Camelsa Consulting Group (Pty) Ltd v Mhizha and Another (J1901/2016) [2016] ZALCJHB 488 (22 September 2016)

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Not reportable

Case no: J 1901/2016

In the matter between

CAMELSA CONSULTING GROUP (PTY) LTD Applicant

and

MILITEZI MHIZHA First

Respondent

BUSHBUCKRIDGE LOCAL MUNICIPALITY Second

Respondent

Heard: 8 September 2016

Judgment: 22 September 2016

VAN NIEKERK J

[1] This is an urgent application to enforce a restraint provision in the first respondent’s contract of employment. The case is unusual in the sense that the restraint sought to be enforced is a restraint against employment by one of the applicant’s clients, rather than the usual restraint against employment by a direct competitor. The applicant contends that the terms of the restraint preclude the first respondent from being employed by the second respondent, one of its clients, and seeks to enforce the restraint for a period of 12 months. Specifically, the applicant seeks to interdict the first respondent from working as an employee of the second respondent in the capacity as an annual financial statement manager, or in any other capacity, until 1 September 2017.

[2] The applicant conducts the business of what it describes as ‘enterprise resource planning’. In plain language, the

applicant sells software to large enterprises, assists with the implementation of the software, and provides on-going maintenance.

The first respondent was employed by the applicant during 2006, and was assigned to render serves to the applicant’s clients at a number of locations. In October 2011, the applicant installed a Sage evolution system at the second respondent’s premises at Bushbuckridge. Since March 2014, the first respondent has provided assistance to the second respondent to implement the system, amongst other things, and to produce annual financial statements. The service level agreement concluded between the applicant and the second respondent, in terms of which the first respondent was assigned to provide the services he did, terminated in June 2014. No new written agreement has been concluded, and the services continue to be rendered on a month-to-month basis.

[3] The restraint in which the applicant relies is a term of a contract of employment concluded on 19 February 2016, when the first

respondent was appointed as an assistant manager. The element of the restraint that is in issue is that contained in clause 7.2.2 which reads as follows:

7.2.2 The employee cannot seek or accept any employment by clients, business partners or prospective clients, specifically Softline

Pastel or any organisation that Camelsa Consulting Group is in a joint venture consortium or partnership with.

[4] It is not in dispute that on 31 July 2016, the first respondent resigned from the applicant’s employ. The applicant discovered

during the course of August 2016 that the first respondent was to commence employment with the second respondent with effect from 1 September 2016 as a senior annual financial statements manager.

[5] The applicant contends that this appointment is a breach of the above restraint, that it has a protectable interest in that the breach of the restraint threatens an income stream in excess of R 1 million annually and that the applicant faces the very real prospect of the second respondent no longer utilising its services to compile annual financial statements.

[6] The restraint clause is poorly drafted. There is no definition of ‘clients’, ‘business partners’ or

‘prospective clients’. The latter in particular would appear to be an infinite and indefinite category. Further, it is not clear whether the word ’specifically’ was intended to qualify the words ‘clients, business partners or prospective clients’. The word ‘specifically’ may also refer to ‘Softline Pastel’; equally, it may also serve to qualify that which follows the words ‘or any organisation…’ The applicant has failed to make any factual averments to provide any context to the formulation of the restraint, even to the limited extent of explaining the reference to Softline Pastel. In my view, the restraint is too vaguely formulated for it to be enforceable.

[7] Even if I am wrong in coming to that conclusion, the restraint is unreasonable and for that reason, it is unenforceable. First, the restraint contains no temporal limit. A literal reading of the restraint precludes the first respondent from ever being employed by any of the applicant’s clients. Mr Beaton SC, who appeared for the applicant, urged me to read in a limitation of 12 months, the time period attached to the standard restraint against being employed by a competitor and contained in clause 7.1 of the employment

contract. There is no reason why this should be assumed to be a reasonable period, and in the absence of any evidence to support the reasonableness of a 12 month period, the indefinite nature of the restraint as to its time of operation renders it unreasonable for that reason alone.

[8] Secondly, in my view, the applicant’s protectable interest is a narrow one, so narrow that it is not deserving of enforcement. The applicant does not contend that the first respondent is in possession of trade secrets or confidential information that may be compromised should he be employed by the second respondent. In essence, the first respondent contends, in the words of Basson v Chilwan and others 1993 SA 742 (A), that the applicant has no interest that is deserving of protection. The protectable interest on which the applicant relies is described as its ‘income stream in excess of R1 million annually’ and the prospect that the second respondent will no longer use its services to compile annual financial statements.

[9] While a commercial relationship with a client can never be said not to constitute a protectable interest, it is common cause that the service level agreement between the applicant and the first respondent continued until 30 June 2014, and that it currently

continues on a month to month basis. The ‘income stream’ on which the applicant relies may therefore be lawfully terminated,

in accordance with the terms of the agreement, on a month’s notice. The applicant’s assertion that it has no security in regard to the income stream to which it refers ‘other than the restraint provisions in First Respondent’s contract of employment’, has no merit. The restraint agreement confers little if any security in circumstances where the service level agreement itself is terminable on a months’ notice. Were the second respondent to terminate the contract, the applicant would have no right to continue to provide services to the first respondent, whether through the auspices of the first respondent or any other employee. The restraint does not provide any right by the applicant to render services to the second respondent or to otherwise maintain the relationship of service provider- client, nor is it a guarantee of the first respondent’s continued loyalty and support. If the second respondent decides that the services currently outsourced to the first respondent are best rendered in-house by one of its own employees, that is the second respondent’s prerogative and provided the service level agreement is lawfully terminated, that is no business of the applicant.

[10] Given my finding in relation to the applicant’s lack of a protectable interest, it is not necessary for me to canvass the parties’ submissions concerning the nature of the first respondent’s duties in his capacity as an employee of the

second respondent.

[11] For the above reasons, the application stands to be dismissed. There is no reason why costs should not follow the result.

I make the following order:

1. The application is dismissed, with costs.

ANDRÉ VAN NIEKERK

JUDGE OF THE LABOUR COURT

REPRESENTATION

For the applicant: Adv R Beaton SC, instructed by Erasmus Scheepers Attorney.

For ter first respondent: Adv S Kanyangarara, instructed by Nyachowe Attorney