Mangaung Building Materials & Hardware (Pty) Ltd t/a Mangaung Build It v Zulu and Another; Mangaung Building Materials & Hardware (Pty) Ltd t/a Mangaung Build It v Sekhoane and Another (3387/2020; 3388/2020) [2020] ZAFSHC 188 (26 October 2020)

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

IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

In the matters between:

Case number 3387/2020 MANGAUNG BUILDING MATERIALS & HARDWARE (PTY) LTD t/a MANGAUNG BUILD IT [Registration number: 2013/047977/07] Applicant and MOHAU ALEXIOUS ZULU [Identity number: […]] 1st Respondent BUILDERS MART SUPER STORE (PTY) LTD t/a BUILDERS MART 2nd Respondent

Case number: 3388/2020 MANGAUNG BUILDING MATERIALS & HARDWARE (PTY) LTD t/a MANGAUNG BUILD IT [Registration number: 2013/047977/07] Applicant and TEBELLO YVONNE SEKHOANE [Identity number: […]] 1st Respondent BUILDERS MART SUPER STORE (PTY) LTD t/a BUILDERS MART 2nd Respondent

CORAM:

DAFFUE J

HEARD ON: 23 SEPTEMBER 2020 & 1 OCTOBER 2020

DELIVERED ON: 26 OCTOBER 2020

I INTRODUCTION

[1] A well-established building material and hardware business in Bloemfontein instituted so-called semi urgent proceedings in an

attempt to interdict and restrain two ex-employees from being employed by the opposition contrary to restraint of trade agreements

entered into with them. Separate applications were issued. Both matters were considered so urgent that they were set down on a Wednesday morning during the first week of the recess instead of on a normal motion court day. The one application is a mirror image of the other, save for the description of the ex-employees, their appointment dates and other minor differences relating to their personal circumstances. The same vague and ever-so-popular allegations often encountered in these kind of applications appear from the founding affidavit. The applications are not opposed. I decided to write one judgment.

II THE PARTIES

[2] The applicant in both matters is Mangaung Building Materials & Hardware (Pty) Ltd t/a Mangaung Build It [Registration number:

2013/047977/07]. It conducts a retail business in the supply of building materials, roofing, hardware and tools, supplying builders and owner builders as well as handymen, homeowners and the public in general. Considering its registration number, it is in business for the last 7 years. It regards other well-known businesses in the Bloemfontein area such as DIY Superstore, BUCO, Cashbuilt and second respondent in this application as its main opposition.

[3] First respondent in application 3387/2020 is Mr Mohau Alexious Zulu, a 39 year old male person residing in the Mofora township in Thaba ’Nchu, a town approximately 65 km east of Bloemfontein. He started his employment career as general worker with applicant on 11 January 2017.

[4] First respondent in application 3388/2020 is Ms Tebello Yvonne Sekhoane, a 33 year old female employed as sales lady/consultant by applicant on 4 December 2015. She is also resident in Thaba’Nchu.

[5] Both these respondents’ gross starting remuneration was the meagre amount of R4 200 per month ex facie the employment contracts attached to the founding affidavits.

[6] The second respondent in both applications is Builders Mart Super Store (Pty) Ltd t/a Builders Mart, a company conducting business in the same market sector as applicant, whose business is also situated in Bloemfontein.

III THE RELIEF SOUGHT

[7] Applicant seeks similar relief against both ex-employees. Herein after I shall refer to the respondent in application 3387/2020 as Zulu and to the respondent in application 3388/2020 as Sekhoane without being disrespectful, but in order to avoid confusion. The second respondent in both the applications will be referred to, if required, as Builders Mart.

[8] Applicant seeks extremely broad relief, but in essence an interdict is sought in terms whereof Zulu and Sekhoane are interdicted and restrained from working for Builders Mart or any other competitor of applicant within the municipal boundaries of Bloemfontein for a period of one year from 27 July 2020 and 6 July 2020 respectively, the effect being that Zulu should be barred from working in the same market sector in Bloemfontein until 27 July 2021 and Sekhoane until 6 July 2021.

IV THE PROCEEDINGS ON 23 SEPTEMBER 2020

[9] The matters were set down for hearing at 09h30 and 10h00 respectively on 23 September 2020. Sekhoane’s matter was to be heard first. I informed applicant’s attorney beforehand that both applications would be heard at 10h00. Sekhoane did not appear, but Zulu was present in court, indicating that he had obtained Legal Aid and that the applicant’s legal representative should contact Legal Aid to arrange dates for the continuation of the proceedings. Consequently I postponed

application 3387/2020 to 1 October 2020 for dates to be arranged with the Bloemfontein office of Legal Aid South Africa for hearing of the matter.

[10] Adv MC Louw on behalf of applicant addressed me in respect of application 3388/2020 and submitted that a proper case had been made out for the relief sought. I made it clear during his oral argument that prima facie I was not inclined to grant any relief. In concluding his argument Mr Louw submitted that if the court was of the opinion that the restraint was too broad in its terms, his client would have no objection if the duration of the restraint is reduced from twelve to six months. I reserved judgment.

V THE PROCEEDINGS ON 1 OCTOBER 2020

[11] Mr Zulu appeared in the unopposed motion court on 1 October 2020 and indicated that he did not want to make use of Legal Aid anymore. When I explained his predicament to him, he tried to place evidence before me from the bar, but eventually indicated that adjudication of the matter was left in the hands of the court. I heard argument on behalf of applicant, this time represented by Adv D de Kock, whereupon I reserved judgment.

VI REASONS FOR THE DELAY IN DELIVERING JUDGMENT

[12] The easiest way out was to immediately grant the applications in the absence of opposition without providing reasons. However, as indicated to counsel during their submissions in both matters, I was really concerned whether applicant had made out proper cases for the relief sought.

[13] The applications were brought the day before a long weekend whilst I was experiencing quite a hectic week as duty judge. The next week was one of the busiest weeks I have ever encountered as duty judge. Thereafter I went on Circuit Court in Sasolburg for two weeks where I had to hear and adjudicate a matter concerning three accused charged with five serious offences, including two murders. Numerous witnesses testified and sentences were imposed on the last day of the two week trial. The week thereafter was less hectic, although I had to adjudicate two civil appeals, an interpleader application where oral evidence was led and an opposed motion.

VII THE CASE LAW IN RESTRAINT OF TRADE DISPUTES

[14] The authorities in restraint of trade disputes are well known and it would suffice to briefly mention a few judgments. We learned from the Romans: pacta servanda sunt, i.e. contracts must be complied with. This remains an important principle, but many years before the enactment of both the interim and final Constitutions, the Appeal Court (as it was then called) held in its landmark decision of nearly 40 years ago in Magna Alloys and Research (Pty) Ltd v Ellis[1] that agreements in restraint of trade are valid and enforceable, unless they are unreasonable and thus contrary to public policy.

The court held that the party challenging the enforceability of the agreement bears the onus to allege and prove that it is unreasonable.[2]

[15] Many years after Magna Alloys the Constitutional Court confirmed in Barkhuizen v Napier[3] that pacta servanda sunt, but courts are allowed to decline to enforce contracts, or terms thereof, that are in conflict with constitutional values, even where the parties consented thereto.

[16] Although restraint of trade agreements should not be regarded as special contracts separate from any other type of contract, it is no doubt so that restraint of trade agreements give effect to a wide range of circumstances “spanning the spectrum from the hugely successful businessperson who sells the business that he or she has built up for massive amounts of money and is required to sign a restraint of trade agreement in order that the purchaser may protect its investment, to relatively humble employees who may be required to sign such an agreement as a matter of rote and possibly in terrorem to deter them from seeking a more advantageous position …” as Wallis AJ (as he then was) stated in Den Braven SA (Pty) Ltd v Pillay and another.[4] Later on, in the same paragraph quoted, the learned judge stipulated that where a business seeks to protect itself, there is no reason for the courts to view this with disfavour, unless the bounds of public policy are overstepped in which case the court will withhold its assistance.

[17] Although the public interest requires parties to comply with their contractual undertakings, it is also in the public interest that all persons shall be granted an opportunity to remain economically productive to enable them to earn a living and to support their families. This was again reiterated in Reddy v Siemens Telecommunications (Pty) Ltd.[5] The court continued in Reddy[6] as follows:

“A restraint would be unenforceable if it prevents a party after termination of his or her employment from partaking in trade or

commerce without a corresponding interest of the other party deserving of protection. Such a restraint is not in the public interest.”

[18] In conclusion, and as Malan AJA did in Reddy, a court should follow the approach adopted in Basson v Chilwan and Others[7] where four questions were identified that should be asked to consider the reasonableness of a restraint of trade:

(a) Does the one party have an interest that deserves protection after termination of the agreement?

(b) If so, is that interest threatened by the other party?

(c) In that case, does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?

(d) Is there an aspect of public policy having nothing to do with the relationship between the parties that requires the restraint to be maintained or rejected?

VIII EVALUATION OF THE EVIDENCE AND THE SUBMISSIONS ON BEHALF OF APPLICANT

[17] Mr Reddy, the appellant in Reddy v Siemens[8] quoted above was a systems engineer in the carrier services high level support network platform department of Siemens which rendered “intelligent network” and value added services to its customers. He had knowledge of confidential technologies which could be utilised when he started employment with a competitor of Siemens, to wit Ericsson. Reddy gained experience and was trained both in South Africa and abroad in relation to his ex-employer’s products and networks and the use of its software, which gave Siemens’ intelligence network platform service a unique identity and competitive edge. The process of customising software was confidential and a trade secret of Siemens. Clearly, Reddy was a skilled employee in possession of knowledge of Siemens “processes, methodologies and systems architecture.” In the case of Reddy, the Supreme Court of Appeal held that he would be employed with Ericsson in a similar position to the one he occupied at Siemens, that his loyalty would be to his new employer and the opportunity to disclose confidential information at his disposal, whether deliberately or not, would exist. Therefore, the restraint was intended to relieve Siemens from the risk of disclosure and the court had no difficulty to find that the restraint was neither “unreasonable nor contrary to public policy.”[9] The differences between the experience and expertise of Reddy and that of Zulu and Sekhoane are enormous.

[18] In the Den Braven case, Mr Pillay, the ex-employee, was regarded as an excellent sales representative who in the past financial year before his resignation

was responsible for close to 50% of Den Braven’s sales of its products in KwaZulu-Natal. Pillay conceded that he had

knowledge of Den Braven’s client base and that he had built-up a close relationship with customers over a period of 8 years.

The court had little difficulty to hold that the purchasing decisions of customers are not only influenced by price as opposed to the relationship between the salesperson and customers in that factual scenario. Furthermore, the trade connection established through a specific salesperson may well be the decisive factor in the minds of customers.[10] No doubt, Pillay could be described as an excellent salesman that would most definitely have a detrimental effect on Den Braven’s future sales whose commercial interests were deserving of protection.[11]

[19] In Reddy the duration of the restraint of trade was one year which the court held was reasonable. In Pillay the duration of the restraint

was decreased from two years as contained in the restraint of trade agreement to eight months and Wallis AJ stated the following in support of the decrease:[12]

“In my view the period of the restraint should not be any longer than is necessary to enable the Applicant to place a new salesperson in the field, enable them to become acquainted with the products and the customers and to make it plain to the latter that they are now the person with whom to deal on behalf of the Applicant. Having regard to the nature of the products, the type of customer to whom they are sold and the number of customers who will need to be contacted I think that a period of 8 months is sufficient for those purposes.” (emphasis added)

[20] What do we have in casu? Both Zulu and Sekhoane are relatively humble employees. Their starting salaries were a mere R4 200 per month. No restraint of trade clause was inserted in the employment contract initially entered into with Sekhoane. However, when she approached applicant for a relatively small loan of R8 000 during May 2019, her employer insisted on a restraint of trade undertaking. Sekhoane did not oppose the application. Without speculating, the probabilities indicate overwhelmingly that she would not have

received the loan if she refused to sign the undertaking. In my view there cannot be any doubt, on the probabilities, of the inequality of the parties’ bargaining powers. The same is probably true in the case of Zulu who would have signed about anything to obtain employment.

[21] Both employees provided service and advice to customers on the floor and from behind the counter. They did not have to leave the shop in order to search for and tout customers as was expected of Mr Pillay in Den Braven. They are not in possession of confidential information and the kind of skills obtained by a Mr Reddy, without trying to say that this should be the benchmark in deciding whether an application to restrain an ex-employee should succeed or not. Both of them have to travel 130 km every day to earn a living in Bloemfontein. They probably have dependants who rely on their meagre incomes. There is a reason why so many people from Thaba ‘Nchu and Botshabello work in Bloemfontein, the capital and economic hub of the Free State Province. Unemployment in especially areas like that is a serious concern due to a lack of economic activity. Therefore taxis and busses transporting thousands of workers every day to and from Bloemfontein is a reality. Zulu and Sekhoane are not salespersons like Mr Pillay that contributed about 50% to his ex-employer’s turnover. In fact, there is no proof that they contributed meaningfully to applicant’s turnover or profit. They are poor, humble and unsophisticated people earning just above the minimum wages.

[22] Applicant failed to show that its turnover dropped by even R1 as a result of the two ex-employees employment with the opposition.

It also failed to show that any of its regular customers did not return and started to purchase from the opposition since the departure of Zulu and Sekhoane. In any event, there is no evidence that customers are so loyal to a specific building material

and hardware shop that they will not shop around to see where they can get the best prices. Of course, competitors in the

particular industry like all other businesses and professional persons in this country and across the world, fight for fair market

share, but that in itself can never be a reason to prevent an ex-employee from taking up employment with a competitor as this will

be against public policy.

[23] As indicated earlier, the one founding affidavit is a mirror image of the other and from paragraph 1 to 53 a copy-and-paste technique has been utilised, save in respect of the particular personal information relating to the ex-employees respectively. Paragraph 34 in both founding affidavits is quite disturbing and I quote:

“Because the building industry (and also related business i.e. building supplies) took a dip as a result of the COVID-19 regulations and restrictions which were imposed from March 2020, I did not think that the employment opportunities in the industry would be such that Tebello (also Mohau) would be in a position to violate the Restraint by taking up employment with a competitor – at least for the foreseeable future and within the Restraint period (one (1) year). I was therefore not too concerned about her (also his) termination of employment and the possibilities which the Restraint seeks to address.”

This allegation leaves a sour taste in the mouth. It is clear that applicant was quite satisfied to terminate the services of its employees for disciplinary reasons and believed that they would receive a further penalty insofar as they would not be able to be economically active for the next year.

[24] If the employees were such valuable members of the workforce of applicant, I would have expected applicant to show the sales

generated by each of them during the past year with reference to commission, if any, earned by them as a result of their excellence

and/or effectiveness and/or close customer relations. This has not been done. In my view the applicant did nothing more than to show that they were part of the workforce and not regarded as key personnel. Consequently, they received quite meagre salaries.

[25] I initially considered dismissing the applications and probably would have done so if there was opposition and full information provided pertaining to the ex-employees’ personal circumstances and especially under what circumstances they signed the restraints.

They not only received four days’ notice to indicate their intention to oppose the applications, but were directed to file their answering affidavits within the same time span. This would be a tall order for any person, even someone with vast financial

resources, to obtain the services of legal practitioners to enable him or her to comply with the directive in the notice of motion.

Zulu and Sekhoane are clearly poor people and I can fully understand why Sekhoane did not even bother to try and oppose the application.

A perusal of r 70 of the Uniform Rules of Court setting out the fees allowed to attorneys and some knowledge of the guideline fees of counsel will inform anyone that litigation is not for the poor. The first consultation by an attorney to institute an application or to oppose same will cost a client in excess of R1 200 per hour if VAT is added. Let alone the drafting of the answering affidavit and counsel’s fees to appear in an opposed motion, including drafting heads of argument, which is in excess of R10 000 in the case of junior counsel.

[26] Zulu appeared in court on 23 September 2020, indicating that he had received Legal Aid. However, on 1 October 2020 he informed the court that he did not want to proceed with Legal Aid assistance. Bearing in mind my experience over a number of years pertaining to the capacity of Legal Aid South Africa in Bloemfontein to deal with civil matters, especially opposed civil matters, I was not surprised. The Bloemfontein office of Legal Aid is seldom involved in opposed civil matters, save perhaps matrimonial matters.

[27] Many businesses closed down as a result of Covid-19 and the lockdown regulations, as well as the overall economic decline in the country. Many more people are unemployed as the statistics tell us. I have reason to believe that it would be easy for applicant to within a month or two obtain the services of experienced people to fill the shoes of Zulu and Sekhoane. Even inexperienced persons could have been trained within a short period of time to act as salespersons. Unlike as Mr Louw submitted, I am not prepared to reduce the duration of the restraint to six months, but I shall reduce it to three months. Such period would have given sufficient opportunity to applicant to substitute the two ex-employees. I reiterate that there is no other reason to keep the ex-employees economically inactive as intended with the restraint of trade agreements. I am not convinced by applicant’s allegations that its commercial interests deserve any protection in casu, but even if this was the case, that Zulu and Sekhoane are threatening such interests whilst employed by a rival business. If I consider the right to protection of commercial interests with the humble employees’ right to remain economically active, a duration of restraint in trade in excess of three months would be unfair, against public policy and in conflict with our constitutional values. Finally, and without trying to criticize applicant for dismissing Zulu and Sekhoane, I would have thought that if they were such valuable members of applicant’s workforce, a less severe sanction would be more appropriate.

[28] In exercising my discretion pertaining to costs, I first of all considered the fact that there was really no reason why this matter should have been dealt with on an urgent basis and secondly, why one application could not have been instituted against the two ex-employees who had been dismissed in similar circumstances during the same month and who had obtained employment at the same competitor soon thereafter. It was really unnecessary to incur enormous extra costs in issuing two applications. Applicant’s sole director and deponent of the founding affidavit learnt on Monday, 24 August 2020 that both ex-employees were in breach of the constraint, but it took applicant in excess of two weeks to issue the applications. The alleged urgency was self-created. As a result of this and the fact that applicant has received insubstantial relief with no practical effect, there should be no order as to costs.

[29] The following orders are issued.

Application 3387/2020

1. The 1st respondent, Mohau Alexious Zulu is interdicted and restrained from being employed by 2nd respondent for a period of 3 months from 27 July 2020.

2. There shall be no order as to costs.

Application 3388/2020

1. The 1st respondent, Tebello Yvonne Sekhoane is interdicted and restrained from being employed by 2nd respondent for a period of 3 months from 6 July 2020.

___________________

J P DAFFUE J

On behalf of Applicant: Adv MC Louw on 23 September 2020

& Adv D de Kock on 1 October 2020

Instructed by: Honey Attorneys

Bloemfontein

[1] 1984 (4) SA 874 (A)

[2] Ibid at 893 C - G and 897 H – 898 D

[3] [2007] ZACC 5; 2007 (5) SA 323 (CC) at par 30

[4] 2008 (6) SA 229 (D & CLD) at par 35

[5] 2007 (2) SA 486 (SCA) at par 15

[6] Ibid par 16

[7] [1993] ZASCA 61; 1993 (3) SA 742 (A) at 767 G-H. See also in general Bradfield, Christie’s Law of Contract in South Africa 7th ed, p 427 and further

[8] Loc cit par 9

[9] Ibid par 20

[10] Loc cit par 17

[11] Ibid par 19

[12] Ibid par 55