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[2015] ZAWCHC 216
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Devere Investments South Africa (Pty) Ltd v Goliath and Others (17275/14) [2015] ZAWCHC 216 (13 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 17275/14
In
the matter between
DEVERE
INVESTMENTS
Applicant
SOUTH
AFRICA (PTY) LTD
and
NIZAAM
GOLIATH
First
Respondent
CARRICK
FINANCIAL
Second
Respondent
SERVICES
(PTY) LTD
2
HELP 1 (PTY)
LTD
Third
Respondent
JUDGMENT
DELIVERED ON 13 FEBRUARY 2015
NDITA,
J
[1] The Applicant seeks
interdictory relief in terms of a restraint of trade agreement
concluded with the First Respondent. The
interdictory relief sought
against the Second Respondent is based on the employment of the First
Respondent by the former. The
relief sought is couched along the
following terms:
1. Dispensing with the forms and
service provided for in the rules of court and allowing this
application to be heard as one of
urgency in terms of rule 6(12)(a).
2. The First, Second and Third
Respondents are interdicted and restrained from contacting any known
client of the Applicant’s,
whether prescribed or otherwise,
from 23 June 2014 to 23 June 2015.
3. The Second and Third Respondents
are directed to take all steps to terminate the Second Respondent’s
employment relationship
with the first respondent so that the First
Respondent is not in breach of his restraint and confidential
undertakings in terms
of his employment agreement with the Applicant.
4. The First Respondent is directed to
deliver to the Applicant all of the Applicant’s confidential
information, including
details of the Applicant’s clients and
prospective clients which was in his possession at the time of the
termination of
his employment with the Applicant and which is
currently in his possession whether in electronic or hard copy,
including all copies
thereof.
5.
Alternatively, to paragraphs 2, 3, and 4 above and in the event of
the Respondents opposing the application, the First, Second
and Third
Respondents are so interdicted on an interim basis pending the final
determination of this application.’
[2]
The Applicant carries on business of providing a comprehensive range
of financial planning and advisory services to, inter alia,
United
Kingdom expatriates living in South Africa. The First Respondent was
employed by the Applicant and later by the Second Respondent.
The
second and third respondents also carries on business as providers of
wealth and capital management advice and are competitors
of the First
Respondent.
[3]
The factual background germane to this application can be summarised
as follows: As earlier indicated, the First Respondent
(“Goliath”) was first employed by the Applicant in or
about February 2013. With effect from 10 June 2013, he
was
employed as a coordinator for an indefinite terms commencing on 10
June 2013 until 23 June 2014. According to facts deposed
to by
Ms Erica Steeman Duncan, the Applicant’s head of Risk and
Compliance Department, (“Steenman Duncan”) he
tendered a
written resignation noticeon23 July 2014 backdated to 23 July 2014.
After leaving the applicant’s employ he joined
the Second
Respondent (“Carrick”) but the precise date is unknown to
the Applicant. A screenshot of Carrick reflects
his capacity as that
of an associate assistant.
[4]
The Applicant alleged that its entitlement to the relief sought
against the first respondent arises from a restraint of trade
agreement concluded between the parties. The First Respondent
does not oppose the relief sought, but for a wholesome understanding
of these proceedings, I consider it necessary to summarise the facts
in their entirety. With regard to the Second and Third Respondents,
the basis on which the relief is sought is that they are unlawfully
using the Applicant’s confidential information to compete
with
it in violation of the restraint of trade and confidentiality
agreement.
[5] The relevant
restraint of trade and confidentiality agreements provisions, which
give rise to the central issue in this case
and upon which the
Applicant relies, provide as follows:
‘
Clause
17.2 It is recorded that:
17.2.1 The business is highly
competitive;
17.2.2 The company has valuable trade
connections;
17.2.3 In the course of his/her
employment by the company, the Employee will be responsible for the
development of the Business
and will acquire in-depth knowledge of
the business, its confidential information, including but not limited
to –
17.2.3.1 knowledge of the technical
information and know-how of the company relating to its activities
and services;
17.2.3.2 the prescribed clients and
their needs; and
17.2.3.3 will have access to the
client database of the company and will be intimately concerned with
the business and affairs of
the company;
17.2.4 The Employee has formed and /or
will continue to form lucrative connections with the prescribed
clients, and/or has forged
and/or will continue to forge
relationships with key decision-makers in business, and in
particular, with those in the specialized
fields of industry to which
the company offers its services.
17.3 In the light of the foregoing,
the Employee irrevocably and unconditionally undertakes and agrees
and warrants in favour of
the company that neither he/she is directly
or indirectly interested will, during any month of the restraint
period and restraint
area, directly or indirectly, through any
entity, and any capacity whatsoever and whether for reward or not –
17.3.1 solicit from the prescribed
clients for the prescribed Products and or the Prescribed services;
17.3.2 canvass business in respect of
the prescribed products and/or the prescribed services from any
prescribed clients;
17.3.3 sell or otherwise supply any
prescribed products to any prescribed clients;
I proceed to consider the issue of
urgency.
URGENCY
[6] The Respondents in
the replying affidavits aver that this application is not of
sufficient urgency to have justified the procedure
adopted by the
Applicant. The urgency relied upon by the applicant is founded upon
the following facts:
1.
The
Second Respondent has detailed knowledge of the applicant’s
business and it is vital that it be prevented from utilising
the
confidential knowledge that it has to the prejudice of the applicant.
2.
The
harm which the Respondents are causing to the Applicant is continuing
and will continue for as long as the Applicant’s
contractual
and common law rights are not enforced.
3.
The
restraint component is for a limited duration and it will in respect
of the First Respondent, lapse in June 2015.
4.
There
was a clear breach of the employment agreement on the part of
Goliath. The mere that he had might have been fired is immaterial.
Goliath’s
conduct
[7] With regard to the
unlawful conduct imputed on Goliath, the applicant in its founding
affidavit, bases its motion on the following
facts:
It
alleges that after Goliath left its employ and joined Carrick, he
sought to poach Devere’s clients in breach of the employment
agreement and common law. One such client is Ms Cindy Cromble-Holme
(“Cramble-Holme”) who owns a restaurant called
Joe’s
Easy Diner in the Blue Route Mall in Cape Town. According to the
Applicant this came about after it had launched a
marketing of its
products at the aforementioned mall when Cromble-Holme expressed an
interest in one or two products. She dealt
with Goliath, who in turn
arranged a meeting between her and Mr Charles Winshaw (“Winshaw”)
on 25 March and 2 April
2014. At that time, Goliath was working as
Winshaw’s assistant. The Applicant further avers that after
Goliath had left its
employ and that on 2 August 2014, he wrote an
email to Cromble-Holme, specifically referring to the conversation
he, as the
Applicant’s employee, had with her at
Blue Route Mall, asking for a meeting to discuss changes to the
pension laws in the
United Kingdom. Goliath did not disclose that he
was no longer working for the Applicant. He only did so when queried
by the client
and apologized for the ‘false impression’
his earlier email created. The Applicant states that it could only
have been
possible for Goliath to contact Crombe-Holme by using her
confidential contact details he had obtained during his employment
with
the Applicant. The consequences of the poaching according to the
Applicant, directly benefited Carrick.
[8]
With regard to the delict imputed on Carrick, it is worthwhile to
commence with a brief background. Mr Craig Featherby, (“Featherby”)
the founder of Carrick is also an erstwhile employee of the
applicant. He resigned during
[9]
It has long been established that the urgency of commercial interests
may justify the invocation of the Uniform Rule of Court
6 (12) no
less than any other interests. (See
Sibex
Construction (SA) (PTY) LTD and Another v Injectaseal CC
and
others
(1988) 4 All SA 190
(T) The instant matter is no exception,
and I too, must assume, as I have to do, that the Applicant’s
case is a good one
and that the Respondents willfully engaged in
unlawful competition with the Applicant.
[10] A further ground on
which the Applicant alleges unlawful competition on the part of the
Carrick and the Third Respondent, 2
Help 1(“Help”) is
premised on the conduct of Weatherdon. The nub of the Applicant’s
case is based on the use
of confidential information by its former
employees for the benefit of Carrick and Help. I find it necessary to
cite the paragraphs
relevant to this averment.
“
[27]
On 23 July 2014, Ms Nicole Weatherdon (an ex-employee of Devere, now
employed by Carrick (“Weatherdon”) sent an
email to the
Real Go Company Limited and six of Devere’s former employees,
now employed by Carrick. The email was sent by
Weatherdon whilst she
was still working for Devere. For the purpose of this application
only, I rely only on the statements therein
that Weatherdon proposed
that Carrick “use a similar layout that Devere did” and
the reference to the use of
Devere’s
template of the “Reasons Why” letter, which is a
financial planning report setting out a client’s
“needs”
analysis and a recommended proposed financial solution. A copy of
this email is attached hereto marked Annexure
“N”. This
indicates the use of Devere’s information. Featherby’s
response to this, in the Anton Pillar
application, was to acknowledge
that this was useful, but puzzlingly, “
of
no value”
.
At any rate, in the Anton Piller application, Carrick did not deny
use of this template. Again, I only recently ascertained that
Weatherdon is also an authorized representative of Help and this
regard I attach hereto marked Annexure“O”, a copy
of a
screenshot from the website of the FSB confirming the aforegoing.”
The email sent by
Weatherdon to Carrick employees on 23 July 2014 reads thus:
“
As
per our discussion this morning, I just wanted to summarise the plan
moving forward. For the reasons of Management to skim over,
I have
bolded.
. . .
. Automating and prepopulating the
Advice Records – this is the next stage for development that
will need to be looked at:
.I
suggest we use a similar layout that Devere did – with the
Reasons Why Letter, this prevents ANY human error, incorrect
information and typos from then contaminating the Advice Record, and
will guarantee ALL info is included in ALL Advice Records,
thus
securing it to be “clean” from a Compliance point of
view. Once we have gone through the Compliance documents
in depth, we
can develop this further.
. . .
Thomas, I will be sending you
templates of the Devere Reasons Why letter, and NBTF – for your
perusal, to start getting ideas
of what is required here, so we can
automate the NBTF.”
Featherby responded to
this email on 24 July 2014 as follows:
“
This
is really good stuff Nicole, very well done.”
[11] In addition to the
above averments, the Applicant states that towards the end of July
2014, she discovered a Dropbox folder
in Featherby’s
ex-personal assistant at Devere, Ms Catherine Bryington’s which
showed that:
1. The “Devere
Group termination report” had been modified on or about 7 July
2013.
2. The Devere employee
consent form had been modified.
3. The Devere
confidentiality agreement had been modified.
4. The Devere expense
claim form had been modified.
According to the
Applicant, this Dropbox folder was still in use by Bryington from
another computer after she had left Devere. Furthermore,
the
modifications were designed simply to turn Devere’s documents
into Carrick’s documents. The Applicant further avers
that this
information in the hands of Carrick and Help will provide both a
‘headstart’ without expending money, effort
and research.
The
Applicant
specifically avers that:
“
30
Devere’s confidential information is an invaluable asset in the
hands of Help, Carrick, its representatives and its employees
for the
establishment of client base and for competing with Devere in the
financial services market place. Possession of this confidential
information will enable Help, Carrick and Devere’s ex-employees
employed by Carrick, to contact clients identified therein
with ease;
they will not have to expend the time and effort required to obtain
the relevant information about such clients.”
On this basis, the
applicant alleges that Carrick and Help are unlawfully competing with
it.
The Second
Respondent’s Answering Affidavit
[12] The Second
Respondent admits that it concluded a contract of employment with
Goliath. However, in its answering affidavit deposed
to by its
managing director, Featherby, it vehemently denies knowledge of any
conduct on the part of Goliath in breach of his employment
contract
with Devere prior to the launching of the present application.
According to Featherby, when he learned of Goliath’s
breach,
Carrick immediately investigated the matter and made necessary
enquiries. On 1 October 2014, Goliath was threatened with
immediate
disciplinary action and his employment was summarily terminated.
Featherby states that Goliath, through his conduct,
contravened
Carrick’s standing instructions to all employees not to
interfere with or attempt to solicit the custom of the
applicant’s
existing clientele. Carrick’s non-solicitation policy was
according to Featherby pertinently brought
to the attention of
Goliath at the commencement of his employment. In addition, Carrick
caused Goliath to sign a non-interference
form, recording that:
1. Carrick did not cause,
encourage or induce him to terminate his employment with the
Applicant;
2. Goliath requested
Carrick to employ him.
Featherby
flatly denies that Carrick is complicit in the conduct of Goliath’s
breach in any way and states that there is no
basis on which such
awareness can be inferred.
[13]
Featherby avers that the Applicant was advised of Goliath’s
dismissal. Pursuant to the aforesaid dismissal, the
Applicant
was further invited to withdraw this application as the relief sought
in prayer 3, 4 and 5 was rendered redundant. Needless
to point
out that the applicant declined the invitation. It is also common
cause that after the alleged dismissal, Featherby referred
Goliath to
Paul Nicholson of St James Global (Pty) Ltd for employment without
disclosing that he (Goliath), was still bound by
the employment
agreement he had with the Applicant. With regard to the specific
allegations of unlawful competition, Featherby
alleges that it is not
in dispute that the Applicant and Carrick are rival traders and
direct competitors. Furthermore, this application
constitutes an
abuse of the court process as the Applicant and Featherby concluded
an Employment Agreement Amendment in terms of
which the rendering of
services and doing business with the applicants customers was not
prohibited, provided that the customers
were not solicited and that
they themselves approached Featherby or Carrick. Put differently, the
Applicant granted to Featherby
consent to ‘
set
up, carry on, or be associated with or employed in any business or
activity of his choice’
,
but for the soliciting of the Applicant’s customers. With
regard to the use of the Applicant’s confidential information
and/or trade secrets, Featherby avers that there is virtually nothing
about the Applicant that is not known to him. He states that
this is
so because he was responsible for establishing most, if not all, of
the Applicant’s systems, procedures and protocol.
Furthermore,
his association with the Applicant enabled him to gain intimate
knowledge of the Applicant’s business; as such
it astounds him
why the Applicant believes that it has interests deserving of
protection.
[14] It will be recalled
that the Applicant in imputing unlawful competition on Carrick,
heavily relies on the averments made in
paragraphs 27 to 30 of the
founding affidavit. Feartherby responds to same thus:
“
58
Ad paragraphs 22 to 32 (Including the subparagraphs)
58.1 It is not disputed that the
application is part of a grater dispute
58.2 . . .
58.3 This I verily believe is part of
the Applicant’s strategy to overwhelm the Second Respondent
with litigation and to make
every effort at making it impossible for
the second respondent to carry on business.
58.4 The Applicant is obviously
threatened by the presence of the competition and is doing its utmost
to stifle competition.
58.5 . . .
58.6 For the rest, it suffices to be
stated that:
58.6.1 these paragraphs contain a
highly selective and misleading account of what had previously
transpired;
68.6.2 effectively all the allegations
made in these paragraphs are and were disputed in the previous
allegation.
58.7
It is to be noted that this fact (the selective account and the
distortion and omission of material facts) did not escape the
Court
and it is submitted that this prompted the Court to set aside the
Anton
Piller
order.”
[15] The Third
Respondent, Help, in an affidavit deposed to by Mr Clifford Dean van
Belkum (“Van Belkum”), a beneficiary
of the trust which
owns 100% of all the shares in the Third Respondent, avers that it
has no business relationship or agreement
with the Applicant, and
that therefore are there can be no basis for the granting of the
relief sought. Similarly, Help played
no role in the employment
of Goliath by Carrick. For these reasons, it alleges that it has been
misjoined in these proceedings.
In addition, Help’s
business involves the sale of funeral policies and is unrelated to
the Applicant’s business.
Furthermore, the Applicant’s
business market in which Help has no interest in the Applicant’s
business market. Van
Belkum outlines the relationship between Help
and Carrick as follows:
“
26
Second Respondent has concluded a Juristic Representative mandate
agreement with the Third Respondent which, complies with the
Act and
which entitles Second Respondent to carry on business as Financial
Service Provider. This agreement is simply one of convenience
and was
intended to apply for three months until Second’s Respondent
obtains its own FSB Licence. Second Respondent pays
the Third
Respondent a pre-determined fixed nominal fee for the right to
operate under Third Respondent’s Licence.
27
Save as aforesaid, the Second and Third Respondent’s business
have nothing whatsoever to do with each other and each entity
operates entirely separately and independently.”
[16]
The averments relating to Carrick’s license and accreditation
are not relevant for the purpose of this application. This
is so
because Carrick obtained the requisite licence on 8 October 2014.
Counsel for the Applicant confirmed in argument that the
Applicant
was not dependent on this aspect to prove unlawful competition on the
part of the Respondents.
[17]
The Applicant in the replying affidavit alleges that the termination
of Goliath’s employment at Carrick is contrived
and is nothing
more than an attempt to exculpate Carrick. According to the
Applicant the above inference can be drawn from
the fact that Goliath
left Carrick or his employment was terminated after the service of
the present Application alleges that on
1 October 2014. Furthermore,
so alleges the applicant, this is irreconcilable with Featherby’s
averments that Goliath indicated
that he accepted the dismissal
whereas the he earlier maintained that the dismissal had not been
discussed with Goliath, nor has
any cogent proof of termination or
dismissal presented. Of note is that
Devere
introduced a new matter in the replying affidavit to the effect that
another of its clients, Mr Conrad Prins was approached by
Jonathan
Nelson (“Nelson”),a Carrick employee and Dever’s
ex-employee.
[18]
In reply to Featherby’s averments that Carrick was not aware of
Goliath’s conduct, the Applicant states that
:
“
12.2
It is denied and disputed that neither Featherby nor any other
representative of Carrick was aware of the conduct of Goliath.
Featherby’s allegations should be rejected, inter alia, for the
following reasons:
12.2.1 Goliath held the position of
“Associate Assistant”. According to Carrick’s
website, a copy of a screenshot
from . . . entailed: -
‘
Typical
Tasks and Responsibilities:
. Attending seminars presented by
financial institutions;
. Working closely with an associate in
a dynamic team;
. Researching and identifying
prospects;
. Engaging prospective clients and
.
Meeting targets and goals’.
[19]
The Applicant, with the leave of the court filed a further
supplementary replying affidavit wherein it alleges that new facts
pointing towards Carrick’s continuing unlawful conduct had
emerged. Steeman Duncan avers that on 8 October 2014 she received
an
email from one of the Applicant’s former employees Mr Paul
Nicholson (“Nicholson”) advising that Featherby
had
contacted him on 30 September 2014 recommending Goliath for
employment stating that he is a good coordinator. Nicholson
deposed to an affidavit confirming that he received Goliath’s
CV and interviewed him on 8 October 2014 but did not employ
him
because it transpired from Steeman Duncan that he was still under a
restraint of trade. The Applicant states that Featherby’s
conduct of soliciting employment for Goliath is demonstrative of the
former’s complicity in Goliath’s unlawful conduct.
According to the Applicant, as the controlling mind of Carrick,
Featherby acted ‘hand in glove’ with Goliath. The
Applicant also sought to rectify some factual averments to the effect
that it is Mr Conrad Prins (“Prins”) who contacted
Nelson, in contrast an earlier averment that Nelson approached him
(Prins) whereas he was fully aware that Prins was the Applicant’s
prospective client. The Applicant reiterated that Carrick’s
conduct of employing Nelson knowing that Nelson was breaching
his
restraint of trade agreement constitutes unlawful competition.
[20] In reply, the Second
Respondent averred that the Applicant has not placed any information
relating to the basis on which it
alleges that Prins was a
prospective client. Furthermore, according to Carrick, an associate
is not permitted to render advice
and/or intermediary services.
Facts which are common
cause
[21] Flowing from the
above summary, the following facts are common cause:
1. Nelson and Goliath’s
employment agreements restrained them from filching the Applicant’s
customers.
2. Their restraint
agreements were signed by Featherby, the founder of Carrick.
3. Goliath was employed
by Carrick as an associate. He is no longer working for Carrick.
4. Help appointed Carrick
as a juristic representative.
The Issues
[22] The succinct issues
for determination are the following:
1. Whether Goliath’s
breach of his restraint of trade agreement can be imputed on the
Carrick notwithstanding the fact that
he was no longer working for
the latter.
2. Whether the Applicant
has confidential information worthy of protection.
3. Whether Carrick made
use of or is likely to make use of such information or trade secrets
knowingly or unwittingly.
4.
Whether any liability can be imputed on Help for the alleged unlawful
conduct of Goliath and Carrick.
[23]
In terms of prayer 5 of the notice of motion, the Applicant seeks
interim relief pending final determination of this application
in the
event of it being opposed. The basis on which interim relief might be
sought, pending an application for final relief is
not readily
discernable from the papers. It can therefore be assumed that final
relief will be sought on the same papers as are
now before court.
Should the court be inclined to grant the relief sought, it will, in
effect be granting final relief. Furthermore,
it is clear that by the
time this application is finally determined, the restraint, which
forms the basis of the relief sought
will have run its course. I
agree with counsel for the Second Respondent, that this application
must be determined on the basis
as if for final relief. It follows
that the test which must be applied is for final relief. I am
fortified in this view by what
was said in
BHT
Water Treatment (Pty) Ltd v Leslie and Another
1993(1)
SA 47 (W) at 48:
“
The
Court should look at the substance rather than at the form
of the relief
sought ,and as the substance was that an interdict was being
sought which run for the full unexpired time of
the restraint, the
Court should accordingly approach the matter as if final relief was
being sought.”
[24]
Counsel for the Second Respondent contended that this application
falls to be dismissed from the outset on the basis that there
are
factual disputes which cannot be resolved on the papers. More
specifically, the circumstances under which Goliath was dismissed
and
the allegations regarding the alleged collusion between the
Respondents as well as the allegations regarding the conspiracy
to
compete unlawfully and to procure a breach of the First Respondent’s
restraint are contentious. The factual disputes,
if found, fall to be
considered in the context of final relief.
The
approach to disputes of fact is restated in
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA)
“
[26]
Motion proceedings, unless concerned with interim relief, are all
about the resolution of legal issues based on common cause
facts.
Unless the circumstances are special they cannot be used to resolve
factual issues because they are not designed to determine
probabilities. It is well established under the Plascon-Evans rule
that where in motion proceedings dispute of facts arise on the
affidavits, a final order can only be granted only if the facts
averred in the applicant’s (Mr Zuma’s) affidavits,
which
have been admitted by the respondent (the NDPP), together with the
facts alleged by the latter, justify the order.
It may be different
if the respondent’s version consists of bald or uncreditworthy
denials, raises fictitious disputes of
fact, is palpably impausible,
far-fetched or so clearly untenable, that the court is justified in
rejecting them merely on the
papers.”
This
restatement of the law is fully explained in
Fakie
NO v CCR Systems (PTY) LTD
[2006] ZASCA 52
;
2006
(4) SA 326
at
347 G-I thus:
“
[55]
That conflicting affidavits are not a suitable means for determining
dispute of fact has been doctrine in this court for more
than 80
years. Yet motion proceedings are quicker and cheaper than trial
proceedings and, in the interests of justice, courts have
been at
pains not to permit unvirtuous respondents to shelter behind patently
implausible affidavit versions or bald denials. More
than 60 years
ago, this Court determined that a Judge should not allow a respondent
to raise ‘fictitious’ dispute of
facts to delay the
hearing of the matter or deny the applicant its order. There had to
be ‘bona fide’ dispute of fact
on a material matter. This
means that an uncreditworthy denial, or palpably implausible version,
can be rejected out of hand, without
recourse to oral evidence. In
Plascon-Evans Paints v Van Riebeeck Paints(Pty) Ltd, this court
extended ambit of uncreditworthy
denials. The now encompassed not
merely those that fail to raise a real, genuine or bona fide dispute
of fact but also allegations
or denials that are so far-fetched or
clearly untenable that the Court is justified in rejecting them
merely on the papers.”
In
order to resolve the dispute or assess whether such dispute is real,
genuine or bona fide, they must obviously be considered
in the
context of whether the denial by the respondents is uncreditworthy.
In
Soffiantini
v Mould
1956 (4) SA 150
EDLD), the following was said:
“
It
is necessary to make a robust, common-sense approach to a dispute on
motion as otherwise the effective functioning of the Court
can be
hamstrung and circumvented by the most simple and blatant stratagem.
The Court must not hesitate to decide an issue of fact
on affidavit
merely because it may be difficult to do so. Justice can be defeated
or seriously impeded and delayed by an over-fastidious
approach to a
dispute raised in affidavits.”
[25]
Against this backdrop, I turn to analyse the facts of the present
matter. As earlier explained, it is not in dispute that the
First
Respondent contacted a prescribed client of the Applicant. the at
least one of the Applicant’s clients, such conduct
being
contrary to the Second Respondent’s policy of non-solicitation
of the Applicant’s custom. Thus, his employment
was terminated
and he was, according to Featherby, to be subjected to a disciplinary
enquiry. The First Respondent’s restraint
period is defined in
the clause as a period of twelve months following the termination
date. It therefore expires on 23 June 2015.
Whether the Second
Respondent had knowledge of the First Respondent’s breach of
employment contract is disputed. I am not
of the view that this
creates a genuine dispute of facts such the matter cannot be resolved
on the papers.
[26] With regard to the
allegations pertaining to the use of confidential information
the Applicant relies on a letter
written by Weatherton wherein
she proposes that they use the Applicant’s template of the
“Reasons Why” letter
and the NBTF, which is explained as
a financial report. These averments are not disputed at all by the
Second Respondent. Instead,
it refers to an Anton Piller application
and states that the allegations were disputed in previous litigation.
Even if that were
so, the fact remains that in the present
proceedings they have not been disputed. Besides, to merely dispute
an allegation without
advancing the reasons thereof gives an
impression that such dispute is not genuine. As I said, the
allegations are undisputed in
the present proceedings. What
remains to be considered are the allegations relating to Nelson. It
will be recalled that the
allegations relating to Nelson approaching
Prins, a supposed client of the Applicant, emanate from the
Applicant’s supplementary
affidavit introduced as a new matter,
which arose subsequent to the commencement of the instant
proceedings. I revert to this issue
later in this judgment. Suffice
to state that I therefore hold that the facts of this matter are
capable of being resolved in the
present application proceedings.
According to the Applicant, the imputation of Goliath’s
conduct on the Second Respondent
is a matter of law.
Applicable principles
and analysis
[27] It must be restated
that the First Respondent does not oppose the relief the Applicant
seeks against him. It follows that it
is unnecessary to determine
prayers 2 and 4 of the notice of motion, to the extent that they
apply to the First Respondent. It
was contended on behalf of the
Applicant that based on the facts presented, a clear case for
unlawful competition has been established.
Similarly, prayer 3
directing the Respondents to take all steps to terminate the Second
Respondent’s employment relationship
with the first respondent
so that the First Respondent is not in breach of his restraint and
confidential undertakings in terms
of his employment agreement with
the Applicant is equally mute given that it is undisputed that
Goliath is no longer working for
the Second Respondent, irrespective
of the circumstances of the termination of his employment.
Furthermore, in the light of the
fact that the Second Respondent was
granted its licence on 8 October 2014, the interdict sought against
the Third Respondent is
rendered redundant. However, the Applicant
does seek a costs order against the Respondent. The adjudication of
the question of
costs must inevitably revert to the factual
background. Thus, I deemed it prudent to outline the full factual
matrix.
Interference with
contractual relations
[28] Counsel for the
Applicant contended that the real basis for the relief sought is
firstly the solicitation of the Applicant’s
custom by both
Goliath and Nelson, secondly the use of the Applicant’s
confidential information. According to the Applicant,
the alleged
breach of the restraint of trade clause on the part of Goliath and
Nelson is as a matter of law imputed on Carrick.
Counsel for the
Second Respondent argued that the high-water mark of the Applicant’s
case is the allegation that Carrick
knew of Goliath’s breach.
According to the Respondent’s there is no basis on which they
could be condemned ‘
by way of association’
. In
addition, at best, the only conceivable basis for liability in this
context could be a case for wrongful interference with
contractual
relations. Put differently, the only basis on which it could be said
that the Applicant has established a prima facie
right arises only if
can establish that the Second Respondent was complicit in Goliath’s
conduct seeing that there is no
contractual relationship between it
(the Second Respondent) and the Applicant. To this end, the second
respondent relied heavily
on
Bid Industrial Holdings (Pty) Ltd v
Strang
2008 JDR 0058 para 15 wherein the court held that :
“
The
delict of wrongful interference with contractual relations is well
known to our law. For the interference with someone else's
contractual relations to be actionable though, it must be wrongful.
It is not enough that it might have been done negligently or
even
intentionally. The interference must be of a kind that the law
brands as wrongful and thus renders actionable.
. . .
In
this case the wrong the applicant suffered, was in the first place
the breach of its contract. It was a contract with a company
and not
with its directors. The breach was committed by the company and not
the directors. The company incurred liability for the
breach. The
nature and extent of its liability are governed by the terms of the
contract and the law of contract. Given this primary
liability of the
company in contract, the question is whether its directors who caused
it to commit the breach should also be vested
with liability for the
same breach but arising in delict
.”
Confidential
Information
[29] The question as to
whether or not information made to an employee during the course of
his or her employment is confidential
is a matter that must be
decided on the facts of each case. In
Townsend Productions (Pty)
Ltd v Leech and Others
2001 (4) SA 33
(C) at 53J-54B, the court
accepted the following three requirements for information to qualify
as confidential, quoting
Van Heerden and Neethling
at
225;
“
First
of all, and this is really self-evident, the information must not
only relate to, but also be capable of application in, trade
or
industry. Secondly, the information must be secret or confidential.
The information must accordingly -objectively determined
- only be
available and thus known, to a, restricted number of people closed or
acircle; or, as it is usually expressed by the
Courts, the
information “must be something which is not public property or
public knowledge”.
. . .
Thirdly, the information must,
likewise objectively viewed, be of economic (business) value to the
plaintiff.
The approach to be
adopted in the circumstances of this case is set out in
Multi Tube
Systems (Pty) Ltd v Ponting &Others
,
1984 (3) SA 182
(D) at
184 B-C:
“
The
features of the applicant’s case which require close scrutiny
then in the nature of the alleged confidential information,
the
circumstances in which it was acquired by the first
respondent and the extent of its confidentiality. In
other words, the
question to be decided is whether the applicant is seeking to protect
its own property, namely, some sort of confidential
trade secret, or
whether it is simply seeking to inhibit lawful competition because
the first and second respondents’ are
merely drawing upon their
general knowledge, experience, memory and skill”.
I
proceed to apply the above principles to the facts of this matter.
[30]
The gravamen of the Applicant’s application is in the first
instance that the email sent by Weatherdon to the Second
Respondent’s
employees, also the Applicant’s ex-employees wherein she
attached the Applicant’s layout and financial
planning report
is unlawful use of confidential information. As earlier alluded to,
the allegation is not denied by the Second
Respondent. Weatherdone
specifically proposed that the Applicant’s format be modified
and used for the benefit of the Second
Respondent. The Second
Respondent has not suggested that the information is not confidential
or that it easily accessible by third
parties. It must therefore, be
accepted that it is confidential. The question that arises is whether
it is worthy of protection.
The kind of information that relates to
the operation of a business as well its financial planning must in my
view, be as confidential.
This I say because the second respondent is
likely to benefit from modifying another company’s existing
procedures and financial
planning. This in essence means that it need
not expend time, money and resources in creating its own financial
system and operations.
This must be so because even Featherby
congratulated Weatherdon on a job well-done. I find that it could
reasonably be used to
provide the Second Respondent with a headstart
or an advantage over the applicant. In the absence of a justification
by the Second
Respondent, I hold that the information was not public
knowledge and viewed objectively, of economic value to the Applicant.
It
is therefore, my judgment that the information is confidential and
worthy of protection. I now turn to consider whether the conduct
of
the First Respondent can be imputed on Goliath.
[31]
Counsel for the Applicant argued that without recourse to inferential
reasoning pertaining to the conduct of Featherby after
the First
Respondent’s conduct of approaching one of the Applicant’s
customers came to his knowledge. It must be accepted
that the First
Respondent did have a non-solicitation policy directing its employees
not to approach the Applicant’s customers.
Similarly, the
Employment Amendment Agreement enabled Featherby to compete with the
Applicant but to refrain from soliciting the
custom of its clients.
In addition, Featherby must have knowledge of the terms of the First
Respondent’s restraint as he,
whilst working for the Applicant
had signed it.
[32] Counsel for the
Respondent contended that the First’s Respondent’s
conduct does not necessarily mean that the Second
Respondent acted
unlawfully for it was not contractually bound to the Applicant. Much
reliance was placed in the judgment of Schwartzman
J, in
IIR South
Africa BV
v Hall
and Another
2004 (4) SA 174
(W) wherein
it was stated thus:
“
[13.5]
The fundamental difference between the two remedies is that in the
delictual claim it does not suffice for the ex-employer
to merely
prove that the ex-employee who has protectable information has taken
up employment with a rival, who is aware of the
restraint. In
addition what must be proved is an existing use, or a threatening
use, of such information by the third party.”
The judgment continues
thus:
“
[20.1]
An ex-employer having protectable confidential information gets the
benefit of its contractual bargain against ex-employees
by obtaining
an interdict against his or her continued breach of the restraint in
taking up employment with a competitor.
[20.2] The competitor’s
employment of the ex-employee with or without knowledge of the
restraint cannot of itself amount
to the delict of unlawful
competition. Unlawful or unfair competition can only result if the
new employer, through the ex-employee,
uses either intentionally or
innocently confidential information of the ex-employer.”
It is undisputed that the
First Respondent approached Ms Cromble-Holme, the Applicant’s
prescribed client with the intention
to poach her from the Applicant.
He only disclosed or confessed that he was no longer working for the
Applicant after the client
enquired whether he was still working for
the Applicant. Moreover, it is plain on the papers that Goliath was
employed by the Second
Respondent as an associate, not as a
secretary. In my view, the second respondent, through the First
Respondent used confidential
information of the Applicant for the
benefit of the Second Respondent. It matters not that the benefit did
not actually materialize.
It did not materialize in spite of the
conduct of the First Respondent because the client who was hoodwinked
into the thinking
that the First Respondent was still working for the
Applicant had the presence of mind to first make enquiries before
consenting
to a meeting. Even if I may be wrong on this score, an
analogous situation arose in
Telefund Raisers CC v Isaacs and
Others
1998 (1) SA 521
at 534 F:
“
The
allegation that Mrs Killian was unaware that the first, second and
third respondents had copied the applicant’s customer
lists or
were using them for the fourth respondent’s benefit, until the
execution of the Anton Piller order, whether it is
true or false, is
irrelevant. What is relevant, on my findings, is that the use thereof
was unlawful, and that the applicant was
entitled to approach this
Court to put a stop to such use.”
Equally,
in this matter, that what does matter, is that the Second Respondent
derived or was likely to derive a benefit form the
First Respondent’s
unlawful conduct. This is not a question of the First Respondent
carrying information in his head, he
actively and knowingly pursued
the Applicant’s prescribed client, irrespective of the rank he
held at the Second Respondent.
This, on its own is enough to form a
basis for the delict unlawful competition. I have nonetheless already
held that the conduct
of modifying the Applicant’s ‘
Reasons
Why’
document,
as well as the financial planning document gave the First Respondent
an unfair advantage or head start.
[33]
For the sake of completeness, I very shortly deal with the new matter
relating to Nelson’s conduct. It is common cause
that the
Applicant secured its interests through a restraint of trade
agreement against Nelson. The allegation is that he
has approached
Prins, also, a prescribed client of the Applicant. Prins has deposed
to an affidavit outlining the basis of his
dealings with the Second
Respondent. In it flatly denies being approached by Nelson. Moreover,
the basis on which it is alleged
that Prins is the Applicant’s
prescribed client is unclear. In my view, it cannot be on these
papers be said that Nelson
unlawfully approached Prins.
It may well be that he breached his restraint by taking up employment
with the First Respondent,
but no relief has been sought against him
personally by the applicant.
[34]
It remains to consider the costs sought by the Applicant against the
Third Respondent. It will be recalled that the latter
is the juristic
representative of the Second Respondent but no interdictory relief is
sought against it because the Second Respondent
obtained its licence
on 8 October 2014. The Third Respondent’s defence is that its
business involves the sale of funeral
policies and has no interest in
the Applicant’s business. Furthermore, the Second and Third
Respondents have nothing to do
with each other and each entity
operates entirely separately.
[35]
During argument counsel for the Applicant reiterated that as a
juristic representative, the Third Respondent has abdicated
its
responsibility and allowed Nelson to operate in breach of his
restraint. According to the Applicant, such abdication effectively
breached its obligations in terms of the Financial Advisory and
Intermediary Services Act 37 of 2002 (“the Act”). In
addition, the Third Respondent is in terms of section 13 of the Act
is liable for the delict committed by its appointed representative.
The Applicant is therefore entitled to the relief it seeks by
operation of law. Put differently, the question of costs must be
considered in the context of the provisions of s 13 of FAIS. If the
court finds that the Third Respondent is not liable in law
for the
delicts of the Second Respondent, then the Applicant must pay its
costs, and vice versa.
[36] In determining
whether the Third Respondent is liable for the Applicant’s
costs, I deem it prudent to first define the
relationship between the
Second and the Third Respondent’s. The Third Respondent is the
financial services provider whilst
the Second Respondent is the
juristic representative. The Act defines a financial
services provider as:
“
any
person, other than the representative, who as a regular feature of
the business of such person-
(a) furnishes advice; or
(b) furnishes advice and renders any
intermediary service; or
(c) renders an intermediary service.
A
representative is defined as any person who renders a financial
service to a client for or on behalf of a financial services
provider, in terms of a mandate or an employment contract. That means
the second respondent renders financial services on behalf
of the
third respondent. To this end, the juristic representative mandate
between the aforesaid parties reads as follows:
“
1.1
The Appointing FSP is an authorized Financial Services Provider and
hereby mandates the Juristic Representative as its representative
and
authorizes the Juristic Representative to render financial services
to clients of the Appointing FSP in respect of the following
indicated financial products:
. . .”
Clause 1,3 reads thus:
“
The
Appointing FSP hereby accepts responsibility for those activities of
the Juristic Representative that are performed within the
scope of or
in the course of implementing this mandate agreement.”
The
rest of the provisions of the mandate relate to the corresponding
duties of the Financial Services Provider and the representative
as
well as the operating instructions.
[37] As discernible from
the Second and Third Respondent’s representative mandate
agreement, the relationship between the
parties, as correctly
submitted by counsel for the Applicant, is regulated, inter alia, by
s 13 of FAIS.
Section 13 (1) reads as
follows:
“
(1)
A person may not –
(a) carry on business by rendering
financial services to clients for or on behalf of any person who-
(i) is not authorised as a financial
services provider; and
(ii) is not exempted from the
application of this Act relating to the rendering of a financial
service;
(b) act as a representative of an
authorized financial services provider, unless such person –
(i) prior to rendering a financial
service, provides confirmation, certified by the provider, to
clients-
(aa) that a service contract or other
mandate, to represent the provider exists; and
(bb) that the provider accepts
responsibility for those activities of the representative performed
within the scope of, or in the
course of implementing, any such
contract or mandate; and
(i)
meets
the fit and proper requirements; and
(ii)
if
debarred as contemplated in section 14, complies with the
requirements
determined by the registrar by notice
in the Gazette, for the re-appointment of a debarred
person as representative.
“
Section 13(2)(a) on the
other hand requires an authorized financial services provider to take
such steps as may be reasonable in
the circumstances to ensure that
representatives comply with any applicable code of conduct as well
with other applicable laws
on conduct of business. Such laws
obviously include those relating to unlawful competition. I
agree with the submission made
by Counsel for the Third Respondent
that as explained in
Nicolaas Odendaal v Absa Brokers &Financial
Services Board
, an unreported decision emanating from the Free
State High Court cited as Case A112/2009 delivered on 24 March
2011explaining the
purpose of the FAIS Act in the following manner:
“
The
main aim of the Act is to regulate the rendering to clients of
financial advisory and intermediary services as defined therein
. .
.”
However,
such meaning and purpose cannot and should not be read to
exempt the a financial services provider from the duty
imposed in s
13 (2)(a) to ensure that its representatives comply with any
applicable code of conduct as well with other applicable
laws on
conduct of business. In short, the Third Respondent , in terms of the
law and the representative mandate cannot claim that
“
it
has not been involved in or played any role in the second
respondent’s decision to employ the first respondent”
and
that “
it
has no knowledge of, neither has it played any role in any of the
alleged unlawful conduct allegedly perpetrated against the
applicant
by first or and or second respondents.”
Similarly, it cannot
abdicate its responsibility towards the Second Respondent as the
parties’ mandate makes it plain that
it accepts the
responsibility for the activities of the Second Respondent, its
juristic representative. A representative acts on
behalf of the
financial services provider. I hold that, based on the representative
mandate agreement, it has been properly joined
in these proceedings.
In
Jaffit v Garlikcke
&Bousefield
2012 (2) SA 562
at 572 Madondo J, also observed
and expatiated on this point as follows:
“
Section
13(2)(a) of FAIS requires an authorised financial services provider
to at all times satisfy himself or herselfthat the provider’s
representatives and key individuals of such representatives are, when
rendering a financial service on behalf of the provider,
competent to
act, and comply with the requirements contemplated in paras (a) and
(b) of s 8(1) and ss (1)(b)(ii) of the section
(s13), and to take
reasonable steps to ensure that representatives comply with any
applicable code of conduct as well as with other
applicable laws on
conduct of business.”
[38]
In conclusion, I have in this judgment held that in the light of the
relief sought by the Applicant, the matter has to be determined
on
the basis of final interdicts. Flowing from the reasons for this
judgment, it follows that the Applicant has satisfied the
requirements of a final interdict. The First Respondent has not
opposed this application, the relief sought by the applicant against
him must be granted as prayed for. I also held the Third Respondent
responsible for the acts of unlawful competition perpetrated
by the
First and Second respondent on the basis that as a financial services
provider and in terms of the representative made,
it had an
obligation to ensure that the Second Respondent complied the business
code of conduct as well applicable law. What remains
to be considered
is a question of costs of the postponement of the matter on 9 October
2014.
[39]
This application initially served before Steyn J, on 9 October 2014.
The Court declined to hear it on the basis that it was
not
sufficiently urgent to be heard in the urgent court. As a result, it
was postponed to 29 October 2014 and costs were reserved
for later
determination. The Applicant indicated that it intended to file a
supplementary affidavit, which it did, as outlined
in this judgment.
I see no reason why the costs of the postponement should not follow
the result. The Applicant has achieved success
in its application and
it was not suggested that the postponement was due to some fault on
its part.
[40] For all these
reasons the following order is issued:
1. The Applicant’s application
for an interdict succeeds.
2. The First and Second Respondents
and are interdicted and restrained from contacting any known client
of the Applicant’s,
whether prescribed or otherwise, from 23
June 2014 to 23 June 2015.
3. The First Respondent is directed to
deliver to the Applicant all of the Applicant’s confidential
information, including
details of the Applicant’s clients and
prospective clients which was in his possession at the time of the
termination of
his employment with the Applicant and which is
currently in his possession whether in electronic or hard copy,
including all copies
thereof.
4. The Second and Third respondents
are ordered to pay the costs of this application, inclusive of the
costs of the postponement
on 9 October 2014, jointly and severally,
the one paying the other to be absolved.
_______________
T. NDITA
JUDGE: Western Cape High
Court