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[2019] ZALCJHB 242
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Service Parts Logistics (Pty) Ltd v Mshengu (J1768/19) [2019] ZALCJHB 242; (2020) 41 ILJ 1762 (LC) (27 September 2019)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case no: J 1768/19
In the matter between:
SERVICE
PARTS LOGISTICS (PTY) LTD
Applicant
and
PHUMLANI MSHENGU
Respondent
Heard: 13
September 2019
Delivered:
27 September 2019
JUDGMENT
PRINSLOO, J
Introduction:
[1]
In casu,
it
is common cause that the Respondent had signed a restraint of trade
agreement with the Applicant, valid for a period of 24 months.
It is
further common cause that he had left the employ of the Applicant on
31 July 2019 and had commenced employment with Bakwena,
a direct
competitor of the Applicant.
[2]
It is also common cause that there were
negotiations between the parties to find an amicable solution, even
prior to the Respondent
joining Bakwena. There was also negotiations
regarding the restraint of trade period and for it to be reduced from
24 to 12 months,
but that such negotiations had failed.
[3]
It is common cause that in an effort to
resolve the matter without resorting to litigation, a consent
agreement was prepared and
proposed by the Applicant, in terms of
which it sought certain undertakings from the Respondent. The
Respondent’s response
to this is no more than a bare denial
that his conduct is in breach of the restraint of trade agreement.
[4]
The consent agreement was subject to
certain confidentiality undertakings, as the Applicant was not
prepared to divulge its customer
and supplier lists, in the absence
of a confidentiality agreement. In its founding affidavit, the
Applicant made it clear that
it was prepared to make the customer
list and supplier list available to the Respondent’s legal
team, subject to undertakings
being furnished concerning the
retention of the customer and supplier list and an undertaking that
same would not be disclosed
to any third parties, including Bakwena.
In his answering affidavit, the Respondent did not provide any answer
to this and evidently,
he did not take up this offer, nor did he
consider it serious, as he instead filed an answering affidavit in
opposition of this
application.
[5]
The Respondent did not dispute the
Applicant’s version that on 14 August 2019, the Applicant’s
attorneys made a final
effort to resolve the matter amicably and
requested him to agree to the terms as set out in the consent
agreement. The Respondent
however made it clear that he had no
intention of reaching an agreement with the Applicant and he had no
intention to discontinue
his relationship with Bakwena.
[6]
The Applicant regarded the Respondent’s
conduct as a breach of the terms of his restraint of trade agreement.
In answer to
this, the Respondent did no more than to make a bare
denial and ‘put the applicant to the proof’, which is
unusual
in motion proceedings where the Respondent is expected to
provide this Court with his version, if he has one, and not to make a
bare denial and put the other party to the proof. The Respondent only
stated that the period of the restraint was excessive and
the area
was unreasonable. The Respondent did not say why the restraint period
was excessive and why the proposed reduced period
of 12 months was
still excessive and not acceptable.
[7]
After all efforts to resolve the matter
amicably had failed, the Applicant approached this Court on an urgent
basis on 6 September
2019 to enforce the restraint of trade
agreement, as contained in the Respondent’s contract of
employment. The relief sought
by the Applicant as set out in the
notice of motion is as follows:
“
1.
That the forms and services provided for in the Rules of Court are,
to the extent necessary, dispensed with and that the matter
is heard
urgently
2. An order interdicting
and restraining the respondent until 31 July 2021 from:
2.1
Recommending to any company of which he may be an employee, director,
member or shareholder, or with
which he may have any form of
association whatsoever, that such company offer employment to any
person who will, as at 31 July
2019, be and will thereafter continue
to be an employee of the applicant;
2.2
In any way imparting to
any company of which he may be an employee, director, member
or
shareholder, or with which he may have any form of association
whatsoever any knowledge acquired by him with reference to the
qualifications, ability or character of any person who will, as at 31
July 2019, be and will thereafter continue to be an employee
of the
applicant;
2.3
Without the prior written
consent of the applicant, which consent shall not be unreasonably
withheld, either directly or indirectly from being employed by,
connected with, interested in or interest himself in (either
personally
or financially), any trade, business, company or
undertaking competitive with that of the business conducted by the
applicant;
2.4
As principal, agent, partner, representative, shareholder, director,
member
or employee, directly or indirectly be associated with,
interested in, or interest himself in (whether financially or
personally)
any firm, person or company carrying on business, in
competition with the applicant.
3.
An order interdicting and
restraining the respondent from using or directly or indirectly
divulging to any third party, the applicant's
trade secrets.
4.
An order directing the respondent to
pay the costs hereof.
[8]
On 6 September 2019 and by agreement
between the Applicant and the Respondent, this Court granted an
interim interdict in the following
terms:
1.
Pending the return date of 13 September
2019, the Respondent is interdicted and restrained from performing
any of the activities
as set out in paragraph 4.4.1 – 4.4.10 of
annexure FA 9 to the founding affidavit;
2.
Costs are reserved
[9]
Annexure FA 9 is the consent agreement, as
was prepared by the Applicant and between 6 and 13 September 2019,
the parties were to
have a discussion regarding the customer list, as
was proposed by the Applicant in the founding affidavit.
[10]
On the return day, 13 September 2019, the
parties indicated that they have agreed to a draft order in the
following terms:
‘
The
Respondent —
1.1
will not visit or contact any customer as per the
attached customer list ("the Customer list"), for the
purpose of selling,
marketing or promoting IT services and/or
products;
1.2
will not share information about any of the Applicant's details on
the Customer list attached hereto
to any third party who is employed
at Bakwena and/or any third party, whose business is in direct
opposition to the Applicant's
business, including the employees,
directors, shareholders or consultants of such third party entity;
1.3
will not share any Project information to any
third party who is employed at Bakwena and/or any third party whose
business is in
direct opposition to the
Applicant's business, including the employees, directors,
shareholders or consultants of such third party
entity;
1.4
will not share prices and pricing structures of the Applicant with
any third party who is employed at Bakwena and/or
any third party
whose business is in direct opposition to the Applicant's business
including the employees, directors, shareholders
or consultants of
such third
party entity;
1.5
will not share information regarding the
Applicant's stock holding with any third party who is employed at
Bakwena and/or any third
party whose business is in direct opposition
to the Applicant's business including the employees, directors,
shareholders or consultants
of such third-party entity;
1.6
will not share any information regarding the
Applicant's suppliers with any third party who is employed at Bakwena
and/or any third
party whose business is in direct opposition to the
Applicant's business including the employees, directors, shareholders
or consultants
of such third-party entity;
1.7
will not share any information regarding the Applicant's
shareholding, business model and/or any other proprietary
information
with any third party who is employed at Bakwena and/or any third
party who's business is in direct opposition to the
Applicant's
business including the employees, directors, shareholders or
consultants of such third party entity;
1.8
will not solicit any of
the Applicant's employees to take up employment with Bakwena or any
third party whose business is in direct
opposition to the Applicant's
business including the employees, directors, shareholders or
consultants of such third-party entity;
1 .9
will not discuss personal
details of any of the staff members, directors and or executives of
the Applicant with any third party
including the employees,
directors, shareholders or consultants of such third-party entity;
1.10
will delete any data obtained during his
employment with the Applicant;
1.11
will not make any statements, verbal or in
writing including comments on social media, which may bring the
Applicant in disrepute
or damage the Applicant's reputation in the
market.
2.
The obligations contained in paragraph 1.1
to 1.11 above shall apply and be
valid
for a period of ______ months from the date of
this order.
3.
The Respondent will keep as confidential
the Customer list and will not disclose it to any third party who is
employed at Bakwena
and/or any third party whose business is in
direct opposition to the Applicant's business, including the
employees, directors,
shareholders or consultants of such third party
entity
4.
Costs are reserved’.
[11]
The draft order agreed to by the parties,
is almost a
verbatim
version
of the consent agreement. The only two issues outstanding were the
period of the restraint and the issue of costs.
[12]
The
general principles applicable to restraint agreements are
well-established. In
Massmart
Holdings v Vieira and another
[1]
the Court summarised them as follows:
‘
Restraint
agreements are enforceable unless they are unreasonable (see
Magna
Alloys and Research (SA) (Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A)). In general terms, a restraint will be
unreasonable if it does not protect some proprietary interest of the
party seeking
to enforce a restraint. In other words, a restraint
cannot operate only to eliminate competition. The party seeking to
enforce
a restraint need only invoke the restraint agreement and
prove a breach of the agreement, nothing more. The party seeking to
avoid
the restraint bears the onus to establish, on a balance of
probabilities, that the restraint agreement is unenforceable because
it is unreasonable (see
2013 (1) SA 135
;
Magna
Alloys and Research (SA) (Pty) Ltd
supra;
Den Braven SA (Pty) Ltd v Pillay and
another
2008 (6) SA 229
(D))’.
[13]
The Respondent, as the party seeking to
avoid the restraint, bore the onus to show that the restraint
agreement was unenforceable
because it was unreasonable. The
Respondent did not discharge the onus in his opposing papers as he
tendered nothing more than
a bare denial and he made no submissions
as to why the reduced period of 12 months should be regarded as
excessive and unenforceable.
After hearing argument on the duration
of the restraint period, I granted an order that the obligations set
out in the draft order
would be valid until 31 July 2020. It was
evident from the papers before me that the Respondent did no more
than to make a bald
statement that the period of the restraint was
excessive, without providing any version or facts to substantiate his
position or
to place this Court in a position to understand why the
reduced period of 12 months was excessive.
[14]
The issue of cost was reserved and that is
the only remaining issue for this Court to determine.
The arguments
[15]
Mr Williams, for the Applicant, submitted
that the Respondent should be ordered to pay the costs associated
with the urgent application.
The argument in support of a cost order
was that, prior to the commencement of litigation, there was a
discussion between the Applicant’s
attorney and the Respondent
to resolve the matter amicably. The Applicant provided the Respondent
with a consent agreement, valid
for a period of 12 months, which
allowed him to work for the opposition, subject to certain conditions
as set out in the consent
agreement.
[16]
The Respondent refused to sign the consent
agreement and he was not prepared to negotiate on the terms contained
therein. Pursuant
to the institution of an urgent application, the
matter became resolved in the same manner the Applicant always
proposed, even
prior to the litigation.
[17]
The Applicant was forced to approach this
Court on an urgent basis, due to the Respondent’s unwillingness
to negotiate around
his restraint of trade and subsequently he agreed
to an order in the same terms as what was offered to him prior to the
commencement
of litigation.
[18]
Mr Maphuta for the Respondent submitted
that the Respondent was always cooperative to resolve the issue and
to negotiate a settlement,
but for the terms on the customer list and
the period of the restraint. When he refused to sign the release
agreement, the Applicant
had approached this Court, whereas the
Respondent’s attitude was to have a discussion to resolve the
dispute.
[19]
Mr Maphuta further submitted that the
burden of a cost order will leave the Respondent poor.
[20]
Mr Williams disputed this and submitted
that the restraint of trade agreement made provision for the
Respondent to approach the
Applicant for permission to work for a
competitor, which he had not done, notwithstanding the fact that he
had to do so in terms
of his contractual obligation and the fact that
he was employed by a competitor. The consent agreement was forwarded
to the Respondent,
but he refused to sign it, yet he is now prepared
to agree to an order in the same terms.
[21]
Mr Williams submitted that it is evident
from the founding affidavit that as recent as 14 August 2019, the
Applicant’s attorney
had a telephonic discussion with the
Respondent in a final effort to resolve the matter amicably and the
Respondent was requested
to agree on the terms included in the
consent agreement. During the discussion the Respondent made it clear
that he had no intention
of reaching an agreement with the Applicant
and that he had no intention of discontinuing his relationship with
Bakwena, a direct
competitor of the Applicant.
[13]
The consent agreement was further subject to certain confidentiality
undertakings concerning
the conclusion of the agreement as the
Applicant was not prepared in the absence of a confidentiality
agreement, to divulge the
particular customer and supplier lists. The
Applicant clearly proposed a way to deal with the issues.
[22]
Evidently from the Applicant’s side,
an undertaking was given to provide the customer list, but instead of
engaging the Applicant,
the Respondent filed an opposing affidavit in
the urgent application and forced the Applicant to proceed to Court.
[23]
The terms of the draft order, agreed to by
the Respondent, are the same as the terms that were sent to the
Respondent on 5 August
2019, which he refused to sign or to engage
the Applicant on. The matter could have been resolved amicably had
the Respondent adopted
a different attitude and it would be wholly
unreasonable to saddle the Applicant with costs in circumstances
where litigation could
have been avoided.
The legal principles
applicable to costs
The general principles
[24]
The general accepted purpose of awarding
costs is to indemnify the successful litigant for the expense he or
she has been put through
by having been unjustly compelled to
initiate or defend litigation. In considering whether costs should be
awarded, the requirements
of law and fairness become applicable.
[25]
The requirement of law has been interpreted
to mean that the costs would follow the result.
[26]
In considering fairness, this Court has
held that the conduct of the parties should be taken into account and
that
mala fide
,
unreasonableness and frivolousness are factors justifying the
imposition of a costs order. Another factor to be considered is
whether there is an ongoing relationship that would survive after the
dispute had been resolved by the Court. If so, a costs order
may
damage the ongoing relationship.
[27]
In
Zungu
v Premier of Kwazulu-Natal and Others
[2]
the
Constitutional Court confirmed the legal position that the rule of
practice that costs follow the result does not apply in labour
matters, but that the Court should seek to strike a fair balance
between unduly discouraging parties from approaching the Labour
Court
and have their disputes dealt with and, on the other hand allowing
those parties to bring to this Court cases that should
not have been
brought to Court in the first place.
Matters settled
without hearing the merits
[28]
In casu,
the
matter effectively became settled, without a hearing on the merits,
but for the period of the restraint and the issue of costs.
[29]
The Courts have awarded costs in instances
where matters are settled without hearing the merits of the matter as
the applicant in
such a case was substantially successful and the
broad general approach applied namely; that costs
be awarded in favour of such applicant.
[30]
In
National
Union of Mineworkers and Others v Coin Security Group (Pty) Ltd
[3]
the
Court was persuaded, after a matter became settled and the Court had
to determine the issue of costs only, that on the facts,
the
applicants would have been substantially successful had the matter
proceeded to trial. In this regard the Court held that:
‘
In
a case such as this, where the merits have been settled, a court will
adjudicate the question of costs on broad general lines
and not on
lines that would necessitate a full hearing on the merits of a case.
Thus in J
enkins v SA Boilermakers', Iron
& Steel Workers' & Shipbuilders' Society
,
Price J held:
'The
concession in respect of the first claim admittedly disposes of the
dispute on the merits. It seems to me to be against all
principle for
the Court's time to be taken up for several days in the hearing of
the case in respect of which the merits have been
disposed of by the
acceptance of an offer in order to decide questions of costs only ...
I cannot imagine a more futile form of
procedure than one which would
require Courts of law to sit for hours, days or perhaps even weeks,
trying dead issues to discover
who would have won in order to
determine the question of costs, where cases have been settled by the
main claims being conceded
... When a case has been disposed of by an
offer which concedes the main claim and the costs of the whole case
have still to be
decided, I think the Court must do its best with the
material at its disposal to make a fair allocation of costs,
employing such
legal principles as are applicable to the situation
....
In
my view the costs must be decided on broad general lines and not on
lines that would necessitate a full hearing on the merits
of a case
that has already been settled.'
The issue in
Roupell v
Metal Art (Pty) Ltd & Another
also concerned the costs that
should be awarded in respect of a matter that had been settled on the
merits the day before the trial
was meant to commence. Margo J,
following the principle in Jenkins, decided that: 'I therefore do not
propose to engage in a close
scrutiny of the various issues of fact
raised in the conflicting affidavits that have been filed, nor do I
propose to conduct a
full investigation into the legal arguments
advanced by the parties. I intend to resolve this issue of costs on
the basis of a
broad general approach to the matter.' The court
then being of the opinion that the application would have succeeded
and
applying 'the broad general approach' awarded costs against the
defendant.’
[31]
In
Dladla
v Council of Mbombela Local Municipality and Another
[4]
the
Court considered the issue of costs as the employer had, subsequent
to the filing of the urgent application, uplifted the employee’s
‘special leave’ and the reason for the urgent application
fell away. The Court held that:
‘
The
award of costs is a matter which falls wholly within the discretion
of the court. In coming to a conclusion, the circumstances
of the
particular case should be taken into consideration including but not
limited to the conduct of the parties which may have
a bearing on the
question of costs.
…
.
Where a party is successful, a disputing party would generally be
entitled to costs. I have already alluded to the fact that I
am of
the view that the applicant would have been successful had the
application to interdict proceeded on the merits. In the light
of
this fact, the applicant would have been entitled to an appropriate
costs order. The merits of the application were, however,
not argued
for the reasons set out above. There is, however, a more compelling
argument why costs should be awarded in favour of
the applicant:
Because the resistance to the claim was effectively withdrawn when
the resolution (on 11 February 2008) was taken
to suspend the
applicant in terms of clause 9 of the contract of service, the need
to seek an interdict fell away.’
[32]
I have to consider the fact that it was the
conduct of the Respondent which caused the Applicant to bring this
application in the
first place and when the matter was enrolled, he
subsequently agreed to an order in the same terms that he could have
agreed to
before this matter came before Court and to compound
matters, on an urgent basis.
[33]
The fact that the Respondent agreed
to the same terms shows that the Applicant was substantially
successful in its application and
if this Court is to apply the
general rule, the result is that the Applicant is therefore entitled
to costs.
[34]
I
can see no reason not to follow the rule of practice in circumstances
where this application was brought not in terms of the provisions
of
the Labour Relations Act
[5]
(LRA), but purely on a contractual basis where the requirement of
‘fairness’ finds no application in deciding the issue
of
costs.
[35]
A cost order is a method of ensuring that
decisions to litigate in this Court are taken with due consideration
of the law and the
prospects of success.
[36]
This Court is ordinarily reluctant to make
orders for costs against individual employees, for whom the prospect
of an adverse costs
order may serve to inhibit the exercise of what
they perceive as their rights. This is not an immutable rule.
[37]
In the present instance, the Respondent had
ample opportunity to consider his position and to avoid litigation,
which is evident
from the fact that he had ultimately agreed to the
terms of the consent agreement. The Respondent provided no convincing
explanation,
safe for bald statements, as to why he could not have
done so earlier or why he had not made any effort to enter into a
settlement
with the Applicant, notwithstanding the invitation for him
to do so, before forcing the Applicant to approach this Court
urgently.
The Applicant has been obliged to incur costs in filing and
pursuing this urgent application, in circumstances where it could
have
been avoided.
[38]
The Respondent is employed and he is not
entirely without means.
Ultimately, the
Respondent, who is bound by a restraint of trade agreement, which he
disregarded and made no subsequent effort to
negotiate an agreement
with the Applicant, is the author of his own misfortune.
It
seems to me that in the present circumstances, the interests of
justice require that the Respondent pays at least a portion of
the
Applicant’s costs. In my view, a sum equivalent to 50% of the
Applicant’s costs will best serve those interests.
[39]
In the premises, I make the following
order:
Order
1.
The
Respondent is to pay the costs of the application, limited to 50% of
the Applicant’s taxed costs.
______________
Connie Prinsloo
Judge
of the Labour Court of South Africa
Appearances:
For the Applicant:
Advocate
D L Williams
Instructed
by: Marshall
Attorneys
For the
Respondent:
Advocate M R Maphuta
Instructed
by: K
Montjane Incorporated Attorneys
[1]
Unreported
Labour Court case J1945-15.
[2]
(2018)
39 ILJ 523 (CC) at paras 25-25.
[3]
2011
(32) ILJ 137 (LC) at para 9 – 10.
[4]
2008
(29) ILJ 1893 (LC) at para 15.
[5]
Act
66 of 1995 as amended.