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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

CASE NO: 31390/17

Not reportable

Not of interest to other judges

Revised.

23/6/2017

In the matter between:

THE WASTE GROUP PTY (LTD)                                                                      APPLICANT

and

STEVEN DALE BRERETON                                                                   1^st RESPONDENT

AVERDA SOUTH AFRICA PROPRIETARY LTD                                   2^nd RESPONDENT

AVERDA SA WASTE MANAGEMENT

SERVICES PTY (LTD)                                                                             3^rd RESPONDENT

 

JUDGMENT

 

KUBUSHI J

INTRODUCTION

[1] The applicant seeks to interdict the first respondent from being employed by its direct or indirect competitors , in virtually all municipal areas of every province in the Republic (with the exception of the Western Cape), and from disclosing any information, business production or marketing secrets or procedures or formulas, customer details or any other sensitive information pertaining to and/or in respect of the applicant's and/or the applicant's business to any such direct or indirect competitors. According to the applicant, the purpose of the application, in essence, is to enforce restraint of trade-, intellectual property- and confidentiality agreements against the first respondent.

[2] The second and third respondents are cited in the application in recognition of any interest that they may have in the relief sought against the first respondent. The second respondent is not opposing the application and has indicated that it will abide the decision of court. The third respondent is not opposing the application as well and it became apparent when the first respondent filed his opposing papers that the first respondent is currently employed by the second respondent, as such, the case against the third respondent was not pursued by the applicant. For purposes of this judgment only the first respondent is before me.

 

URGENCY

[3] The application was launched as a matter of urgency since the restraint was for a limited period of twelve months. The applicant's contention is that should it be brought on the normal opposed roll the application would not be finalised prior to the expiry of the restraint period, and that it has done 'all in its power' to avoid launching the application.

[4] The first respondent has raised a point in limine on urgency. I am, however, of the view that since the restraint is for a limited period of twelve months the matter should be treated as one of urgency. The applicant's contention that by the time the matter is heard on the normal opposed roll, the period of the restraint shall have lapsed, is indicative of the fact that the applicant shall not be afforded substantial redress in due course if the matter is placed on the normal roll.

[5] The first respondent's submission, in opposing the urgency, that prior to the launch of this application he provided written , irrevocable, unconditional and unequivocal undertakings to the applicant, which undertakings align almost precisely with the relief sought by the applicant, is, to me, unsustainable. It is my view, that such undertakings should not prevent the applicant from approaching this court on an urgent basis.

[6] As a matter of law, an application to enforce a restraint of trade cannot be defeated by the giving of an undertaking as suggested by the first respondent. The court in BHT Water Treatment (Pty) Ltd v Leslie & Another[1] which was applied with approval in Reddy v Siemens Telecommunications (Ply) Ltd[2] stated the following:

"In my view, an ex-employee bound by a restraint, the purpose to which is to protect the existing confidential information of his former employer, cannot defeat an application to enforce such a restraint by giving an undertak ing that he will not divulge the information if he is allowed, contrary to restraint, to enter the employment of a competitor of the applicant. Nor, in my view, can the ex-employee defeat the restraint by saying that he does not remember the confidential information to which it is common cause that he has had access. This would be the more so where the ex-employee, as is the case here, has already breached the terms of the restraint by entering the service of a competitor."

As it shall be shown later in this judgment, the first respondent, in this instance, has also breached the terms of the restraint by entering the service of a competitor. As such his undertakings to the applicant are of no assistance to him. The application is urgent and ought to be treated as such.

[7] My conclusion in this regard also puts to bed the first respondent's submission that the applicant has a valid/alternative remedy to accept the undertakings instead of pursuing this application.

 

BACKGROUND

[8] There are four dominant and major role players - competing against each other - within the waste management industry in South Africa and various other different and smaller competitors. The four major largest role players within the waste management industry are able to deliver a complete and holistic service over the spectrum of waste management, namely, industrial waste management; commercial waste management; medical waste management; domestic waste management; mining waste management; municipal waste management and landfill management. There is a further sub-category of hazardous waste management created within any of the aforementioned categories. Each of these four main role players in the complete management industry delivers services and conduct business on a national basis.

[9] The applicant conducts business in all municipalities in Gauteng; the Potchefstroom, Rustenburg and Stilfontein municipalities in the North-West Province; the Witbank-, Middelburg- , Ermelo-, Burgersfort-, Delmas-, and Secunda municipalities in the Mpumalanga Province; the Durban municipality in Kwa-Zulu Natal Province; the Ellisras- and Northam municipalities in the Limpopo Province; the Sasolburg municipality in the Free State Province; and, the Matatiele municipality in the Eastern Cape Province.

[10] The applicant and the second respondent are part of the four major role players in the waste management industry. The applicant and the respondents are said to be direct competitors and opponents in all the aforementioned territorial areas, conducting business and competing for clients within exactly the same categories of waste management.

[11] The delivery of waste management services are specialised and involved and as such, the applicability of a restraint of trade to the industry is a norm.

[12] The applicant as one of the role players within the waste management industry has always entered into contracts of employment, containing specific provisions pertaining to restraint of trade, intellectual property and confidentiality, with its employees.

[13] On 10 October 2012 the applicant concluded such a contract of employment with the first respondent. The pertinent provisions of the employment contract, which the applicant seeks to enforce, are those contained in clauses 18 to 20 of the contract.

 

THE RELIEF SOUGHT BY THE APPLICANT

[14] Relying on clauses 18.1 and 20.2 of the employment agreement the applicant seeks the relief as stated in its notice of motion, which reads as follows :

"1. …

2. That the first respondent be interdicted and restrained from being employed with the Second and/or Third respondents and/or from continuing with his current employment with the mentioned respondents or any one of them for a period of 12 months, calculated from 1 April 2017.

3. That the First Respondent be interdicted and restrained from disclosing any information, business production or marketing secrets or procedures or formulas, customer details or any other sensitive information pertaining to and/or in respect of the applicant and/or the applicant's business to any direct or indirect competitor and/or any person whomsoever .

4. That the First Respondent be interdicted and restrained (for a period of 12 months) from taking up employment with any of the applicant's direct and/or indirect competitors (inclusive of the Second and/or Third Respondents and/or any entity related to it) who operates and/or conduct business within the radius of a 150 kilometres from:

4.1. all municipalities in Gauteng;

4.2. the Potchefstroom, Rustenburg and Stilfontein municipalities in the North-West Province

4.3. the Witbank-, Middelburg-, Ermelo-, Burgersfort-, Delmas-, and Secunda municipalities in the Mpumalanga Province;

4.4. the Durban municipality in Kwa-Zulu Natal Province;

4.5. the Ellisras- and Northam municipalities in the Limpopo Province;

4.6. the Sasolburg municipality in the Free State Province;

4.7. the Matatiele municipality in the Eastern Cape Province."

 

THE APPLICANT'S CASE

[15] The applicant's submission is that it has been in the waste management business for 31 years and has over the years invested in personal relationships with key personnel responsible for waste management, at its clients. As a result, the applicant has intimate knowledge of the likes and dislikes of certain key individuals employed by its clients and regards that intimate knowledge of the utmost importance for its strategic management of its respective clients. That intimate knowledge is:

15.1. The relationship with key personnel employed by the applicant's clients: applicant's evidence is that it works intimately with specific key persons employed by its various clients to attend to their waste management needs and comply with the environmental legislation which their client have to comply with. Each of the persons has unique requirements, likes and dislikes. Knowledge of their preferences enables applicant to negotiate contracts. It is due to the involvement of these personal relationships that the applicant harvest knowledge of the specific preferences of specific key personnel in order to be able to design tailor-made contracts for each of their clients.

15.2. Pricing is one of the dominant factors utilised to compete with other waste management companies. The applicant employs four fulltime specialised cost accountants who are tasked to develop a tailor-made costing module and pricing structure in consultation with the applicant's director and the specific sales person. When the costing module for any specific client is finalised and approved, same is made available to the sales person like the respondent. This costing module and other financial information disclosed to a sales person is highly sensitive as it will disclose to a competitor of the applicant not only the preferences of a specific client but also the unique and tailor made method in which the applicant elected to address the preferences with specific reference to cost and pricing.

15.3. Knowledge of contractual content: All contracts entered into by the applicant are unique and different as it is the result of tailor-made negotiations. Knowledge of contracts with escape clauses or of limited duration will enable a competitor to approach the client of applicant and undercut the applicant as far as its future relationship with the client is concerned. Knowledge of penalty clauses in an agreement and of termination date of long term contracts will enable a competitor to unfairly compete with the applicant.

15.4. Strategic planning: The applicant involves its sales personnel like the respondent in its short, medium and long term planning session. The strategies are followed by the individual sales personnel in the approach they adopt when dealing with their counterparts at the applicant's clients. Such knowledge will enable the applicant's competitors to unfairly compete with it.

 

THE FIRST RESPONDENT'S CASE

[16] The first respondent is opposing the relief the applicant seeks in the notice of motion on many grounds. I shall, in this judgment, not deal with all the defences raised by the first respondent but with only those that are dispositive of this application.

[17] According to the first respondent, the applicant characterises the knowledge and information obtained by the first respondent while working within the waste management industry as belonging to it and argues that such knowledge and information is proprietary and protectable to it. The applicant fails to distinguish between knowledge and expertise which have been acquired whilst in the applicant's employ which would constitute discrete or confidential information belonging to the applicant, unknown to anyone outside of the applicant's most important employees and representatives.

[18] The information the applicant refers to as protectable is information that is privy to the customer in question. It is freely available information from the customer, whose interests will be served in sharing it in order to obtain better and/or cheaper service.

[19] Before joining the applicant, the first respondent had an extensive background in the industry, he learnt more about the industry of waste management whilst working for the applicant, but that is not its protectable interest (nor does the applicant say so).

[20] The first respondent's current employment with the second respondent results in almost no interaction with the applicant's clients or with generators of waste management companies of which the applicant is one and as such what the applicant argues is a protectable interest is irrelevant.

 

THE LAW

[21] A contractual provision in restraint of trade may be, but is not necessarily, contrary to public policy; and a party to a contract who seeks to escape the enforcement of one of its provisions on the ground that it imposes a restraint of trade must satisfy the court that the enforcement of the particular restraint, in the circumstances obtaining at the time when enforcement is sought, would be unreasonable and contrary to public policy.[3]

[22] Public interest requires that, generally speaking, the freedom of each individual to work and compete in the field for which she or he is qualified should not be curtailed. To hold an individual to such a contractual obligation remains reasonable for as long as, and to the extent that, such curtailment is necessary for the legitimate protection of the trade connection and trade secrets of a former employer. Beyond that, it is detrimental to the public interest and therefore it is unreasonable to enforce such a contractual provision.[4]

[23] The proprietary interests that could be protected by a restraint are essentially of two kinds. The first kind consists of the relationships with customers, potential customers, suppliers and others that go to make up what is compendiously referred to as the 'trade connection' of the business, being an important aspect of its incorporeal property known as goodwill. The second kind consist of all confidential matter which is useful for the carrying on of the business and which could therefore be used by a competitor, if disclosed to her/him, to gain a relative competitive advantage. Such confidential material is sometimes compendiously referred to as 'trade secrets'.[5]

 

ONUS

[24] The applicant's counsel contends in argument before me that the respondent bears the onus to make a case that the restraint is unreasonable which includes the onus to show there is nothing protectable.

[25] It is trite that a final order can only be granted in motion proceedings if the facts stated by the respondent together with the admitted facts in the applicant's affidavit justify the order, and this applies irrespective of where the onus lies.[6]

[26] This being an application for final relief I intend, in this judgment, to follow the approach taken in Reddy v Siemens Telecommunications (Pty) Ltd[7] and the Aquatan (Pty) Ltd v Jansen van Vuuren and Another[8] judgment, where it was held that where the facts, concerning reasonableness of the restraint, had been canvassed in the affidavits - genuine disputes of fact are to be resolved in favour of the party sought to be restrained by applying the so-called Plascon-Evans[9] rule. The rule applies irrespective of where the onus lies.

 

APPLICATION OF LAW TO THE FACTS

[27] In order to succeed in the relief it seeks, the applicant should prove the contractual restraint of trade-, intellectual property- and confidentiality agreements and the breach thereof by the first respondent. This much, however, is common cause.

[28] The evidence is that the applicant and the first respondent entered into an employment contract on 10 October 2010 which was terminated by the first respondent on 1 April 2017. It is also not in dispute that the said employment agreement had in terms of clause 18.1 thereof, allowed for a restraint of trade against the first applicant.

[29] In accordance with clause 18.1 of the employment contract the first respondent undertook not to directly or indirectly take up employment, within the direct area with a limit of 150km radius of his employment with the applicant, with the company which is similar to or competing with the applicant. The evidence shows that the first respondent, in contravention of clause 18.1 of the employment contract, has taken up employment with and is currently in the employ of the second respondent, a company which is in direct competition with the applicant and has, as such, breached the restraint of trade agreement.

[30] The first respondent does not deny the breach but is opposing the application on the basis that the restraint of trade is unreasonable, contrary to public policy and thus unenforceable. The contention is that the restraint is not reasonably necessary for the legitimate protection of the applicant's alleged proprietary interests in the form of its restraint of trade-, intellectual property- and confidentiality agreements, that is, its trade secrets. Actually, according to the first respondent, the proprietary interest, that is, the confidential information, the applicant seeks to protect does not exist. It is common cause that the first respondent has in terms of clause 20.2 of the employment contract bound himself to a restraint of trade-, intellectual property and confidentiality agreement with the applicant. In order to extricate himself from this obligation the first respondent should prove that the proprietary interest, that is, the confidential information, the applicant seeks to protect does not exist.

[31] In practice, the dividing line between the use by an employee of her or his own skill, knowledge and experience which she or he cannot be restrained from using, and the use of her or his employer's trade secrets or confidential information or other interest which she or he may not disclose if bound by a restraint, is said to be notoriously difficult to define. Similarly it is said to be difficult to determine whether the process by which a machine is built depends, in the main, for its success on the utility of the steps of the process or on the skill and discretion of the operator. If the former, knowledge of the process is protectable (provided it is sufficiently secret). If it depends on the latter for its success, it is likely that the employer has no secret process; she or he has only a skilled employee whose skill she or he cannot restrain from utilising after termination of the employment. Where the line is to be drawn is often one of degree. The dispute herein is about where the dividing line is to be drawn.[10]

[32] In this instance, I am not convinced on the papers before me that the alleged proprietary interests (confidential information) the applicant seeks to protect are worthy of protection in law. I take into account the applicant's submission that it is the norm within the industry to make use of provisions in restraint of trade, however, in order to be able to enforce the restraint the applicant ought to have a proprietary interest worthy of protection. But, the gravamen of the applicant's contention is that the first respondent had access and was privy to information which it considered to be confidential.

[33] A party that seeks to protect its confidential information, its trade secrets, and intellectual property must show that the information, know-how, technology or method is unique and peculiar to its business and that such information is not public property or that it falls within the public knowledge. Furthermore the party must show that the interest that it has in the information it seeks to protect is worthy of protection.[11]

[34] My view is that the knowledge emanating from the first respondent's exposure to the applicant's trade connections, contents of the contracts of the applicant's clients and the applicant's strategic planning sessions is the knowledge which is in the first respondent's head and he cannot be prohibited from using it. The knowledge has been acquired by the first respondent in the course of developing his trade and does not, as such, belong to the applicant - but accrue to the first respondent as part of his general stock of skills and knowledge which he may not be prevented from exploiting. In that sense, I agree with the first respondent's submission that the applicant has no proprietary interest that might legitimately be protected in this regard.

[35] All the information complained of by the applicant has not been identified with detail and particularity either in the applicant's founding affidavit or replying affidavit. As such it is not known which of the information should be regarded as proprietary interest which the first respondent should be restrained from disclosing.

[36] As regards the knowledge acquired from the applicant's trade connections and the knowledge of the content of contracts, it is my view that that knowledge, as argued by the respondent, is knowledge that can be readily ascertained from the client if need be. In sharing such information the client's interest will be served in that it will obtain better and/or cheaper service from potential service providers. The knowledge acquired from the applicant's clients can also not be referred to as belonging to the applicant or it being the applicant's property. It belongs to the client who provides it whenever so engaged. I would believe that such knowledge, like for instance the preferences of the respective clients, is known to some of the applicant's competitors or would be readily available to them should they request it. The first respondent having acquired such knowledge, whether on his own or with the assistance of the applicant, is entitled to use it to his own benefit. The fact that it was the applicant who facilitated the relationship is of no moment.

[37] In the founding affidavit the applicant relies on the knowledge of contracts with escape clauses or of limited duration as information that the first respondent may pass over to a competitor (the second respondent in this case) to enable such a competitor to undercut the applicant as far as the applicant's future relationships with its clients are concerned. The applicant further relies on the knowledge of penalty clauses in an agreement and of termination dates of long term contracts that the first respondent may give to a competitor (the second respondent in this instance) to enable such a competitor to unfairly compete with the applicant. Such knowledge, in my view, can be readily ascertained from the client if need be and cannot be said to be confidential and worthy of protection on the part of the applicant.

[38] The knowledge acquired during strategic sessions by the first respondent, on the other hand, can be treated in the same way as any that may be acquired during training or seminars provided by the applicant. The applicant does not say if these strategic sessions were mainly exclusive to sales persons or whether any other person attended the sessions which might render the information imparted therein not confidential. These sessions as the applicant states in its papers were meant to enhance the sales persons' skills when they pitch for sales with the clients they service. As such, these sessions were meant to develop the sales persons' skills, knowledge and experience. Such skills, knowledge and experience imparted to the sales persons, the first respondent being one of them, cannot be said to belong to the applicant.

[39] As is trite, technical skills and experience which an employee is able to apply to give an employer a competitive advantage in marketing their services is an ability that does have value without reference to any of the employer's secrets. The ability to strategically apply general technical knowledge and experience to the advantage of an employer does not belong to the employer. As stated in the Labour Appeal Court in Laboumet (Pty) Ltd v Jankielsohn and Another[12] and Aranda v Textile Mills (Pty) Ltd v L D Hum.[13]

"even if an employer spent time and effort and money to train or skill an employee in a particular area of work the employer has no proprietary hold on the employee, or his, or her, knowledge, skills and experience, even if those were acquired at that employer."

[40] However, I take a different approach when it comes to pricing. My view is that in respect of pricing the applicant has a proprietary interest which should be protected. The applicant's evidence is that it employs four fulltime specialised cost accountants. The accountants are provided with detailed information of each specific individual client, inclusive of the client's preferences, and are then tasked to develop a tailor-made costing module and pricing structure. As such, the applicant has a unique and tailor-made method used in developing a costing module and price structure for its individual clients.

[41] The applicant's submission is that all the pricing information is regarded as of utmost importance and highly sensitive as it will disclose to a competitor of the applicant, such as the second respondent, not only the preferences of a specific client but also the unique and tailor-made method in which the applicant elects and elected to address these specific preferences by means of specific cost- and price modules. This information, according to the applicant, is worthy of protection. And I agree that the unique and tailor-made method of developing the cost- and price modules is confidential and worthy of protection in law.

[42] As submitted by the applicant in its replying affidavit, what is sought to be protected is not the ultimate and aggregate price at which the applicant contracted with a specific client, but

42.1. The detailed information that was fed to the cost consultants developing the tailor-made costing module inclusive of the margins and costing;

42.2. The information that flowed from that cost consultants, back to the sales person (the first respondent) to enable him to negotiate and engage with client; and

42.3. The client's response to the negotiations that were in turn relayed by the sales person (the first respondent) to the cost consultant.

[43] From the aforementioned the applicant's contention is that the first respondent had access and exposure in the whole process of developing the cost and price modules for the specific clients he serviced. This, the applicant contends was done in consulting with its sales persons, the first respondent being one of them, when the module is still under development. When the quotation/draft contract or costing module for any specific client is finalised and approved same is made available to the sales person responsible for that specific client, like the first respondent. In this way the first respondent had access and exposure to the knowledge of the margins used in developing a tailor-made costing module for each of the respective clients serviced by him.

[44] The first respondent submits, however, that he was not involved in the process of compiling or producing the costing modules and that he was exposed only to the final product, that is, he was given the cost modules already completed. Because of the dispute that emanates in this regard I have to apply the Plascon­ Evans rule in favour of the first respondent.

[45] It is trite that a restraint of trade should be enforced in the circumstances obtaining at the time enforcement is sought. In this regard, the first respondent contends further that even though it can be said that he was exposed to the costing process, any information he acquired then quickly becomes obsolete as the costing the industry changes constantly due to the fluctuation in fuel price, exchange rate, labour costs and service providers' offerings as well as margin adjustments and cost cutting. This evidence is unchallenged as it is not dealt with in the applicant's replying affidavit - and such failure is significant. I, as a result, have to rule that because of the first respondent's unchallenged evidence, that the costing modules he has been exposed to become obsolete, there is no proprietary interest to protect, that is, the applicant has nothing to enforce once the information is obsolete.

I conclude in the premise that the first respondent was able to prove that the applicant does not have a proprietary interest worthy of protection.

[46] On the facts stated by the first respondent together with the admitted facts in the applicant's affidavit I have to conclude that the first respondent succeeds in establishing that the applicant's restraint of trade is unreasonable, against public policy and is unenforceable; and that at the time the restraint was sought to be enforced it was aimed solely at the restriction of competition.

[47] The first respondent prayed for cost on an attorney and own client scale on the basis that the application is hopeless and is therefore vexatious. In exercising my discretion I do not think that the applicant was vexatious in launching this application. The scale for party and party costs should be applicable.

[48] The application is dismissed with costs.

 

______________________

E. M.KUBUSHI

JUDGE OF THE HIGH COURT

 

APPEARANCES

HEARD ON THE : 15 JUNE 2017

DATE OF JUDGMENT : 23 JUNE 2017

PLAINTIFF'S COUNSEL : ADV.C.F.HEYNS SC

PLAINTIFF'S ATTORNEY : ADV. M. JACOBS

DEFENDANT'S COUNSEL : ADV .C.J WILLEMSE MULLER & BABINSZKY ATTORNEYS

DEFENDANT'S ATTORNEY : SCHINDLERS ATTORNEYS

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