Proglove Consolidated Marketing (Proprietary) Limited v Rheeder and Another (J1267/21) [2021] ZALCJHB 436 (15 November 2021)

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

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Not Reportable

Case No: J1267/21

In the matter between:

PROGLOVE CONSOLIDATED MARKETING

(PROPRIETARY) LIMITED Applicant

(Registration No.1994/092582/07)

and

KAREN MICHELLE RHEEDER First

Respondent

(Identity No. […])

HENNOX 638 CC Second

Respondent

(Registration No. 2005/122042/23)

Heard: 05 November 2021 (via virtual proceedings)

Delivered: This judgment was handed down electronically by circulation to the parties' legal representatives by email, publication on the Labour

Court’s website and released to SAFLII. The date and time for hand-down is deemed to be 10h00 on 15 November 2021.

Summary: Restraint of trade – restraint covenant not signed by the employer is not fatal – post-contractual conduct clearly shows that a contract was formed.

JUDGMENT

NKUTHA-NKONTWANA, J

Introduction

[1] The applicant approached this Court by way of urgency, seeking an order in the following terms:[1]

1.1 Interdicting and restraining the first respondent from, for any reason whatsoever, directly or indirectly, divulging and/or disclosing and/or using any information and/or knowledge acquired by the first respondent relating to trade secrets and/or trade-marks and/or patents and/or secret processes and/or technical information and/or know-how of the applicant to any person whatsoever, whether for the first respondents benefit or otherwise; enticing customers of the applicant away from the applicant.

1.2 Interdicting and restraining the first respondent until 31st August 2022 and within a 1000 kilometre radius of Johannesburg from being employed and/or interested either directly or indirectly and, whether as a director, partner, financier, advisor, shareholder or in any way whatsoever, in a business similar to that being carried on by the applicant, or in any business which is likely to compete with the business being conducted by the applicant at the time of termination of the first respondent’s employment; and

1.3 An order directing the first respondent to pay the costs of the application.

[2] The first respondent is resisting the grant of the relief sought by the applicant on the following grounds:

2.1 That since the applicant did not sign the restraint agreement, it is invalid and unenforceable;

2.2 Alternatively, that she is not in breach of the restraint agreement because the second respondent, her new employer, has given her an explicit instruction only deal with clients which are already on its database and specifically not to approach the applicant’s clients; and the restraint agreement is contrary to public policy.

Background

[3] The first respondent took up employment with the applicant in July 2015 as a sales representative. On 29 August 2021, she was subjected to a disciplinary enquiry and was consequently summarily dismissed on 1 September 2021. The applicant sells and supplies a wide range of safety and personal protective equipment, including, inter alia, safety helmets, safety jackets, safety gloves, safety footwear, work wear freeze wear, eye protection, fall protection, welding

accessories and protection. It is also common case that the first respondent had access to the applicant’s confidential information and that at the time of her dismissal she was in possession of her weekly printed sales reports for the year of 2021.

[4] Following her dismissal, the applicant was recruited by the second respondent as a sales representative. It is not disputed that the second respondent it is only located within 1000 kilometres radius of Johannesburg, it conducts a similar business and competes with the applicant.

Whether there is valid restraint of trade?

[5] The first respondent’s impugn in this regard is that the restraint agreement is not enforceable solely because it was not signed by the applicant up until the date of her dismissal. Yet, the applicant has since signed the agreement and the signed copy is attached to the founding affidavit. It is not the first respondent’s case that, by not signing the restraint agreement in 2015, the applicant waived or abandoned its rights therein. In my view, the first respondent’s contention in this regard is nothing but a fallacy that is committed intentionally in order to persuade by deception. I say so because the second respondent does not challenge the contract of employment which was equally unsigned by the applicant. Even so, the parties continued to perform their respective end of the bargain up until the first respondent was dismissed.

[6] The first respondent correctly conceded that an unsigned contract of employment is binding and enforceable. Yet, she failed to provide any authority for the proposition that an unsigned restraint of trade agreement is not enforceable. The authorities she referred to in her written submissions deal with a non-variation clause in a contract which is not an issue in this present instance. The first respondent is obviously clutching at straws because she signed the restraint agreement and the applicant has since done so. Further, for about six years, the first respondent enjoyed the fruits of her employment. So, it does not avail her to pick and choose the terms of her employment contract she wants to abide by.

[7] This matter is distinguishable from TIBMS (Pty) Ltd t/a Halo Underground Lighting Systems v Knight and Another,[2] as in that matter, the applicant failed to produce the restraint agreement it sought to enforce. Similarly, in A J Charnaud & Co (Pty) Ltd v van der Merwe & Others,[3] the applicant failed to produce a signed copy of restraint agreement in respect of Mr Potgieter, one of the respondents in that matter. Mr Potgieter denied having signed any restraint of trade agreement. On the contrary, in the present instance the first respondent signed the restraint agreement which was subsequently signed by the applicant.

[8] I, accordingly, have no doubt that the restraint agreement does exists.

Legal principles

[9] The legal principles are trite and accepted by the parties, I deem it unnecessary to restate them, save to emphasise that a party seeking to enforce a restraint agreement is required only to invoke the restraint agreement and prove a breach thereof. Then, a party who seeks to avoid the restraint, bears the onus to demonstrate on a balance of probabilities, that the restraint agreement is unenforceable because it is unreasonable.[4]

Restraint agreement

[10] It is not in dispute that the second respondent is operating a business that is similar to that of applicant and competes with the applicant. The restraint agreement obviously prohibits the first respondent from taking up employment with the second respondent, a business that is within 1000 kilometres of Johannesburg for a period of 12 months from the date of the termination of her contract of employment.

[11] The first respondents seem to suggest that she is not in breach of the agreement because the types of products that are sold by the second respondent are slightly different from those that are sold by the applicant. This defence is untenable and was correctly rejected in Medtronic (Africa) Proprietary Limtied v Cawood and Another,[5] where Prinsloo J opined that the ability to forge relationships and build customer connections is the critical factor and it is not dependent on the type of the products that is sold. As a result, the employer is contractually entitled to an opportunity for employee’s replacement to develop an equivalent relationship with the relevant customers.

[12] Likewise, in the present instance, the types of product that the second respondent sold is immaterial as the issue is about the relationship forged and customer connections which are protectable interests she intends exploit for the benefit of the second respondent. Otherwise stated, the applicant is undoubtedly entitled not to have his old customers, by solicitation or such other means enticed away from it.

Confidential information

[13] The first respondent concedes that she had access to and possession of the applicant’s confidential information in a form of her sales report for the year 2021. The circumstances that led to her leaving with these documents after she was dismissed is in dispute. The applicant initially explained under oath that the sales reports were placed in her possession for the purposes of her defence during the disciplinary enquiry. However, in response to the applicant’s demand that was addressed to the second respondent to destroy any confidential information in the possession of the first respondent, she was instructed Mr Miklos Toth (Mr Toth), from the second respondent, to presented those documents and he, Mr Toth, destroyed them in her presence.

[14] The applicant contends that it finds little comfort from the above assertions simply because the first respondent’s bona fides are seriously questionable. When it was shown to her that she had no permission to use or remove the sales reports, she changed her version. She concedes in her answering affidavit that she had no permission to use or remove sales reports but sought to attribute her earlier explanation to error.

[15] I agree with the applicant that the explanation proffered by the first respondent is perplexing because she pleaded guilty on all the charges which had nothing to do with her performance. In any event, it is not her case that she did ultimately presented the sales reports as evidence during the disciplinary hearing nor proffer any explanation as why she did not voluntarily return them to the applicant following her dismissal.

[16] In Labournet (Pty) Ltd v Jankielsohn and Another, [6] the Labour Appeal Court (LAC) endorsed the test for confidential information as information that must ‘…(a) be capable of being applicable in trade or industry, that is, it must be useful; not be public knowledge and property; and (b) it must be known only to a restricted number of people or a closed circle, and (c) be of economic value to the person seeking to protect it’.

[17] It is not in dispute that the sales reports are confidential in the present instance.

[18] In my view, the explanation given by the first respondent that she has destroyed all of the applicant’s confidential information is not convincing given her contradictory explanation as to how she got possession thereof. Besides, since it clear that the second

respondent is a direct competitor of the applicant, the risk of harm to the applicant given the fact that the first respondent has taken up employment with its competitor is obvious. In Reddy v Siemens Telecommunications (Pty) Ltd[7], this point was expounded as follows:

‘Reddy will be employed by Ericsson, a "concern which carries on the same business as [Siemens]" in a position similar to the one he occupied with Siemens. His loyalty will be to his new employers and the opportunity to disclose confidential information at his disposal, whether deliberately or not, will exist. The restraint was intended to relieve Siemens precisely of this risk of disclosure.’

[19] It is also well accepted that the very purpose of the restraint agreement is that the applicant does not wish to have to rely on the bona fides or lack of retained knowledge on the part of the first respondent insofar as the applicant’s confidential information is concerned.[8] The applicant is enforcing the bargain it has obtained to protect itself which in turn entails that it does not have to cross its fingers and hope that the respondents would act honourably or abide by the undertakings that they have given.[9]

[20] There is nothing tangible before me to support the first respondent’s assertion that the enforcement of the restraint agreement will prevent her from remaining economically active despite the fact that the onus was on her. That is so notwithstanding the fact that she had been employed in another industry before; yet she failed to explain why she cannot secure employment in any other or related industry that does not compete with the applicant.

[21] Of course, the period of the restraint should not be any longer than is necessary to afford the applicant an opportunity to acquaint the first respondent’s replacement with its products and customers and sever the ties between its customers and the first respondent as the point of contact. In the light of the limited scope of the restraint, the nature of the applicant’s business and products, I am of the view that 12 months is not unreasonable.

Are damages an adequate alternative remedy?

[22] The first respondent contends that the applicant has not made out case for the grant of a final interdict because it has an adequate alternative remedy in suing for damages. This argument is untenable. In my view, damages would not be an adequate remedy as it would be extremely difficult for the Court to assess the damage which might be suffered where the former employee, armed with skills and customer connections, has deliberately breached a valid restraint agreement by taking employment with a competitor.

Conclusion

[23] In all the circumstances, the restraint sought is reasonable and the requirements for the grant of a final interdict have been met.[10] The applicant successfully demonstrated that it has a clear right which has since been breached (an injury actually committed) and that there is no other appropriate remedy than to hold the first respondent to her contractual undertakings.

Urgency

[24] Urgency is conceded. In any event, a matter relating to a breach of a restraint agreement is an inherently urgent, and I have dealt with this one as such.

Costs

[25] I am not inclined to award costs as the circumstances of the matter dictates that each part pays its own costs.

[26] In the circumstances, I make the following order:

Order

1. This application is heard as one of urgency and the applicant’s failure to comply with the normal time periods is condoned.

2. The first respondent is interdicted and restrained from, for any reason whatsoever, directly or indirectly, divulging and/or disclosing

and/or using any information and/or knowledge acquired by the first respondent relating to trade secrets and/or trade-marks and/or

patents and/or secret processes and/or technical information and/or know-how of the applicant to any person whatsoever, whether for the first respondents benefit or otherwise; enticing customers of the applicant away from the applicant.

3. The first respondent is interdicted and restrained, until 31st August 2022 and within a 1000 kilometre radius of Johannesburg, from being employed and/or interested either directly or indirectly and, whether as a director, partner, financier, advisor, shareholder or in any way whatsoever, in a business similar to that being carried on by the applicant, or in any business which is likely to compete with the business being conducted by the applicant at the time of termination of the first respondent’s employment.

4. There is no order as to costs.

P Nkutha-Nkontwana

Judge of the Labour Court of South Africa

Appearances

For the Applicant: Advocate D L Williams

Instructed by: A C Schmidt Incorporated

For the Respondent: Advocate J C Bornman

Instructed by: JVK Attorneys

[1] See: Notice of Motion, pages 1-2.

[2] [2017] ZALAC 59; (2017) 38 ILJ 2721 (LAC).

[3] (2020) 41 ILJ 1661 (LC) at paras 45-52.

[4] Labournet (Pty) Ltd v Jankielsohn & Another (2017)38 ILJ 1302 (LAC) at para 41; Experian South Africa (Pty) Ltd v Haynes and Another [2012] (2013) 34 ILJ 529 (GSJ) at paras 12 to 19; Basson v Chilwan and Others (Chilwan) [1993] ZASCA 61; 1993 (3) SA 742 (A) at 7761 I-J; Aqatan (Pty) Ltd and Aquatan (Pty) Ltd v Janse Van Vuuren and Another [2017] ZALCJHB 141; (2017) 38 ILJ 2730; Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA); Ball v Bambalela Bolts (Pty) Ltd and Another (2013) 34 ILJ 2821 (LAC).

[5] (J 194/20) [2020] ZALCJHB 168 (12 June 2020) at paras 38-44.

[6] (2017) 38 ILJ 1302 (LAC) at para 48.

[7] 2007 (2) SA 486 (SCA) at 499 to 500E

[8] BHT Water Treatment (Pty) Ltd v Leslie and another 1993 (1) SA 47 (W) at 57J-58B; Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 406 (SCA) at para 20.

[9] Id.

[10] Experian South Africa supra n 2 at para 53.