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[2014] ZALCJHB 209
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Business Connexion (Pty) Limited v Petrus and Another; In re: Business Connexion (Pty) Limited v Strydom and Another (J981/2014; J1022/2014) [2014] ZALCJHB 209 (11 June 2014)
REPUBLIC
OF SOUTH AFRICA
IN THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
NOT
REPORTABLE
CASE
NO: J981/2014
In
the matter between:
BUSINESS
CONNEXION (PTY)
LIMITED
Applicant
and
NAGEL
CHRISTOFEL GERT
PETRUS
First
Respondent
EOH
MTHOMBO (PTY)
LIMITED
Second
Respondent
CASE
NO: J1022/2014
BUSINESS
CONNEXION (PTY)
LIMITED
Applicant
and
JOHANNES
HENDRIK STRYDOM
First
Respondent
EOH
MTHOMBO (PTY)
LIMITED
Second
Respondent
Date
heard: May 20 2014
Delivered:
June 11 2014
Summary:
Urgent applications for interdictory relief iro restraint of trade
agreements.
JUDGMENT
Rabkin-Naicker
J
[1]
These matters were heard as consolidated applications which the
applicant sought to be heard as semi-urgent. By the time the
matter
came to court the relief sought was final and was claimed against the
first respondents in each matter, as well as the second
respondent
company:
2.1
“that the First Respondent be, and is hereby, interdicted and
restrained for a period
of 12 (twelve) months with effect from 14
April 2014 within the boundaries of the Republic of South Africa:
2.1.1 from
directly or indirectly persuading, inducing, encouraging, procuring,
soliciting or employing any employee
or consultant of the Applicant
to terminate his employment or association with the Applicant or
furnish any information
or advice acquired by that employee to any
unauthorized person;
2.1.2 from
being interested or engaged, either directly or indirectly, in any
firm, business or undertaking which carries
on any activity, either
solely or in conjunction with any party, in competition with the
business carried on by the Applicant;
2.1.3 taking
up and/or continuing employment with the Second Respondent;
2.2
that the First Respondent be, and is hereby, interdicted and
restrained for a period of
6 (six) months with effect from 14 April
2014 within the boundaries of the Republic of South Africa from
directly or indirectly
persuading, inducing, encouraging, procuring
or soliciting any licensor or supplier or client of the Applicant to:
2.2.1
terminate its license and/or supply and/or other agreement with the
Applicant; or
2.2.2 enter
into a license and/or supply and/ or other agreement with him or any
other third party or entity; or
2.2.3 require
any license and/or supply and/or the agreements with the Applicant to
be altered to terms or conditions
less advantageous to the Applicant;
or
2.2.4
purchase any products supplied by the Applicant as at 14 April 2014
from a competitor of the Applicant;
2.3
that the First Respondent be, and is hereby, interdicted and
restrained from using and/or
disclosing any of the Applicant’s
trade secrets or confidential business information;
2.4
that the Second Respondent be, and is hereby interdicted and
restrained for a period of
12 (twelve) months with effect from 14
April 2014, from employing the First Respondent directly or
indirectly, or in any manner
whatsoever, within the boundaries of the
Republic of South Africa.”
Background
[2]
Essentially, the applicant (BCX) wishes to enforce restraint of trade
agreements that it entered into with its former employees,
the first
respondents (Nagel and Strydom). It is common cause on the papers
that BCX and the second respondent (EOH) are trade
rivals, direct
competitors in the IT industry and provide similar services to
respective clients throughout the country. The industry
they operate
in is highly competitive, and BCX and EOH often target the same
clientele and compete for the same budget from such
clientele. BCX
and EOH also compete for resources in the form of employees in the
industry.
[3]
During 2013, both BCX and EOH submitted extensive tenders to provide
manufacturing execution systems (MES) to Sasol Group Services
(Pty)
Ltd (Sasol). The MES managed services had been rendered to Sasol by
BCX since 2001. This entailed full-time support of various
software
and hardware components to support Sasol's production operations and
processes.
[4]
The 2013 tender was awarded by Sasol to be E0H by way of a three-year
contract with effect from 1 November 2013, with an estimated
contract
value of approximately Rand 60 million per year. BCX in line with its
contractual obligations, has since entered into
a "transitional
phase" in which it has cooperated in the process of handing over
the MES managed services to EOH.
[5]
On 11 March 2014, Nagel tendered his resignation with BCX. This
resignation was followed by what the applicant describes as
a bidding
war between EOH and BCX during which Nagel eventually signaled his
intention to remain with BCX.
However
on 8 April 2014, he suddenly indicated that he was in fact leaving
for EOH as he had originally planned. His last date
of employment
with BCX was Friday 11th of April 2014 and he immediately took up
employment with EOH on Monday, 14 April 2014. Since
that time it is
alleged that he has met with several of his subordinates from BCX and
advised them to follow him to EOH. Strydom
has followed Nagel to join
EOH.
[6]
The key issues which must be interrogated by the court in this matter
are as set out in
Mozart Ice Cream Franchises(Pty) Ltd v Davidoff
and Another
2009 (3) SA 78
(C)
as follows:
(1)
Is there an interest on the part of the applicant that is deserving
of protection after
the termination of a business relationship?
(2)
Is that interest prejudiced by the conduct of respondents?
(3)
If the interest is so prejudiced, how does that prejudice get weighed
both qualitatively
and quantitatively against the interest of the
respondents to be gainfully employed and to pursue the right of the
dignity of work
if the order sought is so granted?
(4)
Is there any other aspect of public policy as mediated by the values
of the Constitution
and which is unrelated to the relation between
the parties that, nonetheless, requires the restraint either to be
upheld or to
be struck down?
(5)
Does the restraint go further than absolutely necessary to protect
the
legitimate interest of the applicant that
it is deserving of legal protection in terms of the balancing
exercise which I have outlined?
[1]
Evaluation
[7]
In its founding affidavit BCX avers that:
"BCX and Sasol are
currently in the final stages of negotiating a “Cooperation
Agreement” whereby BCX, EOH and
Sasol jointly agreed that EOH
would refrain from further interference, and in particular to stop
soliciting or employing BCX employees.
This
agreement however does not deal with previous offenders such as Nagel
and Strydom.”
[8]
It is further averred by the general manager of the applicant that:
“
It took
considerable time and effort for me to normalise the situation, to
pacify BCX employees and to negotiate the aforementioned
Cooperation
Agreement (which would prevent a further interference with BCX
employees).
[9]
The continued employment of Nagel and Strydom (the previous
offenders) it submits, creates an ongoing infringement of
the
restraint undertakings in question and a further threat of BCX’s
confidential information finding its way to a trade
rival.
[10]
It is further submitted that the harm will not "easily be
remedied" by a claim for damages after the fact, because
by the
time such a claim is heard the harm would have been done. BCX will
also “likely struggle” to mount a sustainable
claim for
damages once the information is leaked, it is alleged.
[11]
The restraints of trade in question are contained in the first
respondent's contracts of employment with BCX, include the following:
"the employee shall
not, while he is associated in any capacity with the company or the
group for the period of 1 (one) year
from the date of termination of
this association with the company (for any reason whatsoever),
directly or indirectly, use for
his own benefit, or the benefit of
any other person, and shall keep confidential and not disclose, any
of the trade secrets and
confidential business information of the
company and/or the group and/or any client of the company and all the
group other than
to those persons connected with the company or the
group, who are required to know those secrets will to have that
information.”
[12]
The restraint undertakings provide that the expression "trade
secrets and confidential information of the company and/or
the client
shall include, but shall not be limited to the technical details,
techniques, know-how, method of operating, cost and
source of
material, pricing and purchasing policies, names of customers of the
company and/or the group and/or that any client
of the company and/or
the group (including potential customers with whom the company has
not yet contracted, but intend contracting
for the purpose of doing
business).” There is also a prohibition on “pirating
fellow employees”. The restraints
set out in the agreements
apply in all the magisterial districts of the Republic for a period
of one year.
[13]
The founding papers deal with the 2013 Sasol tender and state as
follows:
"27.
In order to facilitate a smooth transition of the MES managed
services, BCX eventually agreed
to release a specific 11 (eleven) of
its technical oriented employees (who had by then dedicated more than
80% of their working
time on MES managed services) to become employed
by the EOH, should the employees so wish, but on strict condition
that:
27.1
this would not constitute a section 197 transfer;
27.2
E0H shall not solicit any more BCX employees during the transitional
phase; and
27.3 the
said 11 (eleven) employees would keep BCX confidential information
secret.
28.
This arrangement was confirmed by way of written Heads of Agreement
on 7 November 2013…”
[13]
The said Heads of Agreement annexed to the founding affidavit contain
the following salient term:
“
8.
EOH will not solicit any Business Connexion employee whose name is
not stated on the
list as provided by Sasol to EOH.
Business
Connexion agrees that it cannot prohibit an employee from approaching
EOH’s directly…..”
(my emphasis)
[14]
The Heads of Agreement are dated 7 November 2013. In the light of the
above provisions, it is curious to understand how the
applicant now
submits that there is a protectable interest which is prejudiced by
the conduct of first respondents. The proposition
is further weakened
by averments in the answering papers that the tender with Sasol was
reviewed during January 2014 to the extent
that 60% of the MES
services were awarded to EOH (which EOH has been rendering since 1
May 2014) and 40% to BCX. Both companies
are therefore rendering MES
services to Sasol.
[15]
It is further submitted on behalf of the respondents that in
determining whether or not there are propriety interests that
can be
protected, or warrant being protected by enforcing the restraints of
trade, that the following evidence contained in the
answering
affidavits is relevant:
15.1
Sasol was an existing long-standing and very well-known client of
EOH, which had rendered extensive services,
including MES services,
to Sasol since 2008.
5.2 It
is common cause, taking into account an admission in the replying
affidavit, that prior to EOH being awarded
the current tender there
was a due diligence process and that EOH was made privy to all of
Sasol's information with regard to the
MES environment as well as the
relevant services by way of a due diligence process
15.4
Employees of EOH and BCX worked closely together at Sasol, and EOH
became fully acquainted with Sasol's production
operations in process
and Sasol has been a long-standing and very well-known client of EOH.
15.5
Whatever knowledge any employees of BCX might have gained in regard
to the production operations and processes
of Sasol has equally been
gained by employees of EOH and thus the knowledge of Sasol's
production operations and processes does
not constitute confidential
information.
[16]
In all the above circumstances, and specifically given the content of
the Heads of Agreement annexed to the founding papers
(most
especially clause 8 thereof) I find that in the context of the Sasol
tender and the provision of MES services, BCX has waived
its right to
enforce the restraints of trade it had with the first respondents in
these applications. The Heads of Agreement clearly
did not prohibit
any BCX employee from approaching EOH directly in the context of the
Sasol tender. Clause 8 of that agreement
flies in the fact of an
allegation that a protectable interest has been prejudiced on the
facts of this case. BCX has not even
passed go on the test as
enunciated in the Mozart Ice Cream Franchises case. In fact the tenor
of the applications leads this court
to conclude that the litigation
had more to do with the competitive relationship between BCX and EOH
within the industry that they
operate. I see no reason why costs
should not follow the result.
Order:
1.
The applications are dismissed with costs.
_______________
Rabkin-Naicker J
Judge
of the Labour Court of South Africa
Appearances:
Applicant:
Adv. J du Plessis instructed by Gildenhuys Malatji Incorporated
Respondents:
Advs L Hollander and M de Oliveira instructed by Botoulas
Krause & Da Silva INC
[1]
At
page 85 I-J to 86 A-B