the respondents,
and for the areas wherever the applicant had clients.
[16]
I am compelled to point out that despite the restraint agreement
defining ‘confidential information’, all the agreement
does is define what confidential information is but imposes no duty
or obligation on the respondents relating to it.
[17]
The third respondent, after leaving the employment of the applicant
on 1 April 2014, joined a directly competing business to
that of the
applicant, but as an employee, being NAPE. The applicant was
aware of this, but did nothing to enforce the restraint.
According to the applicant, the third respondent was not pursuing its
clients at the time so it was not concerned. When the
second
respondent then resigned, the third respondent and the second
respondent then joined forces and established the fourth respondent
effective 1 August 2014. The business of the fourth respondent is
that of a labour consulting service provider, and it is clear
that
this would be in direct competition to the applicant in this
respect.The first respondent has become employed with North West
Employers’ Organization as a liaison officer, as from 1 August
2014. Whilst liaison officer is not a competing activity
to the
applicant’s business per se, the fact is that the first
respondent’s new employer on face value also seems to
be an
entity that competes with the applicant.
[18]
The applicant has, in the founding affidavit, given some four
individual examples of the second and third respondents transacting
with its clients. Whilst I have concerns about the lack of
particularity in the founding affidavit about this, and would
have
expected the applicant to provide a lot more detail, it is,
fortunately for the applicant, the second and third respondents’
own answering affidavits that comes to its aid in this regard. The
respondents conceded that labour consultant work was done for
EC
Security and Crime Stop Security, which were existing clients of the
applicant attended to by the second respondent during the
course of
his employment with the applicant. The second and third
respondents however stated that they have no intention
of soliciting
the custom of the applicant’s clients. This is however as far
as the evidence to be accepted in this regard
goes. There is no
evidence of any kind of the first respondent soliciting the custom of
the applicant’s clients.
[19]
The respondents have specifically stated that they have no
confidential information about the applicant’s costing and
pricing, or the computer program. In the absence of a proper
case being made out by the applicant in this regard, and in
particular a replying affidavit by the applicant, I accept these
contentions of the respondents. In any event, and as I have
said above, the restraint agreement itself imposes no obligations on
the respondents insofar as it concerns confidential information.
[20]
The third respondent has specifically stated that he has been
involved in labour consulting since 1991, and that this is the
only
trade and occupation he knows. The second respondent has made
an identical contention, but in his case it dates back
to 1994.
[21]
The applicant has unfortunately not stated in clear terms when it
became aware of the second and third respondent establishing
their
competing business. The undisputed evidence however is that the
applicant has known since March 2014 of the third respondent
joining
a competitor NAPE. The undisputed evidence further is that the
first respondent informed the applicant in June 2014
that he would
become employed with North West Employers’ Organization.
Probabilities however indicate that when the
second respondent
actually left the applicant on 31 July 2014 to then join with the
third respondent in starting the business of
the fourth respondent,
this was the time the applicant became aware of the fact that its
interests needed protection, and I accept
for the purposes of this
application that this was the appropriate moment from which an urgent
application became competent.
[22]
The applicant did initially immediately react. On 1 August 2014, a
letter of demand was sent by its attorneys to all three
respondents,
informing them that as far as the applicant was concerned, they were
in breach of their restraint of trade agreements,
in that they were
acting in competition with the applicant and were soliciting the
custom of the applicant’s clients. It
was demanded that the
respondents provide written undertakings that they would not be
associated with a competitor, that they would
not solicit the custom
of the applicant’s clients, and that they would not disclose
any confidential information. These undertakings
had to be provided
by 6 August 2014, failing which is was specifically recorded the
applicant would file an urgent application.
[23]
It was common cause that the respondents did not respond to these
letters given to each of them. The applicant’s
urgent
application was only filed on 4 September 2014, almost a month
later. No explanation is given for this period of delay.
The issue of
urgency
[24]
The respondents have contended that the application should not be
heard as one of urgency, as the applicant procrastinated
and created
its own urgency. There is some merit in this contention.
Insofar as it concerned the first respondent, and on
the evidence,
the applicant had known at the very least since the end of June 2014
where he was going and did nothing about this.
It is my view
that in respect of the first respondent, he was just thrown into the
mix by the applicant, so to speak, in case he
joined the fourth
respondent together with the second and third respondents. The
applicant’s real interest, in my view,
was pertaining to the
second and third respondents, and their new business. If this
application was only brought against
the first respondent, I would
have had no hesitation to strike it from the roll for want of
urgency.
[25]
Insofar as it concerns the second and third respondent, I accept that
the proper occasion to have brought an urgent application
was after
31 July 2014. The letters of demand of 1 August 2014
displays prompt and immediate action. Some criticism
can be
levelled at the applicant for not explaining the time period between
the expiry of the deadline in the letters of demand
on 6 August 2014,
and 4 September 2014 when the application was finally brought. It was
incumbent upon the applicant to have explained
this period.The
applicant seemed to approach this matter on the basis of an
entitlement to bring it on the basis of urgency. This
approach is ill
conceived.
[26] Urgent applications
are governed by Rule 8. As was said in
Jiba
v Minister: Department of Justice and Constitutional Development and
Others
[14]
:
‘
Rule
8 of the rules of this court requires a party seeking urgent relief
to set out the reasons for urgency, and why urgent relief
is
necessary. It is trite law that there are degrees of urgency, and the
degree to which the ordinarily applicable rules should
be relaxed is
dependent on the degree of urgency. It is equally trite that an
applicant is not entitled to rely on urgency that
is self created
when seeking a deviation from the rules.’
[27]
Probably the most often referred to authority where it comes to the
issue of urgency is that of
Luna
Meubel Vervaardigers (Edms) Bpk v Makin and Another (t/a Makin's
Furniture Manufacturers)
[15]
,
and the following
dictum
from this judgment is important:
‘
Practitioners
should carefully analyse the facts of each case to determine, for the
purposes of setting the case down for hearing,
whether a greater or
lesser degree of relaxation of the Rules and of the ordinary practice
of the Court is required. The degree
of relaxation should not be
greater than the exigency of the case demands. It must be
commensurate therewith. Mere lip service
to the requirements of Rule
6 (12) (b) will not do and an applicant must make out a case in the
founding affidavit to justify the
particular extent of the departure
from the norm, which is involved in the time and day for which the
matter be set down.’
[28]
As stated, the applicant has offered no explanation at all for the
period between 7 August 2014 and 4 September 2014.
The
applicant thus came dangerously close to having its application
struck from the roll for want of urgency. What in essence
saved
the applicant where it comes to urgency is the fact that the
respondents at least had an opportunity to fully ventilate the
issues
raised in the founding affidavit and was willing to, and did, argue
the application on the merits thereof. In also
accept that
restraints have an inherent quality of urgency and I refer to
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff and Another
[16]
where
the Court held:
‘…
.
I accept that breaches of
restraints of
trade have an inherent quality of urgency
….
‘(emphasis added)
I
also consider that restraints are of limited duration and concern
fundamental rights, requiring immediate determination as a matter
of
general principle. I am therefore prepared, with some reservation, to
consider the applicant’s application as against
the second and
third respondents as one of urgency.
[29]
Insofar as it concerns the first respondent, and considering that I
have decided to deal with the merits of the applicant’s
application insofar as it concerns the second and third respondents,
I will determine the application in respect of the first respondent
as well, rather than striking it from the roll. I do this as a matter
of convenience and to determine this entire matter once and
for all.
The restraint
principles
[30]
The general principles applicable to the enforcement of restraints of
trade was set out in
Basson
v Chilwan and Others
[17]
,
where Nienaber JA identified four questions that should be asked when
considering the reasonableness of the enforcement of a restraint,
being
(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?
[31]
In the judgment of
Ball
v Bambalela Bolts (Pty) Ltd and Another
[18]
the
Court dealt with the
Basson
v Chilwan
enquiry and said:
‘
The
enquiry into reasonableness has been refined and elaborated on in
cases such as
Reddy
and
Basson
.
The enforceability of a restraint essentially hinges on the
nature of the activity that is prevented, the duration of the
restraint, and the area of operation of the restraint. In particular,
the determination of reasonableness is, essentially, a balancing
of
interests that is to be undertaken at the time of enforcement and
includes a consideration of 'the nature, extent and duration
of the
restraint and factors peculiar to the parties and their respective
bargaining powers and interests'
[32]
In
Reddy
[19]
the Court held that in deciding whether or not to enforce a restraint
of trade, the following must be considered:
‘
A
court must make a value judgment with two principal policy
considerations in mind in determining the reasonableness of a
restraint.
The first is that the public interest requires that
parties
should comply with their
contractual obligations, a notion expressed by the maxim pacta
servanda sunt. The second is that all persons
should in the interests
of society be productive and be permitted to engage in trade and
commerce or the professions. Both considerations
reflect not only
common-law but also constitutional values. Contractual autonomy
is part of freedom informing the constitutional
value of dignity, and
it is by entering into contracts that an individual takes part in
economic life. In this sense freedom to
contract is an integral part
of the fundamental right referred to in s 22.
In
applying these two principal considerations, the particular interests
must be examined. A restraint would be unenforceable if
it prevents a
party after termination of his or her employment from partaking in
trade or commerce without a corresponding interest
of the other party
deserving of protection. Such a restraint is not in the public
interest. Moreover, a restraint which is
reasonable as between
the parties may for some other reason be contrary to the public
interest. A
n agreement in restraint of trade is
concluded pursuant to 'law of general application' referred to in s
36(1). What is meant by
this expression includes the law in the
general sense of the legal system applicable to all which, in this
case, consists of the
corpus of law generally known as 'the law of
contract' and which allows for contractual freedom and the conclusion
of agreements
pursuant thereto. The four questions identified in
Basson comprehend the considerations referred to in s 36(1). A fifth
question,
implied by question (c), which may be expressly added, viz
whether the restraint goes further than necessary to protect the
interest,
corresponds with s 36(1)(e) requiring a consideration of
less restrictive measures to achieve the purpose of the limitation.
The
value judgment required by Basson necessarily requires
determining whether the restraint or limitation is 'reasonable and
justifiable
in an open and democratic society based on human dignity,
equality and freedom'.
[33]
In
Jonsson
Workwear
I said the following:
[20]
‘
In
simple terms therefore, and what needs to be considered in
determining whether or not the enforcement of a restraint of trade
would be reasonable, are five issues, being (a) the existence of a
protectable interest, (b) the breach of such protectable interest,
(c) a quantitative and qualitative weigh off the respective interests
of the parties, (d) general considerations of public interest,
and
(e) whether the restraint goes further than necessary to protect the
relevant interest. All these considerations need
to determined
as a whole, as part of a value judgment to be exercised, in order to
finally conclude whether or not the restraint
should be enforced.
’
[34]
All three the respondents signed restraints of trade shortly before
they left the applicant, and long after having started
employment
with the applicant. Whilst I note that in the answering
affidavits the respondents contend that they were forced
to sign the
restraints of trade, that is a contention I need not deal with,
considering the basis of the determination of this
matter as set out
in my judgment hereunder. I must however say that I have
difficulty believing such a contention made by
long standing and
experienced labour consultants, who must surely know what their
rights are and that an employer cannot unilaterally
impose a
restraint of trade on them. Insofar as it may be necessary, and
if I had to determine this issue of the respondents
allegedly being
forced to conclude the restraints, it would have been my view that
such contentions had no substance. I will
however not dwell on
this further.
[35]
The fact is that the second and third respondents opened their own
labour consulting business. That would of course be in opposition
to
the applicant’s labour consulting business, and thus a breach
of the restraint of trade agreement as it stands. It would
also seem
that the second respondent has transacted with at least two clients
of the applicant, which would equally be in breach
of the restraint
of trade as it stands.Finally, the first respondent has accepted
employment with a business that competes with
the applicant, albeit
that there is some question mark as to whether he is employed in a
competing activity at such business.
[36]
What must now be considered is whether it is reasonable to enforce
the restraints of trade against the respondents. Two considerations
immediately come to the fore, being whether the applicant has a
protectable interest and if so, whether the respondents are
infringing
on such any protectable interest. As will be discussed
hereunder, an issue of public interest also arises. In
Dickinson
Holdings Group
[21]
it was held that a protectable interest can be found to two general
categories, the first being
trade
(customer) connections, and the second being confidential
information. The applicant, in its founding affidavit, relied
on both these categories.
Protectable
interest: competing business / activity
[37]
The issue of confidential information as a category of protectable
interest can be immediately disposed of. The applicant has
made out
no proper case in its founding affidavit in this regard, for the
reasons I will now set out.
[38] I
will first deal with the respondents’ occupations as labour
consultants. The occupation of a labour consultant,
per se,
constitutes skills, experience and expertise attaching to the person
of the labour consultant, and not his or her employer,
in the absence
of specific evidence by the employer that it is only through the
employer’s efforts that the labour consultant
attained such
skills, experience and expertise. An example would be where the
employer employs a labour consultant, fresh out of
university (so to
speak) and proceeds to comprehensively train, skill and equip such
labour consultant for practice. But
in the case of the
respondents’
in
casu
,
there was nothing of the sort. They came to the applicant with
the necessary skill, experience and expertise in tow.
I
n
Automotive
Tooling Systems (Pty) Ltd v Wilkens and Others
[22]
the Court held as follows:
‘…
.What
is clear, however, is that the interest must be one that might
properly be described as belonging to the employer, rather
than to
the employee, and in that sense 'proprietary to the employer'. The
question in the present case is whether the interest
that is relied
upon - the skill, expertise and 'know-how' that the employees
undoubtedly acquired in the techniques for manufacturing
these
machines - was one that accrued to the employer or to the employees
themselves.
The rationale for this
policy was succinctly explained by Kroon J in Aranda Textile Mills
(Pty) Ltd v L D Hurn as follows:
'A
man's skills and abilities are a part of himself and he cannot
ordinarily be precluded from making use of them by a contract
in
restraint of trade. An employer who has been to the trouble and
expense of training a workman in an established field of work,
and
who has thereby provided the workman with knowledge and skills in the
public domain, which the workman might not otherwise
have gained, has
an obvious interest in retaining the services of the workman. In the
eye of the law, however, such an interest
is not in the nature of
property in the hands of the employer. It affords the employer no
proprietary interest in the workman,
his know-how or skills. Such
know-how and skills in the public domain become attributes of the
workman himself, do not belong in
any way to the employer and the use
thereof cannot be subjected to restriction by way of a restraint of
trade provision. Such a
restriction, impinging as it would on the
workman's ability to compete freely and fairly in the market place,
is unreasonable and
contrary to public policy.'
Thus the mere fact that
the first and second respondents have taken up employment with AMS
Manufacturing, assuming that it is in
competition with the appellant,
does not in itself entitle the appellant to any relief if all they
will be doing is applying their
skills and knowledge acquired whilst
in the employ of the appellant. It is only if the restriction on
their activities serves to
protect a proprietary interest relied on
by the appellant that they would be in breach of their contractual
obligations. ….’
The
Court concluded:
[23]
‘
In
my view, the facts establish that the know-how for which the
appellant seeks protection is nothing other than skills in
manufacturing
machines albeit it that they are specialised skills.
These skills have been acquired by the first and second respondents
in the
course of developing their trade and do not belong to the
employer - they do not constitute a proprietary interest vesting in
the
employer - but accrue to the first and second respondents as part
of their general stock of skill and knowledge which they may not
be
prevented from exploiting. As such the appellant has no proprietary
interest that might legitimately be protected.’
[39]
Applying the ratio in
Automotive Tooling Systems
, the
difficulty for the applicant is that it provides no evidence of any
kind that the skill, experience and expertise of the respondents
serve to establish a proper proprietary interest in favour of the
applicant, other than the respondents as labour consultants servicing
clients belonging to the applicant, as labour consultants. The
fact is that client relationships are separately protected
as a
protectable interest under the ambit of the category of trade
connections, and cannot also serve as basis for the respondents
as
labour consultants being prevented to pursue their chosen occupation
in this field where the skill, experience and expertise
accrue to
them as persons.
[40]
When it comes to other confidential information, I have dealt with
the facts in this regard above. The fact is that other than
a vague
and bald statement about a custom computer program and reference to a
special contract that is not special at all and actually
legally
questionable, the applicant has provided no proper evidence or case
at all about confidential information. In a nutshell,
the applicant’s
entire case in this regard is mere
ipse
dixit
.
In
Mozart
Ice Cream
[24]
specifically in the context of a restraint of trade it was said: ‘It
is clear however …. that the mere ipse dixit
of the applicant
cannot suffice on its own to establish these proprietary interests’.
I wish to make specific
reference to the following dictum in
Esquire
System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé
and Another
[25]
where the Court said:
‘
The
applicant's legal representative glibly states in his heads of
argument that it 'clearly had an interest worthy of protection'.
He
goes on to say that the employee had access 'to all the applicant's
trade secrets, customer particulars, pricing and all other
confidential operational information'.
But is this borne out by
the facts? In order to establish that, I have to consider the facts
as set out in the pleadings in accordance
with the well-known
principles set out in Plascon-Evans Paints Ltd v Van Riebeeck Paints
(Pty) Ltd. ….
Based
on this evidence of the employee, it does not appear to me that the
applicant has an interest worthy of protection that is
threatened by
the employee.’
In
my view, the exact same considerations apply to the applicant’s
case
in casu
,
where it comes to the issue of confidential information.
[41]
What must however be fatal to the applicant’s case with regard
to confidential information is the fact that the restraint
agreement
itself contains no stipulated obligation on the respondents where it
comes to confidential information in the agreement
itself. It
is not good enough to just define confidential information and
describe what it is. The agreement must also prescribe
what is
expected from the respondents with regard to such defined
confidential information. The following basic principle was
enunciated in
Union
Government v Vianini Ferro-Concrete Pipes (Pty) Ltd
[26]
,
which should be applied in this instance:
‘
Now this Court has
accepted the rule that when a contract has been reduced to writing,
the writing is, in general, regarded as the
exclusive memorial of the
transaction and in a suit between the parties no evidence to prove
its terms may be given save the document
or secondary evidence of its
contents, nor may the contents of such document be contradicted,
altered, added to or varied by parole
evidence’.
Contractually,
and on the evidence, the applicant thus has no protectable interest
insofar as an obligation to keep confidential
information
confidential and not to disclose the same to third parties.
[42]
The restraint of trade covenant itself contains, in essence, two
undertakings only. The first is a prohibition on having
any
interest in a competing business or activity, to the business of the
applicant. The second is protecting trade connections.
No
case has been made out, both in contract and with regard to the facts
as established by the founding affidavit as considered
with the
answering affidavit and with it the application of the
Plascon
Evans
test, as to a protectable interest pertaining to trade
secrets or confidential information.
[43]
In short, the applicant has made out no case as to why any competing
business or activity by the respondents should be prohibited.
There is nothing the applicant does, and no information the
respondents had access to, which is worthy of being called a
protectable
interest. In fact, and if regard is had to the
applicant’s own business profile attached to the founding
affidavit,
it is clear to me that the business of the applicant is
that of a stock standard labour consultancy, labour broker and
payroll
bureau. In seeking to prevent the respondents’
competing activities, the applicant, in my view, is doing no more
than seeking
to stifle competition, which cannot be done by way of a
restraint of trade. As was said in
North
Safety Products (Africa) (Pty) Ltd v Nicolay
[27]
:
‘ …
. a
covenant in restraint of trade is enforceable unless the respondent
discharges the onus of proving that 'at the time the enforcement
is
sought, the restraint is directed solely to the restriction of fair
competition with the ex-employer ...’
[44]
The only thing that the applicant has come close in showing a
protectable interest to exist is where it comes to protecting
its
customer base, which I accept could and would be a proper protectable
interest for a business such as that of the applicant.
After
all, it is the customer relationships that lie at the very core of
the applicant’s business, considering the nature
of the
services that it provides. I will next deal with the issue of
trade connections.
Protectable
interest: trade connections
[45]
On face value, and as I have said above, it would appear that the
applicant has shown a proper protectable interest to exist
where it
comes to the issue of trade connections. It is clear that the
respondents as labour consultants employed by the
applicant for some
time, had a close working relationship with the applicant’s
clients. The nature of the task of a
labour consultant is
professional service and advice, which further ingratiates such
consultant with a client. I accept that
the relationship is
equally one of trust and confidence. In this respect as well,
the labour consultant is the face of the
applicant’s service to
its clients. In my view, it would be relatively easy for the
respondents as labour consultants
to exercise some influence over the
clients they serviced and so convince such clients to rather transact
with them than the applicant.
The applicant is entitled to, and has a
legitimate interest in protecting its client base.
[46]
In
Rawlins
and another v Caravantruck (Pty) Ltd
[28]
the
Court said:
'The need of an employer
to protect his trade connections arises where the employee has access
to customers and is in a position
to build up a particular
relationship with the customers so that when he leaves the employer's
service he could easily induce the
customers to follow him to a new
business (Joubert General Principles of the Law of Contract at 149).
Heydon The Restraint of Trade
Doctrine (1971) at 108, quoting an
American case, says that the ''customer contact' depends on the
notion that –
''the employee, by
contact with the customer, gets the customer so strongly attached to
him that when the employee quits and joins
a rival he automatically
carries the customer with him in his pocket'.
In
Morris (Herbert) Ltd v Saxelby
[1916] 1 AC 688
(HL) at 709 it
was said that the relationship must be such that the employee
acquires
'such
personal knowledge of and influence over the customers of his
employer . . . as would enable him (the servant or apprentice),
if
competition were allowed, to take advantage of his employer's trade
connection . . .'.
This
statement has been applied in our Courts (for example, by Eksteen J
in
Recycling
Industries (Pty) Ltd v Mohammed and Another
1981
(3) SA 250
(E)
at
256C-F). Whether the criteria referred to are satisfied is
essentially a question of fact in each case, and in many, one
of
degree. Much will depend on the duties of the employee; his
personality; the frequency and duration of contact between him and
the customers; where such contact takes place; what knowledge he
gains of their requirements and business; the general nature of
their
relationship (including whether an attachment is formed between them,
the extent to which customers rely on the employee
and how
personal their association is); how competitive the rival businesses
are; in the case of a salesman, the type of product
being sold; and
whether there is evidence that customers were lost after the employee
left
(Heydon
(op cit
at 108-120); and see also
Drewtons
(Pty) Ltd v Carlie
1981
(4) SA 305
(C)
at 307G-H and 314C and G).’
The
Court concluded:
[29]
‘
Even though the
persons to whom an employee sells and whom he canvasses were
previously known to him and in this sense ''his customers'',
he may
nevertheless during his employment, and because of it, form an
attachment to and acquire an influence over them which he
never had
before. Where this occurs, what I call the customer goodwill which is
created or enhanced, is at least in part an asset
of the employer. As
such it becomes a trade connection of the employer which is capable
of protection by means of a restraint of
trade clause. ….’
[47]
In
Esquire
Technologies
[30]
Steenkamp
J said:
‘
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.’
The
learned Judge concluded:
[31]
‘
A
protectable customer or supplier relationship exists where an
employee has personal knowledge of, and influence over, the customers
(or suppliers) of his employer so as to enable him, if the
competition were allowed, to take advantage of his former employer's
trade connections. ….
A customer connection
exists where a customer belongs to the employer and the employee
obtains influence over the customer by virtue
of his employment.’
[48]
Considering the above principles, and if this was where the enquiry
stopped, I would have had little hesitation in concluding
that the
applicant had shown a proper protectable interest to exist where it
came to the issue of trade connections. The
appropriate order
in such a case, and assuming all the other
Basson
requirements for reasonableness were met, would be to interdict the
respondents from in any way contacting, approaching, transacting
with
or in any way soliciting the custom of the applicant’s clients,
even if the respondents were allowed to operate and
conduct their own
competing business or employment.
[49]
In short, I accept that considering the nature of the relationships
the respondents had with the applicant’s clients,
as well as
the nature of the services the respondents rendered to such clients,
the respondents would exercise sufficient influence
over such clients
so as to be able to effectively entice such clients away from the
applicant, and to the respondents. The
nature of the business
of the applicant itself enhances a need for protection in this
regard. I accept that a proper protectable
interest would in
normal circumstances exist in this regard. But unfortunately for the
applicant, this is not where the enquiry
stops in this instance.
Public interest
[50]
In their answering affidavits, all three the respondents have raised
an issue which in my view directly goes to the issue of
public
interest. The respondents have said that the applicant’s
own independent contracting model is questionable.
It is
contended by the respondents that this independent contracting model
had been the subject matter of investigative reporting,
and was the
subject matter of contentions of undermining pricing structures in
the private security services sector. The
respondents have said
that this contract is in fact circulated in the CCMA as part of
awareness training relating to the legitimacy
of independent
contracts, and that the validity and status of these independent
contracts are questionable. According to
the respondents, the
applicant administers some 15 000 ‘contractors’ on
this basis. The applicant has not filed
any replying affidavit to
contradict what the respondents have said in this regard, or to offer
any kind of explanation.
I find this concerning.
[51]
Ironically therefore, the very alleged ‘custom contract’
the applicant sought to rely on to establish a protectable
interest
serves as the applicant’s undoing where it comes to
considerations of public interest. This contract must be considered
in proper context, which is exactly what the respondents allude to
above. I will firstly refer to the business profile of the
applicant’s own business, attached to the applicant’s
founding affidavit. In this profile, a part of the applicant’s
business is described as ‘independent contractors’. I
intend to quote from what the applicant says in this profile
about
this business, as follows:
‘
All
Independent Contractors are provided to FMW Group Clients in terms of
Section 198(3) of the Labour Relations Act, 2002’
(sic)
‘
FMW
is the leader in the market of Independent Contractors. An
Independent Contractor is hired to you but will neither be
an
employee of FMW Labour Group, nor be an employee of your company,
this person will be a contractor hired to achieve a specific
goal and
gets paid based on the achievement of that goal. It is the same
principal of opening a job up for tender, once the
tender is awarded,
the winning party is responsible to achieve the required goal before
payment thereof.’
(sic)
[52]
Based on this business model, if one can call it that, individual
persons are then required to conclude a service agreement
purporting
to be an independent service contract, but only after first being
expected to ‘tender’ for the work.
It is clear that
the majority of the applicant’s clients are in the private
security services industry, which explains the
example of the
contract provided being called ‘Invitation to tender for
security assignment by professionally qualified security
service
provider’. From the documents attached to the applicant’s
founding affidavit, as read with the above
modus operandae conducted
by the applicant, the following scheme emerges:
52.1
An individual person tenders for the providing of security services.
The tender is
designed to appear to be that of a completely
independent and third party security service provider tendering to a
client for such
services. But it is clear from the contract itself
that this ‘tender’ is made by one individual person who
works providing
security services, in other words being nothing but a
security guard;
52.2
The company to which this service is provided then ‘accepts’
the tender, and
an independent contract is then concluded between
such company and what is termed ‘the self employed security
officer’.
This contract so concluded purports to be an
independent service agreement in which this individual security guard
contracts to
work as a security officer without any employment
benefits or protections;
52.3
Added to the above, the company with whom this security officer
‘contracts’
then rents all the equipment and uniform
necessary for the security officer to do his or her work, and this
‘rent’
is deducted from the contract remuneration;
52.4
But worse still, the security officer is required to sign a
‘declaration’ to
the effect that he or she exercises
their ‘right’ in terms of section 22 of the Constitution
to render services as
a self employed security officer and that the
provisions of the LRA and BCEA are not applicable.
[53]
The above being the business model the applicant seeks to protect,
and which clearly forms the basis of its trade connections,
a clear
public interest consideration arises. I have little hesitation
in concluding that the applicant’s business
model in this
regard is unlawful and not worthy to protect or even be allowed to
perpetuate. The applicant is perpetrating
a sham to avoid
compliance with the provisions of the LRA and the BCEA and is clearly
exploiting vulnerable individual security
guards desperate for work
in an economy where work is scarce. I say this for the specific
reasons to follow.
[54]
The private security services sector is subject to the Sectoral
Determination 6: Private Security Sector, published in terms
of the
BCEA.
[32]
This
sectoral determination applies to
‘…
.
every employer and employee in the private security sector that
guards or protects fixed property, premises, goods, persons or
employees including monitoring and responding to alarms at premises
which are guarded by persons or by electronic means ….
’
[33]
.
The Sectoral Determination then contains a specific presumption as to
who is an employee, and this includes:
[34]
‘
Any
person on contract performing the duties of a security officer, as
defined in subclauses 2(62) to 2(66), as well as any person
on
contract performing the duties of other categories, as defined
herein, except for managers.
’
Subclauses
2(62) to 2(66) constitute the definitions of security officers grades
A to E and all the duties related to such grades.
In addition,
clause 18(2) provides that:
‘
Until
the contrary is proved, a person who works for, or provides services
to, any other person is presumed, regardless of the form
of the
contract, to be an employee, if any one or more of the following
factors are present-
(a)
the manner in which the person works is
subject to the control or direction of another person;
(b)
the person's hours of work are subject
to the control or direction of another person;
(c)
in the case of a person who works for
an organisation, the person forms part of that organisation;
(d)
the person has worked for that person
for an average of at least 40 hours per month over the last three
months;
(e)
that person is economically dependant
on the person for whom they work or provide services;
(f)
the person is provided with their tools
of trade or work equipment by that person; or
(g)
the person only works for or supplies
services to one person.’
[55]
There is no doubt that the applicant’s purported tender
document and consequent independent contract ticks all the employment
boxes in terms of the Sectoral Determination. It is clear that
all these self employed security officers do nothing else
but fulfil
the functions and duties of grade A to E security officers. In
addition, virtually all the presumptions in clause 18(2)
find
application. It is clear that the purported self employed
security officers forming the basis of the applicant’s
trade
connections are not self employed at all, but should actually be
employees of either the applicant or its client.
[56]
In addition, and in terms of clause 20 of the Sectoral Determination:
‘
(1)
Employers shall abide by the provisions of the Labour Relations Act,
Act 66 of 1995, as amended, in respect of Temporary Employment
Services, Labour Brokers and Independent Contractors.
(2) Notwithstanding the
above, no employer may use the services of Temporary Employment
Services, Labour Brokers or Independent
Contractors unless the
Temporary Employment Service, Labour Broker or Independent Contractor
provides the employer with satisfactory
proof that it is in
compliance with-
(a)
Sectoral
Determination 6;
(b)
the
Unemployment Insurance Act;
(c)
the
Compensation for Occupational Injuries and Diseases Act;
(d)
the
South African Revenue Services, and is in possession of an IT30 tax
certificate; and
(e)
the
rules of the Private Security Sector Provident Fund.
’
The
applicant’s modus operandae is clearly at odds with the above.
The applicant’s business profile specifically
records, as set
out above, that it provides the self employed security officers to
its clients in terms of Section 198(3) of the
LRA. Therefore, and on
its own version, the applicant provides these security officers to
clients either on an independent contract
or labour broking basis,
which means that the applicant and its clients are in breach of the
aforesaid provisions of the Sectoral
determination. This would
clearly not be in the public interest to allow such a contravention
to perpetuate.
[57]
The applicant’s reliance on section 198(3) of the LRA is in any
event ill conceived and at odds with the law. The fact
is that
sections 198(1) and (2) of the LRA create an irrevocable presumption
of employment of the personnel of the temporary service
provider
(that are provided to its clients) with the temporary service
provider. The fact that the relationship may be styled
as an
independent contract matters not. The relationship will always
be one of employment. In
LAD
Brokers (Pty) Ltd v Mandla
[35]
the
Court said:
‘…
.
The question to be answered is what does s 198 intend to achieve in
its exclusionary subsection (3) read with subsection (1).
Does the
person who is an 'independent contractor' and who 'renders the
service or performs the work' stand in an independent contractor
relationship with the 'client' or with the 'temporary employment
service' or both?’
The
Court concluded:
[36]
‘
For
the sake of certainty the legislature clearly intended labour brokers
and the like who pay the remuneration to be held liable
as employers
under the Act. Subsections (4), (5) and (7) of s 198 seek to draw the
net tighter around the temporary employment
services.
To
interpret s 198(1)-(3) to include independent contractors who are
such in relation to temporary employment services would ignore
the
attribute that the contractors must render services or perform work
for the client (not the temporary employment service who
pays).
To
determine whether the service provider is an independent contractor
of the temporary employment service is therefore as an end
in itself
a futile exercise. Even if he is, should he not also act as
independent contractor viz-à-viz the client, the exclusionary
subsection (3) does not apply. ….
’
For
this reason as well, the applicant’s independent contracting
structure is not in accordance with the provisions of the
LRA and
protecting it will not be in the public interest.
[58]
But worst of all, in my view, is the use by the applicant of a
business model that is nothing more than a shameless attempt
to
circumvent minimum employment protection for what is really
employees. This is evident from the statement in the business
profile to the effect that neither the applicant nor the client
employs such persons, and the declaration these persons are required
to sign disavowing any reliance on the BCEA or LRA. This kind of
independent contracting model of in essence engaging employees
through independent contracts has been criticized more than a decade
ago in
Building
Bargaining Council (Southern and Eastern Cape) v Melmons Cabinets CC
and Another
[37]
.
In specifically dealing with persons that were really employees but
were required to sign independent contracts, Landman
J (as he then
was) held as follows:
[38]
‘
The
law takes a special interest in persons who hire out their labour as
employees. It provides them, currently, with a set of minimum
terms
and conditions and provides some measure of protection regarding job
security. The health and safety and unemployment needs
are catered
for by various statutes. All this protective legislation rests upon
the employee being an 'employee' as defined in
the applicable
statute. In this case it is the Labour Relations Act. The
legislature, precisely because most employees have historically
been
the weaker party in bargaining their contracts of service, has seen
it fit to prohibit an employee from contracting out of
the Labour
Relations Act and in particular an applicable collective agreement.
’
I
agree with the above reasoning. Landman J then, in dealing with the
facts in
Melmons
Cabinets
,
said the following, which in my view is equally apposite
in
casu
:
[39]
‘
The
contract between Melmons and Mr Alfred Mawa, …. envisages a
full-blown contract between a principal and an independent
contractor. It envisages a sophisticated relationship. Mr Mawa's
duties were relatively simple and they still are. He accompanies
a
team which installs cupboards. He assists them with loading the
truck. At their destination he waits until the cupboards are
installed and then wipes them clean, using a rag and thinners. He
also uses some paint and a paintbrush to touch up blemishes.
In terms
of his contract with Melmons he has to deliver a completed product or
services. Presumably he only renders a service.
He is obliged to be
in attendance on normal business days or as Melmons may instruct. He
is obliged to report to a certain Mr A
J Louw, who is described as a
quality controller. Mr Mawa is obliged to conform to the spirit of
the agreement which inter alia
requires him to be polite to customers
and to be sober and alert. He is obliged to conform with Melmons
administrative systems
and procedures.
’
As
I have said, the applicant’s contract regime as evidenced by
the document attached to the founding affidavit equally envisaged
the
same result. The duty to be fulfilled by the independent
contractor is simply the unsophisticated duties of a security
guard
working under the instruction of a client. It is untenable to think
that such a person would be wise to a process of allegedly
tendering
for a service, such tender then being approved, and such person then
being contracted to provide a service on the same
basis as security
service provider companies would do. And added to that, this
‘contractor’ is then provided
with all the equipment and
uniform to do the work, and this is deducted from his or her pay.
In
Melmons
Cabinets
,
the learned Judge concluded:
[40]
‘…
.The
dominant and overwhelming impression that the agreement and the
evidence gives is that Mr Mawa is still a mere employee, albeit
one
encumbered by sets of rights and duties which operate to his
detriment. One's impression on reading the record is that one
has to
deal with the surreal. Melmons, with the assistance of its employers'
organization, COFESA, has perpetrated a cruel hoax
on Mr Mawa. He
believes that he is a self-employed entrepreneur, earning more than
he did as an employee. He is blissfully ignorant
of his newly
acquired obligations and the loss of rights and privileges which
Melmons has persuaded him to forego. He has no job
security, he has
no claim for unfair termination of his services, he is prohibited
from relying on the benefit of a collectivity
such as a trade union.
It is fanciful to believe that he would be welcome in any employers'
organization. He has no protection
against accident or illness at
work. He has no safety net in the event that he cannot find work to
do. He has no minimum terms
and conditions such as paid holidays,
paid sick leave or severance benefits. The agreement which purports
to be an independent
contractor-principal relationship is a sham and
it remains a sham even though Mr Mawa has consented to it. In truth I
Mr Mawa is
an employee and Melmons is his employer.
’
The
above ratio is exactly the situation
in
casu
. The applicant’s contract is
nothing but a sham to seek to extract it and its clients from the
employment relationship and
the benefits and protection then bestowed
on employees in terms of employment legislation. This cannot be
a business model
that serves to be protected as a legitimate
protectable interest.
[59]
But matters do not even end there. In the undertaking required to be
signed, it is glibly recorded that the self employed security
officer
exercises his or right in terms of section 22 of the Constitution,
implying that this contract is the exercise of a fundamental
right
that must be respected. I cannot disagree more, and am of the
view that exactly the opposite is true. In
Barkhuizen
v Napier
[41]
the
Constitutional Court dealt with the issue of constitutionality and
contract terms and said:
[42]
‘
Ordinarily,
constitutional challenges to contractual terms will give rise to the
question of whether the disputed provision is contrary
to public
policy. Public policy represents the legal convictions of the
community; it represents those values that are held most
dear by the
society. Determining the content of public policy was once fraught
with difficulties. That is no longer the case. Since
the advent of
our constitutional democracy, public policy is now deeply rooted in
our Constitution and the values which underlie
it. Indeed, the
founding provisions of our Constitution make it plain: our
constitutional democracy is founded on, among other
values, the
values of human dignity, the achievement of equality and the
advancement of human rights and freedoms, and the rule
of law. And
the Bill of Rights, as the Constitution proclaims, "is a
cornerstone" of that democracy; "it enshrines
the rights of
all people in our country and affirms the democratic [founding]
values of human dignity, equality and freedom".
What
public policy is and whether a term in a contract is contrary to
public policy must now be determined by reference to the values
that
underlie our constitutional democracy as given expression by the
provisions of the Bill of Rights. Thus a term in a contract
that is
inimical to the values enshrined in our Constitution is contrary to
public policy and is, therefore, unenforceable.
’
The
applicant’s contract regime simply cannot pass muster if the
above principles are applied. It is contrary to constitutional
values and seeks to exploit vulnerable individual persons in a
society where there is a shortage of available employment.
It
is contrary, in any event, to the right to fair labour practices in
the Bill of Rights. It seeks to undermine what is
in essence
fairness and equality in the workplace.
[60]
Also and in
NAPE
v INTCS Corporate Solutions (Pty) Ltd
[43]
the
Court dealt with the contractual relationship with individuals in the
context of the labour broking environment, and said:
[44]
‘
Public
policy imports the notions of fairness, justice and reasonableness.
Public policy would preclude the enforcement of a contractual
term if
its enforcement would be unjust or unfair. Public policy, it should
be recalled 'is the general sense of justice of the
community, the
boni mores, manifested in public opinion'.
As has
been observed further, in the judgment, 'while public policy endorses
the freedom of contract, it nevertheless recognizes
the need to do
simple justice between the contracting parties. To hold that a court
would be powerless in these circumstances would
be to suggest that
the hands of justice can be tied; in my view, the hands of justice
can never be tied under our constitutional
order'
I
fully agree with this reasoning. In
NAPE
,
the Court then further held:
[45]
‘…
.
this does not mean that the labour broker and the client are at
liberty to structure their contractual relationships in a way
that
would effectively treat employees as commodities to be passed on and
traded at the whims and fancies of the client.
Nor
does it mean that labour brokers and clients may structure their
contractual relationship in a way that would undermine the
employee's
constitutionally guaranteed right to fair labour practices. If
labour brokers and clients are given the licence
to contract for
standards that are less than the fundamentals guaranteed, the right
to security of employment of employees involved
in this tripartite
relationship will be severely undermined.
’
If simple justice is done
in respect of what the applicant seeks to do
in casu
with its
independent contracting model, and now also seeks protect in this
application, such contracts simply cannot be sustained.
The
enforcement of this contract regime would be unjust and unfair, and
severely undermines the right to security of employment
of those
persons the applicant seeks to contract with, and whom are in reality
nothing more than security guard employees.
[61]
As I have touched on above, the applicant seeks to rely on section
198(3) of the LRA. But the point that the applicant
misses, in
addition to what I have already said, is that section 198 must always
be interpreted and applied to give effect to fair
labour practices.
In
Dyokhwe
v de Kock NO and Others
[46]
the
Court held:
‘…
.
To the extent that employment through a TES as opposed to a
former employer - while the employee carries on doing the same job,
but at a lower rate - may threaten employment security and other
aspects of the constitutional right to fair labour practices, s
198
must be interpreted strictly in order to protect workers governed by
s 198.’
The
Court concluded:
[47]
‘
I can see no
reason why the well-known principles relating to sham independent
contractor relationships should not also apply to
TES relationships.
The question remains who the true employer is; and although no
presumption akin to that in s 200A addresses
this question in a TES
relationship, the court should not shy away from examining that
relationship.’
[62]
I thus conclude that the applicant’s independent contracting
model which on its own version is the cornerstone of its
protectable
interest where it comes to trade connections is unlawful and at odds
with the constitutional values of fair labour
practices and just and
fair play. It seeks to avoid the protections afforded by employment
legislation such as the LRA and BCEA.
It directly undermines security
of employment, and in any event flies directly in the face of the
minimum terms and conditions
for individual security guards
specifically imposed on the private security services sector in
Sectoral Determination 6.
[63]
Whilst the applicant’s business clearly also has legitimate
parts, such as the payroll business unit and the labour consulting
business, the fact remains that a material part of the business is
simply not legitimate. In
Labournet
Holdings (Pty) Ltd v McDermott and Another
[48]
the
Court specifically dealt with the consequence of such an illegitimate
business on the enforcement of a restraint of trade, and
said:
[49]
‘
The
business model used by LNH requires of its employees, such as the
respondents, to misrepresent their capacities. They purport
to be
officials of an employers' organization when they appear before the
CCMA, councils and the Labour Court. The NEF deceives
the Registrar
of Labour Relations in regard to its true nature. The public at large
is encouraged to think that they are dealing
with the NEF, an
employers' organization, when, in fact, they are dealing with LNH or
one of its subsidiaries. This is not a legitimate
interest that is
worthy of protection. It is against the public policy to carry on
this sort of business. It would also, in my
opinion, be against
public policy to enforce a restraint and protect such a business. ….
’
Applying
the same reasoning as above, it would not be in the public interest
to seek to enforce any protectable interest the applicant
may have in
this case. As I have illustrated above, it is not in the public
interest for the applicant to conduct the kind
of business that it
does in respect of its independent contracting model. In order
to discourage doing this kind of business,
it must be made clear that
it cannot be protected as a legitimate protectable interest, which is
what he applicant seeks to do.
Conclusion
[64]
In the circumstances, the applicant has failed to establish the
existence of protectable interest. That has to be the
end of
the matter for the applicant. Without a protectable interest
being shown to exist, the applicant simply cannot establish
a clear
right, being the first requirement to be successful in the interdict
it seeks. As I said in
Jonsson
Workwear
:
[50]
‘
In
my view, the applicant has thus failed to demonstrate a clear right
in this matter. I conclude that the applicant has no protectable
interest …. To enforce the restraint of trade in these
circumstances would be unreasonable. As the applicant has not
demonstrated a clear right, this is where the enquiry stops. The
applicant has thus not discharged the onus on it to obtain the
relief
sought.
’
[65]
It is consequently unnecessary to consider the other restraint
principles set out in the judgment of
Basson
, or the other
interdict requirements. The applicant’s application falls to be
dismissed. However, and considering the duty
of this Court to ensure
that justice is done, I intend to direct that the Registrar forward a
copy of this judgment to the Director:
General of the Department of
Labour, and to the Private Security Industry Regulatory Authority
(PSIRA), to investigate what I believe
to be the contravention by the
applicant of the Sectoral Determination 6: Private Security Sector.
Costs
[66]
This then only leaves the issue of costs. There is no reason why
costs should not follow the result.
Order
[67] In the premises, I
make the following order:
67.1
The applicant’s application is dismissed with costs.
67.2
The registrar is directed to forward a copy of this judgment to the
Director: General of
the Department of Labour, and to the Private
Security Industry Regulatory Authority (PSIRA), for investigation as
to whether the
applicant is acting in contravention of Sectoral
Determination 6: Private Security Sector.
____________________
Snyman AJ
Acting Judge of the
Labour Court
APPEARANCES:
APPLICANT:
Advocate S M van
Vuuren
Instructed
by Lovegrove Mulder Attorneys
RESPONDENTS:
Advocate G C Muller
SC
Instructed
by Gerneke and Potgieter Attorneys
[1]
Setlogelo
v Setlogelo
1914 AD 221
at 227 ;
V
& A Waterfront Properties (Pty) Ltd and Another v Helicopter &
Marine Services (Pty) Ltd and Others
2006 (1) SA 252
(SCA) para 20 ;
Royalserve
Cleaning (Pty) Ltd v Democratic Union of Security Workers and Others
(2012) 33 ILJ 448 (LC) para 2 ;
Esquire
System
Technology
(
supra
)
at para 38 – 40.
[2]
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 875H-I.
[3]
(2008) 29 ILJ 1665 (N) para 89.
[4]
[2003] 1 All SA 299
(N) at 302J-303B.
[5]
[2006] 2 All SA 301 (D).
[6]
(2009) 30 ILJ 1828 (LC).
[7]
(2013) 34 ILJ 529 (GSJ).
[8]
(2014) 35 ILJ 712 (LC) at para 8.
[9]
Id
at para 9.
[10]
(2007) 28 ILJ 317 (SCA) para 4.
[11]
Id
at para 14.
[12]
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E 635C ; See also
Jooste
v Staatspresident en Andere
1988
(4) SA 224
(A) at 259C – 263D;
National
Director of Public Prosecutions v Zuma
2009
(2) SA 277 (SCA)
paras 26 – 27 ;
Molapo
Technology (Pty) Ltd v Schreuder and Others
(2002) 23 ILJ 2031 (LAC) para 38 ;
Geyser
v MEC for Transport, Kwazulu Natal
(2001) 22 ILJ 440 (LC) para 32 ;
Denel
Informatics Staff Association and Another v Denel Informatics (Pty)
Ltd
(1999) 20 ILJ 137 (LC) para 26.
[13]
2009 (3) SA 187
(W) para 19.
[14]
(2010) 31 ILJ 112 (LC) at para 18.
[15]
1977 (4) SA 135 (W).
[16]
(2009) 30 ILJ 1750 (C) at 1761.
[17]
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767G-H.
[18]
(2013) 34 ILJ 2821 (LAC) at para 17.
[19]
Reddy v
Siemens Telecommunications
(
supra
)
at paras 15 – 16.
[20]
Jonsson
Workwear (Pty) Ltd v Williamson and Another (supra) a
t
para 44.
[21]
Dickinson Holdings Group (Pty) Ltd and Others v Du Plessis and
Another
(supra) at para 32. See also
Basson
v Chilwan (supra) at
769 G – H ;
Bonnet and Another v Schofield
1989 (2) SA 156
(D) at 160B-C
;
Esquire
System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé
and Another
(
supra
)
at para 27.
[22]
(2007) 28 ILJ 145 (SCA) para 8 – 9.
[23]
Id
at para 20.
[24]
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff and Another
(
supra
)
at 1758.
[25]
(2011) 32 ILJ 601 (LC)
at
paras 43 – 46.
[26]
1941 AD 43
at 47
[27]
(2007) 28 ILJ 350 (C) at 353H – I
[28]
[1992] ZASCA 204
;
1993 (1) SA 537
(A) at 541D-I
[29]
Id
at 542F-I.
[30]
Esquire
System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé
and Another
(
supra
)
at para 27
[31]
Id
at paras 31 – 32. See also
Continuous
Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes and Another
(2012) 33 ILJ 629 (LC) at paras 34 – 36.
[32]
Published
under GN R1250 in
GG
22873 of 30 November 2001 (as amended).
[33]
Clause
2(2)(a).
[34]
Clause 18(1).
[35]
(2001) 22 ILJ 1813 (LAC) at para 26.
[36]
Id
at paras 28 – 30. See also
National
Union of Metalworkers of SA and Others v SA Five Engineering (Pty)
Ltd and Others
(2007) 28 ILJ 1290 (LC) at para 21;
Colven
Associates Border CC v Metal and Engineering Industries Bargaining
Council and Others
(2009)
30 ILJ 2406 (LC) At para 19.
[37]
(2001) 22 ILJ 120 (LC).
[38]
Id
at para 8.
[39]
Id
at para 13.
[40]
Id
at para 21.
[41]
2007 (5) SA 323 (CC).
[42]
Id
at paras 28 – 29.
[43]
(2010) 31 ILJ 2120 (LC).
[44]
Id at paras 53 – 54.
[45]
Id
at paras 60 – 61.
[46]
(2012)
33 ILJ 2401 (LC) at para 25.
[47]
Id
at para 51.
[48]
(2003) 24 ILJ 185 (LC).
[49]
Id
at para 31.
[50]
Jonsson
Workwear (Pty) Ltd v Williamson and Another
(
supra
)
at para 64.