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[2014] ZALCJHB 102
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Schauenburg Systems Proprietary Ltd v Grobler and Another (J2908/13) [2014] ZALCJHB 102 (28 March 2014)
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REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Not Reportable
Case no: J 2908/13
SCHAUENBURG
SYSTEMS PROPRIETARY
LTD Applicant
and
HERMANUS
CHRISTOFFEL
GROBLER First
Respondent
WILLBATT
PRODUCTS
CC Second
Respondent
Heard:
6 March 2014
Delivered:
28 March 2014
Summary:
Restraint of trade: Principles restated. An ex-employee who seeks to
take up employment with a
competitor must lay a basis for a
conclusion to be made that the restriant undertaking is unreasonable,
and therefore unenforceable.
Mere say-so is not sufficient for a
finding to be made that ex-employee not bound by restraint
undertaking.
Practice and
procedure: Non-joinder. Principles restated. - A party can only
be joined to proceedings if it has direct and
substantial interest in
the proceedings. Even if a party has an interest in the outcome, this
is not sufficient to sustain a plea
of non-joinder.
JUDGMENT
TLHOTLHALEMAJE,
AJ
Introduction:
[1]
This matter came before the court by way of an urgent application in
terms of which the applicant seeks a final order in the
following
terms:
1.1
Interdicting and restraining the first respondent for a period of
twelve (12) months, calculated
from 1 January 2014 until December
2014, within the Republic of south Africa, directly or indirectly
from;
1.1.1
Engaging in any work or other activity similar in any way to, or of
the kind performed by the first respondent
for the applicant,
involving products or processes similar to or the same as the
products or process with which the first respondent
worked whilst
employed with the applicant, namely the management services of a lamp
room, and the supply of caplamps and rescue
packs;
1.1.2
Being interested in or concerned with, in any capacity whatsoever,
any person, company or association, organisation
or concern which
competes directly or indirectly with the applicant or its associated
companies;
1.1.3
Offering employment to, or employ, or cause employment to be offered
to or cause to be employed or solicit
any employee of the applicant
or its associated companies who was employed by the applicant or its
associated companies at the
date of the termination of the first
respondent’s employment on 31 December 2013 or at any time
during the six months preceding
such termination.
1.2
Interdicting and restraining the first respondent from revealing to a
third party any confidential
information pertaining to the business
of the applicant or its associated companies, without prior written
consent having been
obtained from the applicant, including but not
limited to information about its inventions, manufacturing process,
financial affairs,
method of design, distribution or procurement for
any trade secrets obtained by the first respondent whilst in the
employ of the
applicant or its associated companies.
[2]
The first respondent, (herein referred to as Grobler) has opposed the
application on the following grounds;
(a)
The application was not
bona
fide
, and was an abuse of the court
process.
(b)
The restraint of trade agreement was not
lawful and/or enforceable.
(c)
The restraint of trade agreement was not
entered into on equal footing (This point was abandoned during
argument).
(d)
The restraint of trade was vague and merely
intended to prevent competition.
(e)
The applicant did not have any trade
secrets and/or confidential information that necessitated the
application.
(f)
The applicant did not have any proprietary
and protectable interest which needed protection.
(g)
He was not in breach of any of the
provisions of the employment contract which he had with the
applicant.
[3]
The application initially came before the court on 9 January 2014,
and a consent interim order was put in place pending the
determination of this application on 6 March 2014. By agreement with
the parties after the hearing of the application, the interim
order
was extended until the date of the delivery of this judgment.
Factual
background:
[4]
The applicant is part of the Schauenburg International Group of
companies. It has its head office in Spartan, Johannesburg,
and
regional offices in Rustenburg, Thabazimbi, Fochville and Welkom. Its
operations are extended throughout South Africa and it
has customers
nationwide and in other parts of Africa. The applicant is in the
business of developing, sourcing and supplying safe
and reliable
health and safety equipment to its clients which mainly consists of
mines. It also supplies equipment that detects
the presence of gases
and vapours. The applicant is known in the mining health and
equipment industry as an “Original Equipment
Manufacturer”
or OEM.
[5]
The applicant’s business includes the development, source and
supply of electronic health and safety equipment. These
include
safety enhanced caplamps, which is equipment which clips onto a
miner’s safety helmet in order to provide him/her
with a
lighting source, radio relayed monitoring, safety systems, radio
communication, breathing apparatus and anti-collision products
in
respect of which the applicant is an “OEM” to the mines.
The applicant’s customers who purchase these products
are mines
in the Republic of South Africa, Zimbabwe and other African
countries.
[6]
The applicant’s business further includes the management of a
lamp room and asset management system. A lamp room within
the mining
context is an asset management facility where the mine stores its
caplamps and breathing apparatus (rescue packs), controls
the access
and egress of the mine shaft and manages time and attendance of
underground employees. By managing a customer’s
lamp room, the
applicant provides qualified and trained employees to the mines to
manage that lamp room. In this regard, the applicant
will act as a
temporary employment service.
[7]
The applicant in offering lamp room management service to its mining
customers also supplies the mines with various health and
safety
equipment but also manages such equipment to ensure that it complies
with the health and safety requirements provided in
the
Mine Health
and Safety Act 29 of 1996
, which is safe and without risk to health
and safety when used properly. To this end, the applicant has to
employ highly skilled
and trained technical staff to ensure the
optimal functioning of its equipment. Furthermore, the applicant has
to provide training
to the employees of its mining customers on how
to operate health and safety equipment, and to ensure that the
lamp-room is well
ventilated, has consistent power supply and
communication systems. The applicant will further be required to
utilise its lamp room
and asset management software system and ensure
that employees of its customers who do not have all the safety
equipment are blocked
by the system from proceedings underground, and
further that employees return all equipment to the lamp room after
their shift.
[8]
The applicant has a system or process of developing and sourcing
products before they can be supplied to customers. This includes
undertaking substantial market research, investigation and
development in respect of the degree of demand for any equipment and
replacement products. The applicant further works closely with
manufacturers of its products in China and Ukraine to develop,
enhance or replace products. The applicant’s employees,
including Grobler whilst he was still employed, acted as
representatives
to liaise with the manufacturers regarding product
specifications, capability, quality, and pricing in order to
facilitate the
development of the products. Such employees were also
from time to time required to travel to China and Ukraine for liaison
and
meetings with the manufacturers.
[9]
Once a sample of a particular product had been developed the
applicant would then implement its testing to ensure that it met
the
relevant health and safety requirements in South Africa. The
applicant’s further contention was that the results of this
research process are highly confidential and constituted proprietary
information in its hands, and was further generated by its
own staff
at its own costs. That information also gave it a competitive
advantage in the market place.
[10]
Grobler was initially employed by the second respondent. He
then moved to Willard Batteries, a company that provided
battery
equipment, rescue packs, caplamps and gas detection instruments, as
well as provide lamp room management services to the
mines. He
managed Willard’s lamp room management services. At the time,
the applicant also supplied Willard Batteries with
health and safety
products, who in turn sold these to its mining customers.
[11]
The applicant’s Operations Director, Timothy Nelson, who
deposed to its founding affidavit, encountered Grobler whilst
he was
an employee of Willard Batteries. At some point the applicant sought
to recruit someone to set up its lamp room management
offering, and
by some coincidence, Grobler approached the applicant for employment.
He then took up employment with the applicant
as its Product Manager
in terms of a contract of employment concluded on 4 May 2010.
[12]
Grobler upon his appointment had reported directly to Nelson. He was
responsible for the applicant’s lamp room division,
and also
managed its caplamps and rescue packs. His main functions as can be
gleaned from his job description included
[1]
;
“
To
manage and take full responsibility on a day-to-day basis of the
Schauenburg Lighting products and associated products.
The
duties will include the day-to-day management of the facility,
personnel, logistics and product development.
Management
reports, statistics and cost management will be a major priority.
The
duties will include International and Local travelling on a regular
basis.
Sales
and business development targets must be achieved.
Lamproom
services and integration with the LMS/AMS systems must be
established and modelled to a sustainable and operational business.”
[13]
Grobler’s further responsibilities included;
Setting
up the applicant’s lamp room management division and
thereafter managing the division.
Negotiating
and concluding contracts with customers for the provision of lamp
room management services.
Recruiting,
training and managing the temporary employment service employees who
would be provided to the applicant’s customers
to manage its
lamp rooms.
Preparing
budgets for the lamp room division and monitoring the division’s
adherence thereto.
Formulating
the pricing which the applicant would charge its customers for lamp
room management services.
[14]
Grobler resigned from the applicant on 29 October 2013 by giving
notice. The applicant however informed him on 31 October 2013
that he
did not need to tender his services after 5 November 2013, and that
he would be paid for November and December 2013
in lieu
of
notice.
[15]
The second respondent did not oppose the application. According to
the applicant, the second respondent is its direct competitor,
a fact
which was confirmed by Grobler. The second respondent had commenced
operations in South Africa in 2000 as a supplier of
battery related
products to the mining industry. It had also acted as a temporary
employment service to manage its customers’
lamp rooms. It
conducts its business in Limpopo, North West, Mpumalanga, Gauteng and
Northern Cape provinces. The second respondent
also purchases health
and safety equipment such as caplamps, rescue packs and gas detection
units from an “OEM” in
South Africa and on-sells such
products to the mines. It also provides the mining industry with lamp
room solutions, products and
related services. Its customers are both
open cast and underground mines.
[16]
According to the applicant, the second respondent also provides lamp
room management services by supplying employees to its
customers who
manage the lamp room on behalf of the customer; managing the mines’
health and safety equipment such as cap
lamps and rescue packs; the
testing of rescue packs and gas instruments, and ensuring that all
legal requirements pertaining to
the management and maintenance of
health and safety equipment are complied with.
[17]
The second respondent also supplies lamp room equipment to its
customers and together with the “OEM”, repairs and
refurbishes such equipment. The OEMs are First National batteries and
Afrox who also develop, manufacture and supply cap lamps
and rescue
packs to mines. These compete directly also with the applicant in the
development, manufacture and supply of such equipment.
The second
respondent also provides a lamp room management system to its
customers. This in turn provides access control to and
monitor
employees in the mining area, ensuring that all employees are in
possession of their safety equipment when entering the
mining area.
[18]
Until 1 December 2013, the applicant and the second respondent had a
working relationship in terms of which the applicant supplied
the
second respondent with certain health and safety equipment such as
caplamps, rescue packs and gas detection instruments which
the second
respondent would then on-sell to those of its customers who had
procured the second respondent to manage its lamp rooms.
[19]
In the light of the above, the applicant holds the view that the
second respondent competes with it in;
19.1
The provision of competing health and safety equipment and, more
particularly, caplamps, gas instrumentation
and rescue packs to the
same customers and potential customers of the applicant;
19.2
The provision of lamp room management services, including the
provision of employees to manage the lamp room
of its customers, who
are mines in South Africa; and
19.3
The provision of lamp room and asset management systems to its
customers.
[20]
The applicant further contended that whilst the second respondent may
not act as an OEM by itself manufacturing or developing
health and
safety equipment but securing such equipment from companies who
operate as an OEM in South Africa, the second respondent
still
competed with the applicant by offering competing products in the
same market
The
Restraint clause:
[21]
Grobler was employed in terms of a contract of employment concluded
on 4 May 2010. The restraint clause provides for a period
of two
years throughout the whole of the Republic of South Africa. The
applicant however only seeks to enforce the agreement for
a period of
one (1) year), on the grounds that it had identified that period as
sufficient to cater for the protection of its proprietary
intersts.The relevant provisions are;
Clause
7 Restraint clause (Senior Employees only):
(a)
Training and development of its
employees;
(b)
Research and development;
(c)
Technical data;
(d)
Commercial plans and strategies;
(e)
Product manufacture, marketing,
selling and servicing;
(f)
The development of goodwill amongst
its customers; and
(g)
Other legitimate business interests
The
Employee will not directly or indirectly throughout the Republic of
South Africa for a period of 2 (two) years after the termination
of
his/her employment for any reason whatsoever;
7.1.1
engage in work or other activity similar in any way to, or of the
kind performed by him/her for the company,
involving products or
processes similar to or the same as the products or processes with
which she /he worked whilst employed with
the Employer;
7.1.2
be interested in or concerned with, in any capacity whatsoever, any
person, company or association, organisation
or concern which
competes directly or indirectly with the Employer or its associated
companies;
7.1.3
offer employment to or employ, or cause employment to be offered to
or cause to be employed or solicit any
employee of the Employer or
its associated companies who was employed by the Employer or its
associated companies at the date of
the termination of the Employee’s
employment or at any time during the 6 (six) months preceding such
termination.
7.2
The Employee acknowledges that:
(a)
s/he has carefully considered the
provisions of the restraint set out above; and
(b)
agrees that those clauses are, after
taking all relevant circumstances into account, reasonable, and that
s/he was in a position
of bargaining equality with the Employer at
the time s/he entered into this agreement and particularly when s/he
agreed to the
aforesaid restraint (Sic).
8.
Confidential Information
The
Employee will not either during or after his/her employment, without
prior written consent of the Employer having been obtained,
reveal to
a third party any confidential information pertaining to the business
of the Employer or its associated companies; financial
affairs,
methods of design, distribution or procurement or any trade secrets
obtained by him/her whilst in the employ of the Employer
or its
associated companies.
Point in limine
(Non-joinder):
[22]
Grobler for the first time in his answering affidavit, disclosed that
he was employed by a company known as Customer Management
Services
(Pty) Ltd (“CMS”) as a Compliance officer, and not by the
second respondent. CMS however rendered certain
services to the
second respondent. According to Grobler, CMS had a real and
substantial interest in any order which the court may
grant in this
application. Grobler further submitted that in a letter sent by his
attorneys of record to the applicant on 9 December
2013, the
applicant was informed that he was not in the employ of the second
respondent, and yet it had proceeded with the
application
without having regard to any legal interests which CMS may have in
the order which may be granted. To this end, Grobler’s
contention was that CMS should have been joined as a party in these
proceedings.
[23]
The applicant’s response was that the joinder of the second
respondent and non-joinder of CMS was the direct result of
Grobler’s
lack of candour in responding to a letter of demand that preceded
this application. On 29 November 2013, the applicant’s
attorneys of record addressed letters to Grobler and the second
respondent wherein they were advised that it had come to
the
attention of the applicant that Grobler was in the employ of the
second respondent in breach of the restraint undertaking.
The
applicant demanded written undertakings by 2 December 2013 that
Grobler cease his employment with the second respondent. It
has also
requested the second respondent to provide written undertakings that
it would desist from employing Grobler. No such undertakings
were
provided by 2 December 2013.
[24]
Following telephonic follow-ups and agreements for extensions between
the applicant’s and the respondents’ attorneys,
the
second respondent’s attorneys responded on 6 December 2013. In
their response, the respondents had refused to accede
to the demands
and denied that Grobler was employed by the second respondent.
Grobler had also denied that he was in breach of
the restraint
undertakings and the second respondent had denied that it was a
direct competitor of the applicant.
[25]
It is my view that the point
in limine
raised by or on behalf
Grobler in regards to the non-joinder of CMS should be dismissed on
the following grounds;
In
his letter of 6 December 2013 to the applicant’s attorneys of
record, Grobler only denied that he was employed by the second
respondent. He did not disclose that he was in fact employed by CMS,
and only did so in his answering affidavit. If indeed CMS
as
Grobler’s employer was aware, as it should have been, of this
application, nothing prevented it from approaching the court
to be
joined if indeed it had direct or substantial interest in the
proceedings and the outcome of this application.
[26]
The Supreme Court of Appeal in
The
Judicial Service Commission and another v The Cape Bar Council and
another
[2]
(per Brand JA) dealt with the question of non-joinder in the
following terms;
“
It
has by now become settled law that the joinder of a party is only
required as a matter of necessity – as opposed to a matter
of
convenience – if that party has a direct and substantial
interest which may be affected prejudicially by the judgment
of the
court in the proceedings concerned (see eg
Bowring
NO v Vrededorp Properties CC
2007 (5) SA 391
(SCA
)
para 21). The mere fact that a party may have an interest in the
outcome of the litigation does not warrant a non- joinder plea.
The
right of a party to validly raise the objection that other parties
should have been joined to the proceedings, has thus been
held to be
a limited one (see eg
Burger v Rand
Water Board
2007 (1) SA 30
(SCA)
para
7; Andries Charl Cilliers, Cheryl Loots and
Hendrik
Christoffel Nel Herbstein & Van Winsen The Civil Practice of the
High Courts of South Africa
5 ed vol 1
at 239 and the cases there cited.)
[27]
The
same issue was also dealt with by Zondo JP (as he then was) in
PSA
v The Department of Justice and other
[3]
in the following terms;
“
With
regard to the issue of non- joinder it is trite that a third party
should be joined in proceedings if he is shown to have a
direct and
substantial interest in a matter and has not consented or undertaken
to be bound by any judgement that may be given
in the matter. It is
not necessary to refer to many authorities in this regard. It is
sufficient to refer to the case of
Amalgamated
Engineering Union v Minister of Labour 1949(3) SA 637(A).”
[4]
And,
“
Where
a third party who has a direct and substantial interest in a matter
is not joined in proceedings, it is not a defence to a
point of
non-joinder to say that such party had knowledge of the proceedings
but did not intervene. His mere non-intervention,
despite having
knowledge of the proceedings, does not make the judgement emanating
from those proceedings binding on such party.
(see
Amalgamated
Engineering Union
at 660)”
[5]
[28]
The applicant in this case only seeks to enforce a contract between
itself and Grobler. CMS only came to light after this application
was
launched, and nevertheless, the applicant does not seek relief
against it. The only interest the applicant has is to ensure
that
Grobler complies with his restraint understanding. The fact that CMS
only came into the picture belatedly cannot in my view
necessitate a
postponement of these proceedings in order for the applicant to
launch an application to join it. It is not known
what direct or
substantial interest CMS has in this application or its outcome, and
the mere fact that Grobler might assume that
CMS has any interest in
the matter cannot sustain a plea of non-joinder. Furthermore, I did
not understand the applicant’s
case to be that it sought CMS to
be bound by any judgment. As shall be illustrated further in this
judgment, CMS did not only come
into the picture as an employer of
Grobler. There is more to the employment relationship between itself
and Grobler. To this end,
an application, if any, to join CMS should
have been brought by either Grobler or CMS.
The legal framework
surrounding restraint of trade:
[29]
The principles set out in
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[6]
have remained authoritative in regards to restraint of trade
agreements. It is now accepted 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.
The
applicant’s duty as concerning the enforcement of the restraint
of trade is to show the existence of the contract and
its breach by
the employee.
The
onus is on a party wishing to be absolved from a restraint of trade
agreement to allege and prove that the enforcement of the
restraint
would be contrary to public policy as it is unreasonable.
[30]
The
court in
Magna
Alloys
accepted
that a contract in restraint of trade is not necessarily wholly
enforceable or wholly unenforceable, and a court may in
the public
interest, order that the whole, or only a part, or no part at all, of
a restriction on trade be enforced
[7]
.
The court stated that it is in the public interest that persons
honour their own agreements. The fact that an agreement is
unreasonable
or unfair in regard to one of the parties will normally
not provide any ground for challenging the validity of the
agreement
[8]
.
[31]
In
Sunshine
Records (Pty) Ltd v Frohling and Others
[9]
Grosskopf
JA summarised the approach in
Magna
Alloys
as follows:
“
In determining
whether a restriction on the freedom to trade and to practise a
profession is enforceable, a court should have regard
to two main
considerations. The first is that the public interest requires, in
general, that parties should comply with their contractual
obligations even if these are unreasonable or unfair. The second
consideration is that all persons in the interests of society,
be
permitted as far as possible to engage in commerce or professions or,
expressing this differently, that it is detrimental to
society if an
unreasonable fetter is placed on a person's freedom of trade or to
pursue a profession. In applying these two main
considerations, a
court will obviously have regard to the circumstances of the case
before it.”
[32]
It follows from the above approach that the then Appellate Division
was persuaded by the common law freedom to economic activity
or
trade. This approach was to be underpinned by
section 22
of the Bill
of Rights in the South African Constitution, which provides as
follows:
“
22. Freedom
of trade, occupation and profession.
— Every citizen has
the right to choose their trade, occupation or profession freely. The
practice of a trade, occupation
or profession may be regulated by
law.”
[33]
The court in
Magna
Alloys
did
not specify what the test for reasonableness was. In
Basson
v Chilwan and others
[10]
Nienaber JA, having aligned himself with the principles set out in
Magna
Alloys
,
had identified four questions which should be asked when considering
the reasonableness of the restraint. These are:
1. Does
the one party have an interest that deserves protection at the
termination of the employment?
2. If
so, is that interest threatened by the other party?
3. Does
such interest weight qualitatively and quantitatively against the
interest of the other party not to be
economically inactive and
unproductive?
4. Is
there an aspect of public policy having nothing to do with the
relationship between the parties, which requires
that the restraint
be maintained or rejected? Thus, where the interest of the party
sought to be restrained outweighs the interest
to be protected, the
restraint is unreasonable and consequently unenforceable.
[34]
In
Kwik
Kopy (SA) (Pty) Ltd v Van Haarlem and Another
[11]
,
the Court added a further enquiry, viz, whether the restraint goes
further than is necessary to protect the interest. In this
regard
issues such as the duration of the restraint and the geographical
area covered by the restraint are accorded the same importance.
In
this case however, although Grobler had submitted in general that the
restraint understanding was unreasonable and unenforceable,
no
specific contentions were made in regard to either the duration of
the restraint or its scope.
Evaluation:
[35]
The existence of the contract of employment, and by implication, the
restraint clause was not placed in dispute. To the extent
that
Grobler had also abandoned his earlier contentions that he had
entered into the agreement as a result of duress, the arguments
pertaining to the lawfulness of the agreement fell by the wayside.
Thus the issues for consideration are whether there was a breach
of
the agreement, and further whether the agreement is reasonable and
enforceable.
[36]
When Grobler handed in his resignation on 29 October 2013, Nelson had
asked him where he would be taking up alternative employment.
Grobler’s response was that he had some options, and had in
passing, mentioned that he would go and work for a certain “Marx”.
“Marx” is the Managing Director of the second respondent.
At that stage, Nelson had informed Grobler that if he were
to work
for Marx, he would be acting in breach of his restraint undertaking.
Grobler’s response was that he had checked,
and that the
restraint would not apply as he had not managed the applicant’s
lamp room service offering for a period of two
years. Nelson had left
the matter at that in the light of Grobler’s position that he
had not as yet made a final decision
in regards to his future
employment.
[37]
On 31 October 2013 when Grobler was informed in writing that he did
not need to work out his notice period, he was also reminded
of his
restraint obligations and was warned that legal action may be taken
against him if the applicant became aware that he was
engaging in any
conduct in breach of his restraint and confidentiality undertakings.
[38]
On 25 November 2013, Nelson attended at Impumelelo coal mine together
with the applicant’s Divisional Product Manager,
Marius Smith
and Paulo Patao, the applicant’s Technical Co-ordinator for
Mpumalanga and Limpopo provinces, to inspect gas
detection
instruments on site. Upon their arrival on site, they noticed Grobler
testing certain products in the mine’s lamp
room. It was also
reported to Patao that Grobler was also seen on the same site during
26 to 28 November 2013. This led the applicant
to believe that
Grobler must be employed or otherwise concerned with or interested in
the business of the second respondent.
[39]
It was only in his answering affidavit that Grobler had revealed for
the first time that he was employed by CMS as a compliance
officer.
CMS according to Grobler, conducts its business by rendering services
to the second respondent regarding the compliance
with the legal
requirements such as Mine and Safety Act, DRM’s requirements
and the Mine’s Code of Practice by the
lamp rooms that are
managed by the second respondent exclusively. He contended that CMS
does not design, manufacture, source, distribute
or sell any
equipment nor does it procure any clients nor does it manage any lamp
rooms or equipment. In his capacity, he only
consults with the second
respondent’s clients and lamp room managers to ensure that the
lamp rooms are managed according
to requirements. He denied that he
used any information and/or knowledge peculiar to the applicant in
the execution of his duties.
[40]
Grobler further contended that in order to ensure tht there was
compliance with the legal requirements, he had to inspect some
of the
equipment in the lamp room from time to time to see whether it was
safe, duly cared for and stored, calibrated and used
in the correct
manner. The information and knowledge needed to execute these duties
according to Grobler, appeared from the applicant’s
own
information and training manuals furnished with the equipment, and
did not prejudice the applicant nor was it in conflict with
any of
the applicant’s alleged rights. He denied that he and CMS
competed with the applicant.
[41]
It is trite that in motion proceedings, the parties are confined to
the Notice of Motion and their pleadings as set out in
the three sets
of affidavits
[12]
. It is
equally trite that a case cannot be made out for the first time in
the replying affidavit.
In
Shephard
v Tuckers Land and Development Corporation (Pty) Ltd
[13]
the
Court had however acknowledged that the rule against raising new
material for the first time in the replying affidavit was not
inflexible. Nestadt J illustrated the point in the following terms:
“
This
is not however an absolute rule. It is not the law of the Medes and
Persians. The court has a discretion to allow new matter
to remain in
a replying affidavit, giving the respondent the opportunity to deal
with it in a second set of answering affidavits.”
[42]
In my view, and without the parties having necessarily raised the
issue, this is one of those cases where the court should
exercise its
discretion and allow the new material raised in the applicant’s
replying affidavit to stand. This material pertains
mainly to the
averments made by Grobler in respect of CMS in his replying
affidavit. The obvious reasoning in this regard is premised
on the
second respondent’s and Grobler’s lack of candour in the
first instance. Had they disclosed prior to the launching
of this
application that Grobler was in fact employed by CMS, instead of
leaving the applicant to second guess what the real state
of affairs
was, it would not have been necessary for the new material arising in
the replying affidavit to have been dealt with
in the manner that the
applicant had. Furthermore, even though Grobler would have been
entitled to file a second set of affidavits,
he had not done so, and
this was not raised as an issue during arguments.
[43]
In his replying affidavit, Nelson had submitted that Grobler’s
contention that he was not employed by the second respondent
was not
entirely correct in that in an e-mail dated 5 December 2013 which was
sent to Patao by one Kotze of the second respondent,
and which was
also copied to Grobler, the latter’s e-mail being [……]
clearly shows that he is employed by the second
respondent. The applicant had also investigated CMS, and a Windeed
search revealed
that:
i.
The sole members of the second respondent
was Gert Cornelius Marx (“Marx”);
ii.
The only active director of CMS was the
said “Marx”;
iii.
and Grobler was appointed as a director of
CMS in september 2005, although he had since resigned.
[44]
Grobler in his answering affidavit conceded that the second
respondent was a competitor of the applicant in the area of
management
of lamp rooms. His contention however was that such
competition was in the normal course of business, and there was
nothing peculiar
about or worthy of protection in the management of
lamp rooms. The issue of any protectable interests will be dealt with
at a later
stage of this judgment. However, in the light of the
concessions that the second respondent is a competitor, and
since CMS
was owned by the sole director of the second respondent,
“Marx”, and further since CMS renders its services
exclusively
to the second respondent, it follows as correctly pointed
out on behalf of the applicant that CMS is in effect, an extension of
the second respondent. I fail to see how it can in these
circumstances be said that the two entities are independent of each
other.
This being the case, it follows that Grobler’s
employment with CMS constitutes a breach of his restraint undertaking
with
the applicant, more particularly its clause 7.1.1.
[45]
It is accepted that merely working for a competitor may not
necessarily be sufficient to grant an interdict. Other than the
fact
that Grobler currently works for a competitor, the questions asked in
Basson v Chilwan
and
Kwik Kopy
still need to be
addressed. These however are to be addressed within the context of
what Grobler’s defence is, and also the
nature of his
employment with the competitor.
[46]
Although Grobler had made a general comment that the agreement was
unenforceable, he did not however point out in what material
respects
he was of the view that the contract was unenforceable or
unreasonable. The thrust of his defence was primarily that he
had no
access to the applicant’s lamp room and the information that
one would acquire therein for over two years. Secondly,
his
contention was that he was never recruited to set up the applicant’s
lamp room management sector. In order to put these
arguments into
context, it will be taken that they pertained to whether in fact
there are any protectable interests that the applicant
is entitled to
protect.
[47]
A restraint would not be regarded as reasonable and enforceable in
the absence of a proprietary interest deserving protection
[14]
.
In
Experian
South Africa (Pty) Ltd v Haynes & another
[15]
,
Mbha J identified protectable interests deserving of protection in
the following terms;
“
It
is well established that the proprietary interests that can be
protected by a restraint agreement, are essentially of two kinds,
namely:
‘
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;
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”.’
(references
omitted)
[48]
The
applicant seeks relief in the form of a final interdict. It therefore
has to show a clear right; the absence of an alternative
remedy; and
that, if the interdict should not be granted, it will suffer
irreparable harm
[16]
. For a
clear right to be established, the court has to consider whether
there is an interest deserving of protection. If this question
is
answered in the affirmative, the next question is whether the
employee is in a position to threaten those interests. If the
answer
is still in the affirmative, those interests must be weighed up
against the interest of the employee not to be economically
inactive
and unproductive
[17]
.
[49]
Grobler’s main contention was that he was employed by the
applicant as a product manager in its SLT division and not
as lamp
room manager. He had contended that although the lamp room services
and integration with the LMS/AMS systems resorted under
his
responsibilities initially, he was never employed to set up the
applicant’s lamp room management offering. Grobler further
contended that he has not had any access to any of the applicant’s
information and/or planning and/or clients and/or systems
employed in
its lamp room management business since the middle of 2011. His
further contention was that the applicant provided
everyone who
purchased lamproom equipment from it with all the necessary
information on how to use lamproom equipment in the correct
manner
and in a manner that is safe.
[50]
Given the nature of the relief that the applicant seeks, and further
in the light of the disputes of facts on the papers, it
is trite that
such disputes should be resolved in accordance with the principles
enunciated in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[18]
.
Accordingly,
where disputes of fact have arisen on the affidavits, a final order,
whether it be an interdict or some other form
of relief, may be
granted if those facts averred in the applicant's affidavits which
have been admitted by the respondent, together
with the facts alleged
by the respondent, justify such an order.
[51]
Nelson had conceded in his replying affidavit that Grobler did not
run the lamp room management division for two years prior
to his
resignation. He however contended that from 2011 until his
resignation, Grobler was employed as the Product Manager of the
applicant’s Lighting Technology division. In that position, he
had worked closely with the lamp room management division,
and had
obtained and used information which was confidential in nature as it
pertained to equipment developed by the applicant
to suit a client’s
needs.
[52]
In the light of the admission by Grobler that the second respondent
is a competitor of the applicant, and further in the light
of the
fact that CMS, which employs Grobler is intrinsicably linked to the
second respondent, or that the two entities are
prima facie
the same company, the following conclusions should be drawn;
The
second respondent, and by implication, CMS, is in competition with
the applicant in the following respects:
The
provision of health and safety equipment and, more particularly,
caplamps, gas instrumentation and rescue packs to the same
customers
and potential customers of the applicant; the provision if lamp room
management services, including the provision of
employees to manage
the lamp room of its customers, who are mines in South Africa; and
the provision of lamp room and asset management
systems to its
customers.
[53]
On Grobler’s own version, CMS is indeed in the business of
inspecting a mine’s lamproom to ensure compliance with
the
relevant legislation. It is effectively the lamp room management of
the second respondent. There is therefore no reason to
reach any
conclusion other than that in respect of the the nature of his duties
under CMS, Grobler is performing the same duties
as performed by a
lamp room manager, and in blatant competition with the applicant.
Furthermore, the second respondent designs,
manufactures, sources,
distributes and sells equipment. Lamp room management service also
includes sourcing equipment for client,
and to that end, CMS would be
required to source the second respondent’s products to client
mines, again, in competion with
the applicant.
[54]
In regards to contact with clients, it was not in dispute that during
his employ with the applicant, Grobler was in contact
with its client
mines and engaged with the client mines in the designing, developing
and manufacturing of new products to suit
their individual needs. He
had therefore developed close relations with the client’s
mines, and had thus has intimate knowledge
of the client’s
mines specific needs.
[55]
Grobler interacted with the applicant’s clients, was involved
on a day to day basis with the planning associated with
client mines
and their specific needs. He has knowledge and awareness of potential
new business with the clients, and also knowledge
of the production
and development of equipment in accordance with clients’ needs.
There is no guarantee that Grobler will
not use all of these client
or customer connections acquired during his employ with the applicant
against it, as he was not inclined
to make any undertakings in this
regard.
[56]
With regards to confidential information or “trade secrets”,
Nelson further filed a “confidential affidavit”,
following from his earlier indication in his founding affidavit that
he intended to get the court’s leave to file such an
affidavit.
In the absence of strenous objections to the “confidential
affidavit”, such leave was granted.
[57]
In this “confidential affidavit”, Nelson made reference
to a sample of documents and copies of e-mails annexed
to the
affidavit, which were exchanged between potential manufacturers and
the applicant, and which also indicates the engagement
of Grobler
with the potential manufacturers in respect of new products; e-mails
involving Grobler in respect of providing feedback
from one of the
applicant’s manufacturer; preparation of reference letters;
requests to Grobler to investigate problems with
the applicant’s
equipment or products; correspondence from manufacturers regarding
queries; Grobler’s liaison with
manufacturers; e-mail
correspondence between Grobler and manufacturers regarding feedback
and suggestions, and exact modifications
to products as suggested by
manufacturers and an e-mail containing a pricelist provided by
Grobler. Nelson had submitted that this
information, which Grobler
was privy to was confidential and included his detailed and intimate
knowledge of the applicant’s
pricing, products, customer
requirements, manufacturer details and problems with certain
products. He further contended that this
information was not in the
public domain.
[58]
It does not appear to be in dispute that Grobler was the applicant’s
representative and had liaised with the manufacturers
regarding
product specifications, capability, quality, and pricing in order to
facilitate the development of the products. Thus
the knowledge he
acquired is not limited to the one already in the public domain in
regards to the training manuals that accompany
products sold to
customers. The knowledge and information in his possession involves
the entire process of manufacture, research
and mechanisms involved
in the design of those products. This information is clearly of
proprietary interest to the applicant.
In this regard, there is no
reason to believe that the applicant will rest assured that this
confidential knowledge will not be
used against it to the advantage
of its competitors, more specifcally the second respondent and CMS.
[59]
At paragraph 20, Mbha J in
Experian South Africa
had
stated the following;
“
As I have pointed
out above, the
onus
is on the respondent to prove the unreasonableness of the restraint.
He must establish that he had no access to confidential information
and that he never acquired any significant personal knowledge of, or
influence over, the applicant’s customers whilst in
the
applicant’s employ. It suffices if it is shown that trade
connections through customer contact exist and that they can
be
exploited if the former employee were employed by a competitor. Once
that conclusion has been reached and it is demonstrated
that the
prospective new employer is a competitor of the applicant, the risk
of harm to the applicant, if its former employee were
to take up
employment, becomes apparent. See
Den
Braven SA (Pty) Limited v Pillay and Another
[2008]
3 All SA 518
(D) at paragraphs [17] to [18]”.
[60]
In this case, Grobler has not established that he had no access to
confidential information. On the contrary he did not dispute
the
applicant’s contention that during his employ with it, he was
responsible for the running of the applicant’s lighting
products and associated products; management of the facility,
personnel, logistics and product development; provision of management
reports, statistics and management costs of the lamp room division;
setting up of applicant’s lamp room management division,
negotiating and concluding contracts with customers for the lamp room
management services, preparing budgets and formulating pricing
in
respect of the lamp room services.
[61]
Crucially, and to repeat what is already stated, Grobler liaised with
manufacturers of the applicant’s equipment to facilitate
the
design and manufacture of such equipment or products, negotiated
costs with manufacturers, facilitated the import and delivery
of
manufactured products and provided technical support to the
applicant’s sales representatives. He also had intimate
knowledge
of the research process, which in its nature is highly
confidential and constituted proprietary information in the
applicant’s
hands. That information obviously gave the
applicant a competitive advantage in the market place, and if it gets
in the hands of
its competitors, that advantange would be lost.
[62]
In the light of Grobler’s role whilst employed by the
applicant, and the nature of the information he had access to,
it can
hardly be said that he had no access to the applicant’s lamp
room and information acquired in that regard as he had
alleged. It is
further improbable that in his new employment as Compliance officer
in CMS, his role is or would be limited to merely
inspecting the lamp
rooms on behalf of the second respondent. It cannot be correct as
contended by Mr. Pio on behalf of Grobler
that the latter’s
position as Compliance Officer is not in conflict with his restraint.
[63]
I am not pursuaded that this application is about an endeavour to
prevent Grobler from exercising his rights under section
22 of the
Consititution. If this was the case, the applicant would have
insisted on the two year period of the restraint clause.
The
application is about the protection of the applicant’s
propritary interests, and the mere fact that Grobler is to be
released earlier from the restraint clause is indicative that there
is reason for the applicant to be apprehensive. Furthermore,
Grobler
had not raised the issue of public policy in his pleadings, and
insofar as it might be argued that his interests would
be prejudiced
by an adverse order, it is my view that given the circumstances of
this matter, his interests cannot supercede those
of the applicant.
[64]
On the whole, it cannot be said that Grobler had no access to
confidential information and that he never acquired any significant
personal knowledge of, or influence over, the applicant’s
customers whilst in the applicant’s employ. As it was also
pointed out in
Experian South Africa
,
it suffices if it is shown that trade connections through customer
contact exist and that the ex-employee can exploit them for
the
benefit of a competitor. This fact has been established by the
applicant. Furthermore, the applicant does not have to show
that
Grobler has already utilised the information confidential to it. All
that it need merely show is that the Grobler could do
so. In the
light of his involvement with a competitor, and his new role therein,
the applicant has every reason to believe that
Grober can utilise the
confidential information in his possession. In the light of these
factors, the risks to the applicant are
apparent, and I am satisified
that the applicant has demonstrated that it is entitled to protection
of its proprietary interests
in respect of its confidential
information and customer connections. In this regard, it has
established a clear right. Given the
circumstances of this case, once
it is concluded that this right has been established, it would not be
necessary to deal at length
with the other requirements pertaining to
the granting of a final order.
[65]
Grobler also contended that this application was an abuse of the
court process. This contention was premised on the fact that
his
holiday plans were disrupted by the launching of this application on
19 December 2013 and the setting down of the application
by the
applicant on 9 January 2014. It was common cause that a consent order
was agreed to on 9 January 2014. I fail to appreciate
how Grobler can
hold the view that his holiday plans were more important than the
fact that the applicant had justifiable cause
to bring this
application on an urgent basis. The fact that the application was
brought at a time that coincided with Grobler’s
holiday plans
cannot be seen as an abuse of the court process, and his contentions
in that regard have no merit.
Costs:
[66]
The costs in respect of the hearing of the application on 9 January
2014 that resulted in a consent order were reserved. Grobler
sought
the costs on the grounds that the application was an abuse of the
court process in view of the timing of the application.
Conclusions
in regard to these contentions have already been made above. It was
however common cause that only the applicant made
an appearance on 9
January 2014, and the consent order was finalised by the parties
telephonically. That consent order was in the
form of interim relief,
and I am of the view that considerations of law and fairness dictate
that no cost order ought to be made
in that regard.
[67]
The only issue of costs to be determined pertains to the application
itself. The application was brought about as a result
of the refusal
of Grobler and the second respondent to be forthright about the
employment of Grobler by either CMS or the second
respondent as far
as 2 December 2013 when the applicant had sought an undertaking from
them. The lack of candour as contained in
their response on 6
December 2013, and the mere denials that Grobler was not employed by
the second respondent or that the latter
was not a competitor in my
view is a matter which the court must show its displeasure at, with
an appropriate cost order. I have
taken account of the fact that
applications concerning restraints of trade ordinarily have
consititutional implications and costs
orders should not be made
lightly
[19]
. However, the
circumstances of this case and the manner with which the respondents
have approached this matter calls for such an
order. In the
circumstances, the following order is made;
Order:
1.
The First Respondent is interdicted and restrained from
directly or indirectly and in any capacity, for a period of 12
(Twelve)
months calculated from 1 January 2014, within the Republic
of South Africa from;
1.1
Engaging in any work or other activity
similar in any way to, or of the kind performed by the first
respondent for the applicant,
involving products or processes similar
to or the same as the products or process with which the first
respondent worked whilst
employed with the applicant, namely the
management services of a lamp room, and the supply of caplamps and
rescue packs;
1.2
Being interested in or concerned with, in
any capacity whatsoever, any person, company or association,
organisation or concern which
competes directly or indirectly with
the applicant or its associated companies;
1.3
Offering employment to, or employ, or cause
employment to be offered to or cause to be employed or solicit any
employee of the applicant
or its associated companies who was
employed by the applicant or its associated companies at the date of
the termination of the
first respondent’s employment on 31
December 2013 or at any time during the six months preceding such
termination.
1.4
Revealing to a third party any confidential
information pertaining to the business of the applicant or its
associated companies,
without prior written consent having been
obtained from the applicant, including but not limited to information
about its inventions,
manufacturing process, financial affairs,
method of design, distribution or procurement for any trade secrets
obtained by the first
respondent whilst in the employ of the
applicant or its associated companies.
2.
The First Respondent is ordered to pay the
costs of this application.
_________________
Tlhotlhalemaje, AJ
Acting Judge of the
Labour Court of South Africa
APPEARANCES:
For
the Applicants:
Adv Christopher Whitcutt SC with
Emma Keeling
Instructed
by:
Edward Nathan Sonnenbergs Inc
For
the Respondent:
Adv. P. Pio
Instructed
by:
Du Plessis & Eksteen Inc
[1]
Annexure
“FA17”
[2]
(Case
No: 818/2011) at para 12
[3]
(Case
no: CA5/2002)
[4]
at
para 25
[5]
at para 29
[6]
[1984] ZASCA 116
;
[1984]
(4) SA 874
(A) at 891 B-C)
[7]
at 896 A-E
[8]
at 893
[9]
1990 4 SA 782
(A) at 794C-E
[10]
[1993] ZASCA 61
;
[1993]
(3) SA 742
(A) at 767 G-H
[11]
1999 (1) SA 472
(W) at 484E
[12]
See
Betlane v Shelly Court CC
(2011 (1) SA 388
(CC) para 29
[13]
(1978
(1) SA 173
(W) at at 177H – 178A
[14]
See
Trevlyn
Ball v Bambalela Bolts (Pty) Ltd and Another
[2013] (9) BLLR 843
(LAC) at para 16, and also
Continuous
Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes and Another
(J 2073/11) [2011] ZALCJHB 150).
[15]
([2013]
(1) SA 135 (GSJ) at paras 17, 17.1 and 17.2
[16]
See
Pilane
and Another v Pilane and Another
2013 (4) BCLR 431
(CC) at para 39.
[17]
See
OH
Mthombo (Pty) Ltd v Bheekie-Odhav
(LC C 177/12) (22 March 2012.)
[18]
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E
[19]
See
Trevlyn
Ball
at
para 30