CTrack South Africa (PTY) v Wright and Another (J736/2022) [2022] ZALCJHB 190 (29 July 2022)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

Not reportable/of interest to other judges

THE LABOUR COURT OF SOUTH AFRICA,

HELD

AT JOHANNESBURG

Case: J736/2022

In the matter between:

CTRACK SOUTH AFRICA (PTY) LTD

(Reg No: 1997/016952/07)

First Applicant

and

JUSTIN

MATTHEW WRIGHT

(ID No: [....])

First Respondent

FLEETCAM (PTY) LTD

(Reg No: 2016/058888/07)

Second Respondent

Date of Hearing: 7 July 2022

Date of Judgment: This judgment was handed down electronically by circulation to the parties’ legal representatives by email, publication on the Labour Court website and release to SAFLII. The date and time for handing down judgment is deemed to be 10h00 on 29 July 2022

Summary: (Restraint of trade – employee working for competitor in breach of restraint – overlap of businesses and employee’s work - Urgency – Insufficient evidence advanced to find pared down restraint unreasonable in relation to protection of employer’s interests weighed against those of employee)

JUDGMENT

LAGRANGE J

Introduction

[1] The applicant (‘C Track’), has applied on an urgent basis to interdict the first respondent (‘Wright’) from being employed by the second respondent (‘Fleetcam’), an alleged competitor of the CTrack, and from disclosing the it’s confidential information. The hearing was conducted virtually using Zoom owing to power cuts, which prevented the application being heard in open court.

[2] Ctrack seeks partial enforcement of the restraint for twelve months, rather than two years as provided for in the restraint agreement. Both respondents oppose the application.

Urgency

[3] Ctrack first learned of Wright’s alleged breach of the restraint on 13 June 2022. After some correspondence between the parties’ attorneys of record, the application was launched on 22 June 2022. The respondents filed their notice of intention to oppose the application on 30 June together with an answering affidavit. Ctrack filed its replying affidavit on 5 July and the application was enrolled for hearing on 7 July 2022. The respondent’s

did not seek leave to file a supplementary answering affidavit as often occurs in these type of proceedings.

[4] Although restraint applications will usually by their nature be considered urgent, an applicant must still demonstrate that it has acted sufficiently promptly in the particular circumstances. The respondents complain that it took Ctrack six days to launch the application after the expiry of its ultimatum to Wright. I do not believe that this period is excessive and Ctrack did not try to draw out attempts to resolve the matter before launching the application. In my view, Ctrack was not dilatory in launching the application

Merits

[5] It is common cause that Wright is bound by the restraint agreement in his contract. What remains is to consider whether it has been breached and, if so, whether it would be unreasonable and contrary to public policy to enforce it.

Has Wright breached the agreement?

[6] Wright started working for Fleetcam by 2 June 2022. The respondents claim that Fleetcam is not a competitor of Ctrack and Wright is working for Fleetcam in a completely different capacity to that which

he fulfilled at Ctrack.

Competition between Ctrack and Fleetcam

[7] The pertinent provisions of Clause 19 of Wright’s contract of employment state:

“19 RESTRAINT

UNDERTAKINGS

19.1 The employee shall be restrained for a period of 2 years from the date of termination of this Agreement from working in competition with the employer as described here under with in a 200 km radius of the area in which you are currently working;

19.2 Directly or indirectly having any interest in, involvement with, connection to, or being employed by any company, corporation, firm, partnership, association, or other form of business entity, whether incorporated or unincorporated (for convenience “Competing Business”), which conducts business along lines similar to or in competition with that of the employer;

19.3 Acting as an employee, director, shareholder, member, partner, consultant, financier, agent or advisor to any Competing Business in respect of the Restrained from Activities in the above-mentioned areas;

19.4 Directly or indirectly soliciting or offering employment to any employee of the employer who was an employee as at the date of signature of the contract of employment, or at any time within 3 [three] months preceding the date of signature of this Agreement, nor shall they attempt to do so.

19.5 The employee acknowledges that these restraint of trade undertakings and covenants are reasonable as to the period, the area of restraint and the nature and extent of the Restrained Activities.”

[8] Ctrack is a company offering vehicle tracking and recovery, fleet management and telematics solutions and services. More specifically, it provides the following services to its clients:

8.1 the development, design, manufacture and wholesale distribution of tracking devices;

8.2 software reporting platform and codes, developed by Ctrack itself, used in the provision of telematics and tracking services and which interfaces with tracking devices - BI Analytics (business intelligence analytics) is used as a reporting tool to analyse operational data (for example, how long a driver has been driving) so that customers have insight and are assisted in decision-making, cost reduction and identifying new business opportunities;

8.3 vehicle tracking, with devices that are designed to be installed into a vehicle for purposes of tracking and locating, as well as for collecting telematics information;

8.4 a 24-hour control room conducting monitoring and recovery services;

8.5 vehicle recovery;

8.6 fleet management;

8.7 in-house technical training for customers on the installation and use of Ctrack’s products, and

8.8 ancillary services such as the escort, recovery and location of client’s assets.

[9] By contrast, it claims that Fleetcam provides the following products and services, based on the information appearing on Fleetcam’s website:

9.1 vehicle video telematics;

9.2 vehicle and asset tracking;

9.3 4G Dash cams;

9.4 Bureau and business intelligence solutions;

9.5 advanced driver assistance systems.

[10] The respondents do not contend the information on Fleetcam’s website including the description of its products and services as alleged by Ctrack is incorrect. However, they contend that Ctrack is a tracking company, even though Fleetcam does provide such a service to customers who request it. They claim that Fleetcam’s business is distinguishable from Ctrack because it is a ‘leading video telematics company’, and the services it offers are not the same as those offered by Ctrack. It provides “wholly different” solutions to those provided by Ctrack. Elaborating on the distinction between the two businesses, the respondents claim that Fleetcam’s business focuses on monitoring client vehicles and stock rather than on recovery and tracking and that it only provides tracking services for fleet vehicles.

[11] It appears that Fleetcam was established about fourteen years ago by a group of former staff of Ctrack and that the new firm did focus on telematics and video monitoring solutions. However, that is also now part of the product offering of Ctrack.

Customer connections

[12] Ctrack contends that Wright had developed connections with its customers, that would enable him to induce a customer to follow him to Fleetcam’s business. It also disputed Wright’s claim that he had not brought any new clients to Ctrack’s business, citing the case of Gulfstream Energy and Wright’s insistence on being involved in the process. Although Ctrack does not allege that Wright has approached any of its customers on behalf of Fleetcam yet, it is concerned that the trade connections he built up with clients could be used by Fleetcam to its advantage.

[13] In the founding affidavit, Ctrack detailed how the Wright negotiated service level agreements (SLAs) with new clients, which Wright does not dispute. Ctrack claims that Wright built interpersonal relationships with key members of clients’ management teams and could induce clients to follow him to a new business.

[14] Examples of the Wright’s interactions with clients are annexed to the founding affidavit, on the basis of which Ctrack contends it is evident that he frequently communicated and met with clients and established a good rapport with them. Wright did not dispute that he had such connections with customers but states that these connections were held in common with other staff of Ctrack, who always accompanied him when he interacted with clients. Ctrack accepts that Wright was not often alone in his communications with clients, but argues that, on his own version, he was the first point of contact for clients if any issues arose, and his contribution in building up the client connection was a primary one.

[15] In addition, the respondents maintain that Wright is no longer employed in a sales capacity but as a Bureau Operations Leader within Fleetcam’s bureau. The Bureau captures information regarding alarms which are set out in clients’ fleets. In that capacity Wright performs data analysis and compiles reports based thereon for customers. It is only when a client has a query regarding information on the system that he will communicate with the client. He is not involved in soliciting and securing clients for Fleetcam, nor does he negotiate and prepare service level agreements or doing client relations. Consequently, the respondents contend that any information Wright has relating to the clients of Ctrack could not be used to its

detriment.

Confidential information

[16] Ctrack says that Wright had access to confidential information relating to its client lists and customer information, distribution structures operations, methods, business strategies, pricing and systems, which would be relevant and useful in his new position at Fleetcam. Ctrack provides, as a specific example of proprietary knowledge, the alarm monitoring protocol which it designed. It also maintains that his knowledge of tailor-made packages and his ability to add value for clients would be useful to Fleetcam.

[17] Wright retorts that Ctrack’s acknowledgment that other competitors might have similar protocols indicated that there was nothing unique about its protocol. Insofar as Ctrack has proprietary software it has developed, Wright has no expertise in that area and has no knowledge of the design of such. In relation to his sales related knowledge of Ctrack is concerned, Wright points out that this information has no bearing on his new job, which does not entail dealing with new clients or Fleetcam’s sales.

Job function

[18] Ctrack disputes Wright’s claim that his functions and duties at Fleetcam are quite distinct from those he performed for it. While Ctrack concedes that his duties as described in his Fleetcam job description are not identical they overlap in significant respects with the work he performed at Ctrack.

[19] Firstly, the so-called ‘bureau’ where Wright works at Fleetcam is not unique to that business. Ctrack also has a bureau which provides fleet monitoring, stolen vehicle recovery, driver behaviour and coaching solutions, event management and customized reporting services. In its bureau services brochure, Ctrack states that the service “is a fully fledged fleet intelligence service centre, offering a wide range of services which provides you with hindsight, insight and foresight for fleet operations” and the bureau “monitors and analyses movements, incidents, and alerts meticulously, providing analytical reporting and support to optimize your fleet operations”. Fleetcam describes the services it offers as going beyond stolen vehicle recovery to include “other integrated services such as trip monitoring and video event management” and “driver coaching, risk reduction, stolen vehicle recovery, and tailored solutions to address industry and client specific challenges,”

[20] Secondly, Ctrack contends that Wright’s specific duties as Fleetcam’s Bureau Operations Leader are not wholly different to the work he performed for it, contrary to what he claims. With reference to the job description set out in an annexure to Wright’s answering affidavit, Ctrack avers that the jobs are similar in that both entailed, inter alia:

20.1 developing bureau objectives with efficiency and profitability and innovation in mind;

20.2 developing operating procedures for staff in the Bureau;

20.3 meeting client expectations;

20.4 analyzing bureau performance;

20.5 tailoring customer solutions, and

20.6 managing post incident functions.

Ctrack contends that these functions unavoidably require interaction with customers.

Evaluation

[21] It is common cause that Ctrack and Wright concluded a restraint of trade agreement as part of his contract of employment. Considering the service and product offerings of Ctrack and Fleetcam, I accept that there may be a stronger emphasis in Fleetcam’s business on telematics. However, there is more that is similar about the services they offer than what is different. I am satisfied that they compete in the same market space. Consequently, in going to work for Fleetcam, Wright has acted in breach of clause 19.2 of his contract of employment.

[22] It remains to be considered if the restraint is unreasonable and contrary to public policy on the basis of the factors identified in Basson v Chilwan and Others [1993] ZASCA 61; 1993 (3) SA 742 (A) at 767F-1. These factors are summarised in English in the headnote to the judgment in the following terms:

“Restraint unreasonable and contrary to public policy if it prevents one party, at termination of contractual relationship, from freely participating in commercial and professional world without protectable interest of other party being served thereby - Restraint which is reasonable inter partes might still be against public interest for a reason not peculiar to parties and vice versa - Four questions to be asked in this regard, ie (a) whether claiming party has a protectable interest; (b) whether such interest is prejudiced by other party; (c) if so, whether such interest, weighed qualitatively and quantitatively against interest of other party, such that latter should not be economically inactive and unproductive, and (d) whether there is another facet of public policy having nothing to do with relationship between parties which requires restraint either to be enforced or to be voided.”[1]

[23] It is up to Wright to demonstrate that it would be unreasonable to enforce the restraint.[2]

Existence of a protectable interest and whether Ctrack’s interests are prejudiced by Wright working for Fleetcam

[24] I accept that no knowledge of Ctrack software designs can be attributed to Wright. Similarly, Ctrack’s alarm monitoring protocol does not have any obviously unique distinctive features, knowledge of which would be invaluable a competitor. Nonetheless, he does possess knowledge of how product and service offerings were tailored to Ctrack’s clients’ needs and, even if he was not the sole point of contact between Ctrack’s clients, his interaction with them and participation in the conclusion of service level agreements means that he had a significantly detailed insight into their particular requirements, which could not have been developed without interacting with them. His knowledge of their needs and his history of involvement with them would obviously be of commercial value to a competitor such as Fleetcam. This knowledge of clients and having developed relationships with them as the human interface between clients and Fleetcam, is quite different from the personal skills Wright has acquired to draft SLAs or to analyse monitoring data and design operating procedures. It is the knowledge and trade connections relating specifically to the client base of Ctrack, which the latter is entitled to retain for its own use only.

Does Ctrack’s interest quantitatively and qualititatively outweigh Whrigt’s interest in being economically active, or is there any other compelling public policy that has a bearing on whether or not the restraint should be enforced?

[25] Wright argues that he is in a role which does not involve new sales and therefore would not involve him personally in marketing Fleetcam’s products to existing clients of Ctrack. However, it is an accepted principle that it is the former employee’s ability to divulge knowledge of Fleetcam’s clients which he acquired while working for it, which creates a risk for Ctrack[3], and that a subsequent claim for damages on account of clients later lost to Ctrack is not adequate protection of that knowledge and the trade connections which Wright was integral to developing[4].

[26] Ctrack has rightly recognised that it would probably be unreasonable to attempt to protect itself against such risks for as long as two years. Accordingly, it only seeks to enforce the restraint for a period of one year, which will expire on 3 June 2023. No evidence or argument has been advanced by Wright that this period is still excessive in relation to the interests Ctrack wishes to protect.

[27] Wright attacks the reasonableness of the restraint on the basis that the geographic scope of the restraint, is too extensive cause it prevents him from taking up employment in the sector in the entire Gauteng area, which would effectively requiring him to relocate himself and his family, who are dependent on him, to work in the industry. He has not advanced any evidence that he would probably be unable to obtain other work for a period of twelve months before joining Fleetcam, nor has he advanced any reason why a smaller geographic radius would be sufficient to balance his interests and those of Ctrack.

[28] In the circumstances, I am not persuaded that Wright has established that it would be unreasonable and against public policy to enforce the pared down restraint which Fleetcam seeks to enforce.

Order

[1] The Applicant's non-compliance with the rules relating to forms, service and time periods prescribed in the rules of this Honourable Court is condoned and the application is heard as a matter of urgency

in terms of Rule 8 of the Labour Court rules.

[2] The First Respondent is interdicted and restrained from directly or indirectly having any interest in, involvement with, connection to, or being employed by any company, corporation, firm, partnership, association, or other form of business entity, whether incorporated or unincorporated, which conducts business along the lines similar to or in competition with that of the Applicant for the period of 3 June 2022 up to, and including, 2 June 2023, within a 200 km radius of 9 Regency Drive, Route 21 Corporate Park, Irene (Centurion).

[3] The First Respondent is interdicted and restrained from acting as an employee, director, shareholder, member, partner, consultant, financier, agent or advisor to any company, corporation, firm, partnership, association, or other form of business entity, whether incorporated or unincorporated, which conducts business along lines similar to or in competition with that of the Applicant for the period 3 June 2022 to 3 June 2023, within a 200km radius of 9 Regency Drive, Route 21 Corporate Park, Irene (Centurion).

[4] The First Respondent is interdicted and restrained from directly or indirectly soliciting or offering employment to any employee of the Applicant who was an employee on 16 June 2009, or at any time within 3 (three) months preceding 16 June 2009.

[5] The First Respondent is interdicted and restrained from utilising or directly or indirectly disclosing any of the Applicant's confidential information.

[6] The First and Second Respondents are jointly and severally liable for the costs of the application, the one paying the other to be absolved.

Lagrange J

Judge of the Labour Court of South Africa

Appearances/Representatives

For the Applicant

J D Withaar instructed by Gioia Engelbrecht Inc

For the Respondents

F W Botes SC instructed by

Steenkamp Van Niekerk Attorneys

[1] At 742H-743A.

[2][2] Experian South Africa (Pty) Ltd v Haynes and Another 2013 (1) SA 135 (GSJ) at para [14].

[3] See Reddy v Siemens Telecommunications (Pty) Ltd (2007) 28 ILJ 317 (SCA), at para [20].

[4] See Continuous Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjies and another (2012) 33 ILJ 629 (LC) at paras [49] and [50].