Air Liquide (Pty) Ltd v Rhakhuduwe and Another (J2042/16) [2016] ZALCJHB 387 (27 September 2016)

IN THE LABOUR COURT OF SOUTH AFRICA

HELD AT JOHANNESBURG

CASE NO: J2042/16

DATE: 2016-09-27

In the matter between

AIR LIQUIDE (PTY) LTD

Applicant

and

Rolland RAKHUDUWE

First Respondent

BOKONE GAS (PTY) LTD

Second Respondent

EX TEMPORE JUDGMENT

STEENKAMP, J:

This is an application to enforce a restraint of trade agreement, brought on an urgent basis. Firstly, therefore, I shall deal with the matter of urgency. In effect, as Mr Sibanda pointed out, the applicant has had the foresight of bringing the application on a semi-urgent basis. It delivered a signed

founding affidavit on 11 September 2016 and afforded the respondent, Mr Rolland Rakhuduwe, and the company of which he is a director,

Bokone Gas (Pty) Ltd, a period of seven court days in which to deliver an answering affidavit. As it happened, they only filed their answering affidavits on 23 September 2016. For part of this time, Mr Rakhuduwe, the first respondent, says he was hospitalised. However, he has attached no proof of that allegation to the three comprehensive answering affidavits that he has filed. Furthermore, on 22 September, the applicant’s attorney, Mr Osborne Molatudi of Hogan Lovells, wrote to Mr Rakhuduwe and noted:

“The following further documents are nonetheless missing from your set of three documents:

(a) In paragraph 18 of your statement in response to the founding affidavit, you refer to “Annexure B1” but have not attached this annexure;

(b) In paragraph 10 of the first statement you refer to a police affidavit, which you have not attached; and

(c) You contend that you sent a Declaration of Interest to our client but have not attached this document or proof thereof.”

In his argument before court today, Mr Rakhuduwe, who is not legally represented, attempted once again to refer to these documents.

He could not explain why, despite having been reminded to do so, he has not attached these documents to his answering affidavit.

The applicant’s attorney, Mr Molatudi, went further and also wrote a letter to Mrs Yvonne Rakhuduwe, the founding director of Bokone Gas, on 22 September and also said to her:

“You contend that the first respondent, being Mr Rakhuduwe, made a Declaration of Interest to our client, but have not attached the document or proof thereof, neither is there a confirmatory affidavit to that effect. Furthermore, we have noted that you have not dealt with the annexures attached to our client’s founding and supplementary affidavit in a substantive manner. We urge you to treat this matter seriously and await to hear from you of your intention in this regard.”

Despite the applicant’s attorneys very properly having pointed this out to both of the Rakhaduwes, they did not respond. The court therefore has to deal with the application on the basis of the affidavits as they stand.

The founding affidavit does deal with the requirements of rule 8(2) of the rules of this court. That rule requires the affidavit in support of the application to contain the reasons for urgency and why urgent relief is necessary. The application has properly set out those reasons.

It has also made out a case in the founding affidavit to justify the extent of departure from the ordinary time periods set out in the rules, and as I have noted, it has given the respondents adequate time to respond to the allegations contained in the application.

The first respondent, although he has denied it orally in court today, is set to take up employment with the second respondent, of which he is a director, in about four days, on 1 October 2016. I am satisfied that the case is urgent.

Turning to the merits, then, it is trite that to obtain final relief, which is what the applicant seeks in this case, it has to satisfy three requirements, as set out as long ago as 1914 in Setlogelo v Setlogelo 2014 AD 221 at 227. Firstly, it must demonstrate a clear right; secondly, an interference with that right actually committed or reasonably apprehended; and, thirdly, the absence of suitable alternative remedy.

The clear right that the applicant seeks to enforce is the restraint of trade agreement. The requirements with regard to restraints of trade are fairly trite. Despite an initial flurry shortly after the interim Constitution was adopted as to the question of the onus in restraint of trade agreements, the law is again settled. Insofar as is necessary, I will refer to the relevant precedents, and I am indebted to Mr Sibanda for also providing the court with a bundle of the most relevant cases, including an unreported case that at first blush goes against

his argument. It is heartening to see that officers of the court still do take their duty seriously in that regard.

I return then to the question of a clear right. A restraint of trade is enforceable if it protects a legally recognisable interest of the party seeking enforcement. It is unenforceable if it is contrary to public policy or if it seeks solely to limit competition. That much, as I have said, is trite law, but it has been confirmed recently by this court in one of the cases that Mr Sibanda referred to, SPP Pumps (South Africa) (Pty) Ltd v Stoop, (2015) 36 ILJ 1134 (LC), a judgment of my brother Mohlahlehi J.

Mr Rakhuduwe has denied signing the restraint. I will return to that issue. He therefore denies that the restraint is binding

against him because he says he never agreed to it. As I pointed out, the issue of onus remains the same as it did in the

pre-constitutional era. That was set out in Magna Alloys & Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A) at 898 c to d. The onus is on the applicant to show the existence of the restraint and to prove the breach thereof. Once the applicant has proven this, the onus is on the respondent to prove that the restraint is unreasonable.

As Mr Sibanda readily conceded, the answering affidavits do raise certain disputes of fact. The court therefore has to consider seriously the effect of the Plascon-Evans rule set out, as we all know, in Plascon-Evans Paints (Pty) Ltd v Van Riebeeck Paints Ltd 1984 (3) SA 623 (A) at 635c. As he has argued, the Plascon Evans rule only operates when a bona fide dispute of fact is raised. I agree with him that in this case it is one of those rare cases where there is no real dispute of fact for two reasons.

Firstly, the alleged dispute of fact raised by the first respondent is not bona fide. It comprises bald denials which are insufficient to defeat the applicant’s right to secure relief in motion proceedings, as was set out in Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T) at 1163.

Secondly, the first respondent’s version, that the court debated with him at some length in court today, is simply untenable. For example, he tried to persuade the court that he did not return the restraint of trade agreement to the applicant. That is patently untrue. The applicant’s Daphne Rohlwink sent an email with various annexures to the first respondent on 20 May 2015, i.e. before his employment commenced. That e-mail included the restraint of trade agreement. The body of the e-mail reads as follows:

“Dear Rolland

Hope all is well. Please see attached pack which we need you to please complete prior to your appointment with us and scan back to us so that in the meantime we can prepare to put you on the system and speed things up so that you can be given a laptop, et cetera, on your arrival. Should you have any queries, please phone me and we will explain… If any problem with the attachments, please revert.”

Mr Rakhuduwe did revert. He did not raise any problems with the attachments. Contrary to what he said in court this morning, he did in fact respond directly to Ms Rohlwink. He even copied himself in what appears to be his private e-mail address. All he said was:

“Hi Daphne/Dianne.

Attached find as requested.”

The only reasonable inference one can draw from that is that he attached the documents, as requested by Daphne Rohlwink, in other words, that he had no problems with them. It is common cause that one of the documents that he attached was an incomplete copy of the confidentiality and restraint agreement. The original comprises four pages. It appears that he only scanned each alternative page and sent back pages 1 and 3. It is common cause though that on the first page, under the heading: “Confidentiality and Restraint Agreement between Air Liquide (Pty) Ltd and ………………….. (the Employee)” he wrote his own name in by hand. Against that background the court must assess whether the parties did indeed enter into a restraint of trade agreement.

I agree with Mr Sibanda that an agreement in restraint of trade is not required to be signed. Of course, as is the case with all other contracts, it is, and I say this with all respect, a foolish employer, or indeed employee, who does not ensure that they both have signed copies of whatever agreement they enter into, but as the court held in Lifeguards Africa (Pty) Ltd v Raubenheimer 2006 (5) SA 364 (D), an agreement in restraint of trade can be verbal. It can also be written and unsigned.

In this case, Mr Sibanda presented a somewhat novel and legally interesting argument. He argued that even on the papers before me the first respondent did indeed sign the agreement. His contract of employment read as follows:

“You will be expected to sign the company’s restraint of trade agreement and Code of Conduct as per the company’s policies and procedures.”

Furthermore, as is apparent from the e-mail that I have just quoted from Daphne Rohlwink, he was requested to sign and return the restraint. In fact, he did so the very next day. This is where it becomes interesting. As I have said, he inserted his name in his own handwriting on that part of the restraint agreement that he did return. In support of his argument that that comprises a signature and an indication of an agreement to the restraint of trade, Mr Sibanda cited the authority of the Supreme Court of Appeal in Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash and Another 2015 (2) SA 118 (SCA). In paragraphs 25 to 26 of that judgment His Lordship Cachalia JA [with Lewis, Bosielo, Swain and Mocumie concurring], said the following:

“[25] As to the second ground – the requirement for an ‘electronic signature’ – a brief discussion on how the courts generally approach signature requirements is necessary. Commonly understood a signature is ‘a person’s name written in a distinctive way as a form of identification…’

But this is not the only way the law requires a document to be signed. In the days before electronic communication, the courts were willing to accept any mark made by a person for the purpose of attesting a document, or identifying it as his act, to be a valid signature. They went even further and accepted a mark made by a magistrate for a witness, whose participation went only as far as symbolically touching the magistrate’s pen.

[26] The approach of the courts to signatures has therefore been pragmatic, not formalistic. They look to whether the method of the signature used fulfils the function of a signature – to authenticate the identity of the signatory – rather than insist on the form of the signature used.”

The case before me is a prime example of one where form must follow function rather than the other way around. It is clear from the sequence of e-mails and attached documents that I have outlined above, that the first respondent did accede to the restraint of trade agreement and did consider himself bound. He has attached no evidence of his protestations to the contrary, i.e. that he did not want to consider himself bound and that he, in fact, declared that much to the applicant. Even upon an invitation from the applicant to show such a declaration, he has not done so.

Mr Sibanda also, quite properly, referred the court to an unreported case that at first blush may go against him, that is Hotel Reservations Worldwide (Pty) Ltd v Ristow [2005] ZAECHC 21, an unreported judgment of 26 May 2005 by Chetty J in the Eastern Cape. I agree with Mr Sibanda that that case is distinguishable from the present one. In that case the court was concerned with an employee who clearly refused to sign the restraint of trade agreement as opposed to the one before me. Secondly, in this case, as distinguished from Hotel Reservations Worldwide, the contract of employment was not intended to be a provisional recordal of an agreement pending the parties entering into a final

restraint. As is clear from the correspondence I have quoted, it was clearly intended to operate as a condition to the employment

contract. I therefore hold that the parties did enter into a restraint of trade agreement and that the first respondent was bound by it.

But even if I am wrong, I am prepared to accept, again unusually, Mr Sibanda’s alternative argument that this is a rare case where a restraint of trade was indeed implied as a tacit term to the contract of employment. The courts are, for obvious reasons, reluctant to include restraints of trade by implication. In Premier Medical and Industrial Equipment (Pty) Ltd v Winkler and Another 1971 (3) SA 866 (W) at 869 c- f the court said the following:

“A covenant in restraint of trade is one which is in itself closely scrutinised as regards its reasonableness. It is the kind of agreement which is not encouraged by the law and must be confined within certain fixed limits before it will be upheld. Where a written contract of service is in existence therefore, the court would not readily read into it an implied covenant in restraint of trade. I do not wish to be understood to say that such a covenant can never be contained in an agreement by implication.”

And Mr Sibanda also referred to the well-known work of Saner, Agreements in Restraint of Trade in South African Law, at Chapter 15.2, where he says:

“There is no reason why the normal rules for the implication of terms in contract should be applied any differently with regard to agreements in restraint of trade than in any other contract. The decision in Magna Alloys has not altered the law in this regard.”

Having regard to the surrounding circumstances that I have discussed above, I am satisfied that, in any event and at the very least, it was an implied term of the contract of employment that the employee would in this case enter into the restraint of trade as requested, and in the light of him returning that document.

And then to the question of whether the first respondent, the employee, has breached the restraint. The terms of the restraint are set out in some detail in the four page document that I have referred to. It defines the business of the company, being in the main the supply and distribution of various gases. It then says the following:

“If on termination of the employee’s employment for any reason whatsoever the employee takes up employment or otherwise becomes

associated with or interested in a competitor of the company or any other company or entity which is involved in the business, the company’s proprietary interest in the company’s trade secrets will be prejudiced.”

That therefore sets out what the company’s trade secrets are and why they should be protected. It then deals in detail under the heading: “RESTRAINT UNDERTAKING” with the actual restraint that the employee agreed. Inter alia he agreed that:

“He will not during his employment with the company or at any time thereafter either use or directly or indirectly divulge or disclose

to third parties… any of the company’s trade secrets;”

And that:

“He shall not during his employment and for a period of one year after resigning from the company be employed or engaged, whether as an employee, consultant or independent contractor or in any other like capacity in the business of Afrox and Air Products SA (I) Ltd or any of their subsidiaries or distributors which is carried on in the Republic of South Africa.”

Although one is tempted to read that clause restrictively, I am persuaded, as argued by Mr Sibanda, that “the business of” these entities would include the business of an entity such as Bokone Gas that operates in direct competition with that of Air Liquide. The employee further acknowledged the reasonableness of the restraint in terms. It also bears notice that the clause in which he acknowledges that the restraint undertakings set out in paragraph 3 are reasonable, form part of the partial restraint document that he returned under his name to the employer before taking up employment.

With regard to the undertaking not to solicit any firm which was a customer of the applicant during his period of employment, it is common cause that the first respondent has attempted to solicit Denel and that he is in that regard already in breach of the restraint clause. He was also actively involved in developing Mokone’s business while he was still employed as the applicant’s procurement director. He denied for the first time from the bar today that he intends taking up employment with Bokone Gas in direct competition with that of the applicant. That is not borne out by the evidence on affidavit before me.

But perhaps most egregiously, he has breached the undertaking to protect the applicant’s confidential information and trade secrets by directly using the applicant’s information on behalf of Bokone. At this juncture the facts of this case move from the sublime to the ridiculous. The respondents, who were in possession of a PowerPoint presentation prepared for Vital Air, a subsidiary of the applicant, used exactly the same map setting out Vital Air’s site locations in a document of its own. The problem is that on that map they did not even go so far as to remove the Vital Air logo from each and every site where it is it is operating.

It also bears mention that Mr Rakhuduwe in his argument today made much of the fact that Bokone Gas is what he termed a “tiny entity”. That flies in the face of what is set out in the document that I just referred to, the so-called “site map”, as well as what he represented to a company called Universal Boschi as long ago as December 2015, whilst he was still employed with the applicant, where he said:

“Bokone Gas Incorporated is a newly established gas company based in South Africa, Johannesburg… Our vision is to become the largest and preferred supplier of liquid gas in Sub Saharan Africa and SADC region. We have already established

relationships within both public and private sector for the supply on both industrial and medical gasses through bulk and cylinder

distribution.”

And further down:

“We would like our discussion to remain confidential at this point, and any content of this e-mail should not be shared with any third party without our consent to do so, and if need be, the confidentiality agreement can be signed between both parties to protect our intellectual property and business model. This e-mail content is solely for Universal Boschi.”

Of course, what the first respondent does not do in that e-mail is to say that he is, in fact, disclosing the intellectual property and business model of his current employer, in breach of his restraint agreement and in breach of his fiduciary duties and confidentiality

undertakings to his employer.

In short, the first respondent is clearly in breach of the restraint.

That brings me then to the reasonableness of the restraint, even though, as Mr Sibanda pointed out, the first respondent has not alleged any factors contesting the reasonableness of the restraint. The Appellant

Division set out the factors to be assessed in Basson v Chilwan & Others [1993] ZASCA 61; 1993 (3) SA 742 (A), and that has been repeated ad nauseam, for example in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (A) at 16, and by this court in SPP Pumps, to which I have referred. The four factors are the following:

“1. Does one party have an interest that deserves protection after termination of the agreement?

2. If so, is that interest threatened by another party?

3. Does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive or unproductive?

4. 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?”

The first issue to be determined is that of a protectable interest. In this case the applicant relies mainly on its trade secrets. That is one of the primary objects to be considered, as set out recently by this court in Vox Telecommunications (Pty) Ltd v Steyn and Another (2016) 37 ILJ 1255 (LC) at 30.

The first respondent was employed as Procurement Director. He reported directly to the Chief Financial Officer. He even sat on the

management committee. He has not shown that he has not acquired any significant personal knowledge, contrary to what the CFO, Mr Neate, has testified to under oath. There clearly was secret information to which the first respondent had access, and in theory he could transmit it to Bokone Gas, if so inclined. It is by now trite that an employer does not have to show that the employee has, in fact, utilised confidential information. All the applicant needs to show is that the employee could do so. That much was set out in Reddy that I had referred to, and recently confirmed by the LAC in Ball v Bambalela Bolts (Pty) Ltd and Another (2013) 34 ILJ 2821 (LC) at 22.

Firstly, therefore, the applicant has shown a protectable interest and it has shown that that interest is threatened by the employee. The question of reasonableness must then be considered. As Mr Sibanda pointed out, it seeks only to interdict the employee from taking up employment with its direct competitor and not to seek employment

elsewhere. He has confidential information and he is about to take up employment with a direct competitor of the applicant.

In those premises I agree that the restraint is reasonable.

No aspect of public policy has been brought before me to say that the restraint should not be enforced. The applicant has shown a protectable interest, the restraint is not so wide as to be unenforceable, and a period of 12 months is, to my mind, not

unreasonable. The constitutional issue of the right to pursue an economic activity, as I have said, has been dealt with by our highest court, and on the whole restraints of trade, provided the other factors have been satisfied, are not unconstitutional or against public policy. In all of those circumstances, I am satisfied that the application must succeed.

Mr Sibanda has, after taking instructions from his attorney, told the court that he will not pursue an order as to costs.

In those circumstances, I grant an order in the following terms:

1. The non-compliance with the rules of this court with regard to times

and manner of service are condoned and the matter is dealt with as one of urgency.

2. The first respondent’s projected commencement of employment

with the second respondent, Bokone Gas, on 1 October 2016, alternatively his involvement in any capacity with Bokone Gas,

is declared to be in breach of his obligations to the applicant in terms of the Code of Good Conduct and the Confidentiality and

Restraint Agreement.

3. The first respondent’s active involvement with the second respondent is declared to be in breach of his fiduciary duties to the applicant.

4. The first respondent is interdicted and restrained from breaching his duties in terms of the Code of Conduct, the Confidentiality and Restraint Agreement and his fiduciary duties by:

4.1 commencing any employment with the second respondent or any other company in competition with the applicant for a period of 12 months from 30 September 2016; and

4.2 engaging, whether as an employee, consultant, independent contractor or in any other capacity in any business which is in competition with the applicant for a period of 12 months.

- - - - - - - - - - - - -

___________________________

STEENKAMP J

JUDGE OF THE LABOUR COURT

APPEARANCES

APPLICANT: M Sibanda

Instructed by Hogan Lovells.

RESPONDENTS: R Rakhuduwe (in person).

TRANSCRIBER’S CERTIFICATE

This is to certify that, insofar as it is audible, the aforegoing is a true and correct transcript of the proceedings recorded by means of a mechanical recorder in the matter of:

AIR LIQUIDE

Applicant

And

MR R RAKHUDUWE

First Respondent

BOKONE GAS (PTY) LTD

Second Respondent

________________________________________________________

CASE NUMBER:

J2042/16

RECORDED AT:

JOHANNESBURG

DATE HELD:

27 SEPTEMBER 2016

TRANSCRIBER:

AG VAN STADEN

DATE COMPLETED:

6 OCTOBER 2016

NUMBER OF CD/audio files: 1

NUMBER OF PAGES:

19

REPORT ON RECORDING 1. Where no clear annotations are furnished, names are transcribed phonetically.

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