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IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE LOCAL DIVISION, GRAHAMSTOWN)

CASE NO: 686/2015

DATE: 01 MMARCH 2016

In the matter between:

NRG OFFICE SOLUTIONS (PTY) LTD...............................................................................Applicant

And

ALOISIUS ALEXANDER....................................................................................................Respondent

JUDGMENT

Heard on: 14 May 2015

Delivered on: 01 March 2016

MAKAULA J:

A. Introduction:

[1] The applicant brought this application seeking the following order:

1.1 That the respondent be interdicted and restrained up to and including 31 October 2016 from:

1.1.1 Approaching, advising or contacting in order to, directly or indirectly, solicit the custom of any person or entity who was a customer with whom or to whom, on behalf of the applicant, negotiations, discussion or representations were entered into or made during the period of the respondent’s employment with the applicant;

1.1.2 Being directly or indirectly employed by or have an interest in, either as an employee, principal, agent, member, shareholder, director, partner, consultant, financier or advisor or in any other capacity in any concern or entity which carries on the same business or a business similar to or like the business of the applicant;

1.1.3 For a period of 10 (ten) years from date of resignation be restrained from disclosing, divulging or making known any of the trade secrets or confidential information of the applicant;

1.1.4 In the region of the Province of the Eastern Cape;

1.2 The respondent be directed to pay the costs of the application.

[2] On 10 March 2003 the parties entered into a written contract of employment (the contract) which they signed on 14 August 2003.  The respondent was employed as a service engineer, advanced to the position of a branch manager and eventually promoted to the position of Group Major Account Manager (a Manager) on 1 March 2014.  The applicant prepared a new contract to be signed by the respondent. The respondent did not sign the new contract until he resigned from the applicant on 29 October 2014.

[3] The respondent was subsequently employed by a competitor of the applicant, Aloe Office and Business Equipment t/a Xerox Queenstown (Aloe).

[4] The applicant advised Aloe that there was a restraint of trade agreement in place between it and the respondent.  Aloe decided to terminate the services of the respondent.

[5] The applicant brought this application contending that the respondent had access to contractual arrangements between the applicant and its suppliers, customers and business conditions, the names of present and prospective suppliers, principals, customers and information regarding them, the manner in which its business is structured, operational know-how, processes and techniques, marketing strategies and policies, exclusivity arrangements, technical information, trade connections and contracts.  The respondent furthermore had access to prospective clients and had information regarding clients which the applicant had actively been canvassing for new business.

[6] The contention by the applicant is that the respondent has extensive knowledge of the applicant’s client base and more specifically the contractual arrangements with clients.  He was the ‘face-to-face’ contact person regarding new and current business on behalf of the applicant.

[7] The applicant submits that the respondent has breached clause 4 of the contract (clause 4) in that the respondent took up employment with Aloe within the restraint period.  The applicant further submits that the respondent does not deny that he has poached Senqu Municipality, a client of the applicant and an account on which the respondent was working prior to his resignation.  Consequently, the Senqu account was awarded to Aloe, because of the respondent, so submits the applicant.  Aloe had an advantage over the applicant because the respondent was privy to confidential information regarding the quotes and specifications supplied to Senqu Municipality by the applicant and therefore Aloe was in a position to compete favourably with the applicant, so argues the applicant.

[8] The applicant pleads that non adherence by the respondent to the restraint of trade agreement, prejudices the applicant in that it cannot protect its financial interest.  The applicant contends a grave and real apprehension of suffering irreparable harm if the actions of the respondent are not interdicted.  The applicant argues that it does not have any other remedy because even if the applicant were to issue summons, it would be difficult to quantify the damages in terms of its financial losses.

B. Respondent’s case:

[9] The respondent argues that clause 4 is not valid and binding on him because:

9.1 in terms of clause 4 the respondent undertook to protect the trade secrets of Gestetner and not the applicant;

9.2 when in 2009, Gestetner South Africa began trading as Ricoh South Africa the restraint of trade became inoperative;

9.3 The respondent upon his promotion to the rank of a manager, the contract no longer bound him and their relationship was governed by an oral agreement entered into Queenstown as stated above;

9.4 The clear construction of clause 4 permits the respondent to utilise Gestetner’s trade secrets whilst acting as an employee;

9.5 Clause 4 is unconstitutional because it prevents him from carrying out his profession, trade or engaging in commerce without there being a corresponding interest of the applicant deserving of protection.

[10] Relying on the principle of contra preferentem, the applicant argues that the applicant drew the terms of the contract and therefore, the interpretation favourable to the respondent is binding.

C. The issues:

[11] The issues before me are:

11.1 whether the restraint of trade contained in clause 4 of the contract is valid and enforceable;

11.2 the interpretation of clause 4; and

11.3 whether the respondent has been breached clause 4, in the event of its applicability.

[12] A restraint of trade agreement is an agreement by which someone is restricted in his/her freedom to carry on his trade, profession, business or other economic activity.  The restraint is usually intended to protect the economic interests of the party in whose favour it is imposed.  The fact that an agreement places some restraint on one of the parties does not in itself make the agreement objectionable.  If, however, the restraint is so restrictive of one of the parties as to conflict with public interests it will be illegal and unenforceable.[1] 

[13] Kroon J, in Aranda Textile Mills (Pty) Ltd v Hurn & Another[2] after having considered a number of decisions, amply summarised the principles applicable to a restraint of trade agreement similar to the present matter as follows:

“G. Legal aspects relating to the remaining issues

[23] In determining whether a restriction on the freedom to trade or to practise a profession is enforceable a court should have regard to two main considerations.  The first is that the public interest requires, in general, that parties should comply with their contractual obligations even if these are unreasonable or unfair.  The second consideration is that all persons should, in the interests of society, be permitted as far as possible to engage in commerce or the professions or, expressing this differently, that it is detrimental to society if an unreasonable fetter is placed on a person’s freedom of trade or to pursue a profession.  In applying these two main considerations a court will obviously have regard to the circumstances of the case before it.  In general, however, it will be contrary to the public interest to enforce an unreasonable restriction on a person’s freedom of trade.  The reasonableness or otherwise of the restraint is assessed with regard to the broader interests of the community, on the one hand, and to the interests of the contracting parties, on the other hand.  As to the former, the two considerations referred to above come into play.  As to the latter, a restraint would be unreasonable if it prevents the one party, after termination of the contractual relationship, to engage freely in the commercial or professional world, without an interest of the other party, worthy of protection, being served thereby.  Such a situation is also of itself detrimental to the public interest.  Further, a restraint which is reasonable inter partes may nevertheless, for a reason not affecting the parties personally, be offensive to the public interest (and the converse is probably also true).  Four questions arise:

(1) Is there an interest of the one party which, after termination of the contractual relationship, is deserving of protection?

(2) Is that interest being prejudiced by the other party?

(3) If so, does that interest weigh up, qualitatively and quantitatively, against the interest of the other party in not being economically inactive and unproductive?

(4) Is there some other facet of public interest, unrelated to the relationship between the parties, which requires that the restraint be upheld or struck down, as the case may be?

To the extent that the interest in (4) overshadows that in (1), the restraint would be unreasonable, and accordingly unenforceable.  A value judgment is involved, which may vary from case to case.”[3]

[14] It is trite that a person (applicant in this instance) who alleges breach of the restraint of trade clause bears the onus to establish that; .the respondent on the other hand has to establish that the restraint of trade clause is unreasonable and hence contrary to public policy.[4]  Furthermore, the respondent has to establish that the applicant has no proprietary interest that is threatened.[5]

[15] The contract is written on a letterhead of Gestetner Queenstown and the preamble reads:

“CONTRACT OF EMPLOYMENT

NAME OF EMPLOYER: N R G Office Solutions (Pty) Ltd

Trading as “Gestetner Border, Gestetner Transkei & Gestetner Queenstown”

ADDRESS: P.O.Box 13126

Vincent, 5217

(Herein after referred to as “The Employer”, “The Company” & “Gestetner”)”

[16] I shall deal first with the issues raised by the respondent in paragraph 9 above.

[17] Relative to paragraph 9.1 above, the definition of employer is clear on the contract NRG Office Solutions (Pty) Ltd is the employer and where in the contract reference is made to “the company”, “the employer”, or “Gestetner”, that should be read to refer to the applicant.  Therefore the words are used interchangeable.  There is no contention by the respondent that the trading name of the applicant is not correct.  The argument by the respondent in this regard stands to be rejected.

[18] A contention that the respondent has raised in 9.2 above stands to be rejected as well on the same grounds.  The contract at all times was concluded between the applicant and the respondent.  The applicant’s submission that Gestetner South Africa started trading as Ricoh South Africa changes nothing as the contract was not between Gestetner South Africa and the respondent but between the applicant and the respondent. 

[19] The issue raised by the respondent in paragraph 9.3 above is also without merit especially if one has regards to the submissions made the applicant that the respondent was employed for an indefinite period.  The contract between the parties was not a fixed term contract which by its very nature entails that promotions, salary increases, benefits scales and responsibilities which flow therefrom, remain regulated at all times by the contract despite that some of the conditions thereof may change with time as per the operational requirements of the applicant.  The letter sent to the respondent dated 29 September 2014 (NRG 3) categorically states as follows in respect of the terms and conditions which were apparently included in the new contract:

“The amendments that have been made since you signed your contract on 14^th of August 2003 have been put in place to keep up to date with current legislation, keep track of inflation in addition to updating your employment records to reflect your current position, salary structure et cetera.

We are not varying away from our current employment contract for anyone of our employees at all as these are in place to protect firstly the company against incorrect labour practice allegations, secondly to protect our customer base, confidential information, customer base et cetera against unscrupulous persons who think that these belong to themselves and can be dealt with whichever way they see fit. And lastly to protect your own income as we are perusing our restraint contracts when occasions arise one persons think that our information et cetera belongs to them.”

[20] The contents of the letter referred to above do not suggest that the terms and conditions especially clause 4 of the contract were varied in anyway as alleged by the respondent.  Put differently, it can be gleaned from the letter that the standard conditions appearing on the contract have not been varied.

[21] The respondent asserts that the contract came to an end immediately upon his promotion to the new position.  The respondent avers that after his promotion the parties entered into a new oral agreement.  However, the respondent does not state what the terms of the new oral agreement were and whether they differed from the terms of the contract hence my conclusion in paragraph 20 above.

[22] The submission by the applicant that the respondent implies that each time there is a raise in his remuneration, written agreements already entered into would cease to operate and new contracts would have to be entered into, is correct.  Such an arrangement cannot be countenanced in business.

[23] I shall deal with the issues raised by the respondent in paragraph 9.4 and paragraph 9.5 above as one.  The relevant portions of clause 4 of the contract read as follows:

“4. Confidentiality undertaking and restraint of trade

4.1 For the purpose of this contract, the following words shall, unless the context clearly otherwise indicates, have the allocated meanings:

4.1.1 Trade secrets

The TRADE SECRETS of Gesteter includes (without limiting the generality of the description) in general the manner in which their business is structured and operation know how, processes and techniques, marketing strategies and policies, designs, patents, exclusivity arrangements, technical information, trade connections and contractual arrangement.

4.1.2 Confidential information

The CONFIDENTIAL INFORMATION of Gestetner includes, but is not limited to, the contractual arrangements between Gestetner and its suppliers, customers and business connections, financial details of Gestetner the names of present and prospective suppliers, principals, customers and any information regarding them, the remuneration paid by Gestetner to any employee and all information with regard to any such employee and in general all such facts or information which relates to the business of Gestetner and which information is not readily available in the ordinary course of business to a competitor of Gestetner.

4.2 It is recorded that you will, as a consequence of employment with

Gestetner, have access to the TRADE SECRETS and CONFIDENTIAL INFORMATION and hereby agree, undertake and bind yourself, in order to protect the proprietary interest of Gestetner in the TRADE SECRETS and CONFIDENTIAL INFORMATION that, during the period of your employment and for a period of 10 (ten) years thereafter, you will not, either directly or indirectly use, disclose, divulge or make known (except as may be required or necessitated in the performance of your duties as an employee) any of the TRADE SECRETS and CONFIDENTIAL INFORMATION.

4.3 Any document, including (but not limited to) data stored in any computer programme or any printout thereof, drawings, records, notes, memoranda or reports which contain any TRADE SECRETS and CONFIDENTIAL INFORMATION, and all copies thereof, irrespective of whether you were the author thereof or not, will be and remain the property of Gestetner and shall be surrendered to Gestetner on the termination of your employment and you will not retain copies or extracts from any such documents.

4.4 You hereby agreed that the proprietary interest of Gestetner in the TRADE SECRETS and CONFIDENTIAL INFORMATION will be prejudiced if you take up employment or become interested in any concern that competes with Gestetner.  It is accordingly agreed that, in order to protect such proprietary interest, you bind yourself, during the period of your employment and for 24 (twenty four) months after the termination thereof, the following restraints.

4.4.1 . . .

4.4.2 Save in the proper execution of your duties as an employee of Gestetner, you will not approach, advise or contact in order to, either directly or indirectly, solicit the custom or any person or entity who was a customer with whom or to whom, on behalf of Gestetner, negotiations, discussions or representations were entered into or made during the period of your employment with Gestetner;

4.4.3 You will not either directly or indirectly be employed by or have an interest in, either as an employee, principal, agent, member, shareholder, director, partner, consultant, financier or adviser or in any other like capacity in any concern or entity which carries on the same business or a business similar to or like the business of Gestetner.” (Emphasis added)

[24] In Cooper & Lybrand & Others v Bryant[6] Joubert JA said the following about the interpretation of contracts:

“The matter is essentially one of interpretation.  I proceed to ascertain the common intention of the parties from the language used in the instrument.  Various canons of construction are available to ascertain their common intention at the time of concluding the session.  According to the ‘golden rule’ of interpretation the language in the document is to be given its grammatical and ordinary meaning, unless that would result in some absurdity, or some repugnancy or some repugnancy or inconsistency with the rest of the instrument. …  The mode of construction should never be to interpret the particular word or phrase in isolation (in vacuo) by itself. . . The correct approach to the application of the ‘golden rule’ of interpretation after having ascertained the literal meaning of the word or phrase in question is, broadly speaking, to have regard:

(1) to the context in which the word or phrase is used with its interrelation to the contract as a whole, including the nature and purpose of the contract. . .”[7]

[25] The provisions of clause 4.2 provide that the respondent ‘as a consequence of his employment with Gestetner’ (the applicant) is precluded from divulging, using or disclosing the trade secrets and confidential information of the applicant during his employment and for a period of 10 (ten) years thereafter.  This wording clearly spells out that the restraint is applicable even after the respondent has left the employ of the applicant hence the use of the word ‘thereafter’.

[26] Clause 4.4.2 starts with the words ‘save in the proper execution of your duties as an employee of Gestetner, you will not - - -’.  The clear meaning hereof is that the applicant prohibits the respondent from doing what is contained in clause 4.4.2 unless the respondent does so in the execution of his duties as an employee of the applicant.  To ascribe a different interpretation would negate their protective effect and undermine their very purpose.  The meaning sought to be given by the respondent is clearly wrong.

[27] The language used in clause 4 in particular clauses 4.2 and 4.4.2 is clear and unambiguous and spells out the obligations of the parties succinctly.  The following dictum by Dimont AJA in Arprint Ltd v Gerber Goldschmidt South Africa Ltd[8] finds application in this matter:

“Language is a best and imperfect vehicle for expressing thought and intention and resort must from time to time be had to the rules of construction.  But where, as in this case, the plain and natural meaning of the word is clear.  There can be no call for the application of the contra proferentem and contra stipulatorem rules.”

[28] It is trite that the respondent bears the onus of proving that the terms of the contract are unreasonable.  The respondent argues that the terms are unreasonable because they prevent him from using his skills, abilities to earn a leaving.  The respondent, with respect, misses the argument and relief sought by the applicant in the notice of motion.  What is sought to be interdicted is the conduct of the respondent which is contrary to the provisions of clause 4 of the contract.  In doing so, the applicant has established that the respondent took up employment with Aloe within the restraint period in breach of clause 4.4 of the contract.  Furthermore, the respondent has not denied the allegation that he caused the account of Senqu Municipality which the respondent had been working on before he left the employ of the applicant, to be awarded to Aloe.  Therefore, in the light of that the terms of clause 4 cannot be said to be unreasonable.

[29] I find that the applicant has established the requirements of an interdict.

Consequently the following order shall issue.

1. The respondent is interdicted and restrained, in the region of the Province of the Eastern Cape, up to and including 31 October 2016 from:

1.1 Approaching, advising or contacting in order to, directly or indirectly, solicit the custom of any person or entity who was a customer with whom or to whom, on behalf of the applicant, negotiations, discussion or representations were entered into or made during the period of the respondent’s employment with the applicant;

1.2 Being directly or indirectly employed by or have an interest in, either as an employee, principal, agent, member, shareholder, director, partner, consultant, financier or advisor or in any other capacity in any concern or entity which carries on the same business or a business similar to or like the business of the applicant;

1.3 The respondent is interdicted and restrained, in the region of the Province of the Eastern Cape for a period of 10 (ten) years from date of resignation, 29 October 2014, from disclosing, divulging or making known any of the trade secrets or confidential information of the applicant;

1.4 The respondent is directed to pay the costs of the application.

M MAKAULA

JUDGE OF THE HIGH COURT

Appearances:

Applicant: Adv Beard instructed by

Kirchmanns Incorporated

c/o Netteltons Attorneys

118A High Street

GRAHAMSTOWN

Respondent: Mr Omar instructed by

Whitesides Attorneys

53 African Street

GRAHAMSTOWN

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