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[2015] ZALCJHB 442
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Mpact Operations (Pty) Ltd t/a Mpact Plastics Wadeville v Whitehead and Another (J1335/2015) [2015] ZALCJHB 442 (25 September 2015)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case
No: J 1335/2015
Not
reportable
Not
of interest to other judges
In
the matter between:
MPACT OPERATIONS
(PTY) LTD
T/A MPACT
PLASTICS WADEVILLE
Applicant
AND
KIRSTY WHITEHEAD
POLYOAK PACAGING
(PTY) LTD
First Respondent
Second
Respondent
Heard
:
20 July 2015 2015
Delivered
:
25 September
2015
Summary
:
Restraint of trade. Application granted
with costs.
JUDGMENT
AC
BASSON J.
Introduction
[1]
This is an application for final relief to
enforce a restraint of trade and certain confidentiality undertakings
incorporated in
a written restraint of trade agreement concluded
between the applicant (Mpact Operations (Pty) Ltd t/a Mpact Plastics
Wadeville)
and the first respondent (“Ms Whitehead”) on 1
November 2011 (“the agreement”). This application was
prompted
by the resignation of the first respondent from her
employment with the applicant and her subsequent employment by the
second respondent
(Polyoak Packaging (Pty) Ltd (“Polyoak”).
[2]
The first respondent was employed by the
applicant as a National Sales Manager and later as the National
Business Development Manager
in its plastics operation in Wadeville.
Shortly after her appointment, she was requested to sign - and did in
fact sign - the restraint
of trade agreement with the applicant. Mr
Bachelor - the General Manager at the time - signed the agreement on
behalf of the applicant.
In terms of the agreement the first
respondent undertook not to disclose or use applicant’s
confidential information to third
parties after the termination of
her employment. She also undertook that she would not become employed
in any capacity whatsoever
with any business which carries on
business directly or indirectly in competition with any business
carried on by the applicant.
The period of the restraint sought to be
enforced is 12 months and is set to terminate on 30 June 2016.
Enforcement is sought within
Gauteng (the greater Johannesburg area)
which includes Ekurhuleni (East Rand), City of Johannesburg
Metropolitan Municipality.
Urgency
[3]
The first respondent took issue with the
urgency of the application. I have considered the founding affidavit
and the reasons set
out therein as to why this application is urgent.
The deponent (Mr Albertse – General Manager of the Wadeville
operations)
to the founding affidavit states that following the
resignation of the first respondent, but during her notice period and
on or
about to June 2015, he (Albertse) and the applicant had a
discussion concerning her resignation. During the discussion she
informed
Albertse that she would be joining the second respondent but
that her employment did not constitute competition with the applicant
as she was joining Polyoak’s so-called BlowPack division.
[4]
On two later occasions following her
resignation, the first respondent approached Albertse regarding her
agreement. At that stage
Albertse had no knowledge of the restraint
of trade agreement as he only joined the applicant in December 2014.
According to him,
the first respondent requested him to obtain
written confirmation from the Managing Director of the applicant’s
plastic division
(Mr Naidoo) that she would be released from the
agreement. He explained with reference to the written formal
delegation of authority
in place at the applicant that only Naidoo
had the authority to waive or vary the restraint. He further
explained that the first
respondent (by requesting him to obtain the
written authority) was alive to the fact that she had to obtain a
written release from
the contract as the restraint of trade agreement
contains a non-variation clause and contains a provision that any
waiver of or
release from the agreement would have to be in writing.
[5]
On 19 June 2015 Albertse sent an e-mail to
the first respondent in which he stated that she had failed to
disclose the full extent
of the restraint of trade agreement to him
during their previous discussions and that his acceptance of her
resignation should
in no way be construed as a release or a waiver of
the obligations under the restraint of trade agreement.
[6]
On 25 June 2015 the attorneys of the
applicant addressed a letter to Polyoak in which it was recorded that
the first respondent
had concluded the restraint of trade agreement
with the applicant and that an undertaking was sought from Polyoak
that it would
not employ the first respondent in breach of her
restraint of trade undertakings. An extension was sought by Polyoak
to obtain
legal advice. An extension was granted until 1 July 2015 on
the basis that Polyoak would not employ the first respondent until 6
July 2015. It became clear to the applicant on 3 July 2015 that no
undertaking was forthcoming. The first respondent further took
up
employment with Polyoak on 6 July 2015.
[7]
It was submitted on behalf of the applicant
that it had therefore endeavoured to resolve the dispute without
having to approach
this Court and that it has acted without delay
once it became clear on 3 July 2015 that no undertakings would be
given on behalf
of first respondent.
[8]
I am satisfied that in light of the
aforegoing, the application is urgent. Furthermore it must also be
pointed out that it is generally
accepted that applications of this
nature are inherently urgent and there is no alternative way of
obtaining adequate redress by
placing this matter on the normal court
roll.
Brief
background facts
[9]
The applicant operates three separate
businesses through three separate divisions namely: (i) Plastics
(which forms the subject
matter of this application); Paper and (iii)
Corrugated. The Plastics division manufactures a range of plastic
packaging products,
beverage, personal care, home care,
pharmaceutical and other related markets. The two major operations
within the Plastic division
are the Wadeville operation and the
so-called fast moving consumer goods business (“FMCG”)
which is situated in Pinetown
and Atlantis.
[10]
The Wadeville operation consists of two
sites. This site specialises in the manufacture of plastic packaging
using polyethylene
terephthalate (“PET”) and closures
using high-density polyethylene (“HDPE”) and
polypropylene (“PP”).
The applicant’s FMCG serves a
customer base in the FMCG market.
[11]
The first respondent’s main
contention is that she will be employed in the BlowPack division
(which is not directly competitive
with the Wadeville operations
where she was employed). The applicant took issue with this
contention. Firstly, the second respondent
is a competitor across the
range of the plastics divisions of the applicant’s operations
and consequently the first respondent
will be in a position to
disclose confidential information to Polyoak. Secondly, the
applicant’s Wadeville operations and
its FMCG operations were
not kept hermetically separate.
[12]
The first respondent attended a joint sales
collaboration day with the Wadeville and FMCG operations during which
confidential information
across a spectrum of both operations was
openly shared. Furthermore, on 30 May 2015 an e-mail was circulated
to the sales teams
from both Wadeville and the FMCG department to
which two versions of the generics catalogue comprising of products
marketed by
both Wadeville and FMCG were attached. This internal
version was embargoed from disclosure to clients or suppliers because
it contained
confidential information. Furthermore, the first
respondent was involved with a number of new projects together with
the FMCG division
which related to new products and all new
customers.
[13]
It is common cause that the second
respondent is a direct competitor of the applicant’s Wadeville
operations through its PET
products. The second respondent’s
BlowPack division in Johannesburg competes directly in respect of
certain products with
the applicant’s FMCG division. The
applicant submitted that the first respondent is in possession of
confidential information
that could directly benefit Polyoak’s
HDPE and PET divisions. Furthermore although Polyoak consists of
various divisions
at a regional level, the divisions are managed
through one regional manager and that this structure exacerbates the
potential for
proprietary information to be disclosed between the
different divisions. Therefore, the mere fact that the first
respondent will
be rendering his services in the BlowPack division
does not bar her from sharing information to benefit the other
divisions.
[14]
The applicant also refers to the fact that
first respondent in her role as National Sales Manager was
responsible for managing and
developing the sales team as well as
delivering results, preparing budgets and interfacing with and
managing all existing and prospective
customers and managing new
business development. In her role as Business Development Manager she
was responsible for product development
and in the course of such
duties interface directly with new and existing customers. She was
also responsible for preparing proposals
and pricing for existing and
new customers. All pricing proposals are determined based on an
application of the applicant’s
costing model. A detailed
description of the costing model is contained in a confidential
affidavit that was placed before the
Court. I do not intend for
purposes of this judgement to explain how the costing model operates.
Suffice to point out that the
first respondent knows the details of
at least three of the costing models and it was submitted on behalf
of the applicant that
the information pertaining to the costing
models would enable a competitor to undercut on pricing given the
fact that products
are price sensitive.
[15]
The applicant also submitted that as part
of the management team, the applicant was privy to and played an
integral role in the
implementation of the applicant’s
strategic objectives in the plastic industry. To this end the first
respondent attended
a strategy session on 22 January 2015 during
which the applicant’s strategic actions to be taken in relation
to new markets
- such as the so-called “hotfill” market -
was discussed. Following the strategic session, a detailed action
plan was
drafted and specific functions were allocated to the first
respondent in respect of some of these products. More in particular,
she was specifically tasked to investigate the “hotfill food”
market. These projects and the manner in which the applicant
intended
to implement these products, are not yet in the public domain and are
intended to give the applicant a competitive advantage
in the market.
It was submitted that a disclosure of these products in a public
document will destroy the confidentially thereof.
The applicant
further submitted that these products constitute an opportunity
which, if disclosed to any competitor including Polyoak,
would enable
them to build on the applicants strategic innovations in order to
short-circuit the process.
[16]
In respect of the first respondent’s
customer connections, it was submitted that she has been working
closely with a number
of clients in order to meet the specific needs
that they may have in the market. To the end the first respondent
formed close relationships
with various customers. She had also
visited customers at their premises to gain an understanding of their
processes; their existing
business requirements and their
requirements for innovative and new products.
[17]
On 8 June 2015 the first respondent sent an
e-mail to an existing customer in which she made the following
statement:
“
I
resigned from Mpact and will be moving to another plastic Company….
I am uncertain if I will be replaced any time soon
and if anyone else
will be picking up the project. Although my new position is not in
PET, I would so like to meet with you in
my personal capacity, if
possible, and this was/is something which I’m passionate about
and wanted to follow through with
it. Please let me know your view.”
[18]
It was submitted on behalf of the applicant
that the contents of this e-mail - at least on the face of it –
convey a willingness
on the part of the first respondent to secure
the business of a customer for herself or for her new employer and
that she is thus
willing to misappropriate a maturing corporate
opportunity from the applicant to Polyoak or to herself. I am in
agreement with
this submission: This e-mail clearly confirms,
firstly, that the first respondent would be in a position to continue
customer relationship
and projects developed still in a developing
phase the applicant with her new employer notwithstanding the fact
that she will be
employed in a different division and secondly, her
willingness to divulge information to her new employer. I am further
in agreement
with the submission that the first respondent’s
contention that her employment constitutes no threat to the applicant
because
she will be employed in a different division is without
merit. (I will return to this issue herein below.)
Preliminary
issues
[19]
The first respondent claimed the following:
(i) Firstly there is no valid restraint of trade agreement which
binds her. In this
regard she claimed that when the restraint of
trade agreement was concluded in November 2011, the General Manager -
the signatory
to the agreement - did not have the necessary authority
to complete the agreement. She also contended that at the time of the
agreement
the Human Resources Manager either deliberately or
negligently misrepresented to her that agreement would not be
enforced and that
the applicant had a policy of not enforcing
restraint of trade agreements. (ii) Secondly, the first respondent
contended that she
was released from the agreement by the current
manager (Albertse). In this regard she contended that in so far as
the applicant
disputes this allegation, the applicant should
nonetheless be bound by the principal of ostensible authority. (iii)
Thirdly, the
first respondent contends that even if the Court finds
that the agreement is binding, the applicant has no proprietary
interest
worthy of protection either in the form of customer goodwill
or in the form of confidential information. (iv) Fourthly, the
agreement
should not be enforced because of the conduct of the
applicant when it constructively dismissed the first respondent.
[20]
I intend to deal with the first two points
raised on behalf of the first respondent very briefly: At the time
when the agreement
was entered into (November 2011), the signatory to
the agreement on behalf of the applicant did in fact have the
necessary authority
to sign the agreement. In respect of the second
point it appears from the applicant’s written policy of
delegation of authority
that any release of the restraint would have
to be authorised by the Divisional Managing Director (Mr Naidoo). In
this case this
was not done. Furthermore the contention by the first
respondent that she was misled by the Human Resources Manager is not
borne
out by the facts. If this was so the first respondent would not
have gone to the lengths she did to obtain written confirmation
from
Naidoo that she was released from restraint of trade agreement. She
also would not have sought to ensure that such release
was recorded
in writing as is required in terms of her contract of employment.
[21]
I am therefore satisfied that a valid
restraint of trade agreement existed at the time the first respondent
left the employment
of the applicant.
Brief
exposition of the law
[22]
A party seeking to enforce a contract in restraint of trade is
required to invoke the restraint agreement and proof a breach
thereof. Thereafter a respondent who seeks to avoid the restraint of
trade agreement bears the onus to demonstrate on a balance
of
probabilities that the restraint agreement is unenforceable because
it is unreasonable
[1]
.
[23]
An applicant does not have to show that the first respondent is
mala
fide
before being allowed to enforce its contractually agreed right to
restrain a first respondent.
[2]
The applicant also does not have to show that the first respondent
has in fact used the information only that he could do so.
[3]
An undertaking by an employee that he or she will not breach the
agreement is not relevant to the exercising of the court’s
discretion.
[4]
[24]
The Court in
Basson
v Chilwan and Others
[5]
set out the test to determine the reasonableness or otherwise of a
restraint of trade as follows:
“
Vier
vrae moet in dié verband gestel word:
(a)
Is daar 'n belang van die een party wat na afloop van die ooreenkoms
beskerming verdien?
(b)
Word so 'n belang deur die ander party in gedrang gebring?
(c)
Indien wel, weeg sodanige belang kwalitatief en kwantitatief op teen
die belang van
die ander party dat hy ekonomies nie onaktief en
onproduktief moet wees nie?
(d)
Is daar 'n ander faset van openbare belang wat met die verhouding
tussen die partye
niks te make het nie maar wat verg dat die
beperking gehandhaaf moet word, al dan nie? (Laasgenoemde vraag kom
nie hier ter sprake
nie.)
Vir
sover die belang in (c) die belang in (a) oortref, is die beperking
in die reël onredelik en gevolglik onafdwingbaar. Dit
is 'n
kwessie van beoordeling wat van geval tot geval kan wissel (Sibex
Engineering Services (Pty) Ltd v Van Wyk and Another
1991 (2) SA 482
(T) te 486H).
Die
partye se eie beskouing, soos in die ooreenkoms verwoord, oor wat
redelik is, kan nooit deurslaggewend wees nie. (Die Magna-saak
supra
te 488E-F.) Ten eerste word die redelikheid van die verbod eers by
nabetragting deur 'n hof beoordeel aan die hand van faktore
en
maatstawwe wat nie noodwendig deur die partye in oënskou geneem
was nie. Ten tweede kan die inhoud van die ooreenkoms nie
self die
uitsluitlike maatstaf wees van wat redelik is nie, want dan word die
behoorlikheid van die ooreenkoms aan homself getoets.”
[25]
The Court in
Kwik
Kopy (SA) (Pty) Ltd v Van Haarlem and Another
[6]
added a further consideration namely whether the restraint goes
further than is necessary to protect the interests of an applicant.
[26]
In terms of
Basson
[7]
two kinds of proprietary interests can be protected by a restraint of
trade agreement: Firstly, 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 relatively
competitive
advantage. Such confidential material is generally referred to as
“trade secrets”. Secondly, the relationships
with
customers, potential customers suppliers and others. This proprietary
interest is sometimes referred to as the “trade
connections”
of the business and is an important aspect of its incorporeal
property known as “goodwill”.
[8]
[27]
It is a factual question whether information constitutes a “trade
secret” (confidential). For information to be
confidential it
must be (i) capable of application in trade and industry. In other
words the information must be useful and not
be public knowledge and
property. (ii) The information is known to a restricted number of
people, and (iii) is of economic value
to the person seeking to
protect it.
[28]
In respect of customer connections it is accepted that there is a
need for an employer to protect his trade connection with
customers
in circumstances where an employee was in a position to build up a
particular relationship with the customer to such
an extent that when
the employee leaves the employer’s service, he could easily use
the customers to follow him to a new
business. See in this regard
Rawlins
and Another v Caravantruck Ltd
:
[9]
“
In
Morris (Herbert) Ltd v Saxelby
[1916] 1 AC 688
(HL) at 709 it was said that the relationship must be
such that the employee acquires 'such personal knowledge of and
influence
over the customers of his employer . . . as would enable
him (the servant or apprentice), if competition were allowed, to take
advantage of his employer's trade connection . . .'.
This
statement has been applied in our Courts (for example, by Eksteen J
in
Recycling
Industries (Pty) Ltd v Mohammed and Another
1981
(3) SA 250 (E)
at
256C-F). Whether the criteria referred to are satisfied is
essentially a question of fact in each case, and in many, one of
degree. Much will depend on the duties of the employee; his
personality; the frequency and duration of contact between him and
the customers; where such contact takes place; what knowledge he
gains of their requirements and business; the general nature of
their
relationship (including whether an attachment is formed between them,
the extent to which customers rely on the employee
and how
personal their association is); how competitive the rival businesses
are; in the case of a salesman, the type of product
being sold; and
whether there is evidence that customers were lost after the employee
left
(Heydon
(op cit
at 108-120); and see also
Drewtons
(Pty) Ltd v Carlie
1981
(4) SA 305
(C)
at
307G-H and 314C and G).”
[29]
I have already pointed out that a respondent must establish that he
had no access to confidential information or that he does
not have
influence over the applicant’s customers.
[10]
[30]
The applicant in this matter is seeking final relief. As such it must
show a clear right; an injury actually committed or reasonably
apprehended; and the absence of any other satisfactory remedy that
may have been available to the party seeking interdict. This
remedy
is discretionary and the Court has a wide discretion.
[11]
Where a dispute exists on the papers, the Court must decide whether
these disputes are capable of satisfactory determination without
recourse to oral evidence. A bare denial by a respondent of the
averments contained in the founding affidavit does not create a
real
dispute of fact.
Does
a valid restraint of trade agreement exist and did the first
respondent breach the agreement?
[31]
I have already referred to the fact that the applicant bears the onus
to show the existence of restraint of trade undertakings
and that the
first respondent is in breach thereof. I have already concluded that
the applicant has discharged the onus of showing
that a restraint of
trade agreement existed.
[31]
The high watermark of the first respondent’s defence is that
the applicant does not have a proprietary interest that
is worthy of
protection in either customer connections or confidential
information. Furthermore, she was not involved in the applicant’s
FMCG operations (which is akin to Polyoak’s BlowPack Division).
The first respondent therefore contended that her restraint
only
pertains to the PET operations and not to the so-called FMCG
operations. Furthermore she contended that she has taken up
employment with Polyoak but only in its BlowPack (FMCG) division -
which manufactures its products using HDPE as opposed to PET
–
and that she consequently did not breach the terms of her restraint
of trade agreement.
[32]
This submission on behalf of the first respondent loses sight of the
fact that the first respondent had concluded the restraint
of trade
in November 2011 and up until very recently the applicant had both a
PET and a FMCG division in Johannesburg. It is therefore
clear from
the restraint of trade agreement that it prohibits the first
respondent from taking up employment with a direct competitor
within
the greater Johannesburg area which, on the common cause facts, she
did. The applicant has accordingly proved that a restraint
of trade
agreement was concluded and that the first respondent had breached
the agreement.
The
applicant’s proprietary interests
[33]
On behalf of the first respondent it was submitted that the first
respondent did not have a connection with customers to the
extent
that would allow the first respondent to easily introduce customers
to follow her to another business. It was further submitted
that the
first respondent also did not have access nor was she exposed to
confidential information or trade secrets which would
require the
protection sought by the applicant.
[34]
In respect of confidential information I have already referred to the
fact that the Financial Manager of the applicant (Mr
Meyer) had sent
an email to the first respondent as late as June 2015 to which
documents were attached relating to the costing
models for a client.
The costings are recorded in an Excel spreadsheet (the first
attachment) which contains up-to-date information
of the Wadeville
operations as a whole. The second sheet calculates the up-to-date
overheads for the Wadeville operation and the
last sheet takes these
costs and applies them towards a particular project. This shows that,
contrary to the assertions by the
first respondent that she was not
fully apprised of the raw material costs and overhead costs as of
April 2015 that she was in
fact fully apprised of not only the raw
material costs and overheads of the Wadeville operations but also the
percentage allocation
to a particular project. The first respondent
was therefore privy to the applicant’s sales budget for the
2015 financial
year. This information regarding costing undoubtedly
is confidential and is of use to a competitor.
[35]
Furthermore, as early as 7 April 2015, the first respondent was aware
of the customer complaints that troubled the applicant.
In this
regard I am in agreement with the submission that this information is
undoubtedly of value to a competitor in light of
the fact that
customers are the lifeblood of any business and if a competitor is
aware of a customer that is dissatisfied, a competitor
will be able
to target that customer and may be able to capitalise on that
dissatisfaction.
[36]
The first respondent was also privy to future strategies developed by
the applicant by virtue of the fact that she held the
position of New
Business Development Manager. In this regard it is common cause that
the first respondent attended a strategy session
early in 2015 where
the market was analysed and during which new business opportunities
were identified. In fact the first respondent
was tasked with
investigating certain sectors of the market. In this regard it is
important to refer to the confidential affidavit
that was filed on
behalf of the applicant and to which spreadsheets are attached
setting out the projects in respect of which of
the first respondent
presented a review at a meeting in May 2015. A total of 38 projects
are listed. The first respondent was directly
involved in 20 of these
products. Although not directly involved in the remaining 18
projects, she was nonetheless privy to sufficient
information on each
project to be able to present thereon at the monthly meetings.
[37]
The applicant also emphasised the fact that the first respondent had
access to the machine costings in respect of the machines
used by the
applicant. Although the first respondent attempted to downplay her
access to machine costings by differentiating between
the machines
used by the applicant and those used by Polyoak, I am in agreement
with the submission that the first respondent,
by being privy to the
costing of the machines used by the applicant will well be able to
provide Polyoak with direct comparisons
with regard to these machines
in respect of the efficiencies and costs involved in using each
machine. This in turn will enable
the second first respondent to
daily business to be more competitive.
[38]
Regarding customer connections, it is trite that these connections
constitute a protectable proprietary interest. It is clear
from the
papers that the first respondent had a close connection with
customers of the applicant and that that placed her at an
unfair
advantage over the applicant by virtue of her influence over the
applicant’s customers. A clear example of her influence
over
customers is borne out by the fact that the first respondent
addressed an email to SAB Miller on 8 June 2015 in which she
indicated that she had resigned from the applicant’s employment
and in which she expressly stated that she would like to
meet with
SAB Miller in “her personal capacity” and that she wanted
to “follow through with the project”.
I have already
pointed out that this e-mail confirms that, not only does the
applicant have a protectable proprietary interest
in customer
connections but that the first respondent by virtue of employment
with the applicant had direct access thereto. This
e-mail also
gainsays her allegation that she was marginalised and that she was
not involved in any projects of significance and
that her interaction
with customers was diminished. Importantly this e-mail clearly
conveys an intention to continue with a project
to the exclusion of
the applicant and to the potential benefit of Polyoak.
[39]
I have already referred to the fact that the applicant’s PET
division and that of Polyoak’s PolyPet division compete
directly with each other. Both these divisions are situated in
Johannesburg. This is relevant because the first respondent, whilst
still in employment with the applicant was involved in the
applicant’s activities in respect of the so-called “hotfill
market”. In this regard the first respondent was tasked to
advance the applicant’s interests in this market from as
far
back as January 2014. The first respondent submitted that
notwithstanding the fact that there is a direct competitive interface
between the two PET divisions of the applicant and Polyoak she will
not be employed in the PET division but will only be employed
in the
BlowPack division Polyoak. I am in agreement with the submission that
this defence is neither good in law nor in fact. In
this regard the
comments made by the Court in
Reddy
v Siemens Telecommunications (Pty) Ltd
[12]
is relevant to this
matter:
“
[19]
Reddy will during the period of the restraint have no contact with
Vodacom, nor will he be able to solicit Vodacom to move
its business
to Ericsson. He will, however, provide services to MTN in South
Africa and to Celtel and Safricom in Kenya where Siemens
does not
operate. The restraint against being employed by a competitor, in
addition, applies to Gauteng only despite Siemens being
active
throughout South Africa. It was submitted on behalf of the appellant
that in these circumstances the restraint is unreasonable.
[20]
However, all the facts must be considered. Siemens and Ericsson are
competitors providing services to telecommunication network
operators. Although Vodacom and Cell C are customers of Siemens,
Ericsson does some business with them. Siemens still has to acquire
any of MTN's business. Reddy is in possession of trade secrets E and
confidential information of Siemens. Moreover, shortly before
his
resignation from Siemens, he attended a training course updating his
knowledge of the processes, methodologies and systems
architecture
developed by Siemens. Information of this kind, if disclosed, could
be used to the disadvantage of Siemens. This is
not a case such as
Basson v Chilwan
where an employer's application to assert a
protectable interest in respect of customer connections against an
ex-employee who had
no such connections was dismissed. Reddy is in
possession of confidential information in respect of which the risk
of disclosure
by his employment with a competitor, assessed
objectively, is obvious.
It is not that the mere possession of
knowledge is sufficient, and this is not what was suggested by Marais
J in BHT Water: Reddy
will be employed by Ericsson, a 'concern which
carries on the same business as [Siemens]'
Clause
26(3).
in
a position similar to the one he occupied with Siemens. His loyalty
will be to his new employers and the opportunity to disclose
confidential information at his disposal, whether deliberately or
not, will exist. The restraint was intended to relieve Siemens
precisely of this risk of disclosure. In these circumstances the
restraint is neither unreasonable nor contrary to public policy.
[13]
I agree with the remarks of Marais J in
BHT
Water:
'In
my view, all that the applicant can do is to show that there is
secret information to which the respondent had access, and which
in
theory the first respondent could transmit to the second
respondent should he desire to do so. The very purpose of the
restraint agreement was that the applicant did not wish to have to
rely on the
bona fides
or lack of retained knowledge on the
part of the first respondent, of the secret formulae. In my view, it
cannot be unreasonable
for the applicant in these circumstances to
enforce the bargain it has exacted to protect itself. Indeed, the
very
ratio
underlying the bargain was that the applicant
should not have to content itself with crossing its fingers and
hoping that the first
respondent would act honourably or abide by the
undertakings he has given. . . . In my view, an ex-employee bound by
a restraint,
the purpose of which is to protect the existing
confidential information of his former employer, cannot defeat an
application to
enforce such a restraint by giving an undertaking that
he will not divulge the information if he is allowed, contrary to the
restraint,
to enter the employment of a competitor of the applicant.
Nor, in my view, can the ex-employee defeat the restraint by saying
that
he does not remember the confidential information to which it is
common cause that he has had access. This would be the more so
where
the ex-employee, as is the case here, has already breached the terms
of the restraint by entering the services of a competitor.'
[40]
From the
Reddy
judgement it is clear that firstly, an employee cannot escape the
effects of the restraint of trade agreement by an undertaking
that he
will not divulge confidential information obtained during the course
of his employment. In this regard the Court in
Reddy
clearly
pointed out that: “
The
loyalty which the employee owes his or her employer is sufficient to
create the real probability that he or she will, consciously
or
unconsciously, do so
.”
[14]
The claim by the first respondent that she will be employed in the
BlowPack division and consequently she will be isolated from
the
other divisions consequently holds no water. Furthermore, on the
facts it is common cause that a single person manages the
various
divisions in a particular region. The argument that Polyoak is
divisionalised is therefore of no consolation to the applicant.
[41]
It is therefore concluded that the first respondent undoubtedly had
access to the applicant’s confidential information
and that she
is infringing upon the restraint of trade agreement by virtue of her
employment with the first respondent.
[42]
I am further unable to find on the papers that the enforcement of the
restraint is disproportionate having regard to any countervailing
interest that the first respondent may have. The first respondent
left the applicant’s employment of her own accord and is
able
to remain economically active outside of the applicant’s
business as long as she does not do so in competition with
the
applicant. Furthermore, the restraint sought is for a period of 12
months which is not, in my view, unduly burdensome given
the
circumstances of this case. The restraint is also only in respect of
the greater Johannesburg area.
[43]
I am therefore of the view that the application must be granted with
costs including the costs of two counsel,
Order
[44]
In the event the following order is made:
44.1
The first respondent is interdicted and restrained until 30 June 2016
from being employed by the second respondent.
44.2
The first respondent is interdicted and restrained until 30 June 2016
within Gauteng (particularly the greater Johannesburg
area) from -
44.2.1
Directly or indirectly rendering any prescribed services (being any
services rendered by the applicant as at 30 June 2015,
or within 12
(twelve) months prior thereto, or which the applicant has planned and
programme to render and does in fact take steps
to render within 12
(twelve) months from 30 June 2015) to or for the benefit of any
prescribed customer (being any customer of
the applicant as at 30
June 2015 or to whom or to which prescribed services were rendered by
the applicant during the 12 (twelve)
months preceding 30 June 2015 or
who or which is a potential customer of the applicant and in
negotiation with the applicant as
30 June 2015) or attempting to do
so;
44.2.2
Soliciting, interfering with, enticing attempting to entice away from
the applicant any prescribed customer;
44.2.3
directly or indirectly being interested, engaged, concerned,
associated with or employed whether as proprietor, partner,
director,
shareholder, employee, consultant, contractor, financier, principal,
agent, representative, assistant, adviser, administrator
or otherwise
and whether reward or not in any company, firm, business undertaking,
concern or other association of any nature which
furnishes or
renders, directly or indirectly, any form of prescribed services.
44.3
The first respondent is interdicted and restrained from using or
directly or indirectly divulging or disclosing any of the
applicant’s
confidential information and/or trade secrets to any person.
44.4
The first respondent is ordered to pay the costs of this application
together with costs of two counsel.
_________________________
AC
BASSON
Judge
of the Labour Court
Appearances:
For
the applicant : Christopher
Whitcutt SC
with
Advocate Claire de Witt
Instructed
by
: Thomson Wilks Inc.
For
the respondent : Andrew Redding SC
Instructed
by : Tabacks Attorneys
[1]
Experian
South Africa (Pty) Ltd v Haynes and Another
(2013 (1) SA 135
(GSD).
[2]
BHT
Water Treatment (Pty) Ltd v Leslie and Another
1993
(1) SA 47
(W)
:
“
[3]
Ibid
at
57H – 58D
:
“It
is quite impossible for the applicant to police the
undertakings given by the first respondent or to know or prove
what
information the first respondent can make available to the second ,
or has made available.
In
my view, all that the applicant can do is to show that there is
secret information to which the respondent had access, and
which in
theory the first respondent could transmit to the second respondent
should he desire to do so. The very purpose
of the restraint
agreement was that the applicant did not wish to have to rely on the
bona fides or lack of retained knowledge
on the part of the first
respondent, of the secret formulae. In my view, it cannot be
unreasonable for the applicant in these
circumstances to enforce the
bargain it has exacted to protect itself. Indeed, the very
ratio underlying the bargain was
that the applicant should not have
to content itself with crossing its fingers and hoping that the
first respondent would act
honourably or abide by the undertakings
that he has given.
In
my view, an ex-employee bound by a restraint, the purpose of which
is to protect the existing confidential information of his
former
employer, cannot defeat an application to enforce such a restraint
by giving an undertaking that he will not divulge
the
information if he is allowed, contrary to the restraint, to enter
the employment of a competitor of the applicant. Nor, in
my view,
can the ex-employee defeat the restraint by saying that he does not
remember the confidential information to which it
is common cause
that he has had access. This would be the more so where the
ex-employee, as is the case here, has already breached
the terms of
the restraint by entering the service of a competitor.
[4]
]
International
Executive Communications Ltd t/a Institute for International
Research v Turnley and Another
1996
(3) SA 1043
(W) 1056H – 1057A: “
I
n
each case, the Court must look to the facts: even a very limited
recollection of a vast amount of confidential information might
be
useful to a competitor; whereas, conversely, an incomplete
recollection of all the information might (conceivably) be
of no
value at all, even as a pointer in the right direction. I would
stress, however, that once it is established that an ex-employee
has
been exposed to trade secrets, and entered the employ of a
competitor, an objective assessment is required of whether the
danger exists that he could disclose such trade secrets to his new
employer; and in making this assessment, the Court will
not be
influenced by undertakings by the ex-employee not to do so, much
less embark on an investigation of the
bona
fides
of the ex-employee in tendering such undertakings.”
[5]
1993 (3) SA 742 (A).
[6]
1999
(1) SA 472
(W) at 484E.
[7]
S
upra
.
[8]
See
in this regard
Sibex
Engineering Pty Ltd Van Wyk and Another
1991(2) SA 482 (T) at 502D, E-F.
[9]
[1992] ZASCA 204
;
1993
(1) SA 537
(A) at 541C and D – I.
[10]
Rawlins
at 543E - H: “In summary then, what Rawlins says is that
during his employment with the respondent he largely dealt,
not with
its existing customers, but with his own pre-existing following
or buyers whom he later found. Does this establish
that the
respondent did not have a proprietary interest of the kind under
consideration? It is, of course, a factor in his favour;
but not
conclusively so (see Cansa (Pty) Ltd v Van der Nest
1974
(2) SA 64 (C)
at
69E-H and M & S Drapers (a firm) v Reynolds
[1956] 3 All ER 814
(CA) at 820E; compare, however, the views of Denning LJ at 821A-E).
Even though the persons to whom an employee sells and
whom he
canvasses were previously known to him and in this sense 'his
customers', he may nevertheless during his employment,
and because
of it, form an attachment to and acquire an influence over them
which he never had before. Where this occurs, what
I call the
customer goodwill which is created or enhanced, is at least in
part an asset of the employer. As such it becomes
a trade connection
of the employer which is capable of protection by means of a
restraint of trade clause.”
[11]
Hix
Networking Technologies v System Publishers Pty Ltd and Another
[1996] ZASCA 107
;
1997
(1) SA 391
(A) at 399A and 401G – 40. See
also
Nestor and others v Minister of Belize and others
1984 (4) (4) SA 230
(SWA) at 244.
[12]
2007 (2) SA 486 (SCA).
[13]
My
emphasis.
[14]
Ibid
.