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THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

 

Reportable

Case no: J440/24

 

In the matter between:

 

DUSTER DOLLIES CENTRAL (PTY) LTD                            Applicant

 

and

 

ERIKA CATHERINE EVA BEHR                                           First Respondent

 

KORBIKA CLEANING SERVICES (PTY) LTD                      Second Respondent

 

JACOBUS JOHAN DEKKER                                               Third Respondent

 

Heard:          5 June 2024

Delivered:    13 June 2024. Served on the parties by email.

Summary:    Urgent application for interdict in re restraint of trade. Requirements not established. Application dismissed with costs.

 

JUDGMENT

 

DANIELS J

 

Introduction

 

[1]  This application was brought, in the main, to interdict and restrain the first respondent from acting in breach of a restraint of trade agreement (the “restraint”) she had concluded with the applicant. It is necessary to commence with a brief statement of the material facts.

 

Background facts

 

[2]  The applicant operates a cleaning service in and around Tshwane (Pretoria), Gauteng. The applicant groups its cleaners into different teams, and each team is supervised by their own team manager. The team managers are given a route map, which includes a list of clients, their contact information, and the routes that the team must follow. Aside from the identity and contact information of clients, the route maps contain little else of real interest. The applicant states that the route maps are one of the reasons why it decided to rely on the restraint to protect its interests.

 

[3]  The applicant alleges, in broad and vague terms, that prior to her employment at the applicant, the first respondent had held several other managerial positions. On the other hand, first respondent says that her skills and experience have been grossly exaggerated, though she admits that she previously managed cleaning services at different employers.

 

[4]  The first respondent (hereafter “Erika”) was employed by the applicant as a team manager. Her team, which consisted of four cleaners, was responsible for eighteen clients whose details would have appeared on her route map or maps.

 

[5]  The applicant concluded agreements with its clients in terms of which the client would undertake not to employ the applicant’s staff during the contract period, or for a period of twelve months thereafter.[1] The applicant does not allege that such agreements applied to the second and third respondents or were breached.

 

[6]  A restraint agreement, between the applicant and the first respondent, was signed during August 2022 and amended during November 2022. The terms of the restraint, as presented to the court, are:

 

RESTRAINT OF TRADE

 

Dear Erica Behr      18 November 2022

 

We herewith restrain you to engage in a company with the same nature in the Gauteng area for a period of two years after termination date.[2]

 

With this letter we restrain you to be engaged in any other business, in opposition to Duster Dollies Cleaning Service business, be it direct or indirect, [handwritten insertion: engaged in any direct opposition to Duster Dollies Cleaning Service] or as a shareholder, partner, member of a Close Corporation, director of a company or in any other capacity, within two years after termination of your employment in the area known as Gauteng.[3]

 

We further restrain you to contact or do business with any existing or future clients of Duster Dollies Cleaning Service.[4]

 

The restraint is fair, reasonable and necessary for the protection of the owners of Duster Dollies Cleaning Service, the trade name of Duster Dollies Cleaning Service and the goodwill attached thereto.

 

You will be held liable for any damages that the company suffers as a result of the breach of this restraint as well as any legal action that needs to be taken.

 

[7]  Following rumours, Erika became concerned that her salary may be unilaterally reduced by the applicant. Her anxiety became known to the third respondent, who represented one of the applicant’s clients. The third respondent approached Erika and proposed to establish a cleaning business with her.

 

[8]  During February 2024, Erika resigned from the employ of the applicant, and just over a month later, the second respondent was established. Erika and the third respondent are both directors of the second respondent. Given that the first respondent is not a woman of means, the third respondent provided the initial funds to start the second respondent. The applicant alleges that Erika is the controlling mind behind the second respondent, but sets out no factual basis for this.

 

[9]  The applicant alleges that the third respondent is acting in concert with Erika, and is enabling her to breach the agreement. No factual basis is laid for this allegation either.

 

[10]  Eight of the applicant’s clients have, to date, abandoned it and become clients of the second respondent. In addition, some cleaning staff left the applicant to join the second respondent. The applicant appears to be largely unconcerned about the defections by employees. Its real concern is that employees who defect could take route maps with them, which would allow the first respondent to approach the clients reflected in the route maps.

 

[11]  The applicant took steps, over the years, to build up its client base. This involved advertising and other marketing initiatives. As a result, it has developed a large client base of approximately 250 clients. The applicant is entitled to keep commercially sensitive information, such as information about its clients, secret and confidential. This information constitutes its trade connection, a recognised proprietary right.

 

[12]  The applicant alleges that Erika is actively soliciting its clients and thereby acting in breach of the restraint.[5] In this respect, the applicant relies on hearsay evidence.[6] The applicant repeats the content of a communication, sent to it by WhatsApp, from one of its clients. In the WhatsApp, the client advises the applicant that Erika had contacted her to encourage her to use the services of the second respondent. Although Erika denied that she had solicited clients of the applicant, no confirmatory affidavit from the client was filed.

 

[13]  Erika says that she has no route maps belonging to the applicant (it was unclear whether her denial included the route map or maps which would previously have been in her possession as a team manager). It is, of course, quite possible that Erika does not require a route map or maps to recall the details of the clients she previously engaged with when employed by the applicant.

 

[14]  It is clear from the restraint that there is no prohibition on the second respondent seeking to employ employees of the applicant.

 

Urgency

 

[15]  The applicant approaches this court on an urgent basis. In SACTWU v Agri Animal Feeds[7] and others, my brother, Tlhotlhalemaje J, summarised the applicable principles drawn from the authorities[8] as follows:

 

15.1  A party seeking urgent relief must adequately, and in detail, set out in its founding affidavit, the reasons for the urgency.

 

15.2  The reasons why substantial redress cannot be obtained at a hearing in due course, must be addressed in full.[9]

 

15.3  A mere allegation that constitutional rights are being infringed does not render a matter urgent.

 

15.4  There are varying degrees of urgency. The degree to which the rules of court are relaxed should not be greater than the exigency demanded by the case, it must be commensurate therewith.

 

15.5  An applicant is not entitled to rely on urgency that is self-created.

 

15.6  An applicant seeking urgent relief must approach the court with the necessary haste, or as soon as the cause of discontentment arises, though genuine settlement discussions must be considered.[10]

 

15.7   The interests of the respondents and any prejudice they may suffer, as a result of the attenuated time frames, must be considered.

 

[16]  To the above principles, one might add that this court has not accepted that the non-payment of wages, despite the immense hardship this would cause to any employee, is a self-standing basis for urgency.[11]

 

[17]  The applicant sets out the following grounds to justify its urgent approach to the Court:

 

17.1   During February and March 2024 it experienced a number of resignations by staff, and cancellations by clients (of their contracts). This level of turnover far exceeded the usual rate.

 

17.2   The applicant had her attorneys address a letter of demand to the first respondent on 4 March. Having sent the letter and received no reply, the attorneys took no further steps.

 

17.3   On 3 April, the applicant became aware that the second respondent had been incorporated.

 

17.4   On 11 April, the applicant received a WhatsApp communication from a client, advising that the first respondent had approached it to solicit its business.

 

17.5   The applicant retained the services of her current attorneys on 12 April and arranged a consultation for 17 April.

 

17.6   On 22 April, the applicant’s current attorneys addressed a second letter of demand to the first respondent.

 

17.7   The application was launched on 23 April, and enrolled for hearing on 5 June.

 

[18]  In my view, taking all the relevant considerations into account, the application is urgent. Although occasionally short on detail, it is clear that the applicant proceeded with haste once it was clear that the initial attorneys had not acted expeditiously. It was only in the middle of April 2024 that the applicant became aware of the existence of the second respondent, and became aware that the applicant was seeking to steal away its clients. The applicant acted without significant delay at the end of April 2024.

 

Jurisdictional challenge

 

[19]  Beside the first respondent, the applicant also seeks relief against the second and third respondents. It seeks an order interdicting the third respondent from operating the second respondent, and an order against the second respondent from operating at all, in competition with the applicant. The applicant alleges that the second and third respondents are acting “in concert” with the first respondent to enable her to breach the restraint, but it sets out no factual basis for the allegation. In the absence of any factual basis for the allegations, this submission is tenuous at best. In addition, the papers reveal that the third respondent was unaware of the existence of the restraint when he decided to establish the second respondent.

 

[20]  In these circumstances, the applicant was required to set out the legal basis on which it asks the court to exercise jurisdiction over the second or third respondents.[12] Instead, the applicant elides the inconvenient truths – the restraint is not applicable to either of them, no other agreements are applicable to them, and there has never been an employment relationship between the applicant and the third respondent.

 

[21]  The respondents submitted that this court has no jurisdiction to grant relief against the second or third respondents because they are not, and have never been, employees of the applicant. I accept the submission. This court derives its authority in matters such as this from section 77(3) of the Basic Conditions of Employment Act No. 75 of 1997 which entitles it “to hear and determine any matter concerning a contract of employment…” In the circumstances, this Court can exercise no jurisdiction over the second and third respondents.

 

General principles: restraint of trade

 

[22]  An agreement or covenant is said to be in restraint of trade when it restricts the liberty of one or both parties to engage in one or more specified commercial activities. These kinds of agreements may arise in different situations including, for example, the sale of a business (or the sale of goodwill of a business) or as part of an employment contract, or as a separate contract in the employment context.

 

[23]  It is trite that, in the employment context, there are only two kinds of protectable interests namely; (i) secret processes or trade secrets, and (ii) trade connections – viz the misuse of acquaintance with clients and customers. In the absence of a protectable interest, a restraint will be unreasonable.

 

[24]  It is trite that a restraint may not be used in the employment context solely to exclude or limit competition.[13] As Lord Parker famously stated:[14]

 

“The reason, and the only reason, for upholding such a restraint on the part of an employee is that the employer has some proprietary right, whether in the nature of trade connection or in the nature of trade secrets, for the protection of which such a restraint is – having regard to the duties of the employee – reasonably necessary. Such a restraint has, so far as I know, never been upheld, if directed only to the prevention of competition or against the use of the personal skill and knowledge acquired by the employee in his employer’s business.”

(Own emphasis)

 

[25]  In Magna Alloys and Research (SA) (Pty) Ltd v Ellis[15] the Appellate Division jettisoned the approach taken by the English courts, and which had earlier been accepted by our courts - that a restraint is prima facie invalid and the onus rests on the person seeking to enforce it to prove its reasonableness inter partes. Instead, said Magna Alloys, in our law, a party seeking to enforce a restraint must prove the contract and prove the breach. Thereafter, a respondent who seeks to avoid the restraint bears an onus to demonstrate, on a balance of probabilities, that the restraint agreement is unenforceable because it is unreasonable. The central question is whether the restraint is unreasonable in the context in which it is to be enforced. Contracts which unreasonably restrict the covenantor’s freedom to trade or work are unreasonable and therefore unenforceable.[16]

 

[26]  The mere fact that the clause may be unreasonable inter partes is not normally a ground for attacking it, since the public interest demands that parties to a contract be held to the terms of their agreement. However, because individuals should be free to engage in useful economic activity, and to contribute to the welfare of society by the exercise of their skills and experience, any unreasonable restriction on the freedom to engage in economic activity is contrary to public policy.

 

[27]  Accordingly, the court must make a value judgment with the following policy considerations in mind:[17] first, that parties should be held to their agreements freely concluded[18] even when they are unfair, and second that all persons in our society should be productive and be permitted to choose their trade, occupation, or profession.

 

[28]  Our courts take a more favourable view of a restraint where it can be shown that the parties were in an equal bargaining position when the restraint was agreed on.[19] Although this is a question of fact in each matter, there is a general acceptance that in the employment context, parties rarely contract as equals.[20] Exceptions will include instances where the employee is highly skilled and in demand.

 

[29]  However, where parties do not contract as equals, the following principles apply, as laid down in Hepworth Manufacturing Co. Ltd v Pyott:[21]

 

(a) notwithstanding the sanctity of contracts between parties of full contracting power bargaining with their eyes open, a restraint inconsistent with the elementary freedom of an employee to earn a living as best he can, is subject to certain exceptions, invalid,

 

(b) with regard to the apparent antagonism between the right to bargain and the right to work, the extreme of the one destroys the other, and the law answers the public interest by refusing to enforce agreements when the right to bargain has been used so as to afford more than a reasonable protection to the covenantee,

 

(c) the protection must fall far short of tyranny,

 

(d) where an employer has exacted a covenant in unreasonably wide terms, the courts do not attempt to carve out of this void covenant the maximum that the employer might legally have exacted,

 

(e) the exceptions to the rule that an employee shall not be prevented from earning his living as best he can include the right of an employer to protect his trade secrets and prevent his old customers from being unlawfully enticed away from him, but protection from competition is not among those exceptions, and there is apparently no case in which a covenant against competition by an employee has, as such, ever been upheld by the courts,

 

(f) just as a vendor may subject himself to restraint in order to obtain the best terms on the sale by him of a business, so an employee may do so to obtain employment or training under a desirable employer, but in each case the restraint must be no more than is reasonable to afford adequate protection to the covenantee, and in the employer employee case, competition as such, is outside the area of protection against the case of the personal, skill and knowledge acquired by the employee in his employer’s service.

 

And lastly, (h) A man’s aptitudes, his skill, his dexterity, and his manual or mental ability may not or ought not to be relinquished by an employee. They are not his master’s property, they are his own. They are himself”

 

(Own emphasis)

 

Terms of the restraint

 

[30]  The parties concluded the restraint during August 2022, and agreed to amend it during November 2022 because of the first respondent’s unhappiness with its terms. In my view, the initial agreement contained three distinct and severable parts:[22]

 

30.1   The first part of the restraint limited the right of the first respondent to “engage in a company with the same nature in the Gauteng area for a period of two years after termination date.”

 

30.1.1   Clearly this was intended to prohibit the first respondent from being employed by another business of the same nature, in Gauteng, for a period of two years after termination.

 

30.1.2   This paragraph was deleted during November 2022. It was therefore common cause that there is no restraint on the first respondent’s employment in a competing cleaning business.

 

30.2  The second part of the restraint seeks to limit the right of the first respondent to be engaged in a similar business, in Gauteng, as a shareholder, director, partner or member for a period of two years after termination. The parties agreed to amend this part, but the precise scope of the amendment is disputed.[23] Regardless of whether I accept the applicant or first respondent’s version of the amendment, I do not believe it would be in the public interest to enforce the second part of the restraint. The second part of the restraint is, in my view, for the reasons discussed below, unreasonable. 

 

30.2.1  At best for the applicant (assuming that the handwritten amendment was made by agreement) the first respondent agreed not to compete with the applicant through another business in which the first respondent is an owner, partner, shareholder, member, or director. It is clear this clause has no purpose apart from avoiding competition. As explained earlier, this is seriously problematic. In the words of our apex court[24] a restraint ‘will be considered to be unreasonable, and thus contrary to public policy and therefore unenforceable, if it does not protect some legally recognisable interest of the employer, but merely seeks to exclude or eliminate competition.” Despite the authorities, in these proceedings, the applicant persisted in seeking to limit competition by the first respondent as well as the second and third respondents.[25]

 

30.2.2  In addition, it is clear that the applicant and the first respondent did not negotiate the restraint agreement as equals. Although inequality may be inferred in the employment context, it is also borne out by the context of this matter. The first respondent feared her salary would be unilaterally reduced and therefore decided to leave the applicant. The first respondent was not a senior manager, she was a supervisor. The first respondent has no special training, or exceptional skills. Finally, despite misgivings, she signed the restraint. It would not have been necessary to renegotiate if first respondent was happy with its terms. In addition, the first respondent is not a woman of means. She holds no formal tertiary qualifications and appears to have little or no managerial skills and experience - apart from supervising cleaning staff. In the circumstances, it is unreasonable to limit the first respondent’s advancement in this manner.

 

30.2.3  While parties should be held to their agreements, the doctrine of pacta sunt servanda carries less force where the contracting parties did not negotiate the restraint as equals.

 

30.2.4  Furthermore, in my view, the restraint serves no purpose when there is no restriction on the employment of the first respondent. The applicant did not explain how preventing the first respondent from owning any part of the second respondent will assist it.

 

30.3  The third part of the restraint reads as follows: “We further restrain you (sic) to contact or do business with any existing or future clients of Duster Dollies Cleaning Service.”

 

30.3.1  The parties both agree that this part of the restraint remains extant.

 

30.3.2  The first respondent contends that the third part is unreasonable because it operates in perpetuity. The first respondent also contends that the term “future clients” is too broad and prevents it from seeking new clients because they are potential clients of the applicant. These submissions are not without persuasive value, but, for the reasons below, it is unnecessary to consider them further.

 

30.3.3  In my view, the enforcement of the third part of the restraint must fail for the following reasons:

 

30.3.3.1  Firstly, the applicant has not put up any admissible evidence that the first respondent has breached the third part of the restraint, or intends to do so. The applicant relies on a WhatsApp from a client, referred to simply as “Hilda.” The applicant states in its founding affidavit that a confirmatory affidavit from this individual will be produced “should the court require it to be confirmed under oath.” It is not for this Court to advise the applicant on how to present its case, particularly where it is legally represented. The applicant approached the court fully aware that the allegations, in paragraph 7.10 of its founding affidavit are hearsay, and cannot be admitted except through section 3(1) of the Law of Evidence Amendment Act No. 45 of 1998 (“LEAA”). Our courts have said that hearsay “evidence” that is not admitted in accordance with section 3(1) of LEAA is not evidence at all.[26] Despite this, the applicant did not apply for the admission of this hearsay evidence.

 

30.3.3.2  Secondly, the first respondent has denied approaching any clients of the applicant. She also denied being in possession of route maps. Despite these denials, the applicant did not apply to refer the factual disputes to oral evidence. There is no basis for the court to reject the denials as far-fetched or untenable. In the circumstances, the application must be determined on the facts as stated by the respondent together with the admitted or undenied facts in the applicants’ founding affidavit.[27] I therefore cannot accept that the first respondent has breached the third part of the restraint by contacting the applicant’s clients, nor do I believe there is a real possibility that she may do so.

 

30.3.3.3  Thirdly, the first respondent points out that the horse has already bolted, and the application has become academic.[28] It argues that there is no live controversy and the judgment will have no practical effect. I agree. This court will not fritter away its limited resources on abstract legal issues. On the facts of this matter, the second respondent has already been established, several clients have crossed the floor, and several employees have also done so. If the applicant had possession of the route map or maps (relating to the clients she serviced on behalf of the applicant) that information is most likely known to all the second respondent’s employees. As Honourable Moseneke DCJ (as he was then) once stated: “An interdict is meant to prevent future conduct and not decisions already made”.[29]

 

30.3.3.4  Finally, there is an alternative remedy available to the applicant. It could institute an action for damages against the first respondent for allegedly breaching the restraint.

 

Costs

 

[31]  The second and third respondents sought a cost order against the applicant on the basis that they were improperly joined. I agree, they should not have been dragged to court in these circumstances. They have no legal interest in this matter. There is no employment relationship between the applicant and the third respondent; and there never has been. In the circumstances, as against the second and third respondents, the application was frivolous and vexatious. The applicant is ordered to pay the costs of the second and third respondents.

 

[32]  I make no costs order in favour of the first respondent.

 

Conclusion

 

[33]  In the circumstances, for the reasons canvassed above, I dismiss the application and order the applicant to pay the costs of the second and third respondents.

 

RN Daniels

Judge of the Labour Court of South Africa

 

Appearances:

 

For the Applicant:

Adv L Pretorius

Instructed by: Lombard and Partners Inc

 

For the Respondents:

Adv EJ Nel

Instructed by: Vorster & Brandt Inc

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