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[2015] ZALCCT 57
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Oasys Innovations (Pty) Ltd t/a Glevents Oasys v Henning and Another (C 536/15) [2015] ZALCCT 57 (10 September 2015)
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
CASE
NO: C 536/15
DATE:
10 SEPTEMBER 2015
NOT
REPORTABLE
In
the matter between:
OASYS
INNOVATIONS (PTY) LTD t/a GL EVENTS
OASYS
...........................................
Applicant
And
BEULAH
HENNING
...................................................................................................
First
Respondent
ASHLEIGH
MASFEN
.............................................................................................
Second
Respondent
Heard:
4 September 2015
Delivered:
10 September 2015
Summary:
Restraint of trade.
JUDGMENT
STEENKAMP
J
Introduction
[1]
The applicant, an events management
company, seeks to enforce an agreement in restraint of trade against
two of its former employees,
Ms Beulah Henning and Ms Ashleigh
Masfen.
Background
facts
[2]
The applicant, Oasys, conducts the business
of an infrastructure service provider to companies that present large
scale events such
as the Cape Wine Show, the Cape Town International
Jazz Festival and the Mining Indaba. The respondents have worked for
it for
a considerable length of time – Ms Henning for 15 years
and Ms Masfen for seven years. They both signed agreements in
restraint
of trade. At the time when they left the company, they were
employed as “client liaison officer” and “key
accounts
manager” respectively.
[3]
The agreements, as is so often the case,
are not a model of clarity or of plain language drafting. The
pertinent parts read as follows:
“
3
RESTRAINT
In
consideration for the benefits in the executive will derive from his
[
sic
] association with the company, the executive shall, for
the period of his employment with the company and for a period of 24
months,
reckoned from the termination date:
3.1
in the event of the executive being employed or directly or
indirectly having or holding any interest or position with or in
any
undertaking which is a company client, be restrained from procuring
or in any way influencing the position such that the services
provided to that company client, or any part thereof, be terminated
or attended to by any undertaking (including the company client
itself) other than the company;
3.2
in the event of the executive acting as consultant to or being
employed by any undertaking, or directly or indirectly acquiring
or
holding any interest or position whatsoever with or in any
undertaking which at the time undertakes/enjoys patronage or
clientele
(in the form of services) from any undertaking which is a
company client, be restrained from:
3.1.1
directly or indirectly attending to, assisting with or in any way
being involved in/or performing services to or for such
company
client; and / or
3.2.2
directly or indirectly attending to, assisting with or in any way
being involved in a pitch for any new business services
to any
company client;
3.3
in all cases, be restrained from directly or indirectly:
3.3.1
soliciting any business of a company client, for his own benefit or
for the benefit of any undertaking other than the company
itself;
and/or
3.3.2
offering employment to or employ or cause to be employed or solicit
for employment, during the period of the restraint, any
employee of
the company who:
3.3.2.1
is employed by it; or
3.3.2.2
was employed by it during the lessor [
sic
] of the following
periods prior to the offer of employment, employment or solicitation
for employment:
3.3.2.2.1
eighteen months; or
3.3.2.2.2
in the event of the executive’s employment with the company
terminating and that period of employment being less
than the period
referred to in 3.3.2.2.1, the actual period of the executive’s
employment with the company; and/or
3.3.3
divulges to any third person or in any other manner making use of
(whether or not on his own behalf) any know-how, trade secrets
or
confidential information which is not information already forming
part of the public domain.”
[4]
The
term “company clients”
[1]
is defined as “any person for whom the company currently
undertakes or has undertaken any services during… [the period
of] 18 months preceding the termination date.” The term
“services” is meant to be defined as “the services
listed on annexure ‘A’ hereto”. Annexure “A”
to the agreement is blank.
[5]
Henning and Masfen both resigned on 1 May
2015 with one month’s notice. The applicant alleged in its
founding affidavit that
Henning is employed by an undertaking called
Big Show Stoppers that is run by a former supplier of the applicant,
Mr Philip Glasser.
In response, Henning denies this. However, she
does not explain why both she and Masfen used email addresses with
the suffix “@bigshowstoppers.co.za”
when corresponding
with an entity called Gearhouse – a supplier used by the
applicant – and Conferences et al –
a long-standing
customer of the applicant. It is only in her supplementary affidavit,
delivered on 21 August 2015, that Henning
says the following:
“
Mr
Philip Glasser, a previous supplier of the applicant, approached us
during or around March 2015 and offered for us to go into
business
with him.
…
We
began the process of launching BSS (Big Show Stoppers) during or
around the beginning of June 2015. At that time, however, BSS
consisted more of ideas than anything else. As time progressed, email
addresses and a temporary base to work from were established.
This
growth is typical of any start-up company. At the time I deposed to
my affidavit, BSS was not even a registered company, in
fact it was
not even trading.”
[6]
The respondents’ subterfuge does not
end there. It appears from a CIPRO search by the applicant that the
two respondents and
Glasser are shareholders and directors of the
company trading as Big Show Stoppers that was registered in May
2015 already.
[7]
Gearhouse provides rigging services. A
long-standing customer of the applicant, Ms Deidre Cloete of an
entity known as Conferences
et al, organises the annual Cape Wine
exhibition. She contacted the respondents after they had resigned for
assistance to secure
rigging services for Cape Wine. They introduced
her to Gearhouse to facilitate this. However, the respondents point
out that Gearhouse
is not the applicant’s customer; Conferences
et al is. Gearhouse is simply a supplier. Nevertheless, the
respondents interacted
with both and facilitated the services to be
supplied to the Cape Wine show through Conferences et al.
[8]
Mining Indaba LLC – the international
company that organises the annual mining indaba in Cape Town --- is a
longstanding customer
of the applicant. The first respondent, Ms
Henning, approached Mining Indaba to solicit its custom for the
Indaba to be held in
February 2016. On 1 July 2015 Mr Tracy (or
“Tray”) Feinsilver sent the applicant a letter saying
that it had decided
to put the stand build for the 2016 mining indaba
out to bid. (The applicant had done the work from 2010 to 2015). The
applicant
responded, thanked Feinsilver for his openness and
transparency, and told him that it had instituted interdict
proceedings against
the respondents. Feinsilver replied on 2 July
2015 and said that Henning had indeed sent him a request to submit a
bid for the
2016 Mining Indaba.
[9]
In her supplementary answering affidavit,
Henning says that the email correspondence between the applicant and
Feinsilver “is
not an accurate reflection of what actually
transpired”. However, other than claiming that the email
correspondence “had
been taken out of context” she does
not explain what actually did transpire; and, most significantly, she
does not deny that
she did approach Feinsilver and ask him to bid for
the 2016 Mining Indaba.
The
relief sought
[10]
On the day of the hearing, the applicant
sought and was granted an amendment to its notice of motion. It seeks
to interdict both
respondents from the following for a period of 24
months from 30 May 2015:
10.1
“
soliciting business for their own
benefit, or the benefit of the person or entity that trades as Big
Show Stoppers, or any undertaking
other than the applicant itself,
from any of the applicant’s clients with whom it currently
undertakes or has undertaken
business, within an 18 month period
calculated from 1 June 2015, including but not limited to the clients
reflected in annexures
‘A’ and ‘B’ hereto;
10.2
employing or offering employment or causing
employment to be offered or soliciting for employment any of the
applicant’s employees
who were in or are currently in its
employ or were in its employ within a period of 18 months calculated
from 1 June 2015;
10.3
divulging to any third person or in any
manner making use of (whether or not for their own benefit) any
know-how, trade secrets,
or confidential information which is not
information already in the public domain.”
[11]
The
applicant also seeks the following relief:
[2]
“
That
the first and second respondents are interdicted and restrained in
the event of them being employed or directly or indirectly
having or
holding any interest or position with or in an undertaking which is a
company client whose name appears in annexure ‘A’
or ‘B’
to the applicant’s notice of motion from procuring or in any
way influencing the position such that the
services provided to that
company client, or any part thereof, be terminated or attended to by
any undertaking (including the company
client itself) other than the
company.”
[12]
The relief sought in the second paragraph
is far from clear, evidently because it has to parrot the wording of
the restraint agreement.
What it means, in effect, is that the
respondents may work for any of the applicant’s competitors.
What they may not do,
is to entice work away from a “company
client” (i.e. one of applicant’s customers); or influence
such a customer
to terminate its contract with the applicant and to
go elsewhere. They may not use their interest in a competitor –
and their
knowledge of the applicant’s business – as a
springboard to attract the custom of the applicant’s customers.
[13]
The applicant says that the respondents
have already breached the restraint; that they are in the position
misuse its customer connections
and confidential information for
their own benefit; and that they should be prevented from doing so.
The respondents deny that
they are in breach. They also argue that
the restraint is overbroad, unreasonable and thus unenforceable.
Evaluation
/ Analysis
[14]
The
principles on deciding disputes about restraints of trade are well
known. As the SCA held in
Reddy
v Siemens Telecommunications (Pty) Ltd
:
[3]
“
Where
the onus lies in a particular case is a consequence of the
substantive law on the issue. I have pointed out that the substantive
law as laid down in
Magna
Alloys
[4]
is that a restraint is enforceable unless it is shown to be
unreasonable, which necessarily casts an onus on the person who seeks
to escape it. But if the rule were to be reversed – to provide
that the restraint is not enforceable unless it is shown that
it is
reasonable – which would necessarily cast an onus on the person
seeking to enforce it to allege and prove that the
restraint is
reasonable the result in the present case would be the same. For in
the present case the facts concerning the reasonableness
or otherwise
of the restraint have been fully explored in the evidence, and to the
extent that any of those facts are in dispute
that must be resolved
in favour of Reddy (these being motion proceedings for final relief).
If the facts disclosed in the affidavits,
assessed in the manner that
I have described, disclose that the restraint is reasonable, then
Siemens must succeed: if, on the
other hand, those facts disclosed
that the restraint is unreasonable in Reddy must succeed. But that
called for is a value judgement,
rather than a determination of what
facts have been proved, and incidence of the onus accordingly plays
no role.
A
court must make a value judgement with two principal policy
considerations in mind in determining the reasonableness of the
restraint.
The first is that the public interest requires that
parties should comply with their contractual obligations, a notion
expressed
by the maxim
pacta servanda sunt
. The second is that
all persons should in the interests of society be productive and be
permitted to engage in trade and commerce
or the professions. Both
considerations reflect not only common law but also constitutional
values.”
[15]
The
test for determining the reasonableness or otherwise of an agreement
in restraint of trade is also well known, and it remains
that set out
in
Basson
v Chilwan
:
[5]
15.1
Is there an interest of the one party which
is deserving of protection at the termination of the agreement?
15.2
Is such interest being prejudiced by the
other party?
15.3
If so, does such interest so weigh up
qualitatively and quantitatively against the interest of the latter
party that the letter
should not be economically inactive and
unproductive?
15.4
Is there another facet of public policy
having nothing to do with the relationship between the parties, but
which requires that
the restraint should either be maintained or
rejected?
[16]
Before considering the reasonableness of
the restraint, I shall consider whether there has been a breach.
Breach:
Mining Indaba LLC
[17]
The
approach to Mr Feinsilver of Mining Indaba LLC is clearly in breach
of the restraint of trade agreement. The respondents are
restrained
from “soliciting any business of a company client”. They
have, together with Big Show Stoppers, solicited
the business of the
Mining Indaba. And the prohibition on soliciting business includes a
response to an invitation by a customer
to submit a tender.
[6]
Nothing further need be said in this regard.
Restraint
unreasonable?
[18]
The first question to be asked is whether
the applicant has an interest worthy of protection.
[19]
The applicant relies on the respondents’
customer connections and its trade secrets.
[20]
The
test with regard to customer connections has been set out by the SCA
in
Rawlins
v Caravantruck (Pty) Ltd
:
[7]
“
The
need of an employer to protect his trade connections arises where the
employee has access to customers and is in a position
to build up a
particular relationship with the customers so that when he leaves the
employer’s service he could easily induce
the customers to
follow him to a new business (Joubert
General
Principles of the Law of Contract
at
149). Heydon
The Restraint of Trade
Doctrine
(1971) at 108, quoting an
American case, says that the ‘customer contact’ doctrine
depends on the notion that
‘
the
employee, by contact with the customer, gets the customer so strongly
attached to him that when the employee quits and joins
arrival he
automatically carries the customer with him in his pocket’.
…
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.”
[21]
In
this case, the respondents were employed as “client liaison
officer” and “key accounts manager” respectively.
It was their job to maintain contact with customers. They were in a
prime position to carry those customers with them. And there
have
already solicited some of those customers, most notably Mining Indaba
LLC. The respondents, through Big Show Stoppers, are
already liaising
with Conferences et al – one of the applicant’s customers
– to provide services for the Cape
Wine expo that will take
place next week, from 15-17 September 2015. They have intimate
knowledge of the customers’ requirements
and business, built up
over many years. And they have intimate knowledge of the applicant’s
pricing structures and incentives.
They are the ones who provided
quotes for services to the applicant’s customers; for example,
Henning quoted – on behalf
of the applicant – for Cape
Wine 2015 to Conferences et al shortly before she resigned. As the
court pointed out in
Meter
Systems Holdings Ltd v Venter
:
[8]
“
Information
relating to the prices at which one person has tendered competitively
to do work for another is confidential in the
hands of one who stands
in a fiduciary relationship to the tenderer:
Sibex
Construction (SA) (Pty) Ltd v Injectaseal CC
1998
(2) SA 54
(T) at 64D and 67F-68C.”
[22]
Having established that the applicant has a
protectable interest, it is clear from the evidence that the
respondents have prejudiced
it and that there is a real likelihood
that they will carry on doing so if not prevented.
[23]
Enforcement of the restraint will not make
the respondents economically inactive or unproductive. Firstly and
importantly, they
are not being prevented from working for a
competitor. Secondly, the applicant has agreed that the restraint be
restricted to the
Western Cape. Although it is for a fairly lengthy
period of two years, the respondents will be able to work in the same
field in
any other area for that period, such as Gauteng where many
local and international conventions, conferences and exhibitions are
held. And the period itself, although at the outside of what is
generally considered reasonable, is not unreasonable in the context
of this industry, as many conferences and conventions take place on
an annual or even biennial basis.
[24]
There
is, in my view, no other aspect of public policy that militates
against the restraint being enforced. The respondents are
astute
businesswomen who entered into the restraint agreements knowingly and
willingly. They can pursue the same business elsewhere
for two years,
and thereafter in the Western Cape, should they so wish; and in any
event, they are free to take up employment with
the applicant’s
competitors, provided they do not target its existing customers for
the next two years. It does not go further
than necessary to protect
the applicant’s interests.
[9]
Conclusion
[25]
Against this background, I am satisfied
that the respondents are in breach of the restraint of trade. I am
also satisfied that,
restricted to the geographical scope of the
Western Cape, the restraint is reasonable and must be enforced.
Costs
[26]
With
regard to costs, I take into account the principles of both law and
fairness.
[10]
The respondents
have flagrantly breached the restraint of trade agreement and
attempted to hide that fact in their answering affidavit.
They should
pay the applicant’s costs, with one
caveat
:
The applicant brought the application on an urgent basis. When it
came before Rabkin-Naicker J on 31 July 2015, the applicant
sought a
postponement in order to file a supplementary affidavit. It proceeded
to deliver an affidavit containing new material,
necessitating yet
further affidavits from the respondents. When the matter eventually
served before me on 4 September, the parties
had delivered seven sets
of pleadings between them, instead of the usual three sets allowed in
motion court proceedings. I allowed
it, as the further information
contained in those affidavits was relevant.
[11]
I also granted condonation for the late filing of the respondents’
further answering affidavit to the applicant’s supplementary
replying affidavit; and the late filing of the respondents’
heads of argument. But it would not be fair for the respondents
to be
held liable for those costs, given the delivery of further affidavits
by the applicant.
Order
[27]
I therefore make the following order:
27.1
The respondents are interdicted and
restrained for a period of 24 months, calculated from 30 May 2015,
and in the province of the
Western Cape, from:
27.1.1
soliciting business for their own benefit,
or the benefit of the person or entity that trades as Big Show
Stoppers, or any undertaking
other than the applicant itself, from
any of the applicant’s customers with whom it currently
undertakes or has undertaken
business within an 18 month period
calculated from 1 June 2015;
27.1.2
employing or offering employment, causing
employment to be offered, or soliciting for employment any of the
applicant’s employees
who were in or are currently in its
employ or were in its employ within a period of 18 months calculated
from 1 June 2015;
27.1.3
divulging to any third person or making use
of any know-how, trade secrets, or confidential information which is
not information
already in the public domain;
27.1.4
procuring or in any way influencing
their position with an undertaking such that the services provided to
a company customer be
terminated, or attended to by any undertaking
other than the company. (This provision applies only if the
respondents are
employed by a company customer).
27.2
The respondents are ordered to pay the
applicant’s costs, jointly and severally, excluding the costs
for 31 July 2015 and
the costs associated with the pleadings filed
between 31 July and 4 September 2015.
Anton
Steenkamp
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
Deborah Watson
Instructed by
Shepstone & Wylie.
RESPONDENTS:
Claire Cawood
Instructed by
Michael Ward attorneys.
[1]
The applicant referred to "clients" instead of "customers"
throughout, although it is not a professional
services company.
[2]
Grammar
verbatim
as in notice of motion.
[3]
2007
(2) SA 486
(SCA) para [14].
[4]
Magna
Alloys and Research (SA) Pty Ltd v Ellis
1984 (4) SA 874 (A).
[5]
[1993] ZASCA 61
;
1993
(3) SA 742
(A) 776H – 777B. See also
Esquire
System Technology (Pty) Ltd v Nortje
(2011)
32
ILJ
601
(LC);
Pinnacle
Technology Shared Management Services (Pty) Ltd v Venter
[2015] ZALCJHB 199 (14 July 2015).
[6]
Sellers
v Eliovson
1985 (1) SA 2013 (W).
[7]
[1992] ZASCA 204
;
1993
(1) SA 537
(A) at 541 D-I.
[8]
1993
(1) SA 409
(W) at 430D.
[9]
Cf
Wunsh J in
Kwik
Kopy SA (Pty) Ltd v Van Haarlem
1999
(1) SA 472 (W).
[10]
As this Court is enjoined to do by virtue of s 162 of the LRA. The
parties have elected to litigate in this Court and not the
High
Court, both courts having concurrent jurisdiction.
[11]
Applying the principles in
MISA
/ SAMWU v Madikor Drie (Pty) Ltd
[2006]
1 BLLR 12
(LC).