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[2019] ZALCJHB 15
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Masterbatch South Africa (PTY) LTD v Gidenhuys and Another (J4405/2018) [2019] ZALCJHB 15 (29 January 2019)
IN
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case
no: J4405/2018
In
the matter between:
MASTERBATCH
SOUTH AFRICA (PTY) LTD
Applicant
and
ALBERT
GIDENHUYS
First
Respondent
XUBA
POLYMER (PTY) LTD
Second
Respondent
Heard:
20 December 2018
Delivered:
29 January 2019
JUDGMENT
TLHOTLHALEMAJE,
J:
Introduction
and background:
[1]
With this application, the applicant (Masterbatch), seeks an order
interdicting
and restraining the first respondent (Gildenhuys) until
28 June 2020 and in the Republic of South Africa, from
being
directly or indirectly associated or concerned with or
interested or engaged in the second respondent (Xuba) or any entity
or business
which manufactures or sells, in any manner or form,
masterbatch, additives, compounds, pigments or products equivalent to
or in
opposition to its products. A further order is sought
interdicting and restraining Gildenhuys from using or disclosing its
confidential
information. Gildenhuys opposed the application.
[2]
In the founding affidavit deposed to by Anthony van Niekerk, its
managing
director, he averred that Masterbatch manufactures and
supplies masterbatch, pigments and additives to the plastic industry.
The
product masterbatch, is highly concentrated, and used to that add
mechanical and aesthetic properties to plastics (polymers) during
the
manufacturing process of plastic products. It is encapsulated in
polymer granules for ease of handling and dosing, and allows
the
plastic processor to colour raw polymer in an economical manner
during the plastic manufacturing process. It is used
inter alia
,
to enhance the performance of products by providing resistance
against fire, degradation due to ultraviolet rays and microbial
growth (referred to as additive masterbatch). It adds aesthetic
properties that allows a product to exhibit a particular colour,
brightness, vibrancy, tint and reflective compound under specified
lighting conditions.
[3]
Van Niekerk went at length in explaining the masterbatch product,
what
it does, what it is used for, who makes it, what is contained in
it, how the business of masterbatch works, and the steps in its
production process. These issues will be dealt with in the course of
this judgment to the extent necessary.
[4]
Gildenhuys
in his answering affidavit raised a number of issues and contend that
these ought to dispose of the matter. It is common
cause that he
commenced his employment with Masterbatch on 1 March 2012
as a Technical Manager. A contract of employment
signed on
16 February 2012
[1]
contains
confidentiality and restraint of trade undertakings in favour of
Masterbatch. A further ‘Confidentiality Agreement
and Restraint
of Trade’
[2]
was signed on
13 February 2012.
[5]
Gildenhuys in opposing the application contends that;
a)
The application is not urgent.
b)
He had not signed or agreed to the restraint of trade undertakings
contained in ‘Confidentiality
Agreement and Restraint of Trade’
that was purportedly signed on 13 February 2012.
c)
Masterbatch and Xuba are not competitors, and he is employed by the
latter as an independent contractor
to work on the development of
compounds for the automotive industry;
d)
Masterbatch has no proprietary interests in its confidential
information and customer connections, which are
worthy of protection
by means of enforcement of the restraint.
Urgency:
[6]
Gildenhuys resigned from Masterbatch’s employ on 24 May 2018,
and his last working day was 29 June 2018. According to
Masterbatch, Gildenhuys advised that he was going to join
an
entity called Faurecia, which is an automotive parts manufacturer and
not its competitor. Masterbatch however contends that
it came to its
attention on 25 October 2018 that Gildenhuys had in fact
joined Xuba, its competitor. Masterbatch only
got to know of
Gildenhuys’ new employer by chance, after a copy of e-mail
meant for Gildenhuys was erroneously sent by one
of Xuba’s
employees named ‘Francois’ to an old email address at
Masterbatch that was previously used by Gildenhuys.
Attached to the
email were minutes of an OPS meeting of Xuba, that took place on
22 October 2018, which Gildenhuys had
attended.
[7]
Masterbatch’s sales director had acted on that information by
making
telephonic enquiries at Xuba, and it was confirmed that
Gildenhuys was indeed its employee. Masterbatch had subsequently
instructed
its attorneys of record to send Gildenhuys a letter of
demand. This was done on 5 November 2018, with undertakings sought by
7 November 2018.
[8]
Gildenhuys’ response on 7 November 2018 was to
request
an extension of one week as he needed to consult with his
attorneys, which Masterbatch’s attorneys of record had
consented
to. In a further response by Gildenhuys through his
attorneys of record, he had denied the allegations made in the
correspondence
of 5 November 2018 without substantiating
those denials. Further correspondence from Masterbatch’s
attorneys of
record followed on 19 November 2018 to
Gildenhuys’ attorneys pointing out that he had not confirmed
whether he
worked for Xuba or not. His attorneys of record undertook
to revert after consultations with him. When no response was
forthcoming,
his attorneys were given until 28 November to issue
a response failing which an urgent application would be instituted.
His
response on 29 November 2018 was essentially that he
would defend any action against him. Masterbatch’s attorneys
then advised him on the same that an urgent application would be
brought in the light of his bare denials and his refusal
to
answer the allegations made against him.
[9]
The urgent
application was launched on 7 December 2018, setting the
matter down for 20 December 2018. The principles
pertinent
to urgent applications are well-established. An applicant
seeking urgent relief as contemplated in Rule 8 of the
Rules of this
Court must adequately and in detail, set out in the founding
affidavit, the reasons for the urgency, the circumstances
which
render the matter urgent, and the reasons why substantial redress
cannot be obtained at a hearing in due cause. It therefore
follows
that where the Court is not satisfied that sufficient reasons exists
for the matter to be treated as urgent, the application
ought to be
struck off from the roll on that ground alone
[3]
[10]
Furthermore,
where it is found that the urgency claimed is ultimately
self-created, the Court should refuse to grant relief
[4]
.
It has also been held that disputes pertaining to enforcement of
restraint undertakings are by their very nature urgent
[5]
.
Even if this might be the case, the Court must be satisfied that the
requirements set out in Rule 8 have been complied with.
[11]
One of the factors to be considered in determining whether a
matter should be accorded
any urgent attention is the haste with
which a party approached the Court. In this case, it was submitted on
behalf of Gildenhuys
that the explanation proffered by Masterbatch in
approaching the Court some six months since the resignation was not
adequate,
and that it was not clear from the papers as to when
Masterbatch became aware of the breach. It was further submitted that
time
had passed by within which it could be argued that there were
any proprietary interests of use, and there was no evidence to
suggest
that Masterbatch’s clients were approached or its
confidential information was disclosed.
[12]
The timeline as summarised above indicates that Masterbatch became
aware on 25 October 2018
of the fact that Gildenhuys had
joined Xuba. Several correspondence exchanged between the parties’
attorneys of record indicates
that Gildenhuys was less than
forthcoming about his employment with Xuba, had not responded
appropriately to the allegations made
against him, and had requested
an extension to respond, or had refused to make any undertakings. In
the circumstances, it cannot
be said that Masterbatch did nothing
until 7 December 2018 when it launched these proceedings,
and it is apparent that
it was only compelled to do so when
Gildenhuys refused to shed some light on his association with Xuba.
In the circumstances, I
am satisfied that Masterbatch acted within a
reasonable period upon being made aware of the fact that Gildenhuys
had joined Xuba,
and further that in accordance with Rule 8 of the
Rules of this Court, it has adequately set out the reasons for
the urgency,
the circumstances which render the matter urgent, and
the reasons why substantial redress cannot be obtained at a hearing
in due
cause. There is no basis for any conclusion to be reached that
the urgency claimed in this case is self-created.
The
merits:
The
legal position in regard to restraint of trade agreement and
evaluation:
[13]
The
principles applicable to disputes surrounding the enforcement of
restraint of trade agreement are trite as rehashed over time
by this
and other Courts. The starting point is that considerations of public
policy dictates that agreements entered into voluntarily
are binding
and enforceable as between parties
[6]
.
A restraint of trade agreement is enforceable if it protects legally
recognised
interests of the party seeking to enforce it. The agreement will
however be unenforceable if it is unreasonable and contrary
to public
policy
[7]
. Furthermore, the
courts will not enforce a restraint of trade if the purpose is merely
to seek to stifle competition or to unreasonably
restrict an
individual’s freedom to work or trade
[8]
.
[14]
The onus to
establish the existence of the restraint of trade agreement and its
breach rests on the party seeking the enforcement
thereof. Once that
onus has been discharged, it would then be for the party resisting
the enforcement, to demonstrate that the
restraint is unreasonable
and therefore unenforceable
[9]
.
[15]
The factors
to be taken into account when determining whether a restraint of
trade is reasonable or otherwise were set out in
Basson
v Chilwan and Others
[10]
as
follows;
a)
Is there interest of the one-party which is deserving of protection
at the termination of the agreement?
b)
Is such interest prejudiced by the other party?
c)
If so, does such interest so weigh up quantitatively and
qualitatively against the interests of
the latter party that the
latter should not be economically inactive and unproductive
d)
Is that another facet of public policy having nothing to do with the
relationship between the parties
but requires that the restraint
should either be maintained or rejected?
[16]
A fifth
consideration is whether the restraint provisions go further than is
necessary to protect the particular interest. It is
further trite
that the mere fact that parties to an agreement choose to describe a
restraint as being reasonable, is not itself
decisive, as the
reasonableness or otherwise thereof is a matter for the Court to
determine
[11]
.
[17]
The two
kinds of proprietary interests worthy of protection through the
enforcement of a restraint agreement are first, confidential
matters
which are useful for the carrying on of the business, and which could
therefore be used by a competitor, if disclosed,
to gain a relative
competitive advantage. Such confidential material is sometimes
compendiously referred to as “trade secrets”
[12]
.
The second kind of interests involves the relationship an employee
had with customers, potential customers, suppliers and others
that go
to made what is compendiously referred to as the “trade
connection” of the business, being an important aspect
of
incorporeal property known as goodwill
[13]
.
[18]
In regards to the question of onus, Masterbatch’s right to the
relief it seeks is
grounded on the existence of what it considers to
be a valid confidentiality and restraint of trade agreement. It is
trite that
a party that seeks to enforce a contract in restraint of
trade is required to invoke the restraint agreement and prove a
breach
thereof.
[19]
In his answering affidavit, Gildenhuys appears to dispute that
he signed the ‘Confidentiality
Agreement and Restraint of
Trade’. He nonetheless recalled that he had signed the letter
of appointment containing the confidentiality
and restraint of trade
undertakings. He could not however recall that he signed the separate
‘Confidentiality Agreement and
Restraint of Trade’ on or
about 13 February 2012 prior to his employment.
[20]
It must be stated that Gildenhuys’ attempts at denying that he
had signed the confidentiality
and restraint of trade agreement are
extraordinary. He does not dispute having signed the letter of
appointment which contains
similar provisions. As it was correctly
pointed out on behalf of Masterbatch, Gildenhuys despite his
attempts, raises no real disputes
in this regard, as the letter of
appointment was signed and initialled by him, which letter in any
event contains similar provisions
as contained in the
‘Confidentiality Agreement and Restraint of Trade’. The
Court ought therefore to take a dim view
of Gildenhuys’ feeble
attempts at denying the obvious. I am satisfied that valid
confidentiality and restraint of trade undertakings
were made by
Gildenhuys in favour of Masterbatch.
[21]
The next issue to be determined is whether there is a breach of the
restraint of trade
agreement. Gildenhuys’ last day at
Masterbatch was on 29 June 2018. He joined Xuba as an
independent consultant
with effect from 1 July 2018. He
however denies that Xuba is a competitor of Masterbatch. The
Restraint of Trade as contained
in the letter of appointment read as
follows:
“
The
employee agrees not to join a Masterbatch manufacturer, supplier or
distributor in the area known as the Republic of South Africa
(RSA)
for a period of 2 (two) years after termination of this agreement.
You are restrained from the involvement, manufacture and
sale, in any
manner or form of masterbatch, additives, compounds, pigments or
product that is equivalent to or in opposition to
an MBSA product.
For a more detailed explanation of the ‘Restraint of Trade’
clause in your contract, please refer
to the MBSA Employee handbook.”
[22]
The above provisions are similarly contained in clause 8 of the
‘Confidentiality
Agreement and Restraint of Trade’, and
clause 27.9 of the Employee Handbook to which the letter of
appointment letter made
reference. In regards to the competitive
interface between the two entities, Masterbatch, as already
indicated, contended that
it conducts business in the manufacture and
supply of masterbatch, pigments and additives for the plastic
industry. Masterbatch
as a product is either sold in granulated form
or already diluted and encapsulated in a polymer in which case it is
referred to
as a ‘compound’.
[23]
Xuba
according to Masterbatch is a direct competitor as it provides
inter
alia
the same masterbatch services such as manufacturing and supply of
masterbatch additives and compounds. It relied on an extract
from
Xuba’s website
[14]
,
which indicated that it (Xuba), is a direct competitor, because it
also manufactured and supplied masterbatch and compounds.
[24]
In his answering affidavit, Gildenhuys confirmed that Xuba is one of
Masterbatch’s
clients, which purchases masterbatch, additives
and pigments from it to mix with the raw polymer to produce a product
that is a
modified polymer (the compound), with a specific colour and
characteristic. He denied that Xuba is a competitor and alleged that
Masterbatch’s core business is not the production of mixing the
masterbatch pigments with raw polymers to produce polymer
compound,
or a supplier of masterbatching, but that its main business is the
production of the masterbatch and pigments, whereas
Xuba’s core
business was in the compounding of automotive materials and mixing of
masterbatch products with raw polymers,
to produce the final
‘compound’ which Xuba then supplied to the manufacturers.
[25]
According to Gildenhuys, Masterbatch only had one client to whom it
provided a service
such as where it provided the masterbatch and
pigments and then also mixes that masterbatch and pigments with the
raw polymers
to provide a final product (compound). Those products
were supplied by another client, (Cochrane Steel)
[26]
Masterbatch however points out that the distinction sought to be
drawn by Gildenhuys was
one without a difference in that masterbatch
products can be sold in granulated form or already mixed with a
polymer in the form
of a compound, and that it manufactured both.
[27]
Gildenhuys on the other hand conceded that the website of Xuba
referred to masterbatching
for the manufacture of plumbing fittings,
but that the website was outdated as Xuba is not involved in
masterbatching. In this
regard, he alleged that he had spoken to one
Gerhard Pretorius of Xuba to remove any reference to masterbatching
in Xuba’s
website, as it was not something that it performed.
[28]
Gildenhuys however conceded that Masterbatch did in fact supply
compounds to at least one
known client, Cochrane Steel.
Masterbatch’s contention was that Cochrane Steel was in fact
its largest customer, and
that the supply of compound to it made 11%
of its total product volume and 9% of its total business. It had
added in its replying
affidavit that other clients that were supplied
with compounds included Flex-0-Thene Plastics (Pty) Ltd; Amcor, Usabo
(Pty) Ltd
and Marley Pipe Systems SA (Pty) Ltd.
[29]
With reference to the Restraint of Trade provisions, they provide
that; “…
You are restrained from
the involvement, manufacture and sale, in any manner or form of
masterbatch, additives, compounds, pigments
or product that is
equivalent to or in opposition to an MBSA product
…”.
In the light of the limited concessions made by Gildenhuys, the
invariable conclusion to be reached is that indeed
Xuba is involved
in the business of masterbatch and compounding in opposition to
Masterbatch’s products, and a clear competitive
interface
between the products of the two entities has been established, which
places Gildenhuys in conflict with his undertakings
made in favour of
Masterbatch.
[30]
In summary, I am satisfied that valid confidentiality and restraint
of trade undertakings
were made in favour of Masterbatch. The
competitive interface referred to above is sufficient in my view for
a conclusion to be
reached that Xuba and Masterbatch are competitors.
To the extent that it is common cause that Gildenhuys has joined
Xuba, a further
conclusion to be reached is that there is indeed a
breach of those undertakings.
Proprietary
interests deserving protection?
[31]
The
mere
fact that Gildenhuys has taken up employment with Xuba, and that the
latter is in competition with Masterbatch, does not in
itself entitle
Masterbatch to any relief, if all that Gildenhuys will be doing is to
apply his skills and knowledge acquired whilst
in the employ of
Masterbatch. It is only if the restriction on his activities serves
to protect a proprietary interest relied on
by Masterbatch that he
would be in breach of his contractual obligations
[15]
.
[32]
As to whether Masterbatch’s proprietary interests are
threatened by Gildenhuys’
employment with Xuba has to be
determined within the context of his role and responsibilities whilst
employed at Masterbatch. Masterbatch
alleged that as Technical
Manager, Gildenhuys (as per his “Job Effectiveness
Description’, was required to understand
key business drives in
the plastics industry and how these could be satisfied by it.
Furthermore, his daily activities entailed
being custodian of
sales relationships with customers; visiting existing and prospective
customers to address their needs,
obtaining and delivering orders;
generating product quotations for customers; developing masterbatch
formulations or adjusting
existing formulations in order to meet
customer needs; and negotiating and discussing price adjustments with
customers;
[33]
Gildenhuys according to Masterbatch was the custodian of product
specification and contact
for all customers; had logged all customer
complaints and implemented corrective measures; accessed customers,
their manufacturing
processes, capabilities and opportunities for
growth; managed customer relations through constant contacts; had
access to sensitive
commercial information of customers including
inter alia
, volumes of products purchased, price lists,
products sold, costs, margins and profitability per customer per
product; involved
in new product development projects; attended
meetings were commercially sensitive and strategic business
information was discussed;
performed extensive work in Masterbatch’s
laboratory thus gaining access to all sensitive software, systems,
data and processes;
gained access to all production facilities and
production equipment; performed procurement and supply chain
functions; imported
new equipment; and engaged in improvements of
operational efficiencies.
[34]
Gildenhuys’ response in his answering affidavit to the
allegations in regards to
his daily activities as summarised above
was to merely note them. In regards to customer connections,
Masterbatch alleged that
Gildenhuys was required to act as a contact
for customer problem and support; liaise with existing and
prospective customers by
managing relationships with them, generating
business from existing and prospective customers; providing them with
technical advice;
was placed in a position to develop strong and
ongoing relationships with customers and was essentially the face of
Masterbatch.
It was further alleged that he was in a position to use
those connections and technical know-how gained from Masterbatch for
the
benefit of Xuba and to assist the latter in competing with it,
and further that he was in a position to divert existing and
potential
business to Xuba.
[35]
Gildenhuys’ response to the allegations in regards to customer
connections was to
merely note or deny them, other than to add that
he had not contacted any of Masterbatch’s clients, nor did he
have any hard
or soft copy of any of Masterbatch’s client list
or technical information. In submissions made on his behalf, he had
conceded
that he knew who those clients were, but contended that
he was not the face of Masterbatch. It was further submitted on his
behalf that Masterbatch had no clients that Xuba wanted as the two
were in different markets.
[36]
It
is accepted that the need for an employer to protect trade
connections arises where an employee had access to customers or
suppliers
and is in a position to build up a particular relationship
with them so that when the employee leaves the service of the
employer,
he could easily induce the employer’s customers and
suppliers to follow him to a new business. Again, this is a question
of fact, and often one of degree
[16]
.
[37]
In
Profibre
,
it was again emphasized that it is incumbent on the employee under
restraint to establish that he/she acquired any significant
influence
over the applicant’s customers while in the applicant’s
employ. In other words, it is enough for the party
seeking to enforce
a restraint to show that trade connections through customer or
supplier contact exist, and that they can be
exploited if the
employee was to be employed by a competitor or compete with the
business of the applicant.
[38]
It
is not for the applicant to have to run the risk of the employee
utilizing its customer connections to the advantage of a competitor.
It is also not incumbent on an applicant to enquire into the
bona
fides
of the employee or to demonstrate that he/she is
mala
fides
before it is entitled to enforce a contractually agreed restraint.
The holder of the restraint also does not have to show that
the
employee in fact utilised information confidential to it, it is
enough that the employee could do so
[17]
.
[39]
Gildenhuys’ contention was that Masterbatch had no proprietary
interests in the form
of customer connections that were worthy of
protection. I have difficulties in comprehending how that should be
the case where
he merely noted the extensive allegations made in
regards to him being closely associated with Masterbatch’s
clients. He
had conceded having knowledge of those customers, and the
need for protection consequently arise to the extent that he had
merely
denied having built a particular relationship with those
customers, without adding anything substantial to his denials.
[40]
It has also
been held that the onus is on the respondent to demonstrate that
he/she never acquired any significant personal knowledge
of, or
influence over, the applicant’s customers whilst in the
applicant’s employ, and that it suffices if it is shown
that
trade connections through customer contact exists, and that they
could be exploited if the former employee were employed by
a
competitor. Thus once a conclusion has been reached and it is
demonstrated that the prospective new employer is a competitor
of the
applicant, the risk of harm to the applicant, if its former employee
were to take up employment, becomes apparent
[18]
.
[41]
In this case, I am satisfied that
Masterbatch has
demonstrated that the trade connections through customer or supplier
contact exists, and that they could be exploited
for the benefit of
Xuba if Gildenhuys continued his employment with it. It is therefore
not sufficient for Gildenhuys to merely
allege that he had no soft or
hard copies of the details of these customers, or that Xuba had no
need for those customers. The
mere fact that he knows those
customers, and had dealt with them before in a manner as described
and detailed by Masterbatch in
the founding affidavit, is sufficient
for the latter to be entitled to protection, and it is not even
required of it to demonstrate
that those connections had been
utilized.
[42]
In regards
to confidential information, it is accepted that this entails
information
which is not in the public domain or public knowledge
[19]
.
What constitutes information of a confidential nature will depend on
the circumstances of each case, with the primary consideration
being
the potential or actual usefulness of that information to a
competitor to the prejudice of the ex-employer
[20]
.
For
information to be confidential, it must other than being known to a
select few, be also capable of application in trade or industry,
and
be of economic value to the person seeking to protect it
[21]
.
[43]
Paragraphs 94.1 – 94.7 of the founding affidavit outlines
detailed confidential information
that Masterbatch alleges Gildenhuys
was privy to. It further alleged that the information and trade
secrets such as manufacturing
and production processes, pricing
laboratory systems, product designs and the like is information which
remains confidential for
years.
[44]
In the answering affidavit, Gildenhuys either noted or denied the
allegations. He alleged
that he did not possess any confidential
information that was relevant for Xuba, as the latter purchased
masterbatch products from
Masterbatch in its manufacturing process.
He further expressly gave an undertaking not to disclose any
confidential information
to Xuba or any other third party, or to
utilise any such information to benefit or for the benefit of any
third party, including
Xuba.
[45]
As I understood Gildenhuys’ response, the nub of it is that
that the information
that he was privy to is of no value to Xuba. In
the same vein however, he made undertakings not to disclose or
utilise that information
for the benefit of Xuba or any other third
party in competition with Masterbatch. The contradictions in his
contentions are glaring.
[46]
It
is trite that the essence and purpose of any restraint of trade
agreement is to prevent the use of confidential information by
a
former employee to the detriment of the employer. It has further been
held that it was not necessary to find that the ex-employee
did or
would actually use trade secrets and confidential information in his
new employment, but that is was sufficient if
he
could do so
[22]
.
In this case, and to the extent that Gildenhuys had either noted or
made bare denials in regards to allegations of the confidential
information he has in his possession or that he was privy to, I am
further satisfied that Masterbatch has demonstrated that indeed
Gildenhuys was privy to its confidential information, which he or
Xuba could use to its detriment. In the circumstances, Masterbatch
is entitled to the protection of that information.
[47]
The undertakings made by Gildenhuys are clearly
half-hearted, and belated in the light of his initial refusal to do
so prior to
this application being launched. Such undertakings are of
little comfort in the light of his continued employment with Xuba and
the likely damage to Masterbatch that this may cause. His contention
that he had not made such undertakings earlier as he was of
the view
that the restraint was unenforceable or that he was not in breach
thereof is equally a lame excuse, particularly since
he had not
responded to Masterbatch earlier when it made enquiries about his
involvement with Xuba. The submission made on his
behalf that he was
under no obligation to provide details surrounding his denials of the
allegations made in correspondence prior
to this application being
launched is equally not of assistance to his case.
The
weighing of interests:
[48]
I accept that whilst the sanctity of contracts is something the
courts should not hesitate
to enforce, a sense of proportion in the
light of the provisions of section 22 of the Constitution of the
Republic ought to be
maintained. Thus, there is a need to strike a
balance between Gildenhuys’ rights to freedom of trade,
occupation and profession,
and the protectable interests of
Masterbatch, which in essence appears to be the real issue between
the parties in this matter.
[49]
Gildenhuys’ complaint was that the restraint imposed
restrictive conditions on him
and was contrary to public policy in
that it was too wide, and effectively meant that he would be unable
to be economically active
and productive in the marketplace for a
period of two years within the whole of the Republic. He contended
that the restraint was
directed solely at the restriction of
competition, and that even if there were interests threatened as a
result of his employment
with Xuba, the interests of Masterbatch
qualitatively and quantitatively did not outweigh his own to be
economically active and
productive. He further alleged that as a
consultant with Xuba, he utilised his own skills, knowledge and
experience for the purposes
of developing the compound products in
the automotive industry and not to utilise any trade secrets or
confidential information
of Masterbatch. It was further submitted on
his behalf that he was a qualified engineer specialising in compound
plastics, and
that the restraint was restrictive as he could not earn
a living as a result of reference to ‘compound’ in the
agreement
[50]
Masterbatch’s contention was that it conducted its business
nationally and throughout
the Republic, with over 100 customers in
the plastic industry, hence its interests should be protected
throughout the Republic.
It further contended that the period of two
years was reasonable as pricing in the industry did not change
regularly, as were the
technical specifications of its products. It
was pointed out that six months of that period had already lapsed.
Masterbatch denied
that Gildenhuys was prevented from being
economically active for the period of the restraint, as he was simply
limited in his choice
of employment for the restraint period as he
had provided the undertakings in its favour. It was submitted
that Gildenhuys
was not rendered economically inactive as he was able
to work in various industries in the plastic industry where
opportunities
were extensive including in plastic conversion,
suppliers, traders and polymer companies, that were not in
competition with Masterbatch.
[51]
It has been concluded in this case that the proprietary interests
demonstrated by Masterbatch
deserves protection. The only issue is
whether the restraint is reasonable in terms of area and duration. It
is trite that a restraint
of trade will be unreasonable if the
duration and scope of area sought to be enforced, falls outside of
the agreement itself, and/or
the restraint is broader than necessary.
[52]
Given the provision of the restraint of trade and the conclusions
reached in regards to
Masterbatch’s protectable interests, it
cannot be said that these provisions are merely meant to stifle
competition, nor
are they intended to render Gildenhuys economically
inactive and unproductive, especially given his qualifications,
skills and
experience, which he was at liberty to utilise
outside of the areas covered by the restraint of trade. The mere fact
that
he had experience in masterbatching which area he sought to
leave for compounding cannot by all accounts be justification to
limit
enforcement of his restraint undertakings.
[53]
Inasmuch as reasons have been proffered by Masterbatch to justify the
duration and scope
of area sought to be enforced, it is my view
however that the reasons in regard to the duration are not
convincing. Pricing and
technical specifications cannot be static for
prolonged periods as they are influenced by market forces and
constant innovations
in a particular industry. To simply rely on
unknown factors or to contend that pricing remains constant for
prolonged periods,
or that changes to technical specifications only
take place in unknown exceptional circumstances cannot in my view
justify unreasonable
duration of restraints. To this end, I am of the
view that the duration of the restraint is longer than necessary
given these considerations,
and thus unreasonable. I have further
taken into account that six months had passed since Gildenhuys had
resigned from Masterbatch
and joined Xuba. In the
circumstances, the period up until 28 December 2019 is a
reasonable period for the operation
of the restraint.
Costs
[54]
An order of
costs is generally at the discretion of this Court, having taken into
account considerations of law and fairness. The
Labour Appeal Court
in
Trevlyn
Ball
[23]
has cautioned against making cost orders in matters pertaining to
enforcement of a restraint in the light of constitutional issues
involved in such matters. The rationale behind this approach is that
any cost orders may dissuade employees who genuinely challenge
the
enforceability or reasonableness of their restraint agreements. In
the light of the conclusions as above, I am not convinced
that
Gildenhuys’ opposition to this application was vexatious or
mala
fide
,
and thus it would be appropriate that each party bears its own costs.
[55]
Accordingly, the following order is made;
Order:
1. The
requirements of Rule 7 of the Rules of this Court are dispensed
with and this matter is heard as
one of urgency in terms of Rule 8.
2. The
First Respondent is interdicted and restrained until
28 December 2019, and within the Republic
of South Africa
from being directly or indirectly associated or concerned with or
interested on engaged in;
2.1 The Second
Respondent;
2.2 Any
entity or business which manufactures or sells, in any manner or
form, masterbatch, additives, compounds,
pigments or products
equivalen
2.3 t
to or in opposition to the Applicant’s products.
3. The
First Respondent is interdicted from disclosing the confidential
information of the Applicant to any third
party including the Second
Respondent.
4. The
First Respondent is interdicted from using the confidential
information of the applicant for his own benefit
or for the benefit
of any third party including the Second Respondent.
5. Each party
is to pay its own costs.
Edwin Tlhotlhalemaje
Judge
of the Labour Court of South Africa
APPEARANCES:
For
the applicant:
P. Bosman
Instructed
by:
Cliffe Dekker Hofmeyer Incorporated
For
the First Respondent:
A. R van der Merwe
Instructed
by:
Eduard Fourie Attorneys
[1]
Annexure
‘O’ to the Founding Affidavit.
[2]
Annexure
‘R’ to the Founding Affidavit
[3]
See
Commissioner
for South African Revenue Service v Hawker Air Services (Pty) Ltd;
Commissioner for South African Revenue Service
v Hawker Aviation
Services Partnership and Others
[2006] ZASCA 51
;
2006 (4) SA 292
(SCA) ;
[2006] 2 All SA 565
(SCA) at para 9, where
it was held that;
“…
Urgency
is a reason that may justify deviation from the times and forms the
rules prescribe. It relates to form, not substance,
and is not a
prerequisite to a claim for substantive relief. Where an application
is brought on the basis of urgency, the rules
of court permit a
court (or a judge in chambers) to dispense with the forms and
service usually required, and to dispose of it
‘as to it seems
meet’ (Rule 6(12)(a)). This in effect permits an urgent
applicant, subject to the court’s control,
to forge its own
rules (which must ‘as far as practicable be in accordance
with’ the rules). Where the application
lacks the requisite
element or degree of urgency, the court can for that reason decline
to exercise its powers under Rule 6(12)(a).
The matter is then not
properly on the court’s roll, and it declines to hear it. The
appropriate order is generally to
strike the application from the
roll. This enables the applicant to set the matter down again, on
proper notice and compliance.”
(Citations omitted)
[4]
See
Jiba
v Minister: Department of Justice and Constitutional Development and
Others
(2010) 31 ILJ 112 at para 18, where it was held that;
“
Rule
8 of the rules of this court requires a party seeking urgent relief
to set out the reasons for urgency, and the degree to
which the
ordinary applicable rules should be relaxed is dependent on the
degree of urgency. It is equally trite that an applicant
is not
entitled to rely on urgency that is self-created when seeking
deviation from the rules”
[5]
See
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff and Another
2009 (3) SA 78
(C) at 88J
[6]
See
Reddy
v Siemens Telecommunications (Pty) Ltd
2007 (2) SA 488
SCA
,
at para [16], where it was held that;
“
A
court must make a value judgment with two principal policy
considerations in mind in determining the reasonableness of a
restraint.
The first is that the public interest requires that
parties should comply with their contractual obligations, a notion
expressed
by the maxim
pacta servanda sunt
. The second is
that all persons should in the interests of society be productive
and be permitted to engage in trade and commerce
or the professions.
Both considerations reflect not only common law but also
constitutional values. Contractual
autonomy is
part of freedom informing the constitutional value of dignity, and
it is by entering into contracts that an individual
takes part in
economic life. In this sense, freedom of contract is an integral
part of the fundamental right referred to in s
22 .... In applying
these two principal considerations, the particular interest must be
examined. A restraint would be unenforceable
if it prevents a party
after termination of his or her employment from partaking in trade
or commerce without a corresponding
interest of the other party
deserving of protection. Such a restraint is not in the public
interest. Moreover, a restraint which
is reasonable as between
parties may for some other reason be contrary to the public
interest.”
[7]
See
Advtech
Resourcing (Pty) Ltd t/a Communicative Personnel Group v Kuhn &
Another
2008 (2) SA 375
(C)
at
para 25
[8]
See
Reddy
v Siemens Telecommunications (ibid); Den Braven v Pillay &
another
2008
(6) SA 229
(D) and
Automotive
Tooling Systems (Pty) Ltd 2007 [2] SA 271 (SCA)
[9]
Reddy
at
para 10
[10]
Basson
v Chilwan
[1993] ZASCA 61
;
1993
3 SA 742
at 767 G-H .
[11]
Kwik
Kopy v Van Haarlem
1999 (1) SA 472
(W)
at
484B-E
[12]
Sibex
Engineering Services (Pty) Ltd v Van Wyk
1991 (2) SA 482
(T)) at
502D-F
[13]
Bapedi
Marota Mamone v Commission of Traditional Leadership Disputes and
Claims and Others
[2014] 3 All SA 1
(SCA)
at
para [16].
[14]
Annexure
‘M’ to the Founding Affidavit
[15]
Automotive
Tooling Systems (Pty) Ltd v Wilkens and Others
[2007] 4 All SA 1073
(SCA);
2007 (2) SA 271
(SCA)
At para 9
[16]
See
Profibre
Products (Pty) Ltd v Govindsami
(J1448/18) [2018] ZALCJHB 240 (5 June 2018) at para 14
[17]
At
para 15
[18]
See
Experian
South Africa (Pty) Ltd v Heyns and Another ([2013] (1) SA 135
(GSJ)
at
para [20];
Den
Braven SA (Pty) Ltd v Pillay & Another
2008
(6) SA 229
(D)
at
para [6], where the Court 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”
[19]
See
Saltman
Engineering Co Ltd v Campbell Engineering Co Ltd
[1963]
3 All ER 413
at 415
[20]
Coolair
Ventilator Co (SA) (Pty) Ltd v Liebenberg and Another
1967
(1) SA 686
(W) at 691B:
[21]
Townsend
Productions (Pty) Ltd v Leech & others
2001
(4) SA 33 (C)
[22]
See
Experian
at
para [22], where the Court held that;
“
The
ex-employer seeking to enforce against his ex-employee a protectable
interest recorded in a restraint, does not have to show
that the
ex-employee has in fact utilised information confidential to it: it
need merely show that the ex-employee could do so.
The very purpose
of the restraint agreement is to relieve the applicant from having
to show
bona fides
or lack of retained knowledge on the part of the respondent
concerning the confidential information. In these circumstances,
it
is reasonable for the applicant to enforce the bargain it has
exacted to protect itself. Indeed, the very ratio underlying
the
bargain is that the applicant should not have to contend itself with
crossing his fingers and hoping that the respondent
would act
honourably or abide by the undertakings that he has given. It does
not lie in the mouth of the ex-employee, who has
breached a
restraint agreement by taking up employment with a competitor to say
to the ex-employer “Trust me: I will not
breach the restraint
further than I have already been proved to have done”.
[23]
Trevlyn
Ball v Bambalela Bolts (Pty) Ltd and Another
[2013] (9) BLLR 843
(LAC) at para [30]