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[2015] ZALCJHB 278
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Vox Telecommunications (Pty) Ltd v Steyn and Another (J1149/15) [2015] ZALCJHB 278; (2016) 37 ILJ 1255 (LC) (4 September 2015)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case no: J1149/15
VOX
TELECOMMUNICATIONS (PTY) LTD
Applicant
and
MURRAY STEYN
First Respondent
INTERNET SOLUTIONS
(PTY) LTD
Second Respondent
Heard:
5
August 2015
Delivered:
4
September 2015
Summary:
Application
to enforce restraint of trade – application dismissed
JUDGMENT
MYBURGH,
AJ
Introduction
[1]
This
is an application to enforce restraint of trade and confidentiality
undertakings contained in a contract of employment.
[2]
The
applicant (Vox) is a telecommunications operator providing voice,
data and collaboration services both in the wholesale and
retail
market. The second respondent (IS) is also a telecommunications
operator, and is both a direct competitor of Vox and one
of its key
suppliers. IS supplies Vox with,
inter
alia
,
wholesale Internet bandwidth and uncapped ADSL services. The NTT
group of companies owns IS and its parent company, Dimension
Data.
[3]
Before
his resignation (addressed below), the first respondent (Steyn) had
worked for the Vox group for some 14 years and had risen
through the
ranks, finally occupying the position of executive head:
communication solutions, but simultaneously performed the
role of
executive: commercial and regulatory (a position he had previously
held for some time). Steyn held a senior strategic executive
position
and was a member of Vox’s executive management committee.
[4]
With
effect from 30 June 2015, Steyn resigned from Vox and then took up
employment (with effect from 1 July 2015) with IS as executive:
wholesale business. This precipitated the present application, which
is opposed by Steyn, with IS having undertaken to abide the
decision
of the court.
[5]
Although
the relief sought by Vox is wide-ranging, it essentially seeks an
order that Steyn be interdicted and restrained from being
employed by
IS (or its holding company or a subsidiary company) for a period of
12 months commencing on 1 July 2015 throughout
the RSA. Vox seeks
such relief against a tender to pay Steyn his monthly remuneration as
at the time of his resignation for a period
of 12 months, or for such
shorter period that he is unemployed.
[6]
The
papers in this matter are voluminous, and include a confidential
affidavit delivered by Vox and a fourth set of affidavits delivered
by Steyn. Both parties also filed comprehensive heads of argument. In
what follows, in determining the various preliminary points
and
issues on the merits, I endeavour to focus on what I consider to be
the essence thereof.
The
issue of urgency
[7]
Steyn
contests urgency and contends that insofar as the matter is urgent,
it was self-created by Vox. Essentially, Steyn relies
on the fact
that whereas he tendered his resignation on 29 May 2015 (on a month’s
notice) and advised Vox on that day that
he intended joining IS, this
application was only launched on 23 June 2015, and that he was only
afforded (in terms of the notice
of motion) some two days to deliver
an answering affidavit. Steyn also contends that by the time the
matter was heard on 5 August
2015, the proverbial horse had bolted,
in that he had already been in the employ of IS for a month.
[8]
In
assessing the issue of urgency, the following aspects of the
chronology of events warrant highlighting.
a)
During
the period 29 May 2015 to 8 June 2015, Vox’s CEO and then the
chairman of its remuneration committee engaged in talks
with Steyn
with a view to securing the retention of his services.
b)
On
9 June 2015, and when the talks proved unsuccessful, Vox’s
attorneys addressed a letter to Steyn in which a series of
undertakings were sought. Steyn’s attorneys replied on 17 June
2015, and provided only limited undertakings.
c)
This
application was then launched on 23 June 2015 (the papers having been
emailed to Steyn’s attorneys the previous day)
and set down for
30 June 2015 (this being the last day of Steyn’s notice
period).
d)
On
the morning of 30 June 2015, Steyn delivered his answering affidavit,
with the result that the matter could not proceed. At the
hearing of
the matter that day, an order was granted,
inter
alia
,
postponing the matter to 9 July 2015, and directing Vox to deliver
its replying affidavit by 6 July 2015. Costs were costs in
the cause.
e)
The
replying affidavit was, however, only filed on 8 July 2015.
f)
On
9 July 2015, at the hearing of the matter, Vox sought a postponement
in order to finalise a confidential affidavit (that was
to accompany
the replying affidavit), which it undertook to deliver by 09h00 on 13
July 2015. An order was granted to this effect,
with the matter being
postponed to 30 July 2015, and Steyn being awarded his costs of the
postponement.
g)
On
13 July 2015, Vox’s confidential affidavit was delivered two
hours late.
h)
On
29 and 30 July 2015, respectively, Steyn delivered a supplementary
affidavit and a reply to Vox’s confidential affidavit.
i)
On
30 July 2015, the matter was postponed to 5 August 2015, with costs
being reserved.
j)
The
matter was then finally heard on 5 August 2015, by which time Steyn
had been in the employ of IS for more than a month (having
taken up
such employment on 1 July 2015).
[9]
With
reference to the above, I am of the view that Vox was not dilatory in
launching the application, and that it was reasonable
to only do so
after receipt of the letter from Steyn’s attorneys of 17 June
2015. Although Steyn was given a short period
of time within which to
deliver his answering affidavit (two days), he ultimately took a week
to do so, and was thereupon afforded
a significant period of time
within which to deliver his supplementary affidavit and reply to
Vox’s confidential affidavit,
which is indicative of him not
having been prejudiced by the truncated time-periods.
[10]
Regarding
the ‘horse has bolted’ contention, the fact that the
hearing was delayed after 30 June 2015 was as a consequence
of the
fact that it was necessary to exchange further affidavits in order
for the matter to be fully ventilated. It is also not
unusual in
labour law litigation for matters to be heard on the urgent roll
despite the effective date having come and gone (for
example, this
often occurs in section 197 applications). Consistent with this, this
court has entertained urgent restraint of trade
applications brought
at a time when a significant portion of the restraint period had
already elapsed.
[1]
[11]
As
has previously been found by this court, an alleged breach of a
restraint of trade is by its very nature urgent.
[2]
Quite clearly, this is not a matter that is suited to being heard on
the opposed motion roll in the ordinary course, with the earliest
available date apparently being in April 2016. By then the restraint
of trade sought by Vox will all but have run its course. In
all the
circumstances, I am satisfied that Vox has made out a case for
urgency.
Other
preliminary issues
Steyn’s
points in limine
[12]
Steyn
raises two points
in
limine
:
firstly, that the founding affidavit had not been commissioned; and,
secondly, that Vox does not have
locus
standi
to bring this application.
[13]
Regarding
the first point, a very unusual situation arose in this matter.
Instead of commissioning the founding affidavit in the
ordinary
course, the commissioner of oaths used the incorrect stamp,
certifying that each page was “a true reproduction /
copy of
the original”. While it is so that the founding affidavit was
thus not commissioned, the deponent attested to the
truth of the
contents under oath in the replying affidavit. The issue was also
subsequently rectified, with the founding affidavit
having been
properly commissioned and tendered for inspection at the hearing on 5
August 2015. As I understand it, Ms Wood
(who together was Ms
Bosman appeared for Steyn) persisted with the point only insofar as
it has a bearing on costs.
[14]
Regarding
the second point, it arises from the fact that the contract of
employment (containing the restraint of trade and confidentiality
undertakings in question) relied upon by Vox was concluded between
Steyn and Vox Telekom Ltd, a different entity to the applicant
herein. To my mind, there is no merit in the point because it is
common cause that, in 2013, Vox Telekom Ltd sold its business
to the
applicant as a going concern, which attracted the operation of
section 197 of the LRA. Steyn’s contract of employment
thus
transferred from Vox Telekom Ltd to the applicant (referred to herein
as Vox), with it being entitled to enforce the provisions
of the
contract and thus having
locus
standi
.
Insofar as Steyn’s complaint is that this ought to have been
dealt with in the founding affidavit and not in reply (in response
to
the point
in
limine
),
no prejudice was suffered as a result.
Steyn’s
opposition to the confidential affidavit (and replying affidavit)
[15]
As
appears from the chronology of events set out in para 8 above, the
confidential affidavit delivered by Vox was, in effect, the
confidential part of its replying affidavit. It was provided to Steyn
upon him furnishing various undertakings relating to maintaining
the
confidentiality of the information contained therein.
[16]
Steyn
objects to the introduction of the confidential affidavit on two
grounds: firstly, that no application had been made for it
to be
admitted into evidence; and, secondly, that it (and the replying
affidavit) contains new matter that ought to have been contained
in
the founding affidavit, with the result that the offending portions
ought to be struck out.
[17]
Regarding
the first point, it is without merit because leave to deliver a
confidential affidavit was sought from this court in Vox’s
replying affidavit. A prayer for the admission of the confidential
affidavit is also contained in Vox’s application for
condonation for the late filing of its replying affidavit and
confidential affidavit.
[18]
Regarding
the second point, although it is so that the confidential affidavit
(and the replying affidavit) contains new matter,
the issue must be
placed in context. As dealt with in the section below on the legal
principles applicable to restraints of trade,
while Vox has the onus
to invoke the restraint and prove a breach thereof, the onus then
shifts to Steyn to establish that the
restraint is unenforceable
because it is unreasonable. In these circumstances, as submitted by
Mr Whitcutt SC (who appeared for
Vox together with Mr Makka), Vox’s
replying affidavit (and confidential affidavit) constitute, in
effect, an answer to Steyn’s
case that the restraint is
unenforceable (as opposed to a new case in reply). In
Townsend
Productions (Pty) Ltd v Leech and others
2001 (4) SA 33
(C) at 41A-D, the High Court sanctioned the very
approach adopted by Vox. While Spilg J adopted a different approach
in the unreported
judgment
[3]
relied upon by Ms Wood, I prefer the approach adopted in
Townsend
Productions
.
[19]
There
is an additional reason why Vox may be entitled to some latitude when
it comes to the scope of its replying / confidential
affidavit. This
is because its founding papers were premised on Steyn taking up
employment with IS as the head of wholesale voice
services only,
whereas it appears from Steyn’s answering affidavit that he has
been appointed to head up the entire wholesale
operation at IS, and
not merely voice services. According to Vox, this required it to
recalibrate its case in reply.
[20]
Furthermore,
Steyn has not suffered any demonstrable prejudice by the introduction
of the confidential affidavit – this in
circumstances where he
has delivered a comprehensive reply thereto.
[21]
In
the premises, the confidential affidavit is admitted into evidence,
and the application to strike out is dismissed.
The
applications for condonation
[22]
This
then leaves for determination a number of applications for
condonation. As appears from the chronology of events set out in
para
8 above, Vox delivered its replying affidavit late (by two days) and
its confidential affidavit late (by two hours). Having
perused Vox’s
applications for condonation, I am of the view that a proper case for
the grant of condonation has been made
out, with the result that
condonation is granted.
[23]
The
unopposed application by Steyn for the late delivery of his answering
affidavit is also granted.
Restraints
of trade: legal principles
[24]
Before
dealing with the merits of the application, this is a convenient
point at which to deal with the legal principles applicable
to
restraints of trade. They have been set out in some detail in a
number of decisions of this court,
[4]
and are summarised below with reference thereto.
[25]
An
agreement in restraint of trade is enforceable, unless it is
unreasonable (and thus contrary to public policy). A restraint of
trade will generally be considered unreasonable if it does not
protect some legally recognisable interest of the party in whose
favour it is granted, but merely seeks to eliminate competition.
[5]
[26]
A
party seeking to enforce a restraint agreement is required only to
invoke the restraint and to prove a breach of its terms (this
being
Vox’s onus). Once this has been done, the onus is on the
respondent to prove on a balance of probabilities that the
restraint
agreement is unenforceable because it is unreasonable (this being
Steyn’s onus).
[6]
[27]
The
enquiry into the reasonableness of a restraint is a value judgment
that involves a consideration of two policy considerations,
namely
the public interest, which requires that parties to a contract must
comply with their contractual obligations, and the principle
that a
citizen should be free to engage or follow a trade, occupation or
profession of his or her choice.
[7]
[28]
In
Basson
v Chilwan
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767C-H, the court set the following test for
determining the reasonableness or otherwise of a restraint agreement:
a)
Is
there an interest of the one party (in this case Vox), which is
deserving of protection at the termination of the agreement?
b)
Is
such an interest being prejudiced by the other party (in this case
Steyn)?
c)
If
so, does such an interest so weigh up qualitatively and
quantitatively against the interest of the latter party that the
latter
(Steyn) should not be economically inactive and unproductive?
d)
Is
there another facet of public policy having nothing to do with the
relationship between the parties which requires that the restraint
should either be maintained or rejected?
Insofar
as the interest in (c) exceeds the interest in (a), the restraint
would be unreasonable and accordingly unenforceable.
[8]
[29]
A
further consideration should be added, namely whether the restraint
is wider than what is necessary to protect the protectable
interest.
[9]
[30]
The
proprietary interests (see the first consideration in
Basson
(supra)
)
that can be protected by a restraint agreement are essentially of two
kinds. The first is 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 it, to gain a relative advantage.
This is
sometimes referred to as “trade secrets”. The second is
the relationships with customers, potential customers,
suppliers and
others that go to make up what is referred to as the “trade
connection” of the business.
[10]
[31]
Whether
information constitutes a trade secret is a factual question. For
information to be confidential, it must be: capable of
application in
the trade or industry (i.e. it must be useful and not be public
knowledge); known only to a restricted number of
people or a closed
circle; and of economic value to the person seeking to protect
it.
[11]
It is for the
respondent to establish that he or she had no access to that
information or that he or she had never acquired any
significant
personal knowledge of, for example, the applicant’s customer
basis while in its employ. All that the applicant
need show is that
there is secret information to which the respondent had access and
which in theory the respondent could transmit
to the new employer if
he or she was inclined to do so. In order to enforce the restraint,
the applicant does not have to show
that the respondent has in fact
utilised information confidential to it; it is sufficient to show
that the respondent could do
so.
[12]
[32]
Indeed,
the very purpose of a restraint agreement is that the applicant does
not wish to have to rely on the
bona
fide’s
or
lack of retained knowledge of confidential knowledge on the part of
the respondent.
[13]
Put
differently, the applicant should not have to content itself with
crossing its fingers and hoping that the former employee
will not
breach the restraint.
[14]
It
is for this reason that an application to enforce a restraint of
trade is not necessarily defeated by the respondent giving
an
undertaking that he or she will not disseminate or utilise
confidential information.
[15]
[33]
Regarding
customer connections, the need of the employer to protect its trade
connections arises where the employee has access to
customers and is
in a position to build up a particular relationship with a customer
so that when he or she leaves the employer’s
service he or she
could easily induce the customer to follow him or her to a new
business. Once that conclusion is 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 would take up
employment becomes apparent.
[16]
[34]
Although
restraints of trade typically afford protection against employees
joining competitors, as Mr Whitcutt submitted, there
exists no reason
why a supplier restraint should not be recognised. The rationale for
enforcing restraints depends first and foremost
on the protection to
the business afforded by the restraint, rather than focussing
necessarily on whom the protection operates
against. Thus, there can
be restraints against poaching employees rather than only against
soliciting customers, and either of
those two can be enforced against
someone who is nonetheless permitted to take up employment with a
competitor. Similarly, a restraint
against disclosure of confidential
information is not confined to disclosure to a competitor, but must
operate to protect against
disclosure to any party which can utilise
that knowledge to the prejudice of the goodwill of the business in
favour of which the
restraint has been obtained.
[35]
The
purpose of a restraint of trade undertaking is to protect the
goodwill of a business, with goodwill including connections with
suppliers. In this regard, Neethling says this about goodwill:
[17]
“
Similarly,
goodwill is a unit in its emanations to potential customers,
suppliers
,
credit granters and employees. This is proven by the continuous
interaction of these emanations. The stronger the attracting power
of
the goodwill towards
suppliers
,
the more favourable the conditions of the supply of stock.”
(Emphasis added.)
[36]
As
Mr Whitcutt went on to submit, if a company’s goodwill requires
protection by way of a supplier restraint, then in principle
there is
nothing less enforceable about such a restraint as compared to an
employee restraint against soliciting customers or employees
or
joining a competitor. The rationale for the restraint remains the
same: the protection of the company’s proprietary interests.
[37]
While
I am in agreement with these submissions, it seems to me that a
supplier restraint would typically be motivated by the ex-employer’s
desire to ensure that the employee joining the supplier did not share
with it confidential information that might cause the supplier
to
change the terms of supply or otherwise treat it differently. By
comparison, the motivation is much narrower than that which
applies
to a competitor restraint.
The
merits of the application
The
contractual provisions and their interpretation
[38]
Vox
relies particularly on clauses 17 and 18 of Steyn’s contract of
employment concluded on 12 December 2007 (“the contract”).
Clause 17 (headed “trade secrets”) essentially provides
that the employee will during the course of his employment
acquire
knowledge of the company’s trade secrets (which are listed
[18]
)
and records an undertaking by the employee not to disclose any trade
secrets (so as to protect the proprietary interests of the
company
therein) during or after his employment with the company.
[39]
This
then brings one to the critical clause 18 (headed “restraint”).
It reads in full as follows (the quotation is verbatim):
“
a.
In order to protect the proprietary interests of the Company as
stated in clause 17 of this Agreement,
the Employee undertakes to the
Company that he
shall
not during this agreement and for a period of 2 (two) years after the
termination of this Agreement
for any reason whatever, be directly or indirectly
i.
approach any customer of the group (which is defined as any customer
indicated on the debtors list which
has been active during the six
months prior to your termination) for the purposes of conducting a
similar or competitive business
to the group’s business with
such customers;
ii.
approach any prospective customer or leads which are being contacted
by the group at the time of termination
of your employment or have
been contacted during the 6 months prior to the termination of your
employment, for the purposes of
conducting competitive business with
such customer or lead;
iii
take up employment with any customer of the group, whether such
employment is in the capacity of employee,
director, consultant,
agent or any other capacity whatsoever;
iv.
take
up employment with any supplier of the group (defined as any business
with whom the group has business dealings for the supply
of the items
outlined herein during the six months prior to your termination)
,
unless you are given specific written agreement to same by the
Managing Director or other senior authorised manager;
v.
either for yourself or as an agent for anyone else persuade or
procure any employee of the group who has been
or is employed at any
time during the restraint period in the sale, installation and
service of the products in the Republic by
the group, to end his
employment and be employed, or be directly or indirectly interested
or concerned (whether financially or
otherwise) in any way in such a
competitive business;
vi.
carried on within the Republic of South Africa; and
vii.
which
competes with any business conducted by the Company at the
termination date of this Agreement
(‘the competitive business’).
b.
The Employee acknowledges –
c.
the restraint imposed upon him in terms of 17.a is reasonable as to
subject matter, area
and duration, and is reasonably required by the
Company to protect and maintain the goodwill of the Company’s
business;
d.
the provisions of 17.a shall be construed as imposing a separate and
independent restraint
in respect of –
e.
each of the years falling within the period referred to in 17.a,
and
f.
every locality falling within the area; and
g.
every activity failing within the ambit of a competitive business;
and
h.
every capacity, in relation to a competitive business, in which the
Employee is prohibited
from acting in terms of 17.a;
i.
The provisions of clause 17.a shall not be construed as prohibiting
the Employee from
i.
acting as a director, officer or employee of, or consultant to the
Company, whether in terms of a written
Service Agreement or not;
ii.
acquiring or holding not more than 5% (five percent) of the issued
ordinary shares in any Company which
is for the time being listed on
any recognised stock exchange, even if such Company carries on any
competitive business, provided
that nothing herein shall permit the
Employee to be directly or indirectly involved or engaged or
concerned or interested in the
affairs and management of such
Company;
iii.
if any of these provisions is wholly or partly invalid or
unenforceable, the remaining provisions will continue
to be
enforceable.” (Emphasis added.)
[40]
As
a reading of clause 18 reveals, several parts of it are literally
incomprehensible. While sub-clause (a)(iv) provides that Steyn
is
restrained from taking up employment with a
supplier
of the group (see further below), sub-clauses (a)(vi) and (vii) make
no sense whatsoever, and do not provide for Steyn being restrained
from taking up employment with a
competitor
(which I refer to as “a competitor restraint”).
[41]
In
its founding affidavit, Vox sought to address this problem by
pleading that it is an implied term of the contract that the words
“Steyn is restrained from taking up employment with a company
(like the second respondent)” appear before the word
“competes”
in clause 18(a)(vii). There is no merit in this, and it was not a
line pursued by Mr Whitcutt in argument.
An implied term is imported
into a written contract as a matter of law, and is part of the
naturalia
of the contract. An implied term arises out of the common law,
statute or so called “trade usage” and is “used
to
describe an unexpressed provision of the contract which the law
imports therein, generally as a matter of course, without reference
to the actual intention of the parties”.
[19]
The term that Vox seeks to imply into the contract simply does not
constitute an implied term.
[42]
Not
pursued by Vox was the option of pleading that a competitor restraint
was a tacit term of the contract, or the option of pursuing
the
rectification of the contract. Mr Whitcutt did, however, submit in
argument that the words mentioned above should, in effect,
be read
into clause 18(a)(vii) so as to give the clause business efficacy.
But to my mind, this would involve the court effectively
creating a
contract for the parties (i.e. a competitor restraint) which it is
not empowered to do. In the result, I conclude that
while clause 18
of the contract serves to restrain Steyn from joining a supplier of
Vox, it does not restrain him from joining
a competitor.
[43]
There
is another issue of interpretation that can conveniently be dealt
with at this point. It relates to the scope of the term
“supplier
of the group” in clause 18(a)(iv). Does it mean that in order
for employment with the supplier to be prohibited,
the supplier must
supply the entire group or would a supply contract with a company
within the group suffice? To my mind, the use
of the word “group”
was intended to cast the net wider (in the sense of covering any and
all suppliers to group companies)
and not narrower (in the sense of
limiting the restraint to only those suppliers who happen to supply
all companies throughout
the group). In the context of a restraint of
trade and having regard to the purpose thereof, the narrower
interpretation (which
was contended for by Steyn) is neither sensible
nor business like.
[20]
Vox’s
onus: restraint and breach
[44]
As
set out above, Vox bears the onus of proving the restraint agreement
and a breach of its terms. With reference to the analysis
undertaken
above, I am satisfied that Vox has established that Steyn is
restrained from taking up employment with a supplier to
a group
company. (But, as dealt with above, Vox has not established that the
contract includes a competitor restraint.)
[45]
Turning
to the issue of breach, in circumstances where it is common cause
that Steyn took up employment with IS on 1 July 2015 and
remains in
its employ, and that IS is a supplier of Vox, I am also satisfied
that Vox has established a breach of the restraint
agreement.
(Indeed, Steyn himself concedes in his supplementary affidavit that
his employment by IS “may constitute a technical
breach of the
terms of clause 18(a)(iv)”.) The onus is now on Steyn to
establish that the restraint is unreasonable and thus
unenforceable.
The
first and second considerations in Basson (supra): an interest worthy
of protection, and, if so, is the interest threatened?
[46]
Turning
now to the considerations set out in
Basson
(supra)
,
it is convenient for present purposes to deal with the first and
second considerations (paraphrased above) together.
[47]
As
mentioned above, it is common cause that Vox and IS are both
telecommunications operators, that Vox and IS are competitors, and
that IS is a supplier of Vox. But in the light of my finding about
the contract not containing a competitor restraint, it is Vox’s
relationship with IS
qua
supplier
that is of particular relevance to this application, and not Vox’s
relationship with IS
qua
competitor.
[48]
In
argument, Mr Whitcutt submitted that in circumstances where IS is
both a competitor and supplier of Vox, it is artificial to
maintain a
distinction between the two roles (insofar as this can be done) for
the purposes of this application. I do not agree
with this
submission. The distinction must be maintained throughout, and
particularly when considering whether Vox has a protectable
proprietary interest. Here the question is not whether Steyn is
possessed of trade secrets and customer connections that may be
of
use to IS in its capacity as a competitor of Vox, but rather in its
capacity as a supplier to Vox. This cuts down and limits
the
information that is relevant. Not to do so would potentially result
in a competitor restraint (which is not included in the
contract)
being enforced against Steyn under the guise of a supplier
restraint.
[49]
Put
differently, as submitted by Ms Wood, the competitive interface
between Vox and IS is not relevant to this application –
this
because the restraint only prohibits Steyn from taking up employment
with a supplier of Vox. Vox’s case must thus be
viewed through
the prism of its relationship with IS
qua
supplier, with it being in this context that any possible harm which
Steyn may be able to cause Vox must be viewed.
[50]
Turning
then to the supplier relationship between Vox and IS and Steyn’s
role therein, during his employment with Vox, Steyn
was responsible
for negotiating and concluding commercial contracts with suppliers,
such as IS. There are three facets of the supplier
relationship
between Vox and IS.
a)
The
first facet involves the wholesale of Internet bandwidth by IS to
Vox. In circumstances where the current agreement between
the parties
has expired, there is a month-to-month arrangement in place, with it
being Steyn’s contention that he cannot
influence the pricing
for various reasons, including that a deflationary pricing model is
in place.
b)
The
second facet involves the reseller relationship between Vox and IS
involving ADSL, and the so-called “25 legacy services”.
IS currently supplies Vox with ADSL, but Vox has given notice of its
intention to cancel this arrangement and to migrate to its
own
platform. Regarding the legacy services, their contribution to Vox’s
revenue is said (by Steyn) to be miniscule (0.5%
or less in respect
of a particular category of revenue).
c)
The
third facet involves the bilateral peering relationship between Vox
and IS, which relates to the interconnection between the
networks of
Vox and IS. This takes place on a “settlement fee” basis,
with no consideration being paid by Vox to IS,
with the result that
it is not open to manipulation.
[51]
Based
on this analysis, Steyn contends that he cannot influence the
business of IS in its capacity as a supplier of Vox such that
it
could harm the business of Vox. Market trends, as Ms Wood put it,
simply do not allow for this. On the papers before me, I am
in
agreement with this.
[52]
In
argument, in response to the “supplier analysis” advanced
by Ms Wood, Mr Whitcutt did not seek to challenge it head
on, but
instead placed heavy reliance on the Telkom reseller agreement, which
Steyn had been involved in negotiating with Telkom
on behalf of Vox
before his resignation (the agreement has yet to be concluded) (“the
Telkom venture”).
a)
Vox
says this about the Telkom venture:
“
This
innovation is highly strategically valuable and is not known to any
supplier
rivals
.
It represents a commercial opportunity that IS can capitalise upon
as
a supplier
.”
(Emphasis added.)
And
further:
“
Steyn
has been responsible for the negotiations and can use this
information to assist in the
IS
supplier strategy
.”
(Emphasis added.)
b)
In
his reply on this issue, Steyn,
inter
alia
,
denies that the services would be provided on a wholesale basis, and
contends that they are provided on a retail basis –
it thus
being his contention that he will not be in a position to make use of
any of this information to the benefit of IS because
he is employed
in its wholesale, and not retail, division. However, Steyn goes on to
record as follows:
“
Be
that as it may, I undertake that I will not deal with Telkom in
respect of any retail business for the 12 month period of my
restraint. I also undertake that I will continue not to disclose to
[IS] any information in relation to the discussions that were
underway between Telkom and [Vox] in terms of which [Vox] may have
been granted the right to resell and bill Telkom services.”
c)
With
reference to this undertaking, Mr Whitcutt went on to submit that Vox
is under no obligation to accept it, and that it is entitled
to
enforce the restraint in order to ensure that its proprietary
interest in the confidentiality of the information in question
is
protected. He submitted further that the Telkom venture is in itself
a sufficient basis upon which to enforce the restraint.
(See further
below.)
[53]
The
balance of Vox’s case in argument on a protectable proprietary
interest was advanced by Mr Whitcutt undertaking a finely
grained
analysis of, in particular, the contents of the confidential
affidavit, and Steyn’s reply thereto. Under the head
of
confidential information possessed by Steyn, Mr Whitcutt placed
emphasis on Steyn’s knowledge of: Vox’s five year
growth
strategy; Vox’s online growth strategy; the Frogfoot
acquisition by Vox; presentations made at the senior managers’
conference; churn rates; marketing strategies; the Free State
Development Corporation contract; and the Alcatel OTEC. As the
confidential
affidavit reflects, it is Vox’s case that all of
this information would be of value and assistance to IS if Steyn made
disclosure
thereof. Mr Whitcutt then addressed the various customer
connections held by Steyn.
[54]
On
the basis of the analysis summarised in para 53 above, if Steyn was
party to a competitor restraint, I would probably have been
persuaded
that Vox has a protectable proprietary interest in restraining him
from being employed by IS
qua
competitor.
But as Ms Wood correctly submitted, Vox cannot base its case on
confidential information relative to IS
qua
competitor. To my mind, all of the information relied on by Vox
summarised in para 53 above falls into that category. The same
applies to the customer connections.
[55]
The
question that remains for consideration is whether the confidential
information held by Steyn in relation to the Telkom venture
is
relevant to Vox’s relationship with IS
qua
competitor or
qua
supplier. As mentioned above, Mr Whitcutt submitted that it relates
to the supplier relationship, and this appears to be borne
out by the
use of the word “supplier” in the extracts from the
confidential affidavit quoted above. However, upon careful
evaluation, it seems to me that the information is rather relevant to
the competitor relationship. This for the following reasons.
In terms
of the Telkom venture (and on the assumption that it comes to
fruition), Vox will enhance the supply of services into
the market
(on either a wholesale or retail basis). It wishes to protect the
relevant confidential information, for fear that IS
may seek to do
likewise in a similar manner. This goes to the relationship between
Vox and IS
qua
competitor, and not
qua
supplier.
[56]
In
the result, to my mind, in respect of the relationship between Vox
and IS
qua
supplier, no protectable proprietary interest has been established in
this matter that is under threat or being prejudiced. The
application
thus fails on this basis alone, with there being no need to consider
the remainder of the considerations in
Basson
(supra)
.
(It is also not necessary to address Steyn’s attack on the
whittling down of the restraint, and his attack on the duration
of
the restraint.)
[57]
Before
turning to make my order on the merits of the application, I should
mention that I do not intend repeating the orders and
rulings that I
have made above on the various preliminary issues. It also warrants
mention that the parties are in agreement that
any order that is made
may include the undertakings given by Steyn in relation to the Telkom
venture.
Order
[58]
In
the result, the following order is made:
a)
The
application is dismissed.
b)
The
first respondent shall not deal with Telkom in respect of any retail
business for a period of 12 months commencing 1 July 2015,
and shall
not disclose to the second respondent any information in relation to
the discussions that were underway between Telkom
and the applicant
in terms of which the applicant may have been granted the right to
resell and bill Telkom services.
c)
The
first respondent is ordered to return all copies of the applicant’s
confidential affidavit and annexures (hard and / or
soft copies)
immediately after the handing down of this judgment.
d)
The
applicant shall pay the costs of the application, including the costs
occasioned by the postponements on 30 June 2015 and 30
July 2015.
Costs shall include the costs of two counsel.
________________________________
Myburgh, AJ
Acting
Judge of the Labour Court of South Africa
APPEARANCES:
On
behalf of the applicant: C Whitcutt SC and A Makka (instructed by
Webber Wentzel)
On
behalf of the first respondent: D Wood and P Bosman (instructed by
Hogan Lovells)
[1]
See, for example,
ARB
Electrical Wholesalers (Pty) Ltd v Grove and Others
(C335/14) [2014] ZALCCT 31 (3 June 2014) at para 20.
[2]
ARB Electrical
(supra)
at
para 20;
Pinnacle
Technology Shared Management Services (Pty) Ltd and Another v Venter
and Another
(J1095/15) [2015] ZALCJHB 199 (14 July 2015) at para 6.
[3]
Interpark
(South Africa) Ltd v Andre Joubert & Really Useful Parking
Company (Pty) Ltd t/a Easipark
(unreported SGHC judgment, case no. 09/29946, dated 29/3/2010) at
para 59.
[4]
See, for example,
New
Justfun Group (Pty) Ltd v Turner and Others
(J786/14) [2014] ZALCJHB 177 (14 May 2014);
ARB
Electrical (supra); Shoprite Checkers (Pty) Ltd v Jordaan &
another
(2013)
34
ILJ
2105 (LC).
[5]
New Justfun
Group
(supra)
at para 8;
ARB
Electrical (supra)
at para 25.
[6]
New Justfun
Group
(supra)
at para 9;
ARB
Electrical (supra)
at para 26.
[7]
Ball v
Bambalela Bolts (Pty) Ltd and another
[2013] 9 BLLR 843
(LAC) at para 15.
[8]
New Justfun
Group
(supra)
at para 10;
ARB
Electrical (supra)
at para 27;
Shoprite
(supra)
at para 23;
Ball
(supra)
at para 16.
[9]
Shoprite
(supra)
at para 24.
[10]
New Justfun
Group
(supra)
at para 11;
ARB
Electrical (supra)
at para 28.
[11]
Townsend
Productions (supra)
at
53J-54B.
[12]
New Justfun
Group
(supra)
at para 13.
[13]
New Justfun
Group
(supra)
at para 13.
[14]
ARB Electrical
(supra)
at para 30.
[15]
New Justfun
Group
(supra)
at
para 20.
[16]
New Justfun
Group
(supra)
at para 12;
ARB
Electrical (supra)
at para 29.
[17]
Van Heerden &
Neethling
Unlawful
Competition
(2
nd
ed) at 102.
[18]
They include all
internal controls, financial details of the company’s
relationship with its suppliers and customers, knowledge
of and
influence over the company’s customers, details of the
company’s financial structure and operating results,
buying
policies and strategies, salary and wage policy, recruitment and
employment policy, details of the company policy relating
to
expansion and marketing, and other matters relating to the business
of the company, in respect of which information is not
readily
available in the ordinary course of business to a competitor of the
company.
[19]
Alfred McAlpine
& Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531.
[20]
Natal Joint
Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at para 18.