Michelin Tyre Co South Africa (Pty) Ltd v Coetzee and Another (J1292/16) [2016] ZALCJHB 494 (7 July 2016)

Not reportable

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Case no: J 1292/16

In the matter between:

MICHELIN TYRE CO SOUTH AFRICA

(PTY) LTD APPLICANT

and

ADRIAAN COETZEE FIRST

RESPONDENT

PIRELLI TYRE (PTY) LTD SECOND

RESPONDENT

Date of hearing: 5 July 2016

Date of judgment: 7 July 2016

VAN NIEKERK J

[1] The applicant seeks a final order against the first respondent, on an urgent basis, to enforce a restraint provision contained in the first respondent’s contract of employment.

[2] The relevant clauses of the first respondent’s employment contract read as follows:

21. Confidentiality

21.1 The Employee will not, at any time, either during his employment or after the termination thereof, without the prior express written consent of the Company, divulge, reveal, publish or otherwise communicate to any person, firm or company (other than an officer or employee of the Company who should know) any of the trade secrets, operations, processes, formulae methods of the Company and\or its associated companies, which have come, or which may have come to his knowledge during his employment and any and all other information of a confidential in nature concerning the business of the Company and/or controlling, subsidiary and associated companies and the sources from which it obtains its materials.

21.2 The Employee will respect the confidentiality of such information and will use his best endeavours to prevent the disclosure or publication (other than as aforesaid) of any of the writings made by him relative to the business of the Company and/or controlling subsidiary or associated companies.

21.3 Such writings are confidential and shall be handed over by the Employee to the Company and\or its associated companies, from time to time on demand and in any event by him, upon his leaving the services of the Company for any reason whatsoever …

23. Restraint of Trade

23.1 The Employee may not for a period of 6 months from the date of termination of this contract, whether on his own behalf or on behalf of any other person, close corporation, partnership or company solicit custom from, deal with or supply any person, close

corporation, partnership or company with whom the Company dealt at any time during his employment.

23.2 The above paragraph also applies to potential clients in which the Company has shown interest or with whom the Company was negotiating at the time of the Employee’s employment in the Company.

23.3 This limitation of trade is restricted to the nature of the Company’s business, products and services.

[3] The first respondent resigned from the applicant’s employ on 30 May 2016. He has since become employed by the second respondent, a competitor of the applicant. On 29 June 2016, after service of the present application, the first respondent provided a written

undertaking to the applicant’s attorneys of record that he would not for a period of six months directly or indirectly solicit

custom from, deal with or supply any person, operation, partnership or company with whom the applicant had dealt at any time during his employment, including potential clients of the applicant in which it had shown an interest or with whom it had been negotiating at the time of his employment with the applicant and that he would not use, divulge or disclose the applicant’s confidential information to any third party. This undertaking reflects the wording of the relevant clauses of the first respondent’s contract of employment and so he contends, is an undertaking in full compliance with his contractual undertakings to the applicant. These

undertakings have been incorporated in a draft order to which the first respondent consents.

[4] The applicant refused to accept the first respondent undertakings and elected instead to proceed with the present application. The applicant contends that the undertakings and the proposed draft order do not include an undertaking that the first respondent will not take up employment with a competitor. The crisp issue to be decided therefore is whether the first respondent’s restraint undertakings, properly construed and interpreted, precludes him from taking up employment, within the restraint period, and within the Republic of South Africa, with the second respondent or any other competitor of the applicant. (For convenience, I shall refer to the restraint sought as a ‘competitor restraint’.)

[5] The applicant advances three primary submissions in support of a competitor restraint. The first is that a competitor restraint is a tacit term of the first respondent’s employment contract; secondly, that a purposive interpretation of the relevant clauses would give effect to the purpose of the employment contract in general and the restraint undertaking contended for by the applicant in particular; and thirdly, that the employment contract, to the extent that it excludes a competitor restraint, does not reflect the true intentions of the parties and thus stands to be rectified.

[6] The first observation to be made is that the applicant’s case is entirely made out in reply. The founding affidavit makes no mention of tacit terms, purposive interpretation or rectification. The affidavit contains unnecessary and inappropriate references to judgments dealing with the applicable legal principles, but it manifestly fails to establish any basis for the existence of any competitor restraint or, indeed, any factual basis for any breach of any such restraint.

[7] It is trite that in motion proceedings, an applicant must stand or fall by the founding affidavit and the facts alleged in it. In particular, an applicant is not permitted, save in exceptional circumstances, to make or supplement by way of reply. In Bayat v Hansa 1955 (3(SA 547 (N), the rule was expressed in the following terms:

An applicant for relief must (save in exceptional circumstances) make his case and produce all the evidence he desires to use in support of it, in his affidavit filed with the notice of motion, whether he is moving ex parte or on notice to the respondent, and is not permitted to supplement it in his replying affidavits (the purpose of which is to reply to averments made by the respondent in his answering affidavits), still less make a new case in his replying affidavits.

[8] This is not to say that the court ought not to adopt a more lenient approach in appropriate circumstances. This is common in restraint of trade disputes, where it is incumbent on an applicant in the founding affidavit only to establish the existence of the restraint relied on and a breach of the restraint. The reasonableness of the restraint is ordinarily canvassed only in the answering affidavit and the replying affidavit inevitably makes out the applicant’s case in regard to the reasonableness threshold that is applied. The court is usually inclined to in these circumstances to depart from the general rule, and even to permit the filing of further sets of affidavits. This is not one of those cases. What is at issue in the present instance is the existence, if any, of a competitor restraint. This is a matter that must necessarily be established in the founding affidavit. To

the extent that the applicant seeks to adduce evidence by way of reply to establish the existence of a competitor restraint, as the court put it in Driefontein Consolidated GM Limited v Schlochauer 1902 TS 33 at 38, at the end of the day, the enquiry remains whether or not the applicant knew of the facts at the time when the founding affidavit was prepared and simply didn’t include them, or ought reasonably to have ascertained them before launching the proceedings.

The dependent to the founding affidavit (Donlin), who also deposed to the replying affidavit, had all of the relevant facts at her disposal that the time she deposed to the founding affidavit. There is simply no explanation for her failure to deal with any alleged undertaking by the first respondent not to take up employment with a competitor for a period of six months following the termination of his employment.

[9] In short, the applicant has failed to make out a case in its founding affidavit that a competitor restraint was a term and condition of the first respondent’s contract of employment. That being so, the application stands to be dismissed.

[10] Even if I were to have regard to the content of the replying affidavit, there is manifestly no basis for any of the contentions

advanced by the applicant. In regard to the submission that a competitor restraint was a tacit term of the applicant’s employment contract and that the surrounding circumstances at the time that the first respondent’s contract of employment was concluded were such that it was the common intention of the parties to have a competitor restraint incorporated, Donlin’s averment that a competitor restraint was meant to be a term of the contract and the restraint undertakings agreed to by the first respondent

fails to satisfy the applicable test. In SA Maritime Authority v Mc Kenzie [2010] 5 BLLR 488 (SCA), Wallis AJA referred to Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) where the court distinguished implied and tacit terms. A tacit term is a term that arises from the actual imputed intention of the parties as representing what they intended should be the contractual position or, where they did not address their minds to that situation, what it is inferred they would have intended had they applied their minds to the question (see paragraph 11 of the judgment). The usual test for a tacit term is that of the interfering bystander who asks what is to happen in the particular situation and receives the answer: ‘Of course X will be the position. It is too obvious for us to say so.’ (See paragraph 12.)

[11] I have no doubt that the answer to the bystander’s question as to the parties’ intention is not one that suggests that the first respondent would have bound himself to a competitor restraint. Restraint agreements typically comprise a number of elements drafted, as they are, in more or less onerous terms. It is one thing for an employee to undertake not to disclose his or her employer’s confidential information or not to solicit the employer’s customers or poach its staff. It is quite another to agree not to be employed by any competitor anywhere within South Africa for a defined period after termination of employment. I find it difficult to conceive how the first respondent would have agreed, without more, to bind himself to a provision that effectively served to sterilise his income producing capacity for six months.

[12] To the extent that the applicant contends that a purposive interpretation of the employment contract discloses a competitor

restraint, this submission ignores the generally applicable rule in relation to the interpretation of contracts. That rule was recently affirmed by the Supreme Court Of Appeal in Natal Joint Municipal Pension Fund v Edumeni Municipality 2012 (4) SA 593 (SCA). Wallis JA said the following:

‘[18]…The present state of the law can be expressed as follows: interpretation is the process of attributing meaning to the words use in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document….The ‘inevitable point of departure is the language of the provision itself’ read in context and having regard to the purpose of the provision and the background to the preparation and production of the document…

[13] In my view, the language used in the contract is clear. It extends only to restraints against the disclosure of confidential information and prevents the first respondent from directly or indirectly soliciting business from the applicant’s customers and potential customers. There is no competing meaning of the words that require analysis. There is nothing that is unbusinesslike or insensible about reading the relevant clauses of the first respondent’s employment contract to the exclusion of any competitor restraint. To the extent that the applicant’s representative submitted that on the facts of the present case there was a need to develop the common law so as to read in a competitive restraint, it should be recalled that restraint of trade agreements

are subject to strict limitations before they will be upheld and that the courts are singularly reluctant to read restraints into

employment contracts in the absence of express agreement (see, for example,the judgment by Myburgh AJ in Vox Telecommunications (Pty) Ltd v Murray Steyn & another, Labour Court, 5 August 2015). A restraint against joining a competitor does not form part of the naturalia of a contract of employment, and there is no statutory provision that requires the importation of such a term into an employment contract. On the contrary, a restraint of trade is a specific, onerous obligation that must necessarily be the subject of express agreement. As the court noted in Tension Envelope Corporation (SA) (Pty) Ltd v Zeller, 1970 2 SA 333 (W), the exceptional nature of the remedy allowed in the case of restraint of trade dictated that there was ‘no room for the application of the ordinary principles upon which a term may be implied into a commercial contract’. The Constitution (and the common law) recognise the right of a person to work and choose his or her trade and profession. In restraint disputes, it is often necessary for a court, within the context of the application of the reasonableness enquiry that applies, to balance that right with the principle pacta sunt servanda. I fail to appreciate how, absent an express competitor restraint agreed between the parties, this court ought to as a matter of course to read in provisions that will serve to restrain an erstwhile employee from using his or her skills in a free economy. If employers wish to protect their commercial interests by way of competitor restraints, they must do so in clear, express and agreed terms. The courts will not imply restraints where they do not exist.

[14] Insofar as the applicant contends that the first respondent’s employment contract stands to be rectified to reflect the true intention of the parties to include a competitor restraint this is a case, quite simply, that is not made out on the papers in any substantive sense. Donlin says in the founding affidavit that she negotiated with the first respondent when his contract of employment was agreed. One might have expected, in those circumstances, some evidence of the nature and extent of any discussion on the ambit of the restraint, and in particular, some evidence to support the contention that the parties true intention was that the first respondent be subjected to a competitor restraint. In her replying affidavit, Donlin baldly asserts what amounts to no more than her say-so:

38. In light of the error\mistake – in not expressly including a competitor restraint – the restraint undertakings do not reflect the true intentions of the parties. The restraint undertakings can be reformed by reflecting the true intentions of the parties; namely to include a competitor restraint.

39. A contract was entered into by both the parties. This is the employment contract in this matter. The written record does not reflect the true intentions of the parties. The true intention of the parties was to include a competitor restraint. The restraint undertakings should be rectified so as to give effect to the true intention of the parties.

[15] To the extent that the applicant contends that it is concerned about the ‘unpoliceable danger’ which may exist should the first respondent take up employment with the second respondent, this is not a basis on which to read a competitor restraint into the first respondent’s employment contract. It can only be assumed that the applicant considered the nature and extent of its risks and yet chose to contract with the first respondent on terms that did not prevent him from taking up employment with a competitor. In other words, it considered that a restraint against the solicitation of customers and the disclosure of confidential information was sufficient to protect its proprietary interests

[16] Finally, in relation to costs, the undertaking given by the first respondent on 29 June 2016 in respect of the full relief to which the applicant is entitled could have brought this application to an end, and avoided the further incurring of costs by the first respondent. In my view, and having regard to the broad discretion conferred on the court by s 162 of the Labour Relations Act, the interests of the law and fairness dictate that the first respondent be entitled to his costs from 29 June 2016.

For the above reasons, I make the following order:

1. The first respondent is interdicted and restrained for the period 6 months from directly or indirectly soliciting custom from, dealing with, or supply any person, close corporation, partnership or company with whom the applicant has dealt during the course of the respondent’s employment with it, or any potential client in which the applicant has shown an interest or with whom the applicant negotiated during the first respondent’s employment.

2. The first respondent is interdicted and restrained from directly or indirectly making use of, disclosing or divulging the applicant’s confidential information to any third party.

3. The applicant is to pay the first respondent’s costs incurred after 29 June 2016.

ANDRÉ VAN NIEKERK

JUDGE OF THE LABOUR COURT

REPRESENTATION

For the applicant: Adv. A Makka, instructed by Cliffe Dekker Hofmeyr Inc

For the first respondent: Adv. P Bosman, instructed by Coetzee Attorneys