SGS South Africa (Pty) Limited v Pillay and Another (D388/2024) [2024] ZALCD 36 (25 September 2024)

FLYNOTES: LABOUR – Restraint – Client relationships – Confidential information – Sought employment with competitor in field of testing and certification – Interdict – Reasonableness of enforcement – Knowledge of key clients and ability to influence them – Consideration of parties’ competing interests – Employer’s interest in enforcement of restraint agreement does not surpass employee’s interest in remaining economically active – Enforcing restraint would be unreasonable – Application dismissed.

IN THE LABOUR COURT OF SOUTH AFRICA, DURBAN

Case No: D388/2024

Of interest to other judges

In the matter between:

SGS SOUTH AFRICA (PTY) LIMITED Applicant and SUBSENTHIRAN PILLAY First Respondent ALFRED H KNIGHT UKWANDA (PTY) LIMITED Second Respondent

Heard: 22 August 2024, with supplementary heads of argument delivered on 9

September 2024.

Delivered: This judgment was handed down electronically by circulation to the parties and / or their legal representatives by email. The date

and time for handing-down is deemed 10h00 on 25 September 2024.

JUDGMENT

ALLEN-YAMAN J

Introduction

[1] By way of an urgent application the applicant (SGS) sought an order enforcing compliance by the first respondent (Mr Pillay) with the restraint of trade obligations and confidentiality undertakings embodied in an agreement alleged to have been concluded to this effect in 2004.

[2] Mr Pillay opposed the application on the merits. As he did not challenge the issue of urgency there is no reason for this court not to exercise its discretion in favour of enrolling and determining the matter accordingly.

[3] The second respondent (AHK), Mr Pillay’s intended employer, evinced its intention to abide the decision of this court. Whilst SGS indicated in its application that AHK had been cited merely on the basis of its possible interest in these proceedings, it nonetheless sought an order against it,

‘Interdicting and restraining the Second Respondent for a period of 12 months from 1 August 2023, from employing the First Respondent.’

In adjudicating restraint of trade applications this court exercises the jurisdiction given to it to do so in terms of s77(3) of the Basic Conditions of Employment Act, 1997. No possible cause of action could arise between SGS and AHK in terms of such provision, and nor is there any other basis upon which this court is empowered to grant such order.

[4] Ancillary to this, Mr van der Merwe who appeared for SGS accepted that this court does not have the jurisdiction to adjudicate a claim premised on the common law principles of unlawful competition, having been one of SGS’ pleaded causes of action.

[5] Mr Pillay’s fourth affidavit was delivered outside the time period prescribed in Rule 39(3)(c) and he accordingly applied for condonation for the delay. As SGS did not oppose the granting of such indulgence, condonation will be granted.

[6] SGS indicated in its founding affidavit that it would seek interim relief pending the outcome of the referral of the matter to oral evidence / trial in the event of an irresoluble dispute of fact, but made no such request at the hearing of the matter. In the circumstances, the application will be determined as one for final relief.

Background

[7] SGS operates a testing and certification company in seven of South Africa’s provinces as well as other countries in Africa, its parent company being situated in Switzerland. Relevant to the present application is that part of its business relevant to inspection and verification of commodities. The services offered enable its clients to determine the precise physical properties of commodities being imported or exported, thereby facilitating quality control. Through the mechanisms of checking, sampling and testing, its clients are provided with certificates which accurately reflect the aspects of the commodities required to be so assessed.

[8] Mr Pillay was first permanently employed by SGS in June 2004 as an inspector. Initially employed within SGS’ agricultural

division, since 2006 his services were utilised within its minerals division, the division responsible for the inspection of non-energy / energy related commodoties such as metals, fertilisers, minerals and coal. At all material times of his employment he was stationed at SGS’ offices in Durban, KwaZulu-Natal.

[9] On SGS’ version, in anticipation of taking up employment with SGS the parties concluded a contract of employment and a confidentiality and restraint agreement (the restraint agreement). Generally speaking, in terms of the latter Mr Pillay undertook not to be involved, in whatever capacity, with any business which competes with SGS for a period of twelve months after the termination of his employment, not to solicit any of SGS’ clients or employees, and not to disclose any of the confidential information to which he would become privy during the course of his employment.

[10] In the course of his employment with SGS he was promoted to the position of Location Manager / Site Supervisor, the position held by him at the time of his written notice of his intention to resign with effect from the end of July 2024. Although not recorded in his letter of resignation, he informed SGS’ Regional Manager, Mr Nigel Ramlall, of his intention to take up employment with AHK, a known competitor in the field of testing and certification, with effect from 1 August 2024. In response to correspondence transmitted to him by SGS’ attorney on 4 July 2024 in which he was reminded of his restraint of trade and confidentiality obligations and was advised to reconsider his future employment with AHK, through correspondence authored by AHK’s attorney Mr Pillay disputed that he was in possession of any of SGS’ confidential information or that AHK would obtain any unfair competitive advantage by virtue of his employment by it, it having been asserted that the clients, services and procedures utilised in the industry were common to both entities. Both Mr Pillay and AHK were of the belief that the former’s employment by the latter would not be prejudicial to the interests of SGS and so declined to provide SGS with an undertaking that he would not do so.

[11] SGS duly launched the present application in which it sought to interdict Mr Pillay from being employed by AHK for the duration of the restraint agreement.

Analysis

[12] The recently amended Rules of this court make provision for the delivery of four sets of affidavits in restraint of trade applications.[1] SGS sought to explain in its heads of argument the reason for this court having so amended its Rules,

‘There is a discernible policy underlying the new rule 39 insofar as it allows the respondent to, as of right, deliver a fourth affidavit (in contrast with the usual rule that a fourth affidavit is only permissible by the leave of the court). The new rule recognises and gives practical effect to the legal principle that the onus to prove that an agreement in restraint of trade is not enforceable is on the respondent. (The legal principles applicable to restraints are dealt with below, including this principle). The applicant need only allege the conclusion of the agreement in restraint of trade and the respondent’s breach or imminent breach of the agreement. It is then for the respondent to lead evidence (in the answering affidavit) on which it could be found that the restraint is unenforceable. The applicant is then entitled to deal with the grounds on which the respondent contends that the restraint is unenforceable in a replying affidavit. This means that it can be expected that the replying affidavit will contain new material – which would be permissible in that the applicant need not deal with the grounds on which it may be contended that the restraint is unenforceable (as a result of the onus being on the respondent) in the founding affidavit. That is why the new rule permits a fourth affidavit as of right. It also means that the applicant is entitled to lead evidence in the replying affidavit on those grounds on which the respondent contends the restraint is unenforceable.’

[13] In view of those submissions, the issues raised were dealt with extensively by both parties in argument and, at the conclusion of the hearing, this court requested both parties to deliver supplementary heads, which both parties did by 9 September 2024.

[14] The proposition that the amendment to the Rule gives effect to an existing legal principle that a former employee bears an onus to prove that a restraint of trade agreement is unenforceable, and that an applicant in an application for the enforcement of a restraint of trade agreement need do no more than prove the existence of the restraint and its breach requires consideration. Ancillary to these issues is the question of the application of the test established Plascon-Evans Paints (TVL) Ltd v Van Riebeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 in restraint applications in circumstances in which four sets of affidavits have been delivered.

[15] Contrary to the position which previously prevailed, which was predicated on the application of English law, the Appellate Division determined that restraint of trade agreements were, indeed, enforceable in Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A). In so finding, the court was satisfied that an individual who sought to avoid his (or her) previously agreed to contractual obligations was required to prove that the public interest would be adversely affected by the enforcement of such obligations. The principles articulated in Magna and relied upon by SGS in its heads of argument were succinctly explained in Basson v Chilwan and Others [1993] ZASCA 61; 1993 (3) SA 742 (AD),

‘The incidence of the onus in a case concerning the enforceability of a contractual provision in restraint of trade does not appear to me in principle to entail any greater or more significant consequences than in any other civil case in general. The effect of it in practical terms is this: the covenantee seeking to enforce the restraint need do no more than to invoke the provisions of the contract and prove the breach; the covenantor seeking to avert enforcement is required to prove on a preponderance of probability that in all the circumstances of the particular case it will be unreasonable to enforce the restraint; if the court is unable to make up its mind on the point the restraint will be enforced. The convenantor is burdened with the onus because public policy requires that people should be bound by their contractual undertakings. The covenantor is not so bound, however, if the restraint is unreasonable, because public policy discountenances unreasonable restrictions on people’s freedom to trade. In regard to these opposing considerations of public policy, it seems to me that the operation of the former is exhausted by the placing of the onus on the covenantor; it has no further role to play thereafter, when the reasonable or otherwise of the restraint is being enquired into. “The paramount importance of upholding the sanctity of contracts”, which is emphasized by EKSTEEN JA, finds its complete expression in the rule of the law that the onus is on the covenantor; it has no bearing on the issue of whether the particular restraint in question is unreasonable.’[2]

[16] The principle that a former employee bears such an onus has often been reiterated by our courts. In those cases in which this principle has been reaffirmed, it has not always been clear whether the enforceability of the restraint of trade agreement in question was being determined by way of action or application. The form of litigation adopted by a litigant is highly relevant to the issue of onus, for the reason that onus is inapplicable in motion proceedings. As was stated by the Supreme Court of Appeal in The National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA),

‘In motion proceedings the question of onus does not arise and the approach set out in the Plascon-Evans matter governs irrespective of where the legal or evidential onus lies. The more serious the allegation or its consequences, the stronger must be the evidence before a court before it will find the allegation established.’[3]

[17] The Supreme Court of Appeal in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA), presumably because it was then dealing with the issue of the enforceability of a restraint of trade agreement in application proceedings, stated as follows,

‘In the present case we are not called upon to decide that issue. Where the onus lies in a particular case is a consequence of the substantive law on the issue. I have pointed out that the substantive law as laid down in Magna Alloys is that a restraint is enforceable unless it is shown to be unreasonable, which necessarily casts an onus on the person who seeks

to escape it. But if the rule were to be reversed – to provide that a restraint is not enforceable unless it is shown that it is reasonable – which would necessarily cast an onus on the person seeking to enforce it to allege and prove that the restraint is reasonable the result in the present case would be the same. For in the present case the facts concerning the reasonableness or otherwise of the restraint have been fully explored in the evidence, and to the extent that any of those facts are in dispute that must be resolved in favour of Reddy (these being motion proceedings for final relief). If the facts disclosed in the affidavits, assessed in the manner that I have described, disclose that the restraint is reasonable, then Siemens must succeed: if, on the other hand, those facts disclose that the restraint is unreasonable then Reddy must succeed. What that calls for is a value judgment, rather than a determination of what facts have been proved, and the incidence of the onus accordingly plays no role.’[4]

[18] The Labour Appeal Court explained the reasoning and conclusions reached in Reddy in Labournet (Pty) Ltd v Jankielsohn and Another [2017] 5 BLLR 466 (LAC),

‘In Reddy, the Supreme Court of Appeal preferred not to become embroiled in the issue of onus and adopted a pragmatic approach, which according to it, was consistent with an approach where there was a direct application of the Constitution to restraint agreements. This approach was specifically adopted in respect of motion proceedings for the enforcement of restraints where the issue for determination

was the reasonableness of the restraint. In terms of that approach, where the facts, concerning the reasonableness, had been canvassed in the affidavits – genuine disputes of fact are to be resolved in favour of the party sought to be restrained by applying the so-called Plascon-Evans rule. If the accepted facts show that the restraint is reasonable, then the applicant must succeed, but if they show that the restraint is unreasonable then the respondent in those proceedings must succeed.

The enquiry into the reasonableness of the restraint is essentially a value judgment that encompasses a consideration of two policies, namely the duty on parties to comply with their contractual obligations and the right to freely choose and practice a trade, occupation or profession. A restraint is only reasonable and enforceable if it serves to protect an interest, which, in terms of the law, requires and deserves protection. The list of such interests is not closed, but confidential information (or trade secrets) and customer (or trade) connections are recognised as being such interests. To seek to enforce a restraint merely in order to prevent an employee from competing with an employer is not reasonable.’[5]

[19] The issue is not then one of an onus, the issue is whether the enforcement of the restraint would be reasonable or unreasonable. The statement that a restraint will only be regarded as one which is reasonable if it serves to protect a legitimate interest echoes the first question posed in the test proposed in Basson, ‘Does the applicant have an interest that deserves protection after termination of the first respondent’s employment?’ This enquiry precedes any assessment regarding a former employee’s interest in not being rendered economically inactive and

unproductive, and calls into question the assertion that an employer in applications such as the present need do no more than establish

the existence of the restraint and its breach in order to be entitled to an interdict.

[20] In support of its argument that an interdict sought in applications for the enforcement of restraint of trade applications differed from ‘final interdicts properly called’ SGS referred this court to Badenhorst v Theophanous 1988 (1) SA 793, Makeshift 1190 (Pty) Ltd v Cilliers 2020 (5) SA 538 (WCC), and IIR South Africa BV v Hall (aka Baghas) 2004 (4) SA 174.

[21] The court in Badenhorst was called upon to determine the correctness or otherwise of a Magistrate’s conclusion reached that he did not have jurisdiction to grant an interdict where such relief was premised upon the breach of a restraint of trade agreement in light of the provisions of s30(1) and s46(2) of the Magistrates’ Courts Act, 1944,

‘That is the crucial enquiry: if an interdict is a manner of obtaining specific performance of a contractual obligation, is the magistrate’s

court’s ability to grant it excluded by s46(2)(c) or is it permitted by s30(1)?’[6]

Having referred to earlier cases which articulated the principle that the manner of enforcement of an obligation in a contract expressed in the form of a negative covenant is inevitably by way of an interdict, the court upheld the conclusion reached by the Magistrate in the court a quo.

[22] The court in Makeshift concurred with the conclusion reached in Badenhorst.

[23] The court in IRR South Africa was concerned with the distinction between a cause of action premised upon a breach of a restraint of trade agreement (a contractual claim) and one premised on unlawful competition (a delictual claim), and the requirements relevant to the issue of confidential information in each case. The court found that, in the case of the former, all that the applicant was required to demonstrate was the possibility of the utilisation of confidential information by the former employee, whilst in the latter case, evidence of actual utilisation by the former employee was required.

[24] SGS accordingly argued that a distinction was to be found in the origin of the right sought to be protected – in the case of a breach of a restraint of trade agreement the applicant asserts that ‘the very right that the obligation undertaken by the respondent, not to take up employment with a competitor, should be performed,’ whereas in contrast, a final interdict is not a right in and of itself, it is a remedy to give effect to another right which can be of any kind. The distinction appears artificial – an applicant seeking to enforce a restraint of trade agreement is not

armed with a contractual entitlement to an interdict, it is armed with an agreement that the former employee will not take up employment with a competitor. Regardless of the origin of a claim for an interdict, whether the right relied upon is in contract or some other source, the relief sought is then the same as any other: an interdict to give effect to a right. None of the cases relied on by SGS advance its proposition that there exists, as a matter of law, different categories of interdicts, nor that the requirements for an interdict sought in support of the enforcement of a restraint of trade agreement (encompassing an agreement not to become employed by a competitor) are other than the requirements which are to be met when an interdict is sought to prevent any other wrong.

[25] This much has previously been stated by this court in Jonsson Workerwear (Pty) Ltd v Willaimson and Another (2014) 35 ILJ 712 (LC),

‘I agree with Mr Smithers, who appeared for the first respondent, that there is no particular magic in a restraint of trade application that per se necessitates it being dealt with in a manner other than any other interdict application. After all, a restraint of trade application is nothing but an interdict. The unique requirements of a restraint of trade to be enforced all relate to the existence or not of a clear right as the first requirement of any interdict application. There is simply no compelling reason why a restraint of trade must be determined differently to any other application for an interdict dealt with by the Courts on a daily basis.’[7]

[26] Whether the application is treated as an application for a ‘final interdict properly called’ or an interdict to enforce a negative contractual obligation, an applicant is required to establish the existence of an protectable interest before it will be entitled to any relief. If sought on the basis of specific performance of a negative obligation encapsulated in an agreement, an order of specific performance is not guaranteed. This court retains a discretion whether to grant such an order, which discretion could never be exercised in favour of being granted in the absence of a protectable interest. If sought on the basis of a ‘final interdict properly called’ the need for an applicant to establish a protectable interest rests on two legs. Firstly, given the competing public policy interests at play in the enforcement of restraint of trade agreements, no litigant claiming enforcement could establish the existence of a clear right on the mere existence of a contract and its breach: the right to enforcement arises only if the contract itself serves the legitimate purpose of protecting an interest worthy thereof. Secondly, absent the existence of a protectable interest no harm, irreparable or otherwise, could ever arise.

[27] Accordingly, in the absence of any authority to the contrary, it is the view of this court that to succeed in a claim for the enforcement of a restraint of trade agreement in application proceedings an applicant is required, in addition to establishing both the existence of the restraint and its breach, the existence of a protectable interest.

[28] This conclusion is fortified by that reached by the Labour Appeal Court in Ball v Bambalela Bolts (Pty) Ltd [JA2311 May 2013], that a restraint of trade agreement would be regarded as neither reasonable nor enforceable in the absence of a legitimate protectable interest.[8]

[29] In summation: (1) the issue of onus is inapplicable in motion proceedings, including application proceedings in which a restraint of trade agreement is sought to be enforced; (2) the enforcement of a restraint of trade agreement will only be reasonable if it serves to protect an interest warranting protection; (3) the determination of the reasonableness or otherwise of the enforcement of a restraint is to be assessed by reference to the established facts; and (4) the facts are established by application of the test established in Plascon Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A).

[30] The application of Plascon-Evans has the effect that an applicant seeking final relief can succeed in its application only on the basis of the facts which are common cause. Disputed facts are to be determined in favour of the respondent, even in circumstances such as the present, where additional affidavits have been delivered, a principle confirmed in Ngqumba v Staatspresident; Damons NO v Staatspresident; Jooste v Staatspresident 1988 (4) SA 224 (A).[9]

[31] Notwithstanding its argument that it was not required to have done so, SGS did not, in fact, limit itself to the issues which it asserted sufficed; it addressed in its founding affidavit the protectable interests upon which it relied, albeit without reference to any of the documentary evidence upon which it ultimately sought to rely, which was introduced only in its replying affidavit.[10] As Mr Pillay did not apply to have such evidence excluded on the basis that it constituted new material introduced in reply, and had the opportunity to deliver a fourth affidavit in response thereto, there is no reason for this court not to take it into account,

notwithstanding that it ought to have been introduced in SGS’ founding affidavit. The effect, however, of SGS’ decision not to have introduced the evidence upon which it intended to rely in its founding affidavit is that it deprived itself of the opportunity which it would otherwise have had to reply to any response given thereto by Mr Pillay.

[32] Although not addressed in his heads of argument, Mr Pillay challenged the authenticity of the restraint of trade agreement upon which SGS relied in his affidavits. This was by reason of the omission of any signature on the part of a representative of SGS on the copy of the restraint agreement which had originally been transmitted to him, and the subsequent inclusion thereof on a further copy sent to him thereafter. Irrespective of the questionable circumstances in which a signature came to appear on the restraint agreement, Mr Pillay nonetheless admitted that the signature appended thereto which had been alleged to have been his own was authentic. Save for the clause in the restraint agreement which required any amendment thereto to be in writing and signed by the parties, the restraint agreement itself did not stipulate that its efficacy was contingent upon both parties’ signatures. As it is evident that SGS offered to contract with Mr Pillay on the basis of entering into the restraint agreement, and Mr Pillay clearly evinced his acceptance of such offer, there is no reason not to find that a valid agreement was entered into.

[33] It was Mr Pillay’s further contention that the restraint agreement was inchoate by virtue of the incomplete nature of two of the clauses contained therein, such clauses not having been completed with descriptions concerning the nature of SGS’ business activities. This contention is likewise rejected for the reason that such clauses did not constitute material terms of the agreement. The material terms of the agreement were those relating to the restraint and confidentiality obligations imposed on Mr Pillay, which were clearly and completely expressed.

[34] SGS alleged that it required the enforcement of the restraint agreement due to the need on its part to protect its customer

connections and its confidential information. Mr Pillay disputed that he had any relationships with SGS’ clients, or that he was in possession of any of SGS’ confidential information.

[35] SGS serves clients in the mining, government, consumer, agricultural, industrial, oil, gas and chemical industries. As competitors in these industries, both SGS and AHK offer the same or similar services to their respective clients, some of whom are common to both. It was alleged by SGS that Mr Pillay, as a senior employee and ‘the face’ of its business in KwaZulu-Natal had in the course of his employment by it dealt directly and extensively with its clients. In the course of executing his functions he acquired detailed knowledge of SGS’ clients’ requirements and was aware of the identities of the key decision makers of each. As evinced by his job description,[11] he managed all aspects of the clients’ relationships with SGS, his responsibilities having included liaising with them regarding

technical information and relating to SGS’ operations. To give effect to his functions he was required to co-ordinate and manage the quality of services offered to SGS’ clients in compliance with its customer services policy. By virtue of his position in its employ, he had forged relationships with its clients such that he was in a position to be able to influence their choice of service provider.

[36] Given Mr Pillay’s knowledge of its key clients and his ability to influence them, coupled with the fact that SGS’ clients have faith in his knowledge, skills and abilities, not only would he be in a position to induce them to leave SGS, but on the strength of his employment by AHK alone, SGS’ clients would be inclined to entrust their business to AHK. In substantiation of its assertions regarding the close personal relationships forged by Mr Pillay with its clients during his tenure, SGS annexed a series of emails to its replying affidavit evincing certain exchanges amongst certain of SGS’ employees, including Mr Pillay, and certain of the employees of one of its clients (Glencoe) during January 2024. It was argued that this email demonstrated Mr Pillay’s interactions with its customers regarding technical matters.

[37] Mr Pillay did not dispute that he had interacted with SGS’ clients concerning technical matters in the course of his employment and, subject to his assertions relating to the change in certain of the functions which had previously been undertaken by him as a result of SGS having restructured its operations in 2023, did not seriously challenge any aspect of the role alleged to have been performed by him. Beyond liaising with clients, however, Mr Pillay denied that he had developed any close relationships with SGS’ clients and, as such, had no ability to exercise any influence over their choice of service provider. He explained that his interactions with clients were minimal and were limited to technical issues only, which entailed ensuring conformity with ISO or other standards in relation to the taking and preparation of samples. He asserted further that if he had ever had any relationships with SGS’ clients, such relationships had been eroded over time by SGS’ restructuring of its business, during the course of which it had appointed Commodity Co-ordinators who then became the primary interfaces between SGS and its clients, at which point in time Mr Ramlall himself had assumed the function of client engagement.

[38] In the circumstances, Mr Pillay denied that he had any ability to divert customers from SGS. Moreover, as the respective businesses of SGS and AHK, are both well established (both having been founded in the 19th century) his own employment by AHK was irrelevant to its previously established reputation as a technically proficient service provider in the field of testing and certification.

[39] The extent of the relationship between a former employee and the client of an applicant which must be established by an applicant which seeks to enforce a restraint of trade agreement on the basis of such relationship was explained in New Justfin Group (Pty) Ltd v Turner and Others (2018) 39 ILJ 2721 (LC),

‘Not every contact between an employee and the employer’s customers constitutes or forms the basis of a protectable interest in the form of customer connection. The need of an employer to protect a trade connection arises where the employee has access to customers and is in a position to build up a particular relationship with the customer. It is sufficient for the applicant to show that customer contacts exist and that they can be exploited by the former employee. In Rawlins v Caravan Truck (Pty) Ltd [1992] ZASCA 204; 1993 (1) SA 537 (A) at 541 C-D it was said that the need of an employer to protect its trade connections arises where the employee has access to

customers and is in a position to build up a particular relationship with the customers and could easily induce the customers to follow him or her to a new business. Once that conclusion has been reached and it is demonstrated that the prospective new employer is a competitor of the applicant, the risk of harm to the applicant if its former employee would take up employment becomes apparent.’[12]

[40] It is evident that the nature of Mr Pillay’s functions whilst employed by SGS necessitated that he interact with SGS’ clients on technical matters as one of his core duties. It is not, however, evident that in the performance of those functions he developed any close personal relationship with SGS’ clients which would enable him to induce their abandonment of SGS in favour of AHK. Distinct from Mr Ramlall’s subjective view of Mr Pillay’s ability to do so, the only objective evidence relied upon by SGS in support of its assertions (being the email referred to above) reflected Mr Pillay as initially having been but one of a number of people who had been included in the correspondence. His eventual response, when given was devoid of any suggestion of a personal relationship with the client. If the email relied upon by SGS is demonstrative of the type of interactions Mr Pillay had with SGS’ clients, it is not apparent that he forged any type of relationship with the individuals with whom he dealt beyond that which could be considered to be merely professional, or which would enable him to induce those clients to change service provider, which would necessitate the protection of SGS’ interest in its customer base.

[41] Whether Mr Pillay’s obvious skills and expertise could have such an effect is a theoretical possibility. These skills are, however, his own and are not something to which SGS can legitimately claim any proprietary interest. This principle was explained in Aranda Textile Mills (Pty) Ltd v Hurn and Another [2000] 4 All SA 183 (E), referred to with approval by the Supreme Court of Appeal in Automative Tooling Systems (Pty) Ltd v Wilkens and Others 2007 (2) SA 271 (SCA),[13]

‘A man’s skills and abilities are a part of himself and he cannot ordinarily be precluded from making use of them by a contract in restraint of trade. An employer who has been to the trouble and expense of training a workman in an established field of work, and who has thereby provided the workman with knowledge and skills in the public domain, which the workman might not otherwise have gained, has an obvious interest in retaining the services of the workman. In the eye of the law, however, such an interest is not in the nature of property in the hands of the employer. It affords the employer no proprietary interest in the workman, his know-how or skills. Such know-how and skillis in the public domain become attributes of the workman himself, do not belong in any way to the employer and the use thereof cannot be subjected to restriction by way of a restraint of trade provision. Such restriction, impinging as it would on the workman’s ability to compete freely and fairly in the market place, is unreasonable and contrary to public policy.’[14]

[42] The further issue for determination is whether Mr Pillay was privy to SGS confidential information. The court in Experian South Africa (Pty) Ltd v Haynes and Another (2013) 34 ILJ 529 (GSJ) explained what is required for information to be categorised as such,

‘It is trite that the law enjoins confidential information with protection. Whether information constitutes a trade secret is a factual question. For information to confidential it must be capable of application in the trade or industry, that is, it must be useful and not be public knowledge and property; known only to a restricted number of people or a close circle, and be of economic value to the person seeking to protect it.’[15]

[43] It was SGS’ case that Mr Pillay was armed with its confidential information which warranted protection. This was alleged in its founding affidavit to have related to its business strategies, new projects, product development, pricing and sampling protocols. The first three categories of information claimed to have been confidential may be disposed of at the outset. Mr Pillay described SGS’ assertions that he was in possession of confidential information concerning product development as ‘nonsensical’ for the reason that SGS has no involvement in product development; it business concerns the provision of services. SGS avoided dealing with this issue in reply, instead having referred to its responses previously given to Mr Pillay’s assertions concerning the protocols utilised by SGS in the course of sampling commodities. Such response clearly did not address Mr Pillay’s denial and was wholly irrelevant to the question of his alleged possession of confidential information relating to product development. Its assertions concerning his alleged possession of confidential information relating to its strategies and projects were equally

unsubstantiated in response to Mr Pillay’s denials that he had been privy to any such information.

[44] The confidential information upon which SGS actually sought to establish its case, distinct from that which had been claimed in its founding affidavit, was confined to that of its pricing and the protocols utilised by it in the provision of its sampling services.

[45] Insofar as its pricing is concerned, it was SGS’ case that the pricing of services in the industry is one of the most influential factors taken into account by clients when selecting where to place their business. It was alleged that Mr Pillay, as one of its most senior members had access to and knowledge of its confidential financial information. In the execution of the preparation and submission of tenders and detailed costing proposals for projects in which SGS was involved as a preferred supplier, he became privy to its price lists, pricing structures, profit margins, financial arrangements with customers, and discounts given to selected clients. Armed with this information, and employed by AHK, AHK would obtain an unfair advantage in the market place by enabling it to undercut SGS’ prices, to solicit existing clients with knowledge of its fee structures, approach its suppliers with knowledge of its pricing structures, prepare quotations with advance knowledge of which client’s contracts require renewal, and focus on its most profitable clients.

[46] In response, Mr Pillay denied that his knowledge of SGS’ financial information was as extensive as SGS had portrayed it to have been. He conceded that pricing was one of the factors which may influence a client’s decision regarding which service provider to employ, but denied that such factor was of paramount importance. He asserted that the prices charged by SGS were, for the most part and subject to a few exceptions, higher than those charged by AHK. He denied that the pricing utilised by either entity was confidential as any member of the public could, by obtaining a quotation from each, readily establish the prices charged by each for any particular service. To this he added that clients often utilise both entities for the same service and, for that reason, would be well aware of each entities’ pricing.

[47] He denied that he had any control over the prices charged for the services offered by SGS, but accepted that he had until recently prepared quotations for services on the basis of prices set by more senior personnel, whereupon such quotations would be issued by Mr Ramlall. The practice of him preparing quotations came to an end when SGS restructured its operations and appointed Commodity Co-ordinators who then became responsible for the preparation of quotations and pricing. Any quotations required by SGS’ international clients are prepared by its offices in Geneva.

[48] He admitted that he has some knowledge of SGS’ pricing which had been provided to him from time to time, and would from time to time be appraised regarding the profitability of the business as a whole. He accepted that he would occasionally and informally be made aware of discounts given to a particular client, but denied that this was standard practice. Mr Pillay asserted that he had no knowledge of SGS’ profit margins or the determination thereof, and that his knowledge of its pricing structures was readily available in the market place.

[49] In reply SGS accepted that certain of its prices are standard, but of greater concern to it were the prices charged to its clients for long term contracts, which prices had been arrived at by a process of negotiation which are not a matter of public knowledge. Although it accepted that its prices could be readily established by clients, as would be the case with AHK, neither entity was aware of one another’s prices and such awareness would afford them an unfair competitive advantage. SGS accepted that Mr Pillay ceased to prepare quotations with effect from March 2023, but alleged that he nonetheless remained aware of the prices charged by SGS by virtue of his responsibility to have approved invoices, as evidenced by an invoice approved by him in September 2023. In further substantiation of its assertions that Mr Pillay was intimately aware of its pricing it annexed to its replying affidavit a series of emails in which he had been included relating to the efforts expended by it to secure the business of a commodities trader. In addition, it annexed an email transmitted to Mr Pillay, amongst other employees, to which was attached a document alleged to have shown SGS’ costing for sampling and analysing a number of commodities.

[50] Mr Pillay disputed the correctness of the assertions set out in the replying affidavit. He admitted that he is aware of the prices in respect of the long term contracts, but disputed that he had been involved in their negotiation, which is done in Geneva and which are public knowledge. Whilst he accepted that he approved invoices, he did not approve quotations which were based on prices established by employees more senior than him and approved by Mr Ramlall. He contended that the chain of emails relied upon by SGS demonstrated no more than that SGS’ Geneva office was responsible for its international clients and that the document which had been transmitted to him by Mr Ramlall indicated SGS’ prices only, and not the costing thereof. To the extent that he had knowledge of SGS’ pricing, as he had ceased to sign invoices after July 2024, its pricing after that date was unknown to him.

[51] From that which was placed in evidence, a distinction falls to be drawn between SGS’ costings and its pricing.

[52] Whilst Mr Pillay would undoubtedly have to have been aware of SGS’ costings for the purposes of the preparation of quotations, he ceased to perform that function some one and a half years prior to his resignation. As such, any confidential information to which he may have been privy prior thereto would no longer be of any economic value as it is now outdated. Insofar as the document which was shared with Mr Pillay was concerned, being the only objective evidence upon which SGS relied in substantiation of its assertion that Mr Pillay was well aware of its costings, Mr Pillay denied that the document included any information concerning the costings relevant to various commodities but rather that it indicated pricing alone. As SGS did not provide this court with a copy of the document itself by way of a confidential affidavit, this court has not had sight thereof and is unable to reach its own conclusions as to the nature of the information which had then been conveyed to him. This being the case, Mr Pillay’s version is bound to be accepted and this court cannot find that he is in possession of any of SGS’ information concerning its costings.

[53] As to SGS’ pricing for its services, there are two aspects to this – its standard pricing and its negotiated pricing. Given the ease with which its standard prices may be gleaned by any individual not employed by SGS who may wish to find out, its standard pricing cannot be considered to be confidential. This is in contrast to the prices it charges to its clients in circumstances in which it has secured work by way of a tender process, a process of negotiation or through the provision of discounts. On his own version, Mr Pillay was privy to both discounts given and the resultant prices charged thereby or through the process of negotiation. Contrary to Mr Pillay’s assertion, such information would not be in the public domain, and nor would it be freely accessible to anyone but the contracting parties and their employees.

[54] The final issue is that of SGS’ contentions that the protocols utilised by it in the execution of its services with which Mr Pillay is very familiar, require protection by the enforcement of the restraint agreement.

[55] The aspect of its business in which Mr Pillay was involved concerned obtaining and preparing a sample or samples for the purpose of enabling laboratory analysis. Mr Pillay was not involved in any laboratory analysis, save for the preparation of the eventual certificates, but had intimate knowledge of the protocols utilized by SGS for the purpose of obtaining and preparing the samples required therefor. The point of difference between SGS and Mr Pillay concerns the value ascribed by SGS to its protocols, regarded by it as confidential and which it asserts affords it a competitive advantage in the market of commodity analysis. On SGS’ version Mr Pillay has extensive knowledge of the inhouse processes developed by it which were are not in the public domain, in particular those utilized in the sampling of metals and minerals. Additionally, he is well aware of the testing protocols established by its key clients. Mr Pillay, on the other hand, disputes that such protocols may be attributed any type of confidentiality or protection.

[56] The starting point for the analysis of any commodity is the applicable International Standard, being a protocol issued by the International Organization for Standardization. As may be presumed from their descriptors, that body publishes standards which are recognised internationally to achieve uniform, comparable results, regardless of where or by whom the testing in question is being performed. In the context of the services provided by SGS and previously undertaken on its behalf by Mr Pillay, the applicable ISO standard will specify the method to be utilised to analyse the chemical composition and other attributes of metals and minerals.

[57] Neither party provided this court with any relevant ISO standard by way of reference which could have assisted this court in its understanding of either the processes involved or the alleged deficiencies therein which necessitated the establishment of protocols by SGS. It was, however, evident from the accreditation which had been issued by the South African National Accreditation

System that SGS had been accredited to determine the moisture content of manganese ores by application of ISO 4299, to which document this court had independent reference. ISO 4299: 1989 specifies a method for determining the mean value of the moisture content of a consignment of manganese ore, whether natural or processed, including in concentrated, pellet or agglomerate form. The standard procedure to be adhered to is set out in the body of the document, whilst two annexures thereto, Annexures A and B, specify the methods to be used in cases of adhesive/wet manganese ore or in circumstances in which the manganese ore has been affected by sprinkled and/or rain water. Generally speaking, the process entails the drying of samples in an oven at a stipulated temperature and the subsequent application of various formulae to the measurements taken of the samples’ pre- and post-drying weight from which the moisture content of the samples is capable of determination. It may be mentioned that the processes of sampling and preparation of samples taken prior to the ascertainment of their moisture content are required to adhere to separate ISO standards, being ISO 4296-1: 1984 and ISO 4296-2: 1984 respectively.

[58] SGS alleged that although sampling and analysis is done in accordance with ISO standards, such standards do not constitute a complete set of instructions for the mandatory steps which are required to be performed in the process of sampling. It was SGS’ case that as the sample taking protocols were not prescribed by any standard it and other service providers in the field are required to supplement the ISO standards with their own, unique protocols. It has accordingly devised and developed its own, which are embodied in a document prescribing its unique protocols to be followed when sampling and testing, which protocols are confidential to it.

[59] Mr Pillay, on the other hand, denied that the protocols to be followed in obtaining a sample was not prescribed by any standard. Although he admitted to the existence of SGS’ protocol document, as well as that SGS’ protocols contained more detail than that which is contained in the ISO standard, he denied that such protocols constituted confidential information, worthy of protection. He denied that there was anything particularly unique concerning the protocols as the result sought to be achieved must, in any event, at all times conclude in a result that is in compliance with the ISO standard. He also denied that they were confidential on the basis that the protocols used in any given instance are shared with the client involved.

[60] Clearly ISO standards do exist for sampling and preparation of samples: at least one such commodity (manganese ore) has such standards. The issue is accordingly whether the additional protocols established by SGS for the purposes of supplementing the ISO standards may be considered to be confidential to it.

[61] SGS did not provide this court with the document evincing the protocols created by it on the basis of the alleged confidentiality

thereof. It did not, however, explain why this could not have been provided by way of a confidential affidavit. Without such a document, and without any explanation as to how its protocols expanded upon that which is prescribed in the ISO standards, from which this court was not placed in a position to arrive at an objective conclusion that SGS’ protocols were indeed unique and potentially warranted protection. Instead, SGS simply relied on its own subjective assertion that the protocols were novel and confidential, a conclusion which was disputed by Mr Pillay.

[62] In the absence of the protocols themselves, this court had reference to the accreditation relied upon by SGS, asserted by it to have been premised on the strength of its own, unique protocols. This, on its own, is doubtful in view of the fact that the accreditation is premised upon meeting the ISO standard, and nothing more. Moreover, had the accreditation body had reference to SGS’ own protocols for the purpose of accreditation, the effect thereof would be that the protocols are in the public domain.

[63] In the circumstances, this court is unable to conclude that SGS’ protocols constitute information confidential to it.

[64] In consideration of the test propounded in Basson, it is the finding of this court that the facts demonstrate that Mr Pillay is in possession of certain of SGS’ confidential information pertaining to the negotiated or discounted prices for its services rendered to certain of its clients (distinct from its prices which are generally charged). Given that AHK is a competitor, such information is potentially useful to it.

[65] The particularity of such information was not, however, made known to this court. Accordingly, in consideration of the third question posited in Basson, it is impossible to determine the consequential effect to SGS, if any, of Mr Pillay being armed with such information. So, for example, this court does not know how many of SGS’ current clients were acquired by way of individual negotiations, or retained through the provision of discounts; it does not know when key contracts are scheduled to be renewed, or their value. In short, this court has not been placed in a position to determine what, if any, harm could be caused to SGS in the event of Mr Pillay’s disclosure of the information in his possession in the event that the restraint is not enforced.

[66] Mr Pillay, on the other hand, stated that the consequences of enforcement of the restraint would render him incapable of working in the industry in South Africa, or anywhere else in the world for the duration thereof, which would result in his complete financial ruin. In response, SGS asserted that Mr Pillay would be able to work in another field which has no impact on its business and gave, as examples, the transport and logistics industries, suggestions which were disputed by Mr Pillay.

[67] Mr Pillay was employed by SGS for a period of 20 years from 2004 until 2024, by far the majority of his working life. During that period it is evident that he has acquired knowledge, skills and expertise in the field of the sampling of commodities. His abilities are, on SGS’ own version, such that his mere employment lends credibility to the services offered by an employer performing commodity analysis. It is difficult to imagine any position in either the logistics or transport industries which could benefit from his skills, and nor was the basis for such a suggestion explained, with reference either to Mr Pillay’s skills, or the type of job for which he may be otherwise qualified.

[68] In consideration of the parties’ competing interests this court is unable to find that SGS’ interest in the enforcement of the restraint agreement surpasses Mr Pillay’s interest in remaining economically active. This court accordingly finds that an order enforcing the restraint would be unreasonable.

[69] As SGS sought no relief in the form of an interdict preventing the disclosure of confidential information, no such order will be granted.

Costs

[70] The Labour Appeal Court in Ball explained the principles relevant to the costs associated with restraint of trade applications in the following terms,

‘… the enforcement of a restraint, technically, involves a constitutional issue. Restraints of the kind being considered, constitute a limitation on a citizen’s right, in terms of section 22 of the Constitution, which, arguably, requires justification. … In constitutional matters, the general rule that costs follow the result does not apply. In such matters costs orders are generally eschewed out of concern that they may produce a ‘chilling effect’, in that litigants may be deterred from approaching the court to litigate concerning an alleged violation of their constitutional rights for fear of being penalised with costs if they are unsuccessful. If constitutional matters are raised or defended in good faith and not vexatiously and the issues raised have merit or are important, like the violation of a right guaranteed in the Bill of Rights, and the proceedings that ensued resolved those issues, the party complaining of the violation, even if unsuccessful would, generally, not be ordered to pay the costs.’[16]

[71] Although SGS has not been successful in its application, it nonetheless succeeded in establishing the existence of a protectable interest, albeit to a far lesser extent than that which was originally contended for by it. As it was the balance favouring Mr Pillay’s right to remain economically active in the only industry in which he has been employed for the last 20 years which has led this court to conclude that the enforcement of the restraint would be unreasonable it cannot be said that SGS initiated the application frivolously or vexatiously, and will accordingly not be required to pay Mr Pillay’s costs.

Order

1. The first respondent’s late delivery of his fourth affidavit is condoned.

2. The application is dismissed.

3. There is no order as to costs.

K Allen-Yaman

Judge of the Labour Court of South Africa

Appearances

Applicant:

Mr H A van der Merwe, instructed by Fluxmans Inc.

First Respondent:

Mr R Meneses of Meneses Simpson Inc.

[1] Rule 39

[2] At 776H – 777C

[3] At paragraph 27

[4] At paragraph 14

[5] At paragraphs 40 - 41

[6] At 796D

[7] At paragraph 7

[8] At paragraph 16

[9] At 258H – 263D

[10] The court in Basson had no regard to allegations which were raised for the first time in the replying affidavit (At 753E)

[11] Two job descriptions were placed in evidence, only one of which was signed by Mr Pillay. Irrespective, both evinced that he had been required as part of the functions of his position to liaise with SGS’ clients.

[12] At paragraph 12

[13] At 278 - 279

[14] At paragraph 33

[15] At paragraph 19

[16] At paragraph 30