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[2014] ZALCJHB 97
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Dust A Side Partnership v Ludik and Another (J151/14) [2014] ZALCJHB 97 (3 April 2014)
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA,
IN JOHANNESBURG
JUDGMENT
Of
interest to other judges
Case
no: J 151/14
In
the matter between:
DUST A SIDE
PARTNERSHIP
Applicant
and
LUDIK, ERIK
First
Respondent
PURPLEGLAZE
3 CC T/A E-CAT
Second
Respondent
Heard:
27 March 2014
Delivered:
03 April 2014
Summary:
(Restraint of trade – applicant having protectable interest
which the coventor’s employment by the second
respondent
threatened – enforcement nonetheless declined -
unreasonable to enforce one month before restraint due to
expire –
Costs – fair and equitable for respondents to pay the
costs despite successful opposition).
JUDGMENT
LAGRANGE,
J
Introduction
[1]
This is an urgent application to enforce an
agreement in restraint of trade. The matter was originally set down
for hearing on 30
January 2014. On that date the parties agreed to
postpone the matter for an extended period until 27 March 2014 to
permit the filing
of answering and replying papers as well as heads
of argument.
[2]
The essential features of the provisions of
the restraint agreement contained in the first respondent’s
contract of employment
were that, for a period of six months
calculated from the date of termination of his employment on 25
October 2013, he had undertaken:
2.1
to keep confidential and not to disclose
any of the applicant’s trade information and secrets to any
other person during the
continuance of his employment or at any time
thereafter;
2.2
not to be interested in any way whatsoever
in any competing business to that of the applicant in the areas of
Sishen and the Northern
Cape;
2.3
not to solicit the custom, transact or deal
with or accept any custom from, any of the applicant’s
customers or any person
that was a customer of the applicant.
The
restraint further defined the term ‘interested’ to
include an interest as an employee of a competing business.
[3]
The applicant conducts a dust prevention
undertaking mainly serving various mining sites throughout the
country, in which it has
been engaged for over thirty years. The
applicant was employed as a contract manager at the applicant’s
Sishen mining site
for a period of about eleven months until he
resigned with effect from 25 October 2013. After that he had a brief
stint of employment
with another firm, but that did not work out
because of the shift he was required to work. He then urgently sought
work through
a labour broking firm. In December 2013 was approached
by the second respondent, Purple Glaze 3 CC t/a E-CAT, with an offer
of
employment which he accepted. He was offered alternative
employment by the applicant but that would have required him to
relocate
to Witbank which was not feasible given that his wife was
still currently employed by a building contractor in Kathu, where she
had worked for the last eight years. In January when he took up
employment with the second respondent, he was made aware by the
applicant that it might seek to enforce the restraint of trade
agreement against him, but he felt he had little choice but to pursue
his employment with the second respondent.
[4]
In summary, the applicant asserts that it
has the following interests which it claims are deserving of
protection:
4.1
the sourcing, costing and pricing of its
own unique bitumen emulsion product, which it claims is very
successful and sought after,
is a trade secret;
4.2
the knowledge of the method of applying the
emulsion for dust control purposes, known as the' application
protocol' which the applicant
claims is an important element in
generating revenue;
4.3
knowledge of the pricing, specification and
sourcing of specialised brooms developed by the applicant for
cleaning surfaces;
4.4
relationships with customers in the
relatively small Northern Mining community in which the applicant has
developed through its
long-term operation in the industry, and
4.5
a detailed knowledge of pricing products
and operational activities of the applicant which are essential to
servicing the applicant's
customers.
[5]
In my view anyone who has knowledge of the
elements of the applicant’s business described above and who
played a direct role
in fostering and maintaining customer relations
would be a valuable asset to a competitor of the applicant by reason
of such knowledge
and experience. The respondents also do not claim
that any of the information mentioned is public knowledge or easily
obtainable
from sources other than persons with inside knowledge of
the applicant’s business, save in respect of the specialised
brooms
supplied by the applicant. In the circumstances, I am
satisfied that the interests described above do constitute interests
deserving
of protection.
[6]
Although the respondents’ dispute
that the second respondent is a competitor of the applicant, they do
so only on a narrow
basis, namely that they are resellers or agents
of suppliers of dust control products whereas the applicant also
manufactures its
own unique bitumen emulsion in conjunction with one
of its suppliers. However, the respondents do not contend that the
second respondent
is not in the business of providing dust control
products and services in the mining industry. The fact that the
second respondent
is not involved in the development of its own
products, but simply sources them from suppliers and uses them in
accordance with
the supplier’s own application protocols does
not mean in relation to the final service they provide to customers
that they
are not competing in the same market as the applicant. On
the papers there is nothing to suggest that a mining company could
not
approach either the applicant or the second respondent to provide
similar dust control products or services. Accordingly, on the
balance of probabilities, I believe the second respondent is a
competitor of the applicant.
[7]
The main thrust of the respondents’
defence is to dispute the existence of the protectable interests
asserted by the applicant,
and to deny that the first respondent has
any knowledge, or partial knowledge of any value concerning the
information which it
seeks to protect. In respect of the specialised
brooms referred to by the applicant, the first respondent denies that
he has the
know-how to assist the second respondent in developing a
competing product and asserts that it could not be difficult for
third
parties to acquire information about the brooms. The first
respondent claims a sweeping ignorance of information about the
bitumen
emulsion product and its application for dust control
purposes.
[8]
Similarly, he denies any detailed or
intimate knowledge of the applicant's products, operations, services
and pricing. He also volunteered
that he never took part in any
meetings at which the sensitive issues referred to were discussed.
This is strongly disputed in
reply by the applicant. It mentions a
number of site managers meetings that the applicant attended at which
budgets, the financial
statements and forecasts for the Northern Cape
region were discussed in detail. It also points out that on a monthly
basis he received
information on product prices per litre, available
square meterage of road surface area and the rand value of the
contract per
square metre. The applicant further contends that given
his position as the person managing one of the applicant's largest
contracts,
his claim to be so ignorant of the information in question
is ludicrous.
[9]
The first respondent avers that as the
contract manager, the information he had access to, was common
knowledge to anyone on site
who had anything to do with the contract
including those involved in safety incident investigations or the
authorisation of licenses
for water tankers. Although the applicant
admits that some of the information about the bitumen emulsion
product might have been
common knowledge among other employees, there
was information such as the actual application of the product per
square metre which
only he had access to.
[10]
On the question of customer relationships
the second respondent admits he had built a working relationships
with the people he came
into contact with, but denies that this had
any material impact on the business of the applicant because the
applicant’s
customers do business with it on the basis of its
products, which he was not in a position to supply from the second
respondent's
business. The respondent disputes the applicant’s
contention that the working relationships were of insignificant
commercial
value because it was those relationships that would enable
the first respondent to persuade a customer to do business with the
second respondent.
[11]
Although there is some dispute of fact on
the papers, the onus falls on the respondents to prove that the
applicant’s protectable
interests are not compromised or likely
to be compromised, by the first respondent's employment by the second
respondent. There
are some issues raised in reply by the applicant
disputing the second respondent’s claimed ignorance of
significant information.
Ordinarily, some of these replies might be
ignored, but to a degree they do arise out of specific averments by
the second respondent
which could not have been anticipated by the
applicant and required a response. If the second respondent felt that
he could have
rebutted some of that additional information it was
open to him to have applied for leave to file a supplementary
affidavit.
[12]
In any event, a further difficulty I have
in evaluating the respondents’ case is that the answering
affidavit is characterised
by a certain shyness when it comes to
detailing why the second respondent's business is supposedly that
different from the applicant.
More importantly, there is precious
little detail about what the first respondent's duties,
responsibilities and actual knowledge
of the applicant’s
business was. Similarly, virtually nothing is laid before the court
to elaborate on the scope of his current
duties and responsibilities
in his new employment with the second respondent.
[13]
Had he provided greater detail on these
matters, it might have gone some way to demonstrate that he was able
to perform his job
as a contract manager without any knowledge of the
sensitive information the applicant seeks to protect. I am not
persuaded on
what is before me that his level of ignorance of
sensitive information could have been as extensive as he claims.
[14]
Consequently, there is reason to believe
that the relationships the first respondent developed with the
applicant’s customers
and his knowledge of information about
the applicant’s business, which he could only have gained
through his employment with
it, would be of value to the second
respondent and the applicant’s interest in preventing a
competitor from accessing that
value is compromised by the second
respondent employment of the first respondent.
[15]
In
Basson v
Chilwan
1993 (3) SA 742
(A) at 775I–777B, it was stated that
“
The
incidence of the
onus
in a case concerning the
enforceability of a contractual provision in restraint of trade does
not appear to me in principle to entail
any greater or more
significant consequences than in any other civil case in general. The
effect of it in practical terms is this:
the covenantee seeking to
enforce the restraint need do no more than to invoke the provisions
of the contract and prove the breach.
The covenantor seeking to avert
enforcement is required to prove on a preponderance of probability
that in all the circumstances
of the particular case it will be
unreasonable to enforce the restraint; if the court is unable to make
up its mind on the point,
the restraint will be enforced.
[16]
On
the evidence, I am satisfied that the applicant has established that
the first respondent has breached the terms of his restraint
of trade
with the applicant by taking employment with the second respondent, a
competitor of the applicant, before 6 months had
expired since he
left the applicant’s employment. Further, the respondents
have failed to disprove that the applicant
has a protectable interest
in relation to information about its products, pricing and costing
and its customer relations which
was threatened by the first
respondent’s breach in taking up employment with the second
respondent.
[1]
[17]
The only question that remains, in the
absence of the existence of alternative defences, is whether it is
reasonable at this juncture
to enforce the restraint, given that on
the date when the parties had agreed the matter should be heard the
restraint was due to
expire in one month’s time.
[18]
Mr Snyman
for
the applicant contended that since the parties had agreed to postpone
the matter, the respondents could not rely on the lateness
of the
hearing to contend that it would be inappropriate to enforce when the
period of the restraint has almost run. Whilst I agree
that the
respondents were party to the postponement, it was really in the
hands of the applicant to agree to such a leisurely timetable
for
finalising the matter, having initially launched the application on
six calendar days notice.
[19]
The order sought is in the form of an order
of specific performance. It is well known that a plaintiff is always
entitled to claim
specific performance and assuming he makes out a
case, his claim will be granted, subject only to the court’s
discretion.
In
Haynes v King Williams’
Town Municipality
1951 (2) SA 371
(A) at 378G, it was stated:
“
The
discretion which a Court enjoys, although it must be exercised
judicially, is not confined to specific types of cases, nor is
it
circumscribed by rigid rules. Each case must be judged in the light
of its own circumstances.”
Further,
it has been held that:
Good
and sufficient grounds for refusing specific performance is where it
would operate unreasonably hard on the respondents or
where the
agreement giving rise to the claim is unreasonable, or where the
decree would produce injustice, or would be inequitable
under all the
circumstances.”
[2]
[20]
It
is also well established that the time for assessing the
reasonability of the restraint is the time when enforcement is
sought.
[3]
It is with these
principles in mind that I turn to the question whether or not the
restraint should be enforced at this time.
[21]
In this instance, if an order of specific
performance was granted it would have the effect of the first
respondent having to leave
the second respondent’s employment
for a period of a month having been employed for three months
already. I accept on the
one hand that the applicant is entitled to
enforce the restraint, but in deciding if it reasonable to do this
now I must also consider
the relative value to the applicant of
removing the first respondent from the second respondent’s
employment for a month
at this juncture and the loss of an entire
month’s income by the first respondent. My concern is that the
protectable interests
the applicant has are unlikely to be served at
this point by neutralising the first respondent’s employment
with the second
respondent for the last month of the restraint.
Further, any potential prejudice the applicant might suffer as a
result of the
first respondent’s breach of the restraint in all
probability has already occurred. At this juncture, depriving the
first
respondent of a month’s earnings where his absence from
the second respondent’s workplace is unlikely to serve the
purpose of the restraint does not seem to strike a reasonable balance
between the applicant’s right to enforce the agreement
and the
second respondent’s freedom to engage in economic activity.
[22]
Had the applicant pressed ahead with this
application on the urgent basis on which it launched it, at which
stage the applicant
had scarcely been employed by the second
respondent for a month and there was a better chance of shielding the
applicant’s
protectable interest from being prejudiced by
neutralising the first respondent’s involvement in the second
respondent’s
business, the position might well have been very
different. At that time the value of enforcing the restraint to the
applicant
would have been much more obvious as it still had three
months to run.
[23]
Nevertheless, even though I decline to
enforce the restraint, the applicant was fully justified in launching
the application at
the time it did and I do not see why it should
have to bear the costs of this application, despite being ultimately
unsuccessful
solely on account of the time when the enforcement of
the restraint came to be considered. I am also mindful of the fact
that the
second respondent admitted to being made aware that the
applicant may bring this application if he was employed by the second
respondent.
Accordingly, I believe it would be just and
equitable for the respondents to pay the applicant’s costs.
Order
[24]
In light of the above,
24.1
The application is dismissed
24.2
The respondents are jointly and severally
liable for the applicant’s costs, the one paying the other to
be absolved.
_______________________
R LAGRANGE, J
Judge of the Labour
Court of South Africa
APPEARANCES
APPLICANT:
S Snyman of Snyman Attorneys
FIRST
RESPONDENT: H
Vorster instructed by Wynand Bester Attorneys
[1]
It
is not that the applicant must disclose an actual breach of the duty
not to provide information to the second respondent, it
is
sufficient that there is a real risk of that happening and an
undertaking by the employee that he will respect the confidentiality
of the information he acquired is not enough to deny the employer
the right to enforce the restraint. See
Reddy
v Siemens Telecommunications (Pty) Ltd
2007
(2) SA 486
(SCA)
at
499-500 at [20].
[2]
Klimax
Manufacturing Ltd and another v Van Rensburg and another
[2004]
2 All SA 301
(O) at 304, para [13]
[3]
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
1984 (4) SA 874
(A)
at 894F–G