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[2013] ZAWCHC 98
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Freemantle and Another v ADIDAS (South Africa) (Pty) Ltd (A 166/2012) [2013] ZAWCHC 98 (26 July 2013)
Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE IGH COURT, CAPE TOWN)
Case no: A 166/2012
In the application between:
DEREK FREEMANTLE
..................................................................................
First
Appellant
PUMA SPORT DISTRIBUTORS (PTY) LTD
............................................
Second
Appellant
v
ADIDAS (SOUTH AFRICA) (PTY) LTD
.............................................................
Respondent
Court
: Griesel, Yekiso
et
Cloete JJ
Heard
: 22 July 2013
Delivered
: 26 July 2013
JUDGMENT
CLOETE J
:
INTRODUCTION
This is an appeal with the leave of
the court
a quo
against interdicts granted in favour of the
respondent (‘
Adidas’
) against the first appellant
(‘
Freemantle’
) to enforce restraint of trade and
confidentiality clauses contained in his employment contract; and
prohibiting the second appellant
(‘
Puma’
) from
offering employment to, or employing, Freemantle for the six month
period of the restraint which commenced on 1 August
2011 and expired
on 31 January 2012, i.e. some 18 months ago. It was
accepted by all parties that the duration of the
relief granted
against both Freemantle and Puma had long since lapsed and that, in
this sense at least, setting aside the orders
of the court
a quo
would have no practical effect or relevant result. The court
a
quo
declined to grant the other relief sought against Puma,
namely to interdict it from passing on or disclosing the
confidential
trading information of Adidas to any third party.
The appellants were alive to the
obstacles that they faced in the form of s 21A(1) and (3) of
the Supreme Court Act 59 of
1959 (‘
the Act’
),
namely that in appeal proceedings where the issues are of such a
nature that the judgment or order will have no practical effect
or
result, the appeal may be dismissed on that ground alone; and that,
save in exceptional circumstances, this determination
must be made
without reference to the costs incurred by the aggrieved party
concerned. The only other exception to this general
rule is the
appeal court’s discretion to allow an appeal, even where the
actual dispute has become academic, when the issue
itself presents
as a discrete legal issue of public importance that would, or will,
affect matters in the future:
Qoboshiyane NO and Others v Avusa
Publishing Eastern Cape and Others (Pty) Ltd
2013 (3) SA 315
(SCA) para [5]; cited with approval in
The Kenmont School and
Another v D M and Others
(454/12)
[2013] ZASCA 79
(30 May
2013) [para 12]. The parties filed affidavits dealing with the
aforementioned obstacles prior to the hearing of
the appeal and
their respective submissions will be considered later in this
judgment. It will only become necessary to consider
the merits of
the appeal if the appellants succeed in overcoming this hurdle.
BACKGROUND
Freemantle took up employment with
Adidas as a field account manager on 1 March 2006. His written
contract of employment
contained both a restraint of trade clause
and a confidentiality clause. The restraint prohibited Freemantle
from working in
the sporting goods industry for a period of six
months after the termination of his employment. The confidentiality
clause recorded
Freemantle’s acknowledgment that, in his
association with Adidas, he would have access to its confidential
trading information;
and that he was under an obligation not to pass
on or disclose any of its information or systems. Freemantle was
subsequently
promoted to the position of Key Account Manager in
April 2009 and held this position with Adidas until his resignation
on 3 May
2011.
On the same date Freemantle entered
into a written contract of employment with Puma, one of the main
competitors of Adidas. He
was appointed as Puma’s National
Sales Manager ‘
with effect from 22 May 2011 or
earlier’
. The employment contract does not contain a
restraint of trade clause but it does contain a confidentiality
clause prohibiting
Freemantle from using any of Puma’s trade
secrets or confidential information for his own benefit or for the
benefit of
any third party.
When Freemantle resigned he informed
Adidas that he intended taking up employment with Puma. The latter
was not aware of the restraint
clause contained in Freemantle’s
employment contract with Adidas when it appointed Freemantle on
3 May 2011; however
Adidas made Puma aware thereof some seven
days later on 10 May 2011. Puma sought legal advice and was
informed that the
restraint was not enforceable against Freemantle.
Puma decided to accept this advice but did not communicate this to
Adidas.
Puma continued during the period of the restraint to
actively engage with Freemantle in finalising the practical aspects
of his
future employment, which included the scheduling of a
business trip to East Africa for the first week of August 2011..
On 22 June 2011 Puma was
reminded by the attorney appointed by Adidas of the terms of the
restraint and was pertinently asked
whether it had employed
Freemantle and when his employment was due to commence. The response
of Puma’s managing director,
Mr Rink, on 24 June 2011 was
simply that ‘
I find it totally inappropriate that a
competitor of PUMA, through its counsel, seeks to obtain information
about PUMA’s
possible current or future plans’.
It
bears mention that all of the attempts made by Adidas to obtain
clarity from Freemantle as to his future employment with Puma
had
been unsuccessful. It was only on 25 July 2011 that Adidas
obtained information that Freemantle intended to take up
employment
with Puma as from 1 August 2011.
The application which has given rise
to this appeal was launched three days later, on 28 July 2011.
The terms of Freemantle’s
contract of employment with Puma
were disclosed to Adidas for the first time on 5 August 2011.
BASIS OF RELIEF SOUGHT IN THE
COURT
A QUO
The basis of the relief sought
against Freemantle was contractual, i.e. to compel him to comply
with the restraint and confidentiality
clauses contained in his
contract of employment with Adidas. The relief sought against Puma
was delictual in nature and was founded
on unlawful competition. The
deponent to the founding affidavit alleged that:
‘
I
have been advised that PUMA, as his putative employer, ought properly
to be included in this application as it is and will be
complicit in
assisting Freemantle to breach his covenant of restraint of trade and
will thus be a party to the invasion of the
rights of adidas. This, I
am advised, is a species of unlawful competition and adidas is
entitled to be protected from being harmed
in this manner.’
Although the respective bases for the
relief sought by Adidas against Freemantle and Puma were different,
the two made common
cause on virtually every ground of opposition
advanced. Thus, both disputed that Adidas had an interest deserving
of protection;
that the restraint of trade agreement was
enforceable; and that Freemantle could or would in any way use
confidential information
that he might have acquired during his
employment with Adidas to benefit Puma.
As to the allegation of complicity,
Puma’s response was limited to the following, namely that: (a)
if it had been informed
of the restraint prior to Freemantle’s
appointment, it would have taken legal advice on its enforceability
already at that
stage; (b) once it became aware of the restraint,
and on the basis of legal advice, it took the decision to honour its
contract
with Freemantle; and (c) it would have abided the decision
of the court had no relief been sought against it. Puma also alleged
that it was Freemantle who had made the first approach to it. It was
against this background that Puma contended that its conduct
was not
unlawful.
The court
a quo
found that:
(a) Adidas had an interest deserving of protection; (b) Freemantle’s
employment with Puma posed a direct threat
to that interest; (c) the
restraint of trade clause contained in Freemantle’s employment
contract with Adidas was not contrary
to public policy, nor cast in
terms that were too vague or wide and was thus enforceable; and (d)
Freemantle should thus be interdicted
as sought. It also found that
there was no evidence that Puma had used, or was using, the
confidential information of Adidas
and, as previously mentioned,
declined to interdict Puma from doing so. However, the court
a
quo
granted an order prohibiting Puma from offering employment
to, or employing, Freemantle for the six month period of the
restraint.
Unfortunately the basis upon which the latter order was
made is not apparent from the judgment of the court
a quo.
Costs were awarded against Freemantle and Puma jointly and
severally.
FREEMANTLE’S SECTION 21A
SUBMISSIONS
Freemantle contended that the appeal
was not academic and would indeed have a practical effect and a
relevant result because of
his resultant loss of income during the
period of the restraint as well as the costs awarded against him.
During argument before
us Mr
De Kock
, who appeared on
Freemantle’s behalf, correctly conceded that the latter’s
loss of income had no bearing on a determination
in terms of s 21A.
That left the costs that Freemantle had incurred, which, it was
contended, were substantial and thus
constituted ‘
exceptional
circumstances’
as envisaged by s 21A(3).
Freemantle’s averments relating
to costs were limited to the following, namely that: (a) the
application in the court
a quo
was heard over a number of
days and the fees paid by him to his own legal representatives were
substantial in the context of
what he was earning as a salary at the
time (the salary that he was earning was not disclosed by him); (b)
he had been advised
that he and Puma would each be held liable for
one half of the costs awarded against them; and (c) were the appeal
to succeed
on the merits he would not be burdened with costs ‘
which
could potentially ruin me in my endeavours to seek further career
advancement in my chosen occupation’
(the reasons for this
contention were not explained).
PUMA’S SECTION 21A
SUBMISSIONS
Puma similarly contended that the
appeal was not academic and would indeed have a practical effect and
relevant result, essentially
on three grounds.
First, it was submitted that the
‘
suggestion’
by Adidas (in its papers) that Puma
is a company which engages in unlawful competition, which
was‘
impliedly confirmed’
by the order of the
court
a quo
, is viewed by Puma in a serious light; given its
reputation as an international brand of some standing, the effect of
the court
a quo
’s judgment on it is indeed a ‘
living
issue’
.
Second, the industry in which Puma
operates has been left uncertain regarding the circumstances in
which companies such as itself
may employ persons who are subject to
restraints of trade, and it would thus be ‘
in the public
interest’
to have this issue definitively determined,
given
inter alia
the effect that it may have on employees’
scope for career advancement.
Third, the costs incurred by Puma in
opposing the application, as well as the costs awarded against it,
were substantial, in that:
(a) there was a total of four court
appearances with one counsel representing each party; (b) Puma
employed the services of senior
counsel; and (c) the papers ran to
399 pages together with heads of argument and additional notes of
212 pages, thus 611 pages
in all. Accordingly, it was submitted,
these factors constituted ‘
exceptional circumstances’
within the meaning of s 21A(3).
EVALUATION
I will deal first with Puma’s
submissions as to its reputation and the public interest argument
and thereafter with the
submissions made by both it and Freemantle
in regard to costs since they are essentially one and the same.
The first ground advanced by Puma,
namely that pertaining to its reputation, cannot be sustained. On
its own version the order
of the court
a quo
, at best, only
‘
impliedly confirmed’
the allegation of
complicity with Freemantle in the breach of his restraint of trade.
No factual finding was made to that effect.
Furthermore, in refusing
to grant the further interdictory relief claimed by Adidas, the
court
a quo
found that there was no evidence of Puma’s
misuse of confidential information belonging to Adidas. The fact of
the matter
is thus that, whether or not the order was wrongly
granted against Puma, setting it aside will have no practical effect
or relevant
result.
During argument before us Mr
Stelzner
, who appeared on behalf of Puma, correctly accepted
that the second ground advanced, namely the ‘
public
interest’
argument, was doomed to failure, for the simple
reason that Puma was, in effect, seeking legal advice from this
court in a matter
that is essentially fact-bound. In
The Kenmont
School
case the Supreme Court of Appeal set out the legal
position at para [12] as follows:
‘
It
is trite that every case has to be decided on its own facts. And
efforts to compare or equate the facts of one case to those
of
another are unlikely to be of assistance. For, as we well know,
parties endeavour to distinguish their case on the facts from
those
reported decisions adverse to them.’
Moreover, ‘
[c]ourts of appeal
do not give advice gratuitously. They decide real disputes and do not
speculate or theorise. . .’
(See:
Radio Pretoria v
Chairman, Independent Communications Authority of South Africa and
Another
2005 (1) SA 47
(SCA)para 44).
I now turn to the remaining ground
advanced, namely that relating to the costs incurred by both
Freemantle and Puma in the application.
Freemantle contented himself
with bare allegations and did not take us into his confidence about
the actual amount that he had
expended on his own legal
representation, nor the salary that he claimed to have earned during
the course of the litigation.
Puma gave an indication of the length
of the papers and the number of days spent in court, but was
similarly silent on the amounts
expended by it. Puma is a large,
well-established company and there is no suggestion that the costs
order which it is required
to meet will cripple it financially.
During argument we were informed that the costs incurred were in the
region of R500 000
in total.
Although each case must be decided on
its own facts, it is nevertheless instructive, in order to place the
appellants’ contentions
in proper perspective, to refer to
what the Supreme Court of Appeal regarded as ‘
exceptional
circumstances’
in relation to costs as envisaged by
s 21A(3). In
Oudebaaskraal (Edms) Bpk v Jansen van
Vuuren
2001 (2) SA 806
(SCA) the trial in the Water Court had
lasted a number of days; the record consisted of some 2379 pages,
contained in 35 volumes,
9 copies of which had already been filed
with the appeal court; the appellant had been represented by senior
and junior counsel,
the respondents by an attorney, and the
Department of Water Affairs and Forestry by senior counsel; and
several experts had testified.
Those circumstances are a far cry
from what this court is faced with in the present matter, namely a
relatively straight-forward
opposed motion, requiring attendances at
court on four separate occasions in the court a quo; a record of
some 400 pages excluding
heads of argument; and only one of the
parties represented by senior counsel, who appeared alone without a
junior.
I am thus not persuaded that the
costs incurred by either Freemantle or Puma are such as to
constitute ‘
exceptional circumstances’
as
envisaged in s 21A(3) of the Act; and it follows that this
ground must also fail.
Having found that neither Freemantle
nor Puma have overcome the obstacles that they face in terms of
s 21A,it is not necessary
to consider the merits of the appeal.
CONCLUSION
The parties are in agreement that the
costs incurred in the rule 49(11) application, which were reserved,
should follow the result.
In the result the following order is
made:
Both appeals aredismissed with
costs, including the costs of the application in terms of rule
49(11), all such costs to be paid
by the appellants jointly and
severally.
______________________
J. I. CLOETE
Judge of the High Court
griesel J: I agree and it is so
ordered.
______________________
B. M. GRIESEL
Judge of the High Court
yekiso J: i
agree.
______________________
N. J. YEKISO
Judge of the High Court