About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Johannesburg Labour Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: Johannesburg Labour Court, Johannesburg
>>
2018
>>
[2018] ZALCJHB 388
|
|
Scott Bader (Pty) Ltd v Brink and Others (J 2882/18) [2018] ZALCJHB 388 (23 November 2018)
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
CASE
No: J 2882/18
In
the matter between:
SCOTT
BADER (PTY)
LTD
Applicant
and
CHARL
BRINK
First Respondent
JUSHI
SINOSIA SOUTH AFRICA (PTY) LTD
Second Respondent
SINOSIA
SA COMPOSITE SOLUTIONS (PTY) LTD
Third
Respondent
Heard:
11 October 2018
Delivered:
23
November
2018
Summary:Restraint
of trade
JUDGMENT
MABASO,
AJ
Introduction
[1]
On 29 August 2018 the applicant approached this court on urgent basis
seeking an order in the following terms:
1.
That the first respondent be interdicted from directly or indirectly
being employed by or have an interest in or in any way a
representative ,agent or officer to the Second or Third
Respondent for a period of 1 (one) year anywhere Republic of South
Africa calculated from 08 September 2018;
2.
The Second and Third Respondent be interdicted and restrained from
employing the first respondent, or in any way being associated
with
the First Respondent, in breach of the restraint of trade covenant of
the First respondent with the applicant.”
[1]
[2]
Following the delivery of the answering affidavit by the first and
second respondents, deposed to by the first respondent, which
raised
inter
alia
that
the applicant was not employed by the second respondent but by an
entity called Sinosia SA Composite Solutions (Pty) Ltd (hereinafter
referred to as the employer), On 04 October 2018 the applicant
delivered an application for joinder, in terms Rule 22 of the Labour
Court Rules, asking that the employer be joined as a party in these
proceedings. The latter application is unopposed. I have taken
into
account the nature of the dispute and the reason behind the joinder
of
the
employer and am satisfied that the applicant has made out a case in
respect of joinder which is therefore granted.
[3]
The applicant is
Scott
Bader (Pty) Ltd, the first respondent is Mr Charl Brink, the second
respondent is Jushi Sinosia South Africa (Pty) Ltd, and
Sinosia SA
Composite Solutions (Pty) Ltd is the third respondent.
Brief
Background
[4]
On 5 January 2009 the applicant and the first respondent entered into
an employment contract, whereby the former was employed
as a
Technical Sales Representative. On 17 July 2014, they entered into a
restraint of trade agreement, which is the subject matter
herein.
[5]
In the latter agreement it was agreed between the parties that during
the course of his employment with the applicant , the
first
respondent will
inter
alia
acquire knowledge of the
applicant’s confidential information and other private
intelligence, will learn the identity of customers
and suppliers of
the applicant and will forge personal links with such customers and
suppliers and will acquire confidential information
which is used by
the applicant during the course of the business. He then agreed to be
restrained for a period of 12 months, in
case of resignation from the
applicant, within the Republic of South Africa, whether directly or
indirectly. The relevant clause
reads as follows:
“
s/he
will not become employed by, have an interest in, or in any way act
as representative, agent or officer of the competitor of
the
Employer, whether for the employee’s benefit or not
”
[2]
[6]
The applicant asserts that it has protectable interests and as a
result of the employment relationship with the first respondent,
the
latter acquired “
a
great knowledge, know-how, customer connections, information relating
to the Applicant”.
As
a result of the first respondent’s association with the second
respondent, who is the applicant’s direct competitor,
there are
a potentially harmful consequences for it as the first respondent has
developed extensive and close relationships with
its customers as
well as knowing who is its suppliers and the costing and pricing
strategies and have assisted the applicant to
remain competitive
within the small market.
[7]
The first respondent, on or about 8 August 2018, tendered his
resignation from the applicant and when the latter’s commercial
director enquired from the first respondent as to where he was going,
the first respondent advised that he would be joining the
second
respondent herein.
[8]
Parties are in agreement that as a result of the employment
relationship between the applicant and the first respondent the
latter’s duties among other things involved promoting and
maintaining the image of the applicant to the marketplace, increase
sales to the existing customer base, actively seeking new
opportunities to promote sales of the applicant’s products and
services, provide technical support at shop floor level, to report to
the relevant regional business manager custom activities
and
movements in the marketplace.
[9]
The applicant asserts that as a result of the tasks of the first
respondent he acquired an intimate knowledge of the applicants
business including production, suppliers and its customers. He was in
regular contact with the applicant’s customers, built
a
relationship with them as a result, and was the “
face
of the Applicants business at its customers”
.
The first respondent, however,, asserted that the product base of the
applicant is available on the Internet. The first respondent’s
response to this is found in paragraph 18.1 to 18.4 of the answering
affidavit which reads thus, which was not denied by
the applicant:
“
18.1
I specifically deny that I acquired intimate knowledge of production
and suppliers. As far as production is concerned, I have
no knowledge
of the detailed of the process associated with the Applicant’s
products.
18.2
As far as knowledge of the applicant’s business is concerned;
its unclear what the allegation in that regard is aimed
at. Any
casual search on the Internet would reveal the nature and extent of
Scott Bader’s business and the products/services
it provides.
18.3
I did not attend to all Scott Bader’s customers in the Gauteng
region. I had a limited number of customers I attended
to in that
regard. As stated, I did not attend to this customers alone, but was
regularly escorted by Scott Bader’s afore-mentioned
Regional
Business Manager and Commercial Director. The reminder of Scott
Bader’s customers in the Gauteng region, was attended
to by
inter alia Mrs Hofmeyer, … Although she accompanied me on
visits to clients I attended to in the said province, I
did not
accompany her on visits to clients that I was not required to attend
to. Consequently, I only attended (together with the
Manager), to
approximately 55% of [the applicant’s] customers Gauteng.”
[10]
Among other things, the applicant alleges that the first respondent
was responsible for pricing in order to maintain and achieve
target
margins, therefore, he knows what the applicant mark-ups and what
it’s profit margins are. This is disputed by the
first
respondent. In the replying affidavit, the applicant has not provided
any persuasive reply to this.
[11]
The applicant alleged that the first respondent had access to
confidential information through the applicant’s ERP
information
system M3/DAN, accolade Project development system, 8D
Complaint System, SUGAR CRM System and through general
correspondence, meetings
and training. This is denied by the first
respondent, and he further states that he never had the M3 system. In
respect of the
DAN system, he avers that he only had access to
clients that he attended to. In respect of the accolade Project
development system,
he avers that a special code was required which
he did not have. In respect of 8D complaint system, he had no access.
However,
he accepts that he had access to the SUGAR CRM but denies
that the information on that system could be considered confidential
information. Moreover, he says the applicant failed to substantiate
on the actual confidential information that it claims
is in his
possession.
[12]
It is common cause between the parties that close customer relations
are crucial in this type of business. However, the first
respondent
presented the following undisputed evidence about customers
relationship: they are supported and assisted by a
technical
team, and as a result of such, the technical team is acquainted with
customer specific requirements and needs, and that
forms a
relationship with such customers, and this leads to customers
becoming so well acquainted with members of the technical
team, and
therefore customers would request the assistance of the specific
members of the team.
[13]
The first respondent in the answering affidavit asserts that his
employer is part of the Jushi Group of Companies which is
structured
as follows: China Jushi Co Ltd is the biggest manufacturer of
fibreglass in the world, Sinosia SA Composite Solutions
(Pty) Ltd is
the sole importer of Jushi China fibreglass products in the Republic
of South Africa, and the Sinosia SA Composite
Solutions (Pty) Ltd is
the sole accredited sub-distributor of the Jushi Group SA Sinosia
Composite Materials Co (Pty) Ltd fibreglass
in South Africa.
Law
and application thereof
[15]
The applicant’s case is based on the covenant in the restraint
of trade, which the applicant says is imposed by virtue
of the
agreement entered into between it and the first respondent. It is a
well-known principle that restraint of trade agreements
are valid and
enforceable unless they impose an unreasonable restriction
inter
alia
in
a person’s freedom of trade and profession. Under those
circumstances, a party who is a party to such an agreement, and
who
seeks to avoid it, has to show that such restraint is against public
policy and therefore unenforceable.
[3]
[16]
Courts, if approached, firstly are required to determine as to
whether, based on the facts before them, such restraints of
trade
protect the proprietary interest of a party. There is no specific
definition of what is a proprietary interest. However,
this may
include confidential information and customer connections.
Wallis
J,
in
Den
Braven S.A. (Pty) Limited v Pillay and Another,
[4]
when summarising the
principle of customer connections, 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
.
”
[5]
The
defunct AD in the matter of
Rawlins
and Another v Caravantruck (Pty) Ltd
[6]
, held the following in
respect of customer connections,
“
the
need of an employer to protect his trade connection arises where an
employee has access to customers and is in a position to
build up
particular relationship with the customers so that when he leaves the
employer’s service he could
easily
induce
the customers to
follow him to a new business”
[7]
(Own emphasis)
In
essence, one has to determine whether such an employee, at the time
when he was employed by the employer concerned, based on
the evidence
presented before the Court, has established a particular relationship
with such customers which might “
easily
induce”
them
to follow him in joining the new employer.
[17]
For information to be confidential
,
the Court in
Walter
McNaughton (Pty) Ltd v Schwartz & Others
[8]
held:
“
For
information to be confidential, it must (a) be capable of application
in trade or industry, that is, it must be useful; not
be public
knowledge and 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.”
[18]
The Supreme Court of Appeal (SCA), in
Reddy
v Siemens Telecommunications (Pty) Ltd
[9]
set out the following
questions to be asked in restraint of trade matters:
“
Moreover,
a restraint which is reasonable as between the parties may for some
other reason be contrary to the public interest. In
Basson v Chilwan
and others Nienaber JA identified four questions that should be asked
when considering the reasonableness of a
restraint:
(a)
Does the one party have an interest that deserves protection after
termination of the agreement?
(b)
If so,
is that interest threatened by the other party
?
(c)
In that case, does such interest weigh qualitatively and
quantitatively against the interest of the other party not to be
economically
inactive and unproductive?
(d)
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? Where the interest of the party sought to be
restrained weighs more than the interest to be protected,
the
restraint is unreasonable and consequently unenforceable. The enquiry
which is undertaken at the time of enforcement covers
a wide field
and includes the nature, extent and duration of the restraint and
factors peculiar to the parties and their respective
bargaining
powers and interests.
…
A
fifth question, implied by question (c), which may be expressly
added, viz whether the restraint goes further than necessary to
protect the interest.
[10]
”
[19]
The SCA in the matter of
Automotive
Tooling Systems (Pty) Ltd v Wilkens
and
Others
[11]
when
discussing the issue of the skill that an employee concerned acquired
during the period of his employment with the employer
concerned, it
held that:
“
In
my view, the facts establish that the know-how for which the
appellant seeks protection is nothing other than skills in
manufacturing
machines albeit it that they are specialised skills.
These skills have been acquired by the first and second respondents
in the
course of developing their trade and do not belong to the
employer – they do not constitute a proprietary interest
vesting
in the employer – but accrue to the first and second
respondents as part of their general stock of skill and knowledge
which
they may not be prevented from exploiting. As such the
appellant has no proprietary interest that might legitimately be
protected.
The restraint is therefore inimical to public policy and
unenforceable.”
[12]
[20]
Competition is allowed in a country like ours. Whatever restraint,
where it “
seeks
to exclude or eliminate competition,”
[13]
is considered to be
unreasonable and in this way contrary to public policy, and would,
therefore, be unenforceable
.
[21]
There are three issues in
casu
,
namely that the first respondent has acquired skill during his
employment with the applicant, has confidential information, and
that
he has a connection with the customers of the applicant.
[22]
As indicated above, the parties agree that close customer relations
are crucial in this type of business. Without any doubt
indeed this
is an interest that deserves protection. However, is that interest
threatened
by the first respondent
association with further respondents?
[23]
The applicant explained in paragraphs 24 to 24.8 of the supporting
affidavit as to the tasks that the first respondent was
doing.
Clearly, the first respondent in executing these tasks he was doing
what the applicant required him to do, and by doing
so he acquired
skill and knowledge which he may not be prevented from using same
with any prospective employer if will not prejudice
the applicant.
The burden to show the nexus between acquired knowledge/skill with
the prejudice (actual or potential) to be suffered
by the applicant
is on the applicant. Inter alia, the first respondent, as a result of
these tasks, denied that he had any intimate
knowledge of production
and suppliers as he says he has no details of the process associated
with the applicant’s products.
[24]
Moreover, where it is stated that the first respondent had access to
all of the applicant’s basic product formalities
to enable him
to understand what was best suited for customer application, the
costing and pricing, the first respondent denies
these and says he
does not have the knowledge attributed to him by the applicant. The
first respondent says he made reference to
the readily available data
sheets whenever he needed understanding of a particular product and
as soon as the client required technical
knowledge and support, the
assistance of a technical team was to be called in.
[25]
In respect of customers, he says he attended to a limited number of
customers of the applicant and was regularly escorted by
the Regional
Business Manager and Commercial Director. Some of the meetings he was
not even allowed to accompany the Regional Business
Manager and
states that he only attended to approximately 55% of the applicant’s
customers in Gauteng. It must be emphasised
that in the papers the
applicant has not alleged that the first respondent attended to its
customers outside Gauteng, meaning in
other areas of the country.
Based on this, it is my view that the relationship that the first
respondent had with the customers
of the applicant was too remote to
lead to him to “easily induce” them to follow him to the
employer and/ or to the
second respondent. This conclusion is also
being supported by the fact that the first respondent asserts that a
technical team
intervention was necessary as stated in paragraph 12
above. I have also taken into account that in the application for
joinder,
delivered almost two months after the first respondent
resigned, there are no allegations that he has lured some of the
customers
to second and/or third respondents.
[26]
In respect of competition, the first respondent denies that he is
employed by the second respondent, the assertion that the
employer is
the sole accredited sub-distributor fibreglass. The first respondent
acknowledges in respect of product that the applicant
and the first
respondent are not exactly the same as he says “
the
two companies manufacture and specialise in different products, and
to the extent that they engaged in each other’s markets
from
time to time, they supplied but a fraction of either resting of
fibreglass to their customers respectively”.
Therefore, taking into
account that the first respondent is not employed by the second
respondent but by the employer which is the
sole accredited
sub-distributor of fibreglass in South Africa whereas the
applicant is generally regarded as the manufacturer
and distributor
of specialised polyester resin systems in South Africa.In paragraph
13 of the founding affidavit, the applicant
states “
also
imports and supplies fibreglass as part of its product range when
selling its resin, gel coat and release agent products”
.
The first respondent says the applicant supplies fibreglass as a
secondary supplier, but the third respondent is “
the
sole accredited sub-distributor of the aforementioned Jushi Group SA
Sinosia Composite Materials Co (Pty) Ltd fibreglass, in
South
Africa”
.
In passing it must be mentioned that the Jushi Group SA Sinosia
Composite Materials Co (Pty) Ltd is not joined as a party in these
proceedings.
[27]
Taking into account the aforementioned facts, I conclude the
applicant is attempting to eliminate competition and unfairly
preventing the first respondent to be economically active, and to use
his skill.
[28]
I am unable to ascertain how the applicant is “threatened”
by the relationship between the first respondent and
his new employer
taking into account
inter
alia
that
the applicant’s averment that the first respondent is privy to
its confidential information such as pricing is denied
by the first
respondent and considering what is contained in paragraphs 18.1 to
18.3 of the answering affidavit, as set out above.
[29]
In respect of confidential information, the first respondent
indicated that some information is available on the Internet which
is
not disputed by the applicant. Moreover, the applicant has not
substantiated what it means by confidential information and that
information as mentioned in paragraph 11 above is denied by the first
respondent, I conclude that no protectable interests has
been shown
by the applicant in respect of confidential information.
[30]
Wherefore I make the following order:
Order
1.
The application is heard
as one of urgency;
2.
The application for
joinder is granted;
3.
The application for
restraint is dismissed;
4.
There is no order as to
costs.
S
Mabaso
Acting
Judge of the Labour Court of South Africa
Appearances:
For
the Applicants: Snyman Attorneys
Instructed
by:
Mr A Posthuma
For
the Respondents: Deale Attorneys
Instructed
by:
Advocate C Goosen
[1]
This is in terms of the replying
affidavit wherein the applicant asked that the notice of motion
should read in this way, following
the joinder application.
[2]
Clause 3.3.3 of the restraint of
trade.
[3]
See:
Afrox
Healthcare BPK v Strydom
2002
(6) SA 21
(SCA) at para 8 and
Ball
v Bambalela Bolts (Pty) Ltd and Another
[2013]
9 BLLR 843 (LAC).
[4]
2008 (6) SA 229 (D).
[5]
Den Braven
(
supra
)
at para 6. Emphasis added.
[6]
1993 (1) SA 537.
[7]
Id at page 541 C – D. Emphasis
added.
[8]
2004 (3) SA 381
(C) at page 388 J –
389 A.
[9]
2007 (2) SA 486 (SCA).
[10]
Ibid at para 16 and 17.
[11]
2007 (2) SA 271
(SCA). The LAC in
Labournet’s judgment summarised it as follows: “Even
though it is acknowledged that it is difficult
to distinguish
between the employee’s use of his or her own knowledge, skill
and experience, and the use of his or her
employer’s trade
secrets, it is accepted that an employee cannot be prevented from
using what is in his, or her, head.”
[12]
Ibid at para 20.
[13]
Automotive Tooling Systems
supra.