Vanguard Rigging (Pty) Ltd v Nordengen and Another (983/2012) [2012] ZAGPJHC 284 (30 November 2012)

REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: 983/2012

DATE:30/11/2012

In the matter between:

VANGUARD RIGGING (PTY) LTD..................................................................Applicant

and

NORDENGEN ANDREW TREVOR...................................................First Respondent

OUTSOURCE INDUSTRIAL LOGISTICS (PTY) LTD....................Second Respondent

JUDGMENT

MOKGOATLHENG J

(1) The applicant seeks an order interdicting the respondents from:

(a) directly or indirectly approaching the applicant’s customers with a view to soliciting business therefrom; and

(b) making use of the applicant’s confidential information in order to solicit business from the applicant’s customers.

THE FACTUAL MATRIX

(2) The applicant has carried on business for the past 35 years as a specialist in the installation, commissioning, and the rigging of industrial, equipment and machinery. On 7 October 2003 the first respondent was employed by the applicant as a project manager. On the 2 day of April 2008, he was appointed by the applicant as an executive director.

(3) On 14 March 2008 the applicant and the first respondent concluded a written agreement of employment. Clause 8.1 thereof provides:

“8.1 CONFIDENTIAL INFORMATION:

By virtue of your employment with the company/group, you will gain access to the industry secrets (confidential information, intellectual property, specialized methods of operation, industry connections, inventions and all other data and information whatsoever) of the company/group and that the company/group would suffer substantial prejudice should you divulge to anyone outside the group such industry secrets and, accordingly, in terms of this agreement, you agree not to divulge any industry secrets of the company/group whilst in the service of the company/group or at any time thereafter;” and Clause 8.2 thereof provides:

“BUSINESS PRACTICES:

It is contrary to group policy to engage in practices or pursue private interests that are in conflict with the interests of the company/group. it is, therefore, necessary for you to disclose and declare in writing all outside interests that you may have at present and any additional interests which might arise whilst contracted to the company/group.”

(4) On 31 December 2010 the first respondent resigned as the applicant’s executive director. On 29 May 2011 he left the applicant’s employ. Whilst still a director of the applicant and in its employ as a project manager, the first respondent became a director of the second respondent on 6 November 2009. On 1 July 2011 he became the second respondent’s business project manager. The first respondent did not disclose to the applicant that he was a director of the second respondent.

(5) The second respondent was registered as a company on 16 October 2009, at a time when the first respondent was an employee and a director of the applicant. As such, the first respondent was an active director of the applicant’s competitor between the period 6 November 2009 until 7 June 2010 at a time when he was still in the applicant’s employ as a project manager and its executive director.

(6) The catalyst for the second respondent business activities was due to the alleged misuse of the applicant’s confidential information which the first respondent imparted to the second respondent to enable the second respondent to compete unlawfully with the applicant’s business.

(7) Whilst in the employ of the applicant, as its project manager

and executive director the first respondent became aware had access to the applicant’s:

(a) documentation, quotations and written contracts used by the applicant in transacting business with its customers;

(b) trade secrets, products, new developments, business methods and techniques, as well as the devices, improvements, machine utilization, methods of installation and processes employed by the applicant in its business;

(c) customers, namely Amalgamated Beverage Industries (Pty) Ltd, Bateman Engineering, Heineken, Worldwide Logistics Global Shipping Solutions, as well as the individuals employed by the applicant’s customers who placed business with the applicant;

(d) sub-contractor’s, the personnel associated therewith and such sub-contractor’s costs and charges in installing equipment; and

(e) formed relationships with those individuals of such a nature that on leaving the employ of the applicant, he could easily induce and did induce to follow him to his new employment with the second respondent in which he obtained a financial interest and directorship.

(8) The applicant alleges that the second respondent is a competitor of the applicant which after employing the first respondent started to compete with the applicant’s business unlawfully by approaching the applicant’s customers by making use of the applicant’s confidential information to solicit business through the aegis of the first respondent.

THE PROCEEDINGS BROUGHT WHILST THE FIRST RESPONDENT WAS A DIRECTOR TO INTERDICT THE APPLICANT’S FORMER EMPLOYEE JOHANNES VAN DER MERWE AND DRENCON RIGGING CC FROM UNLAWFUL COMPETITION

(9) Van der Merwe was formerly the head of the applicant’s medical supply equipment installation division. In terms of a written agreement of employment he bound himself to a confidentiality clause in which he undertook to keep, inter alia, the applicant’s trade secrets confidential. After Van der Merwe left the applicant’s employ in October 2009, he associated himself with Drencon Rigging CC which acted in direct competition with the applicant’s medical equipment installation business by making use of the applicant’s confidential information acquired during his employ with the applicant, to the applicant’s detriment.

(10) As a result of such unlawful conduct, the applicant instituted legal proceedings under case number 09/501906, in which the applicant sought certain interdictory relief against Van der Merwe and Drencon Rigging CC. The first respondent was a director of the applicant at the time the application was launched and was present when the purpose of the application was discussed and applicant’s Board of Directors, resolved to interdict Van der Merwe and Drencon Rigging CC from unlawfully competing with the applicant.

(11) On the 20 day of April 2009 an order was granted in favour of the applicant interdicting both Van der Merwe and Drencon Rigging CC for a period of eighteen months from directly or indirectly approaching the applicant’s customers, or making use of the applicant’s confidential information or soliciting business from such customers.

(12) The first respondent was aware that any unlawful competition and any interference of the applicant’s business by the utilization of confidential information and the procurement of business by approaching the applicant’s customers, would result in legal action being taken by the applicant to protect itself from unlawful business competition.

(13) Although the first respondent was a director of the applicant at the time such proceedings were instituted and had knowledge of the interdict granted against Drencon Rigging CC he did not disclose his membership in Drencon CC to the applicant.

(14) Notwithstanding the first respondent’s knowledge of such legal proceedings, and the discussion thereof in confidence at board meetings, the first respondent, in defiance and contravention of his fiduciary duty to the applicant and in violation of his own terms of employment, did exactly what the applicant had interdicted Van der Merwe and Drencon Rigging CC pursuant his conduct.

THE SOLICITING OF HEINEKEN’S BUSINESS

(15) The applicant’s employee Peter Lovemore was present at Heineken’s business premises during the alleged soliciting of applicant’s customers during the second week of July 2011 by the first respondent’s after his resignation as an employee of the applicant. Peter Lovemore met the first respondent at Heineken’s premises who was then in the employ of the second respondent. It accordingly became quite apparent to him that the first respondent had come to approach Heineken in order to solicit business in competition against the applicant.

(16) The first respondent was well known to and had formed relationships with Heineken’s employees who concluded procurement contracts with the applicant in terms whereof the applicant rendered certain services to Heineken. The inference that the first respondent had approached the applicant’s customer Heineken, using the information and knowledge he had acquired as a project manager and executive director of the applicant is overwhelming.

THE SOLICITING OF THE APPLICANT’S BUSINESS

(17) On 10 November 2011 the applicant’s financial director Craig Pace had access to a written communication from the second respondent which was addressed to Worldwide Logistics Shipping Solutions. It is highly improbable that the said customer would have tendered business to the second respondent unless the first respondent had introduced such customer to the second respondent.

(18) The first respondent sent an e-mail to the second respondent’s director Baisch, following an enquiry by Bateman Engineering which reads as follows:

“Can someone please make necessary contact with Mr Lourens Swart from Bateman Engineering RE relocation/turnkey project, he has been very unsuccessful in someone come and look at his factory.”

Lourens Swart from Bateman Engineering is known to the first respondent and had a good working and personal relationship with the latter whilst in the employ of the applicant. The inference that the first respondent and the second respondent were soliciting the applicant’s customers is clear and overwhelming.

(19) The first respondent was well known to persons employed by Amalgamated Beverage Industries (Pty) Limited (“ABI”) who concluded agreements with the applicant in terms whereof the applicant rendered certain services to the company. On 20 October 2011 the applicant was invited to attend a meeting to submit quotations to Amalgamated Beverages Industries (Pty) Ltd in Phoenix, Natal. The applicant was represented by Dennis Scholfield. The first respondent was present at such meeting. He informed Dennis Scholfield that he was representing the second respondent and was there to submit a quotation on its behalf utilising the applicant’s confidential prising structure.

(20) The applicant in many instances uses Proman Industries as a sub-contractor to perform work on its behalf. Proman Industries was approached by the second respondent to perform sub-contracting work on its behalf. The second respondent was introduced to Proman Industries by the first respondent because he had an intimate relationship with persons employed by Proman Industries who awarded contacts and negotiate prices.

THE WRITTEN DEMAND TO THE FIRST RESPONDENT

(21) On 6 September 2011 the applicant’s attorney addressed a letter to the first respondent to make him aware of his breach the terms of their contract of employment, then he was specifically precluded from unlawfully interfering with the applicant’s customers by assisting the second respondent to trade unlawfully in competition with the applicant. Further that the first respondent was also in breach of sections 75(1)(b),75(6) and 76 of the Companies Act 71 of 2008 because as applicant’s executive director, he owed it a fiduciary duty.

(22) The first respondent attorney’s letter dated 28 September 2011 in response to applicant’s letter failed to deal with specific facts and did no mention the first respondent’s breach of his fiduciary duty and employment contract. The stance taken by the first respondent was that since he resigned as a director of the second respondent he:

“had nothing to do with the business of the second respondent whilst he was employed by (the applicant).”

This stance flies in the face of the very allegations relied on by the applicant that the first respondent not only breached a fiduciary duty to the applicant, but that the he had access to the applicant’s confidential information which he violated in the furtherance of the second respondent’s business.

THE FIRST RESPONDENT’S DEFENCE

(23) Although he was appointed as a director of the first respondent he had nothing to do with the second respondent’s business when he was still employed by the applicant. He denies that he ever breached any fiduciary duty he owed to the applicant. The second respondent did not trade during the period he was a director thereof. The only business undertaken by the second respondent during the 2010/2011 financial year concerned the packaging of equipment which was not in competition with the applicant’s business.

(24) He did not receive any financial reward or benefits from the second respondent’s business. He has complied with all the fiduciary obligations he owed to the applicant during the period of his employment and undertakes to continue to comply with same to the extent and for so long as such obligation exists beyond the termination of his employment.

(25) He undertakes not to use the applicant’s confidential information and has as at 7 February 2012 repeated such undertaking and has not breached same. The relief which the applicant seeks against him and the second respondent is not competent in the absence of a valid and enforceable restraint of trade agreement.

(26) Although the applicant alleges that he has or will use the applicant’s confidential information to enable the second respondent to compete with it unlawfully, no case has been made out to demonstrate that the applicant has any confidential information or that he was exposed to any such confidential information which he has used or could use to compete or enable the second respondent to compete unlawfully with the applicant.

(27) The skill and knowledge he has pertaining to the business the applicant is conducting was acquired on his own endeavours. Such knowledge was not acquired during the course and scope of his employment with the applicant. He possess no confidential information of the applicant which can be used to its detriment or to the advantage of the second respondent.

(28) The information that he had access to while employed by the applicant is in the public domain. Since he commenced employment with the second respondent he has actually turned away work when been approached directly by the applicant’s customers. He has frequently provided assistance to the applicant when approached directly by the applicant in respect of queries by its customers.

(29) He denies that the applicant has any confidential trade secrets, business methods or techniques nor has it shown that it has. That business methods and techniques used by the applicant are common throughout the industry. Many of the techniques used are even displayed on the applicant’s website, and in the industry magazines. Access to the applicant’s website is unrestricted, and is easily accessible and available to the applicant’s competitors.

(30) The identities of the applicant’s customers are well known in the industry. The applicant’s relationships with its customers is not exclusive and many of the applicant’s customers use the services of more than one service provider for services provided by the applicant. The identities of the sub-contractors and their personnel as well as their costs and charges are neither confidential nor are they the exclusive right of the applicant’s business. The applicant does not have exclusive rights to the services of any of the sub-contractors.

(31) He admits that he became acquainted with individuals employed by the applicant’s customers, but denies that he could easily induce them to follow him to the second respondent’s business. When he was employed by the applicant as a project manager, he had access to all its customer and sub-contractors for almost six years without any written restraint of trade agreement. He has no influence over the applicant’s customers.

(32) The applicant did not suffer any harm through his directorship of the second respondent. He commenced employment with the second respondent on 1 July 2011. He manages the entire business operation of the second respondent which includes the procurement of business commenced partially in competition with the applicant. He denies that the applicant has protectable customer relationships especially in the absence of an enforceable restraint of trade agreement. The names, the contact details and addresses of the applicant’s customers are in the public domain and are freely accessible.

(33) Worldline was not a customer of the applicant during the time he was employed by the applicant. He admits sending an e-mail to Baisch. Baisch, in his capacity as a director of the second respondent has had a business relationship with Worldline for a considerable period of time. Baisch was introduced to Worldline by a customer of the second respondent based in Durban which has a business relationship with the second respondent’s customer.

(34) He denies the statements attributed to him by Peter Lovemore regarding his attendance at Heineken’s premises in Phoenix. Heineken is not a customer of the second respondent. It is a subcontractor of Krones AG. He was at Heineken’s premises on behalf of the second respondent in the performance of Krones AG’s obligations to Heineken. He was approached by Peter Schumacher from KHS, to attend a meeting with him in Phoenix. Peter Schumacher needed his assistance and advice. He pointed out to the former that although the second respondent would be able to submit a quotation in respect of the project the applicant would probably be awarded the contract for the project by Krones AG due to its track-record with the latter.

(35) Neither the second respondent nor he have sought to secure or use the services of Proman Industries nor have they ever received a quotation from Proman Industries. On the contrary, the second respondent regards Proman Industries as a competitor.

(36) He admits he had a consultation with his attorneys regarding the conflict of interest with the applicant with regard to a contract offered to him by SAB. He admits “writing an email that he will be treading on very shaky ground if he went ahead and did the pasteurizer job for you at SAB Alrode Line 11, only owing to the fact that he was involved in this job while he was still in Vanguard’s employ. He mentioned to him that he would like him to prepare a quotation for the installation of the new pasteurizer on Line 11 but he has said that he has already given the order for the removal of the old pasteurizer to

Vanguard.”

THE EVALUATION OF EVIDENCE

(37) The respondents do not dispute the legal principle that where its established that an erstwhile employee is using confidential information unlawfully to compete, either for himself or herself with another party utilising his erstwhile employers confidential information an interdict can be granted. But the respondents erroneously contend that trade connections cannot be protected by an interdict in the absence of a restraint of trade agreement.

(38) The respondents counsel argued that in all the cases the applicant has cited in support of the interdict application the confidential information unlawfully utilized in those cases was found to constitute unlawful competition, because it was truly confidential and could not be used in the circumstances of those cases for unlawful competition. Further counsel submitted that in none of those cases in the field of unlawful competition was an interdict ever granted against the exploitation of trade connections per se, without there being information that is truly confidential in the course thereof.

(39) Counsel as authority for the above proposition cited the case of Rawlins and Another v Caravantruck (Pty) Ltd [1992] ZASCA 204; 1993 (1) SA 537 (A) where Nestadt J at page 541 D stated: “The need of an employer to protect his trade connections arises where the employee has access to customers and is in a position to build up a particular relationship with the customers so that when he leaves the employer’s service he could easily induce the customers to follow him to a new business.”

(40) At page 542G the learned judge in dealing with the principle on which the exploitation of customer connection is based stated:

“Even though the persons to whom an employee sells and whom he canvasses were previously known to him and in this sense ‘his customers’, he may nevertheless during his employment, and because of it, form an attachment to and acquire an influence over them which he never had before. Where this occurs, what I call the customer goodwill which is created or enhanced, is at least in part an asset of the employer. As such it becomes a trade connection of the employer which is capable of protection by means of a restraint of trade clause.”

(41) Counsel submitted that and there is no precedent for expanding a trade connection to fall within the category of confidential information in seeking the interdict without a restraint of trade agreement. Counsel in support of this proposition cited the case of Meter Systems Holdings Limited v Venter and Another 1993 (1) SA 409 (W) pages 428 to page 433 where Stegman J dealing with a list which was not exhaustive referred to categories of confidential information and specifically indentified customer lists as being something that is not different to the cases the applicant relies on where an employer through the expenditure of time and labour has compiled a list containing information as the Bantex directory in the Van Castricum v Theunissen and Another 1993 (2) SA 726 (T) concerning a list of customers, removed by the erstwhile employee that is protectable but where there is no evidence that the employee has actually taken away such a list there it is not established to the extent that the but where the customer connections have been consciously memorised are concerned there has been a misappropriation of confidential information.

(42) Counsel argued that there is no suggestion in the founding or replying affidavits that the first respondent has either taken a list or that he has consciously memorised such a list or even a suggestion that such a list exist. All that the applicant’s case is based is on, is that the first respondent knew the applicant’s, customers and dealt with them and acquired influence over them. Counsel submitted the applicant’s customer connections, is not a protectable interest and is not confidential information.

(43) In support of his submission counsel cited the unreported case of Silverton Services Ltd v George Milne Helfrich and Another Case No 15942/90 wherein an application for an interdict restraining the respondents from unlawfully competing with the applicant by utilising confidential information there was a restraint of trade agreement. The ratio in the case is one must be aware of reading the restraint

of trade cases and apply general principles applicable on a far broader basis in the absence of a restraint of trade agreement in cases of unlawful competition.

(44) Counsel quoted the following ratio therefrom “It is true that the paragraph relates to the use of confidential information and trade secrets but it is clear from the next paragraph which contains the restraint itself, that it is inexplicably bound up therewith. Apart from the aforegoing this inquiry must turn on the question as to whether there is any evidence as to the nature of the applicant’s interest which is sought to be protected.”

It was pointed out in Super Safes (Pty) Ltd and Others v Voulgarides and Others 1975 (2) SA 783 (W) that a bare covenant not to compete cannot be upheld. There must be evidence that the employer requires protection for something like his trade secrets and his trade connections.”

(45) Counsel conceded that the onus is on the respondent to explain the unreasonableness of the restraint which is tied to the protection of confidential information and the applicant’s trade secrets.

(46) The applicant’s contention is that if the first respondent had removed a list of the applicant’s customers or if before he left the employ he memorised the list of its customers, that would be protectable. I agree with the applicant’s submission that where a person in the position of the first respondent comes into contact on a daily, weekly or monthly basis with the applicants customers he acquires and has knowledge of the customers names without making reference to some list or document because he has a brain which is capable of remembering or memorising the names of the customers.

(47) The first respondent discloses his knowledge of the individuals who represented the applicant’s customers and his relationship with them is of such a nature that when they experienced problems with the applicant they consulted the first respondent.

(48) The first respondent was able to help the applicant’s customers because he acquired knowledge of them while in the employ of the applicant. The characterisation of that information is confidential and is of value to the applicant, and the confidential information is unlawfully of value to the second respondent, because it directly solicited business from the applicant’s customers. The second respondent would not have been able to approach the applicant’s customers solicit business therefrom without the knowledge and confidential information the first respondent acquired while in the employ of the applicant. The applicants counsel cited the case of Van Castricum v Theunissen and Another 1993 (2) SA 726 (T) is as authority for the proposition.

(49) The applicant has a clear right to prevent the first respondent and the second respondent from making use of its confidential information to the detriment of the applicant’s business. The applicant contends that as a result of the first respondent filching the applicant’s customers and unlawful conduct it has caused damages and loss of profits.

(50) The applicant further reasonably apprehends that in the event of the first and second respondents not being interdicted in the future it will suffer injury in the form of loss of profits. It has no other remedy available to protect itself against the wrongful and unlawful conduct and competition from the respondents in utilising its confidential information, its customer connections, and trade secrets.

(51) The essential elements to be proved to protect confidential information by way of an interdict are:

(i) the applicant must have an interest in the confidential information;

(ii) the information must be of a confidential nature;

(iii) the relationship must exist between the parties which imposes a duty on the respondents to preserve the confidentiality;

(iv) the respondents must have knowledge of the confidentiality of the information and its value; and

(v) improper use must not be made of the information concerned. Van Castricum v Theunissen 1993 (2) SA 726 (T) at 732.

(52) In the case of Faccenda Chicken Ltd v Fowler and Others; Fowler v Faccenda Chicken Ltd [1985] 1 ALLO ER 724 (Ch) and [1986] 1 ALL ERR 617 (Ca) it was held that the distinction relevant in between:

“(a) ‘trade secrets’, in a broad sense, being confidential information of an employer to which an employee may have access and which is of such a nature that the employee may never use it except for the benefit of the employer, and which the employee remains bound to keep secret at all times after leaving that employer’s employ;

(b) other confidential information of an employer which an employee must guard as confidential as long as he remains employed by the employer, by virtue of his general implied duty of good faith to his employer (a duty the extent of which varies according to the nature of the contract), but which is of such a nature that “it is inevitably carried away in the employee’s head after the employment has ended”, and which the employee then remains free to use for the benefit of himself or others provided that he has not, whilst still employed by that employer, broken his duty of good faith by, for example, making or copying a list of that employer’s customers or deliberately memorizing such a list.”

(53) The assertion that the applicant has failed to prove the existence of any confidential information was based on the unreported case of Silverton Services v G.M. Helfrich and Another supra is unsustainable and distinguishable having regard to the facts of the present matter.

(54) It is not disputed that for the past thirty-five years the applicant has carried on business as specialists in the installation, de-installation, rigging and commissioning of industrial and commercial equipment and machinery, that the first respondent was employed by the applicant as a project manager and was appointment as a director of the applicant, and that his duties entailed the procurement of business for the applicant, that he had intimate knowledge of the applicant’s business methods and customer connections.

(55) In Van Castricum v Theunissen and Another 1993 (2) SA 726 (T) it was held that “To be confidential, the information must have the necessary quality of confidence about it, namely it must not be something which is public policy or public knowledge.” See Atlas Organic Fertilizer (Pty) Ltd v Pikkewyn Ghwano (Pyt) Ltd and Others 1981 (2) SA 173 (T) at 185. In Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1948] 65 RPC 203 (CA) at 211 Lord Green MR also said the following…“What is clear from the aforesaid, is that someone who saves himself the trouble of going through the process of compilation of the document, even where it is compiled from information which is available to anybody, such a person would be interdicted if that information had been obtained in confidence. The reason is simply that the confidential information may not be used as a spring board for activities detriment to the person who made the confidential information available. It would remain a springboard even when all the features have been published or can be ascertained by actual inspection by any member of the public.” See Cranleigh Precision Engineering Ltd v Bryant [1965] 1 WLR 1293 (QB) at 1317-8 [1964] 3 ALL ER 289), as quoted in the Harvey Tiling case supra at 324B-D. It is sometimes difficult to draw a dividing line between information which constitutes general knowledge and information which is confidential or constitutes a trade secret. It seems that the four principles enunciated in the following English authority are of great assistance in discerning whether information constitutes confidential information or a trade secret worthy of protection:…

First, I think that the information must be information the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Second, I think that the owner must believe that the information is confidential or secret, i.e. that it is not already in the public domain. It may be that some or all of his rivals already have the information: but as long as the owner believes it to be confidential I think he is entitled to try and protect it. Third, I think that the owner’s belief under the two previous heads must be reasonable. Fourth, I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements may be entitled to protection as confidential information or trade secrets: but I think that any information which

does satisfy them must be of a type which is entitled to protection.’

(56) Regarding confidentiality in general and client lists in particular, the learned judge in quoted Cross J in Printers and Finishers Ltd v Holloway [1965] RPC 239 (Ch) at 255-6 where the following was stated:

‘The mere fact that the confidential information is not embodied in a document but is carried away by the employee in his head is not, of course, of itself a reason against the granting of an injunction to prevent its use or disclosure by him. If the information in question can fairly be regarded as a separate part of the employee’s stock of knowledge which a man of ordinary and honest intelligence would recognize to be the property of his own employer, and not his own to do as he likes with, then the Court, if it thinks that there is danger of the information being used or disclosed by the ex-employee to the detriment of the old employer, will do what it can to prevent that result by granting an injunction. Thus an ex-employee will be restrained from using or disclosing a chemical formula or a list of customers which he has committed to memory.’

(57) It is common cause that the first respondent was employed in the senior management and confidential staff of the applicant. In the Van Castricum case supra at p 735E the court held that… “the Bantex handwritten telephone directory complies with the requirements relating to confidentiality and that the names, telephone numbers and fax numbers of existing clients of the applicant are worthy of protection as confidential information, or as a trade secret… the respondents’ denial that the information is in fact confidential does not create a bona fide dispute of fact.”

(58) In Faccenda Chicken Ltd v Fowler and Others, Fowler v Faccenda Chicken Ltd [1985] 1 ALL ER 725 (Ch) and the appeal in that matter reported under Faccenda Chicken Ltd v Fowler and Other; Fowler v Faccenda Chicken Ltd [1986] 1 ALL ER 617 (CA); “It is, firstly, to be noted in passing, to the first respondent’s detriment, that the Court of Appeal held at 625f of the Faccenda Chicken Ltd case that the deliberate memorizing of a list of clients is frowned upon. It is thus not only the actual compilation of the list that might later lead to an interdict, but also the deliberate memorizing thereof.”

(59) “…It is clearly established in our law that it is unlawful for an employee to take his employer’s confidential information or documents and use them to compete with his employer. See Aercrete South Africa (Pty) Ltd and Another v Skema Engineering Co (Pty) Ltd and Others 1984 (4) SA 814 (D) at 822E-G. This applies also to former employees… I also hold that the second respondent, being a trade rival of the applicant and having obtained confidential information knowing its true nature and how it was obtained, and having used such information in competition with the applicant, may be restrained from continuing with the unlawful conduct. See Dunn and Bradstreet (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd 1968 (1) SA 209 (C).

(60) The first respondent admits that he had direct access to all the applicant’s confidential information, including the applicant’s pricing structure, the cost at which the applicant performed equipment installation services, quotes, trade secrets, products, business methods, techniques, names and addresses of applicant’s customers, direct knowledge of persons employed by the applicant’s customers who placed business with the applicant and that the first respondent formed relationships with such individuals.

(61) There is no dispute of fact at all raised by the respondent not to justify a final interdict.

See: Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623(A)-635C.

See further: Fakie N.O v CC II Systems (Pty) Ltd [2006] ZASCA 52; 2006 (4) SA 326 SCA, which restated the test for resolving genuine or bona fide factual disputes. Cameron, JA (as he then was) stated that:

“…motion proceedings are quicker and cheaper than trial proceedings and, in the interest of justice, courts have been at pains not to permit unvirtuous respondents to shelter behind patently implausible affidavit versions or bald denials…This means that an uncreditworthy denial, or a palpably implausible version, can be rejected out of hand, without recourse to oral evidence.”

(62) There was a written employment agreement which the first respondent signed and which prevented him from using confidential information during or after his employment. The first respondent’s denial that he did not acquire any confidential information and that he is not using confidential information belonging to the applicant is not sustainable having regard to the proven objective facts.

(63) The first respondent admits that his duties with the second respondent “includes the procurement of business for the second respondent which has commenced business partially in competition with the applicant.”(my emphasis) This concession coincides with the applicant’s assertion that the first respondent competes directly with it and that the first respondent while in its employ had as one of his duties the procurement of business for the applicant.

(64) The first respondent manages the entire business operation of the second respondent, which was commenced partially in competition with the applicant, consequently, the logical inference is that the first respondent has moved across to a competitor and has taken with him confidential information in the form of trade connections and confidential information cannot be said to be unfounded.

(65) The first respondent alleges that because he is no longer in the applicant’s employ he cannot be restrained from soliciting its clients is in my view decisive of the conclusion that the only remedy available to the applicant is to procure an interdict to prevent the respondent’s unlawful competition.

(66) The first respondent was actively assisting in acquiring work for Outsource Packaging a company which Baisch is also a director of to do work on behalf of a Bateman the applicants. The first respondent colluded with Baisch in order to misappropriate a corporate opportunity of the applicant’s in order to benefit his friend Baisch who is a director and shareholder of the second respondent.

(67) The object facts show that Heineken was a customer of the applicant. The second respondent was able to secure a contract with Heineken the applicant’s customers immediately after the first respondent left the applicant’s employ, logic decrees that the first respondent approached Krones AG of Heineken in order to secure the work for the second respondent, relying on the relationship he had developed with employees of Heineken and Krones AG whilst in the employ of the applicant.

(68) Peter Schumacher of KHS was known to the first respondent from the relationship the first respondent had with the said Peter Schumacher in his capacity as a director of the applicant. The first respondent could only have been in a position where Peter Schumacher would have approached him because of the relationship that developed between Peter Schumacher and the first respondent while the first respondent was in the employ of the applicant. The first respondent is clearly making use of the applicant’s trade connections he acquired while in the employ of the applicant. These trade connections constitutes part of the applicant’s confidential information.

(69)It is quite clear that the first respondent has and is in fact using the applicant’s confidential information to advance the interests of the second respondent to the detriment of the applicant. Moreover the first respondent has threatened to make use of the applicant’s confidential information in the future by stating that he intends to solicit business from the applicant’s customers whom he became aware of and knew while he was a director of the applicant because he has not signed a restraint of trade agreement.

(70) The skill and knowledge the first respondent claims is his own without disclosing where he acquired same was acquired during the course of his long employment with the applicant, constitutes knowledge of a confidential nature which the applicant is entitled to protect. For all intents and purposes the first respondent was the business face of the applicant, and was fully aware of all the applicant’s trade connections. As a director of the applicant, the first respondent acquired information of a confidential nature which is worthy of protection particularly arising from the relationship he enjoyed with the individuals employed by the applicant’s customers who placed business with the applicant.

(71) The first respondent on his own version was while a director of the applicant he was also a director of the second respondent. The first respondent is being disingenuous in suggesting that “most if not all of the information” he had access to while employed by the applicant is in the public domain. The names of the applicant’s customers, the nature of work undertaken by the applicant for and on behalf of its customers over many years while the first respondent was in its employ, the pricing structure, the names of the individuals who worked for the applicant’s customers who placed business with the applicant, and with whom the first respondent achieved a working relationship was certainly not in the public domain.

(72) The duty to preserve confidential information is not limited to the existence of a contractual relationship between the employer and employee, but extends to the period after termination of such contractual relationship. Although strictly speaking the first respondent did not sign a restraint of trade agreement, he signed an employment agreement which incorporates a restraint or confidential information belonging to the applicant.

(73) The fact of the matter is that the first respondent while in the employ of the applicant had as one of his duties the procurement of business for the applicant. It would be naïve in the extreme to believe that the first respondent would not in his attempts to procure business for the second respondent not approach the applicant’s customers with whom he had formed a relationship whilst he was in the employ of the applicant.

(74) On the first respondent’s own version, he is making use of the applicant’s confidential information for the benefit of the second respondent while the first respondent was employed by the applicant, he was in direct contact with Baisch, a co-director of the second respondent and engaged in advancing the interests of the second respondent by performing precisely the same type of work as the applicant does namely, rigging services for customers.

(75) In my view one cannot find a more compelling case to establish firstly that while in the employ of the applicant the first respondent became acquainted with the applicant’s customers, and more importantly the customer’s individuals who placed business with the applicant.

(76) The defence by the first respondent that the applicant cannot prevent him from approaching or soliciting the applicant’s customers “in the absence of a restraint of trade agreement” is a misconception of the tenets of the applicable law. The existence of a binding restraint of trade agreement is not a precondition to the relief sought by the applicant. See Van Castricum v Theunissen & Another 1993 (2) SA 726 (T); and Harvey Tiling Co (Pty) Ltd v Rodomac (Pty) Ltd & Another 1977 (1) SA 316 (T) at 321G-H.

(77) The first respondent pronounces on oath that it is his avowed intention to approach the applicant’s customers. The first respondent became aware of the names of the applicant’s customers through his work with the applicant which confidential information he intends to exploit to his and the second respondent’s benefit by his avowed intention “to solicit the applicant’s customers.”

(78) The overwhelming inference is that the first respondent is in breach of his fiduciary duty to the applicant. In addition, the first respondent admits breaching section 75(1)(b), 75(6) and section 76 of the Companies Act 71 of 2008. In my view the applicant has shown that there is an unfair usage by the respondents of the applicant’s fruits and labour (Schultz v Butt 1986 (3) SA 667(A); Dunn and Brad Street (Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd 19 68 (1) SA 209 (C) that such conduct is wrongful (Elida Gibbs (Pty) Ltd v Colgate Palmolive (Pty) Ltd (1) 1988 (2) SA 350 (W) in that the respondents have interfered with the applicant’s confidential information namely its customers and its pricing

structures and quotations. See Waste Products Utilisation (Pty) Ltd v Wilkes and Another 2003 (2) SA 515 (W) at 570. See Further: Van Castricum v Theunissen & Another (supra).

(79) The respondents do not argue with the principle that in appropriate circumstances a court will grant an interdict against the use by a trade rival of confidential information acquired by an employee of and concerning the business of the applicant. In my view the applicant has proven the requirements of an interdict. See Knox D’Arcy Ltd and Others v Jamieson and Others1992 (3) SA 520 (W); Waste Products Utilisation (Pty) Ltd v Wilkes 2003 (2) SA 515 (W).

ORDER

(80) The first and the second respondents are interdicted for a period of eighteen (18) months from date of this order from:

directing or indirectly approaching the applicant’s customers, with particular reference to Amalgamated Beverage Industries (Pty) Limited, Bateman Engineering, Heineken, with a view to soliciting business from the applicant’s customers;

making use of the applicant’s confidential information in order to solicit business from the applicant’s customers pertaining to the installation, and/or rigging and/or commissioning of equipment within the Republic of South Africa;

competing with the applicant’s business arising out of the first/second respondents’ use of the applicant’s confidential information;

from securing or doing business with the applicant’s customers referred to in paragraph (a) above; and

the first and/or second respondent/s, are ordered jointly and severally, the one paying the other to be absolved, pay the costs of this application on the scale as between attorney and client.

DATED AT JOHANNESBURG ON THIS 20 DAY OF NOVEMBER 2012.

___________________________________­­­___________

MOKGOATLHENG J

JUDGE OF THE SOUTH GAUTENG HIGH COURT

DATE OF HEARING:

DATE OF JUDGMENT: 30 NOVEMBER 2012

ON BEHALF OF THE APPLICANT: MR S. JOSEPH SC ASSISTED BY MR RG COHEN

INSTRUCTED BY: MERVYN JOEL SMITH ATTORNEYS

TELEPHONE NUMBER: (011) 334-4229

ON BEHALF OF THE RESPONDENT: MR I. MILTZ SC

INSTRUCTED BY: FLUXMANS INCORPORATED

TELEPHONE NUMBER: (011) 328-1711