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[2017] ZALCD 20
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ARB Electrical Wholesalers (Pty) Limited v Ashley and Another (D683/17) [2017] ZALCD 20 (13 October 2017)
IN THE LABOUR COURT OF SOUTH AFRICA
(HELD AT DURBAN)
Case no : D683/17
Not
Reportable
In
the matter between:
ARB
ELECTRICAL WHOLESALERS (PTY) LIMITED
Applicant
And
BHODRAJ,
ASHLEY
MOKSA
ELECTRICAL (PTY) LTD
First
Respondent
Second
Respondent
Heard:
22 June 2017
Delivered:
13 October 2017
Summary:
Restraint of trade - An application to give effect to a restraint of
trade is by its very nature somewhat urgent -
An
interdict
may
be
an
appropriate remedy to prevent a breach
or threatened breach of contract - it
may
take the form of an
order of court prohibiting the first respondent from doing whatever
is specified in the order
_
the
principles governing the issue of an interdict to enforce a promise
not to do something and the issue of an interdict to protect
any
other right are fundamentally different – scope covered found
to be unreasonable.
JUDGMENT
CELE
J
Introduction
[1]
This is an urgent application for final relief brought in terms of
section 158 (1) (a) (ii) of the Labour Relations Act
[1]
where the order sought is couched in the following terms:
1. Dispensing with the forms and
service provided for in the rules of this Court and disposing this
matter in such manner and in
accordance with such procedure as seems
meet, in terms of rule 8 and permitting this matter to be dealt with
as an urgent application.
2. Interdicting and restraining the
first respondent until 31 December 2017 from being employed by the
second respondent.
3. Interdicting and restraining the
first respondent until 31 December 2017 within the Republic of South
Africa and whether directly
or indirectly as an employee, manager or
agent for any person firm or body corporate from:
3.1 carrying on or assisting
financially or otherwise being engaged with or concerned or
interested in;
3.2 being a Director, shareholder or
member of;
3.3 acting as a consultant or advisor
to;
any company, closed corporation or
business which carries on business which is similar to or competes
with the applicant.
4. Interdicting and restraining the
first respondent from utilising and/or divulging and/or disclosing
whether directly or indirectly
any of the applicant's trade secrets
to the second respondent or any other third party.
5. ordering the first respondent to
pay the costs of this application, alternatively and in the event
that the second respondent
opposes this application ordering the
first and the second respondents to pay the costs of this application
jointly and severally,
the one paying the other to be absolved.
6. Further and/or alternative relief.
[2]
It is only the first respondent who opposed the application, acting
in his capacity as the erstwhile employee of the applicant.
Factual
Background
[3]
The first respondent was employed by the applicant, initially on a
fixed term contract and later on permanent basis from 2008
as an
Internal Sales Personnel in the low voltage general electrical sales
department. In that role, he was responsible,
inter alia
, for:
-
3.1
providing customer service
knowledge and skills to ensure customer satisfaction;
3.2
generating tender pricing for
the local electrical contractors;
3.3
generating quotations for
customers on a variety of products;
3.4
generating purchase orders for
non-stock and/or buy out items; and
3.5
providing internal support to
external sales representatives when they called for pricing and/or
stock availability.
[4]
He dealt with the applicant’s suppliers by virtue of which he
knew which products could be sourced and from which supplier
and at
what price. Admittedly, he had previous knowledge and dealings with
“all those entities” prior to his employment
with the
applicant. Moreover, from time to time he would assist with
“buy-outs” which meant that if the applicant did
not have
stock of any particular item, the first respondent would contact the
applicant’s supplier, obtain the item at a
price and then
“on-sell” the item at a margin which he would determine
within certain parameters. He however maintained
that he did not
obtain knowledge as to the applicant’s future business
operations and that he did not have intimate knowledge
of the
applicant’s proposed future fixed fee arrangements or the
profit margins in respect thereof.
[5]
The applicant’s business operations depended upon the
protection of proprietary interests in confidential information.
To
this extent the applicant entered into a restraint of trade agreement
with the first applicant when he assumed his duties with
the
applicant. T
he
restraint undertaking was incorporated in the contract of employment
concluded between the first respondent and the applicant.
The
restraint of trade precluded the first respondent from taking up
employment with any business in competition with that of the
applicant whether directly or indirectly in South Africa for a period
of 12 months.
[2]
[6]
On 5 December 2016 the first respondent resigned from the employment
of the applicant with effect from 31 December 2016. In
his exit
interview the first respondent said that he was leaving the applicant
to seek better employment opportunities, without
disclosing where
such better opportunities would be found. Sometime in February 2017,
it came to the knowledge of the applicant
that the first respondent
had taken up employment with the second respondent as its Branch
Manager. This was a starter–up
business. In early March 2017
the applicant sought an undertaking from the first respondent that he
would terminate his employment
with the second respondent, as a
violation of the restraint of trade agreement. The applicant regarded
the practise of the second
respondent as in competition with its
business. When that demand could not be met, the applicant initiated
the present application.
[7]
The first respondent has conceded in his answering affidavit that he
took up employment with the second respondent.
[3]
He also conceded that the business of the second respondent is in
competition with that of the applicant.
[4]
The first respondent conceded, albeit indirectly, that there was a
restraint of trade prohibiting him from taking employment
with any
entity which operated in competition with the applicant. He was
critical of the restraint of trade and its scope of operation.
He
said that this application failed to meet the requirements set for an
interdict. No relief is sought against the second respondent
which
has indicated that it will abide with the decision of this Court.
[8]
According to the applicant, it seeks contractual relief as framed in
its notice of motion. It contends that there is no conceivable
basis
upon which the first respondent can aver that the applicant’s
“true cause of action” resides in a delictual
claim for
unlawful competition. The applicant seeks to enforce against the
first respondent contractual undertakings not to compete
and also
contractual undertakings not to disclose confidential information.
[9]
An interdict may be an appropriate remedy to prevent a breach or
threatened breach of contract and may take the form of an order
of
court prohibiting the first respondent from doing whatever is
specified in the order.
The principles governing
the issue of an interdict to enforce a promise not to do something
and the issue of an interdict to protect
any other right are
fundamentally different.
[5]
I am persuaded by the applicant’s submissions and I find that
one way of breaching a contract is by doing something expressly
or
impliedly forbidden by the contract or inconsistent with the
obligations imposed by the contract. An applicant who asks for
an
interdict to prohibit such a breach is in reality asking for specific
performance in the negative form of non-performance of
the forbidden
or inconsistent act to ensure performance of the contract. Its
entitlement to an interdict, subject only to the court’s
discretion, is therefore as unquestionable as in the case of an
applicant who seeks specific performance in the positive form.
[10]
Its entitlement is not subject to the requisites for an application
for an interdict as set out by
Van Der Linden 3 1 4 7
.
Reference to the context makes it clear that these requisites apply
only to protect other rights and that
Van Der Linden
had
nothing to say about interdicts to enforce specific performance. The
consequence is therefore that the applicant is not required
to prove
that -
9.1
it would suffer injury or loss
if the interdict were not granted, merely that the respondent is
committing or threatening to commit
a breach of the contract;
9.2
it has no other ordinary
remedy, although the inadequacy of an alternative remedy may be
relevant in persuading the court to exercise
its discretion in favour
of granting an interdict.
[11]
In this latter regard, it is well accepted that the alternative
remedy must be adequate in the circumstances, be ordinary and
reasonable, be a legal remedy and must grant similar protection.
[6]
In deciding whether damages will provide an adequate alternative
remedy the court will have regard to factors such as whether an
action for damages will, in the circumstances provide ample
compensation, whether the injury is one which is indeed capable of
being estimated in money and whether a claim for damages does not in
fact force the applicant, in the circumstances, to part with
the
right which the applicant is seeking to protect.
[7]
Restraint
of trade: The Legal Principles
The
onus
[12]
It is settled law 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 respondent who seeks
to avoid the restraint bears an onus to demonstrate,
if he can, on a
balance of probabilities that the restraint agreement is
unenforceable because it is unreasonable.
[8]
Accordingly,
it is well established that the onus is on the respondent to prove
the unreasonableness of the restraint.
[9]
While the applicant has the onus to invoke the restraint and prove a
breach thereof, the onus then shifts to the respondent
to establish
that the restraint is unenforceable because it is unreasonable and is
contrary to public policy. In these circumstances,
the applicant’s
replying affidavit seeks to constitute, in effect, an answer to the
respondent’s case that the restraint
is unenforceable.
Urgency
[13]
An application to give effect to a restraint of trade is by its very
nature somewhat urgent. Urgency will itself differ from
case to case.
It is often said that such of these applications are semi-urgent. The
applicant cannot be held to blame for endeavouring
to settle this
matter outside court where this could reasonably have been achieved.
A refusal by the first respondent not to co-operate
could not render
the application less urgent.
[14]
Clause 5 of the employment contract containing the restraint of trade
prohibits the first respondent
directly
or indirectly from:
Ø
carry
on or assist financially or otherwise be engaged or concerned or
interested in;
Ø
be
a director or shareholder directly or member of;
Ø
acts
as a consultant or advisor to any company, closed corporation or
business which carries on business in South Africa which is
similar
to or competes with or endeavors to compete with the business carried
out by the company as at the date of termination
of your employment
with the Company.
[15]
Surely, this restriction imposed on the first respondent has not been
fine tuned to protect the applicant against the type
of work which
the first respondent rendered for the applicant. The scope of
protection given to the applicant by the restraint
casts a wider net
than the type of job rendered by the first respondent. The risk
inherent in this scope is that it could deny
the first respondent
access to jobs he was doing long before he joined the applicant. The
ambit of the protection is too wide with
no corresponding
justification. This consideration makes the restraint unreasonable as
it puts the first respondent out of the
market in jobs which had no
link with the work he did for the applicant. In a country which is
notorious for its high rate of unemployment
the restraint is against
public policy. To this extent, the applicant may therefore not be
entitled to a blanket protection as
was designed in the restraint.
[16]
The restraint was designed to cover the whole of the Republic Of
South Africa. During the presentation of the application the
ambit of
operation was narrowed to the KwaZulu-Natal area. That was a clear
concession that as it stood, the area covered by the
restraint was
unreasonably wide. This could not help the situation but demonstrated
that the restraint was designed to make employees
vulnerable to the
desires of the employer. The first respondent worked for the
applicant only in Durban but has been restricted
to an area much
wider than Durban. The second respondent operated its business only
in Durban. The business competition between
the applicant and the
second respondent remains fair. In my view, the geographic scope
covered by the restraint was unreasonably
wide, particularly when
mind is had to the size of the business of the second respondent.
[17]
Contrary to the submissions of the first respondent, I find that the
period of 12 months was reasonable in the circumstances.
If it was
shorter, say 6 months, it could be so short as to render the relief
the applicant could be entitled to academic. 6 months
might expire
before the whole litigation process, including judgment writing, is
completed.
[18]
The applicant has
demonstrated that it is entitled to a protectable interest in
relation to confidential information in the general
electrical
division of its business which forms the subject matter of this
application. Admittedly, there is a challenge in according
to the
applicant’s protection while he is to keep his job with the
second respondent. Monitoring the first respondent is
the real
challenge. The challenge notwithstanding, contempt of court
proceedings appear to be the only appropriate relief left
for the
applicant, having to follow from a restraining court order.
[19]
In conclusion, the following order shall issue:
1.
The order is granted as prayed
for in paragraphs 1 and 4 of the notice of motion. Consequently:-
1.1
This matter is heard as a
semi-urgent application;
1.2
The first respondent is
Interdicted
and restrained from utilising and/or divulging and/or disclosing
whether directly or indirectly any of the applicant's
trade secrets
to the second respondent or any other third party.
2.
The order sought in paragraphs
3 and 5 of the notice of motion is dismissed and therefore no costs
order is made.
_______
Cele
J.
Judge
of the Labour Court of South Africa.
APPEARANCES:
FOR
THE APPLICANT: Adv C Whitcutt
Instructed
by Nicqui Galaktiou INC.
FOR
THE FIRST RESPONDENT: Mr V Singh:
Instructed
by AshleyBhodraj
[1]
[1]
Act Number 66 0f
1995, hereafter referred to as the Act or LRA.
[2]
Clause 5:”You
shall not, for a period of one (1) year after termination of your
employment with the Company for any cause
whatsoever, either solely
or jointly or together with or as an employee, manager or agent for
any person, firm or corporate or
incorporate, directly or
indirectly:
5.1 carry on or assist financially or
otherwise be engaged or concerned or interested in;
5.2 be a director or shareholder
directly or member of;
5.3 acts as a consultant or or
advisor to Any company, closed corporation or business which carries
on business in South Africa
which is similar to or competes with or
endeavors to compete with the business carried out by the company as
at the date of termination
of your employment with the Company.”
[3]
See paragraphs 1
(b) and 43 of the answering affidavit.
[4]
See paragraph 44
of the answering affidavit.
[5]
Christie, The Law of Contract in
South Africa, 6
th
Edition, p554 – 5.
[6]
Francis v
Roberts
1973 (1) SA 507 (RA) 512
[7]
Rivas v The
Premier (Tvl) Diamond Mining Co Ltd
1929
WLD 1
14-16,
Setlogelo
supra
at 221-227
[8]
Experian South
Africa (Pty) Ltd v Haynes and another
2013 (1) SA 135
;
Basson
v Chilwan & Others
1993
SA 742
(AD) at 7761I-J;
Magna
Alloys and Research (SA) (Pty) Ltd
v Ellis 1984 4 (SA) 847 (SCA) at [10] to [14], pp 493E/F to 496D
;
Reddy v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 406
(SCA
); Den
Braven SA (Pty) Ltd v Pillay and another
2008 (6) SA 229
(D)
[9]
Magna Alloys, supra; Basson v
Chilwan
, supra.