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[2017] ZALCCT 57
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Absa Insurance and Financial Advisors (Pty) Ltd v Jonker and Another, Absa Insurance and Financial Advisors (Pty) Ltd v Jonker and Another (C741/17, C742/17) [2017] ZALCCT 57 (17 November 2017)
REPUBLIC
OF SOUTH AFRICA
Reportable
Of interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
C
ase
no: C 741/17
In
the matter between:
ABSA
INSURANCE AND FINANCIAL ADVISORS (PTY
LTD
Applicant
and
JOHAN
LEON JONKER
First respondent
MOMENTUM
CONSULT (PTY) LTD
Second respondent
and
Case
no C 742/17
ABSA
INSURANCE AND FINANCIAL ADVISORS (PTY
LTD
Applicant
and
TERESA
JONKER
First
respondent
MOMENTUM
CONSULT (PTY) LTD
Second
respondent
Heard
:
14 November 2017
Delivered:
17 November 2017
SUMMARY:
Urgent application – unlawful
competition – application to restrain former employees from
being employed by competitor
in absence of restraint clause. Further
application to prevent employees from using confidential information.
Applications dismissed.
JUDGMENT
STEENKAMP
J
Introduction
[1]
This is a most unusual application. It raises a novel issue before
this Court: Can an employer interdict and restrain its former
employees from taking up employment with a competitor, on the basis
of unlawful competition and without relying on a covenant in
restraint of trade?
[2]
Two applications were brought before Court on an urgent basis. They
involve the same former and new employers, but two different
employees. Although the positions of the two employees are slightly
different, the two applications were heard and argued together
and
this judgment deals with both.
[3]
The applications were heard on
an urgent basis, outside of the normal time periods, in the midst of
a very full opposed motion court
roll on Tuesday 14 November 2017.
The employee in case no C 742/17 is due to take up employment with
the competitor in three days’
time, on Friday 17 November 2017.
She has not, through her legal team, given any interim assurances or
undertakings. This judgment
has therefore been drafted under severe
time constraints, without the opportunity to do justice to a full
discussion of the novel
point that it raises.
[1]
Background
facts
[4]
The applicant, ABSA Insurance and Financial Advisors (AIFA), operates
as a broker in the financial services industry. The first
respondent
in case number C 741/17 is Mr Leon Jonker. AIFA employed him and his
wife, Mrs Teresa Jonker, as financial advisers.
He specialised in
commercial and agricultural lines of short term insurance; Teresa
specialised in personal lines. She is the first
respondent in case
number C 742/17. Mr Jonker has taken early retirement and Mrs Jonker
has resigned. He has taken up employment
with Momentum Consult (Pty)
Ltd (the second respondent in both applications) with effect from 1
November 2017. She intends to do
so from today, Friday 17 November
2017. Momentum is a competitor of AIFA.
[5]
The Jonkers live in Robertson. All the parties accept that it is a
small community – especially when one has regard to
those
members of the community who are in the privileged position of being
in need of financial advice – and that the Jonkers
have built
up close relations with their clients. Many of their clients are also
friends. They provided brokering services to clients
on behalf of
AIFA and earned commission on an initial and ongoing basis for each
client that they bring to and retain with AIFA.
[6]
Both of the Jonkers have signed
contracts of employment with AIFA that contain the following
clauses:
[2]
“
11.
CONFIDENTIALITY
AND COMPANY PROPERTY
…
11.2 All information or information
documents that the employee receives from the company must be kept
strictly confidential.
…
11.4 All training material in respect
of internal courses conducted by the company [
sic
].
Instruction books, product analyses, forms, tariff books and client
records or information [
sic
]. Company letterheads and other
written matter that the employee may obtain in the course of his
employment at the company, including
all client data in whatsoever
form or format, remain the property of the company, unless explicitly
stated otherwise and must be
returned to the company upon request on
termination of his service. As long as the employee fails to give
effect to this, in addition
to the company’s right to claim
damages, all further payments to the employee will be terminated
until the requirements of
these provisions have been met.
11.5 Any lead, reference, name or
marketing information that the employee may obtain during his
employment with the company remain
[
sic
] the property of the
company and shall not be actively applied by the employee following
the termination of his service with the
company in order to negotiate
new assurance/insurance business or any other financial gain for
himself, his family or any company/business
in which he has a direct
or indirect interest. However, this limitation does not prevent a
client, from his own motivation and
without encouragement from the
employee, to have his business conducted by the employee following
the termination of the latter’s
service with the company.”
[7]
Mrs Jonker’s contract contains no agreement in restraint of
trade. Mr Jonker’s contract, though, does contain the
following
further clause:
“
12.
PROTECTION OF CLIENT
INFORMATION AND COMPANY INTERESTS
12.1 It is not the intention of the
company with this clause to prevent the employee from conducting
business as a broker or financial
adviser anywhere in the Republic of
South Africa, or anyone else, as long as the employee’s conduct
is not in contravention
of the stipulations of this clause in
particular, or any other relevant laws in this agreement in general.
12.2 The employee agrees and
undertakes in favour of the company, that should he resign from the
employee of the company, or should
his services be terminated for any
reason whatsoever, he will not, for a period of two years after such
resignation or termination,
either personally or as principal, agent,
partner, representative, shareholder, director, employee, consultant,
adviser, financier,
demonstrator, or in any other capacity, directly
or indirectly:
12.2.1 carry on a business or activity
similar to that of the company, by utilising the database, or any
part thereof, or the client
information on the database, or any part
thereof, which she had access to or utilise at his normal place of
business was employed
by the company;
12.2.2 solicit, interfere with or
entice away from the company any person who was employed by the
company as at the date of resignation
of the employee from the
employee of the company or at any time within two years immediately
preceding such date.
12.3 The intention of the company with
this clause is to protect the proprietary interests of the company,
the client information
of the company, the client information of the
company within the practice the departing employee leaves behind, and
the goodwill
of the business of the company.”
[8]
Mr Jonker took early retirement on 1 October 2017. His notice period
was to terminate on 31 October 2017. At the time he serviced
some 470
clients. Mrs Jonker resigned on 16 October 2017. She serviced 792
clients. She did not tell AIFA in her resignation letter
that she
intended to go to work for Momentum at the end of her notice period,
but it was a well-known fact in the office. The applicant
immediately
put both Jonkers on “garden leave” for the remainder of
their notice periods. On 20 October 2017 they returned
their company
equipment, including their laptops and other software. AIFA also
removed any confidential information from their
laptops. It did not
ask them to return or clear the information on their cellular phones.
After this application had been launched,
though, the Jonkers had all
of the potential confidential information (including all client
details, emails and SMSes) professionally
removed from their cellular
phones by an IT expert, as well as all information stored on iCloud.
[9]
AIFA uses what it calls “sky agents” to approach what it
calls “orphaned clients”, i.e. clients that
had been
serviced by a financial adviser that leaves its employ. The sky
agents try to persuade the clients to remain with AIFA
rather than
following the former financial adviser to a new brokerage or if they
decide to practice for their own account.
[10]
When the sky agents started contacting Mr Jonker’s clients, it
emerged that five of them had been in contact with Mr
Jonker and that
they had decided to stay with him as their broker. Transcriptions of
the conversations were made available to the
court. One sky agent
asked one of the clients a leading question after having been told
that “Leon Jonker is still doing
things”. Having asked,
“oh, so he did contact you in the recent days?”, the
client answered, “yes, yes.”
Only one other client
contacted indicated that Jonker had phoned him, but said that it was
after Jonker had retired from AIFA.
None of them indicated that they
had been contacted by Mrs Jonker.
[11]
Mr Jonker acknowledged that he had been contacted by clients who had
been contacted by the “sky agents”
or the applicant’s
call centre. They requested him to continue as their short-term
insurance adviser after they had had dealings
with the call centre.
He was careful not to respond to any of those requests until after 31
October 2017.
[12]
Mrs Jonker acknowledged that she had sent an email (from AIFA’s
server) to her former clients advising them that she
was leaving the
applicant. However, she did not say that she was joining Momentum nor
did she encourage clients to follow her.
What she said, was:
“
Ek stel u hiermee in kennis dat
ek bedank het by ABSA Finansiële Adviseurs.
Ek wil [van] hierdie geleentheid
gebruik maak om u te bedank vir u lojale ondersteuning deur die
jare.”
[13]
On 20 October 2017 the applicant wrote to Mr Jonker and reminded him
of his obligations relating to confidential information
and
proprietary interests. It said:
“
Absa does not seek to enforce
these provisions to prevent you from being employed as a short term
adviser. This is, however, subject
to the very important and express
conditions relating to the poaching/enticement of our clients as
outlined in clause 12 of your
contract of employment.”
[14]
The applicant sought an undertaking from Mr Jonker not to communicate
with any of its clients with the purpose of advising
them that he is
taking up competitive employment and encouraging them to transfer
their business to him or his new employer. He
replied by email
without giving the undertaking but simply saying: “Ek verwys na
u brief. Ek neem kennis van die inhoud.”
[15]
The applicant then launched this urgent
application.
The
relief sought
[16]
The applicant sought the following relief from both Mr and Mrs Jonker
on an urgent basis:
“
2. Declaring that the
respondent’s position and use of the applicant’s
proprietary data (including, but not limited
to, client contact
details) is unlawful and in breach of the respondent’s
contractual obligations to the applicant, as set
out in his contract
of employment.
3. Ordering the respondent to return
all proprietary data belonging to the applicant, in whatsoever format
it may be held, within
24 hours of receipt of the order;
4. To the extent that such proprietary
data cannot be returned, ordering the respondent to delete or destroy
it and furnish proof
that he has done so to the applicant’s
attorneys within 24 hours of receipt of the order;
5. Interdicting and restraining the
respondent from breaching his confidentiality undertakings by
contacting the applicant’s
clients, alternatively by using the
applicant’s proprietary data for the furtherance of his
personal interests or the interests
of another party, whether
individual or juristic entities;
6. Restraining the respondent from
taking up employment in the financial advice sector, within the
Republic of South Africa, whether
for his own account or in the
employment of the applicant’s competitors, for a period of six
months or any other period that
the court may deem reasonable.”
[17]
In an amended notice of motion, apart from joining momentum to the
application, the applicant sought to change the time period
in prayer
6 to two years instead of six months in respect of Mr Jonker only.
Urgency
[18]
It is as well to dispose of the issue of urgency upfront. In the case
of Mr Jonker, the horse has not only bolted, it has been
grazing on
the green grass of Momentum for two weeks. But Mrs Jonker is only due
to take up employment with Momentum in three days’
time, on
Friday 17 November. And in any case, applications of this sort –
regardless of their merits – are inherently
urgent. It is on
that basis that the court dealt with the matter.
The
confidential information
[19]
AIFA seeks to enforce clause 11 of the contract quoted above in
prayers 2, 3 and 4 of its notice of motion. It says that the
Jonkers
have its client data – including client contact details –
and that they must either return or destroy it.
[20]
The applicant did have a right
to enforce this clause; but the Jonkers have already given effect to
it. They have destroyed the
client data in their possession –
in the case of the data on their iPhones and on iCloud, of their own
accord. They say they
have no other client data in their possession.
AIFA has not put up any evidence that they do. Applying the rule in
Plascon-Evans
[3]
,
as this Court must in motion proceedings asking for final relief, I
must accept that the Jonkers have destroyed the data in their
possession.
[21]
Prayers 2 to 4 in the notice of motion are moot.
Unlawful
competition: Should the employees be restrained?
[22]
Mr
Sibanda
argued that AIFA has a
right to ensure that client confidential information is not used in
competition with it. He argues that it
is an implied term of every
employment contract. In
Coolair
[4]
,
the court set out the contractual and common law basis of this right
as follows:
“
It is a matter of common
knowledge that, under a system of free private enterprise and
therefore competition, it is to the advantage
of a trader to obtain
as much information as possible concerning the business of his rivals
and to let them know as little as possible
of his own. He would
be happiest if only what he himself chooses to disclose comes to the
knowledge of his competitors.
He is of course aware of the fact
that his employees collectively know a great deal if not all of his
business affairs. Whilst
in his employ, or even after leaving
it, it is in their power to disclose to competitors information
capable of use adverse to
him. The information may be a trade
secret, e.g. a method of production not protected by patent, or a
business secret, such
as the financial arrangements of the
undertaking, or a piece of domestic information like a salary scale
of clerks, or the efficiency
of the firm’s filing system.
Some of this information would be of a highly confidential nature, as
being potentially
damaging if a competitor should obtain it, some
would be less so, and much would be worthless to a rival
organisation. All
this being well known to employers and
employees alike, it must be presumed that every employer who has
trade competitors would,
if asked the question, say: ‘But
of course my employees are under a duty to me not to disclose
information which can
harm my business,’ and the employees
would confirm that such a term is implied in their contract of
service. If an
employee or ex-employee breaches the term he is
liable to be interdicted from continuing to do so and to be made to
compensate
for damages caused.”
[23]
The conventional way to protect
this right is of course by means of a restraint of trade, as Mr
Steyn
pointed out. The Appellate
Division recognised this in
Reeves
[5]
,
when it said:
“
An employee who by virtue of
his employment would be in a position to exploit on his own behalf
his employer's customer connections
is free on leaving his
employment, subject to certain limitations, to compete with his
erstwhile employer for the business of the
latter's customers unless
restrained by contract from doing so…”
[24]
But, argued Mr
Sibanda
, a restraint of trade is not the only
way for an employer to protect itself. As a general principle,
every person is entitled
to exercise his or her trade or profession
in competition with others. However, this right is not
absolute. Such competition
must remain within lawful bounds.
If it does not, the other party is entitled to two forms of relief,
namely (i) an interdict
against unlawful competition; and (ii) a
delict against unlawful competition.
[25]
Our law recognises two forms of
unlawful competition, namely the unfair use of a competitor’s
fruits and labour; and the misuse
of confidential information in
order to advance one’s business interests and activities at the
expense of a competitor. The
elements of unlawful competition were
set out in
Waste
Products
[6]
:
“
Confidential information can be
protected by means of an interdict and/or a claim for damages. To
succeed with such relief, the
following must be established. The
plaintiff must have an interest in the confidential information,
which need not necessarily
be ownership. The information must be of a
confidential nature. There must exist a relationship between the
parties which imposes
a duty on the defendant to preserve the
confidence of information imparted to him, which could be the
relationship between the
employer and employee, or the fact that he
is a trade rival who has obtained information in an improper manner.
The defendant must
have knowingly appropriated the confidential
information. The defendant must have made improper use of that
information, whether
as a springboard or otherwise, to obtain an
unfair advantage for himself. Finally, the plaintiff must have
suffered damage as a
result.”
[26]
In
Mullane
[7]
,
the High Court recognised that, in the absence of a restraint of
trade, a former employer could rely on unlawful competition.
There, the Court was not faced with an application to restrain an
ex-employee from taking up employment. Rather, it was faced
with an interdict against the use of confidential information.
[27]
Although it appears to be
against him, Mr
Sibanda
argued that
Freight
Bureau
[8]
is not authority for the proposition that this Court cannot grant
interdictory relief of the nature sought in this application.
The Court in
Freight Bureau
held that an interdict of
the nature sought is impermissible because its scope could be wider
than the already overbroad restraint.
However, he argued, this
was
obiter
as the parties in any event agreed to an order. I disagree. The
following remarks of King J
[9]
preceding his comment that the common law interdict would be wider in
scope than the restraint clause in that case, appear to me
to be
unequivocal:
“
In
Pelunsky
& Co v Teron
[10]
no interdict was sought restraining the defendant from carrying on
any business whatsoever in competition with the plaintiff, nor,
in my
view, could such an order have been competently sought. …
In any event, the granting of an
interdict is an extraordinary remedy. It is granted in the exercise
of a discretion by a court.
It is not an actionable wrong for which
there is no defence in law for an erstwhile employee to commence
employment with a direct
competitor of his or her erstwhile employer.
In
Roberts v Etwell's Engineers Ltd
(1972) 2 All ER 890
Lord DENNING MR at 894 said:
‘
It is settled law
that a servant, having left his master's service, may, without fear
of legal consequences, canvass for the custom
of his late master's
customers, whose names and addresses he has learned during the period
of his service, so long as he does not
take a list of them away
with him: see
Robb v Green
(1895) 2 QB 315.
All the more so, an agent may do so, especially when
the customers have been introduced by the agent himself.
In
the absence of express restriction
[11]
(which
must be reasonable) he cannot be restrained from canvassing the
customers for a new principal.’
The commentary in Heydon
The
Restraint of Trade Doctrine
at 98 also contemplates that the
difficulties of policing an order restraining the divulging of
confidential information
‘
can be overcome
by
a covenant not to compete drafted
to prevent work in a certain
area, or in a certain trade, or for a certain firm. Such covenants
act as blankets:
they go further than the interests protected by
general law
, but this is permitted so that these interests are
more effectively protected’.
Thus
Heydon
recognises
that without such an agreement to prevent employment with a
competitor the general law would not grant such a protection.
The interdict sought by the applicant
based on common law cannot, therefore, be granted on the application
of the basic principles
for the granting of an interdict. No
authority was quoted to me nor have I been able to find any which
justifies the granting of
an interdict merely on the basis that it
creates a mechanism to police an interdict which is granted to stop
conduct for which
there is no defence in law. If the interdict could
be granted on the basis of the common law as sought by the applicant
there should
in principle be no limitation in regard to time or area.
The startling result would be that the applicant would have an
interdict
wider in scope than even if the grossly unreasonably
restraint clause was enforced by way of interdict. In answer to this
difficulty
Mr
Cohen
submitted that the Court could limit the
effect of the interdict by granting it for a period of six months.
The period is arbitrary
and there is, in my view, no valid basis for
choosing such a period.”
[28]
The following part of the
judgment in
Freight Bureau
was indeed obiter:
[12]
“
I might add that, but for the
consent of the first respondent to the granting of an interdict
restraining her from divulging confidential
information, I might have
been mindful to refuse that order as the question as to whether the
applicant had a reasonable apprehension
that the first respondent was
to divulge such information was evenly balanced on the papers. The
unequivocal undertaking given
by the first respondent in that regard
might well have carried the day.”
[29]
In this case as well, the Jonkers have not only given an undertaking
that they won’t use the client data, they have destroyed
it.
Can AIFA in any event rely on an “express restriction” in
this case?
[30]
The only restriction applicable to both Mr and Mrs Jonker is that
client names and data they obtained at AIFA “shall
not be
actively applied by the employee following the termination of his
service with the company in order to negotiate new
assurance/insurance
business or any other financial gain for himself,
his family or any company/business in which he has a direct or
indirect interest.
However, this limitation does not prevent a
client, from his own motivation and without encouragement from the
employee, to have
his business conducted by the employee following
the termination of the latter’s service with the company.”
[31]
On the papers before me, and taking into account the rule in
Plascon-Evans
, the Jonkers have not “actively applied”
the information they obtained at AIFA to negotiate new business or to
obtain
financial gain (such as continued commissions from their old
clients). The only clients that have demonstrably been in contact
with them are those that, according to Mr Jonker, contacted him
because of their unhappiness with the AIFA call centre; and in the
case of Mrs Jonker, those that she informed (by way of an email sent
from the AIFA server) that she had resigned, without disclosing
where
she was going. I do not read the relevant clause to prevent the
Jonkers from letting their old clients know that they were
leaving
without actively canvassing their business for themselves or MMI; and
the clause explicitly allows any clients to elect
for themselves to
continue using the Jonkers as their brokers.
[32]
I agree with Mr
Sibanda
that the case most on point appears to be the judgment of Pillay J in
Forwarding African
Transport
[13]
[
FATS
]
– a case that he, to his credit, brought to the Court’s
attention although it appeared to be against him and he had
to do his
best to distinguish it from this one. There, the High Court was
faced with an application to interdict an ex-employee
from taking up
employment with a new employer. The ex-employer sought this
interdict (i) on the strength of an overbroad
restraint of trade; and
(ii) unlawful competition. The Court declined to enforce the
restraint, leaving only the interdict
to prevent unlawful
competition. The Court’s finding can be broken down into
the following component principles:
The
applicant did not bring an application to interdict the ex-employee
from using confidential information. The Court continued:
“This
suggests that the applicant’s claim must rest on the notion
that merely being employed by a competitor of the
applicant in
circumstances where the second respondent is in possession of
confidential information constitutes unlawful competition
by the
second respondent…”
32.1 The Court endorsed
the view expressed in
Freight Bureau
.
32.2 The Court reiterated
that an interdict is a drastic remedy. To have granted it in
the circumstances of that
case, would have the effect of rendering
the ex-employee economically inactive for a year.
32.3 The Court then said:
“
All that the applicant
has now is a fear that the second respondent might disclose
information yet it does not apply for an order
prohibiting the
disclosure of confidential information but simply requires the second
respondent not to work for the first respondent
for a year.”
32.4 Having found the
restraint unenforceable, the Court could not grant an interdict that
had the same, or a greater
effect than the restraint.
[33]
Mr
Sibanda
submitted that
FATS
is not an impediment to
the relief his client seeks. This is so, he argued, for the following
reasons:
33.1 The Court’s
ratio in
FATS
did not close the door to interdicting an
ex-employee from taking up employment with a new employer based on
unlawful competition.
It only said this was unacceptable in the
context where the ex-employer did not even seek protection of its
confidential information
in the interdict.
33.2 AIFA’s case is
distinguishable because its relief is finely carved. It is only
designed to permit AIFA
the opportunity to contact its clients who
were serviced by the Jonkers before those clients decide to remain
with the Jonkers.
He argued that this will “give effect
to” the right of those clients to elect. And AIFA seeks
only to interdict
the Jonkers to the extent that it will permit it to
contact former clients to give effect to this election. This
period is
crafted in the notice of motion as six months, but Mr
Sibanda
argued that it could be as little as one or two months
(or any other period the Court may deem reasonable).
33.3 Mr
Sibanda
conceded, quite properly, that the mere fact that the Jonkers are
taking up employment with Momentum, even while in possession
of
client confidential information, is not unlawful competition.
However, he urged the Court to find that the Jonkers have done
more:
They have actually utilised the information to contact clients.
33.4 AIFA does not seek
the interdict solely to police the use of its confidential
information. AIFA has already
sought specifically to interdict
the use of confidential information. However, he argued, AIFA
cannot be expected to be content
that the Jonkers will resist this,
especially in light of the compelling personal circumstances
described by Mr Jonker.
[34]
Much like the case in
FATS
, granting the interdict based on
unlawful competition would have the result of rendering the Jonkers
economically inactive and
unproductive for six months (or perhaps a
lesser period, given Mr
Sibanda
’s submissions in
argument – but that is still a drastic inroad on their
productive capacity).
[35]
The Jonkers have already destroyed the confidential information that
remained in their possession after they had returned their
laptops
and files to AIFA. And they are expressly permitted to continue
servicing clients who elect to do so, provided they do
not “actively
apply” AIFA’s data to pursue those clients. The onus is
on AIFA to prove a clear right; it has
not, on the papers before me
and given the Jonkers’ assurances to the contrary, proven that
the Jonkers have actively pursued
any AIFA clients in order to secure
their business for themselves or for Momentum.
[36]
AIFA’s “sky agents” are free to contact the clients
who have been using the Jonkers’ services. And
they are free to
compete for their continued custom in an open market. What it cannot
do, is to prevent those clients from making
their own election to
continue with the Jonkers’ services. As Mr Jonker pointed out,
Robertson is a small community. Many
of the Jonkers’ clients
are also their friends. His explanation that the news of their
resignation from AIFA has “spread
like wildfire” through
the community, is entirely plausible. It would quickly come to the
attention of their clients; and
it is entirely logical and
conceivable that those clients would contact them to obtain clarity
about their insurance and other
portfolios, whether the sky agents
got to them first or not.
[37]
Mr
Sibanda
further argued that what AIFA seeks is not a
restraint by the back door. It is akin to an “implied
restraint”,
which is not excluded in our law. Only a handful of
cases have dealt with an implied restraint of trade. Courts are
reluctant to
include restraints of trade by implication.
“
A covenant in restraint of
trade is one which is in itself closely scrutinised as regards its
reasonableness. It is a kind
of agreement which is not
encouraged by the law and must be confined within certain fixed
limits before it will be upheld.
Where a written contract of
service is in existence, the Court would not readily read into it an
implied covenant in restraint
of trade. I do not wish to be
understood to say that such a covenant can never be contained in an
agreement by implication.”
[14]
[38]
However, the courts have not
excluded its possibility.
Saner
[15]
states:
“
There is no reason why
the normal rules for the implication of terms in contracts should be
applied any differently with regard
to agreements in restraint of
trade than in any other contract. The decision in Magna Alloys has
not altered the law in this regard.”
But, he adds:
“
But the courts will not lightly
read into an unclear or ambiguous provision in an agreement a
restrictive covenant in restraint
of trade, primarily, presumably,
because of the importance at common law, and in terms of the
Constitution, of a person’s
right to work and to choose his or
her trade or profession.”
[39]
I am not persuaded that AIFA has been able to prove an implied
restraint of trade in the face of the clear protections relating
to
the protection of confidential information it has negotiated in the
contracts of employment.
Clear
right?
[40]
As the court pointed out in
Freight Bureau
and in
FATS
,
the granting of an interdict is an extraordinary and drastic
remedy. Has AIFA established a clear right to that extraordinary
remedy in this case? I think not.
[41]
AIFA did have a clear right to protect its confidential information;
but the Jonkers have destroyed the information in their
possession.
AIFA has not proven that they have acted unlawfully.
Injury
committed or reasonably apprehended?
[42]
Similarly, AIFA has not been able to show that the Jonkers have
committed an injury. AIFA may subjectively have an apprehension
that
the Jonkers will still actively solicit its clients’ business;
but on the evidence to date, that apprehension has not
been shown to
be a reasonable one.
Alternative
remedy?
[43]
AIFA has an alternative remedy in any event. Should it be able to
prove – in a trial with oral evidence – that
the Jonkers
have indeed abused confidential information in unlawful competition
with it, the damages (mostly based on commission
lost) will be easily
quantifiable.
Mr
Jonker’s restraint clause
[44]
That leaves the application based on Mr Jonker’s restraint
clause, interdicting him for two years “from taking
up
employment in the financial advice sector, within the Republic of
South Africa, whether for his own account or in the employment
of the
applicant’s competitors”. This is based on the clause in
his contract of employment that says that he may not
-
“
carry on a business or activity
similar to that of the company, by utilising the database, or any
part thereof, or the client information
on the database, or any part
thereof, which he had access to or utilise at his normal place of
business was employed by the company”.
[45]
The aspects to consider to
assess the reasonableness of a restraint are well known:
[16]
45.1 Does one party have
an interest that deserves protection after termination of the
agreement?
45.2 If so, is that
interest threatened by another party?
45.3 Does such interest
weigh qualitatively and quantitatively against the interest of the
other party not to be economically
inactive or unproductive?
45.4 Is there an aspect of
public policy having nothing to do with the relationship between the
parties that requires
that the restraint be maintained or rejected?
[46]
Enforceability of a restraint
hinges on a reconciliation of a number of factors. These
include the nature of the activity
sought to be prevented, the
duration of the restraint, and the area of operation of the
restraint.
[17]
[47]
This issue turns on a protectable interest. The following
principles have been espoused regarding protectable interests:
47.1
There are generally two kinds
of interest to protect: (i) trade secrets, which could be used by a
competitor to gain a relative
advantage; and (ii) trade connections,
which are relationships with customers and suppliers.
[18]
47.2
Information received in
confidence during employment is protected by a legal duty implied in
the contract of employment.
[19]
47.3
Information deserving of
protection includes information received by an employee about
business opportunities; information received
in confidence; and
information about a process of skill which has been kept
confidential. In assessing the employee’s
role, care must
be taken to view it holistically.
[20]
[48]
It is for the respondent to
show that he or she did not acquire any significant personal
knowledge. All the applicant need
show is that there is secret
information to which the respondent had access and could, in theory,
transmit if so inclined.
[21]
[49]
The commitment not to disclose
confidential information is not a defence. An employer does not
have to show that an employee
has, in fact utilised confidential
information. Only that he could do so. The employer
should not have to content itself
with hoping that the employee will
not breach the restraint.
[22]
[50]
AIFA contends that its restraint is reasonable on account of all
these factors and that it is enforceable. I disagree.
[51]
AIFA hung its restraint on one identifiable protectable interest, viz
its database, and more specifically client information.
Mr Jonker did
have access to that information and his access to the information did
threaten AIFA’s interests: he could use
it to his advantage or
to the advantage of Momentum. But he has destroyed it; AIFA need not
cross its fingers and hope that Mr
Jonker doesn’t use the
information, because it is no longer his to use.
Conclusion
[52]
AIFA has not demonstrated a clear right to the extraordinary relief
it seeks. Nor has it satisfied the other requirements for
final
relief.
[53]
Both parties have asked for costs to follow the result. I agree.
Order
The applications in case numbers
741/2017 and 742/17 are dismissed with costs.
_______________________
A
J Steenkamp
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
M Sibanda
Instructed
by
Tim Sukazi
Inc.
RESPONDENTS:
J F Steyn
Instructed
by
Gerings attorneys.
[1]
I am
nevertheless grateful to counsel, and especially to Mr
Sibanda
,
for the helpful and fairly comprehensive heads of argument that they
have produced under similar time constraints. I have drawn
liberally
from those heads for references to authorities and indeed for
framing the debate.
[2]
His in
English and hers in Afrikaans, but the Afrikaans version is a
translation of the English.
[3]
Plascon-Evans Paints (Tvl)
Ltd. v Van Riebeck Paints (Pty) Ltd
.
1984 (3) SA 620
(A) at 623: “[W]here 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 … 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.”
[4]
Coolair Ventilator Co SA
(Pty) Ltd v Liebenberg and Another
1967 (1) SA 686
(W) at page 689.
[5]
Reeves and Another v
Marfield Insurance Brokers CC and Another
[1996] ZASCA 39
;
1996 (3) SA 766
(A) at 772E-F.
[6]
Waste Products Utilisation
(Pty) Ltd v Wilkes and Another
2003 (2) SA 515
(W) at 571 F-G.
[7]
Mullane and Another v Smith
and Others
[2015] 3 All SA
230
(GJ) at paras 10 and 11.
[8]
Freight Bureau (Pty) Ltd v
Kruger and another
1979
(4) SA 337 (W).
[9]
At 341 C –
H.
[10]
1913 WLD
34.
[11]
My
underlining.
[12]
At 342 B-C.
[13]
Forward
African Transport Service CC t/a FATS v Manica Africa (Pty) Ltd
(2005)
26
ILJ
734 (D).
[14]
Premier
Medical and Industrial Equipment (Pty) Ltd v Winkler
1971
(3) SA 866
(W) at 869 E-F.
[15]
Saner,
Restraints
of Trade in South African Law
(LexisNexis
Issue 11 at 15.7.
[16]
Basson v
Chilwan
[1993] ZASCA 61
;
1993
(3) SA 742
(A);
Reddy
v Siemens Telecommunications (Pty) Ltd
2007
(2) SA 486
(SCA) par 16;
SPP
Pumps (SA) (Pty) Ltd v Stoop
(2015)
36
ILJ
1134
(LC) par 28.
[17]
Ball v
Bambalela Bolts (Pty) Ltd
2013
(34)
ILJ
2821
(LAC) paras 16-17.
[18]
Vox
Telecommunications (Pty) Ltd v Steyn
(2016)
37
ILJ
1255
(LC) par 50.
[19]
Dickinson
Holdings Group (Pty) Ltd v Du Plessis
(2008)
29
ILJ
1165
(N).
[20]
Meditronic
(Africa) (Pty) Ltd v Van Wyk
(2016)
37
ILJ
1165
(LC) par 16.
[21]
Vox Telecommunications
(Pty) Ltd v Steyn
(2016)
37
ILJ
1255
(LC) par 31.
[22]
Ball v Bambalela Bolts
(Pty) Ltd
2013 (34)
ILJ
2821 (LAC) para 22.