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[2018] ZALCJHB 4
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Massmart Holdings Limited v Theron (JS1043/16) [2018] ZALCJHB 4; (2018) 39 ILJ 870 (LC) (11 January 2018)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
no:
JS1043/16
In
the matter between:
MASSMART
HOLDINGS LIMITED
Applicant
and
JACQUES
THERON
Respondent
Heard:
20 November 2017
Delivered:
11 January 2018
Summary:
Breach of contract – former
employee enticed a former colleague to join his current employer in
breach of his contractual
undertaking – claim for damages
incurred in recruit
ing his replacement
consequent to the breach – the quantum is fair and reasonable.
JUDGMENT
NKUTHA-NKONTWANA.
J
Introduction
[1]
The applicant is a South African-based
retailer with the divisions made up of,
inter
alia
, Makro, Game, Dion Wired, Builders
Warehouse, Jumbo Cash and Carry. The respondent was employed by the
applicant in terms of a
contract of employment dated 6 November 2008.
Arising out of the contract of employment with applicant, the
respondent signed an
undertaking of confidentiality (the undertaking)
in favour of the applicant on 1 November 2008, the undertaking reads
as follows:
‘
I
hereby undertake to you that throughout the period of my employment
with you and after the termination thereof, for any reason,
and save
as authorised, in writing, by a director or a person delegated by the
Board of Directors, …I will not…Nor
will I or any
company, firm, undertaking or concern in or by which I am directly or
indirectly interest or employed within 12 months,
directly or
indirectly encourage or entice or incite or persuade or induce any
person employed by you or any associate and/or subsidiary
companies
terminate his employment with the group’
[2]
The respondent resigned
on 25 January 2016 and left at the end of February 2016. At that
time, he held the position of head of Business
Intelligence (BI). The
respondent took employment with African Bank Limited (the bank) as
the Head of Finance Distribution.
[3]
On 11 April 2016, the
respondent signed an offer of employment on behalf of the bank, an
offer that was presented to Mr Eden Pillay
(Mr Pillay) who had just
been promoted to succeed the respondent as the applicant’s head
of BI. On 13 April 2016, Mr Pillay
tendered a notice of resignation
from the applicant’s employ.
[4]
Accordingly, the
applicant claims damages from the respondent arising out of a breach
by him of the undertaking not to entice any
of the applicant’s
employee(s) to join his new employer. In this instance, the applicant
contended that the respondent enticed
Mr Pillay to resign and take up
employment with the bank where he is the Head: Finance Distribution;
as a result, the applicant
had to replace Mr Pillay at some costs.
The costs of the replacement are the damages suffered by the
applicant and are in the sum
of R284,961.24.
[5]
The merits and quantum
are in dispute.
Survey
of evidence
The
applicant’s case
[6]
The applicant led the
evidence of two witnesses, Mr Llewellyn Steeneveldt (Mr Steeneveldt)
and Ms Bianca Mnkandla (Ms Mnkandla).
Mr Steeneveldt testified
that he was employed by the applicant as its Group Commercial
Executive and has 16 years’ service.
The respondent was
his immediate subordinate and was responsible for the BI. The BI was
involved in real-estate decisions analytics,
corporate governance and
analytical services. The BI provided service to the various divisions
with its primary function being
to assist these divisions in decision
making in relation to establishing of stores. These involved
analysing the areas in
which the divisions proposed opening stores,
the demographics of the area and to ensure that the divisions do not
compete with
each other.
[7]
The BI consisted of six
individuals including the respondent as its head. Mr Pillay reported
to the respondent. The respondent and
Mr Pillay were instrumental in
the risk assessment function of the department. The
consequences of the BI’s recommendations
could be massive if
incorrect. The divisions could end up establishing stores in areas
that are not suitable and end up being burdened
with long term leases
and costs.
[8]
At the time of his
resignation, Mr Pillay never mentioned that he was unhappy with the
applicant. He even showed Mr Steeneveldt
his appointment letter from
the bank that had been signed by the respondent.
[9]
The respondent and Mr
Pillay had a close relationship when they were still in the employ of
the applicant. The respondent was Mr
Pillay’s mentor who had
been recruited by him to join the applicant. In fact, he even signed
his contract of employment with
the applicant. Mr Pillay was the
respondent’s successor title, having been groomed by the
respondent as such. Mr Pillay was
exceptionally skilled in respect of
dealing with the complex issues which arose out of the relationship
with the applicant and
its holding company Walmart. His resignation
was extremely prejudicial to the applicant.
[10]
Mr Pillay’s
notice period ended in the middle of July 2016. On 1 August 2016, one
Mr Hasjee, another member of the BI resigned
to join the bank. The
applicant lost three important components of the BI to the bank
within a space of 6 months. The applicant
was a stable employer as
compared to the bank that had just came out of curatorship. Mr
Pillay had told him (Mr Steeneveldt)
that he was leaving to join the
bank, despite the risks, because he was going to work with the
respondent.
[11]
He was not aware that
Mr Pillay had been looking for other employment or had been unhappy
during his employment by the Applicant.
The only issue that Mr Pillay
had raised with him was in relation to the red tape and bureaucracy
at times with the applicant and
its holding company, Walmart.
[12]
He was of the view that
the remuneration package that had been offered by the bank was
essentially the same as the one Mr Pillay
enjoyed with the applicant.
[13]
The applicant found a
replacement for Mr Pillay, Mr Solomon Monama (Mr Monama) through a
recruitment agency, Assessment Technologies
International (ATI). Mr
Monama commenced his employment with the applicant on 1 November
2016. ATI charged the applicant
R284,961,24 for their services,
a direct damages suffered by the applicant for replacing Mr Pillay.
[14]
The second witness, Ms
Mnkandla, ATI operations manager, testified that ATI is a talent
management, provision and recruitment company.
ATI was mandated by
the applicant to urgently find a replacement for Mr Pillay. She is
the one who undertook the task and conducted
a talent based search
against the specification which took about 21 days. She interviewed
the candidates on the sample in order
to create a shortlist. 76
candidates were interviewed during the first round of interviews and
10 were shortlisted. Final interviews
were held on 25 July 2016 and 5
candidates underwent psychometric assessment. Mr Monama was the
successful candidate.
[15]
ATI charged the
applicant 20% of the selected candidates’ total remuneration
package and R11 500.00 per candidate for
psychometric test. The
total amount charged by ATI is R284 961.24.
The
respondent’s case
[16]
The respondent had been
recruited from ABSA to join the applicant through the services of
ATI. He was recruited to join the bank
by Mr Gustav Raubenheimer (Mr
Raubenheimer), whom he had worked with at Nedbank and ABSA. He had
met with Mr Raubenheimer twice
before accepting the bank’s
offer on 28 January 2016.
[17]
He, indeed, had had a
good relationship with Mr Pillay while he was still with the
applicant. They had a number of confidential
discussions about the
job offers Mr Pillay was considering at that time. He never disclosed
these activities with Mr Steeneveldt.
Mr Pillay had attended an
interview at Nike but rejected the offer because he did not like
their culture.
[18]
Mr Pillay had been
identified to take over his role as the head of BI, this he did
discuss with Mr Pillay. He did not arrange a
meeting between Mr
Pillay and the bank. He was told by Mr Pillay that he had been
contacted by Mr Raubenheimer regarding a position
at the bank. He
then told Mr Pillay that he is the one who had given Mr Raubenheimer
his contact details but he told him that the
bank was unstable as
compared to the applicant as it had just come out of curatorship.
[19]
He never gave reference
for Mr Pillay and Mr Raubenheimer had not spoken to him about Mr
Pillay. He signed two offers of employment
for Mr Pillay’s
merely because he is the head of department. However, he was never
involved in the recruitment of Mr Pillay.
He signed a request for
approval to make an offer to Mr Pillay on 23 March 2016.
However, he did not have anything to do
with the increased offer that
was ultimately accepted by Mr Pillay.
[20]
Under cross
examination, the respondent made the following concessions:
20.1
He had given Mr
Pillay’s contact details to Mr Raubenheimer who had asked him
if he was aware of any good analysts who could
be approached;
20.2
Mr Pillay took his
views seriously and would be persuaded by them. He had signed Mr
Pillay’s offer of employment when he joined
the applicant and
did the same when he joined the bank;
20.3
There was no evidence
to suggest that Mr Pillay had been in discussion with the bank prior
to his resignation from the applicant;
20.4
He was employed in a
position of trust and owed the applicant a duty of care;
20.5
He was bound by the
undertaking;
20.6
The BI unit was
important and if its recommendations were incorrect and relied upon
by one of the decisions, it could have cost
implications for that
division.
[21]
Mr Pillay testified
that he was employed by the bank as a customer analyst. He had placed
his profile in Linked In which made him
available to be contacted for
offers of employment. He never saw himself retiring with the
applicant as he wanted to grow and expand
his career, hence he joined
the bank. He did discuss with the respondent that he had attended an
interview at Nike but did not
get the job.
[22]
He was also approached
by various recruitment agencies before he received an offer by the
bank. He never discussed his departure
from the applicant with the
respondent. However, after he had been contacted by Mr Raubenheimer,
he informed the respondent and
his response was that he should do
what was good for himself.
[23]
He was influenced to
join the bank by Mr Ramosedi, an executive at the bank who was part
of his interview. He was made an offer
on 4 April 2016, signed by the
respondent. He discussed the possibility of an increased offer with
the respondent. He promised
to speak to Mr Raubenheimer. Thereafter,
he received a revised offer signed by the respondent.
[24]
The applicant made a
counter offer which was more than that which he was getting at the
bank but he rejected it. He conceded that
the recruitment emails he
had received prior to taking up employment with the bank were
unsolicited cold calls by recruitment agents.
He was happy at the
applicant and never told anyone that he was not happy. He even stated
in his letter of resignation that he
enjoyed working at the
applicant.
[25]
He found out that the
bank was under curatorship through the media. The respondent did not
inform him that he had given his contact
details to Mr Raubenheimer.
However, he knew that he was going to work with the respondent at the
bank.
Issues
for determination
[26]
The real issues for determination are clearly
elucidated in the pleadings, read with the pre-trial minute.
Consequent to the material
concessions that were made during
evidence, the remaining issues are as follows:
26.1
Whether the respondent breached the undertaking;
26.2
Whether the respondent is liable for the damages
suffered by the applicant;
26.3
Whether it was within the contemplation of the
parties when the undertaking was signed that damages as claimed would
flow from a
breach of the undertaking; and
26.4
Whether the amount of damages claimed is fair and
reasonable.
The
legal principles and application
[27]
This
is a civil claim for damages in terms of section 77(3) of the Basic
Conditions of Employment Act
[1]
(the BCEA).
[2]
There are two
issues that arise in respect of a claim for damages consequent to a
breach of contract and are succinctly stated
in
KwaZulu-Natal
Tourism Authority and Others v Wasa;
[3]
firstly,
the applicant must prove: (i) that it had suffered damages as a
consequence of the breach of the undertaking by the respondent,
that
there is a link between the damages it suffered and the breach; and
secondly (ii) the quantum of damages it actually suffered.
[28]
In this instance, the
respondent denied having influenced or been involved in the
recruitment of Mr Pillay to the bank and that
he breached the
contractual undertaking. He tried to distance himself from the
recruitment of Mr Pillay by the bank, despite the
following evidence:
28.1
He resigned from the
applicant’s employ on 25 January 2016 and left on 29 February
2016 to join the bank consequent to being
headhunted by Mr
Raubenheimer, whom he had worked with at Nedbank and ABSA.
28.2
He gave Mr Pillay’s
contact details to Mr Raubenheimer who had specifically asked him
whether he knew any analysts he could
approach. It is undisputed that
Mr Pillay and Mr Raubenheimer did not know each other prior to the
respondent’s intervention.
On 11 February 2016, Mr Raubenheimer
initiated a process of recruiting Mr Pillay as a potential recruit
for the respondent’s
new team of analytics.
28.3
Mr Pillay attended an
interview meeting with the bank’s executives on 17 February
2016 and then informed the respondent about
being approached by the
bank. The respondent, despite having supported Mr Pillay’s
appointment as his successor as the applicant’s
head of the BI,
remained mum about Mr Pillay’s intentions. It must be mentioned
that the process of recruiting Mr Pillay
commenced during the
respondent’s notice period in February 2016. His half-heartened
caution about the risks of joining the
bank as it was still under
curatorship was disputed by Mr Pillay.
28.4
Hardly a month of his
employment with the bank, on 21 March 2016, the respondent signed a
request for approval of employment of
Mr Pillay. On 4 April 2016, he
signed Mr Pillay’s offer of employment. The respondent, not Mr
Raubenheimer, was approached
by Mr Pillay requesting an increase in
the bank’s offer. Mr Pillay’s request was acceded to and
a revised offer was
also signed by the respondent on 8 April 2016.
28.5
The applicant’s
attempts to retain Mr Pillay were in vein. He was resolute that he
would rather leave the applicant, when
he had just been promoted and
was enjoying working for it, to join bank that had just emerged from
curatorship.
[29]
The respondent’s counsel endeavoured
to discredit the applicant’s evidence in various ways. He
submitted that the applicant
failed to tender evidence that the
respondent had breached the contractual undertaking. Mr Steeneveldt
expressed his opinion based
on the chronology of events that led to
the departure of Mr Pillay to join the bank. In the absence of direct
evidence to prove
facts giving rise to the inference sought to be
drawn would amount to speculation. Mr Steeeveldt’s evidence is
inadmissible
and as such the applicant’s circumstantial claim
is unsustainable, so the further submissions went.
[30]
I do not agree with the above submissions.
It is clear from the objective and admitted facts that the respondent
was instrumental
in the headhunting of Mr Pillay. He is the one who
recommended Mr Pillay to
Mr
Raubenheimer and went further to provide Mr Pillay’s contact
details. He signed his offer of employment and facilitated
the
revised offer which was ultimately accepted by Mr Pillay. The
respondent conceded in cross examination that he had recruited
Mr
Pillay to join the applicant and, similarly, had signed his offer of
employment. Clearly,
he was not a passive
bystander as he would want the Court to believe.
[31]
It is also highly improbable, as correctly
contended by the applicant’s attorney, that the respondent
would have distanced
himself from the headhunting of Mr Pillay
because he was not aware of his contractual undertaking at that time.
He testified that
he became aware of his contractual undertaking when
he was served with the applicant’s letter of demand sometime in
October
2016.
[32]
Mr Steeneveldt
testified that Mr Pillay was an essential resource in the BI unit. He
had been trained and groomed as the respondent’s
successor. He
did not expect him to leave soon after the respondent’s
resignation especially since he had accepted a promotion
into a
position he had been groomed to occupy. The applicant had no high
turnover; no one had left its employ for eight years prior
to the
respondent’s resignation. This evidence was never challenged.
Mr Pillay, contrary to the respondent’s
evidence,
testified that he was happy at the applicant. The applicant had no
choice but to go into the market to search for Mr
Pillay’s
replacement.
[33]
To sum up to this point, I am persuaded
that the respondent, a former employee of the applicant, was directly
involved in headhunting
of Mr Pillay to join the bank in breach of
the contractual undertaking and consequently rendered himself liable
for damages suffered
by the applicant in replacing Mr Pillay.
[34]
The
next stage of the enquiry is whether applicant is entitled to the
damages claimed
.
Put differently, whether there is a link between the damages it
suffered and the breach
.
In
Holmdene
Brickworks
(Pty) Ltd v Roberts Construction Co Ltd,
[4]
the
referred to by the respondent, the Court stated:
‘
The
fundamental rule in regard to
the award
of damages for breach of contract is that the sufferer should be
placed in the position he would have occupied had the
contract been
properly performed, so far as this can be done by the payment of
money and without undue hardship to the defaulting
party
…
To ensure that undue hardship is not imposed on the defaulting party
the sufferer is obliged to take reasonable steps to
mitigate his loss
or damage (ibid.) and, in addition,
the
defaulting party's liability is limited in terms of broad principles
of causation and remoteness, to (a) those damages that
flow naturally
and generally from the kind of breach of contract in question and
which the law presumes the parties contemplated
as a probable result
of the breach
, and (b) those damages
that, although caused by the breach of contract, are ordinarily
regarded in law as being too remote to be
recoverable unless, in the
special circumstances attending the conclusion of the contract, the
parties actually or presumptively
contemplated that they would
probably result from its breach…The two limbs, (a) and (b), of
the above stated limitation
upon the defaulting party's liability for
damages correspond closely to the well-known two rules in the English
case of Hadley
v. Baxendale,
156 E.R. 145
, which read as follows (at
p. 151):
"Where
two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such
breach of contract should be such as may fairly and reasonably
be
considered either arising naturally, i.e., according to the usual
course of things, from such breach of contract itself,
or such as
may reasonably be supposed to have been in the contemplation of both
parties, at the time they made the contract, as
the probable result
of the breach of it."’ Emphasis added.
[35]
In the present case,
the second limb of
Holmdene
Brickworks
is
applicable. As such, it is my view that the damages incurred by the
applicant for Mr Pillay’s replacement are
natural
and a foreseeable consequence of the respondent’s contravention
of the contractual undertaking. Mr Pillay, a succession
plan
appointee and the respondent’s successor in title, was
headhunted by the bank at the instance of the respondent. The
applicant was left with no alternative but to seek the assistance of
the ATI to recruit Mr Pillay’s replacement. The bank,
on the
other hand, had been spared the recruitment expenses because of the
respondent’s breach of his undertaking.
[36]
The
respondent further submitted that the applicant failed to prove that
the amount of damages claimed is fair and reasonable in
the
circumstances. However, the respondent failed to tender any evidence
that
there
were
other
cost effective remedies that the applicant ought to have adopted,
when the onus rested upon him.
[5]
Conversely, Ms Mnkandla testified that the damages suffered by the
applicant were purely for the ATI’s service charges for
placing
Mr Pillay’s replacement. In practice, recruitment agencies
charge 20% to 30% of the appointed candidate’s total
remuneration package. The applicant was billed 20% of Mr Monama’s
total package; R11 500.00 for conducting the psychometric
tests
for 5 candidates but the applicant was billed for 3 candidates, a
discounted amount because of the long term relationship
ATI enjoys
with the applicant. This evidence was undisputed. Therefore, I accept
that the total amount claimed by the applicant
is fair and
reasonable.
Conclusion
[37]
I am persuaded that the respondent, a
former employee of the applicant, was directly involved in
headhunting Mr Pillay to join the
bank in breach of the contractual
undertaking and consequently rendered himself liable for damages
suffered by the applicant in
replacing Mr Pillay. The total amount
claimed is fair and reasonable.
[38]
There
is no reason why costs should not follow the result. Even though the
respondent is an individual litigant, he ought to have
been better
advised of the consequences of unsuccessfully resisting the
applicant’s claim. The applicant
duly
claimed, also, for the payment of interest at the rate of 10.25% per
annum on the award of damages as from the date of this
judgment. This
rate was not disputed in the pleadings nor in argument. There is
therefore no reason why it should not be applied.
[6]
[39]
In the circumstances, I make the following order:
Order
1.
The respondent is
ordered to pay the applicant an amount of
R284 961.
24
.
2.
The respondent is
ordered to pay interests on the above amount at 10.25% per annum
a
tempore
morae
.
3.
The respondent is
ordered to pay the costs.
__________________
P
Nkutha-Nkontwana
Judge
of the Labour Court of South Africa
Appearances:
For
the Applicant:
Mr D Woodhouse
Attorney
from:
Mervyn Taback Incorporated
For
the Respondents:
Advocate BD Hitchings
Instructed
by:
Charmaine Gray Attorneys
[1]
No 75 of 1997.
[2]
Section 77(3) of the BCEA provides that this Court ‘has
concurrent jurisdiction with the civil courts to hear and determine
any matter concerning a contract of employment, irrespective of
whether any basic condition of employment constitutes a term
of that
contract’.
[3]
[2016] ZALAC
35
;
[2016] 11 BLLR 1135
(LAC); (2016) 37 ILJ 2581 (LAC) at para 32.
[4]
[1977] 4 All SA 94
(A) at page 108; 1977 (3) SA 670
(A) at page 687 C-F.
[5]
Supra
at Page 110; see also
Lawson
v Schmidhauser Electrical CC
(7596/2007)
[2012] ZAWCHC 146
at para 35.
[6]
Russell, N.O. and Loveday,
N.O.
v.
Colllins
Submarine Pipelines Africa
(
Pty
.)
Ltd.
,
1975 (1) S.A. 110
(A.D.) at p. 156)