Waco Africa (Pty) Limited t/a Form Scaff v Sack and Others (J2393/19) [2019] ZALCJHB 360; (2020) 41 ILJ 1771 (LC) (23 December 2019)

80 Reportability
Commercial Law

Brief Summary

Authority — Locus standi — Authority to institute proceedings — Challenge to authority of deponent to founding affidavit — If attorney is authorised to bring application, no additional proof of authority required from deponent — Restraint of trade — Novation — No presumption of novation — In absence of evidence of intention to novate, confidentiality and restraint of trade agreement enforceable. The applicant, Waco Africa (Pty) Limited, sought a final interdict to enforce a restraint of trade agreement against the first respondent, Martina Sack, who intended to join a competitor. Sack challenged the authority of the CEO of Waco to institute proceedings, claiming lack of proof of authority. The court held that the challenge to authority was unfounded as the attorney's authority sufficed, and there was no evidence to support Sack's claim of novation of the restraint agreement, thus affirming its enforceability.

Comprehensive Summary

Summary of Judgment


1. Introduction


The matter concerned an urgent application in the Labour Court for a final interdict enforcing confidentiality undertakings and a restraint of trade agreement. The applicant, Waco Africa (Pty) Limited t/a Form-Scaff (Form-Scaff), sought to restrain the first respondent, Ms Martina Sack (Ms Sack), from taking up employment with a competitor and from using or disclosing confidential information. The third respondent, Peri Formwork Scaffolding Engineering (Pty) Ltd (Peri), was joined because it was Ms Sack’s prospective employer and therefore had an interest in the dispute, although no substantive relief was sought against it. The second respondent, Mr Dewald van Biljon, was initially cited but the relief against him was settled and the settlement agreement was made an order of court.


Procedurally, the application was treated as urgent. A preliminary objection (a point in limine) was raised by Ms Sack concerning the authority of the applicant’s deponent to institute the proceedings. The court disposed of that issue before addressing the merits.


The dispute arose from Ms Sack’s resignation and intended employment with Peri, in circumstances where Form-Scaff contended that she remained bound by a restraint and confidentiality agreement originally concluded with Doka South Africa (Pty) Ltd (Doka), Form-Scaff’s predecessor in title. The central controversy was whether the restraint agreement remained enforceable after the transfer of the business to Form-Scaff and after the conclusion of a later employment contract between Ms Sack and Form-Scaff.


2. Material Facts


Form-Scaff operated in the hire and sale of scaffolding, formwork, falsework, and related services to the construction and civil engineering industries. It supplied design and technical services and, in the course of business, received construction plans from customers and developed project-specific solutions, including pricing and technical proposals.


On 26 April 2017, Ms Sack concluded two separate agreements with Doka: an employment contract appointing her as a regional sales manager, and a separate confidentiality and restraint of trade agreement. The restraint agreement restricted her, for 24 months after termination of employment, from working for a competitor and from soliciting customers within a defined territory (Gauteng, KwaZulu-Natal, and the Western Cape), and also required her to maintain confidentiality.


It was common cause that, on 1 August 2019, Form-Scaff acquired Doka’s business in terms of a written transfer agreement. Ms Sack’s employment transferred to Form-Scaff with effect from 1 August 2019 in terms of section 197 of the Labour Relations Act 66 of 1995, with the consequence that rights and obligations continued as if between Form-Scaff and Ms Sack. The restraint agreement itself provided that the restraints would endure in favour of a successor-in-title.


On 15 November 2019, Ms Sack resigned from Form-Scaff, with effect from 31 December 2019, to commence employment with Peri. It was common cause that Peri’s business was identical to Form-Scaff’s and that it was a major competitor.


The court treated as materially significant Ms Sack’s concessions that her employment with Peri would constitute a breach of the restraint agreement; that she had strong customer connections with customers of Form-Scaff (including customers acquired through the Doka business); and that she had access to information that was confidential in nature. The primary dispute on the facts and legal characterisation was Ms Sack’s contention that a new employment contract concluded with Form-Scaff in September 2019 (effective 1 October 2019) superseded the earlier arrangements and, on her version, brought the restraint agreement to an end.


The later employment contract contained wording to the effect that it “supersedes any other employment contract you signed previously.” The applicant contended that this clause only superseded the prior employment contract and did not affect the separately concluded restraint agreement.


3. Legal Issues


The court was required to determine, first, a procedural issue: whether the application was properly before the court given the challenge to the authority of the deponent (the applicant’s CEO) to institute proceedings.


On the merits, the central legal questions were whether the restraint of trade agreement remained binding and enforceable against Ms Sack after (i) the section 197 transfer and the applicant’s acquisition of the business, and (ii) the conclusion of the subsequent employment contract; and, if so, whether the restraint was unreasonable and therefore unenforceable as a matter of public policy.


The dispute largely concerned the application of legal principles to common cause facts, particularly regarding (a) novation (whether the later contract replaced the earlier restraint agreement), and (b) the standard restraint-of-trade enquiry balancing enforceability, protectable interests (customer connections and confidential information), and the respondent’s freedom to work.


4. Court’s Reasoning


Authority point (in limine)


The court rejected the challenge to the CEO’s authority. Relying on the principle articulated in Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA) (as quoted with approval in Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA)), the court accepted that where an attorney is authorised to bring proceedings on behalf of an applicant, the proceedings are those of the applicant, and there is no general requirement for additional proof that a deponent (even a senior officer) is separately authorised.


The court emphasised that Rule 7(1) of the Uniform Rules of the High Court provides a mechanism to challenge the authority of an attorney acting for a litigant. Ms Sack did not invoke that procedure and, moreover, her counsel disavowed any challenge to the authority of the applicant’s attorneys. In those circumstances, the court held the preliminary objection to be ill-founded and dismissed it.


Novation and the effect of the new employment contract


On Ms Sack’s main defence, the court treated her argument as invoking novation. It applied the established presumption against novation and the rule that an intention to novate is never presumed, drawing on the Supreme Court of Appeal’s discussion in National Health Laboratory Service v Lloyd-Jansen van Vuuren [2015] ZASCA 20; 2015 (5) SA 426 (SCA), as well as earlier authorities cited there and in the judgment (including the principle that novation is a question of intention to be proved by necessary inference from the circumstances).


Applying those principles, the court found no express agreement to novate the restraint. It also found no basis to infer such intention from the circumstances or the parties’ conduct. The court placed weight on the fact that Ms Sack had originally concluded two distinct agreements with Doka: one governing the employment relationship, and another governing post-employment obligations directed at protecting goodwill and confidential information. The later contract concluded with Form-Scaff expressly superseded only a prior employment contract, and the court held that this could not, on its terms, reasonably be read as terminating a separate restraint agreement.


The court also accepted the applicant’s submission that restraints (including Ms Sack’s) were materially relevant to the purchase of Doka’s business, because such restraints protect the value and goodwill acquired and are enforceable by the successor in title. In the result, Ms Sack was held not to have discharged the onus of proving novation, and the restraint agreement was treated as continuing in effect and capable of enforcement by Form-Scaff.


Enforceability and reasonableness of the restraint


The court approached reasonableness in line with the general restraint-of-trade framework referenced in the judgment: once the applicant proves the restraint and a breach, the respondent bears the onus to show that the restraint is unreasonable and thus contrary to public policy. The judgment described the relevant public policy considerations as including both pacta servanda sunt (the policy favouring enforcement of contracts) and the constitutional interest in a person’s ability to choose and practise a trade, occupation, or profession.


On the protectable interests, the court found that customer connections existed and were protectable. It relied on Ms Sack’s own concessions that she was a key interface with customers, that she maintained close relationships with key decision-makers, and that maintaining such relationships was important to retaining business. The court rejected the contention that pricing dynamics in an economic downturn displaced the relevance of customer connections, referring to the approach in Den Braven SA (Pty) Ltd v Pillay and Another 2008 (6) SA 229 (D) that an applicant need not isolate customer contact as the sole factor influencing purchasing decisions; it is sufficient to show that customer connections exist and can be exploited by a former employee working for a competitor.


On confidential information, the court relied on Ms Sack’s admissions regarding her involvement in project coordination, tenders, proposals, quotations, access to technical drawings and temporary works designs, pricing information, and sales strategy. The court held that it was not decisive whether she still physically possessed the information; access and the risk of disclosure in employment with a competitor were sufficient. In this respect, the court applied the reasoning endorsed in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 406 (SCA), namely that restraints are designed to relieve an employer of the risk of disclosure of confidential information and that an ex-employee cannot defeat enforcement merely by offering undertakings not to disclose or by asserting that the information is not remembered.


Regarding the territory and duration (Gauteng, KwaZulu-Natal, Western Cape; 24 months from 1 January 2020), the court was not persuaded that the restraint was overbroad or unfair. It noted that Ms Sack was not prevented from working in her chosen field altogether; rather, she was restricted from working for competitors within the specified provinces, and she remained able to work outside that territory. The court also rejected the argument that the applicant’s operational know-how was short-lived, reasoning that confidential pricing and related information could still be useful in a competitor’s hands and that customer connections justified protection for the full restraint period.


Urgency and final interdict requirements


The court accepted that enforcement of restraints is generally treated as inherently urgent and, on the papers, was satisfied that urgency had been established.


On the requirements for a final interdict, the court concluded that Form-Scaff demonstrated a clear right (arising from the restraint agreement), an injury committed or reasonably apprehended (arising from Ms Sack’s acceptance of employment with a competitor in breach of the restraint), and the absence of an alternative satisfactory remedy, making interdictory relief appropriate.


5. Outcome and Relief


The court dismissed the preliminary authority challenge and granted final interdictory relief enforcing the restraint and confidentiality obligations.


The application was heard as urgent and non-compliance with ordinary service time limits was condoned. Ms Sack was interdicted and restrained for 24 months from 1 January 2020 from resuming employment with Peri and from involvement in any competing business within Gauteng, KwaZulu-Natal, and the Western Cape, in wide terms encompassing various capacities. She was also restrained from enticing away the applicant’s clients or inducing them to terminate or restrict their relationship with the applicant, and from using the applicant’s confidential information for her own benefit or that of anyone other than the applicant.


Costs followed the result. Ms Sack was ordered to pay the applicant’s costs, including the costs of two counsel.


Cases Cited


Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA).


Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA).


Eskom v Soweto City Council 1992 (2) SA 703 (W).


National Health Laboratory Service v Lloyd-Jansen van Vuuren [2015] ZASCA 20; 2015 (5) SA 426 (SCA).


Acacia Mines Ltd v Boshoff 1958 (4) SA 330 (A).


Proflour (Pty) Ltd and Another v Grindrod Trading (Pty) Ltd t/a Atlas Trading and Shipping and Another [2010] 2 All SA 510 (KZD).


Electric Process Engraving and Stereo Co v Irwin 1940 AD 220.


Ewers v The Resident Magistrate of Oudtshoorn and Another (Foord) 32.


Swadif (Pty) Limited v Dyke NO 1978 (1) SA 928 (A).


French v Sterling Finance Corporation (Pty) Ltd 1961 (4) SA 732 (A).


Barclays National Bank Ltd v Smith 1975 (4) SA 675 (D).


Botha and Another v Carapax Shadeports (Pty) Ltd [1991] ZASCA 134; 1992 (1) SA 202 (A).


Experian South Africa (Pty) Ltd v Haynes and Another 2013 (1) SA 135.


Basson v Chilwan and Others [1993] ZASCA 61; 1993 (3) SA 742 (A).


Sibex Engineering Services (Pty) Limited v Van Wyk and Another 1991 (2) SA 482 (T).


IIR South Africa BV (Incorporated in the Netherlands) t/a Institute for International Research v Tarita and Others 2004 (4) SA 156 (W).


IIR South Africa BV (Incorporated in the Netherlands) t/a Institute for International Research v Hall (aka Baghas) and Another 2004 (4) SA 174 (W).


Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 406 (SCA).


Den Braven SA (Pty) Ltd v Pillay and Another 2008 (6) SA 229 (D).


International Executive Communications Ltd t/a Institute for International Research v Turnley and Another 1996 (3) SA 1043 (W).


Reeves v Marfield Insurance Brokers CC 1996 (3) SA 776 (A).


Labournet (Pty) Ltd v Jankielsohn and Another [2017] 5 BLLR 466 (LAC); (2017) 38 ILJ 1302 (LAC).


Aquatan (Pty) Ltd and Aquatan (Pty) Ltd v Janse Van Vuuren and Another [2017] ZALCJHB 141; (2017) 38 ILJ 2730.


Ball v Bambalela Bolts (Pty) Ltd and Another (2013) 34 ILJ 2821 (LAC).


Legislation Cited


Labour Relations Act 66 of 1995 (as amended), section 197.


Rules of Court Cited


Rule 7(1) of the Uniform Rules of the High Court.


Held


The Labour Court held that the authority challenge to the deponent was unsustainable where the authority of the applicant’s attorneys to institute and prosecute the proceedings was not challenged and the respondent did not invoke Rule 7(1).


It further held that the later employment contract between Form-Scaff and Ms Sack did not novate or supersede the earlier restraint agreement. In the absence of an express agreement to novate, and given the presumption against novation, no intention to replace the restraint agreement could be inferred from the terms of the later employment contract or from the parties’ conduct.


On the merits, the court held that Form-Scaff established protectable interests in customer connections and confidential information, that Ms Sack’s intended employment with a direct competitor posed a sufficient risk to those interests, and that the restraint’s territory and duration were not shown to be unreasonable. The requirements for a final interdict were accordingly satisfied, and the restraint was enforced for 24 months from 1 January 2020, together with a confidentiality interdict and a costs order including two counsel.


LEGAL PRINCIPLES


A challenge to the authority to institute proceedings is properly directed at the authority of the attorney acting for the litigant; where such authority is not challenged, there is generally no need for separate proof that the deponent to a founding affidavit is authorised, and Rule 7(1) provides the procedural mechanism to dispute an attorney’s authority.


Novation depends on intention and is subject to a presumption against it because it entails waiver of existing rights. In the absence of an express agreement to novate, novation will not be found unless the intention to replace the prior agreement arises by necessary inference from the terms of the later arrangement and the surrounding circumstances, including the parties’ conduct.


In restraint of trade matters, once the existence of the restraint and breach are established, the respondent bears the onus to prove that enforcement would be unreasonable and contrary to public policy. Reasonableness is assessed by balancing the policy favouring enforcement of contractual obligations against the interest in a person’s freedom to work, and by determining whether the restraint protects a legitimate proprietary interest such as customer connections and confidential information.


Where a former employee had access to confidential information and seeks employment with a competitor in a similar position, the risk of disclosure (whether deliberate or inadvertent) is a legitimate concern the restraint is designed to address, and undertakings not to disclose do not, without more, defeat enforcement.

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[2019] ZALCJHB 360
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Waco Africa (Pty) Limited t/a Form Scaff v Sack and Others (J2393/19) [2019] ZALCJHB 360; (2020) 41 ILJ 1771 (LC) (23 December 2019)

THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not
Reportable
Case
No: J2393/19
In
the matter between:
WACO
AFRICA (PTY) LIMITED t/a FORM-SCAFF
Applicant
and
MARTINA
SACK
DEWALD
VAN BILJON
PERI
FORMWORK SCAFFOLDING ENGINEERING (PTY)  LIMITED
First Respondent
Second
Respondent
Third
Respondent
Heard
:
19 December 2019
Delivered:
23 December 2019
Summary:
Authority to institute and prosecute proceedings – if the
attorney is authorised to bring
the application on behalf of the
applicant, application is then that of the applicant – there is
no need for additional proof
of authority by the deponent of the
founding affidavit.
Restraint
of trade – novation cannot be presumed – in the absence
of any evidence that there was an intention to novate,
the full terms
of the confidentiality and restraint of trade agreement are
enforceable.
JUDGMENT
NKUTHA-NKONTWANA.
J
Introduction
[1]
This is an
urgent application for a final interdict to enforce the
confidentiality undertakings and restraint of trade agreement

(restraint agreement) between Waco Africa (Pty) Limited t/a
Form-Scaff
[1]
(Form-Scaff)
predecessor in title, Doka South Africa (Pty) Ltd) (Doka) and the
first respondent, Ms Martina Sack (Ms Sack). The
geographical area of
the restraint encompasses the provinces of Gauteng, KwaZulu-Natal and
the Western Cape (restraint territory)
and the period of the
restraint is 24 months commencing on 1 January 2020.
[2]
Form-Scaff’s claim and the relief sought against the second
respondent, Mr. Dewald van Biljon (Mr van Biljon) has since
been
settled. By agreement between Form-Scaff and Mr van Biljon, the
agreement of settlement has been made an order of Court.
[3]
There is no relief sought against the third respondent, Peri Formwork
Scaffolding Engineering (Pty) Ltd (Peri), which was joined
as a party
to the proceedings purely by virtue of its interest in the matter;
the new employer of Ms Sack.
[4]
This Court is indebted to counsel for the helpful written
submissions.
Point
in limine
[5]
Before I deal with the merits of the application,
it is necessary to deal with the point
in
limine
taken by Ms Sack that Mr Michel Els
(Mr Els), the Chief Executive Officer (CEO) and the deponent to
Form-Scaff’s founding
affidavit, has no authority to institute
these proceedings. It was submitted on her behalf that since Mr Els
failed to attach the
resolution of the Board of Directors of
Form-Scaff authoring him to bring these proceedings, he accordingly
lacks the necessary
locus standi
.
Oddly, this point is persisted with in oral submissions despite Mr
Lerm’s, counsel for Ms Sack, disavowal that the authority
of
Form-Scaff’s attorneys of record to bring these proceedings is
not challenged.
[6]
Mr Whitcutt SC, who appeared for Form-Scaff,
submitted in motion that it does not avail Ms Sack to challenge the
authority of Mr
Els to bring these proceedings since she certainly
knows that he is Form-Scaff’s CEO and it would seem that she is
not challenging
the authority of the Form-Scaff’s attorneys.
[7]
In
Ganes
and Another v Telcom Namibia Ltd
2004
[2]
, quoted with authority
in
Unlawful
Occupiers, School Site v City of Johannesburg,
[3]
referred to by Mr Whitcutt, the Supreme Court of Appeal (SCA) stated
that if the attorney is authorised to bring the application
on behalf
of the applicant, the application necessarily is that of the
applicant and there is no need for any other person who
becomes
involved whether as a witness or someone to be additionally
authorised. In the event that the respondent wishes to challenge
the
authority of a person allegedly acting on behalf of the applicant,
Rule 7(1) of the Uniform Rules of the High Court (Uniform
Rules) is
an adequate remedy.
[8]
Likewise, in this instance, Mr Els deposed to the
affidavit which is annexed to the notice of motion signed by
Form-Scaff’s
attorneys of record whose authority to institute
and prosecute these proceedings is not challenged. In any event, Ms
Sack failed
to avail herself to the remedy provided by Rule 7(1) of
the Uniform Rules.
[9]
It follows that the point
in
limine
is injudicious and must fail.
Factual
background
[10]
Form-Scaff is South Africa’s market leader
in hire and sale of scaffolding, formwork, false work and associated
services to
the construction and civil engineering industries across
the country. With experience of over 50 years and top-notch
expertise,
Form-Scaff also provides design skills, technical advice
and support through its branches across the country and continent.
[11]
Form-Scaff trades in over 2500 individual items
in over 26 product lines. More than 90% of all products have been
designed and manufactured
in-house. Because Form-Scaff is primarily a
rental company, most of its stock is for its own use and, as such,
durability is prime.
Its product line includes beams and bearers
which span between two or more points to create a supporting
structure for horizontal
formwork, column formwork in respect of
columns of all shapes and sizes, both horizontal and vertical
formwork as well as modular
scaffolding systems.
[12]
Form-Scaff customers will often provide it with
construction plans that have been prepared by engineers and
architects. Form-Scaff
then assess the requirements of the customer
for purposes of designing the most effective formwork solution for
the project involved
which often consist of a combination standard
and specialised products which are manufactured and supplied by
Form-Scaff.
[13]
On 26 April 2017, Ms Sack entered into a contract
of employment with Doka appointing her as a Region 1 Sales Manager
reporting to
the Managing Director of Doka. At the same time Ms Sack
concluded the restrain agreement with Doka. In terms of the restraint
agreement,
Ms Sack agreed that for a period of 24 months from the
date on which she ceased, for whatever reason, to be an employee of
Doka,
she would not be employed by a competitor or solicit customers
of her erstwhile employer within the restraint territory and that
she
would not disclose confidential information relating to its business.
[14]
The
restraint agreement states that the restraints ‘
shall
endure also in favour of the successor-in-title’
,
being any person who acquires the business or the goodwill of the
business operated by Doka. On 1 August 2019, Form-Scaff acquired
the
business of Doka in terms of a written business transfer agreement.
Ms Sack’s employment was transferred to Form-Scaff
with effect
from 1 August 2019 in terms of section 197 of the Labour Relations
Act
[4]
(LRA), with the
result that the rights and obligations between Doka and Ms Sack
continued in force as if they were rights and obligations
as between
Form-Scaff and Ms Sack.
[15]
On 15 November 2019, Ms Sack tendered her
resignation from Form-Scaff, with her last day of employment being 31
December 2019, in
order to commence employment with Peri. It is
common cause that Peri’s business is identical to that of
Form-Scaff in every
respect and is its major competitor.
[16]
Ms Sack seemingly concedes that her employment
with Peri will constitute a breach of the restraint agreement. Also,
she seems to
accept that she has a particularly strong customer
connection with the customers of the business operated by Form-Scaff
and also
that she had access to information which is of a nature that
constitutes confidential information
[17]
Notwithstanding, Ms Sack’s main defence is
that she and Form-Scaff concluded a new contract of employment in
September 2019
which did not contain restraint undertakings. Mr Lerm
submitted that the essence of the new contract of employment is that
it superseded
the Doka contract of employment and the ancillary
restraint agreement. Alternative to this defence, Ms Sack staged a
lukewarm attack
on the reasonableness of the restraint agreement.
Has
the restraint of trade agreement been superseded by the new contract
of employment ?
[18]
It is trite that a party
seeking to enforce a contract in restraint of trade is required to
invoke the restraint agreement and prove
a breach thereof. Forthwith,
a respondent who seeks to avoid the restraint bears an onus to
demonstrate, on a balance of probabilities,
that the restraint
agreement is unenforceable because it is unreasonable.
[5]
[19]
In the present case, Ms Sack takes no issue with the fact that she
concluded the restraint agreement, albeit with Doka, and
that she
intends to take up employment with Peri, which is a direct competitor
of Form-Scaff. She further accepts that Form-Scaff
stepped into
Doka’s shoes when the transfer of business agreement was
concluded and as such will be entitled to enforce the
restraint of
trade undertakings against her unless the restraint of trade
agreement is terminated.
[20]
Ms Sack accordingly contends that the restraint agreement was
terminated when she and Form-Scaff subsequently concluded the
new
employment contract and that such contract contains no restraint of
trade undertakings.
[21]
To the
extent that Ms Sack’s defence is premised upon novation, it is
important that I deal with this aspect. The SCA succinctly
expounded
the principle of novation in
National
Health Laboratory Service v Lloyd-Jansen van Vuuren
.
[6]
It was stated that:

[15] …There is a
presumption against novation because it involves a waiver of existing
rights. When parties novate they intend
to replace a valid contract
with another valid contract. In determining whether novation has
occurred, the intention to novate
is never presumed. In
Acacia
Mines Ltd v Boshoff
,
[7]
the court held that novation is essentially a question of intention.
[16] In
Proflour
(Pty) Ltd & another v Grindrod Trading (Pty) Ltd t/a Atlas
Trading and Shipping & another
[8]
the court, when determining whether the agreement resulted in a
novation, referred to the decision
of
Electric Process Engraving and Stereo Co v Irwin
1940 AD 220
at 226-227 where the court said:

The law on the subject was
clearly enunciated as far back as 1880 in the well-known case of
Ewers v The Resident Magistrate of Oudtshoorn and Another
,
(Foord) 32, where DE VILLIERS, C.J, said: “The result of the
authorities is that the question is one of intention and that,
in the
absence of any express declaration of the parties, the intention to
effect a novation cannot be held to exist except by
way of necessary
inference from all the circumstances of the case.”’
It follows that in order to establish
whether novation has occurred, the court is entitled to have regard
to the conduct of the
parties, including any evidence relating to
their intention.’
[22]
In
Swadif
(Pty) Limited v Dyke NO,
[9]
it
was stated that:

In
our law there are two forms of novation, namely novation
voluntaria
and novation
cessaria
.
Novation
voluntaria
,
voluntary novation, has its origin in contract. In this sense, it is
essentially a matter of intention and consensus. When parties
novate
they intend to replace a valid contract by another valid contract.’
[23]
In the absence of an express
agreement to novate, the intention to do so will only be inferred;
firstly, where the terms of the
new arrangement are inconsistent with
the continued existence of the original right; and secondly, where
the admissible evidence
as to the circumstances in which the new
arrangement was made lead to the necessary inference that the parties
intended that the
original right should be novated and be replaced by
the new.
[10]
[24]
In a
nutshell, the requirements for a successful defence of novation are
neatly summarised in
Barclays
National Bank Ltd v Smith
[11]
as follows
:

(a) the onus of proving
novation rests on the person alleging novation…;
(b) the intention to novate is never
presumed…;
(c) the question is one of intention
and that, in the absence of any express declaration of the parties to
effect novation can’t
be held to exist except by way of the
necessary inference from all the circumstances of the case…;
and
(d) the circumstances of the case
…include the conduct of the parties…’
[25]
In the present matter, there is no express declaration of the parties
to effect novation to the restraint agreement. I am unable,
on the
facts before me, to infer from the circumstances of the case, that
the parties intended to do so. I also find nothing in
the conduct of
the parties that points to that direction.
[26]
It is common cause that Ms Sack
had concluded two separate agreements with Doka; a contract of
employment and, independently, the
restraint of trade agreement. As
correctly summited by Form-Scaff, the contract of employment dealt
with matters pertaining to
rights and obligations of parties during
the currency of the employment relationship. Whilst, the restraint
agreement deals with
post-employment obligations aimed at protecting
the goodwill of the business.
[12]
[27]
It is also not disputed that
Form-Scaff would not have concluded the purchase of the business of
Doka without the restraint undertakings
of,
inter
alia
, Ms Sack.
[13]
Clearly, when Form-Scaff purchased the business of Doka it obtained
restraints of trade for the protection of the goodwill of the

business together with the ability to enforce them.
[14]
[28]
The new contract of employment concluded between Form-Scaff and Ms
Sack specifically replaces only the Doka employment contract.
The
phrase in the new contract of employment relied on by Ms Sack states:
‘…
this
letter sets for your employment effectively from 1 October 2019 and
supersedes any other
employment
contract
you signed previously’. (Emphasis added).
[29]
There is no indication that in so doing, the additional,
post-employment rights contained in the restraint agreement are in

any way disturbed. As such, Ms Sack’s submission that this
phrase should be understood to mean that the Doka contract of

employment and restraint agreement are superseded by the new contract
of employment is untenable. What is clear, however, is that
the
parties expressly replaced the Doka employment contract with the new
employment contract.
[30]
I am, therefore, satisfied that there is no basis to infer that
Form-Scaff in any way waived any of the rights to the restraint

agreement. Being mindful that novation is not to be presumed, I
conclude that Ms Sacks failed to discharge the onus on her to
establish that the restrain agreement was novated.
[31]
In the light of the demise of Ms Sacks defence of novation,
Form-Scaff has invoked the restraint agreement on which it relies
and
proved the necessary breach thereof.
Is
the restraint of trade agreement enforceable?
[32]
Ms Sack
bears the onus to demonstrate on a balance of probabilities that the
restraint is unreasonable and therefore unenforceable.
In turn, the
reasonableness of
a restraint agreement is determined with reference to public policies
that enjoin parties to abide by the contractual
obligations and the
constitutional right to freely choose a trade, occupation, or
profession and to practice such.
[15]
Therefore, for a restraint agreement to be reasonable and
enforceable, it must serve to protect an interest, which, in terms of

the law, requires and deserves protection.
[16]
The principles are trite and it is not required to restate them. What
follows becomes apparent when applying those principles to
the issues
at hand in this application.
Customer
Connections
[33]
Ms Sack concedes that she
acted
as the interface between Form-Scaff and Doka prior to the takeover,
and its customers as she would personally call upon the
customers for
whom she had a sales responsibility and as such developed a close
working relationship with the key decision makers
at these customers.
She further concedes that key to securing Form-Scaff’s
customers is the ongoing relationship that had
been forged between
her and these customers. It is also instructive that Ms Sack was
specifically identified as one of the key
employees to Doka’s
business that could play an important role in growing the business
further. That, according to Form-Scaff,
was one of the incentives
behind the purchase of the business of Doka and securing Ms Sack’s
employment.
[34]
In essence, Ms Sack
acknowledges that the forging, preserving and maintaining of
relationships between Form-Scaff and its customers
is pivotal to its
survival. Still, her defence is that
by
virtue of the economic downturn, pricing will ordinarily be more
important in most instances than customer connections.
[35]
Ms
Sack clearly misconceived the probe. I
n
Den
Braven SA (Pty) Ltd v Pillay and Another,
[17]
referred to by Form-Scaff, it was stated that:

It is not
in my view necessary for an applicant in this situation to winnow the
wheat of trade connections and customer contact
from the chaff of
other factors that may influence purchasing decision
s.
It suffices for the applicant to show that trade connections through
customer contact exist and can be exploited by the former
employee if
employed by a competitor.’ (Emphasis added)
[36]
The fact that more than 80% of Ms Sack’s
time was spent on the Msikaba River Bridge Project, which tenders had
already been
awarded, and that she has since handed over her work in
respect thereof is of no consequence. She readily conceded that she
had
access to all of Doka’s main customers, who are now
Form-Scaff customers, including Concor whose recent form order
pertains
to the Msikaba River Bridge Project.
[37]
I am satisfied that there exist trade connections
through the customer contact and that they could be exploited by Ms
Sack to the
benefit of her new employer, Peri. Form-Scaff’s
interests in being able to maintain its existing customer connections
in
this regard are worthy of protection.
Confidential
information
[38]
Ms Sack made crucial
admissions pertaining her role in coordination of projects from
inception to completion, including preparation
of tenders, proposals
and quotations. She had also possession of Form-Scaff’s
technical drawings, sketches, formwork solutions,
temporary works
designs which would be prepared for each project and the pricing
information on all projects she was working on.
As Sales Manager, she
was privy to Form-Scaff sales strategies.
[39]
Ms Sack also concedes
that she did have influence in respect of the setting of prices and
accordingly influence profits, albeit,
with the limited scope of
authority. Given her defence that by
virtue
of the economic downturn, pricing is more crucial, Form-Scaff
correctly submitted that her access to its confidential information,

including the pricing structure is even more crucial.
[40]
In
Reddy v
Siemens Telecommunications (Pty) Ltd
,
[18]
the SCA, ceased with a similar matter, stated that:

[20] …Reddy will be
employed by Ericsson, a "concern which carries on the same
business as [Siemens]" in a position
similar to the one he
occupied with Siemens. His loyalty will be to his new employers and
the opportunity to disclose confidential
information at his disposal,
whether deliberately or not, will exist. The restraint was intended
to relieve Siemens precisely of
this risk of disclosure.
In these circumstances the restraint
is neither unreasonable nor contrary to public policy. I agree with
the remarks of Marais J
in
BHT Water
:
"In my view, all that the
applicant can do is to show that there is secret information to which
the respondent had access,
and which in theory the first respondent
could transmit to the second respondent should he desire to do so.
The very purpose of the restraint agreement was that the applicant
did not wish to have to rely on the bona fides or lack of retained

knowledge on the part of the first respondent, of the secret
formulae.
In my view, it cannot be unreasonable for the applicant
in these circumstances to enforce the bargain it has exacted to
protect
itself.
Indeed, the very ratio underlying the bargain was
that the applicant should not have to content itself with crossing
its fingers
and hoping that the first respondent would act honorably
or abide by the undertakings he has given
.
In my view, an
ex-employee bound by a restraint, the purpose of which is to protect
the existing confidential information of his
former employer, cannot
defeat an application to enforce such a restraint by giving an
undertaking that he will not divulge the
information if he is
allowed, contrary to the restraint, to enter the employment of a
competitor of the applicant.
Nor, in my view, can the ex-employee
defeat the restraint by saying that he does not remember the
confidential information to which
it is common cause that he has had
access.
This would be the more so where the ex-employee, as is the
case here, has already breached the terms of the restraint by
entering
the services of a competitor
.’ (Emphasis added)
[41]
Clearly, Ms Sack had
access
to
confidential information
and
whether or not she remains in possession of it is inconsequential.
Restraint
territory and period
[42]
The only remaining issues are the
reasonableness of the restraint territory and the period thereof. Ms
Sack asserts that that it
would be unfair situation if she is
rendered economically unproductive for a period of 24 months.
However, she does not proffer
any explanation as to why she would not
be in a position to find any other employment with her skills.
[43]
Also, as correctly submitted by Form-Scaff,
Ms Sack is not prohibited from taking up employment in her chosen
vocation provided
only that she does not do so for a direct
competitor within the provinces of Gauteng, KwaZulu-Natal and the
Western Cape. She,
therefore, remains able to be gainfully employed
outside of these provinces in the same industry. I am not convinced
that the restraint
territory is overbroad as she is free to venture
into other provinces.
[44]
Ms Sack is disingenuous in her submission
that Form-Sack seeks to enforce a restraint agreement for the period
of 24 months where,
on its own version, an employee only has three
months’ worth of know-how in respect of its business
operations. Even if Form-Scaff
changed its pricing guideline three
months before her resignation, the crux of the matter is that that
information,
inter alia
,
is confidential and would be useful in the hands of the competitor.
Also,
Form-Scaff’s interests in being able to maintain
its existing customer connections in this regard are worthy of
protection
for the full period of
24 months.
Urgency
[45]
It is generally accepted that enforcement of the
restraint of trade agreement is inherently urgent. There is no need
to overly deliberate
on this issue as, having read the papers before
me, I am satisfied that the matter is urgent and have treated it as
such.
Conclusion
[46]
In all the
circumstances, the restraint agreement is neither unreasonable nor
contrary to public policy.
[19]
Accordingly,
the requirements for the grant of a final interdict have been met.
Form-Scaff has successfully demonstrated that it
has a clear right
which has since been breached by Ms Sack’s acceptance of
employment with Peri, its competitor, the very
breach is ‘an
injury actually committed or reasonably apprehended’ and that
there is no other appropriate remedy than
to hold Ms Sack to her
contractual undertakings.
[20]
Costs
[47]
This Court has a wide discretion in awarding
costs with principles of law and fairness serving as guides. In this
matter I can find
no reason both in law and fairness why costs should
not follow the result, including the costs of two counsel.
[48]
In the circumstances, I make the following order:
Order
1. This application is heard as one of
urgency and the applicant’s non-compliance with the normal time
limits in relation
to service is condoned.
2. The first respondent is interdicted
and restrained for a period of 24 months calculated from 1 January
2020:
2.1
From resuming employment with the third respondent and from rendering
services to the third respondent as an employee or in
any like
capacity.
2.2
From directly or indirectly being engaged in, concerned with,
interested in as a proprietor, shareholder, member, partner,
consultant, manager, employee, agent, representative, advisor, or any
other capacity with any business, person, company, close corporation,

partnership, trust, body corporate, association or other legal entity
within geographical boundaries of Gauteng, Kwa-Zulu Natal
and Western
Cape that conducts or carries on the business of the applicant or
that trades in any business similar thereto.
2.3
From enticing away any clients of the applicant or inducing them to
terminate or restrict their business relationship with the
applicant
in any way.
3. The first respondent is restrained
and interdicted from using the confidential information of the
applicant, whether directly
or indirectly, for her own benefit or for
the benefit of any other person other than the applicant.
4. The first respondent shall pay the
applicant’s costs including the costs of two counsel.
__________________
P
Nkutha-Nkontwana
Judge
of the Labour Court of South Africa
Appearances:
For
the Applicant:
Advocate C Whitcutt SC
Instructed
by:

Fluxmans Attorneys
For
the Respondent:
Advocate JM Lerm
Instructed
by:

Hurter Spies Incorporated
[1]
The applicant trades primarily in South African mining, construction
and energy related sectors of the economy and has four divisions.

This application concerns the business conducted under the
Form-Scaff division.
[2]
2004 (3) SA 615
(SCA) at paras 18 and 19. See also:
Eskom
v Soweto City Council
1992 (2) SA
703
(W) at 705F-H.
[3]
2005 (4) SA 199
(SCA) at paras 14 and 15.
[4]
Act 66 of 1995 as amended.
[5]
See:
Experian
South Africa (Pty) Ltd v Haynes and Another
2013 (1) SA 135
;
Basson
v Chilwan and Others
1993
SA 742
(A) at 7761I-J;
Magna
Alloys and Research (SA) (Pty) Ltd v 486
(SCA) at [10] to [14], pp 493E/F to 496D;
Sibex
Engineering Services (Pty) Limited v Van Wyk and Another
1991 (2) SA 482
(T) at 502D-F;
IIR
South Africa BV (Incorporated in the Netherlands) t/a Institute for
International Research v Tarita and Others
2004 (4) SA 156
(W) at 167 B-C;
IIR
South Africa BV (Incorporated in the Netherlands) t/a Institute for
International Research v Hall (aka Baghas) and Another
2004 (4) SA 174
(W) at 178E-F, para [17];
Reddy
v Siemens Telecommunications (Pty)
Ltd
2007 (2) SA 406
(SCA);
Den
Braven SA (Pty) Ltd v Pillay and Another
2008 (6) SA 229 (D).
[6]
[2015]
ZASCA 20
;
2015 (5) SA 426
(SCA) at paras 16 to 17.
[7]
Acacia
Mines Ltd v Boshoff
1958 (4) SA 330
(A) at 337D.
[8]
Proflour
(Pty) Ltd and Another v Grindrod Trading (Pty) Ltd t/a Atlas Trading
and Shipping and Another
[2010] 2 All SA 510
(KZD) at para 10.
[9]
1978
(1) SA 928
(A)
at 940G.
[10]
See:
French
v Sterling Finance Corporation (Pty) Ltd
1961
(4) SA 732
(A) at 736D-H.
[11]
1975 (4) SA 675
(D) as follows at 683B-D
[12]
See:
Reeves
v Marfield Insurance Brokers CC
1996 (3) SA 776
(A); see also:
Protea
Technology Ltd and Another v Ridder and Another,
an
unreported decision of this Court under case number J305/17 per van
Niekerk J.
[13]
See:
Founding Affidavit, paras 43 and 44; and Answering Affidavit, paras
49 to 51.
[14]
See:
Botha
and Another v Carapax Shadeports (Pty) Ltd
[1991] ZASCA 134
;
1992 (1) SA 202
(A).
[15]
Christie,
the Law of Contract in South Africa, 6
th
Edition,
p 554; see also
Labournet
(Pty) Ltd v Jankielsohn and
Another
[2017] 5 BLLR 466
(LAC); (2017) 38 ILJ 1302 (LAC) at para 39.
[16]
Labournet supra
at
para 41
; Experian South
Africa (Pty) Ltd v Haynes and Another [2012] (2013) 34 ILJ 529 (GSJ)
at paras 12 to 19; Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 7761 I-J;
Aqatan
(Pty) Ltd and Aquatan (Pty) Ltd v Janse Van Vuuren and Another
[2017] ZALCJHB 141; (2017)
38 ILJ 2730;
Reddy v
Siemens Telecommunications (Pty) Ltd
2007
(2) SA 486
(SCA);
Ball v
Bambalela Bolts (Pty) Ltd and Another
(2013)
34 ILJ 2821 (LAC).
[17]
2008 (6) SA
229
(D) at 240H.
[18]
2007 (2) SA 406
(SCA) at para 20. See also:
International
Executive Communications Ltd t/a Institute for International
Research v Turnley and Another
1996 (3) SA 1043
(W)
at 1055E–1057A,
quoted with approval in
Reddy
.
[19]
See Experian South Africa
supra
at para 19; and
Reddy
supra
at
para 20.
[20]
Reddy supra
n 18 at para 22.