About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Johannesburg Labour Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: Johannesburg Labour Court, Johannesburg
>>
2017
>>
[2017] ZALCJHB 205
|
|
Novozymes South Africa (Pty) Limited v Schenckenberg and Another (J626/17) [2017] ZALCJHB 205 (31 May 2017)
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case
no: J 629/17
In
the matter between:
NOVOZYMES
SOUTH AFRICA (PTY) LIMITED
First Applicant
and
THOMAS
GIULIANO SCHENCKENBERG
First Respondent
DANISCO
SOUTH AFRICA (PTY) LTD
Second Respondent
Heard:
11 April 2017
Delivered:
31 May 2017
JUDGMENT
TLHOTLHALEMAJE,
J
Introduction:
[1]
The Applicant seeks interdictory relief to enforce certain restraint
of trade and confidentiality undertakings contained in
the First
Respondent’s (Schenckenberg) contract of employment. The
specific orders sought by the Applicant are as follows;
“
1.
…
2.
Interdicting and restraining the First Respondent until 31 March 2018
and in the Republic
of South Africa, from taking up employment with
the Second Respondent, or directly or indirectly working or otherwise
engaging
in the production, manufacture, sale or distribution in
South Africa of any products similar to or competitive with those
manufactured
or sold by the Applicant or its subsidiaries either for
his own benefit or for the benefit of any other person, firm or
corporation
whatsoever.
3.
Interdicting and restraining the First Respondent from disclosing the
confidential
information of the Applicant to any third party
including the Second Respondent.
4.
Directing the First Respondent to return to the Applicant
alternatively to destroy
and to provide the Applicant with proof of
affidavit that it has been destroyed, the information uploaded by the
First Respondent
onto his Google Drive on 21 December 2016
or on any other date.”
Background:
[2]
The Applicant carries out business in the enzyme and microbial
solutions industry. It is subsidiary of a Danish company that
conducts business internationally in the production of
inter alia
biological solutions including industrial enzymes which it supplies
to various industries including the household care, food and
nutrition, brewing, bio-energy and baking.
[3]
The Applicant supplies its enzymes to the baking industry globally
and in South Africa. Its customers, including AB Mauri, RCL,
Bake
Tech, Pepsico and Grants Baking, use these enzymes for a variety of
purposes, including improvements in the quality of their
end products
or in a wide variety of applications,
i.e.
to increase colour
and volumes of loaves of bread, improve crumb texture, appearance,
dough handling etc.
[4]
Schenckenberg had entered into a contract of employment with the
Applicant on 3 February 2015, and commenced his duties on 16
February
2016. He was the Applicant’s Account Manager-Baking, Africa
Region, and was based in Johannesburg. He also was required
to visit
the Applicant’s offices and branches locally and abroad. He had
resigned from his position on 3 January 2017
having given
three months’ notice. His employment was to terminate on 31
March 2017, but he was informed on 21 February 2017
that he was
‘suspended’ from duty and that his services were no
longer required pending the termination date.
[5]
It is common cause that Schenckenberg has taken up employment with
the Second Respondent (Danisco), as Bakery Technical Sales
Manager in
its Cape Town branch. Danisco, is a company carrying on the business
in the food and beverage sector. It was joined
to this proceedings
since it has a material interest in the outcome, as Schenckenberg had
taken up employment with it, and also
since the Applicant views it as
a competitor. No relief is however sought against Danisco.
[6]
The basis upon which the Applicant seeks to enforce the restraint and
confidentiality clauses is that Schenckenberg will be
employed by
Danisco in a position which will make him responsible for selling
enzymes of DuPont/Danisco in the South African baking
industry in
direct competition with it.
[7]
A further factor necessitating the enforcement of the restrain
according to the Applicant was that during his employment,
Schenckenberg
was the only employee dealing with baking enzymes in
the Middle East, Africa and the SADC countries. By virtue of his
position,
Schenckenberg was required to generate sales of its enzymes
products in the baking industry, and was privy to and therefore
granted
access to confidential information and trade secrets
including all the Applicant’s customer portfolios, product
details,
strategy for growth, strategy to deal with competitors,
sales figures, and process.
[8]
Schenckenberg according to the Applicant was viewed as the most
critical employee within its baking enzyme division and had
reported
directly to Esra Özcömlecki, the Head of Sales for baking,
food and nutrition for the Middle East and Africa.
[9]
It was contended that Schenckenberg had also developed significant
relationships with clients, which relationship were proprietary
and
protectable, as he was required as part of his role, to visit and
meet with clients and to try and persuade them to purchase
its
enzymes, and that through his regular access to and contact with the
customers, he had developed and maintained significant
customer
connections. Other than these factors, it was also submitted on
behalf of the Applicant that prior to his resignation,
Schenckenberg
was exposed to customer specific projects on its behalf. In this
regard, it was submitted that he was involved in
two important
projects for large customers of the Applicant,
viz
, Tiger
Brands and RCL.
[10]
When Schenckenberg resigned on 3 January 2017, he had informed the
Applicant through his attorneys of record that he intended
to take up
employment with an entity known as DuPont, or that he would be
working for a ‘baking company’. It nevertheless
transpired that he had instead taken up employment with Danisco,
which is a subsidiary of DuPont, and which according to the
Applicant,
competes directly with it in the supply of enzymes in the
baking industry in South Africa and globally. The taking up of
employment
with Danisco therefore according to the Applicant
constitutes a breach of the restraint agreement.
[11]
It was further submitted on behalf of the Applicant that by taking up
employment with Danisco, Schenckenberg will cause harm
to its
business as he will be able to disclose its confidential information
and trade secrets to which he was made privy while
employed. Danisco
will then be able to use the information and trade secrets to compete
unlawfully with it. Schenckenberg, it was
also submitted, would be
able to use customer connections which he established whilst employed
by the Applicant, and which were
proprietary to the Applicant to the
benefit of Danisco.
[12]
The nub of Schenckenberg’s opposition to the application is
that the Applicant and Danisco are not competitors because
the
Applicant manufactures and sells ‘single enzyme’ products
whilst Danisco only sells ‘pre-mix’ products.
He further
contended that the Applicant does not have a protectable interest
worthy of protection and/or that it cannot harm the
Applicant by
taking up employment with Danisco.
[13]
Schenckenberg had denied that he was exposed to the Applicant’s
confidential information or customer connections which
could
substantiate the existence of a protectable interest; that the
enforcement of the restraint would cause him to suffer prejudice,
and
further that the considerations of weighing of interest and public
interest favoured him.
[14]
Prior to dealing with the merits of the applicant, it is important to
highlight that Schenckenberg placed too much emphasis
on the
contention that the application should not be accorded urgency. It is
my view that the issue of urgency should be disposed
of within the
context of the following events upon his resignation;
[15]
The Applicant had initially approached the court having cited DuPont
as the second respondent. This was on the basis that Scheckenberg
had
created an impression after his resignation that he was going to be
employed by that entity. This impression was further created
by
Schenckenberg’s attorneys of record in their letter of 30
January 2017. It was only after the initial application was
launched
that Scheckenberg’s attorneys and those of DuPont had pointed
out that it was in fact Danisco that had employed
him. This had
resulted in the Applicant having to remove its initial application
from the roll as set down on 31 March 2017, amend
its papers and
re-issue the application against Schenckenberg and Danisco.
[16]
In the founding affidavit, the
Applicant had averred that Schenckenberg’s attorneys of record
had specifically indicated that
they would not take issue with the
urgency of the application occasioned by the further postponement of
the hearing and the need
for the Applicant to amend its papers
[1]
.
Schenckenberg in his answering papers merely admitted to the
Applicant’s averments in this regard
[2]
.
[17]
An area of concern needs to be
highlighted regarding Schenckenberg and his attorneys of record not
being candid in respect of who
the former’s new employer was.
It was not disputed that Schenckenberg had received his letter of
appointment from Danisco
on or about 12 December 2016. In an undated
letter confirming receipt of his resignation
[3]
,
the Applicant’s Anne Agergaard Pøhls had reminded
Schenckenberg of his restraint obligations as shall be dealt with
below, and was asked to disclose the identity of his new employer by
31 January 2017. In a response dated 30 January 2017 through
his
attorneys of record, Schenckenberg indicated that he would be
employed by DuPont which was not a competitor. In a separate
e-mail
by Schenckenberg dated 4 January 2017, Schenckenberg in a response to
Özcömleckci nevertheless refused to disclose
the identity
of his new employer, contending that he was not legally obliged to do
so. He merely indicated that the new employer
was a ‘baking
company’. As at 23 February 2017, and following further
correspondence between the respective attorneys
of record, the
Applicant laboured under the impression that Schenckenberg was to be
employed by DuPont, to which the Applicant
had nonetheless raised its
reservations.
[18]
The point being made with the above background is that to the extent
that Schenckenberg was in possession of a letter of appointment
from
Danisco, at the very least, good faith required of him and his
attorneys of record to disclose that fact. As a result of having
the
wrong impression as to who the real employer was to be, the Applicant
had ended up citing the wrong second respondent, and
this in my view
was utterly unnecessary in view of the subsequent need for it to
amend its papers.
[19]
In the light of the above, it
is indeed disingenuous for Schenckenberg to strenuously argue that
the application is not urgent when
he had in my view deliberately,
failed to disclose who his new employer was immediately after he had
resigned and was asked about
it. To the extent that further emphasis
was placed on other delays in bringing this application, I am
satisfied that these are
not substantial to render the matter not
urgent. In any event, it has also been held on numerous occasions in
this Court that applications
to enforce restraint of trade are by
their nature urgent
[4]
,
and to this end, there is no merit in the contrary contention as
advanced on behalf of Schenckenberg.
The relevant restraint clauses and
breach:
[20]
It is trite that a party that seeks to enforce
restraint provisions must invoke the agreement and demonstrate a
breach thereof.
The existence of the agreement as I understood
Schenckenberg’s case is not in dispute. The following clauses
as contained
in the contract of employment are relied upon;
“
21
NON-COMPETITION
CLAUSE
20.1
After termination of the Employee’s employment with the Company
for any reason, he agrees for a period of
twelve (12) months after
leaving the employment of the Company, that he will not directly or
indirectly work or otherwise engage
in the production, manufacture,
sale or distribution in South Africa of any products similar to or
competitive with, those manufactured
or sold by the Company or its
subsidiaries either for the Employee’s own benefit or for the
benefit of any other person,
firm or corporation whatsoever.
20.2
The Employee acknowledges and agrees that the stipulated remuneration
on this contract includes compensation on
this respect and no
compensation can be claimed on this regard after termination.
20.3
The period of 12 months referred to above commence on the day upon
which the Employee leaves the Company, even
if this date is prior to
the expiry date of any given notice or of termination. The Company’s
board of directors may at its
discretion by express written consent
release the Employee from the above restriction.”
“
21.
CONFIDENTIALITY
AGREEMENT
21.1
The Employee acknowledges that by virtue of his position in the
Company that he will be placed in possession of
confidential
information and/or documentation relating to both the Company and its
clients;
21.2
The Employee shall not, save in as far as it is necessary and
appropriate in the ordinary course of his employment,
disclose to any
person, Company or institution any information regarding the
business, operations; clients, finances, dealings
or any other
affairs of the Company, associated companies or any other customer or
business associated Company, either during or
after his employment.
Nor shall the Employee disclose any information or documentation,
other than in the ordinary course of employment,
to which he has come
into possession by virtue of his employment.
21.3
The confidentiality requirement shall apply during the Employee’s
employment with the Company and at all
times after the termination of
his employment with the Company for any reason”
[21]
Schenckenberg’s contention was that the restraint was not
enforceable and should not endure for any period of time. He
nevertheless contended that to the extent that it did, the period of
restraint commenced on 21 February 2017 based on the application
of
clause 20.3 of the contract, which was the day on which he was
‘suspended’.
[22]
As to whether there is a breach of the above restraint provisions
needs to be examined within the context and circumstances
under which
Schenckenberg will take up employment with Danisco, and whether the
latter is the Applicant’s competitor.
[23]
The starting point is that upon receipt of Schenckenberg’s
letter of resignation, the Applicant on 3 January 2017
wrote a letter to him to confirm that he was bound by the terms of
the restraint agreement and that he would be held to them. In
his
response
via
his attorneys of record, Schenckenberg had
confirmed that he was to take up employment with
DuPont
as its
Technical Sales Manager in Cape Town, and that this entity was not a
competitor of the Applicant but rather a customer in
that it
purchased certain enzymes from the Applicant.
[24]
Schenckenberg had further in his response alleged that the restraint
provisions relied upon were unenforceable as they
inter alia
,
‘nonsensical’; were aimed at stifling competition, and
that the Applicant had no protectable interests because he
was not in
a position to solicit business away from it. He further alleged that
clause 20 was too wide in its geographical reach,
and stated that he
had no intention of divulging the confidential information of the
Applicant or harming it.
[25]
The Applicant through its attorneys of record then responded on
20 February 2017 and
inter alia
reiterated that the
restraint provisions remained binding on Schenckenberg, and that by
taking up employment with DuPont he would
be in breach of those
provisions. The Applicant sought an undertaking from Schenckenberg
that he would comply with the terms of
the restraint provisions
failing which this application would be launched. In his response
through his attorneys of record, Schenckenberg
confirmed that he
stood by his allegations and that he would oppose any action.
[26]
The Applicant’s main contention was that Danisco is a
direct
competitor since its parent company, DuPont is a diversified company
which is involved in various industries globally, and
in particular,
in the enzymes industry as it produced, manufactured, sold and
distributed enzymes for the baking industry in South Africa.
According
to the Applicant, both entities were involved in the
manufacture and supply of industrial enzymes globally and in South
Africa.
DuPont in particular was a major competitor in the
manufacture and supply of industrial enzymes to the various
industries. It was
conceded that the Applicant holds the dominant
market position globally, but that DuPont was the second biggest
manufacturer and
seller of enzymes globally, and distributed its
enzymes to the baking industry via Danisco.
[27]
The Applicant’s further contention was that the area of
competitive interface between it and Danisco in the baking industry
was in respect of five enzymes which were used in the improvement of
flour. Only the Applicant and DuPont/Danisco competed in the
production of these five enzymes, whilst other competitors only
produced certain enzymes.
[28]
As Schenckenberg was to take up the role of Bakery Technical Sales
Manager with Danisco, the Applicant’s contention was
that he
would be involved in the sale of enzyme products for Danisco into the
baking industry in South Africa, and in direct competition
with it.
The capacity in which Schenckenberg was to be employed in at Danisco
was according to the Applicant, similar to that which
he previously
held at it.
[29]
Schenckenberg denied that Danisco is a competitor on the basis that;
29.1 In the
wholesale baking industry, where products are manufactured and sold
in high quantities, baking companies
incorporate various types of
single enzymes (different types of proteins) in their recipes to
achieve different goals. Baking companies
purchase different kinds of
single enzymes and then incorporate these into their own recipes
using their own formulae. Other companies
however chose to purchase
‘pre-mixes’ that consist of a number of ingredients which
have been pre-mixed by the manufacturer
according to their
proprietary formulae and then sold in this form to the baking
companies that prefer to purchase pre-mixes.
29.2 Customers who
purchased single enzymes and incorporated it into their own mixes are
referred to as ‘Enzyme
customers’, whilst those who
prefer to purchase pre-mixes are the ‘Pre-mix customers’.
Enzyme customers have
different infrastructure, technical know-how
and different operational and business models than pre-mix customers,
and one cannot
become the other without consequences in respect of
capital expenditure and/or changes in their operational structure and
business
model.
29.3 Within South
Africa, a number of companies manufacture and sell pre-mixes (the
pre-mix sellers) to pre-mix
customers. Others sell single enzymes to
customers (Enzyme sellers and enzyme buyers). Pre-mix sellers and
enzyme sellers are not
competitors because their customers purchase
different products from them. The Applicant is an enzyme manufacturer
seller, whilst
Danisco is a pre-mix seller. Danisco merely through
DuPont, purchases single enzymes from a number of companies including
the Applicant
in order to manufacture its pre-mixes. Thus, since the
Applicant does not sell pre-mixes in South Africa, and since Danisco
does
not sell single enzymes in SA, they were not competitors.
29.4 DuPont and
Danisco did not sell single enzymes in the SADC region, nor were they
in competition with the
Applicant in that region. DuPont and Danisco
did not have manufacturing plants for enzymes in South Africa other
than blending
plants in Midrand and Cape Town. The Applicant’s
competitor in this regard were entities known as DSM and MuhlenChemie
[30]
In its replying affidavit as deposed to by its Head of Business
Operations, Umut Köroğlu the Applicant refuted the
allegations that Danisco was not a competitor, and averred that;
30.1 Danisco
manufactured single enzymes which it sold globally, and that those
products competed directly with
the single enzymes manufactured by
the Applicant;
30.2 Danisco and the
Applicant competed directly in the manufacture and sale of five
enzyme segments which were
used in the baking industry;
30.3 The distinction
sought to be drawn by Schenckenberg that the two entities were not in
competition to support
his contention was merely artificial, and also
pertained to the manner and form in which these enzymes were sold to
customers.
All baking products were accordingly made up of five
ingredients referred to as ‘improvers’, and these in turn
consisted
of various ingredients, the most important of which was the
enzymes;
30.4 The enzymes,
whether single or part pre-mixes as sold by both entities to
customers clearly competed in respect
of the end product sought by a
customer. The two entities sold similar and competitive enzymes
either on a single basis or in combination
with other ingredients as
a pre-mix as they target the same requirements of customers, and the
fact that they position themselves
as a seller of single enzyme or
blended products did not imply that they did not compete because
ultimately, they compete for the
custom of baking companies who want
to achieve specific product results.
30.5 Danisco was not
a customer of the Applicant as suggested by Schenckenberg, as not a
single enzyme was sold
to it for inclusion in its pre-mixes, and
furthermore, Danisco/DuPont manufactured their own enzymes which were
sold globally.
There was therefore no reason for Danisco to purchase
the enzymes of a competitor for use in its pre-mixes when it
manufactured
its own enzymes and sold these globally.
[31]
As expected with applications
to enforce restraint provisions, disputes of fact are bound to rise
from the parties’ pleadings.
These disputes, to the extent that
they are real or genuine, are however to be resolved by the
application of principles as set
out in
Plascon
Evans Paint Ltd v Van Riebeeck Paints (Pty) Ltd
[5]
.
[32]
As correctly pointed out on behalf of the Applicant, the issue
insofar as determining whether Danisco is in competition with
it
pertains to the nature of the two entities’ business, and
whether in fact there are differences in the enzymes as manufactured
and sold within the baking industry. I did not understand it to be
Schenckenberg’s case that the primary purpose of enzymes
is not
to obtain certain attributes in the finished product. Thus, as
pointed out on behalf of the Applicant, whether enzymes are
sold as
single enzymes or pre-mixes is not material, as the end result sought
by customers is to achieve a particular attribute
in its final
product.
[33]
As I further understood Schenckenberg’s case, the main issue is
the manner and form in which these enzymes are either
produced or
sold by either entity. Based on the pleadings and submissions in this
regard, I am satisfied that it should be concluded
that the Applicant
and Danisco/DuPont manufacture and sell enzymes to the baking
industries locally and globally, and thus compete
directly in that
regard, with particular reference to the five enzyme segments which
are used in the baking industry.
[34]
I am further of the view that as correctly pointed out on behalf of
the Applicant, the distinction which Schenckenberg sought
to draw in
regard to the nature and form of enzymes which the two entities
manufactured or sold is indeed artificial, and accordingly,
the
alleged disputed facts raised by Schenckenberg cannot be real or
genuine, and his allegations on the papers therefore ought
to be
rejected as they are untenable. The enzymes, whether single or part
pre-mixes as sold by both entities to customers clearly
compete in
respect of the end product sought by a customer. The two entities
sell similar and competitive enzymes either on a single
basis or in
combination with other ingredients as a pre-mix as they target the
same requirements of customers.
[35]
There is further no merit in Schenckenberg’s contentions that
Danisco is the Applicant’s customer, and I am persuaded
that
indeed Danisco was not a customer of the Applicant. This in my view
makes sense in that if Danisco manufactured and sold its
own enzymes,
there would not be any reason for it to purchase the enzymes of a
competitor to use in its pre-mixes. On the whole
therefore, I am
satisfied that on the facts, the Applicant has discharged the onus of
demonstrating a competitive interface between
it and Danisco,
particularly in respect of the five enzymes. By joining Danisco
therefore, Schenckenberg would be in breach of
his restraint of trade
obligations.
The
legal framework and evaluation:
[36]
Once
a restraint agreement has been invoked and a breach of the agreement
proved, the onus is on Schenckenberg to prove on a balance
of
probabilities that the agreement is unreasonable or contrary to
public policy and thus unenforceable
[6]
.
Considerations of public policy normally involves an examination of
whether the restraint agreement imposes an unreasonable restriction
on the former employee’s freedom to trade or to work
[7]
.
[37]
The
principles set out in
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[8]
remain authoritative in determining whether a restraint of trade
agreement is enforceable or not. Thus, it is
accepted
that a contract in restraint of trade is not necessarily wholly
enforceable or wholly unreasonable, and that a court may
in the
public interest, order that the whole, or only a part, or no part at
all, of a restriction on trade be enforced
[9]
.
This principle is in sync with the acknowledgement that it is in the
public interest that parties should honour their own agreements
[10]
.
[38]
In
Basson
v Chilwan and others
[11]
,
the Court identified four questions which should be asked when
considering the reasonableness of the restraint. These are;
1.
Does the one party have an interest that
deserves protection at the termination of the employment?
2.
If so, is that interest
threatened/prejudiced by the other party?
3.
Does such interest weight qualitatively and
quantitatively against the interest of the other party not to be
economically inactive
and unproductive?
4.
Is there an aspect of public policy having
nothing to do with the relationship between the parties, which
requires that the restraint
be maintained or rejected? Thus, where
the interest of the party sought to be restrained outweighs the
interest to be protected,
the restraint is unreasonable and
consequently unenforceable.
[39]
Other considerations entail
whether the enforcement of restraint undertakings is merely intended
to stifle competition. Any enforcement
for that purpose would be
deemed to be unreasonable
[12]
.
It further needs to be determined whether
the
restraint goes further than is necessary to protect the interests
alleged
[13]
.
In this regard issues such as the duration of the restraint and the
geographical area covered by the restraint are important
[14]
.
In this regard, and as repeatedly stated by Schenckenberg in his
replying affidavit despite his other contentions, the reasonableness
of the duration and the area of the restraint is not challenged.
Protectable
proprietary interests:
[40]
Protectable interests worthy of
protection are of two kinds. The first relates to the ‘trade
connections’ of the business,
which essentially entails the
goodwill of the business encompassing
relationships
with customers, potential customers, suppliers and others. The second
relates to ‘trade secrets’ of the
company, which involves
all confidential matters which are useful for the carrying on of the
business and which could be useful
to a competitor
[15]
.
Crucial also is that once it is demonstrated that the prospective new
employer is a competitor of the applicant as in this case,
the risk
of harm to the applicant, if its former employee were to take up
employment, becomes apparent
[16]
.
Trade
Connections:
[41]
In this
case, the onus is on Schenckenberg to demonstrate that he has never
acquired any significant personal knowledge of, or influence
over,
the Applicant’s customers, potential customers, suppliers and
others. It is trite however that
not
every contact between an employee and the ex-employer’s
customers constitutes or forms the basis of a protectable interest
in
the form of trade connections.
It
however suffices if it is shown that trade connections through
customer contact exists, and that they can be exploited if the
former
employee was to be employed by a competitor. This is particularly so
where on the facts, it can be established that
there
was indeed an attachment between the ex-employee sought to be
restrained and those customers, and that the attachment was
of such a
nature that the ex-employee would be able to induce those customers
to follow him or her
[17]
.
[42]
As to w
hether
there was or is an attachment between the ex-employee and the
customers or potential customers is obviously a question of
fact to
be determined taking into account the ex-employee’s duties, his
personality, the frequency of his contact with clients
and the
duration of such contact, what knowledge he gained of their
requirements and business, the general nature of the relationship
he
has with clients, whether the ex-employee was involved in the
canvassing of customers and whether any customers were lost after
the
ex-employee left his or her employment
[18]
.
[43]
The Applicant’s contention was that in his
position, Schenckenberg had access to its customer portfolios, and
was required
to visit and meet clients in an endeavour to persuade
them to purchase its enzymes.
Schenckenberg
was the primary and critical liaison between the Applicant and its
baking customers; was responsible for driving sales;
kept in constant
contact with clients regarding its products; was essentially its face
with the clients and was required to manage
those relationships.
[44]
Schenckenberg denied any attachment to the
Applicant’s customers or clients, and contended that he did not
have the kind of
relationships with them that was of such a degree of
closeness that they would follow him to his new employer, especially
after
having been employed by the Applicant for a period of 24
months.
[45]
There are however a number of concessions made by
Schenckenberg in this regard which belie his contentions. He had
conceded that
he was a liaison between customers and the Applicant
and some of its baking customers in the SADC region, even though he
was not
the only liaison as baking customers liaised with several
other people within the Applicant.
Despite his contentions
that
his responsibilities as Account Manager did
not include building personal relationships with customers, as the
product sold by the
Applicant was unique and not readily available,
he nevertheless conceded that he did generate new business even
though this was
not his primary or only function.
[46]
Schenckenberg further conceded that he did
proactive courtesy calls at least once a month to customers, but that
this did not involve
constant contact. He also rarely did reactive
courtesy calls if customers had experienced problems with the
Applicant’s products.
He further conceded that he was indeed an
important role player or ‘face’ in managing the
relationship with customers,
but that he was not the only role player
or ‘face’ of the Applicant. In any event, according to
Schenckenberg, the
nature and type of the Applicant’s business
did not require of him to maintain close relationships with
customers.
[47]
In the light of the above concessions, I am satisfied that the
Applicant is entitled to protection in respect of its trade
connections. This is further so in that as Accounts Manager whilst
employed by the Applicant, Schenckenberg also dealt with
clients/customers
both in South Africa and within the SADC region.
His role and responsibilities in view of that position clearly placed
him in contact
with clients and customers, and that role cannot by
any accounts be insignificant. I am therefore of the view that his
attempts
at downplaying his role and responsibilities and the nature
of his contact with clients were indeed feeble, particularly in view
of his own concessions, including that he knew who those customers
were and what products they bought from the Applicant.
The
fact that he was not the only person responsible for liaising with
customers or that he was not the only ‘face’
of the
Applicant is irrelevant, in that on his own and in his individual
capacity within the course of his duties, he had liaised
with those
customers, and was also responsible for generating new business. He
had further conceded that he did proactive and reactive
courtesy
calls to customers, and the fact he was not in constant contact with
these customers is neither here nor there as on his
further version,
he was an important role player or ‘face’ in managing
relationships with those customers.
[48]
Significant also with Schenckenberg’s concessions was that he
would be performing exactly the same functions at Danisco
as he had
performed whilst employed by the Applicant,
albeit
he will
have a different job title. To the extent that he had conceded that
he knew who the Applicant’s customers were and
what they had
bought from it, and further to the extent that he had conceded that
he would be performing exactly the same functions
as he had done
whilst employed by the Applicant, I am satisfied that the
trade
connections alleged by the Applicant exists, and that they can be
exploited for the benefit of Danisco.
[49]
Schenckenberg was therefore unable to demonstrate that he never
acquired any significant personal knowledge of, or influence
over,
the Applicant’s customers, potential customers, suppliers and
others. The contact that he had with these customers
and clients is
in my view, sufficient to constitute the basis of a protectable
interest in the form of trade connections.
Confidential
Information:
[50]
The next issue to be determined
is whether the Applicant has a protectable interest in preventing the
risk of Schenckenberg divulging
confidential information about its
business. The essence and purpose of any restraint of trade agreement
is to prevent the use
of confidential information by a former
employee to the detriment of the ex-employer. It is therefore not
necessary to find that
the ex-employee did or would actually use
trade secrets and confidential information in his new employment, but
that is was sufficient
if
he
could do so
[19]
.
[51]
For information to be regarded
as confidential, it must
be
objectively established that it could reasonably be useful to, and
enable a competitor to gain an advantage over the ex-employer
[20]
.
More specifically, such information must (a) be capable of
application in trade or industry, must be useful; not be public
knowledge
or property; (b) it must be known only to a restricted
number of people or a closed circle and (c) be of economic value to
the
person seeking to protect it.
[21]
[52]
The Applicant submitted that Schenckenberg was
privy to a variety of confidential information in the form of its
customer list,
including the names and contact details of key
customer representatives and the requirements of particular
customers;
sales and marketing strategies
for the Applicant in respect of the baking industry; pipeline
business and prospective clients targeted
by the Applicant
;
the pricing of products sold to clients including
discounts offered to clients to incentivise them to purchase
products; the terms
of contractual relationships with suppliers and
the terms of the supply;
financial
information in relation to the Applicant’s business including
its generated revenue; business strategy; and confidential
details
about the Applicant’s products including their uses, benefits
and disadvantages.
[53]
Schenckenberg conceded that he had developed technical knowledge in
respect of the Applicant’s enzyme products, knew
its elements,
their uses, advantages and disadvantages. He further conceded that he
had knowledge of the prices of products and
sales figures. He however
contended that pricing was not confidential to the Applicant, and
that he was not familiar with any confidential
information or
purported trade secrets that were useful to a competitor. He also
contended that information in respect of sales
figures was in any
event in the public domain, and that the Applicant’s pricing of
products is not confidential as it could
be established by simply
phoning the Applicant.
[54]
As to whether Schenckenberg was
privy to the Applicant’s confidential information ought to be
disposed of on two significant
grounds. The first is in regard to
concessions made in respect of Tiger Brands and RCL, which the
Applicant viewed as its big projects.
On 4 January 2017 and
after his resignation, Schenckenberg assured Özcomlecki of the
Applicant that despite his
concerns with confidentiality in regard to
Tiger Brand, he ‘
will
go with these secrets to his grave’
[22]
.
[55]
From the above concession
alone, it can be extrapolated that Schenckenberg was aware of the
confidential information he had in his
possession, and I am not
convinced that these only pertained to Tiger Brand. At the time that
he gave Özcomlecki assurances,
he was less than forthright in
disclosing who his next employer was despite being in possession of a
letter of appointment at that
time. In circumstances where an
ex-employee particularly as in this case has been exposed to
confidential information, and is on
the verge of joining a competitor
and was reluctant to disclose that fact, and further where such an
employee gives half-hearted
assurances in respect of that
confidential information, it cannot be for the ex-employer to rely on
the ex-employee’s
bona
fides
.
[23]
[56]
A second significant factor and
even more worrisome in this case is the conduct of Schenckenberg
prior to leaving the Applicant’s
employ. It was not disputed
that on 31 December 2016, and before his resignation,
Schenckenberg whilst on leave had uploaded
a variety of confidential
information
[24]
onto his google drive, including information related to the
Applicant’s clients/customers’ and the projects embarked
upon in respect of those clients. The information uploaded is
according to the Applicant, proprietary in nature as it also contains
its price list. At the time that Schenckenberg uploaded the
information, he was as already indicated, in possession of a letter
dated 12 December 2016 which confirmed his appointment by
Danisco.
[57]
In his answering affidavit, Schenckenberg merely denied having
uploaded information in respect of RCL, but conceded that he
had
uploaded information containing pricelists and about meetings and
communication dates with Tiger Brands. He however contended
that the
information uploaded was not proprietary in nature, and that he
had uploaded hundreds of files and documents onto
google drive during
the same period which had nothing to do with the information related
to Tiger Brands and RCL. He nevertheless
contended he had uploaded
the information as it was practice he had had been following over the
years before he even joined the
Applicant, and that he did so purely
as backup in case information was lost.
[58]
Schenckenberg further defended his conduct on the basis that there
was no internal policy or procedure at the Applicant that
prohibited
him from uploading information onto his google drive, and that by
uploading, he merely meant to update information and
to store it, and
that in any event, the google drive was not password protected, hence
it was easy for the Applicant to access
it.
[59]
It is my view that Schenckenberg’s glib responses to the
allegations made against him insofar as the uploading of information
onto his google drive signifies his lack of appreciation of the
consequences of his actions, and the reason the Applicant is
justified
in being concerned with his employment by Danisco. In the
founding and replying affidavit, the Applicant had in detail, shown
why
it should be found that the information that Schenckenberg had
access to or was exposed to was of value to it, and I have no reason
to hold otherwise.
[60]
At the time that Schenckenberg uploaded the said information, he knew
that he was leaving the Applicant’s services, as
he was already
in possession of a letter of appointment. The fact that the google
drive was not password protected or that the
Applicant did not have a
policy in that regard did not entitle him to upload that information
at the time that he did. It therefore
did not make sense for him to
attempt to update the Applicant’s information on his own google
drive for the purposes of creating
back-ups, as the Applicant, which
was part of an international group of companies had a sophisticated
network back-up system. There
was no reason therefore as correctly
pointed out on behalf of the Applicant, for Schenckenberg to create
his own back-up on his
google drive. In the light of these factors,
the only inference to be drawn is that Schenckenberg knew that the
information he
had uploaded was confidential and of value to the
Applicant. He also knew that the information could prove useful to
Danisco and
had uploaded it onto his google drive for use in the
future.
[61]
Having had regard to the above, and further based on Schenckenberg’s
own concessions in regards to the information he
was exposed to or
had access to, I am satisfied that the Applicant has demonstrated
that it is entitled to protection of that information
as it remains
confidential and capable of application in the trade or industry that
Danisco operates in. I am satisfied that such
information would be
useful to Danisco, and it is apparent that Schenckenberg’s
employment with Danisco would infringe on
the Applicants’
protectable interest in that regard.
Weighing
of interests:
[62]
The next question to be determined is how does the
Applicant’s interests weigh up qualitatively and quantitatively
against
Schenckenberg’s interests to be economically active and
productive. It was common cause that Schenckenberg resigned on 3
January 2017, and it is apparent from the facts that he had done so
after he was offered a position by Danisco.
[63]
Primary
amongst Schenckenberg’s concerns if the restraint was to be
enforced was that in terms of his offer of employment
from Danisco,
he was to be based in Cape Town, and had already relocated thereto
with his family. The starting point is that Schenckenberg
did not
deny knowledge of the terms of his contract with the Applicant. His
approach however as evident from his earlier correspondence
with the
Applicant was that the restraint was not enforceable
[25]
,
or that ‘
no
restraint of trade will hold in SA court if there is a chance of me
not being able to provide for my family’
[26]
.
He even went to the extent of describing the restraint provisions as
‘nonsensical’.
[64]
It has
already been stated that flowing from the principles set out in
S
unshine
Records (Pty) Ltd v Frohling and Others
[27]
,
parties
are generally bound by restraint provisions even if they might appear
to be unreasonable.
Schenckenberg’s
approach to the binding nature of the restraint provisions, and his
failure to take the Applicant’s
warnings that it would seek to
invoke those provisions appeared to be cavalier. As correctly pointed
out on behalf of the Applicant,
any prejudice to him if the restraint
provisions are found to be enforceable was clearly foreseeable and
his own doing. In this
regard, despite the full knowledge of these
restraint provisions, Schenckenberg accepted a position from a
competitor, decided
to relocate his family to Cape Town, and
essentially dared the Applicant in a reckless manner to enforce the
restraint. He should
have foreseen the consequences of his reckless
conduct.
[65]
It has also been pointed out that Schenckenberg
does not challenge the reasonableness of the duration and area of the
restraint
and there is therefore no basis upon which the Court can
interfere in this regard. The Applicant only seeks to prevent
Schenckenberg
from working for a business which competes with it in
the sale of enzymes, and he is thus not prevented from working for
any baking
customer. There is therefore no substance to the
allegation that the enforcement of the restraint would prevent
Schenckenberg from
earning a living in an industry he is familiar
with.
Requirements
of final relief:
[66]
Where a final order is sought,
three essential requisites must be met. Thus there must be a clear or
alternatively a
prima facie
right, secondly an injury actually committed or reasonably
apprehended, and lastly, the absence of any other satisfactory
remedy.
[28]
[67]
For a clear
right to be established, the court must consider whether there is an
interest deserving of protection. If this question
is answered in the
affirmative, the next question is whether the ex-employee can
threaten those interests. If the answer is still
in the affirmative,
those interests must be weighed up against the interest of the
ex-employee not to be economically inactive
and unproductive
[29]
.
[68]
In this case, and upon a consideration of all the factors, I am
satisfied that the Applicant has established a clear contractual
right to a protection of its proprietary interest in the form of
confidential information and customer connections. By taking up
employment with Danisco, which is the Applicant’s direct
competitor, Schenckenberg will be in breach of his restraint
undertakings.
I am also satisfied that the enforcement of the
restraint provisions is not meant to stifle competition but to
protect the Applicant’s
proprietary interest against any harm
posed by Schenckenberg’s association with Danisco. The
Applicant’s alternative
remedies in the circumstances are
limited if not non-existent if the restraint is not enforced, and I
am satisfied that on the
facts, the Applicant’s interests in
regard to the protection it seeks far outweighs those of
Schenckenberg, as he is not
completely prevented from being
economically active.
Costs:
[69]
The provisions of section 162
(1) of the LRA, requires of this court to take into account the
requirements of law and fairness when
considering an order of costs.
In so doing also I am mindful of the fact that issues surrounding
restraint of trade invariably
impacts on the provisions of section 22
of the Constitution of the Republic
[30]
,
and litigants should not be
deterred
from defending or prosecuting bona fide actions for fear of adverse
costs orders. Having considered these factors, I am
not persuaded
that a cost order is warranted in this case.
Order:
[70]
In the premises, I make the following order:
1.
The First Respondent is
interdicted and restrained until 31 March 2018 and in the Republic of
South Africa, from;
a)
taking up employment
with the Second Respondent, or
b)
directly or indirectly
working or otherwise engaging in the production, manufacture, sale or
distribution in South Africa, of any
products similar to or
competitive with those manufactured or sold by the Applicant or its
subsidiaries either for his own benefit
or for the benefit of any
other person, firm or corporation whatsoever;
c)
from disclosing the
confidential information of the Applicant to any third party
including the Second Respondent.
2.
The First Respondent is directed to return to the Applicant,
alternatively to destroy and to provide the Applicant with proof on
affidavit that it has destroyed, the information uploaded by
him onto
his Google Drive on 21 December 2016 or on any other date.
3.
Each party is to pay its own costs.
____________________
E.
Tlhotlhalemaje
Judge
of the Labour Court of South Africa
Appearances:
For
the Applicant:
Adv. Penny Bosman
Instructed
by:
Mervyn Taback
Inc.
For
the First Respondent:
Mr. RD Orton of Snyman Attorneys
[1]
At para 90
of the Founding Affidavit
[2]
At para 67
of the Answering Affidavit.
[3]
Annexure
‘TGS2’ of the Answering Affidavit
[4]
Mozart Ice Cream Franchises
(Pty) Ltd v Davidoff
and
Another
2009 (3) SA
78
(C) 89A.
[5]
1984(3) SA
623 (A) at 634H-635C, where it was held that:
‘
It is
correct that, where in proceedings on notice of motion disputes of
fact have arisen on the affidavits, a final order, whether
it be an
interdict or some other form of relief, may be granted if those
facts averred in the applicant's affidavits which have
been admitted
by the respondent, together with the facts alleged by the
respondent, justify such an order. The power of the Court
to give
such final relief on the papers before it is, however, not confined
to such a situation. In certain instances the denial
by respondent
of a fact alleged by the applicant may not be such as to raise a
real, genuine or bona fide dispute of fact …
. If in such a
case the respondent has not availed himself of his right to apply
for the deponents concerned to be called for
cross-examination under
Rule 6(5)(g) of the Uniform Rules of Court … and the Court is
satisfied as to the inherent credibility
of the applicant's factual
averment, it may proceed on the basis of the correctness thereof and
include this fact among those
upon which it determines whether the
applicant is entitled to the final relief which he seeks … .
Moreover, there may
be exceptions to this general rule, as, for
example, where the allegations or denials of the respondent are so
far-fetched or
clearly untenable that the Court is justified in
rejecting them merely on the papers.
’
[6]
See
Experian South Africa (Pty) Ltd v Heyns and Another
([2013] (1) SA 135 (GSJ), where Mbha J (As he then was) held as
follows:
“
The
position in our law is, therefore, that a party seeking to enforce a
contract in restraint of trade is required only to invoke
the
restraint agreement and prove a breach thereof. Thereupon, a party
who seeks to avoid the restraint bears the onus to demonstrate
on a
balance of probabilities that the restraint agreement is
unenforceable because it is unreasonable”.
[7]
As to what
constitutes public policy was summarised in Venter v Khan and Others
(14185/2011) [2014] ZAKZDHC 48 (3 November 2014)
at para [63] as
follows;
“
In
summary, clauses that public policy cannot tolerate include those
that are ‘draconian’, ‘so gratuitously
harsh and
oppressive’, that are ‘clearly inimical to the interests
of the community’, that are ‘contrary
to law or
morality’, that ‘run counter to social or economic
expedience’ or are ‘unconscionable and incompatible
with
public interest’.
(Authorities
Omitted)
[8]
[1984] ZASCA 116
;
[1984] (4)
SA 874
(A) at 891 B-C)
[9]
at 896 A-E
[10]
See
S
unshine
Records (Pty) Ltd v Frohling and Others
1990 4 SA 782
(A) at 794C-E, where it was held that;
'In determining
whether a restriction on the freedom to trade and to practise a
profession is enforceable, a court should have
regard to two main
considerations. The first is that the public interest requires, in
general, that parties should comply with
their contractual
obligations even if these are unreasonable or unfair. The second
consideration is that all persons in the interests
of society, be
permitted as far as possible to engage in commerce or professions
or, expressing this differently, that it is
detrimental to society
if an unreasonable fetter is placed on a person's freedom of trade
or to pursue a profession. In applying
these two main
considerations, a court will obviously have regard to the
circumstances of the case before it.'
[11]
[1993] ZASCA 61
;
[1993] (3)
SA 742
(A) at 767 G-H
[12]
See
Ball
v Bambalela Bolts (Pty) Ltd and Another
(2013)
34 ILJ 2821 (LAC)
[13]
Kwik
Kopy (SA) (Pty) Ltd v Van Haarlem and Another
(1999) (1)
SA 472
(W)
at
484E
[14]
See also
Den Braven SA (Pty) Ltd v Pillay and Another
2008(6)
SA 229 (D) at paragraph [50], where it was held that:
"The
proper approach in my view is for the court to ask itself whether
the conduct that the applicant seeks to restrain by
way of an
interdict is conduct that falls within the terms of the restraint
agreement and from which the former employee agreed
to abstain. If
the answer to that question s in the affirmative the court then
moves to an analysis of whether it should, in
accordance with the
principles of public policy, enforce the agreement to that extent by
granting relief to the applicant. It
has no need in those
circumstances to have regard to those portions of the agreement that
are more extensive than the relief
actually being sought."
[15]
Experian at
paras 17, 17.1 and 17.2
[16]
Experian,
at para [20]. See also Den Braven SA (Pty) Ltd v Pillay &
Another at para [6], where the Court held that;
“
In
considering the facts of a particular case it must always be borne
in mind that a protectable interest in the form of customer
connections does not come into being simply because the former
employee had contact with the employer’s customers in the
course of their work. The connection between the former employee and
the customer must be such that it will probably enable the
former
employee to induce the customer to follow him or her to a new
business”
[17]
See
Reddy
v Siemens Telecommunications (Pty) Ltd (above) at para 20.
[18]
Den
Braven SA (Pty) Ltd v Pillay & Another
at para [6]
[19]
In
Reddy
v. Siemens Telecommunications (Pty) Ltd supra
[20]
See
Coolair
Ventilator Co SA (Pty) Ltd v Liebenberg and Another
1967 (1) SA
686 (W)
[21]
See
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff and Another; Waste
Products Utilisation (Pty) Ltd v Wilkes and another
2003 (2) SA 515
(W) at 577B C.
[22]
Annexure
‘TAF9’ to the Founding Affidavit
[23]
See
Experian at para [22] where it was held that;
“
The
ex-employer seeking to enforce against his ex-employee a protectable
interest recorded in a restraint, does not have to show
that the
ex-employee has in fact utilised information confidential to it: it
need merely show that the ex-employee could do so.
The very purpose
of the restraint agreement is to relieve the applicant from having
to show bona fides or lack of retained knowledge
on the part of the
respondent concerning the confidential information. In these
circumstances, it is reasonable for the applicant
to enforce the
bargain it has exacted to protect itself. Indeed, the very ratio
underlying the bargain is that the applicant
should not have to
contend itself with crossing his fingers and hoping that the
respondent would act honourably or abide by the
undertakings that he
has given. It does not lie in the mouth of the ex-employee, who has
breached a restraint agreement by taking
up employment with a
competitor to say to the ex-employer “Trust me: I will not
breach the restraint further than I have
already been proved to have
done”.”
[24]
Annexure
‘TAF10’ to the Founding Affidavit
[25]
Annexure
‘TAF8’ to the Founding Affidavit
[26]
Annexure
‘TAF9’ to the Founding Affidavit
[27]
ibid
[28]
See
Pilane
and Another v Pilane and Another
2013 (4) BCLR 431
(CC) at para 39.
[29]
See
OH
Mthombo (Pty) Ltd v Bheekie-Odhav
(LC C 177/12) (22 March 2012.)
[30]
See
Trevlyn
Ball v Bambalela Bolts
(Pty) Ltd
at para 29 - 30