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[2019] ZALCD 7
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North Safety Products v Naidoo and Another (D943/19) [2019] ZALCD 7; (2020) 41 ILJ 1736 (LC) (10 September 2019)
THE
LABOUR COURT OF SOUTH AFRICA, DURBAN
Case no: D 943-19
Reportable
In
the matter between:
NORTH
SAFETY PRODUCTS
Applicant
and
MARSHALL
NAIDOO First
Respondent
BRIAN
PIENAAR NORTH LTD
T/A
PIENAAR BROS (PTY) LTD Second
Respondent
Heard:
7 August 2019
Judgment
delivered: 10
September 2019
Summary:
Restraint of trade –
employee free to
use and disclose general recollected knowledge in his own interests,
or in the interest of new employer who competes
with the old on
JUDGMENT
WHITCHER
J
[1]
The relief sought in this application concerns the enforcement of
restraint and confidentiality
undertakings against the First and
Second Respondents for a period of 12 months within the geographical
area of Richards Bay.
[2]
The Applicant’s business concerns the design, manufacture and
marketing of personal
protection and safety equipment products for
use in the workplace. First Respondent was employed by the Applicant
as a Sales Representative
in the Richards Bay area from 6 July 2017
until he resigned at the end of May 2019 to take up employment with a
competitor (the
Second Respondent) of the Applicant as its Key
Contracts Manager.
[3]
In deciding restraint of trade disputes, the following questions
require investigation:
whether the party who seeks to restrain has a
protectable interest, and whether it is being prejudiced by the party
sought to be
restrained. Further, if there is a protectable interest,
to determine how that interest weighs up, qualitatively and
quantitatively,
against the interest of the other party to be
economically active and productive. Lastly, to ascertain whether
there are any other
public policy considerations which require that
the restraint be enforced. If the interest of the employee outweighs
the interest
of the employer – the restraint is unreasonable
and unenforceable.
[1]
[4]
The law on what constitutes a protectable interest recognizes
essentially two types.
An employer may seek to protect its customer
connections and trade secrets. In this matter, the Applicant alleges
that it faces
risk on both these fronts should the restraint of trade
against the First Respondent not be applied.
[5]
The same factual crux informs the Applicant’s argument that it
possesses protectable
interests in its customer connections and trade
secrets which the First Respondent’s work for a competitor, the
Second Respondent,
threatens.
[6]
The Applicant states that the crux of the advantage that the First
Respondent has
now taken to the Second Respondent is knowledge of
specific requirements of the customers with which he dealt during the
course
of his employment, and specifically in regard to products
which they deemed important to their basket of products.
Customer Connections
[7]
The Applicant claims that as a result of the connection the First
Respondent had with
its customers, specifically a unique knowledge of
customer needs and their specific requirements, these customers might
be induced
to follow him to his new employer.
[8]
First, it is not sufficient to say, as it was in argument, that a
former employee
had satisfactory dealings with clients and that they
“may well” thus follow the First Respondent to another
employer.
Our law permits an employer to protect connections forged
by an employee with its customers under the ambit of an employment
contract
if these connections are deep enough such that a customer
may readily or easily follow the employee.
[9]
In
Rawlins and Another v Caravantruck
(Pty) Ltd
[1992] ZASCA 204
;
1993 (1) SA 537
(A), the
learned judge endorsed the idea that the ‘
customer
contact’
doctrine depended on the
notion that:
“
the
employee, by contact with the customer, gets the customer so strongly
attached to him that when the employee quits and
joins a rival
he automatically carries the customer with him in his pocket”.
[10]
In my view, the Applicant did not make out a case that the First
Respondent’s personality,
the frequency and duration of his
contact with its customers, the place of such contact, the nature of
his relationship with buyers
and his knowledge of its customer’s
businesses was such that he could probably induce them to leave the
Applicant.
[2]
[11]
Second,
while the law prohibits taking away
an employer’s customer or pricing lists or deliberately
memorising these customer details,
“…
it
nevertheless recognises that on termination of an employee’s
employment, some knowledge of his former employer’s
customers
will inevitably remain in the employee’s memory and it leaves
the employee free to use and disclose such recollected
knowledge in
his own interests, or in the interest of anyone else including the
new employer who competes with the old one.
See
Meter
Systems Holdings Ltd v Venter and Another
1993 (1) SA 409
(W)”.
[3]
[12]
Knowledge of the Applicant’s client’s previous purchases
and product preferences
strikes me as recollected knowledge in the
circumstances of this case. I am reluctant to find that an employer
has a protectable
interest in this sort of information as it would be
unreasonable, verging on dystopian, to expect employees on exit to
purge this
from their memory or else suffer an impairment to their
right to freedom of occupation by way of a court-enforced restraint
of
trade.
[13]
Apart from possessing recollected knowledge, the First Respondent
plausibly denied that he was
in a position to forge anything more
than occupational relationships with the Applicant’s customers
and, following the
Plascon
Evans
rule
[4]
, I accordingly find that
no protectable interest in customer connections was established.
[14]
In truth the averment that the First Respondent has acquired unique
knowledge of customer needs
and their specific requirements while
working for the Applicant is but a variant of the claim that the
Applicant possesses trade
secrets which should be protected; a
subject to which I now turn.
Trade secrets
[15]
The essence of this dispute concerns how much of what the First
Respondent knows about the industry,
which may be useful to a
competitor, he has gained uniquely, specifically and confidentially
in the employ of the Applicant and
how much is background or common
knowledge of the industry or is recollected knowledge and weight of
experience a person inevitably
acquires.
[16]
In deciding this question I take note of the fact that while the
First Respondent may have spent
just short of two years working at
the Applicant, he spent twelve years prior working for a personal
protective equipment manufacturer.
This, he plausibly claims,
provided him with the wealth of industry-related knowledge. It is, at
least, a portion of this knowledge
which he used to service the
Applicant’s customers and which the Applicant now seeks to
interdict him from using again.
[17]
The First Respondent goes so far as to state that his product
knowledge was not enhanced by the
Applicant while he worked for it.
He transferred
his
extensive existing knowledge of personal protective equipment to the
Applicant. This may be true as far as general product knowledge
is
concerned but I do accept the Applicant’s point that the First
Respondent, additionally, came to know which products its
clients
tended to prefer as a result of his employment at the Applicant.
[18]
This information too, however, does not automatically bring a
protected interest into being.
The law on restraint of trade is wary
of preventing an employee using the general know-how he carries along
with him in his head.
[5]
This
includes the sales experience and wisdom acquired at an employer,
which in turn produces a general acumen which other employers
may
seek to acquire and which an employee should be free to trade on the
labour market. Where a trade secret shades into general
recollected
knowledge and experience can be a difficult line to draw. A trade
secret will however usually contain specific knowledge
formulated by
an employer and conveyed to an employee. It would often be
documentary in nature but may, in a sales environment,
encompass
specific verbal information, advice, strategy, techniques and
formulas given to an employee to enable or enhance his
or her
performance. A key element of a trade secret, to my mind, is its
genesis. It is not knowledge passively acquired while working
at an
employer but knowledge formulated by an employer and transmitted to
an employee as an important tool in the performance of
his duties. An
insight into how to do the job better is different from a confidence
primarily in that the latter is shared. To
my mind, an employer has
no protectable interest in the recollected knowledge, insights and
experience garnered by an employee
and his or her increasing acumen
or mastery of the trade, honed over the years, even if this acumen is
acquired and honed while
under contract to the employer.
[6]
[19]
I turn now to consider what concrete information the First Respondent
may have gleaned about
the needs of specific clients of the Applicant
who are in the market for personal protective equipment during the
period the restraint
would have applied. In doing so, we must
consider which information was not in the public domain or of general
application in the
industry.
[20]
The Applicant states that the crux of the advantage that [the First
Respondent] has now taken
to the Second Respondent is knowledge of
specific requirements of the customers with which he dealt during the
course of his employment,
and specifically in regard to products
which they deemed important to their basket of products.
[21]
There is another reason embedded in the pleadings that fortifies my
view that the First Respondent
is not in possession of true trade
secrets. As stated above, in seeking final relief by way of motion
proceedings, the Applicant
is subject to the
Plascon
Evans
rule. This is important because,
in its founding affidavit, the Applicant specifically notes that two
significant clients (Rio
Tinto and South 32) have indicated their
intention to go out to tender for personal protective equipment
during late 2019 or early
2020. All too often, wide and generalized
allegations of potential harm are made in restraint proceedings to
support an argument
that a protectable interest exists. However, in
this matter, two concrete examples are cited and I am thus able to
consider the
nature of the risk posed to the Applicant should the
First Respondent place his knowledge of customer product preferences
at the
disposal of the Second Respondent.
[22]
The First Respondent’s answer to the Applicant’s mention
that its existing Rio Tinto
and South 32 contracts are at risk should
the restraint not be enforced is that:
“
knowledge
of the specific requirements of a potential or existing client, that
goes out to tender, becomes public knowledge by virtue
of the nature
of the tender process, which demands that such requirements are
published for public consumption. Further, all, or
the majority
portion, of this knowledge and information is readily ascertainable
from various internet sources and documents online
in the public
domain.”
[23]
To this the Applicant issues a general and rather bare denial in
reply although referencing averments
(scattered) elsewhere in the
affidavits which would contradict the First Respondent’s
answer. This approach has left the
Court with the task of searching
the Applicant’s pleadings for evidence to contradict the First
Respondent’s assertion
that Rio Tinto and South 32 have
published their tender specifications and thus he cannot be said to
possess
confidential
information of these client’s specific needs.
[24]
The only relevant reference to tenders in the Applicant’s
pleadings is that Rio Tinto has
issued a closed tender to which only
those who are invited are eligible to provide submissions. What is
not specifically denied
by the Applicant is the averment that the
tender process renders more or less transparent to all suppliers what
the particular
client’s needs are. The First Respondent cannot
convey to his new employer confidential knowledge set out in public
calls
to tender.
[25]
On the papers, there is an insufficient basis to suggest that the
Applicant risks being excluded
from the list of closed tenderers
based on the First Respondent’s historical knowledge of their
product preferences. Logic
would dictate that customers would
precisely want the two suppliers who best understand its needs to
compete on price.
[26]
To the extent that an understanding of a customer’s product
preferences enables a tenderer
to more satisfactorily meet the PPE
specifications set out in the call to tender, I have already found
that this information, on
the facts of this matter, falls short of
constituting confidential information and is more in the way of
recollected knowledge
and sales experience.
[27]
I thus find that the Applicant has not shown that it has a
protectable interest which the First
Respondent is capable of
exploiting, which would call for this court to enforce the restraint
of trade agreement.
Order
[28]
In the premises, I make the following order:
1. The application
is dismissed with costs.
________________________________
Benita
Whitcher
Judge
APPEARANCES:
For
the Applicant:
Futcher
&
Poppesqou Attorneys
For
the Respondents: Clifford
Levin Incorporated
[1]
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767E-I.
[2]
see
Walter
McNaughton (Pty) Ltd v Schwartz and Another
2004
(3) SA 381 (C)
[3]
Handico
(Pty) Ltd t/a Hardware Centre v Vallabh and Another
(19/06422) [2019] ZAGPJHC 90 (15 March 2019)
[4]
See
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd [
1984]
ZASCA 51
;
1984 (3) SA 623
(A) at 634. See also:
Labournet
(Pty) Ltd v Jankielsohn and Another
[2017] 5 BLLR 466
(LAC) at para 40;
Fry’s
Metals (Pty) Ltd v Numsa and Others
[2003]
2 BLLR 140
(LAC) and
Ball
v Bambalela Bolts (Pty) Ltd and Another
(2013) 34 ILJ 2821 (LAC) at para 14.
[5]
Labournet
(Pty) Ltd v Jankielsohn and Another
(2017) 38 ILJ 1302 (LAC) at para 44.
[6]
See
Automotive
Tooling Systems (Pty) Ltd v Wilkens
2007
(2) SA 271
(SCA) at 282E-G.