Stahl Cranes & Hoists Proprietary Limited v Van Staden and Another (1630/19) [2019] ZANCHC 40 (6 September 2019)

IN THE HIGH COURT OF SOUTH AFRICA, NORTHERN CAPE DIVISION, KIMBERLEY

Not reportable

Case No: 1630/19

In the matter between:

STAHL CRANES & HOISTS

PROPRIETARY LIMITED

APPLICANT

And

SUANNETTE VAN STADEN

FIRST RESPONDENT

GREGBEV ENTERPRISE

PROPRIETARY LIMITED

SECOND RESPONDENT

Heard: 16 August 2019

Delivered: 06 September 2019

Judgment

PHATSHOANE ADJP

[1] Stahl Cranes & Hoists (Pty) Ltd (“Stahl”), the applicant, approached this Court on semi-urgency to enforce the restraint of trade provisions which it alleges were breached by Ms Suannette Van Staden, the first respondent. It seeks an order interdicting and restraining her, for a period of twenty four (24) months, from:

1.1 either alone or jointly or together with or as agent for any other person, assist, be interested, engaged or concerned, directly or indirectly whether as principal, proprietor, shareholder, partner, representative, member, consultant, advisor, director, financier, administrator, employee or otherwise in any business, company or concern which carries on business in competition with Stahl within Africa;

1.2 persuading or attempt to persuade any person whom, during her employment with Stahl, was a banker, financier, supplier or a customer of Stahl or to cease doing business with Stahl or commence doing business with anyone else;

1.3 soliciting or attempt to solicit the business or custom of any person whom, during her employment with Stahl was a banker, financier, supplier or a customer of Stahl; and

1.4 persuading, inducing, soliciting, encouraging to procure any employee employed by Stahl, to cease such employment or to undertake employment with or have any interest in any other business.

[2] Stahl is a specialised multi-disciplinary engineering, lifting and materials handling entity to mining, power generation, chemical, oil, gas and industrial sectors, throughout Africa. It offers a full spectrum of services, including design, fabrication, construction, installation of overhead cranes, hoists, and the like machines. It also attends to breakdowns, repairs, service and maintenance to all makes of cranes, hoists and lifting equipment. It is the sole distributor of Stahl crane systems in South Africa. It executes projects and renders services to mines and power stations throughout Africa.

[3] Stahl has a satellite office at Sishen Mine, Kathu, Northern Cape, and supply Sishen Mine with overhead cranes, hoists, hook lifting, rigging equipment, and spare parts in respect of cranes. It also attends to repairs and maintenance of cranes. Its satellite office was established at Sishen in order to ensure that it is able to render effective service to Sishen Mine on ongoing basis.

[4] Gregbev Enterprise (Pty) (Ltd) (“Gregbev”), the Second Respondent, is in the business of inspection of machinery used for lifting equipment such as cranes and hoists. It examines them to ensure that they are fit for use for which they were intended. Under normal circumstances it does not supply spare parts or repair machines as that was the work performed by Stahl. Its principal place of business is also situated on the premises of Sishen Mine, Kathu, Northern Cape.

[5] On 06 February 2018 Ms Van Staden was appointed as an administrative assistant by Stahl at its satellite office in Sishen, Kathu, on a three months fixed-term contract which commenced on 01 February 2018 and expired on 30 April 2018. The contract had a restraint of trade clause, the salient terms of which were that Ms Van Staden would protect the proprietary interest of Stahl as follows:

5.1 She would not during her employment or at any time thereafter, directly or indirectly, divulge or disclose to others any of Stahl’s trade connections and trade secrets;

5.2 Any written instructions, notes, memoranda or records relating to the employer’s trade connection and trade secrets which are made by the employee or which come into her possession during the period of her employment shall be deemed to be the property of the employer and shall be surrendered to the employer on demand and in the event of termination of her employment, and she will not obtain any copies thereof or extracts therefrom.

5.3 She would not for a period of 24 months “after the date of the termination” of her employment with Stahl:

5.3.1 persuade or attempt to persuade any person who, during her employment with Stahl, was a banker, financier, supplier or customer of Stahl, to cease doing business with Stahl or to commence doing business with anyone else; or to solicit or attempt to solicit their business or custom;

5.3.2 persuade, induce, solicit, encourage or procure any employee employed by Stahl to cease such employment or to undertake employment with or have any interest in any business.

5.4 She would not, during her period of employment with Stahl, and for a period of 24 months after the termination of her employment for any reason whatsoever, either alone or jointly or together with or as agent for any person, assist, be interested, engaged or concerned either alone or jointly or together with or as agent for any person, employee, or otherwise, in any business, company or concern which carries on business in competition with the employer within Africa.

[6] Each part of the restraint is separate, severable and separately enforceable in the widest sense possible in respect of each of the years falling within the period of the restraint; each locality falling within the area which the restraint operates; and every capacity in relation to other businesses in which the employee is prohibited from acting as set out in the restraint clause.

[7] Stahl and Ms Van Staden agreed that the restraint was reasonable in all respects relating to the subject matter, period and territorial limitation and that the terms were more than reasonable to protect the proprietary interest, goodwill, trade secrets, trade connections and confidential information of Stahl. I hasten to state that the parties' own views, as reflected in the agreement, as to what is reasonable can never be decisive, inter alia, because the reasonableness of the restraint is judged only after consideration by a court on the basis of factors which might not necessarily have been present to the minds of the parties when they concluded the contract.[1]

[8] Following the expiry of the three months fixed-term contract Stahl did not renew it. However, Ms Van Staden remained in its employ for a period of a year until she tendered her resignation on 16 June 2019 and took up employment with Gregbev on 18 June 2019.

[9] On or about 15 July 2019 Ms Van Staden was instructed by her direct supervisor at Gregbev to call for a quotation for a new optidrive part for a Lasch crane. In view of the fact that the optidrive that had to be replaced was a product of Invertek Drives SA (“Invertek”) she says she approached Invertek for a new optidrive part which was sought by Gregbev for its use and therefore complied with the instruction. In any event, Invertek did not supply its quotation and consequently she never submitted its quotation to Sishen Mine.

[10] At first, Stahl was not keen on enforcing the restraint provisions against Ms Van Staden because Gregbev rendered different services to Sishen Mine. It was only on 15 July 2019 when it came to Mr Steven Claase’s attention, the deponent to Stahl’s founding papers, through a telephone call by a certain Mr Mark de Beer, an employee of Invertek, a supplier of Stahl, that Ms Van Staden approached Invertek, for purposes of obtaining a quotation to purchase some 37 kilowatt Invertek Drive to be installed on a crane at Sishen Mine. Stahl was an agent of Invertek in the Northern Cape. It supplied crane parts and spares to Sishen Mine.

[11] On 16 July 2019 Stahl’s attorneys dispatched a letter to Ms Van Staden requiring her irrevocable written undertaking to leave the employ of Gregbev by Friday 19 July 2019 because it was carrying on business in competition with Stahl. In the event of noncompliance, she was informed, this Court would be approached for urgent relief.

[12] Ms Van Staden refused to accede to the demand which precipitated the launching of this application. Stahl submitted that whilst executing her duties as administrative assistant Ms Van Staden became privy to Stahl’s strategies, know-how, identity of suppliers, profit margins and the likes. Mr Claase explained that, when a crane at Sishen had a breakdown or the Sishen’s cranes required to be serviced, Ms Van Staden would be instructed to liaise with Stahl’s suppliers to establish the pricing and availability of spares. A Stahl’s technician would furnish Van Staden with a list of spares required and thereafter Van Staden would contact suppliers to establish pricing and availability of the spares. She would also prepare quotations in respect of the spares for Sishen which included all the expenses relating to procuring the spares as well as Stahl’s profit. She presented quotations to the site supervisor in Sishen for purposes of correcting any mistakes.

[13] Mr Claase says that by using Stahl’s strategy and now-how Ms Van Staden rapidly gained sufficient knowledge to prepare the quotations without any significant intervention by any other employee of Stahl. As a sequel to this she began liaising directly with the representatives of Sishen for purposes of presenting quotations. He intimates that Ms Van Staden would not have been able to execute this task without the knowledge of Stahl’s profit margins. Mr Claase further explained that Ms Van Staden not only became privy to the identity of Stahl’s suppliers but also the identity of the representative of Sishen to whom the quotations would be presented. He says that prior to taking up employment with Stahl Ms Van Staden never worked in the industry that Stahl operated in. She acquired all her knowledge of the industry while she was in the employ of Stahl.

[14] Ms Van Staden admitted that regard being had to the limited number of staff at the Sishen Satellite office of Stahl her duties would not only be limited to trivial administrative tasks but included assisting Stahl in its service delivery to Sishen. She denies having obtained knowledge of Stahl’s strategies or know how. She claimed to have merely obtained knowledge of Stahl’s profit margins only on spare parts for lifting machinery. She admitted preparing quotation by merely typing them on the instruction of her supervisor or the site manager of Stahl. She never used her own initiatives when preparing quotations for Sishen. Her liaison with Stahl’s suppliers and Sishen Mine was restricted to obtaining lists of required spares in order to determine prices and availability. Upon receiving quotation she would forward them to Sishen following authorization by responsible managers. As to the identity of Stahl’s suppliers she says this were known to Gregbev even prior to her employment with it.

[15] The principal controversy in this case is whether following the expiry of the fixed-term contract Ms Van Staden remained in

employment of Stahl on the same terms and conditions as contained in the fixed-term which included the restraint of trade clause. Put differently, whether the terms set out in the expired fixed-term contract were impliedly extended to the employment relationship

between Stahl and Ms Van Staden following its termination.

[16] Ms Van Staden argued that it was never explained to her that some of the terms of the fixed-term contract would endure beyond the expiry of the fixed-term. In any event, she contended that in terms of Clause 1.1 of the expired contract Stahl made it clear to her that the fixed-term contract was not to be construed as raising any expectation for ongoing employment or a permanent appointment; Which she understood to mean that a further contract would be concluded for her permanent appointment by Stahl. This never occurred. Instead, she says, she was offered a new contract which she was unhappy with due to its unfair and unreasonable restraint of trade clause.

[17] Mr Wannenburg, for Stahl, submitted that following the expiry of the fixed-term contract Ms Van Staden was remunerated on terms as set out in the expired contract; she received her monthly salary advice; and was entitled to all the benefits provided for in the fixed-term contract, for instance, the bonus, annual leave, and sick leave. He, therefore, contended that the terms and conditions of employment as set out in the expired fixed-term contract were impliedly extended to the employment relationship between Stahl and Ms Van Staden.

[18] In KPMG Chartered Accountants (SA) v Securefin Ltd and Another[2] the Court emphasised the importance of parol evidence as follows:

'First, the integration (or parol evidence) rule remains part of our law. However, it is frequently ignored by practitioners and seldom enforced by trial courts. If a document was intended to provide a complete memorial of a jural act, extrinsic evidence may not contradict, add to or modify its meaning (Johnson v Leal 1980 (3) SA 927 (A) at 943B)…’

[19] Clause 2.1 of the fixed-term stipulated that should the contract be in conflict with any existing or future law or collective agreement,

such law or agreement shall be binding in respect of the impugned term only and all other terms of the contract shall remain valid and binding upon the parties.

[20] Section 198B of the Labour Relations Act, 66 of 1995 (“LRA”), applies to fixed-term contracts of employees earning below the threshold determined by the Minister of Labour in terms of s 6 of the Basic Conditions of employment Act, 75 of 1997. At present the threshold is R205 433.30.[3] Ms Van Staden earned R5000. 00 per month. Her employment on fixed-term fell within the purview of s 198B of the LRA. For purposes

of s 198B(1)(c ) a 'fixed-term contract' means a contract of employment that terminates on, inter alia, a fixed date, other than an employee's normal or agreed retirement. An employer may employ an employee on a fixed-term contract or successive fixed-term contracts for longer than three months of employment only if- the nature of the work for which the employee is employed is of a limited or definite duration or the employer can demonstrate any other justifiable reason for fixing the term of the contract.[4] More pertinently, an offer to employ an employee on a fixed-term contract or to renew or extend a fixed-term contract, must be in writing; and state the reasons for the limited duration of the employment contract.

[21] Following the expiry of the three months contact Stahl did not renew the contract in writing as required in terms of s 198B or the LRA. It describes Ms Van Staden’s version that she was offered a new contract with restraint provisions which she was unhappy with as “a blatant lie.” According to Stahl such a new or extension contract “does not exist.” That may well be. But the point is that the fixed-term contract could not have been impliedly extended on intervals of three months or on a monthly basis as Stahl sought to argue. It follows that the restraint provisions were binding upon the parties for a period of 24 months following the expiry of the fixed-term on 30 April 2018. This, of course, is subject to a caveat on the reasonableness of the restraint provisions to which I now turn.

[22] Freedom to contract is of great social value and so is the right to engage freely in trade and occupation. These competing rights were dealt with by Malan AJA in Reddy v Siemens Telecommunications (Pty) Ltd [5] as follows:

“All agreements including agreements in restraint of trade are subject to constitutional rights obliging courts to consider fundamental constitutional values when applying and developing the law of contract in accordance with the Constitution of the Republic of South Africa, 1996……A court must make a value judgment with two principal policy considerations in mind in determining the reasonableness of a restraint. The first is that the public interest requires that parties should comply with their contractual obligations, a notion expressed by the maxim pacta servanda sunt. The second is that all persons should in the interests of society be productive and be permitted to engage in trade and commerce or the professions. Both considerations reflect not only common-law but also constitutional values. Contractual autonomy is part of freedom informing the constitutional value of dignity, and it is by entering into contracts that an individual takes part in economic life. In this sense, freedom to contract is an integral part of the fundamental right referred to in s 22”.

See also Barkhuizen v Napier 2007 (7) BCLR (CC) 691 at 700 B-C para 29-30.

[23] The covenants in restraint of trade are valid and enforceable unless they are unreasonable and thus contrary to public policy.[6] In Basson v Chilwan & others[7] it was held that a restraint which is reasonable inter partes might nevertheless, for a reason not peculiar to the parties, damage the public interest. Four questions were formulated as follows: (a) Is there an interest of the one party which is deserving of protection at the termination of the agreement? (b) Is such interest being prejudiced by the other party? (c) If so, does such interest so weigh up qualitatively and quantitatively against the interest of the other party that the latter should not be economically inactive and unproductive? (d) Is there another facet of public policy having nothing to do with the relationship between the parties but which requires that the restraint should either be maintained or rejected? Insofar as the interest in (c) surpasses the interest in (d), the restraint would as a rule be unreasonable and accordingly unenforceable. It is a matter of judgment which can vary from case to case.

[24] A restraint would be an enforceable restriction on the activities of an employee who, amongst others, had access to the company's customers and could use his/her relations with the company's customers to the advantage of a competitor and to the detriment of the company.[8]

[25] Although Ms Van Staden and Gregbev denied that Gregbev was a competitor of the applicant, in an affidavit filed by the marketing director of Gregbev, in support of Ms Van Staden’s case, it is clear that Gregbev was not only registered with Sishen Mine as an inspector of lifting machines but was also a supplier of spare parts for these machines and may upon request from the mine supply spare parts. In light of this, Gregbev, in my view, was a competitor of Stahl.

[26] Ms Van Staden’s duties were not limited to trivial administrative tasks. On her own version, she knew the relevant

representatives of Stahl’s customers. For instance, when this litigation was underway, she made contact with a certain Mr Ruben Rakgalakane, a crane maintenance supervisor of Anglo American, to enquire whether Stahl was the sole supplier of spare parts to Sishen Mine. She also knew the identity of Stahl suppliers and obtained and submitted their quotations; she typed quotations and knew the percentage increase that Stahl added to its quotations for spare parts. She had a list of spare parts and knew of Stahl’s profit margins on spare parts for lifting machinery. She volunteered information to Mr Marc De beer of Invertek that she no longer worked for Stahl. She gave him her new e-mail address where he had to forward his the quotation to. She also admitted that when a crane at Sishen suffered a breakdown or when the Sishen’s

cranes were serviced she liaised with Stahl’s suppliers in order to establish pricing and availability.

[27] Ms Van Staden’s concession that she attempted to buy spare parts from a supplier of Stahl, to wit: Invertek, is a clear breach of the restraint clause. Invertek was never a supplier of Gregbev because Mr De beer of Invertek would not have requested Ms Van Staden, upon learning that she no longer worked for Stahl, to approach Stahl as the agent of Invertek in the Northern Cape.

[28] There can be no question that Ms van Staden used the knowledge she acquired and the relationship she built with the suppliers of Stahl for purposes of furthering the business activities of Gregbev to the prejudice of Stahl. In my view, Stahl established that it had a protectable interest in the form of customer connections, its strategies, know-how, identity of suppliers, profit margins which is imbedded in the restraint of trade provisions it sought to enforce.

[29] Mr Olivier, for Ms Van Staden, contended that the scope of the restraint in respect of the area which Stahl seeks to enforce is unreasonably wide and the 24 months period of operation is unduly lengthy. Mr Wannenburg readily conceded, wisely so, that the territorial operation of the restraint, insofar as it was applicable to the African continent as a whole, had a far-reaching effect on Ms Van Staden’s constitutional right to freely engage in economic activity or to choose a trade, occupation or profession. I am of the view that limiting the applicability of the restraint within the provincial boundaries of the Northern Cape would suffice.

[30] In respect of the period of operation of the restraint Mr Wannenberg urged that it be found that it commenced from 16 June 2019, when Ms Van Staden resigned and took up employment with the rival business because clause 28 of the fixed-term contract expressly stipulated that : “The employee shall not for a period of 24 months after the date of the termination of her employment with the employer persuade or attempt to persuade any person whom during her employment with the employer was a banker, financier, supplier or customer of the employer, to cease doing business with the employer or commence doing business with anyone else…” (My own emphasis)

[31] I have already determined that restrained provisions became binding on the parties immediately following the expiry of the three months fixed-term contract. Regard being had to the limited duration of the fixed-term contract and Ms Van Staden’s experience as an administrative assistant, I am of the view that the 24 months period of restraint is unreasonable. There is a paucity of information regarding what the reasonable period of restraint should be. However, the purpose of a restraint is not to punish.[9] The restraint in issue is severable and separately enforceable in the widest sense possible in respect of, inter alia, its period of operation. Restricting the period of operation in the order of a year (12 months) would, in my view, be reasonable in the circumstances of this case. Essentially, Ms Van Staden honoured the 12 months period of the restraint by remaining in the employ of Stahl following the expiry of the fixed-term. The 12 months period has lapsed and therefore she is no longer bound by the restraint provisions.

[32] On the above conspectus both parties succeeded only to a limited extent. Therefore, each party should bear its own costs. I make the following order.

Order

1. Stahl Cranes & Hoist Proprietary Limited, the applicant, succeeds to the following extend:

1.1 Ms Suannette Van Staden, the first respondent, is interdicted and restraint for a period of twelve (12) months, calculated from 01 May 2018 , to:-

1.1. 1 either alone or jointly or together with or as agent for any other person, assist, be interested, engaged or concerned, directly or indirectly whether as principal, proprietor, shareholder, partner, representative, member, consultant, advisor, director, financier, administrator, employee or otherwise in any business, company or concern which carries on business in competition with the applicant, within the provincial boundaries of the Northern Cape.

1.1. 2 persuade or attempt to persuade any person whom, during her employment with the applicant, was a banker, financier, supplier or a customer of the applicant or to cease doing business with the applicant or commence doing business with anyone else;

1.1.3 solicit or attempt to solicit the business or custom of any person whom, during her employment with the applicant was a banker, financier, supplier or a customer of the applicant;

1.1.4 persuade, induce, solicit, encourage to procure any employee employed by the applicant, to cease such employment or to undertake employment with or have any interest in any other business.

2. Each party is to pay its own costs.

MV Phatshoane ADJP

APPEARANCES:

FOR THE APPLICANT: Adv W Wannenburg

Instructed by Duncan & Rothman Inc.

FOR THE FIRST RESPONDENT: Adv D Olivier

Instructed by Hugo Mathewson & Oosthuizen Inc.

[1] See Basson v Chilwan and Others 1993 (3) SA 742 (A)

[2] 2009 (4) SA 399 (SCA) ([2009] 2 All SA 523; [2009] ZASCA 7) para 39

[3] GN 531 in GG 37795 of 1 July 2014 determines that all employees earning in excess of R205 433.30 per annum be excluded from sections 9, 10, 11, 12, 14, 15, 16, 17 (2) and 18 (3) of the Basic Conditions of employment Act with effect from 1 July 2014 - for the purposes of this notice: 'earnings' means the regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowances

received, achievement awards and payments for overtime worked shall not be regarded as remuneration for the purpose of this notice.

[4] Section 198B(3)

[5] 2007 (2) SA 486 (SCA) at 494 C-F.

[6] See Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA) and authorities cited therein at 493-494 at para 10.

[7] [1993] ZASCA 61; 1993 (3) SA 742 (A) at 767G-H

[8] Continuous Oxygen Suppliers (Pty) Ltd t/a Vital Aire v Meintjes & another (2012 33 ILJ 629 (LC) at 638 para 34

[9] Ntsanwisi v Mbombi 2004 (3) SA 58 (T) at 64E