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REPUBLIC OF SOUTH AFRICA

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Not Reportable

Case No: J2509/2016

In the matter between:

IMBAWULA TECHNICAL SERVICES AND SUPPLIER

GROUP (PTY) LTD                                                                                                Applicant

and

ANTHONY RAYMOND BROWN                                                                 1st Respondent

WANDIES TECHNICAL SERVICES CC                                                    2nd Respondent

HEARD: 02 December 2016

DELIVERED: 09 December 2016

 

JUDGMENT

 

MALINDI AJ

Introduction

[1] The applicant seeks to enforce a restraint of trade agreement entered on 23 September 2015 between the Applicant and the First Respondent. It is Annexure “C” to the contract of employment between the parties.

[2] The applicant prays that:

“1. the forms and service provided for in the Rules of Court be dispensed with and the matter be heard as one of urgency as contemplated by Rule 8 of the Rules of the above Honourable Court;

2. the First Respondent be interdicted from soliciting any clients the Applicant met whilst working for the Applicant and/or the First Respondent be interdicts from soliciting the Applicant’s clients on behalf of the Second Respondent for a period of 6 (six) months anywhere in the Republic of South Africa. The list of clients of the Applicant are attached hereto and marked annexure “A”;

3. the Second Respondent be interdicted and restrained from using the First Respondent to solicit the Applicant’s clients, in breach of the restraint of trade covenant of the First Respondent with the Applicant;

4. the First Respondent be interdicted from engaging in employment with the Second Respondent or any company which is engaged in the business or activities related to that of the Applicant for a period of six months anywhere in the Republic of South Africa.”

[3] The First Respondent denies that he has breached the restraint, alternatively that the restraint is unreasonable and it is a violation of his right to work.

 

Urgency

[4] Applications of this nature are inherently urgent.[1] This matter involves a restraint period of 6 months and the alleged breach happened when the First Respondent joined the Second Respondent on or about October 2016. It is desirable therefore that the matter be heard as a matter of urgency.

The Restraint

[5] The First Respondent is restrained from breaching clauses 1.4, 2.3, 2.4 (iii) – (iv) and 2.5, which provide as follows:

“1.4 The following expressions bear the meanings assigned to them hereunder and cognate expressions bear corresponding meanings, namely:

(i) “Prescribed clients” mean any person, in the Republic of South Africa:

(a)  Who is or was a client of the company at the termination date, or;

(b)  Who is or was a prospective client of the company at the termination date whom such company had approached to do business with the company within a period of one year preceding the termination date,or;

(c)  Who purchased/contracted for prescribed services from the company within a period of one year preceding the termination date;

(ii) “Prescribed services provider” means the people or business with whom the company contracts to, in whole or in part _____ with the execution of the services, the company renders

(iii) “Prescribed services” means the services, management or otherwise involving the business conducted by the Company as at the date of signature hereto and within the restraint area;

(iv) “Termination date” means the date of which the Employee’s engagement with the Company ceases or is terminated for any reason whatsoever;

(v) “Restraint period” means the period during which the employee is employed by the Company and a period of 6 months from the termination date;

(vi) “Territory” means everywhere in the Republic of South Africa and countries where foreign jurisdiction would apply legislation of the Republic of South Africa, where the Company has business concerns, as well as or has an interest in a business;

(vii) “Company” means any Company, close corporation, partnership, sole proprietorship or like concern.

2. RESTRAINT OF TRADE

2.1 …

2.2 …

2.3 The Employee acknowledges that upon termination of his engagement with the Company, he will be entitled to obtain engagement in a field which is unrelated to the business or activities of the Company;

2.4 The Employee undertakes that neither he nor any Company, close corporation, firm, undertaking or concern in or by which he is directly or indirectly interested or employed will, within the Restraint period and whether for reward or not, directly or indirectly:

(i) …

(ii) …

(iii) Furnish any information or advise to any Prescribed client that he intends to or will, directly or indirectly, be interest or engaged in or concerned with or employed by, or

(iv) Elicit any client met whilst working for the Company that was not  a client of the employee before the working relationship started.

2.5 The Employee further undertakes that neither he nor any company, firm, undertaking or concern in or by which he is directly or indirectly interested, engaged, concerned or employed will during the restrained period, directly or indirectly, whether as proprietor, partner, director, shareholder, employee, consultant, contractor, financier, employee, representative, assistant or otherwise in the territory and whether for reward or not:

(i) Solicit orders from prescribed clients or prescribed service providers for prescribed services;

(ii) Canvass business in respect of the prescribed services from prescribed clients or prescribed service providers;

(iii) Sell or otherwise supply any prescribed services to any prescribed clients;

(iv) Purchase or attempt to purchase prescribed services from prescribed service providers;

(v) Solicit appointment as a distributor, licensee, employee or representative of any prescribed supplier in respect of prescribed services.

[6] In essence the Applicant:

6.1 restricts the clients that the First Respondent is to be interdicted from soliciting as those listed in Annexure “A” to the application;

6.2 seeks to interdict the First Respondent from working with the Second Respondent or any company which is engaged in the business or activity related to that of the Applicant for a period of 6 (six) months after leaving the Applicant;

6.3 the restraint applies to the whole country, being the Republic of South Africa.

 

Protectable Interest

[7] Protectable interests that an Applicant may seek the court’s assistance in protecting are its trade (client) connection and confidential information.[2] Therefore the court will assist in interdicting a Respondent from luring a former employer’s clients away from it and from disclosing confidential information to his or her new employer or from using it for his/her own benefit.

[8] Nine of the Applicant’s clients that are set out in Annexure “A” are municipalities. Most of their business is conducted through the supply chain management policy and are therefore subject to open procurement of services in terms of s217 of the Constitution of thee Republic of South Africa. They can therefore not be regarded as a “client list drawn by a trader, and kept confidential for the purposes of his own business” as envisioned in Dickinson Holdings Group (Pty) Ltd and Others v Du Plessis and Another.[3] With such a category of clients it cannot be claimed that the Applicant has built up “a particular relationship with the clients”.[4]

[9] In regard to confidential information the Applicant alleges that the First Respondent acquired knowledge of its pricing methods in the form of preparing quotations, discounts and price lists. Linked to this is the averment that as a result of being employed as operations manager, the First Respondent acquired an intimate knowledge of the Applicant’s business in a very small and competitive environment of maintenance installation and commissioning, oil change repairs, refurbishments, replacements, electrification projects, cabling (which includes but is not limited to cable fault location and cable route tracing, VLE testing, jointing and termination), etc. There are few competitors in the industry, including the Second Respondent.

[10] The above averment in order to enjoy protection as confidential information must relate to:

“specifications of a product, and a process of manufacture, either of which has been arrived at by the expenditure of skill and industry or has been kept confidential.”[5]

[11] It must therefore be:

“ Information, know-how, technology or method [which is] unique and peculiar to its business and that such information is not public property or that it falls within the public’s knowledge.”[6]

[12] The Applicant alleges that the Second Respondent carries on business in “exactly the same market in the same area” as the Applicant. The Applicant is therefore conceding that there is nothing unique, peculiar or whose know-how is confined to the Applicant. It can therefore fall within the category of protected confidential information all that the Applicant seeks is to restrict the number of competitors in this industry. The Applicant avers that it conducts “training programmes for its employees to be involved in this rare skill including that of cable faulting.” The fact that a skill is rare does not mean that it is unique to the Applicant.

[13] The First Respondent contends that at the time that he joined the Applicant as an employee he was already well versed, skilled and experienced in this industry and familiar with its operational aspects. It is for this reason that the Applicant employed him and deployed him at such a high position. He alleges further that he was not involved in every aspect of the Applicant’s business as his role “was limited to duties and performance within the operations of the company.” By this I understand him to deny that he was exposed to any unique skills, training or developing pricing formulas. The Applicant contends that the Applicant did not have these skills and that he was particularly trained therein by the Applicant.

[14] There is a dispute about whether the First Respondent was the only person responsible for negotiating pricing on behalf of the Applicant. This dispute is resolved in my view, by the fact that as a result of 9 (nine) of the clients being public bodies that procure through an open tender process, the price sensitivity issue is greatly diluted by this process.

[15] The ultimate issue remaining is that clause 2.3 of the restraint agreement prohibits the First Respondent from working for any business that is in direct competition with that of the Applicant. This anti-competition restraint cannot be justified. An employee who has acquired general knowledge and skills during employment with a particular employer may use it once they leave its employment, even if their new employer benefits from such knowledge and skill.[7]

[16] Following on the first question to be asked when considering the reasonableness of a restraint, being whether the one party has a protectable interest that deserves protection after termination of the agreement,[8] I have come to the conclusion that the Applicant has no protectable interest, firstly in that the clients that it seeks to interdict the First Respondent from soliciting are public bodies whose contracts/relationships with the Applicant endure until those contracts lapse and new tenders are invited. It is not reasonable to forbid the First Respondent from ever having a business relationship with them or taking employment with the Second Respondent or any other business involved in the same industry.

[17] Secondly the pricing sensitivity that the Applicant is concerned about has not been shown to be critical or so unique that it becomes decisive in whether the Applicant wins a tender or not. To find these two aspects as constituting a protectable interest would lead to a denial of the First Respondent’s right to be productive and be permitted to engage in trade and commerce or the professions[9], merely to enforce a contractual obligation.

[18] In the circumstances, I make the following order:

17.1 The application is dismissed;

17.2 The Applicant is to pay the costs of the application.

 

___________________________

MALINDI AJ

Acting Judge of the Labour Court

 

Appearances:

For the Applicant:        Thandi Moyo of Snyman Attorneys

For the Respondent:   Meereshni Luckan of Rehman and Rehman Incorporated.

 

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