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[2019] ZALCJHB 10
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Graffiti Design Proprietary Limited v Teffu and Another (J4376/2018) [2019] ZALCJHB 10 (22 January 2019)
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case
no: J4376/2018
In
the matter between:
GRAFFITI
DESIGN PROPRIETARY
LIMITED Applicant
and
JEFNEY
LERATO
TEFFU First
Respondent
PICAL
PROPRIETARY
LIMITED Second
Respondent
Heard:
19 December 2018
Delivered:
22 January 2019
JUDGMENT
TLHOTLHALEMAJE,
J:
Introduction
and background:
[1]
The applicant (Graffiti) seeks an order interdicting and restraining
the first respondent (Teffu) until 17 October 2019
and in
the Republic of South Africa, from being employed by the second
respondent (Pical) or from being directly or indirectly
engaged by
any of its competitors. An order is further sought interdicting and
restraining Teffu from breaching the terms of a
confidentiality and
restraint of trade agreement that was signed in favour of Graffiti on
7 October 2013, and from further
disclosing its
confidential information to any third party including Pical. Only
Teffu opposed the application.
[2]
In opposing the application, Teffu was initially assisted by her
erstwhile attorneys, who had filed an answering affidavit.
The
attorneys withdrew from the matter on 13 December 2018.
Teffu’s contention was that the withdrawal was due
to the
reason that she could no longer afford to pay for legal services. She
appeared in person in these proceedings.
[3]
Graffiti is a specialist Fleet and Vehicle, Tarpaulins, Indoor and
Outdoor branding company. Teffu was initially employed as
its Retail
Project Manager in October 2013 and was subsequently promoted to
the position of Lead Projects Manager. Teffu nonetheless
denied that
there was a promotion, and contends that she was merely given a
changed title which did not entail a change in her
duties.
[4]
It is not in dispute that upon
her employment, Teffu had as part of her contract of employment, also
signed the written Confidentiality
and Restraint Agreement
[1]
.
She resigned from Graffiti’s employ with effect from
17 October 2018. Upon being asked who her prospective
employer
was in the light of the restraint undertakings, Teffu’s
response was merely that she was going to join an advertising agency,
and had refused to divulge the details of her new employer or the
nature of its business. Graffiti thought nothing much of this
information as it had no conflict with advertising agencies.
[5]
It subsequently came to Graffiti’s attention that Teffu had
commenced employment with Pical with effect from 18 October 2018.
Pical according to Graffiti is a direct competitor, which operate in
the same market, for the same or similar customers, and had
in the
past, poached its employees.
[6]
Graffiti further contends that Pical has been in the business of
Vehicle Branding for the last seven years, and it further conducts
business in the transport, interior, exterior and retail branding
industry. It had been attempting to enter the branded tarpaulins
and
Truck Top market business.
[7]
Graffiti further contends that, whilst in its employ, Teffu was one
of the most critical employees within its Fleet and Vehicle
and
tarpaulins branding division, and had reported to the Production
Manager. It was contended that she had handled the job inflow
and
outflow, and was accordingly responsible for the planning, execution
and monitoring of all projects from the customer inflow
stage to the
invoicing stage, and was therefore one of its main faces in the Fleet
and Vehicle branding business, as she further
interacted with major
clients including City of Johannesburg, Avis and JMPD. To this end,
it was further contended that she was
privy to confidential
information and trade secrets including customer portfolios, pricing
structures, production IP, fleet list,
full customer lists, turnover,
revenue, strategies for growth, customer contacts, strategies, which
confidential information and
trade secrets were deemed to be
proprietary to Graffiti.
[8]
It was further contended that as Lead Project Manager, Teffu through
her regular access to and contact with Graffiti’s
clients, she
developed and maintained significant relationships with those
clients, which relationships were similarly proprietary
to Graffiti.
[9]
Teffu opposed the application on a variety of grounds, including that
the application was not urgent; that Pical was not a direct
competitor of Graffiti as the two entities focussed on different
businesses; that there was no basis for enforcing the restraint
as her employment with Pical was not in breach of the restraint; that
she was not during her employ by Graffiti, exposed to sales
and
business; was not privy to confidential information or customer
connections; and essentially that the enforcement of the restraint
would cause her prejudice.
Urgency:
[10]
It is accepted that matters
involving enforcement of restraint provisions are inherently
urgent
[2]
.
The duration of the restraint in this case is 12 months, and on the
facts, I did not understand it to be placed in dispute that
upon
Graffiti having learnt that Teffu had taken employment with Pical,
certain undertakings were sought from her and when these
were not
forthcoming, Graffiti had then approached the Court for relief. Even
if it can be said that there was a significant delay
in approaching
the court, I am satisfied that a reasonable explanation in that
regard has been proffered, and the facts and circumstances
of this
case dictate that it be accorded urgency.
The
legal framework and evaluation:
[11]
The principles applicable to
the enforcement of restraint undertakings are fairly well
established. In this regard, an applicant
seeking to enforce the
restraint provisions need only invoke the contract and prove a breach
of its terms. It is thereafter for
the respondent to demonstrate on a
balance of probabilities, that the restraint provisions are
unenforceable on account of being
unreasonable
[3]
.
[12]
The enquiry into the
reasonableness of the restraint is essentially a value judgment that
encompasses a consideration of two policies,
namely the duty on
parties to comply with their contractual obligations, and the right
to freely choose and practice a trade, occupation
or profession.
It
is also generally accepted that a restraint will be considered to be
unreasonable (and thus contrary to public policy and unenforceable),
if it does not protect some legally recognisable interest of the
ex-employer, but merely seeks to exclude or eliminate competition
[4]
.
[13]
Central to an enquiry into the reasonableness of the restraint are
four interrelated questions as identified in
Basson v Chilwan and
others
. These are:
i. Does the one party have an interest
that deserves protection at the termination of the employment?
ii. If so, is that interest
threatened/prejudiced by the other party?
iii.
Does such interest weight
qualitatively and quantitatively against the interest of the other
party not to be economically inactive
and unproductive?
iv.
Is there an aspect of public
policy having nothing to do with the relationship between the
parties, which requires that the restraint
be maintained or rejected?
Thus, where the interest of the party sought to be restrained
outweighs the interest to be protected,
the restraint is unreasonable
and consequently unenforceable
[5]
.
[14]
A further consideration should
be added, namely whether the restraint is wider than what is
necessary to protect the protectable
interest
[6]
.
Was
there a Breach of the Restraint undertakings?
[15]
In regards to the alleged breach, and since it was common cause that
Teffu had joined Pical, the issue is whether the latter
is a
competitor of Graffiti for the purposes of determining whether
Teffu’s employment with Pical constitutes a breach of
the
restraint provisions.
[16]
Teffu’s contention was that there could not have been a breach
since the two entities are not competitors, and secondly
since
Graffiti’s main business entailed vehicle and tarpaulin
branding, whilst Pical was involved in creative marketing and
shopfitting with minimum branding. Teffu further averred that Pical
offered more products and services than Graffiti, and that
vehicle
branding was only a small part Pical’s business.
[17]
As it was correctly pointed out
on behalf of Graffiti, once Teffu had conceded that there was a
competitive interface between the
businesses of the two entities, it
follows that her denials that the two are not competitors should be
considered as being without
merit.
The
overall conspectus of the evidence clearly demonstrates that Pical is
in the business of exterior and interior branding, transport
and
retail branding
[7]
,
thus offering the same or similar services as Graffiti, which it
clearly competes with.
[18]
Pical’s
business
motto
is ‘
Branding
Made Easy’
,
and it cannot be correct to suggest that its involved in branding is
on a limited scale. To the extent that Teffu conceded that
the two
entities operate in the same, small and highly competitive industry,
but had in the same vein taken employment with Pical,
she had indeed
acted in breach of her restraint undertakings
[8]
.
On the whole, I am satisfied that Graffiti has discharged its onus in
this regard.
[19]
Teffu had further contended that as Lead Project Manager, she could
hardly be deemed to be a critical employee of Graffiti
as she was not
involved in its tarpaulin division or in sales, and that she was
merely involved in the execution and management
of orders. Obviously
these contentions
are aimed at creating the
impression that she would not be able to assist Pical to compete
against Graffiti. The contentions are
however unsustainable where a
clear competitive interface between the two entities has been
established.
[20]
A further significant factor is that Teffu conceded that she was
employed by Pical as Head of Projects, and would have the
same or
similar responsibilities to that of the Lead Project Manager. She
however contended that even though the responsibilities
would be
similar in terms of project management functions, her role at Pical
was different in terms of
job spec
and products offered. On a
conspectus of the evidence however, Teffu clearly seeks to
downplay
her role whilst employed at Graffiti. She was definitely not a very
junior employee with a marginal involvement in the
business. The
evidence further reflects that in her position, she was nonetheless
fully immersed in Graffiti’s business.
Protectable
Proprietary interests?
[21]
There are two kinds of proprietary interests that
can be protected by a restraint agreement. The first relates to all
confidential
information (Trade Secrets) which is or might be useful
to a competitor, if disclosed to it, to gain a relative advantage.
The
second relates to the relationships with customers, potential
customers, suppliers and others that have been referred to as the
‘trade connections’ of the business.
[22]
Whether
information constitutes a trade secret is a question of fact. For
information to be regarded as confidential and thus worthy
of
protection, it must be capable of application in the trade or
industry (
i.e
.
it must be useful and not be public knowledge); must only be known to
a restricted number of people or a closed circle; and must
be of
economic value to the person seeking to protect it
[9]
.
[23]
In this
case, the onus is upon Teffu to demonstrate that she had no access to
that information or that she had never acquired any
significant
personal knowledge of it whilst in the employ of Graffiti. The latter
on the other hand however, only needs to demonstrate
that indeed
Teffu had access to such information, which could be transmitted to
and utilized by Pical. Graffiti need not demonstrate
that the
confidential information had in fact been utilized, and all that it
needs to show is that Pical could do so.
[10]
[24]
It cannot be doubted that information such as customer lists
including the names and contact details of key customers and their
requirements; sales, business and marketing strategies; pricing of
products of clients; the terms of contractual relationships
with
suppliers and the terms of supply; business financial information
including revenue generated; and information and contact
details of
suppliers, is confidential. Such information in a competitive market
is clearly
capable of application in the trade or
industry , and is of economic value to the person seeking to protect
it, unless the person
seeking to escape from the restraint provisions
can demonstrate that such information is either useless to other
persons, or alternatively,
that it cannot be deemed to be
confidential as it was in the public domain. Graffiti contends that
Teffu was privy to this type
of information during her employment,
and that it remains useful in the hands of competitors.
[25]
Teffu’s contention on the other hand was that she was not privy
to any of Graffiti’s confidential information,
as she was not
involved in any of its strategies, sales and pricing structures. She
further contended that she was not given full
access to confidential
information, and that the limited information she had access to was
public knowledge.
[26]
Whether Teffu was privy to and had access to confidential information
for the purposes of determining whether those interests
are worthy of
protection has to be assessed within the context of the functions she
had performed whilst in the employ of Graffiti.
As already indicated,
Teffu in her capacity as Lead Projects Manager was according to
Graffiti, responsible for planning, executing
and monitoring of
projects carried out from time to time that customers had appointed
Graffiti to perform the work, up to the invoicing
stage.
[27]
Annexures ‘RA7’ and ‘RA8’ to the Replying
Affidavit further indicates that despite her denials, Teffu
was
involved in the tarpaulin business of Graffiti, whilst annexure ‘RA6’
to the Replying Affidavit indicates that
she was involved in the
bringing in of new business between 9 January 2017 and
October 2018. Similarly, she conceded
to having had limited
information or knowledge of sales figures, and had contended further
that the limited knowledge she had such
as material sold to clients
was already in the public knowledge as it was communicated to clients
through enquiries and quotes.
[28]
I did not understand it to be Teffu’s case that in her position
as Lead Projects Manager, she was not responsible for
the management
of projects carried out for Graffitti’s clients, and further
that she was not responsible for overseeing the
process of each
project. It would therefore have been impractical for her to have
carried out these functions without being privy
to any confidential
information.
[29]
Further based on the annexures
to the Replying Affidavit referred to above, again Teffu seeks to
downplay the amount of confidential
information she had access to. As
already indicated, given Teffu’s relatively senior position, it
is impossible that she
could have performed her duties without access
to any such confidential information. It is therefore not sufficient
for her to
simply allege that the information in question was
limited, or was in the public domain, or was not confidential. The
fact of the
matter is that confidentiality is relative, and she had
acquired that information in the course of her employment
relationship
with Graffitti. The fact that such information might
have been in the public domain does not make it less
confidential
[11]
.
It remains protectable.
[30]
In regards to customer connections,
the need for
Graffiti to protect its trade connections arises where it has been
demonstrated that Teffu had whilst in its employ,
gained access to
its customers, that such connections exists, and she was in a
position to build up a particular relationship with
those customer so
that when she left its employ, she could easily induce those customer
to follow her to Pical. It is then for
Teffu to demonstrate that she
never acquired any significant knowledge of or influence over
Graffiti’s customers whilst in its employ.
[31]
Teffu had denied that she was the primary and critical liaison
between Graffiti and some of its major clients. She in fact
denied
that there was a need for her to meet clients, and contended that she
was not required to meet with clients on a regular
basis, unless post
application on extreme cases where the client was aggrieved by
services rendered. She denied having established
strong relationships
with clients, and contended that was not in a position to influence
them in any way.
[32]
It has already been concluded that given the nature of her functions
and responsibilities, on the facts, it would not have
been possible
for Teffu to fulfil those functions unless she had access to clients,
their details, requirements and needs. Equally
so, and despite her
denials, the facts point that Teffu had indeed dealt with various
clients of Graffiti, and in particular, the
City of Johannesburg,
Avis, and JMPD. As pointed out by Graffiti in the replying affidavit,
Teffu may not have at times interacted
with these clients on her own
as she had accompanied its Operations Director (Richard Wood), when
consulting with those clients.
However, annexures ‘RA2’
and ‘RA3’ to the Replying Affidavit demonstrate Teffu’s
direct communication
with the contact persons of those clients,
particularly Avis and City of Johannesburg. She was clearly the
contact person of Graffiti
when its clients sent through order forms.
[33]
It is worth repeating that
Teffu’s position as Lead Project Manager was at a reasonably
senior level. Despite her denials,
which at most times were bare, it
is inescapable that she must have had access to and must have
developed relationships with Graffiti’s
clients. It suffices as
in this case, that Graffiti has established that trade connections
through customer contact existed between
her and its clients, and
further that these could be exploited for the benefit of Pical. I am
persuaded that this risk is real
[12]
.
[34]
A further consideration in this
case relates to how Graffiti’s interests weighs qualitatively
and quantitatively against those
of Teffu to be economically active
and productive. In
S
unshine
Records (Pty) Ltd v Frohling and Others
[13]
,
it
was held that;
'In
determining whether a restriction on the freedom to trade and to
practise a profession is enforceable, a court should have regard
to
two main considerations. The first is that the public interest
requires, in general, that parties should comply with their
contractual obligations even if these are unreasonable or unfair. The
second consideration is that all persons in the interests
of society,
be permitted as far as possible to engage in commerce or professions
or, expressing this differently, that it is detrimental
to society if
an unreasonable fetter is placed on a person's freedom of trade or to
pursue a profession. In applying these two
main considerations, a
court
will
obviously have regard to the circumstances of the case before it.'
[35]
Central to Teffu’s submissions was that she would suffer
extreme prejudice in the current economic climate should the
restraint be enforced and her employment with Pical be terminated.
This was even more particularly so as the period of the restraint
was
12 months and throughout the Republic. She had contended that her
current trade was the only one she had studied and knew,
and that the
restraint would further cause her and her dependent son prejudice.
[36]
It is accepted that questions
of enforcement of restraint of trade undertakings will always raise
the conundrum between the sanctity
of contracts and the
constitutionally entrenched freedom of trade, occupation and
profession
[14]
.
Central to this debate however is the fact that such undertakings are
freely and willingly made, and employers expect employees
to be bound
by those undertakings. Whether it can in each case be said that such
undertakings were freely and willingly made is
a subject of another
debate in view of the constant counter-argument that an unemployed
person will sign anything to secure employment
in these hard economic
times, and further that prospective employees always bargain from a
position of weakness.
[37]
The issue however as in this case is that once it is established that
such restraint provisions exists; that there was in fact
a breach;
and further that a case has been made out for a protection of
proprietary interests, the issue is whether there
is any facet
of public policy that militates against the enforcement of the
restraint.
[38]
On Graffiti’s undisputed version, Teffu upon having resigned,
was requested to re-consider her decision. She had nonetheless
refused to do so. Upon being asked where she was going to be
employed, her response without divulging much, was that she was going
to join an advertising agency. Since Graffiti had no reason to
believe that there was conflict with the business Teffu intended
to
join, her word was trusted. It had however turned out that she had
joined a competitor.
[39]
The Court will always take a dim view of ex-employees under a
restraint who seeks to escape such provisions when they
had
caused the very unfortunate circumstances they find themselves in.
Teffu in this case knew that she was bound by the restraint
and
confidentiality undertakings. Had she come out clean and informed
Graffitti about where she was going to be employed, she would
then
have been told at that stage that her move to Pical would have been
in conflict with her undertakings. She nonetheless refused
to reveal
who her prospective employer was, told untruths, and took a risk. She
cannot now argue that the restraint provisions
are unreasonable when
her deliberate choices come back to haunt her.
[40]
For what it is worth, it is not correct as Teffu had alleged, that
the industry she is currently in is the only one where she
can be
employed. To the extent that she had conceded that she had informed
Graffiti when she left that she was going to join an
advertising
agency, which Graffiti had accepted as not being a threat, she
remains able, for the period of the restraint, to seek
employment in
the advertising industry, or alternatively in the marketing industry,
and with parties that are not in direct competition
with Graffiti.
[41]
Further concerns raised by Teffu about security of employment and
financial prejudice as a consequence of the duration and
area of the
restraint are as already indicated, factors that she brought upon
herself. In any event these concerns do not in themselves,
raise
issues of public policy that serve to outweigh the basic principle
that parties ought to be bound by agreements which they
freely and
voluntarily enter into.
Conclusions:
[42]
Where a final order is sought,
three essential requisites must be met. Thus, there must be a clear
or alternatively a
prima
facie
right, secondly
an injury actually committed or reasonably apprehended, and lastly,
the absence of any other satisfactory
remedy
[15]
.
[43]
In this case, I am satisfied that Graffiti has
established a clear right in the light of the interests it seeks to
protect,
and that Teffu by virtue of her employment with Pical, is in
a position to threaten those interests. Those interests which
Graffiti seeks to protect outweighed those of Teffu not to be
economically inactive and unproductive. In any event, and as already
illustrated, it is not as if the enforcement of the restraint would
leave Teffu without choices or alternatives, and it cannot
be said
that she would be rendered economically inactive.
[44]
I am also satisfied that the enforcement of the restraint provisions
is not meant to stifle competition but to protect Graffiti’s
proprietary interest against any harm posed by Teffu’s
association with Pical. Graffiti’s alternative remedies in the
circumstances are limited if not non-existent if the restraint is not
enforced, given its limited duration and the harm posed by
Teffu’s
employment with Pical. In the circumstances, it is concluded that
Graffiti has made out a case for the relief that
it seeks, and in
particular, the enforcement of the restraint and confidentiality
undertakings. I have further had regard to the
requirements of law
and fairness, and deem it not appropriate to make any cost order.
[45]
Accordingly, the following order is made;
Order:
1. The forms and service provided for
in the Rules of this Court are dispensed with, and the matter is
dealt with as an urgent application.
2. The First Respondent is interdicted
and restrained;
2.1
until 17 October 2019 and in the Republic of South Africa,
from taking up employment with the Second Respondent or
directly or
indirectly, being employed by, concerned, engaged and/or associated
with, interested in and/or form part of any business
or concern, in
any capacity whatsoever, which conducts business in competition with
the Applicant;
2.2
Until 17 October 2019, from breaching the provisions of the
Confidentiality and Restraint Agreement as annexed to
her contract of
employment with the Applicant marked ‘B’.
2.3
From disclosing the confidential information of the Applicant to any
third party including the Second Respondent.
3. There is no order as to costs.
____________________
Edwin Tlhotlhalemaje
Judge
of the Labour Court of South Africa
APPEARANCES:
For
the applicant: P. Bosman
Instructed
by: Mervyn Taback Incorporated
For
the First Respondent: In Person
[1]
Annexure ‘RJW1’ to the Founding Affidavit
[2]
Mozart Ice Cream Franchises
(Pty) Ltd v Davidoff and Another
2009
(3) SA 78 (C) 89A
[3]
See
Basson V Chilwan
[1993] ZASCA 61
;
1993 (3) SA 742
(A);
Siemens
Telecommunications (Pty) Ltd
2007
(2) SA 486 (SCA)
[4]
See
Labournet (Pty) Ltd v
Jankielsohn and Another
[2017] 5 BLLR 466
(LAC)
at
paragraphs 39 to 45
;
Sunshine Records (Pty) Ltd
v Frohling and others
1990
(4) SA 782
(A) at 794C-E
[5]
At 767C-H
[6]
See
Kwik Kopy (SA) (Pty)
Ltd v van Haarlem & Another
1999
(1) SA 472
(W) at 484E;
Shoprite
Checkers (Pty) Ltd v Jordaan & another
(2013) 34 ILJ 2105 (LC)
[7]
Annexure
‘RJW7’ to the Founding Affidavit
[8]
Clause 3.2
Non-
Solicitation undertakings
provides that;
“
In order to
protect the proprietary interests of the company, the employee
irrevocably undertakes in favour of the company that
he shall not,
in any capacity whatsoever, for the duration of the employee’s
employment with the company and for a period
of twelve (12) months
from the termination date-
3.2.2.2 become employed by,
associated with and/or form part of any business or concern, in any
capacity whatsoever, which conducts
business in competition with the
company”
[9]
See
Profibre Products
(Pty) Ltd v Govindsami
(J1448/18) [2018] ZALCJHB 240 (5 June 2018) at para [13]
[10]
BHT
Water treatment (Pty) Ltd v Leslie and another
1993
(1) SA 47
(W) at 57J-58D:
[11]
See
Experian South Africa
(Pty) Ltd v Heyns and Another
[2013] (1) SA 135
(GSJ) at para 44, where it was held that;
‘
All of the above, in my view,
constitute confidential information which is proprietary to the
applicant and which it is entitled
to protect. It follows that first
respondent’s contention that this information to which he had
access whilst employed
by the applicant is not confidential cannot
be sustained. In any event, the contention is legally untenable in
that it is clear
from several reported judgments on this issue, that
irrespective of whether or not information is in the public domain,
the fact
that the first respondent has obtained such information
within the context of a confidential relationship means that it in
fact
is protectable….’
[12]
See
Experian
at para 20
[13]
[1990] 1 ALL SA 8
(A) at 41 and 42.
[14]
Section 22
of the Constitution of the Republic of South Africa, Act 108 of 1996
[15]
See
Pilane
and Another v Pilane and Another
2013
(4) BCLR 431(CC)
at para 39.