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[2017] ZALCJHB 199
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Weir Minerals Africa (Pty) Ltd v Potgieter and Others (J2832/16) [2017] ZALCJHB 199 (26 May 2017)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Not
reportable
Case
no
J 2832/16
In the matter between:
WEIR
MINERALS AFRICA (PTY) LTD
Applicant
and
MARTHINUS
JOHANNES POTGIETER
RUI
FELIX GOMES
GOODWIN
SUBMERSIBLE PUMPS AFRICA
(PTY)
LTD
Application
heard: 16 March 2017
Date
of judgment: 26 May 2017
First
Respondent
Second Respondent
Third
Respondent
JUDGMENT
VAN
NIEKERK J
[1]
On 16 December 2016, Steenkamp J postponed this application and
granted an interim order, the terms of which included the enforcement
of a restraint agreement (albeit in terms more curtailed than those
originally sought) between the applicant (Weir) and the first
and
second respondents. The applicant seeks final interdictory
relief to enforce the pared down restraint of trade and
confidentiality
undertakings given by the first respondent
(Potgieter) and the second respondent (Gomes).
[2]
It is not disputed that Potgieter and Gomes signed the restraint
undertakings on 27 March 2007 and 13 January 2007 respectively.
The
restraint undertakings were given in favour of their then employer,
Warman Africa (Pty) Ltd. That entity was wholly owned by
an
Australian company, Research and Development (Pty) Ltd (R&D). In
March 2008, Weir Group Plc, listed in the United Kingdom,
purchased
all of the shares in Warman. On 1 March 2010, Warman changed its name
to Weir Minerals Africa (Pty) Ltd, the applicant
in these
proceedings.
[3]
Potgieter was employed by Warman on 27 March 2007 as a sales
engineer. At the time of his resignation from Weir on 31 August
2017,
he was employed as the rentals manager and based in Middleburg.
During the first week of September 2016, Potgieter took up
employment
with the third respondent, Goodwin. At that stage, Goodwin was in the
process of establishing a presence in southern
Africa. Goodwin did
not commence trading until 13 November 2016.
[4]
The second respondent, Gomes, was employed by Warman in January 2002
as a sales engineer. At the time of his resignation from
the
applicant’s employ on 31 October 2016, he held the position of
product manager. He too took up employment with Goodwin
during the
first week of November 2016.
[5]
The restraint agreement signed by Potgieter and Gomes contain
undertakings, amongst others, that they will not, for a period
of 12
months and in the Republic of South Africa, either directly or
indirectly:
1.
be concerned or engaged in any business which competes with the
business of Weir;
2.
provide or attempt to provide any service or product which is the
same as or similar to a service or product
or marketed by Weir in the
carrying on of its business, to any prescribed client of Weir; and/or
3.
solicit, interfere with, entice or attempt to entice away from Weir
any of its prescribed clients or customers.
[6]
Weir’s core business is the manufacture, sale, support,
service, repair, rental and supply of a variety of pumps, including
submersible slurry pumps. Weir was until recently the exclusive
supplier of submersible slurry pumps manufactured by Goodwin
International,
the international parent company of Goodwin and in
particular, the 100 ANZE submersible slurry pump. These pumps are
typically
made available to customers in the mining, oil and gas,
power and industrial sectors. Prior to 13 November, Weir marketed the
100
ANZE pump in terms of a distribution agreement with Goodwin
International. That agreement has been terminated and Goodwin has
been
incorporated with a view to entering a market previously
serviced by Weir. Weir contends that by taking up employment with
Goodwin,
Potgieter and Gomes are in breach of the restraint
undertakings, because since 13 November 2016, Goodwin entered the
pump supply
market in South Africa and thus became a direct
competitor of Weir.
[7]
Potgieter and Gomes have raised a number of defences to Weir’s
claim. The first substantive defence is that the restraints
that form
the subject of these proceedings were given in favour of R&D and
its subsidiaries, and that Weir is not a subsidiary
of R&D. The
second is that Potgieter is not bound by any restraint of trade in
favour of Weir. The third defence is that the
restraints of trade
sought to be enforced by Weir are overly broad, and interfere
unreasonably with the constitutional right to
freedom of trade and
occupation, and that they are against public policy. The fourth and
possibly related defence is that Weir
is seeking to use the
enforcement of the restraints as part of a negotiating tool in its
dealings with Goodwin. Further, Potgieter
and Gomes contend that Weir
and Goodwin are not in competition with one another and that they are
thus not in breach of any restraints.
Finally, they contend that the
license agreement between Goodwin International and Weir permitted
Goodwin International access
to the information that Weir claims is
confidential and that Potgieter and Gomes cannot therefore be
interdicted from providing
this information to Goodwin.
[8]
Prior to considering the above issues, and to the extent that urgency
remains a live issue, Potgieter and Gomes place reliance
on the
factor that they resigned from Weir’s employment in August 2016
when they aver that they advised Weir that they were
taking up
employment with Goodwin. They contend that in circumstances where the
present proceedings were launched only on 1 December
2016, that any
urgency is self-created. It is not in dispute that Potgieter left
Weir’s employ on 1 August 2016, and Gomes
on 31 October 2016.
It is also not in dispute that Goodwin entered the market for the
sale and rental of the 100 ANZE submersible
pump on 13 November 2016
or that it became a competitor (potentially at least) only from that
date. It was only after Goodwin entered
the market, after the
negotiations on the renewal of the license agreement between Weir and
Goodwin International had failed, that
on Weir’s version at
least, the restraints became operative. In the circumstances, I am
satisfied that the application is
urgent, as disputes of this nature
inevitably are. In any event, the restraints are for a limited
duration. They expire at the
end of August 2017 and the end of
October 2017 respectively. If the application is to be heard in the
ordinary course, the applicant
will not be able to obtain any
substantial adequate redress.
[9]
The principles relevant to the enforcement of restraints of trade are
well- established and I do not intend to repeat them here.
A party
seeking to enforce the restraint agreement is required only to invoke
the agreement and prove a breach of it. A respondent
who seeks to
avoid the restraint there has an onus to demonstrate on a balance of
probabilities that the restraint agreement is
unenforceable because
it is unreasonable. In regard to the latter, the test remains is that
set out in
Basson v Chilwan and others
[1993] ZASCA 61
;
1993 (3) SA 742
(A),
where the court stated that the reasonableness or otherwise of a
restraint is to be determined by the following:
1.
Is there an interest of the one party, which is deserving of
protection at the termination of the agreement?
2.
Is that interest being prejudiced by the other party?
3.
If so, does the interest weigh up qualitatively and quantitatively
against the interests of the latter party
so that the latter should
not be economically inactive or unproductive?
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?
[10]
It is equally well-established that in relation to the first enquiry
established by
Basson v Chilwan
that proprietary interests
deserving of protection are of two kinds. The first is all
confidential matter which is useful for the
carrying on of the
business and which could be used by competitor, if disclosed to them,
to gain a relative competitive advantage.
The second is the
relationships with customers, potential customers, suppliers and
others that go to make up what is referred to
as the ‘trade
connections’ of the business. The onus is on the respondent to
prove the unreasonableness of the restraint.
[11]
To the extent that Weir’s right to seek a paring down of the
restraint is the subject of challenge, this court has previously
addressed this issue. In
New Just Fun Group (Pty) Ltd v Turner and
others
(J786/14, unreported) the court said:
The
truncated relief sought seeks to limit the scope of the restraint…
There are at least two reasons why the applicant ought
not to be
bound to attempt to enforce the full ambit of the restraint. First,
it is well-established that a court is entitled to
enforce the
restraint partially by restricting the scope of its operation to
reflect what is found to be reasonable.
The
court referred to the judgment by Wallis AJ (as he then was) in
Den
Braven SA (Pty) Ltd v Pillay
2008 (6) SA 229
(D) and continued:
The
nature and extent of any partial restraint is a matter to be
determined from the papers. I do not understand the applicable
authorities to preclude an applicant from seeking a partial restraint
only because the applicant has sought in its founding affidavit
to
enforce the full ambit of the agreed restraint. In any event, the
extent to which any restraint agreement ought to be pared
down is
ultimately the decision of the court, having regard to all of the
facts and circumstances, to grant more limited relief
than that
initially sought….
[12]
In the present instance, neither Potgieter nor Gomes deny having
signed the restraints. Insofar as they contend that the restraints
were given in favour of R&D and that they are not enforceable by
Weir. The papers disclose the following: the written restraint
undertakings were concluded, as I have noted above, in favour of
Warman Africa (Pty) Ltd. That entity changed its name on 1 March
2010
to Weir Minerals Africa (Pty) Ltd. The restraint undertakings were
given in favour of ‘the Company’, defined explicitly
to
include Warman Africa (Pty) Ltd, i.e. the applicant. When reading the
restraint, references to ‘the Company’ and
its business
include Weir and its business. That Weir used to be wholly-owned by
R&D and that is now wholly-owned by Weir Group
PLC is entirely
irrelevant. The operative provisions of the restraint of always
included the applicant itself. There was no need
therefore for any
restraints to be transferred or assigned to the Weir Group after the
purchase by that entity of all of the shares
in Warman – in
other words, there was never a sale of the business as a going
concern but a transfer of the shareholding
in the business of the
applicant that necessitated either a transfer or assignment. In any
event, it is not in dispute that the
business operated by Weir, the
applicant, both before and after the sale of its shareholding, has
always been the same. It is that
business which employed both
Potgieter and Gomes and which the restraints operated to protect.
[13]
To the extent that Potgieter contends that on his promotion to branch
manager with effect from 1 November 2008 the restraint
that he had
given in March 2007, (the date of the commencement of his employment
with Warman) somehow fell away, the plain wording
of clause 4.1 of
his restraint is that ‘
whilst employed by [the applicant]
and for a period of 12 months after the termination
’ he
will be restrained. What matters for the purposes of the restraint is
that Potgieter remained employed by Weir, not that
he was promoted.
It is not disputed that Potgieter remained employed by Weir until he
resigned with effect from 31 August 2016.
His promotion and his
averment that he was thereafter required to sign a restraint but
refused to do so takes the matter no further
- the restraint
agreement that forms the subject of these proceedings is not linked
to any particular position held by Potgieter.
Finally, there is
nothing to indicate that Weir had ever released Potgieter from his
restraint undertaking.
[14]
I turn next to the issue of any breach of the restraint agreements.
It will be recalled prior to 12 November 2016 (in fact,
for some 15
years), Weir was the exclusive supplier of the Goodwin ANZE 100
submersible slurry pump, manufactured by the international
parent
company of Goodwin, in terms of a licence agreement between Warman
and Goodwin International. In addition to being the supplier
of
submersible slurry pumps, Weir offers its customers after-sales
support in the form of spares, repairs and maintenance services
and
also operates a rental division from which submersible slurry pumps
are rented to its customers. It is not in dispute that
Goodwin
International confirmed to Weir by way of correspondence on 4
November 2016 that as at 12 November 2016, it would start
trading its
submersible pump range in South Africa through the newly-established
Goodwin. It is clear therefore that with effect
from 12 November
2013, Goodwin has commenced business on terms that bring it into
direct competition with Weir. Although the respondents
have made
reference to some of the regulatory and logistical difficulties in
commencing trade and the impact that this will necessarily
have on
the conduct of business, the fact remains that from the date of the
termination of the licensing agreement, Goodwin has
been open for
business. Indeed, the competitive relationship between Weir and
Goodwin exists despite the fact that the license
agreement has been
terminated. It is not in dispute that Weir remains in possession of
existing stock of the ANZE submersible pump
that it purchased prior
to the termination of the agreement, which it intends to sell into
the market until the stock is depleted.
Further, Weir intends to
continue to endeavour to support its some 800 customers with ongoing
support, repair and maintenance services.
Weir also intends to
continue to rent out the approximately 45 workable pumps designated
for that purpose to its customers. It
will do so in competition with
Goodwin’s rental division. In my view, there is no substantive
difference between the rental
options offered by Weir and by Goodwin
respectively. The respondents concede that Goodwin has established
its business and that
it commenced Ltd trading in November 2016, that
it has sold at least six 100 ANZE submersible pumps, that it at least
intends to
provide maintenance and support services and also that it
operates a rental division.
[15]
An article published in mining weekly in relation to the launch of
Goodwin’s business makes the nature and extent of
the
competitive interface clear –
Increased
demand for the high-performance reliable range of Goodwin submersible
pumps has led to the opening of the local division
to support the
large customer base.
Goodwin
submersible pumps Africa which will officially open in November 2016,
will operate from a comprehensively equipped facility
in Tunney Ext 9
Germiston. The custom premises will house a fully equipped workshop,
a state-of-the-art pump test bay, a warehouse
and a service exchange
store, as well as a large rental fleet…
All
products are backed by highly skilled and knowledgeable technical
personnel with an in-depth understanding of pump applications.
The
range of products includes the well-known ANZE submersible pumps,
pontoon mounted pumping solutions, control panels, couplings
and
ancillary equipment.
[16]
In my view, Weir has discharged the onus of demonstrating a
competitive interface between it and Goodwin. It follows from the
time that Goodwin commenced trading that Potgieter and Gomes have
been in breach of their restraints.
[17]
To the extent that Potgieter and Gomes dispute the reasonableness of
their respective restraints, as the branch manager of
the Witbank
branch, Potgieter was required to develop and grow Weir’s
current market with an art increasing sales. He was
required to have
direct contact with customers, develop relationships with them and to
pursue new business. As pump rental store
manager for Middleburg,
Potgieter was instrumental in the operation of Weir’s rental
business, the core component of which
was the Goodwin ANZE 100
submersible pump. As a sales engineer, Gomes was responsible for
establishing and maintaining customer
relationships. As a product
manager, he was responsible for reporting and sales, margins,
competitor activity and the like. In
the various capacities, both
Potgieter and Gomes had access to and knowledge of Weir’s
customers, the market that Weir had
developed for the ANZE 100
submersible slurry pump, the identity of those customers who had
purchased the pump and the after sales
service maintenance and repair
needs. The employment of Potgieter and Gomes by Goodwin would place
Goodwin in a position to exploit
the knowledge of Weir’s
customer connections and to garner business for Goodwin. Both
Potgieter and Gomes also had access
to strategic business information
that sales meetings were cross selling opportunities were discussed
across the sales network,
as well as pricing strategies and
mechanisms, current and pipeline project, customer purchasing
patterns, discard strategies and
the like. Particular
significance in this regard is the undisputed fact that for the
previous 15 years, Weir was the exclusive
supplier of the Goodwin 100
ANZE submersible pump in South Africa. It built the market for this
product in South Africa, it established
a brand of the goodwill
attached to it, it developed an extensive installed base of customers
to whom it sold the pump, rendered
maintenance, support, rental and
repair services. It is obvious that these relationships, when
supplanted from Weir to Goodwin,
will be of an enormous value to the
letter and will permit it a head start in developing its business.
[18]
In so far as it is contended that in terms of the license agreement,
Weir was obliged to provide Goodwin International with
certain
information which Potgieter and Gomes
say
was proprietary to Weir and that Weir therefore cannot claim
confidentiality over this information. Any disclosure obligations
contained in the license agreement exists between the applicant and
Goodwin International
and do not exist
between Weir and Goodwin, being a new South African entity which has
entered the market to compete directly with
Weir. Goodwin is not a
party to the license agreement. In any event, customer lists and the
like were not disclosed by Weir to
Goodman International in terms of
the agreement.
[19]
In so far as Potgieter and Gomes contend that the restraint
agreements are overbroad, the fact remains that enforcement of
the
restraints is sought only in respect of the Republic of South Africa
and only in respect of the market for the manufacture,
distribution
and sale of submersible slurry pumps. The enforcement of the
restraints will not render either Potgieter or Gomes
unemployable.
They will be limited, for a period, in the choice of employment. They
are entitled to seek employment and remain
employed in the mining and
related industries but most simply not, for a short period, take up
employment with Goodwin or competitor
of the applicant which renders
the defined services in respect of submersible slurry pumps. In my
view, the enforcement of the
restraints on these limited terms is
fair and reasonable.
[20]
For the above brief reasons, in my view, Weir has satisfied the
requirements relevant to the granting of final relief and is
entitled
to an order for the pared down relief that it seeks.
[21]
Finally, this court has a broad discretion in terms of s 162 of the
LRA to make orders for costs according to the requirements
of the law
and fairness. In my view, there is no reason to deny the applicant
its costs, including the costs of the proceedings
on 15 December 2016
when the application was postponed and cost reserved.
I make
the following order:
1. The first and
second respondents are restrained within the Republic of South
Africa, until 31 August 2017 and
31 October 2017 respectively,
from:
1.1
being concerned, engaged, interested or employed in any capacity with
a directly or indirectly in:
1.1.1 the third
respondent; or
1.1.2 any other
entity which carries on a business in the sale, rental or maintenance
of submersible slurry pumps
including the Goodwin 100 ANZE (‘
the submersible slurry pump’);
1.2
directly or indirectly providing or attempting to provide any
service or product which is the same as or similar to the
submersible
slurry pump to any client of the applicant that has previously
purchased or rented the submersible slurry pump from
the applicant;
1.3
directly or indirectly, soliciting, interfering with, enticing or
attempting to entice any client that has previously purchased
or
rented the submersible slurry pump from the applicant away from it;
1.4
directly or indirectly soliciting or otherwise approaching any
employee or consultant of the applicant with a view to encouraging,
persuading or inducing him/her to become employed by or interested
in, in any manner whatsoever, in any entity which competes with
the
applicant or to terminate his/her employment or association with the
applicant and/or to furnish information including confidential
information or advice to anyone.
2. The first and
second respondents are restrained from directly or indirectly using,
divulging or disclosing
the applicant’s confidential
information to any person, including the third respondent.
3.
The first and second respondents, jointly and severally, the one
paying the other to be absolved, are to pay
the costs of these
proceedings, including the costs of proceedings on 15 December 2016
when an interim order was granted, such
costs to include the costs of
two counsel.
ANDRÉ
VAN NIEKERK
JUDGE
OF THE LABOUR COURT
REPRESENTATION
For
the applicants: Adv. C Whitcutt SC, with him Adv. P Bosman,
instructed by ENS
For
the first and second respondents: Adv. G Hulley SC, with him Adv. GM
Young, instructed by Teixeira Du Toit Attorneys