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[2020] ZALCJHB 254
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Airconduct CC v Dunn and Another (J442/20) [2020] ZALCJHB 254 (18 May 2020)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case no: J442/20
In the matter between:
AIRCONDUCT
CC
Applicant
and
DUNN,
DIVAN
First
Respondent
DUCT FOR AFRICA (PTY)
LTD
Second
Respondent
Heard:
4 June 2020
Delivered:
This judgment was handed down electronically by circulation to the
parties' legal representatives
by email, publication on the Labour
Court’s website and released to SAFLII. The date and time for
hand-down is deemed to
be 10h00 on 18 May 2020.
Summary:
Restraint of trade – employee joined the ex-employer’s
competitor – public policy
challenges untenable –
the full terms of the restraint of trade covenant and confidentiality
undertakings are enforceable.
JUDGMENT
NKUTHA-NKONTWANA, J
Introduction
[1]
This is an urgent application brought by
the applicant, Airconduct CC (Airconduct), for final relief regarding
the enforcement of
a restraint of trade covenant and confidentiality
undertakings against the first respondent, Mr Divan Dunn (Mr Dunn).
Airconduct
seeks an order interdicting Mr Dunn, until 28 February
2021, from:
1.1
soliciting, interfering with, inducing or
enticing or endeavour to entice away from Airconduct any person,
firm, company, close
corporation, or institution, who was a customer,
or canvassed client of, or accustomed to dealing with Airconduct
during the period
of his association with Airconduct and/or as at
date of termination of his employment with Airconduct;
1.2
directly or indirectly, whether for reward
or otherwise, be concerned with, engaged or interested, in any
capacity whether as employee,
agent, partner, shareholder, director,
consultant or otherwise, in any business similar to or competing with
or intending to compete
with Airconduct’s business and/or any
client or potential client to whom or for whom Airconduct has
submitted or prepared
a quote, and which operates or conducts
business within a 150 kilometer radius of Airconduct's premises at
414 Rustic Road, Silvertondale,
Pretoria, Gauteng; and
1.3
using or disclosing or divulging to any
person or entity any confidential information of Airconduct, which
information shall include
but not be limited to the names and contact
details of clients or prospective clients and target markets,
suppliers and other trade
connections; the requirements of clients;
the contractual arrangements between Airconduct and its clients,
suppliers and other
trade connections; the financial details of
Airconduct's relationship with clients, suppliers and other trade
connections; Airconduct's
pricing and discount structures; the
Airconduct's manufacturing processes; Airconduct's quoting and tender
methods and principles;
know - how; Airconduct's business techniques
and modus operandi and trade secrets.
[2]
Airconduct also seeks an order directing Mr
Dunn to terminate his employment with the second respondent, Duct for
Africa (Pty) Ltd
(DFA). There is no relief sought against DFA as it
is joined as a party to these proceedings purely by virtue of its
interest in
the matter as Mr Dunn’s new employer.
[3]
The application is only opposed by Mr Dunn,
but concedes urgency. The grounds of his challenge are as follows:
3.1
Airconduct and DFA conduct different
businesses;
3.2
The restraint which Airconduct seeks to
enforce is too wide and unreasonable; and
3.3
An undertaking has been provided by Mr
Dunn.
[4]
This Court is indebted to counsel for the
helpful written submissions.
Factual Background.
[5]
Airconduct is a leading independent ducting
manufacturer for the air - conditioning and ventilation industry in
Southern Africa
and has a strong reputation for service and quality.
It conducts business from a 7 000m² premises
in Silvertondale and its facilities enable it to provide outstanding
service to
its clients and an efficient work environment for its
employees.
[6]
Airconduct believes in investing in new
machinery, software and ongoing personnel training to enable it to
deliver quality ducting
and exact documentation in the required time,
for large and small quantities as per clients' requirements. It has
CNC cutters,
fed by motorized decoilers, which is one of the factors
that enable it to have a high output ratio of weight per production
worker.
[7]
The total workforce presently in
Airconduct’s employ is approximately 27 permanent employees. It
also employs employees on
a temporary basis during peak production
periods.
[8]
Airconduct manufactures ducting from high
quality galvanised sheet metal according to client specifications and
requirements. The
galvanised sheet metal is purchased from reliable
manufacturers or suppliers in coil form. In addition to ducting, it
also supplies
clients with various consumables for duct installation,
among these, a unique time and money saving duct hanging bracket.
[9]
It is not disputed that the ducting
manufacturing industry is an extremely competitive industry. There
are approximately 30 ducting
manufacturers in Gauteng alone.
Airconduct’s largest competitors in Gauteng include DFA,
Ductshop, Airclear, Ductpro, Express
Ducts and Simplex Ducting.
[10]
Airconduct’s client base comprises of
air-conditioning contractors, both large and small in size,
throughout the Republic
of South Africa. Approximately 90% of its
clients are situated within a radius of 150 km of its premises in
Silvertondale. The
remaining 10% are situated elsewhere in the
Republic and even in neighbouring countries such as Swaziland.
[11]
There are approximately 200
air-conditioning contractors
within a
radius of 150 km of its premises in Silvertondale.
Approximately 125 of them form part of
Airconduct's client base. Airconduct markets its products on its
website at airconduct.com
and by directly liaising with
air-conditioning contractors.
[12]
It is common cause that air-conditioning
contractors tender on projects and are then requested to provide
quotations for the ducting
component of the particular project. A
number of factors are taken into consideration in preparing a
quotation for an air-conditioning
contractor on their tender request.
[13]
Airconduct asserts that even though the
specifications and aspect ratios of the tender play an important
role, so do the profile
of the contractor in the industry, the amount
of orders received from a specific contractor by Airconduct, the
credit worthiness
of the specific contractor, the length of the
client relationship with a particular contractor, etc.
[14]
Airconduct contends that goodwill of
clients in the ducting manufacturing industry is mainly acquired and
maintained through pricing,
service and good client relationships. As
such, personal contact between Airconduct's administration and
operational personnel
and the clients' key personnel, particularly
Project Managers in each project, is one of the most important ways
of maintaining
client relationships. Project Managers fulfil an
important task in acquiring quotations, placing orders, solving
problems and liaison
between the building programmes and suppliers of
material on site.
[15]
Airconduct's biggest clients include HVAC
Installations, Luft Technik, Airgro and Enviroware Construction. It
has no alternative
source of income apart from its stated business
activities.
[16]
Mr Dunn was employed by Airconduct on 7
February 2008 in the capacity of Production Administrator and his
contract of employment
incorporated a restraint of trade covenant. On
18 September 2012, both Airconduct and Mr Dunn concluded a
confidentiality agreement.
Mr Dunn concedes that he had no experience
in the ducting manufacturing industry prior to his employment with
Airconduct.
[17]
Mr Dunn agreed to the terms and conditions
of the restraint covenant and confidentiality undertakings that,
inter alia
,
for a period of 12 months from the date on which his association as
an employee of Airconduct, for whatever reason, terminates,
he would
not be employed by a competitor or solicit customers of Airconduct
within the restraint territory and that he would not
disclose
confidential information relating to its business.
[18]
On 29 January 2020, Mr Dunn resigned from
his employment with Airconduct. The circumstances surrounding his
resignation are in dispute.
However, it is common cause that Mr Dunn
never disclosed his intention to join the DFA, as a result, he was
allowed to serve notice.
His employment effectively terminated on 29
February 2020.
Do Airconduct and DFA
conduct different businesses?
[19]
It
is trite that a party seeking to enforce a contract in restraint of
trade is required to invoke the restraint agreement and prove
a
breach thereof. Forthwith, a respondent who seeks to avoid the
restraint bears an onus to demonstrate, on a balance of
probabilities,
that the restraint agreement is unenforceable because
it is unreasonable.
[1]
[20]
Mr Dunn concedes that he concluded the
restraint covenant and confidentiality undertakings. He, however,
disputes that he is in
breach of the restraint covenant and
confidentiality undertakings by taking employment with DFA in a
similar position to the one
he held with Airconduct.
[21]
The restraint provisions prohibit Mr Dunn
from being concerned with, engaged or interested in any business
similar to or competing
with the business of Airconduct. Mr Dunn
concedes that both Airconduct and the DFA manufacture and sell aircon
ducting as their
principal business.
Clearly, that makes their
businesses similar and as such competitors.
[22]
Mr Dunn seems to suggest that because DFA
does not tender for large volume projects like Airconduct, DFA is not
capable of competing
with the applicant on volume pricing as its
business model is totally different. This version is quickly put to
rest by Airconduct’s
argument that 76.8% of its client accounts
over the period 1 March 2019 to 29 February 2020 were below R500
000.00
per annum.
Approximately 10 of the 125 regular Airconduct’s clients can be
classified as large air - conditioning contractors and, in
any event,
it will amount to a financial suicide to focus on certain projects in
these difficult economic times, so it was further
argued. It is also
common cause that the DFA has provided competing quotes on several
projects on which the Airconduct has quoted
in the past, a clear
indication that there is an overlap of business.
[23]
If indeed DFA’s business model is
different, Mr Swart, from DFA, could have made that point when he was
confronted about employing
Mr Dunn in breach of his restraint
covenant.
[24]
I note that Mr Dunn’s counsel did not
address this point in his written submissions nor during oral
argument and I should
accept that it is abandoned, prudently so.
[25]
I am satisfied that Mr Dunn is clearly in
breach of the restraint covenant by accepting employment with DFA.
Is the restraint
covenant Airconduct seeks to enforce is too wide and unreasonable?
[26]
The
principles applicable to restraint agreements are trite and accepted
by both parties. In
Labournet
(Pty) Ltd v Jankielsohn and Another
[2]
referred to by Airconduct, the Labour Appeal Court (LAC) succinctly
captured them as follows:
‘
[39]
According to the decision in
Magna
Alloys and Research SA (Pty) Ltd v Ellis
,
(“Magna Alloys”) restraints of trade are enforceable
unless they are proved to be unreasonable. Because the right
of a
citizen, to freely choose a trade, occupation, or profession and to
practice such, is constitutionally protected, the onus
to prove “the
reasonableness” of a restraint might well have been affected.
[40]
In
Reddy
, the Supreme Court of Appeal preferred not to become
embroiled in the issue of onus and adopted a pragmatic approach,
which according
to it, was consistent with an approach where there
was a direct application of the Constitution to restraint agreements.
This approach
was specifically adopted in respect of motion
proceedings for the enforcement of restraints where the issue for
determination was
the reasonableness of the restraint. In terms of
that approach, where the facts, concerning the reasonableness, had
been canvassed
in the affidavits – genuine disputes of fact are
to be resolved in favour of the party sought to be restrained by
applying
the so-called Plascon-Evans rule. If the accepted facts show
that the restraint is reasonable, then the applicant must succeed,
but if they show that the restraint is unreasonable then the
respondent in those proceedings must succeed.
[41]
The enquiry into the reasonableness of the restraint is essentially a
value judgment that encompasses
a consideration of two policies,
namely the duty on parties to comply with their contractual
obligations and the right to freely
choose and practice a trade,
occupation or profession. 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. To seek to enforce a
restraint merely in order to prevent
an employee from competing with an employer is not reasonable.
[42]
According to the Appellate Division in
Basson v Chilwan and
Others
, the following questions require investigation, namely,
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 such an interest – to
determine
how that interest weighs up, qualitatively and
quantitatively, against the interest of the other party to be
economically active
and productive. Fourthly, to ascertain whether
there are any other public policy considerations which require that
the restraint
be enforced. If the interest of the party to be
restrained outweighs the interest of the restrainer – the
restraint is unreasonable
and unenforceable.
[43]
It is now clear from, inter alia,
Basson
and
Reddy
that
the reasonableness and enforceability of a restraint depend on the
nature of the activity sought to be restrained, the rationale
(purpose) for the restraint, the duration of the restraint, the area
of the restraint, as well as the parties’ respective
bargaining
positions. The reasonableness of the restraint is determined with
reference to the circumstances at the time the restraint
is sought to
be enforced. With reference particularly to the facts of this matter,
it is an established principle of law that the
employee cannot be
interdicted or restrained from taking away his or her experience,
skills or knowledge, even if those were acquired
as a result of the
training which the employer provided to the employee.
[44]
Even though it is acknowledged that it is difficult to distinguish
between the employee’s
use of his or her own knowledge, skill
and experience, and the use of his or her employer’s trade
secrets, it is accepted
that an employee cannot be prevented from
using what is in his, or her, head.’ (Footnotes omitted)
Customer connection
[27]
Mr Dunn concedes that he did have dealings
with a large number of Airconduct’s clients and knows the names
and surnames of
people employed by those clients. He also had direct
contact with several Project Managers employed by Airconduct's
clients. He
does not dispute that he had good relationships with
Airconduct’s clients, socialised with them and have their
mobile numbers
in his possession.
[28]
Mr Dunn was the second senior employee
during his employ by Airconduct and the key liaison between
Airconduct and its clients. His
attempt to down play his seniority at
Airconduct by contending that he held the same position and performed
the same functions
as Mr Jannie Kotze (Mr Kotze) is disputed by Mr
Kotze.
[29]
It
is clear that Mr Dunn’s connections with Airconduct’s
clients were not superficial or transient, as correctly submitted
by
Airconduct’s counsel. In fact, Mr Dunn points out that out of
125 clients of Airconduct, 11 are also clients of DFA. He
does not
dispute that he had contacts with the other 114 Airconduct’s
clients who are not the clients of FDA but may well
become its
clients through his efforts. In any event, the fact that the clients
are shared cannot trump the fact that through Mr
Dunn’s good
relationship with them, he is able to carry them across to FDA.
[3]
[30]
Mr Dunn’s argument that, since
Airconduct’s business is essentially tender based, he is unable
to influence decision
makers to steer business away from Airconduct
as pricing is always being the determining factor is negated by his
assertion in
the answering affidavit where he stated that:
‘
Several
factors do come into play in the manner in which the applicant
tenders on projects, and it will happen that customer relationships
do play a role in the applicant securing tenders. As an example, the
applicant may be advised by a customer that the applicant's
price is
not in line with the pricing received from other duct manufacturer
which could, in turn, lead to the applicant amending
its pricing
downwards to provide competitive pricing.’
[4]
[31]
It
is without doubt that given the connection that Mr Dunn has with
Airconduct’s clients, he would be able to take advantage
of
that connection.
[5]
Still, in
Den
Braven SA (Pty) Ltd v Pillay and Another,
[6]
confronted with a similar argument, that pricing is more important
than client connections, it was stated that:
‘
It
is not in my view necessary for an applicant in this situation to
winnow the wheat of trade connections and customer contact
from the
chaff of other factors that may influence purchasing decisions. It
suffices for the applicant to show that trade connections
through
customer contact exist and can be exploited by the former employee if
employed by a competitor.’
[32]
There
is no evidence to suggest that Mr Dunn will not influence
Airconduct’s clients to jump ship and move their patronage
to
DFA.
[7]
The fact that DFA does
not tender in large scale projects is inconsequential given the fact
that he is occupying the same position
as the one he held whilst in
the employ of Airconduct.
Confidential
information
[33]
Mr Dunn concedes that he performed core
functions in the Applicant's business. He does not dispute the fact
that he gained intimate
knowledge of Airconduct’s method of
preparing quotations for different clients and that he prepared
thousands of quotations
using such method.
[34]
Also, it is common cause that Airconduct
maintains a database with a list of projects indicating the
air-conditioner contractor,
project name and project value. Even
though Mr Dunn does not dispute that he had access to the database,
he contends that it is
not confidential or beneficial to a competitor
due to its historic nature. Airconduct is adamant, still, that the
value of the
database is not time bound given the fact that a project
may commence only two years after the tender had been awarded to the
air
- conditioning contractor. Airconduct asserts that, if that
information were to end up in the hands of a competitor, it could be
used to undercut the price quoted by Airconduct and obtain the work
from the successful contractor.
[35]
Airconduct accepts that information from
its database systems could easily be downloaded by a limited number
of people, who included
Mr Dunn. However, it is not Mr Dunn’s
case that he did not download the information.
[36]
Mr Dunn, in his own version, was part of
the team that attended sales meetings and obtained knowledge of
Airconduct’s business
strategies and ancillary business
activities. It is not disputed that confidential information relating
to Airconduct's business
techniques and
modus
operandi
, marketing strategies, pricing
structures, financial position, discount structures, profit margins,
the identity of potential clients
and target markets, priority
structures, preferential pricing, credit worthiness of clients,
credit terms and action plans which
set out the vision, mission,
goals and objectives of the Applicant, etc. were disclosed and
discussed during such meetings. Mr
Dunn does not dispute that he
became aware of the supplier's contractual arrangements with
Airconduct such as pricing, terms of
payment, discounts, delivery
lead times, etc.
[37]
Mr Dunn cannot dispute that he was aware of
the confidential nature of the information obtained by him nor
dispute that he was exposed
to confidential information proprietary
to Airconduct. Notwithstanding, he offered an enfeebled denial that
he is in possession
of confidential material which he can use for the
benefit of DFA because of the different focuses of the business of
Airconduct
and DFA. This averment is without merit and I have already
dealt with it elsewhere in this judgment. What is obvious from Mr
Dunns’
own version that each competitor has its own policies
and practices regarding production, costing quoting and client
interaction.
This, as correctly contented by Airconduct, makes them
unique and of value to a competitor.
[38]
Airconduct
does not seek to restrain Mr Dunn’s general knowledge,
experience and skills.
[8]
Conversely, Airconduct only seeks to restrain him from using the
confidential information he was exposed to during his employment
with
it.
[9]
It is not disputed that
Mr Dunn had access to Airconduct’s pricing structures and
profit margins for purposes of preparing
quotations and negotiating
prices. This information is of value in the industry and not public
knowledge. In
L'Oreal
South Africa (Pty) Ltd v Kilpatrick and Another,
[10]
it was stated that:
‘
Even
if some of the information is ultimately in the public domain, which
is one of the first respondent’s principal defences,
the fact
remains that it did take substantial time, effort and resources to
create, compile and reduce it down to a useable form,
and that the
distribution of most of such information was done on a confidential
basis. An example would be the applicant's
price list and
discount structures. Whilst it may be so that this information is
provided to customers, and even accepting the
first respondent's
version that the customers may share this information with other
suppliers, the fact remains that the information
is given to
customers not to disseminate into the market place but to keep for
themselves. This information, despite being made
so available,
remains confidential.’
Weighing up the
interest of the parties
[39]
The
next stage is to determine how the interest of Airconduct weighs up,
qualitatively and quantitatively, against the interest
of Mr Dunn to
be economically active and productive. Mr Dunn’s impugn is
greatly hinged on the
dictum
in
Pinnacle
Technology
Shared Management Services (Pty) Limited and Another v Venter and
Another
,
[11]
where this Court, as per Whitcher, J, dealing with the potential
prejudice associated with confidential information stated that:
‘
[57]
It seems to me that, where a company has competitors, adjustments to
its profit margins and discount
packages will be made fairly often.
Unlike a ‘secret recipe’, the exact amount of profit a
company sets out to make
or gives up by way of discount to attract
business on any given deal is not an immutable piece of information.
Likewise,
knowing this information does not give a competitor a
permanent advantage.
[58]
If the second respondent were to come to know this information, there
is nothing to suggest that
it would be able to better the prices the
applicants already offer their customers. While it is not ideal
that a competitor
knows the applicant’s exact mark-up, it
strikes me that undercutting, itself, is a routine business threat.
[59]
It is difficult to calculate the applicants likely prejudice should
their historical sales to
the other 18 customers the first respondent
dealt with be disclosed the second respondent. It seems to me that
the value of this
information would principally be to alert a
competitor when a customer’s stock was low or equipment needed
replacement. While
undoubtedly confidential, this information is
unlikely to be a deciding issue in winning customers away.’
[40]
To my mind,
Pinnacle
is distinguishable.
In
the present case, Mr Dunn was a senior employee and had access to
Airconduct’s confidential information in the form of
business
techniques and
modus
operandi
,
marketing strategies, pricing structures, financial position,
discount structures, profit margins, the identity of potential
clients and target markets, priority structures, preferential
pricing, credit worthiness of clients, credit terms and action plans
which set out the vision, mission, goals and objectives of the
Applicant, etc. Unlike in
Pinnacle,
this information, in the hands of Airconduct’s competitor,
would be valuable and useful.
[41]
Mr
Dunn misconstrued the actual enquiry. The test is not whether the
confidential information would be used indeed, but whether
it could
be used to the benefit of the new employer. In
Turner
Morris (Pty) Ltd v Riddell,
[12]
it was pertinently stated that:
‘
However,
the employer need not show actual harm. In order to claim an
infringement of its proprietary interests, the employer need
prove
only that its erstwhile employee is potentially able to exploit its
trade secrets or business connections in his or her new
employment.
The loyalty which the employee owes
his or her employer is sufficient
to create the real probability that
he or she will, consciously or unconsciously, do so.’
[42]
The
undertaking not to use the confidential information does to render
any assistance to Mr Dunn. In
Ball
v Bambalela Bolts (Pty) Ltd and Another,
[13]
the
LAC stated that:
‘
In
my view, quantitatively and qualitatively, the interest of the first
respondent surpassed that of the appellant. The fact that
the
appellant stated that she did not intend and did not use any of the
information in favour of or for the benefit of the second
respondent
is irrelevant in determining whether the restraint is reasonable, or
in determining whether the restraint had been breached...’
[43]
Mr Dunn’s
assertion that he was
compelled to
resign is inconsistent with the evidence before me. Mr
Gerrit
Antoni Wibbelink (Mr Wibbelink), the sole member of Airconduct and
the deponent to the founding affidavit, asserts that even
though
Airconduct had commenced with a rationalisation process with a view
to retrench some of its employees, Mr Dunn’s position
was not
affected. It is clear from the conversation that he had with Mr Dunn
before his resignation that he assured Mr Dunn that
his position and
salary would not be affected by the rationalisation exercise. Still,
Mr Dunn resigned, stating that he was going
to pursue something else
after he had been with Airconduct for 12 years. Absent from Mr Dunn’s
resignation letter is a decry
that he departs under compulsion or a
mention that he was to take employment with DFA, Airconduct’s
competitor.
I, therefore, accept that Mr
Dunn’s resignation was voluntary.
[44]
There
is no other means that Airconduct would have been able to protect the
confidential information. Mr Dunn was not open to Airconduct
as to
his future employment when he tendered his resignation. Mr
Wibbelink
was adamant that had he known that Mr Dunn was going to join DFA, he
was not going to allow him to serve his notice period.
It is not
unreasonable for Airconduct to
prohibit
Mr Dunn from working for DFA in order to protect its proprietary
interest. In
Reddy
v Siemens Telecommunications (Pty) Ltd
,
[14]
the Supreme Court of Appeal (SCA), confronted with a similar claim,
espoused the view that, to render the restraint effective,
it is
necessary that the employment of the offending employee with
the competitor be terminated. It was stated that:
‘
Public
policy requires contracts to be enforced. This is consistent with the
constitutional values of dignity and autonomy. The
restraint
agreement in this matter is not against public policy and should be
enforced. Its terms are reasonable. What Reddy is
required to do is
to honour the agreement he entered into voluntarily and in the
exercise of his own freedom of contract. While
it is correct that his
employment with Ericsson will be restricted it remains a breach of
his contractual undertaking.
It follows
that it is no answer to suggest that an undertaking would be
sufficient to protect Siemens' interests and that less restrictive
means could therefore achieve the same purpose as enforcing the
restraint
…
…
The
reason is because it is so difficult to draw the line between
information which is confidential and information which is not;
and
it is very difficult to prove a breach when the information is of
such a character that a servant can carry it away in his
head. The
difficulties are such that the only practical solution is to take a
covenant from the servant by which he is not to go
to work for a
rival in trade. Such a covenant may well be held to be reasonable if
limited to a short period
.’
(Emphasis added)
[45]
Mr Dunn’s argument that it is highly
unlikely for him to obtain work in any other industry because he has
no real knowledge
of any other industry and that he is not trained to
perform any other function is untenable in the absence of proof of
his attempts
to obtain employment in another industry. Also, he made
bald assertions that he had looked for positions throughout the
country.
[46]
Mr
Dunn also submitted an argument
ad
misericordiam
that his children are enrolled in school in Gauteng, and his wife is
receiving medical treatment there. Given his wife’s
medical
condition, he relies significantly on family to assist with his
children which family is all based in the Pretoria area.
However, he
failed to give an explanation as to why he could not secure
employment outside the geographical area covered by the
restraint;
and for the limited duration of about nine months of the remaining
period of restraint.
[15]
[47]
In my view, the
geographic area covered by the restraint is not too wide given the
interest sought to be protected. As correctly
argued by Airconduct,
the
restraint period is necessary in
the light of the period it would take to train Mr Dunn’s
successor, Mr Kotze, to perform
his duties and to rebuild and
strengthen the client relationships formed and/or maintained by Mr
Dunn during the 12 years of his
employment with Airconduct.
[48]
Mr Dunn argues that he
did
not receive any quid pro quo in return for the signing of the
restraint of trade covenant and that he was even a junior employee
prior to obtaining any knowledge of the business or industry
subjected him to such restraint of trade covenant. This submission
is
untenable because at the time of his departure, he was the second
senior employee, reporting directly to Mr Wibbelink. It is
also
instructive that he concluded the confidentiality undertakings after
he had completed four and half years in the employ of
Airconduct.
[49]
Quantitatively, the conduct of Mr Dunn has
placed the business of Airconduct and the livelihood of its employees
and their families
in jeopardy. Clearly, contrary to Mr Dunn’s
argument, the risk to Airconduct should the
restraint
of trade covenant and confidentiality undertakings not be enforced
far outweighs the prejudice to Mr Dunn if the relief
sought is
granted.
Urgency
[50]
It is generally accepted that enforcement
of the restraint of trade agreement is inherently urgent. There is no
need to overly deliberate
on this issue as, having read the papers
before me, I am satisfied that the matter is urgent and have treated
it as such.
Conclusion
[51]
In
all the circumstances, I am satisfied that Airconduct had made out a
case for the grant of a final relief as the restraint covenant
and
confidentiality undertakings are neither unreasonable nor contrary to
public policy.
[16]
Airconduct,
has demonstrated, with great success, that it has a clear right which
has since been breached by Mr Dunn when he accepted
employment with
DFA, its competitor. The very breach is ‘an injury actually
committed or reasonably apprehended’ and
that there is no other
appropriate alternative remedy than to hold Mr Dunn to his
contractual undertakings.
[17]
Costs
[52]
This
Court has a wide discretion in awarding costs with principles of law
and fairness serving as guides. Additionally, in
Ball
[18]
the
LAC gave the following guidance in cases of restraint of trade:
‘
Restraints
of the kind being considered, constitute a limitation on a citizen’s
right, in terms of section 22 of the Constitution,
which, arguably,
requires justification… In constitutional matters, the general
rule that costs follow the result, does
not apply. In such matters
costs orders are generally eschewed out of concern that they may
produce a ‘chilling effect’,
in that litigants may be
deterred from approaching a court to litigate concerning an alleged
violation of their Constitutional
rights for fear of being penalised
with costs if they are unsuccessful… If constitutional matters
are raised or defended
in good faith and not vexatiously and the
issues raised have merit or are important, like the violation of a
right guaranteed in
the Bill of Rights, and the proceedings that
ensued, resolved those issues, the party complaining of the
violation, even if unsuccessful,
would, generally, not be ordered to
pay the costs…’
[53]
In
the present instance, it is my view that even though Mr Dunn’s
opposition is ill-considered, it is far from being
mala
fide
or pursued without sufficient grounds.
[19]
Put otherwise, it is not vexatious. Hence, I am disinclined to saddle
him with costs.
[54]
In the circumstances, I make the following
order:
Order
1.
This application is heard as one of urgency
and the applicant’s non-compliance with the normal time limits
in relation to
service is condoned.
2.
Mr Divan Dunn is interdicted and restrained
until 28 February 2021:
2.1 From
soliciting, interfering with, inducing or enticing or endeavour to
entice away from Airconduct CC any person,
firm, company, close
corporation, or institution, who was a customer, or canvassed client
of, or accustomed to dealing with Airconduct
CC during the period of
his association with Airconduct CC; and/or as at date of termination
of his employment with Airconduct
CC;
2.2
From directly or indirectly, whether for reward or otherwise, be
concerned with, engaged or interested, in
any capacity whether as
employee, agent, partner, shareholder, director, consultant or
otherwise, in any business similar to or
competing with or intending
to compete with Airconduct CC's business and/or any client or
potential client to whom or for whom
Airconduct CC has submitted or
prepared a quote, and which operates or conducts business within a
150 kilometer radius of the Airconduct
CC's premises at 414 Rustic
Road, Silvertondale, Pretoria, Gauteng
3.
Mr Divan Dunn is ordered to terminate his employment with Duct for
Africa (Pty)
Ltd;
4.
Mr Divan Dunn is interdicted and restrained from using or disclosing
or divulging
to any person or entity any confidential information
that belongs to Airconduct CC, including but not limited to the names
and
contact details of clients or prospective clients and target
markets, suppliers and other trade connections; the requirements of
clients; the contractual arrangements between Airconduct CC and its
clients, suppliers and other trade connections; the financial
details
of Airconduct CC's relationship with clients, suppliers and other
trade connections; Airconduct CC's pricing and discount
structures;
Airconduct CC's manufacturing processes; Airconduct CC's quoting and
tender methods and principles; know-how; Airconduct
CC's business
techniques and
modus operandi
and trade secrets.
3.
There is no order as to costs.
__________________
P. Nkutha-Nkontwana
Judge
of the Labour Court of South Africa
Appearances:
For the
Applicant:
Advocate R Grundlingh
Instructed
by:
Maritz Smith Incorporated
For the
Respondent:
Advocate AJ Nel
Instructed
by:
Lee McAdam attorneys
[1]
See:
Experian
South Africa (Pty) Ltd v Haynes and Another
2013 (1) SA 135
;
Basson
v Chilwan and Others
1993
SA 742
(A) at 7761I-J;
Magna
Alloys and Research (SA) (Pty) Ltd v 486
(SCA) at [10] to [14], pp 493E/F to 496D;
Sibex
Engineering Services (Pty) Limited v Van Wyk and Another
1991 (2) SA 482
(T) at 502D-F;
IIR
South Africa BV (Incorporated in the Netherlands) t/a Institute for
International Research v Tarita and Others
2004 (4) SA 156
(W) at 167 B-C;
IIR
South Africa BV (Incorporated in the Netherlands) t/a Institute for
International Research v Hall (aka Baghas) and Another
2004 (4) SA 174
(W) at 178E-F, para [17];
Reddy
v Siemens Telecommunications (Pty)
Ltd
2007 (2) SA 406
(SCA);
Den
Braven SA (Pty) Ltd v Pillay and Another
2008 (6) SA 229 (D).
[2]
(2017)
38 ILJ 1302 (LAC)
[3]
See:
Rawlins
and Another v Caravantruck (Pty) Ltd
1993
(1) SA 537 (A).
[4]
See
Answering Affidavit, page 132, para 15.2.
[5]
See:
Walter
McNaughton (Pty) Ltd v Schwartz and Another
2004 (3) SA 381
(C).
[6]
2008
(6) SA 229
(D) at para 17; see also:
Waco
Africa (Pty) Limited t/a Form Scaff v Sack and Others
(J2393/19)
[2019] ZALCJHB 360 (23 December 2019) at para 35.
[7]
Ibid
at para 15.
[8]
See:
Aranda
Textile Mills (Pty) Ltd v Hurn and Another
[2000]
4 All SA 183
(E) at para 33.
[9]
See:
Automotive
Tooling Systems (Pty) Ltd v Wilkens
2007
(2) SA 271
(SCA) at 279E – F.
[10]
(J1990/2014)
[2014] ZALCJHB 353 (16 September 2014) at para 75, see also:
Multi
Tube Systems v Ponting and Others
1984 (3) SA 182
(T) at 189C - E;
Experian
South Africa (Pty) Ltd v Haynes and Another
2013 (1) SA 135
(GSJ) at para 44.
[11]
[2015]
ZALCJHB 199 at paras 57 - 59.
[12]
1996
(4) SA 397
(E) at 409J - 410A.
[13]
(2013)
34 ILJ 2821 (LAC) at para 25; see also:
New
Justfun Group (Pty) Ltd v Turner and Others
(2018)
39 ILJ 2721 (LC) at para 21;
Discovery
Life Limited v De Meyer
2018
JDR 2035 (GJ) at para 15;
African
Independent Brokers (Pty) Ltd v Coetzee and Others
(J
2012/19) [2020] ZALCJHB 62 (13 March 2020) at para 30.
[14]
2007
(2) SA 486
(SCA) at para 21.
[15]
See:
Dickenson
Holdings (Group) (Pty Ltd and Others v Du Plessis and Another
2008
(4) SA 214
(N) at para 46.
[16]
See
Experian South Africa supra
at
para 19; and
Reddy
supra
n
14 at para 20.
[17]
Reddy
supra
n 14 at para 22.
[18]
Supra
n 13 at para 30.
[19]
Fisheries
Development Corp v Jorgensen
1979
(3) SA 1331
(W) at 1339E-F.