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[2020] ZALCJHB 1
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AJ Charnaud & Company (Pty) Ltd v van der Merwe and Others (J2096/19; J2037/19) [2020] ZALCJHB 1; (2020) 41 ILJ 1661 (LC) (7 January 2020)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no. J 2096 / 19
Case no. J 2037 / 19
In the matter between:
AJ CHARNAUD &
COMPANY (PTY)
LTD Applicant
and
RUBEN VAN DER
MERWE First
Respondent
REINHARDT
VERMAAK Second
Respondent
CORNE
VERMAAK Third
Respondent
ANDRE DE
WET Fourth
Respondent
JOOSTE
POTGIETER Fifth
Respondent
DROMEX
CC Sixth
Respondent
Heard:
5 December 2019
Delivered:
7 January 2020
Summary:
Restraint of trade
–
restraint
provisions considered – determination as to what constitutes
restraint provisions in restraint agreements –
restraint not
prohibiting employment with competitor
per se
–
no protection of trade connections – breach of restraint
provisions not shown to exist
Restraint
of trade – onus on applicant to prove breach of the contractual
terms giving rise to restraint – breach of
contract not proven
– if breach not proven not necessary to consider whether
enforcement of restraint reasonable
Determination
of factual dispute – application of
Plascon Evans
principle – applicant has proper onus to prove existence of
restraint agreement and breach of such agreement – factual
dispute and undertaking by respondents destructive of applicant’s
case
Urgency
– principles relating to urgency in restraint applications
considered – urgency shown – application to
be considered
as one of urgency
Restraint
application – applicant failing to prove conclusion of
restraint agreement and breach of the restraint – application
dismissed with costs
JUDGMENT
SNYMAN, AJ
Introduction
[1]
Out of the hundreds of standard urgent
restraint of trade enforcement applications that come before this
Court every year, this
matter, I must confess, is somewhat different.
The reason why it is different because in this case, unlike most
restraints, the
very contractual provisions giving rise to the
restraint obligations, are in dispute. In most cases, when a
restraint enforcement
application comes before Court, the parties are
ad idem
that the former employee has acted in contravention of the restraint
of trade covenant as defined and set out in the employment
(restraint) contract, and the only issue for determination is whether
the enforcement of such restraint would be reasonable. However,
and
where the parties are not on common ground in this regard,
determining whether the contract had been breached in the first
place
is not the same enquiry as determining whether the enforcement of a
restraint of trade is reasonable. This issue will be
dealt with in
this judgment, below.
[2]
In the current application, the applicant
has sought to enforce restraint of trade agreements against the first
to fifth respondents,
in the form of an interdict prohibiting these
respondents from utilizing the confidential information of the
applicant, and in
particular, from being employed with the sixth
respondent in this context. The applicant seeks final relief in this
regard. The
sixth respondent has been joined in the application, at
its own request, on the basis of having an interest in the matter,
and
due to the fact that it currently employs the first to fifth
respondents. The respondents have opposed the application.
[3]
The matter first came before me on 29
November 2019, where a number of preliminary issues were dealt with.
The applicant had brought
two separate applications for ultimate
final relief. The application against the first and second
respondents was brought under
case number J 2037 / 19, and the
application against the third to fifth respondents under case number
J 2096 / 19. Both these applications
were then consolidated into one
matter, and it was requested that the matter be disposed of on such
basis. Also, the sixth respondent
sought to intervene as an
interested party in the proceedings, as certain allegations were made
about its conduct and its motives,
by the applicant. This application
for intervention (joinder) was opposed by the applicant, and after
hearing argument by the parties,
I made an order granting the sixth
respondent leave to intervene as a party to the proceedings, and
directed that the founding
affidavit in its joinder application serve
as its answering affidavit in the applicant’s main application.
The current third,
fourth and fifth respondents also sought leave to
submit a further affidavit, following the filing of the applicant’s
consolidated
replying affidavit, and I granted such leave. Finally, I
gave the applicant leave to file a replying affidavit to the sixth
respondent’s
answering affidavit, which it did. The application
was then postponed to an agreed hearing date of 5 December 2019, for
argument
on the merits.
[4]
After hearing argument from all parties on
5 December 2019, I reserved judgment. What follows is my judgment in
this application.
[5]
Where
is comes to urgency, this was in reality not in issue when this
matter was argued. Very little was said in the course of argument
by
the parties as to the urgency of the matter. In particular, all the
parties appeared to be
ad
idem
that it was in the interest of all the parties that this matter be
finally disposed of with expedition, so all the parties know
where
they stand. Overall considered, I am satisfied that the applicant met
all the requirements of urgency in this matter.
[1]
The applicant became aware of what it considered to be a breach of
the first to fifth respondents’ restraint undertakings
in
separate restraint agreements concluded by them, at various point in
time in the course of October 2019. What followed was initial
letters
of demand sent to the various respondents and when this did achieve
the result the applicant wanted, the two applications
followed. This
course of action is appropriate, as it is advisable that parties
first try and find an alternative way to secure
compliance with the
restraint, before resorting to litigation.
[2]
Considering the nature of the relief sought, and the purpose sought
to be achieved by the enforcement of a restraint of trade,
there is
also no other form of substantial redress in due course.
[3]
Applications to enforce restraints of trade also carry with them an
inherent quality of urgency.
[4]
[6]
Further,
the applicant seeks final relief, and thus the applicant must satisfy
three essential requisites to succeed, being (a)
a clear right; (b)
an injury actually committed or reasonably apprehended; and (c) the
absence of any other satisfactory remedy.
[5]
I will now to deciding whether the applicant has satisfied these
requirements, by first setting out the relevant background facts.
The
factual matrix
[7]
Because
the applicant is seeking final relief in motion proceedings, any
factual dispute must be resolved in line with the normal
principles
established in
Plascon
Evans Paints v Van Riebeeck Paints
[6]
.
In summary, these principles entail that the facts as stated by the
respondent together with the admitted facts or facts in the
applicant’s founding affidavit that are not denied, constitute
the factual basis for making a determination, unless the dispute
of
fact is not real or genuine or the denials in the respondent's
version are bald or not creditworthy, or the respondent's version
raises such obviously fictitious disputes of fact, or is palpably
implausible, or far-fetched or so clearly untenable, that the
court
is justified in rejecting that version on the basis that it obviously
stands to be rejected.
[7]
Admitted facts include facts that, though not formally admitted,
simply cannot be denied.
[8]
The
factual matrix set out below is arrived at applying these
considerations.
[8]
For ease of reference in this judgment, I
will refer to the first respondent as ‘Van Der Merwe’,
the second respondent
as ‘Reinhardt’, the third
respondent as ‘Corne’, the fourth respondent as ‘De
Wet’, and the
fifth respondent as ‘Potgieter’.
Reference to the first to fifth respondents collectively will be made
by referring
to them as ‘the individual respondents’.
[9]
The applicant manufactures and distributes
personal protective clothing and safety equipment. The applicant
offers eight what is
called ‘head to foot’ protective
clothing ranges, and its customer base includes international and
local customers.
The applicant has two main local competitors, being
BBF Safety Group (Pty) Ltd, and the sixth respondent (‘Dromex’).
[10]
V
an Der Merwe commenced employment with the
applicant on 1 September 2017, Reinhardt on 14 November 2016, Corne
on 2 July 2018, De
Wet on 1 February 2016, and Potgieter on 12
September 2011.
[11]
All the individual respondents, save for
one of them, signed written contracts of employment. In terms of
clause 13 of these contracts
of employment, it was required that the
individual respondents sign a separate restraint of trade and
confidentiality agreement
(hereinafter referred to as the ‘restraint
agreement’).
[12]
Potgieter disputed that he ever concluded a
restraint agreement with the applicant. It is undisputed that the
applicant was unable
to produce such a signed document. The applicant
however contended that it is ‘standard practice’ that all
employees
must sign such a restraint agreement and Potgieter ‘would
have’ signed the same when he commenced employment. As to
all
of the other individual respondents, the applicant did produce signed
restraint agreements, which were all identical in form
and content.
Van der Merwe signed his restraint agreement on 12 September 2016,
Reinhardt on 14 November 2016, Corne on 12 July
2018, and de Wet on
14 December 2015.
[13]
The restraint agreement defined
‘
confidential information
’
as: ‘
Subject to clause 5, shall
mean all data, drawings, documentation, technical specifications,
formulae and formulations, processes,
trade secrets, know how,
accounts, computer readable data (including but not limited to any
software or program) and all information
in whatever form, tangible
or intangible, pertaining to the Business …
’.
In terms of clause 3.1 thereof, any information received by the
employee in confidence shall be deemed to be confidential
information, unless it is excluded in terms of clause 5. Clause 4
contains an obligation to keep all confidential information
confidential, and not to use or disclose any such information. Clause
5 provides that excluded from confidential information shall
be
information that is available to the general public or part of the
public domain, information that the employee is required
to disclose
pursuant to a legal obligation, information already in possession of
the employee prior to conclusion of the restraint
agreement, or
information where it is indicated by the employer that the
information is free of restriction.
[14]
Of importance in the current application is
clause 7 of the restraint agreement. It is the clause that deals with
restriction on
other employment. Considering the issues raised by the
respondents, it is important to specifically quote the relevant parts
thereof.
Clause 7.1 reads:
‘
The
Employee shall not, during the course of any other full or part time
employment, whether during the currency of this agreement
or
subsequent to its termination for whatever reason, use the
Confidential information in the conduct of that employment.
’
Next,
clause 7.2 provides:
‘
For
a period of one year after the term (sic) of the Employee’s
employment with AJC, the employee shall not accept employment
with
any third party if that employment is reasonably likely to require
the Employee to make use of any part of the Confidential
information.
’
[15]
Clause 7.3 applies where the employee
assists in the formation of or acquiring all or part of a business
that was reasonably likely
to compete with the business of the
applicant. This was not the case of the applicant in this matter, and
this clause thus would
not apply. In any event, Dromex was an
established and competitor to the applicant, and the respondents were
only employed by it
as employees and where not shareholders.
[16]
All of the individual respondents were
employed in the applicant’s sales department. Potgieter was the
sales manager, and
the other individual respondents were all sales
representatives. As sales manager, Potgieter managed a total of seven
sales consultants,
which included the other individual respondents.
[17]
Each sales representative was responsible
to sell the applicant’s protective clothing products in a
particular allocated area
/ region of South Africa allocated to such
sales representative. Their duties included the establishment,
development and maintenance
of relationships with customers, calling
on customers, generating new business, attending to customer queries,
and preparing and
submitting sales reports. The sales reports were
not in the form of detailed reports, but done by logging sales
activity on the
applicant’s Sales Force system, to which
everyone in the applicant had access. It is reports pulled from this
system that
is submitted to the applicant’s senior management.
[18]
Considering that all the individual
respondents in this case were responsible for all aspects of the
sales of the applicant’s
product, I will accept that they had
access to at least some confidential information relating to the
applicant’s customer
base and particulars, pricing, and
customer requirements. This would obviously include customer lists
and customer spending / order
patterns. However, the restraint
agreement did not contain an obligation prohibiting the exploitation
of trade connections by employees
upon leaving the employment of the
applicant.
[19]
According to the individual respondents,
they as sales representatives spent the bulk of their time ‘on
the road’ calling
on customers in their respective regions,
promoting the sales of the applicant’s products. Van der Merwe
and Reinhardt stated
that they spent ‘99%’ of their time
selling the electric and flash protective wear range, and the sales
activity included
‘sizing’ the employees of customers to
ensure that the products ordered were of the correct size.
[20]
The sales representatives were not involved
in the preparing and submission of tenders. This was the
responsibility of another employee
(Cindy Du Plessis) based at the
Johannesburg office of the applicant. The sales representatives also
did not develop any marketing
materials.
[21]
Importantly, the sales representatives did
not prepare quotes for customers. They only obtained information on
what the customer
needed to order, and these requirements were then
passed on to the applicant’s own internal sales department, who
would then
prepare the quote and send it directly to the customer.
Once the quote was accepted, it would mostly be passed on directly
the
applicant’s factory in Ladysmith, without even being sent
to the internal sales department. The sales representatives were
not
involved in determining or negotiating prices or discounts. Potgieter
was however in the position to determine discounts, but
this had to
be approved by senior management. The sales representatives however
did have access to internal price lists, so as
to give customers an
indication of the possible cost of the order. But these price lists
changed annually. The individual respondents
further stated that
these general price lists are in any event not secret, but readily
available in the market place, and the sales
representatives had no
knowledge of special pricing arranged with individual customers.
[22]
The individual respondents were not
involved in the design, development, or manufacture of the
applicant’s products in any
way. The fabric used by the
applicant is in any event not manufactured by the applicant, but
purchased from the same suppliers
overseas, as where other
competitors purchase their fabrics. The technical specifications of
the applicant’s products are
published on its web site. The
sales representatives also do not have access to any other kind of
technical information or specifications
relating to the applicant’s
product or business.
[23]
According to Van der Merwe and Reinhardt,
their relationship with the applicant started breaking down on
November 2018, when they
were short paid the actual commission that
was due to them. Potgieter and de Wet also complained about short
payment of commission
in November 2018. There was no reason for any
of these short payments, and they were never consulted by the
applicant on it. In
December 2018, there were unilateral deductions
made from the salaries of Van der Merwe, Rienhardt and Potgieter,
purportedly for
overpaid commissions and ‘unpaid leave’,
again without cause or reason, and without them being consulted. All
queries
brought to the applicant to explain all of these issues went
unanswered. Even the assistance of Potgieter as sales manager to try
and resolve this, proved fruitless. Corne’s complaint was that
he was appointed on a small basic salary for six months, after
which
he was supposed to have earned commission. He was however never put
on a commission structure. Despite attempts at resolving
this issue
for more than a year, it was never resolved. The answering affidavits
also referred to other abusive conduct of the
directors of the
applicant towards sales representatives in sales meetings and in
interactions with them, which according to them
rendered working
conditions intolerable.
[24]
As a result of all the difficulties
experienced by them, the individual respondents lodged a grievance.
In this grievance, complaints
were raised about unlawful deductions,
the changing of account codes on the system to house accounts so the
consultants do not
earn commission, and that the consultants were no
longer receiving back order reports so they could monitor commissions
due to
them, which were only paid upon completion of orders. The
applicant refused to engage with them about the grievance, prompting
a referral of a dispute to the Commission for Conciliation, Mediation
and Arbitration (‘CCMA’) on 19 August 2019.
[25]
Potgieter was dismissed on 22 August 2019.
According to the applicant, he was dismissed for ‘moonlighting’
for his wife’s
transport business (Bluefin Transporters) during
his hours of employment at the applicant and using the applicant’s
resources.
According to Potgieter, however, he was dismissed without
cause or reason, or any prior process, because he was seen to have
instigated
the grievance and being some kind of trouble maker. The
applicant in fact specifically said on reply that Potgieter
‘orchestrated’
this grievance. The individual respondents
viewed the dismissal of Potgieter as devastating. They looked up to
him, and believed
that he was the only one capable of protecting
their interests. It is at this point that they decided to leave the
employ of the
applicant, but this did not take place as a unitary or
concerted exercise.
[26]
It does appear from the evidence that after
referring the dispute to the CCMA, the applicant did engage with the
sales representatives,
and some of the difficulties raised were
resolved. Most of the sales representatives in fact withdrew the
grievance, even though
everything was not resolved. It however seemed
that the resentment remained.
[27]
Van Der Merwe resigned on 1 October 2019,
indicating that he did so with a heavy heart, but he had to stand up
for what was right
and what was wrong. He was referring to the
unresolved disputes referred to above. He accepted, only after
resigning, an offer
of employment made to him by Dromex, on 4 October
2019. Corne and De Wet also resigned on 1 October 2019, and were
offered and
took up employment with Dromex on 1 and 4 October 2019
respectively.
[28]
According to Reinhardt, he was ‘utterly
disillusioned’ with the applicant and resigned on 12 September
2019, stating
in his resignation that he did not know what his future
held for him in the applicant, that his loyalty had been tested, and
his
relationship with the applicant could not be recovered. He met
with the applicant’s directors on 25 and 26 September 2019,
where he explained all his difficulties, and they tried to convince
him not to resign, undertaking to resolve these difficulties.
He
considered their proposals, but in the end decided not to retract his
resignation. When Reinhardt resigned, he had no alternative
employment, and was offered and accepted employment with Dromex only
on 4 October 2019.
[29]
As touched on above, it was undisputed that
all the individual respondents ultimately became employed by Dromex
in the course of
October 2019. The applicant suggested that this was
part of some grand conspiracy, in which Dromex and all the individual
respondents
with Potgieter as their leader, conspired to in essence
hijack part of the business of the applicant for Dromex.
[30]
This allegation of a conspiracy is founded
on a recent decision of Dromex to actively enter the market with a
range of protective
clothing, protecting the wearer against
electrical arcs. According to the applicant, this mirrored the
applicant’s ‘Arc
range’. The applicant stated that
Dromex became active in selling these garments into the market place
some three to four
months prior to the individual respondents
becoming employed by it. According to the applicant, it thus had to
be more than pure
coincidence that such a significant part of the
applicant’s sales force would go across to Dromex at more or
less the same
time, and when Dromex was seeking to expand its
interest into this market. The applicant also made much of the fact
that Potgieter
was responsible for employing all the other individual
respondents, that they had some or other loyalty towards him, and
that this
loyalty was used to harm the applicant by taking away the
bulk of its sales force.
[31]
All the respondents disputed the existence
of such a conspiracy. Potgieter was dismissed, on the applicant’s
own version,
for misconduct which had nothing to do with advantaging
a competitor. The other sales representatives explained that they
resigned
because of payment disputes, and intolerable working
conditions. Most of the individual respondents resigned without even
having
been offered employment by Dromex. Reinhardt resigned before
Potgieter was even offered employment by Dromex.
[32]
In turn, Dromex has explained that it
developed and went to market with its own Arc protection products
long before the individual
respondents became employed by it, being
about three years earlier. Interestingly, it presented photographs
where it exhibited
virtually identical products in a stand right next
to the stand of the applicant, at an AOSH exhibition in May 2019.
Dromex has
always had its own design, standards and certification
department, managed by an employee with 17 years’ experience in
the
industry, and in the course of 2017 designed and tested its own
Arc protection products for itself. It only entered the market with
this product when it satisfied itself that it was up to standard. As
to customers, Dromex had its own established customers list,
several
of which it in fact shared with the applicant.
[33]
Dromex came to hear about the dismissal of
Potgieter on 24 August 2019, when it was informed of this by one of
its existing customers.
The customer indicated that Potgieter was a
‘good ambassador’ for Arc if Dromex was interested to
employ him. It was
then that Dromex came into contact with Potgieter,
who was still unemployed at the time. Potgieter then mentioned to
Dromex that
the other individual respondents were unhappy in their
employment at the applicant and intended resigning. Potgieter also
informed
Dromex that he did not have a restraint, but he was aware
that the other individual respondents (save for Corne who he could
not
recall having signed one) did have restraints.
[34]
Potgieter and Corne were only offered
employment by Dromex on 1 October 2019. It then considered the
restraint agreements of the
other individual respondents, and because
the restraint provision only prohibited employment if they were
likely to use confidential
information, it decided to employ them as
well, but only after first taking legal advice on the matter. The
reason given for the
decision to employ them was that Dromex had no
interest in any of the confidential information of the applicant, and
thus it was
satisfied that their employment was not prohibited if
each of these employees signed a warranty not to use confidential
information
and Dromex did not utilise any of the information of the
applicant (which it was in any event not interested in). The other
individual
respondents were then offered employment on 4 October
2019.
[35]
All the individual respondents, even
including Potgieter and Corne who disputed they were subject to a
restraint, gave warranties
that they would not utilize the
applicant’s confidential information, and this was provided to
the applicant. This was done
at the insistence of Dromex, who also
instructed them not to utilize any confidential information of the
applicant they may have.
[36]
The applicant made much in its affidavits
about the individual respondents sending what it considered to be
confidential information
to their private e-mail addresses or e-mail
addresses of spouses. On 3 October 2019, the applicant accessed the
work e-mail accounts
of the individual respondents. According to the
applicant, what it found proved that the individual respondents
breached their
confidentiality undertakings by sending customer
lists, product pricing, product specifications and sales reports, and
other forms
of confidential technical specifications to these e-mail
addresses, and then also deleting content from their work e-mail
accounts.
In summary, the particulars in this regard as alleged by
the applicant are as follows:
36.1
On 19 February 2019, Van Der Merwe sent two e-mails to his private
gmail address attaching images, fabric designs, styles,
colours,
weight and thickness of garments for a customer, Tshwane
Municipality. According to the applicant, this information is
relevant to the submissions of tenders. On 6 November 2017, he sent
the Tshwane tender documents to his wife’s e-mail address.
On
16 May 2018, he sent SANS 724 Survive Arc documents to his wife’s
e-mail address, which document relates to the national
standards for
personal protective equipment. There were also two further
e-mails sent to his wife’s e-mail address
on 12 March and 16
May 2018 respectively, attaching a new customer list and price list.
On 26 October 2017 he sent the ‘Black
Ginger’ quotation
to his wife’s email address. And finally, on 2 October 2019, he
sent to his wife’s e-mail address
a list containing the details
of the applicant’s customers.
36.2
Reinhardt forwarded two items to his personal e-mail address on 2 and
3 October 2019 respectively. The one item related to
information
concerning the Fabric Systems A and B of the applicant used in arc
protective clothing, dating back to November 2017,
whilst the other
document was a back order and invoicing schedule dating back to
January, March and April 2018.
36.3
Potgieter sent an e-mail to Reinhardt’s personal e-mail, prior
to him even commencing employment with the applicant,
containing
fabric particulars and a customer list, on 4 November 2016. On 16
January 2019, he sent a number of documents to his
wife’s
e-mail address. This included a customer list, a new product
development request from a customer (Sasol), prices quoted
by the
applicant to resellers who were in turn quoting Eskom for protective
clothing, and market research done by the applicant
for specific
provinces. On 25 January 2019, he sent an email to his wife’s
email address containing information about a customer,
Select PPE. He
sent an e-mail to De Wet on 28 January 2019 containing the invoicing
and back order reports for another sales representative,
Ria Louw.
[37]
Van der Merwe provided explanations for the
emails he sent to his wife’s personal email address. He
explained that the email
of 2 October 2019 was sent as being part of
the evidence he needed to pursue his claims for salaries due and
deductions made, which
was still not resolved. As to the other
emails, these dated back more than a year earlier, and were sent so
that his wife could
print the documents for him to use in the normal
execution of his duties, and in particular, meetings with customers.
He did so
because he spent most of his time on the road seeing
customers and did not always have time to go to the office to do the
printing,
so he simply did it at home. He also provided a
comprehensive explanation why a substantial part of this information
was in any
event not confidential. Lastly, he said that he only
deleted his private emails.
[38]
Reinhardt explained that when he accessed
his emails after he had decided not to retract his resignation, he
found that his email
account had been accessed by someone else and in
particular, the applicant had deleted all the information he had
therein about
back orders that had been placed prior to December
2018, being the period relating to his commission and deduction
dispute, which
had still not been resolved. He needed the back order
document as part of his proof in claiming back the deduction, and
that is
why he sent the back order document he still had to his
personal email on 2 October 2019. He explained that the Fabric
Systems
document sent on 3 October 2019 to his private email address
was sent in error, and information relating to these fabrics in any
event belong to suppliers and not the applicant. The emails he did
delete were of a personal nature.
[39]
Potgieter explained that he sent the
information contained in the email of 4 November 2016 to Corne,
before he actually started
working, so as to better prepare him even
before he started working. He also said that he sent some information
to himself as evidence
for his own unpaid commission and unlawful
deduction claim, as well as to support the grievance brought against
the applicant to
the CCMA. Other documents were sent to his wife for
the purposes of printing it out, as part of his preparation for his
2019 sales
strategy. He explained that the information he shared with
other sales representatives was a normal part of the duties of a
sales
manager providing information to sales representatives.
Potgieter also added that a lot of this information was simply
outdated,
of little use to a third party, and in fact not
confidential at all, giving proper explanations for these
contentions. Lastly,
Potgieter indicated that it was practice for
sales representatives to keep a hard copy of a list of all the
customers in their
region, to ensure that they did all their visits.
[40]
Van der Merwe and Reinhardt explained that
when they accepted employment at Dromex, it was made clear to them
that Dromex had no
interest in any confidential information of the
applicant they may have had. They were in fact required by Dromex to
sign a warranty
that they would not make use of such confidential
information. These warranties were given and also provided to the
applicant,
before it launched litigation.
[41]
According to the applicant, the individual
respondents received extensive sales and product training. The
individual respondents
dispute this, contending that they received
limited product training and very little general sales training. They
earned commission
only and were left very much up to their own
devices in discharging their duties of selling products to customers
in their respective
areas.
[42]
In the end, and in response to various
letters of demand emanating from the applicant’s attorneys, the
individual respondents
disputed that they were acting in breach of
the restraint agreements, and indicated that they would be willing to
provide undertakings
that they would not in any manner utilize any
confidential information they had access to whilst employed at the
applicant, but
were not willing to leave the employment of Dromex.
The applicant was unwilling to accept this state of affairs, leading
to the
current litigation.
Analysis
[43]
I will first deal with the dispute of fact
concerning the issue as to whether Potgieter in fact signed a
restraint agreement. As
said, no signed document could be produced by
the applicant. According to the applicant, the denial by Potgieter
that he signed
such an agreement was far-fetched to the extent that
it can be rejected, for a number of reasons. The first is that Claude
Langman
(‘Langman’), the HR manager at the applicant at
the time and who had since left, confirmed in correspondence to the
applicant that Potgieter signed such an agreement. The second is that
it was ‘standard practice’ that all employees
had to sign
such an agreement. The third is that because Potgieter was senior,
and he signed the restraint agreements of other
employees on behalf
of the applicant, he must have signed one himself. Finally, the fact
that a restraint agreement was contemplated
is evidenced by the
applicant’s rules requiring that employees must sign a
restraint agreement. According to the applicant,
Potgieter had access
to his personnel file and therefore he must have removed the signed
restraint agreement.
[44]
Potgieter candidly stated that he could not
recall exactly what he signed when he commenced employment. He stated
that he did recall
receiving a contract of employment. He however
disputed that he signed a restraint agreement and that one signed by
him even existed.
He added that if he signed the same, it is
inconceivable that the original and all copies would be lost.
Potgieter also pointed
out that there was an anomaly in the letter by
Langman confirming that he signed a restraint agreement, in that he
appeared to
consider the employment contract and restraint agreement
as one and the same document, when it was actually separate
documents.
He specifically disputed that he removed the restraint
agreement from his personnel file, calling the allegation ‘untrue
and opportunistic’ and without any factual basis. Finally, he
stated that he in any event did not have access to his personnel
file.
[45]
There accordingly exists a material and
directly contradictory dispute of fact. This being so, the
insurmountable difficulty
the applicant has is that the basis of
denial by Potgieter, in the absence of a signed document, is not so
unlikely or far-fetched
that it can be rejected on the papers. The
situation is exacerbated by the fact that Langman did not depose to a
confirmatory affidavit,
despite the applicant indicating in the
founding affidavit that it would be provided. In fact, and in the
consolidated replying
affidavit, the applicant had to concede that
Langman actually refused to sign a confirmatory affidavit. All that
the applicant
could then produce was a confirmatory affidavit by
Fiona Charnaud, one of the applicant’s directors and
shareholders, who
purportedly had a telephone discussion with Langman
in which he told her that Potgieter signed a restraint, which is not
only hearsay,
but entirely insufficient as establishing any kind of
proper proof of this allegation.
[46]
As to what possibly could have happened to
the signed restraint agreement of Potgieter, if it existed, the
applicant’s explanation
that Potgieter had access to his
personnel file, and thus must have removed the signed restraint
agreement, and is nothing but
pure speculation and without any
factual basis. It falls far short of establishing any kind of
legitimate basis to contradict Potgieter’s
denial in this
regard.
[47]
In my view, nothing that the applicant has
put up is sufficiently convincing to contradict the denial by
Potgieter that he ever
signed a restraint agreement, with the
applicant being unable to produce such a signed document. It is just
as probable, for example,
that the applicant omitted to have
Potgeieter sign a restraint agreement. There is no proper evidence of
any kind, with only pure
speculation, that Potgieter removed his
signed restraint agreement.
[48]
The
current matter has many similarities with the judgment in
TIBMS
(Pty)
Ltd t/a Halo Underground Lighting Systems v Knight and Another
[9]
.
In
TIBMS
,
the issue similarly was that the employee disputed having signed a
restraint of trade where such a signed document could not be
produced, and the employer contended, based on a number of factual
considerations, that this denial should be rejected. The facts
involved the employee being part of a plot to create a new competing
business, which would market and sell a competing product
using the
employee’s intimate knowledge of customers’ needs. The
Court called this ‘…
the
most egregious actions calculated to sabotage Halo’s
business…
’
[10]
.
According to the employer party, the missing signed restraint was
explained as follows:
[11]
‘
Bezuidenhout
says he can positively state the agreements indeed exist because he
signed them after being presented with them, bearing
the respondents’
signatures, in 2013. He offers a manifestly weak corroborating
affidavit by his sister, Fritz, who claims
she was present when the
documents, signed by the respondents, were bandied about. She does
not say when this occurred; supposedly,
sometime in 2013, some three
years prior to her recollection. Moreover, she does not hint at how
or why she might remember the
event after that elapse of time. In
addition, emphasis was placed on the common cause fact that in 2013,
fresh contracts for the
entire staff were composed, a point thought
to bolster the averment of the signing of restraint agreements at
that time. …
The
sole reason alleged by Bezuidenhout why the documents cannot be
produced is that the two respondents, in mid-October 2016, took
the
documents from the company records and destroyed them. …
’
[49]
The
employee party in
TIBMS
supra
answered the aforesaid contentions of the employer by disputing
the
existence of any restraint of trade agreement, in the form of firstly
raising points about the appearance of the draft unsigned
document
attached to the employer’s founding affidavit and suggesting
its provenance was in doubt, and secondly by ‘flatly’
denying the version of the employer concerning the destruction of the
signed document.
[12]
Whilst
the Court ultimately rejected the employee’s contention about
the draft unsigned document not being genuine,
[13]
it however held as follows:
[14]
‘…
Whilst
the denial of the existence of the agreements is not wholly
convincing, that is never sufficient, on paper, to justify an
outright rejection. The denial is not bald nor unsupported by
allegations of fact nor are the allegations of fact inherently
implausible.’
The
Court in
TIBMS
concluded:
[15]
‘
The
dispute of fact in this matter cannot be resolved on paper, even on a
robust approach, as whatever nuances may nibble at the
edges of
either version, neither can be dismissed out of hand. Credibility is
only capable of being addressed on paper when the
assertions are
palpably absurd or demonstrably false. The threshold that had to be
cleared is ‘wholly fanciful and untenable’.
Moreover, the
appetite to resolve paper contests by reference to the probabilities,
though ever present, is not appropriate. On
the allegations canvassed
on the record, the threshold was not cleared.
’
[50]
A similar fate must befall the applicant’s
case concerning the signature of a restraint agreement by Potgieter.
The significant
comparisons between the case advanced by the
applicant
in casu
and the case advanced by the employer in
TIBMS
supra
are undeniable. In particular,
there was reliance on a plot, a similarly weak supporting affidavit
deposed to by Fiona Chandler
of Potgieter having been seen signing a
restraint agreement, and the fact that it was required by the
applicant’s rules that
all employees must sign the restraint
agreement. However, and even worse than the case in
TIBMS
,
the applicant was unable to offer an actual explanation as to what
happened to the missing signed document, other than pure speculation.
None of the factors relied on by the applicant thus render the denial
by Potgieter that he ever signed such a document to be, as
said in
TIBMS
,
‘
palpably
absurd or demonstrably false
’.
[51]
Insofar
as the applicant may argue that probabilities establish that such a
restraint of trade was signed, it is not appropriate
to resolve
material disputes of fact in motion proceedings based on
probabilities.
[16]
In the end,
Potgieter raised a genuine dispute of fact that cannot be resolved on
paper, and as such, has to be decided in his
favour. As held in
Gbenga-Oluwatoye
v Reckitt Benckiser SA (Pty) Ltd and Another
[17]
:
‘…
In
the face of a real, genuine and bona fide dispute of facts put up by
the respondent, which amounted to a substantiated and clear
defence,
the Labour Court, on an application of the relevant principles, could
not properly have granted the relief sought by the
appellant. …’
[52]
I therefore conclude
that the applicant has failed to discharge the onus that rested upon
it to prove that Potgieter signed a restraint
agreement. On this
basis alone, the application as against Potgieter must fail.
[53]
This then leaves the restraint agreement
signed by all the other individual respondents. Whilst it is true
that Corne also disputed
signing the restraint agreement, stating
that he could not remember signing the document and alleging
impropriety where it comes
to the signed document actually produced
by the applicant, I do not intend to resolve this factual
controversy. I will simply accept,
simply based on the production of
the restraint agreement purportedly signed by Corne, that he did sign
a restraint agreement,
as a result of the basis upon which I have
decided to deal with all the restraint agreements in this judgment.
[54]
In my view, the applicant has unfortunately
shot itself in both feet where is comes to the proper interpretation
to be attached
to clause 7.2 of the restraint agreement. The clause
is, even generously considered, so poorly worded that it simply
cannot be
said that by taking up employment with Dromex, the
individual respondents acted in violation of this clause in the first
place.
The reasons for this conclusion now follow.
[55]
As
a matter of general principle, restraint of trade covenants should be
properly defined and worded. The employer should make it
clear what
conduct of an employee would be considered to be in violation of the
restraint undertaking. The cause / reason for the
restraint being
required should be identified in the agreement as well. For example,
most restraint clauses specifically prohibit
employment with a
competing employer and/or the solicitation of the custom of the
customers of the former employer. In the case
of such a properly
defined restraint, all the employer would need to show in order to
establish the
prima
facie
breach of the restraint is that the employee either took up
employment at a competitor or approached a customer of the employer
after leaving employment, or both. Once that is established, then
only does the reasonableness consideration relating to enforcement
thereof arise, which was set out in
Ball
v Bambalela Bolts (Pty) Ltd and Another
[18]
as follows:
‘
... the
reasonableness of a restraint could be determined without
becoming embroiled in the issue of onus. This could be done
if
the facts regarding reasonableness have been adequately explored in
the evidence and if any disputes of fact are resolved in
favour of
the party sought to be restrained. If the facts, assessed as
aforementioned, disclose that the restraint is reasonable
then
the party, seeking the restraint order, must succeed, but if those
facts show that the restraint is unreasonable, then the
party, sought
to be restrained, must succeed. …’
[56]
In
short, the logical sequence that applies in the case of an employer
(the applicant) seeking to enforce a restraint against an
employee,
is to firstly prove the existence of a restraint obligation that
applies to the employee. Secondly, and if a restraint
obligation is
shown to exist, the employer must prove that the employee acted in
breach of the restraint obligation imposed by
the restraint. Finally,
and once the breach is shown to exist, the determination then turns
to whether the facts, considered as
a whole, show that the
enforcement of the restraint would be reasonable in the
circumstances. The reasonableness enquiry, once
applicable, involves
answering five questions, being whether a party has an interest that
deserves protection after termination
of the agreement, is that
interest threatened by the other party, does such interest weigh
qualitatively and quantitatively against
the interest of the other
party not to be economically inactive and unproductive, is there an
aspect of public policy having nothing
to do with the relationship
between the parties that requires that the restraint be maintained or
rejected, and whether the restraint
goes further than necessary to
protect the relevant interest.
[19]
[57]
As dealt with above, the applicant failed
at the first hurdle where it came to Potgieter, being unable to prove
the existence of
a restraint obligation. Next, and insofar as it
concerns the other individual respondents, and before it can even be
considered
whether or not the restraint as contained in clause 7.2 of
the restraint agreement is reasonable or unreasonable, it must be
established
whether the employment of the individual respondents with
Dromex contravened (breached) the clause in the first place. It is in
this respect where the applicant’s case unfortunately goes off
track. In effect, the applicant tries to establish a breach
of the
restraint by focussing on establishing that it has a protectable
interest and that this interest has been breached by the
individual
respondents’ employment with Dromex. That is putting the cart
before the horse, for the simple reason that if
the restraint
obligation in terms of clause 7.2 does not prohibit employment with
Dromex in the first place, the issues of evaluating
whether the
applicant has a protectable interest or whether such interest is
being infringed simply do not arise. In short, the
reasonableness
determination cannot serve to establish a breach, but it is the
breach that leads to the reasonableness enquiry.
[58]
The
point can perhaps be best illustrated by way of proper example. A
protectable interest in a restraint of trade can be found
in one or
both of two considerations, being confidential information (trade
secrets), or trade connections.
[20]
In
Labournet
(Pty) Ltd v Jankielsohn and Another
[21]
the Court held:
‘…
A
restraint is only reasonable and enforceable if it serves to protect
an interest, which, in terms of the law, requires and deserves
protection. The list of such interests is not closed, but
confidential information (or trade secrets) and customer (or trade)
connections are recognised as being such interests. …’
In
casu
, it was undisputed that clause 7.2
of the restraint agreement contains no trade connection protection
obligation. So, and in simple
terms, if any of the individual
respondents took up employment with Dromex and sought to call upon
the customers they dealt with
whilst employed at the applicant, to
solicit their custom for and on behalf of Dromex, this would not be
prohibited by the restraint
obligation in the first place. It follows
that it is then simply not necessary to determine whether it is
reasonable to protect
that which is not prohibited.
[59]
It
is thus critical to determine exactly what obligation is imposed on
the individual respondents by clause 7.2 of the restraint
agreement.
This determination calls for a proper interpretation of the restraint
agreement. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[22]
the Court said:
‘…
Interpretation
is the process of attributing meaning to the words used in a document
… having regard to the context provided
by reading the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon
its coming into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light
of the ordinary rules of grammar
and syntax; the context in which the provision appears; the apparent
purpose to which it is directed
and the material known to those
responsible for its production. Where more than one meaning is
possible each possibility must be
weighed in the light of all these
factors. The process is objective, not subjective. A sensible meaning
is to be preferred
to one that leads to insensible or
unbusinesslike results or undermines the apparent purpose of the
document. …’
[60]
Having
referred with approval to the above
dictum
in
Endumeni
Municipality,
the
Court in
Bothma-Batho
Transport (Edms) Bpk v S Bothma en Seun Transport (Edms) Bpk
[23]
added the following:
‘…
. Whilst
the starting point remains the words of the document, which are the
only relevant medium through which the parties have
expressed their
contractual intentions, the process of interpretation does not stop
at a perceived literal meaning of those words,
but considers them in
the light of all relevant and admissible context, including the
circumstances in which the document came
into being. The former
distinction between permissible background and surrounding
circumstances, never very clear, has fallen away.
Interpretation is
no longer a process that occurs in stages but is 'essentially one
unitary exercise'.
[61]
Applying
the approach as set out above, and considering the restraint
agreement as a whole, I accept that ‘confidential information’
as defined in the restraint agreement may include information
concerning identities, particulars, requirements, pricing, and
contact
persons, of the applicant’s customers, that were dealt
with by the individual respondents during their course of employment
with the applicant. Such an interpretation would in any event be in
line with the legal position that this kind of information
can be
seen to be confidential information susceptible to protection under a
restraint of trade.
[24]
[62]
However,
the definition of ‘confidential information’ should not
be considered in isolation. It must apply in a proper
context. The
context must be that it is confidential information as part and
parcel of a restraint obligation. It must be information
that, as
said in
Labournet
supra
,
[25]
that meets the following qualifications:
‘
It
is well-accepted that for information to be confidential ‘it
must
(a)
be capable of being applicable in trade or industry, that is, it must
be useful; not be public knowledge and property; and
(b)
it must be known only to a restricted number of people or a closed
circle, and
(c)
be of economic value to the person seeking to protect it’
[63]
It is in this context that clause 7.2 is
fraught with shortcomings where it comes to establishing a basis of
an obligation relating
to confidential information. First and
foremost, the clause does not prohibit employment of the employee
with a competitor. Secondly,
the clause does not protect against the
exploitation of trade connections or impose any obligation on the
individual respondents
in this regard. Therefore, and as a matter of
principle, clause 7.2 as it stands, permits as a point of departure,
the employment
of the individual respondents with Dromex, and does
not stand in the way of the individual respondents soliciting the
custom of
the applicant’s customers. So, and as a simple
example, if the individual respondents took up employment with Dromex
and
solicited the custom of the applicant’s customers using the
personal knowledge of and close working relationship they built
up
whilst employed at the applicant, there is nothing the applicant
could do about it.
[64]
The protection afforded by clause 7.2 only
applies if the applicant can show that the individual respondents, in
the course of their
employment with Dromex, was ‘
reasonably
likely to require
’ the employee
to make use of confidential information. This cannot include relying
on the existence of trade connections
or customer relationships,
which is an issue distinct and separate from confidential
information. It follows that the applicant
has to prove, on the
facts, that the individual respondents were possessed of confidential
information that would be of use and
value to Dromex and which
information would likely be utilized by the individual respondents in
executing their duties as sales
representatives with Dromex.
[65]
In
seeking to prove such a case, the thrust of the applicant’s
case is focussed on the individual respondents forwarding what
it
described as confidential information to either their private e-mail
addresses or the e-mail addresses of family members. The
applicant’s
confidential affidavits set out in detail the information, which I
have dealt with above. In my view, and even
considering the
applicant’s own version, this quest for confidential
information to rely on seemed to be closer than a witch
hunt to try
and justify a case against the individual respondents, than genuine
concerns. This is evident from the fact that a
bulk of the
information dates back more than a year, and appears even on face
value outdated. The lapse of time diminishes the
value of
confidential information.
[26]
[66]
In
any event, the individual respondents have provided proper
explanations, with sufficient particularity attached to those
explanations,
for this conduct. This included gathering evidence for
their unpaid commission and deduction claims and the grievance, and
for
printing documents at home to be used in the normal execution of
their duties on the road. In my view, there is nothing implausible
or
far-fetched or so unlikely in these explanations offered, which can
justify a conclusion that it must be rejected.
[27]
Most of the explanations actually make sense, and certainly do not
constitute mere bald denials. Even if this
modus
operandae
adopted by the individual respondents in sending these kind of
documents to other e-mail addresses is open to criticism, it simply
does not follow that it was done with the intention to in effect
misappropriate this information from the applicant, which is what
the
applicant actually suggests.
[28]
[67]
In the end, I consider all these e-mails
sent by the individual respondents, as referred to above, as nothing
more than a red herring,
which simply does not assist the case of the
applicant. It serves as camouflage, by trying to attach a clandestine
and malicious
intent to the individual respondents so they can be
visited with censure, and so in effect hide the patent shortcomings
in the
restraint itself. The individual respondents are sales
representatives. They sell protective clothing to customers. The
restraint
needed to prohibit their employment with a competitor such
as Dromex per se, or at the very least prohibit them from soliciting
the custom of the customers they dealt with whilst employed at the
applicant. A general confidentiality undertaking in this context
simply cannot serve to prohibit the employment of the individual
respondents with Dromex.
[68]
For
the same reason relating to the application of the
Plascon
Evans
test as set out above, the is no reason to reject the explanation
offered by the individual respondents that they simply did not
have
access to, nor dealt with, so-called technical information. They were
not involved in manufacturing, design, quality or any
trade secrets
relating to the applicant’s protective clothing range.
[29]
They only knew what was necessary to sell it, which is information
that is in the public domain in any event. Further, and considering
Dromex had already developed its own Arc product range long
beforehand, which is primarily at stake in this case, and long before
the individual respondents joined it, no information in this regard
the individual respondents may have will be of any use or value
to
Dromex. I also take into account the nature of the product, and the
fact that the applicant does not manufacture its own materials
with
all competitors in effect buying from the same suppliers. In
Jonsson
Workwear
(Pty) Ltd v Williamson and Another
[30]
this Court also dealt with an application to enforce a restraint of
trade brought by an employer in the workwear industry, which
is
comparable to the business of the applicant
in
casu
.
The employer in
Jonsson
supra
raised
similar issues as to the employee having access to confidential
information, as raised by the applicant in the current matter.
The
Court held:
[31]
‘
The
nature of clothing is such that it is not possible to keep as
'confidential' any makeup of the clothing. As the first respondent
points out, anyone in the clothing industry can take any garment and
readily and easily determine how it was made and what materials
have
been used. Added to this is the fact that once the clothing is sold,
it is in the public domain and cannot attract any 'confidentiality'
thereafter, even if it is accepted that it had some or other form of
confidentiality in the first place.
’
[69]
But whatever current confidential
information the individual respondents may have had in their
possession when joining Dromex, this
is entirely mitigated by the
undertakings given by them in this regard, as set out above. All the
individual respondents confirmed
in writing that they had not in any
way utilized the applicant’s confidential information, nor did
they intend to ever do
so. Van Der Merwe and Reinhardt confirmed on
affidavit that they had returned all property and information of the
applicant they
had in their possession, to the applicant. Added to
this, and even though there would be no obligation on it to do so,
Dromex has
made common cause with these undertakings, and confirmed
that it will not require the individual respondents to utilize any
confidential
information they may have about the applicant. In my
view, that is a complete answer to any allegation of breach of the
obligation
the individual respondents may have in terms of clause 7.2
of the restraint agreement.
[70]
The
applicant contended that it could not be expected of it to trust the
respondents’ undertakings not to use the confidential
information, and in effect ‘cross its fingers’ and hope
for compliance. No doubt, this argument is based on the many
authorities to the effect that an employer cannot be expected to
trust an undertaking by an employee who already has acted in
contravention of a restraint obligation and that the providing of an
undertaking in such circumstances cannot avoid the enforcement
of the
restraint.
[32]
The current
matter is however different, because there is no breach of the
restraint obligation in the first place. In the case
where a
restraint has been breached, the undertakings given cannot remedy the
breach and an employer would be justified in not
trusting an
undertaking by an employee that has already breached. In such a case,
the undertaking at best would simply be part
and parcel of the
reasonableness evaluation. However and where it must be decided if a
breach exists in the first place, as is
the case
in
casu
,
such undertakings can legitimately serve to prove that no breach
exists. This is the unfortunate result of the manner in which
the
restraint obligation is defined in the restraint agreement in the
current matter.
[71]
The
above being said on the facts, it is my view that from a principle
point of view, one has to ask what possible value can confidential
information about customer particulars, pricing, or buying patterns
have ,if it does not go hand in hand with a trade connection
protection restraint covenant? Surely, and considering that it is the
primary duty of a sales representative to establish, maintain,
and
cultivate a close working relationship with customers, it has to be
logical that any information in this regard is in the head
of the
sales representative, so to speak. This information cannot be
extracted out of the mind of the sales representative, and
attaches
to him or her as a person.
[33]
As said in
Rawlins
and another v Caravantruck (Pty) Ltd
[34]
:
‘…
Much will
depend on the duties of the employee; his personality; the frequency
and duration of contact between him and the customers;
where such
contact takes place; what knowledge he gains of their requirements
and business; the general nature of their relationship
(including
whether an attachment is formed between them, the extent to which
customers rely on the employee and how personal
their
association is); how competitive the rival businesses are; in the
case of a salesman, the type of product being sold …’
[72]
Where it comes to protecting a customer
base, the confidential information must be tied to a non-solicitation
restraint obligation.
To describe it as simply as possible, if there
is nothing prohibiting the sales representative from pursuing the
customers he or
she dealt with, after taking up employment at his or
her new employer, what point can the protection of customer
information possibly
serve? In short, the value of the information is
directly linked to the obligation associated with it. If there is no
obligation,
then there can be no commercial value attached to the
information, thereby rendering it confidential. That is why the
existence
of a protectable interest is evaluated, in the case of the
prohibition of employment with a competitor, based on the
confidential
information the employee had access to and had knowledge
of, or in the case of prohibition of solicitation of the custom of
customers,
based on the existence of protectable trade connections.
[73]
In casu
,
employment of the individual respondents with Dromex is not
prohibited, nor is solicitation of custom of the customers of the
applicant. It follows that here can be no breach of the restraint
agreement where it comes to customer information. That has to
be the
common sense, businesslike and sensible interpretation, with the
restraint agreement being holistically considered, based
on the
actual language of clause 7.2.
[74]
I
accept that the situation may have been different if the individual
respondents were employed in the echelons of senior management
where
business strategies and sensitive business and financial information
are formulated, assessed, evaluated, decided, and strategic
business
decisions are made.
[35]
The
employment of an employee who occupied such a position in a
comparable position with a competitor such as Dromex, may well
make
it reasonably likely that the employee will be called upon to utilize
such information. In my view, what was envisaged by
clause 7.2 of the
restraint agreement was this kind of scenario. There was no intention
to protect a customer case. It is evident
from the definitions of
‘confidential information’ which specifically identifies
the kind of information normally associated
with these kind of
occupations (positions). The lack of any specific reference to
customer information in the definition is telling.
This
interpretation is also apparent from a consideration of clause 7.3,
which prohibits acquiring or establishing a competing
business, and
evaluating it in conjunction with clause 7.2.
[75]
However,
none of the individual respondents occupied the kind of positions as
set out above. They were simply a sales manager with
a team of sales
representatives, doing what all sales persons ordinarily do. There
would be no need to impart on them the kind
of strategic, financial
and proprietary information that could possibly bring the prohibition
in clause 7.2 into play. The individual
respondents have in any event
denied having access to any of this kind of confidential information
and applying the provisions
of the
Plascon
Evans
test, there is no basis upon which to gainsay this denial. Comparable
is the following
dictum
in
Labournet
supra
:
[36]
‘
Jankielsohn
did not just baldly deny that he had access to confidential
information, but he explained in the context of the nature
of his
duties, why he did not have and did not require such access. He
states in effect that the confidential information was information
in
the possession of ‘the proprietors’ of Labournet’s
business and was never imparted to him. He states that
all the
documents that were used while he was in the employment of Labournet
were retrieved from the Internet and they were thus
available to the
public. Bearing in mind his relatively junior employment status, his
version cannot be rejected as ‘far-fetched’
or ‘clearly
untenable’ or
‘
palpably
implausible
’.
His work was to render relatively basic kinds services to clients of
Labournet — as were assigned to him by his managers
…
’
[76]
This
only leaves the issue of the conspiracy. I am alive to the
respondents’ complaint that this was raised for the first
time
by the applicant on reply, but I will nonetheless, for the sake of
being complete, consider it.
[37]
That being said, what is on face value an appealing argument by the
applicant, fades into nothingness upon a proper consideration
of the
facts in this case. I accept the version by Dromex on how it came to
offer employment to Potgieter after he had been dismissed
by the
applicant in August 2019. This had nothing to do with Dromex
conducting an all-out pursuit of the applicant’s sales
force to
get its new Arc product range going off the back of the applicant’s
business and customer base. It was in fact a
third party that drew
Dromex’s attention to the fact that Potgieter was no longer
employed by the applicant and available.
Potgieter did not even seek
out employment at Dromex. It may well be that after becoming employed
with Dromex, Potgieter appeared
to be instrumental in Dromex offering
employment to his former sales team at the applicant. However, there
was nothing prohibiting
this.
[38]
[77]
I also take a dim view of a completely
absurd allegation made by the applicant in the founding affidavit in
the application relating
to the third, fourth and fifth respondents,
to the effect that Potgieter ‘
hired
his bulle
’ (referring to the
other individual respondents) from the outset to ‘
purposefully
and progressively
’ harm the
applicant. As Potgieter explained, he in the past thought the
applicant was a ‘happy and comfortable’
place to work,
and would always recommend employment there, but this unfortunately
changed in 2018 / 2019, resulting in an exodus
of staff. This
allegation of impropriety by the applicant is simply ridiculous and
without foundation, and shows the lengths the
applicant would go to
in order to create a case.
[78]
All the individual respondents explained
that they were dissatisfied with their working conditions at the
applicant. There were
issues with their commission paid and payable.
They also explained that they were a close nit group, and viewed
Potgieter as their
mentor. Each individual respondent explained that
he of his own accord decided to resign from the employment of the
applicant,
because they were not willing to work there any longer.
The motivation for their resignations were not to take up employment
with
Dromex. Most of them resigned without an actual offer of
employment from Dromex in place. Reinhardt and Corne in any event
resigned
before Potgieter even took up employment at Dromex. There is
simply nothing untoward in these versions necessitating rejection of
the same, and these versions effectively dispel the notion of some
grand conspiracy. It should also be considered that there were
about
40 resignations from the applicant in the last two years, giving some
support to the individual respondents’ view of
intolerable
working conditions.
[79]
Therefore, and where it comes to the
individual respondents other than Potgieter, the applicant has been
unable to prove that these
respondents acted in contravention of the
restraint agreement by taking up employment at Dromex. The restraint
agreement does not
prohibit such employment, per se, and it is simply
not reasonably likely that the individual respondents would utilize
any of the
applicant’s confidential information in the course
of the discharge of their duties as sales representatives at Dromex.
The
situation is exacerbated by the material shortcomings in the
restraint provision itself, which failed to put the necessary
prohibitions
in place.
[80]
I am convinced that what the applicant was
trying to do is to prevent the individual respondents from exploiting
the trade connections
they obtained in the course of their employment
with the applicant, in favour of their new employer, Dromex. Due to
the material
inadequacy of the applicant’s own restraint
agreement, the applicant however failed to provide for this
eventuality. The
current applications are nothing but a contrived
process to achieve this result, and so cover for this failure. This
cannot be
ascribed to.
[81]
For all the reasons as set out above, the
applicant’s applications must fail, without the need to
consider whether or not
the enforcement of the restraint agreement
would be reasonable, for the simple reason that there was no breach
of the same in the
first place.
Conclusion
[82]
In summary, and firstly, the applicant has
failed to prove that Potgieter signed a restraint agreement, and as
such, he has no restraint
obligations towards the applicant. Secondly
and as to the other individual respondents, the applicant has failed
to prove that
the current employment of these respondents with Dromex
constitute a breach of the restraint obligations as contained in
their
respective restraint agreements. In the end, the applicant only
has itself to blame for the predicament it finds itself in. The
restraint obligation it sought to rely upon was poorly drafted,
entirely deficient, and susceptible to being defeated by the
provision
of the undertakings such as those provided by the
individual respondents in this instance. The applicant’s case
thus does
not come out of the starting blocks, and it is therefore
not necessary to even consider whether enforcement of the restraint
agreement
would be reasonable. As matters stand, the applicant’s
consolidated application falls to be dismissed.
[83]
However, and when this matter was argued,
counsel for all the individual respondents indicated that the
individual respondents,
despite the basis of their attack on the
enforcement of the restraint agreements, were willing to agree to an
order interdicting
and restraining them from using the applicant’s
confidential information or imparting it to any person for any
purpose whatsoever.
This was basically just an extension of the
warranty and undertakings already given. In my view, this gesture of
good faith is
the best the applicant can get in this case. If the
respondents are prohibited of their own volition from utilizing the
confidential
information of the applicant, there would be nothing
standing in the way of their continued employment with Dromex. I
shall therefore
grant such an order.
[84]
Finally, there is the issue of the interim
relief granted by Mahosi J and Baloyi AJ respectively, under case
numbers J 2037 / 19
and J 2096 / 19. This relief falls to be
discharged as a result of the final determination of the applicant’s
consolidated
application in this judgment.
Costs
[85]
This
then leaves only the issue of costs. There is no reason why costs
should not follow the result, for the reasons to follow.
Firstly, all
parties suggested that costs follow the result. However, and despite
this position adopted by the parties, I must
nonetheless exercise the
wide discretion I have in terms of section 162(1) where it comes to
costs.
[39]
In this case, I
consider the fact that the applicant’s application was faced
with a number of challenges from the outset
due to the poor and
defective nature of the restraint provisions in the restraint
agreements, and should in reality not have been
pursued by the
applicant. Also, and as far as I am concerned, the real reason for
the application was to stifle competition, and
not really to protect
a legitimate protectable interest, which simply did not exist because
there was no breach in the first place.
Another factor is that the
applicant sought to substantially supplement its case on reply, which
is deserving of some censure.
Finally, the applicant should have
given serious consideration to not proceeding with this matter, after
Dromex had filed its answering
affidavit. Overall considered, this is
a case where fairness dictates that the respondents should have their
costs.
[86]
For all the reasons as set out above, I
make the following order:
Order
1.
The applicant’s applications are
heard as one of urgency.
2.
The application against the fifth
respondent, Jooste Potgieter, is dismissed.
3.
The first, second, third and fourth
respondents are interdicted and restrained from using the applicant’s
confidential information
or disclosing or imparting it to any person
for any purpose whatsoever.
4.
Save only for the order granted in terms of
paragraph 3 of this order, the applicant’s applications against
the first, second,
third and fourth respondents are dismissed.
5.
The interim order granted by Mahosi J on 11
October 2019 under case number J 2037 / 19 is discharged.
6.
The interim order granted by Baloyi AJ on
28 November 2019 under case number J 2096 / 19 is discharged.
7.
The applicant is ordered to pay the costs
of the respondents, which shall include the costs associated with the
applications for
interim relief.
_____________________
S Snyman
Acting Judge of the
Labour Court of South Africa
Appearances:
For the Applicant:
Advocate I Miltz SC together with Advocate S Schwartz
Instructed by: Cliffe
Dekker Hofmeyr Inc Attorneys
For the First and Second
Respondents: Advocate P
Bosman
For the Third to Fifth
Respondents: Advocate A J
Daniels SC together with Advocate
C T Vetter
Instructed by: Shepstone
& Wylie Attorneys
[1]
For the requirements of urgency see
Association
of Mineworkers and Construction Union and Others v
Northam
Platinum
Ltd and Another
(2016)
37 ILJ 2840 (LC) at paras 20 – 26, and in particular where it
comes to restraint of trade applications
Vumatel
(Pty) Ltd v Majra and Others
(2018)
39 ILJ 2771 (LC) at paras 4 – 5;
Ecolab
(Pty) Ltd v Thoabala and Another
(2017)
38 ILJ 2741 (LC) at para 20.
[2]
In
Continuous
Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes and Another
(2012)
33 ILJ 629 (LC) at para 21 it was said that: ‘…
In
my view, litigants should be encouraged in any attempt to avoid
litigation, rather than rushing to court as a first option.
Litigation is costly and often unnecessary. …
’
[3]
See
Maqubela
v SA Graduates Development Association and Others
(2014)
35 ILJ 2479 (LC) at para 32;
Transport
and Allied Workers Union of SA v Algoa Bus Co (Pty) Ltd and Others
(2015) 36
ILJ
2148 (LC) at para 11.
[4]
See
Mozart
Ice Cream Classic Franchises (Pty) Ltd v Davidoff and Another
(2009)
30 ILJ 1750 (C) at 1761;
Vumatel
(
supra
)
at para 4.
[5]
Setlogelo
v Setlogelo
1914 AD 221
at 227;
V
& A Waterfront Properties (Pty) Ltd and Another v Helicopter &
Marine Services (Pty) Ltd and Others
2006 (1) SA 252
(SCA) para 20. In particular, and where it comes to
restraint applications, see
Esquire
System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé
and Another
(2011) 32 ILJ 601 (LC) at para 38 – 40;
Continuous
Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes and Another
(2012) 33 ILJ 629 (LC) at para 26;
Experian
SA (Pty) Ltd v Haynes and Another
(2013) 34 ILJ 529 (GSJ) at para 59;
Jonsson
Workwear (Pty) Ltd v Williamson and Another
(2014) 35 ILJ 712 (LC) at para 54;
FMW
Admin Services CC v Stander and Others
(2015) 36 ILJ 1051 (LC) at para 1.
[6]
[1984] ZASCA 51
;
1984
(3) SA 623
(A) at 634E 635C.
[7]
See
Jooste
v Staatspresident en Andere
1988
(4) SA 224
(A)
at
259C – 263D;
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009
(2) SA 277
(SCA)
paras
26 – 27;
Thebe
Ya Bophelo Healthcare Administrators (Pty) Ltd and Others v National
Bargaining Council for the Road Freight Industry and
Another
2009
(3) SA 187
(W) para 19;
Molapo
Technology (Pty) Ltd v Schreuder and Others
(2002) 23 ILJ 2031 (LAC) para 38;
SA
Football Association v Mangope
(2013)
34
ILJ
311 (LAC)
at
para 12.
[8]
Gbenga-Oluwatoye
v Reckitt Benckiser SA (Pty) Ltd and Another
(2016)
37 ILJ 902 (LAC) at para 16.
[9]
(2017)
38 ILJ 2721 (LAC).
[10]
Id at para 8.
[11]
Id at paras 15 – 16.
[12]
Id at para 17.
[13]
Id at para 18.
[14]
Id at para 26.
[15]
Id at para 29.
[16]
See also
Buffalo
Freight Systems (Pty) Ltd v Crestleigh Trading (Pty) Ltd and
Another
2011
(1) SA 8
(SCA)
at
para 20.
[17]
(2016)
37 ILJ 902 (LAC) at para 20.
[18]
(2013)
34 ILJ 2821 (LAC) at para 14. See also
Reddy
v Siemens Telecommunications (Pty) Ltd
(2007)
28 ILJ 317 (SCA) at para 14;
Labournet
(Pty) Ltd v Jankielsohn and Another
(2017) 38 ILJ 1302 (LAC) at para 40.
[19]
See
Basson
v Chilwan and Others
[1993] ZASCA 61
;
1993
(3) SA 742
(A) at 767G-H;
Jonsson
(
supra
)
at para 44;
Medtronic
(Africa) (Pty) Ltd v Van Wyk and Another
(2016)
37 ILJ 1165 (LC)
at
para 15;
Esquire
(
supra
)
at paras 50 – 51;
Labournet
(
supra
)
at para 42;
Vox
Telecommunications (Pty) Ltd v Steyn and Another
(2016) 37 ILJ 1255 (LC) at paras 28 – 29
.
[20]
Dickinson
Holdings Group (Pty) Ltd and Others v Du Plessis and Another
(2008) 29
ILJ
1665 (N)
at
para 32;
Basson
(supra) at
769
G – H;
Bonnet
and Another v Schofield
1989
(2) SA 156
(D) at 160B-C
;
Hirt
and Carter (Pty) Ltd v Mansfield and Another
(2008)
29 ILJ 1075 (D) at para 37;
Esquire
(
supra
)
at para 27;
Sibex
Engineering Services (Pty) Ltd v Van Wyk and Another
1991
(2) SA 482
(T)
at
502E-F;
Medtronic
(
supra
)
at para 16 – 17;
FMW
(supra)
at para 36;
Vox
(
supra
)
at para 30.
[21]
(2017)
38 ILJ 1302 (LAC) at para 41.
[22]
2012
(4) SA 593
(SCA) at para 18.
[23]
2014
(2) SA 494
(SCA) at para 12.
[24]
See
SPP
Pumps (SA) (Pty) Ltd v Stoop and Another
(2015)
36 ILJ 1134 (LC)
at para 37;
Ball
(
supra
)
at para 20;
Continuous
Oxygen
(
supra
)
at para 40.
[25]
Id at para 48. See also
Esquire
(
supra
)
at
para 29;
Experian
(
supra
)
at para 19;
Jonnson
(
supra
)
at paras 46 – 49.
[26]
See
Vumatel
(
supra
)
at para 38.
[27]
Compare
Jonsson
(
supra
)
at para 11.
[28]
Compare
TIBMS
(
supra
)
at para 27.
[29]
Compare
Jonsson
(
supra
)
at para 38.
[30]
(2014)
35 ILJ 712 (LC).
[31]
Id at para 29.
[32]
See
Ball
(
supra
)
at para 22;
Reddy
(
supra
)
at para 20;
Medtronic
(Africa)
(Pty) Ltd v Kleynhans and Another
(2016)
37 ILJ 1154 (LC)
at
para 40.
[33]
See
Den
Braven SA (Pty) Ltd v Pillay and Another
2008
(6) SA 229
(D) at para 15 where the Court held: ‘…
Mr
Pillay's simple response in his affidavit is to say that he is an
excellent salesman. No doubt that is true and it is equally
true
that he is entitled to take his qualities and skills as a salesman
to another employer …
’
[34]
[1992] ZASCA 204
;
1993
(1) SA 537
(A) at 541D-I. See also
Esquire
(
supra
)
at
para
27;
Continuous
Oxygen
(
supra
)
at paras 34 – 36;
FMW
(
supra
)
at para 45.
[35]
See
L'Oreal
South Africa (Pty) Ltd v Kilpatrick and Another
(J1990/2014)
[2014] ZALCJHB 353 (16 September 2014) at paras 25 and 76;
Stratosat
Datacom (Pty) Ltd v Vermaak and Another
(J583/2018) [2018] ZALCJHB 203 (14 June 2018) at para 53.
[36]
Id at para 49.
[37]
See
Jonsson
(
supra
)
at para 20.
[38]
Normally, restraint of trade covenants contain a prohibition on the
former employee seeking to solicit the employment of other
employees
at his or her erstwhile employer, for the new employer. The
restraint agreement
in
casu
contained no such prohibition.
[39]
See
Long
v SA Breweries
(Pty)
Ltd and Others
(2019)
40 ILJ 965 (CC) at paras 28 – 29.