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IN THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

 

Reportable

Case no: J1222/2022

 

In the matter between:

 

PLANET FITNESS (PTY) LTD                                                       Applicant

 

And

 

DEON SIDNEY BUIRSKI                                                              First Respondent

 

VIRGIN ACTIVE SOUTH AFRICA (PTY) LTD                              Second Respondent

 

Heard:           28 October 2022

Delivered:     08 November 22

 

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 08 November 2022.

 

Summary:     Restraint of trade – failure to attach a true copy of the contract is fatal – restraint is unreasonable in relation to the nature of the protectable interest.

 

JUDGMENT

 

NKUTHA-NKONTWANA, J

 

Introduction

 

[1]          These urgent proceedings arise out of the employment relationship between Planet Fitness (Pty) Ltd (Planet Fitness) and Deon Sidney Buirski (Mr Buirski) which terminated on 2 September 2022 when Mr Buirski was dismissed. Mr Buirski immediately thereafter took up employment with Virgin Active South Africa (Pty) Ltd (Virgin Active), the main competitor of Planet Fitness. Planet Fitness accordingly seeks to enforce the terms of the restraint of trade agreement and confidentiality undertaking (restraint covenant).

[2]          The application is vigorously opposed by Mr Buirski who in turn takes a point in limine to the effect that Planet Fitness invoked and seeks to enforce the incorrect restraint covenant. Without being exhaustive, the essence of Mr Buirski’s contention involves the proposition that the employment contact and the restraint contract invoked was superseded by the contract that promoted him. Alternatively, Mr Buirski contends that the enforcement of the restraint covenant, if found to be correct, would be unreasonable. Nonetheless, urgency is conceded.

Factual background

[3]          Mr Buirski commenced his employment with Planet Fitness on 4 March 2014 and held the position of regional sales manager. Attached to his letter of appointment was the restraint covenant marked annexure A. The appointment letter was signed by Mr Mario Collopen (Mr Collopen), representing Planet Fitness. Mr Buirski accepted the offer and signed the letter of appoint and initialled the annexure A thereof.[1]

[4]          On 1 February 2021, Mr Buirski was promoted to a position of a national sales manager. The appointment letter was signed by Mr Manne de Wet (Mr De Wet). Likewise, the appointment letter refers to annexure A which, as contended by Planet Fitness, is a restraint covenant with similar terms as the one that was attached to the 2014 contract or employment. The major obstacle facing Planet Fitness is that annexure A to the 2021 contract of employment is not before Court. I shall revert to this issue in due course.

[5]          The restraint covenant Planet Fitness seeks to enforce is for a period of 6 months after the termination of Mr Buirski’s employment and is applicable for the entire geographical area of the Republic of South Africa.

[6]          On 21 July 2022, Mr Buirski appeared before a disciplinary enquiry in relation to a charge of gross misconduct in that he allegedly approached Virgin Active for employment, an allegation he denied. He was found guilty as charged and demoted with a final written warning valid for 12 months. He appealed the verdict and sanction but was unsuccessful. He referred the unfair labour practice dispute to the CCMA.

[7]          On 2 September 2022, Mr Buirski appeared before a second disciplinary enquiry and pleaded guilty to a charge of breach of confidentiality by disclosing a member’s private information in violation of the Protection of Personal Information Act[2] (POPI Act). He was summarily dismissed. On 19 September 2022, he took up employment with Virgin Active.

Legal principles

[8]          It is well accepted that the party seeking to enforce a restraint of trade covenant, is required to invoke the restraint covenant and prove a breach thereof; then, the party who seeks to avoid the restraint, bears an onus to demonstrate, on a balance of probabilities, that the restraint of trade covenant is unenforceable because it is unreasonable.^[3] Yet in Ball v Bambalela Bolts (Pty) Ltd & another (Ball)[4] confronted with the issue of the reasonableness of the restraint, the Labour Appeal Court (LAC) made the following instructive observations:

‘[13]  …Prior to the decision in Magna Alloys and Research SA (Pty) Ltd v Ellis,[5] restraints of trade were only enforceable if they were proved to be reasonable. Since then they have been regarded as enforceable, unless they are proved to be unreasonable. The effect of the Magna Alloys’ decision was to place an onus on the party, sought to be restrained, to prove, on a balance of probabilities, that the restraint was unreasonable. However, because the right of a citizen freely to choose a trade, occupation, or profession, is protected in terms of s 22 of the Constitution and a restraint of trade constitutes a limitation of that right, the onus may well be on the party who seeks to enforce the restraint to prove that it is a reasonable or justifiable limitation of that right of the party sought to be restrained.

[14]   In Reddy v Siemens Telecommunications (Pty) Ltd,[6] it was held that the reasonableness of a restraint could be determined without becoming embroiled in the issue of onus. This could be done if the facts regarding reasonableness have been adequately explored in the evidence and if any disputes of fact are resolved in favour of the party sought to be restrained. If the facts, assessed as aforementioned, disclose that the restraint is reasonable then the party, seeking the restraint order, must succeed, but if those facts show that the restraint is unreasonable, then the party, sought to be restrained, must succeed. Resolving the disputes of fact in favour of the party sought to be restrained involves an application of the Plascon-Evans rule.’ (Own emphasis)

Is the contract sought to be enforced incorrect?

[9]          The crisp question for determination is this whether or not Planet Fitness has validly invoked the restraint covenant alleged to have been breached. As mentioned above, Planet Fitness has merged and transposed the documentation pertaining to the 2014 contract of employment and restraint covenant where Planet Fitness was represented by Mr Collopen (2014 restraint covenant) and the 2021 promotion contract to national sales manager where Planet Fitness was represented by Mr de Wet (2021 restraint covenant).

[10]       Planet Fitness asserts that it seeks to enforce the 2021 restraint covenant. However, Mr Buirski unequivocally avers that the document attached to the founding affidavit and marked annexure A is a 2014 restraint covenant. In reply, Planet Fitness failed to explain the muddle. Instead, it concedes that the initialled restraint covenant it relies upon is a 2014 annexure A. Mr Buirski contends that the 2014 contract of employment and the attached restraint covenant were superseded by the 2021 contract of employment and restraint covenant. As such, Planet Fitness pleaded the incorrect restraint.

[11]       Planet Fitness remonstrates with Mr Buirski for raising the point in limine for the first time in his head of argument. It contends that there is no basis for Mr Buirski to contend that the 2021 agreement superseded the 2014 agreement. Conversely, there is no suggestion that Mr Buirski’s employment relationship was disrupted by the new agreement which served the purpose of promoting him. In any event, Mr Buirski does not state that there is a difference in the terms of the 2014 restraint covenant and the 2022 covenants, so it is further contended.

[12]       In my view, there is no merit in Planet Fitness’ protest that the muddle in the restraint covenants is taken as a point in limine as the issue is duly pleaded. Moreover, as correctly contended by Mr Buirski’s counsel, the onus is on Planet Fitness to invoke the contract it seeks to enforce and prove the breach thereof. So, obviously, this issue goes to the merits of the application. Equally, nothing turns on whether the terms of the two sets of restraint covenants are the same or different because all the obligations it seeks to enforce depend on their existence and their attributes solely upon the law of contract. Tellingly, in terms of Rule 18(6) of the Uniform Rules of Court, a party who relies on a written contract is enjoined to annex to the pleading a true copy thereof.

[13]       Whether the 2014 restraint covenant was superseded by the 2021 restraint covenant is not seriously disputed. Even if it is a material dispute of fact, it must be resolved in favour of Mr Buirski by applying the Plascon-Evans[7] principle. Therefore, to the extent that the Planet Fitness now contends that it has invoked the 2014 restraint covenant, contrary to its pleaded case, I agree with Mr Buirski that the 2014 restraint covenant was superseded by the 2021 restraint covenant, which is not even before Court and, in any event, it is not relied upon. Curiously, Plant Fitness contends that the new contract of employment that promoted Mr Buirski did not disrupt the employment relationship and in turn the 2014 restraint covenant. That is not its pleaded case. It is adamant in its replying affidavit that it is invoking the 2021 restraint covenant.

[14]       I venture to highlight the fact that, since restraint of trade pertains to a severe infringement of employees’ constitutional rights in terms of section 22 of the Constitution, it does not avail an employer to approach the Court and hope to justify a limitation of a constitutional right on the back of an erroneous or scantily worded document that may require major reconstructive surgery.[8]

[15]       For these reasons, I find on the facts that Planet Fitness failed to prove the restraint covenant it seeks to enforce. That being the case, Planet Fitness is non-suited and cannot succeed to obtain the relief it seeks, regardless as to whether Planet Fitness and Virgin Active are competitors.

[16]       This finding is dispositive of the application. However, if it became apparent that the restraint covenant invoked by Planet Fitness is correct, I deal with Mr Buirski’s alternative defence that the enforcement of the restraint covenant would be unreasonable. In view of my finding above in respect of the issue of the correctness of the restraint covenant invoked, an exhaustive analysis of this question is not necessary. Nonetheless, in the event that I am wrong on that matter, a degree of analysis is necessary.

Is the restraint covenant reasonable and enforceable?

[17]       The general principles pertaining to the reasonableness and enforceability of the restraint covenant were conveniently summarised in Basson v Chilwan & Others[9] as follows:

(a)     Does the one party have an interest that deserves protection after termination of the agreement?

(b)     If so, is that interest threatened by the other party?

(c)     In that case, does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?

(d)     Is there an aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected?

(e)     Whether the restraint goes further than necessary to protect the relevant interests?

[18]       The party seeking to avoid enforcement of the restraint is required to prove, on a balance of probabilities, that, in all the circumstances of the particular case, it will be unreasonable to enforce the restraint. As was recognised in Reeves and Another v Marfield Insurance Brokers CC and Another[10]:

‘The circumstances to which regard may be had cover a wide field and include typically those pertaining to the nature, extent and duration of the restraint and the legitimate interests of the respective parties in relation thereto…Even factors such as the equality or otherwise of the bargaining power of the respective parties may be taken into account.’

[19]       The protectable interest of an applicant in a restraint of trade pertains to confidential information and customer connections. In Labournet (Pty) Ltd v Jankielsohn and Another^[11] the Court held:

‘… A restraint is only reasonable and enforceable if it serves to protect an interest, which, in terms of the law, requires and deserves protection. The list of such interests is not closed, but confidential information (or trade secrets) and customer (or trade) connections are recognised as being such interests…’

[20]       The issue as to what constitutes a trade secret was dealt with in Mozart Ice Cream Classic Franchises (Pty) Ltd v Davidoff and another,^[12] where, referring to Walter McNaughtan (Pty) Ltd v Schwartz and Others,^[13] the basis of the enquiry was aptly outlined as follows:

‘Whether the information constitutes a trade secret is a factual question... For information to be confidential it must (a) be capable of application in trade or industry, that is it must be useful; not be public knowledge or property; (b) it must be known only to a restricted number of people or a closed circle, and (c) be of economic value to the person seeking to protect it.’

[21]       Tritely, when the former employer asserts a protectable proprietary interest in confidential information, there must be a balancing of interests; i.e. its interest in the maintenance and protection of its trade secrets and the former employee’s interest to use his know-how and skills elsewhere post termination of his employment. If the Court, having considered the confidentiality and economic value the information sought to be protected, is not convinced that the information in question constitutes a trade secret, cadit quaestio (that is the end of the case). Put otherwise, that would be the demise of the former employer’s case. However, if the information is found to constitute a trade secret, the Court must pass a value judgment as to whether the use of the information by the former employee is justified despite its confidential nature. Such judgment involves a weighing up of the conflicting interests of both parties, applying the criterion of reasonableness or the boni mores in the light of all the relevant circumstances of the case.[14]

[22]       In the present instance, Mr Buirski was suspended on 18 July 2022 and his access to all information relating to Planet Fitness was blocked and he was unable to access company e-mails until 15 August 2022. Moreover, Planet Fitness avers that it demoted him to the position of regional sales manager where there was less risk in trusting him with its company secrets and confidential information. Soon thereafter, Mr Buirski was suspended once more, as indicated above. Henceforth, he had no access to any of Planet Fitness’ information up until he was dismissed on 2 September 2022.

[23]       The information Planet Fitness seeks to protect, it would seem, was accessible to Mr Buirski by virtue of him being part of its management committee. The details thereof are thriftily pleaded. Planet Fitness avers that it could not provide the details of the said information because it constitutes trade secrets. However, there is no explanation proffered for not availing itself to filing a confidential affidavit with consent from Mr Buirski’s attorneys of record to be bound by its confidentiality.

[24]       Notwithstanding, Planet Fitness refers to the minutes of the management meeting of 22 July 2022, attached to the founding affidavit, as proof that Mr Buirski was privy to its confidential information. It is mind-boggling that Planet Fitness still considers this information confidential when it has placed the issues discussed at these meetings in the public domain and specifically disclosed to Virgin Active who was served with the founding papers in this application.

[25]       Mr Buirski is adamant that, even though he had knowledge of the strategic partnerships entered into by Planet Fitness and its partners, these strategic partnerships are listed on Planet Fitness’s website and are in the public domain. He further avers that even his knowledge of the agreements with these strategic partners did not extend to the critical information relating to costings, structure and other details of the arrangement with these partners. Nothing meaningful is added in reply.

[26]       There is consequently a question as to what protected information has been shown in the papers. To the extent that it may be said that there is a dispute on this aspect, it must be resolved in favour of the respondent.[15] While the Court gives weight to the fact that the parties have agreed upon the terms of a restraint covenant, the party seeking to enforce the restraint must present sufficiently persuasive evidence to show that the protection it seeks is not greater than what is reasonably necessary between the parties. In discharging that evidentiary burden, that party must do more than merely point to the existence of a bargain; it must justify the restraint by showing that the value of the information is directly linked to the obligation associated with it. If there is no obligation, then there can be no commercial value attached to the information, thereby rendering it confidential. [16]

[27]       Having considered the confidentiality and economic value of the information sought to be protected, I am not convinced that the information in question constitutes a trade secret, cadit quaestio.

[28]       I now turn to the issue of business connections. Even though Planet Fitness avers in its founding papers that it has business connections worthy of protection, it accepts that Mr Buirski’s positions (as sales manager and, subsequently, regional sales manager) removed him from the daily dealings with its clients. It is also not disputed that the client facing functions were managed by other employees of Planet Fitness who have been building connections with these clients from, at best, February 2021 when Mr Buirski was appointed as the regional manager.

[29]       Planet Fitness prudently abandoned this claim in its written submission and was confirmed by its counsel during the oral argument.

[30]       In the circumstances, Planet Fitness failed to make out a case to show that there exists trade secrets and business connections sufficient enough to justify the enforcement of the restraint covenant.

[31]       Given the above conclusion, I deem it superfluous to be arrested by the rest of the issues, namely the period and area of the restraint; and the other public policy considerations.

Conclusion

[32]       In all the circumstances, the application stands to be dismissed.

Costs

[33]       Mr Buirski seeks costs which include the costs of senior counsel and relies on this Court’s recent judgment, per Van Niekerk J, that since the enforcement of restraint covenants pertains to civil litigation, the general rule that costs follow the result does apply. That is contrary to LAC’s views in Ball^[17] that, to the extent that the enforcement of a restraint, in principle, involves a constitutional right in terms of section 22 of the Constitution^[18], the general rule that costs follow the result does not apply.

[34]       In my view, the Ball dictum did not strip this Court of its discretion when dealing with the issue of costs. In the present case, there is no justifiable reason for costs not to follow the result given the fact that Planet Fitness sought to enforce an incorrect document on the vaguest pleaded terms which are untenable. Also, there is a justifiable reason why the costs of employing two counsels, one being senior counsel, should not be granted.

[35]       In the result, I make the following order:

Order

1.         The application is dismissed.

2.         Planet Fitness shall pay Mr Buirski’s costs, including the costs of two counsel.

 

P. Nkutha-Nkontwana

Judge of the Labour Court of South Africa

 

Appearances:

 

For the Applicant:                           Advocate S Swieger

 

Instructed by:                                  Strydom and Associates

 

For the First Respondent:              Advocate Whicutt SC & Advocate D Whittington

 

Instructed by:                                 Cowan- Harper – Madikizela Attorneys

 

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