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IN THE HIGH COURT OF SOUTH AFRICA
DURBAN AND COAST LOCAL DIVISION
Case No :9579\07
In the matter between:
FAST TRACK LIQUORS INVESTMENTS(PTY) LTD Applicant
and
GONSEGARAN VIRASAMI MOODLEY Respondent
J U D G M E N T
NICHOLSON J
Introduction and relief sought
1. The applicant seeks an interim interdict pending an arbitration in
which the main relief sought is as follows:
a. ‘Pending the finalisation of the arbitration proceedings to be
instituted by the applicant against the respondent holding the
respondent to the provisions of the restraint of trade within the
Province of KwaZuluNatal, the following order shall apply –
i.The respondent shall not, within the province of KwaZulu
Natal, either as principal, agent, partner, representative,
shareholder, member, director, employee, consultant,
adviser, financier, demonstrator or in any other like
capacity, directly or indirectly in any way be associated or
concerned with, interested or engaged or interest itself in
any firm, business, company or other association of
persons which carried on a business or activity similar to
or competing with the business of the applicant for the
entire period of making this order to the final outcome of
the arbitration;
ii.Specifically the respondent shall not have any interest,
whether direct or indirect, in the business of Market
Demand and/or Fiesta Liquors nor shall he partake in the
operation and/or running of Market Demand’s and/or
Fiesta Liquors business nor shall he attend at the
business premises of Market Demand located at 330
Point Rd, Durban;
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iii.The respondent shall pay the costs of this application,
alternatively the costs of this application shall be
determined by the arbitrator appointed for the arbitral
proceedings foreshadowed in this application…’
2. Before mentioning the merits of this application I should place on
record my extreme displeasure that the papers in this matter were
not properly indexed and paginated. I was told from the bar that the
local attorneys had failed to do so and that the attorneys of record
in Johannesburg were not at fault. Rule 62(4) requires the papers to
be so indexed and paginated five days before the hearing and it
was the Johannesburg attorneys duty to make sure that was done
by their local agents. I heard the matter as a courtesy to counsel
who had flown down for the application.
3. The applicant, who was represented in this application by Mr Strobl,
purchased a business from an entity in which the respondent
together with certain other parties held an interest in terms of a
written agreement of sale (“the sale agreement”) during May 2005
for the sum of R10 million. The business had been commenced in
1993 when it had only a limited number of customers.
4. The applicant conducts a business selling alcohol and other
3
beverages. It operates by purchasing from the suppliers in large
quantities and then sells on to liquor outlets. It conducts its business
throughout KwaZuluNatal with branches spread as far as Port
Edward, St Lucia and Dundee.
5. Part and parcel of the sale agreement included a restraint of trade
undertaking. The respondent was represented by Mr Callum.
6. In this restraint the respondent agreed that he would not, within
South Africa, either as principal, agent, partner, representative,
member, director, employee, consultant, adviser, financier,
demonstrator or in any other like capacity, directly or indirectly in
any way be associated or concerned with, interested or engaged or
interest itself in any firm, business, company or other association of
persons which carried on a business or activity similar to or
competing with the business of the applicant for a period of five
years.
7. The parties agreed that the restraints were reasonable as to subject
matter, area and duration and were reasonably necessary to
preserve and to protect the legitimate and proprietary interests of
the applicant and the goodwill of the business. Also agreed was that
each restraint was severable.
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8. An acknowledgment by an employee in a restraint of trade
agreement that the restraint is fair reasonable and necessary is not
decisive. David Whul (Pty) Ltd v Badler 1984 3 SA page 427 (W) at
434, Bonnet and another v Schofield 1989 2 SA 156 (D) at 160 BC.
9. The parties agreed that in the event of any dispute arising the
matter would be referred for arbitration but nothing would prevent
either party approaching a court for urgent relief.
10.At the same time as the sale agreement was concluded an
employment contract was concluded with the respondent in terms
of which he was employed for two years with applicant and
thereafter for the next three years he could leave after furnishing 30
days notice but there was a disincentive as he could not work in the
liquor industry as a result of the restraint provision.
11. The respondent alleges that without the cushion of this employment
for five years with the salary involved R525 000 per annum he
would never have contemplated agreeing to the restriction to his
economic activity envisaged by the restraint.
12. The applicant has placed on record in its founding papers evidence
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and indeed it is common cause that the respondent is currently
involved in the business of Market Demand which is in the business
of selling liquor as well approximately five blocks from where the
applicant’s premises are situated.
13.The respondent concedes that he is employed by Market Demand
which is run by his two cousins. He also places on record that he
received R1.4 million in respect of the sale of the business for
himself.
14.The applicant has restricted its relief to the province of KwaZulu
Natal. The restraint will run from the effective date mentioned in the
contract namely 1 June 2005 for a period of five years.
15.Mr Callum submitted that the Court is called upon to determine
whether the restraint relied upon is designed merely for the
prevention of competition or whether it is necessary for the
protection of the applicant’s proprietary interests.
Customer connections
16. I accept that the only protectable interest relied upon by the
applicant is its customer connections.
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17. It is well known that customer connections are protectable where
the relationship formed between the customer and the employee is
so strong that when the employee leaves his employment and joins
a rival he automatically carries the customer with him in his pocket.
See Rawlins v Caravantruck (Pty) Ltd 1993 (1) SA 557 AD at C –
F).
18. As the applicant is seeking an interim interdict he must show either
a clear right or a right which, though prima facie established, is
open to some doubt. In that event the applicant will have to show
that the balance of convenience favours him.
19.The test for the grant of relief involves a consideration of the
prospects of success and the balance of convenience the stronger
the prospects of success, the less need for such balance to favour
the applicant; the weaker the prospects of success the greater the
need for the balance of convenience to favour him. By balance of
convenience is meant the prejudice to the applicant if the interdict
be refused, weighed against the prejudice to the respondent if it be
granted.
20.Even if there are material conflicts of fact the Courts will still grant
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interim relief. The proper approach is to take the facts as set out by
the applicant, together with any facts set out by the respondent,
which the applicant cannot dispute, and to consider whether, having
regard to the inherent probabilities, the applicant should on those
facts obtain final relief at a trial.
21.The facts set up in contradiction by the respondent should then be
considered. If serious doubt is thrown on the case of the applicant
he should not succeed in obtaining temporary relief, for his right,
prima facie established, may only be open to 'some doubt'.
22. If there is mere contradiction, or unconvincing explanation, the
matter should be left to trial and the right be protected in the mean
time, subject of course to the respective prejudice in the grant or
refusal of interim relief.
23.Although the grant of a temporary interdict interferes with a right
which is apparently possessed by the respondent, the position of
the respondent is protected because, although the applicant sets up
a case which prima facie establishes that the respondent has not
the right apparently exercised by him, the test whether or not
temporary relief is to be granted is the harm which will be done.
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24. And in a proper case it might well be that no relief would be granted
to the applicant except on conditions which would compensate the
respondent for interference with his right, should the applicant fail to
show at the trial that he was entitled to interfere. See Eriksen
Motors (Welkom) Ltd v Protea Motors, Warrenton, and Another
1973 (3) SA 685 (A) at 691C G, Webster v Mitchell 1948 (1) SA
1186 (W) at 1189 90, Gool v Minister of Justice and Another 1955
(2) SA 682 (C) at 688E F, Hix Networking Technologies v System
Publishers (Pty) Ltd and Another 1997 (1) SA 391 (A) at 398I
399A and Hydro Holdings (Edms) Bpk v Minister of Public Works
and Another 1977 (2) SA 778 (T).
25. To sum up in this context of a restraint interim interdict I accept also
that the test is whether the facts averred by the applicant, together
with such facts set out by the respondent which are not or cannot
be in dispute, having regard to the inherent probabilities, the
applicant should obtain final relief at a trial (see Simon NO v Air
Operations of Europe AB and Others 1991(1) SA 217 SCA at 228 G
– H).
26. In Rawlins v Caravantruck (Pty) Ltd 1993(1) SA 557 AD it was held
that
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‘Whether the criteria referred to as satisfied is essentially a question of fact in each case, and in many, one of degree. Much will depend on the duties of the employee; his personality; the frequency and duration of contact between him and the customers; where such contact takes place; what knowledge he gains of their requirements and business; the general nature of their relationship (including whether an attachment is formed between them, the extent to which customers rely on the employee and how personal their relationship is); how competitive the rival businesses are; in the case of a salesman, the type of product being sold; and whether there is evidence that customers were lost after the employee left.’ (at page 541 G – I).
27. It is as well to concentrate for a moment on some of the features
mentioned by the learned judge in the context of this matter.
Clearly the respondent was a dynamic personality in the applicant’s
business and had frequent contact with customers. Nestadt JA
refers to the factor as to how competitive the rival businesses are. It
is clear that in the liquor business competition is rife and very fierce.
28.The respondent alleges that trade rivals such as Makro, Trade
Centre and Liberty Liquors are very competitive and that whatever
applicant had to offer it had to be at a price that matched those of
its competitors. There is also a suggestion in the papers that the
applicant was no longer making its products available at competitive
prices due no doubt to the purchase price and sundry other factors
which made trade with it difficult.
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29.On the question of the type of product being sold there is no
dispute. Liquor is obtained from the suppliers and there is no
variation in quality. Price would seem to be the most important
consideration and no doubt service and efficiency. I will return to
this aspect.
30.Mr Callum pointed out that the facts relied upon by the applicant are
essentially ‘that through the respondent’s building up the business
for a period of approximately 12 years it almost always follows as a
matter of course that he has built up a strong relationship with the
customers and that he has a large influence over them.’
31. Mr Strobl submitted that it is clear from the papers that the
respondent has a flair for business and a strong personality. It also
seems to be common cause that he grew the business from a small
to a very large operation and that the business was supported by a
loyal customer base.
32. In Meter Systems Holdings Ltd v Venter 1993(1) SA 409 (W) at
page 429 et sequor Stegmann J quoted the English case of
Faccenda Chickens Ltd v Fowler and Others; Fowler v Faccenda
Chickens Ltd [1985] 1 All ER 724 (Ch) including the following
passage
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‘It follows, in my opinion, that the servant may, while in the employment of the master, be as agreeable, attentive and skilful as it is in his power to be to others with the ultimate view of obtaining the benefit of the customers' friendly feelings when he calls upon them if and when he sets up business for himself. That is, of course, where there is no valid restrictive clause preventing him doing so.’
33. I will return to the question of the restrictive clause later in this
judgment.
34. I also accept that the respondent has built up strong relationships
with the applicant’s customers and has a large influence over them.
35.Mention is made of three customers whom the applicant alleges
have been poached away by the respondent.
36.The first, Booth’s Bottle Store (South) (Pty) Ltd is alleged to have
been a customer for five or six years. The sales figures are certainly
very dramatic. From a high of R271 000 odd in December 2006 the
sales have dropped to nil by July 2007.
37.The respondent replies to this by explaining that the applicant has
increased its prices and is no longer as competitive as it was and
that this customer no longer deals with middle men such as
applicant and buys directly from the suppliers.
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38.The same can be said for Stanger Liquor Rama. The sales from
here have shown a similar dramatic drop from some half million
rand sales in October 2006 to nil in February the next year.
39.The owners of each of these customers have filed affidavits
explaining why they no longer buy from applicant.
40. The owner of Sean’s Discount Liquors, Sean Gild maintains that the
sole criterion in the liquor industry is price and he no longer does
business with the applicant because its prices are too inconsistent.
He purchases from Liberty Liquors, Makro and Trade Centre.
41.The sales of this concern also showed a dramatic drop November
2006 to May 2007.
42.The owner of Stanger Liquor Rama, Vikash Rampurthab says much
the same, emphasising that he deals directly with wholesalers as a
result of the growth of his business. Should he need the services of
a middle man he will always allow price to dictate where he buys.
43.From the above it is clear that there is a plausible answer from the
three customers who are alleged to have been poached by the
13
respondent. Whereas the applicant relied on inference from the fact
of the sales the respondent puts up positive facts which explain the
fall in sales.
44. Mr Callum argued that respondent maintains that the only factor as
to whether a potential customer will conclude a transaction with a
player in the industry is price. I am of the judgment that this is a
trifle naïve as there must be other factors which impact on trade
such as locality, convenience, service and affability of the staff. But
I cannot exclude that price is a dominating factor.
45. Mr Callum also submitted that no averments have been made that
might demonstrate that the respondent’s influence with the
applicant’s customers was such that ‘he automatically carries the
customer with him in his pocket’.
46. He also submitted that the applicant has failed to set out any
compelling material from which a customer connection of the kind
protectable in law can be determined. It is also clear that the
business relationship between the respondent and the applicant’s
customers consists of the supply of liquor to customers for resale to
the public.
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47. Mr Callum argued that no reason has been advanced that might
reasonably cast doubt on the respondent’s version that no customer
would buy liquor from him no matter how friendly the relationship
unless his prices were lower than those of his competitors. It is not
disputed by the applicant that its highly competitive selling prices to
its customers were a significant feature of its success.
48. I also accept that the applicant has failed to show on even a prima
facie level that the respondent has solicited its customers or that
there is a real apprehension that he may do so. The mere fact that
the respondent is employed in the liquor industry which is the only
fact of substance relied on by the applicant is insufficient to support
a claim for the relief sought by the applicant.
49. I do accept however that not the whole truth appears to have been
told and that the arbitration may be the proper forum for a full
ventilation of this issue.
The goodwill
50. Besides the reliance on customer connections the applicant’s
complaint is that ‘it has not only paid for the right not to have the
respondent and\or any other members of the previous owner poach
the business.’
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51. It seems clear that the value attached to such trade connections as
at the time the applicant purchased the business was in the region
of R5 million and has been reflected in the applicant’s financials as
goodwill. This should be dealt with at the same time as the question
of respondent’s dismissal is considered.
52. One of the two main forms of contracts in restraint of trade concern
potential competitors, namely where the seller of the goodwill of a
business undertakes not to carry on a similar business in
competition with the purchaser. See A Becker & Co (Pty) Ltd v
Becker 1981 3 SA 406 (A); Sellers v Eliovson 1985 1 SA 263 (W);
Botha v Carapax Shadeports (Pty) Ltd 1992 1 SA 202 (A); Chubb
Fire Security (Pty) Ltd v Greaves 1993 4 SA 358 (W); Manousakis v
Renpal Entertainment CC 1997 4 SA 552 (C).
53. Where a person has sold his goodwill in a business then, even
without a restrictive trade covenant, he is not permitted in law to
take back improperly that which he has sold and in an English case,
Trego v Hunt, 1896 A.C. 7 at p. 24, Lord MACNAGHTEN, dealing
with sale of goodwill where there was no restrictive trade covenant,
said as follows:
'And so it has resulted that a person who sells the goodwill of his business is
16
under no obligation to retire from the field. Trade he undoubtedly may, and in the very same line of business. If he has not bound himself by special stipulation, and if there is no evidence of the understanding of the parties beyond that which is to be found in all cases, he is free to carry on business wherever he chooses. But, then, how far may he go? He may do everything that a stranger, in the ordinary course, would be in a position to do. He may set up where he will. He may push his wares as much as he pleases. He may thus interfere with the custom of his neighbour as a stranger and an outsider might do: but he must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value. He must not make his approaches from the vantageground of his former position, moving under cover of a connection which is no longer his. He may not sell the custom and steal away the customers in that fashion. That, at all events, is opposed to the common understanding of mankind and the rudiments of commercial morality and is not I think to be excused by any maxim of public policy.'
54. In this matter there is, of course, a specific restraint. In dealing with
the reasonableness of restraints the courts have over time looked at
the unequal bargaining terms of the parties. Where the restraint
was agreed upon by parties contracting on equal terms, I accept
that the general tendency of the court was not to interfere since the
parties themselves might often be regarded as the best judges as to
what protection was reasonable in their own interests.
55. This occurred for example with the seller and buyer of the goodwill
of a business. In this regard it was held in A Becker & Co (Pty) Ltd
v Becker supra 419 (and see Manousakis v Renpal Entertainment
CC supra 560; compare Berco Sameday Express v McNeil 1996 4
All SA 100 (W) 107–108 113 et seq) that where a business is sold
17
with goodwill subject to a restraint of trade, the seller is precluded,
even after the restraint has expired, from directly utilising the
goodwill sold, eg by actively soliciting his or her former customers.
56.Mr Callum submitted that a purchase of goodwill may not, even by
means of contractual restraint agreed to by the seller, eliminate
competition.
‘It has long been accepted that the mere elimination of competition as such is not the kind of interest which can be protected by a restriction of freedom of trade after the termination of a contract; that is, that it does not weigh up against the prejudice which the other party will suffer if he cannot freely exercise his calling. The position does not change because the restraint was not arbitrarily stipulated but was contracted for in order to protect an investment, irrespective of whether it was an investment in time and attention devoted to the training of an employee. That does not mean that an investment of this kind is not deserving of protection; it only means that it cannot normally be protected by means of a provision which attempts to restrict freedom of trade after termination of the agreement; stated differently, the interest which the restraint attempts to protect in this manner does not as a rule weigh up against the interest of the other party not to be unemployed in his chosen field.’
Humphrys v Laser Transport Holdings Ltd and Another 1994(4) SA
388 CPD at 402 B – E. See also Manousakis and Another v Renpal
Entertainment CC 1977(4) SA 552 CPD at 561 D and Basson v
Chilwan and Others 1993(3) SA 742 AD.
57. The respondent is working some five blocks away in the same
industry. At that level it seems that it is possible that he is interfering
with the goodwill that he sold to applicant. Goodwill consists of
18
course in a large part of the customers of the applicant and the
reputation together with other intangible factors.
58.Mention has been made of three customers who have left applicant.
Explanations have been supplied as to why they left. There are a lot
of allegations about the importance of price and other factors in the
decline of applicant’s business. It seems to me that only oral
evidence at the arbitration will truly determine the extent and nature
of respondent’s interference with applicant’s trade and whether it
impinges on the goodwill applicant bought.
The dismissal of the respondent
59. In determining whether interim relief should be granted it is also
important to look at the severing of relations between the applicant
and respondent.
60.The precise relationship between the sale agreement and the
employment contract is not clear.
61. There is a comprehensive employment contract annexed to the
papers with detailed clauses relating to the normal matters of
19
employment. The employment contract between applicant and
respondent states that respondent’s employment ‘is subject to the
conditions stipulated in the Sale of business agreement which
specifies an employment period of two years’. The sale agreement
does not so provide and makes no mention of this fact.
62.The employment contract then provides for the parties to enter into
an employment or consultancy agreement at the expiry of the two
years. The sale agreement makes no mention of this either. The
sale of the business agreement excludes registered beneficial
members of the seller as employees. This would seem to exclude
the respondent from the category of employees whose employment
was automatically taken over by the applicant in terms of section
197 of the Labour Relations Act.
63. The applicant did not make mention of the fact that the respondent
was dismissed after allegations of theft were made against him. It
is clear that he was given short shrift and frogmarched out of the
premises without any sort of hearing whatsoever. The subsequent
suggestion by the applicant that he was merely suspended does not
convince.
64.The respondent alleges that he was fired because the applicant
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wanted to hire someone on a lower salary level than the R525
000,00 per annum he was receiving. The respondent embarked on
litigation through the Labour Court system and his claim was settled
by payment by the applicant of R188 353,32.
65. The applicant made allegations in a letter dated 8 December 2006
to respondent that he misappropriated R200 000,00 but it clearly
did not advance that case nor has it been made out in these
papers. In all probability had he been guilty of misappropriation of
the sort mentioned in the letter there must have been a paper trail
indicating his guilt. In the absence of any proof on these papers and
given the test in interim interdicts the most plausible inference to be
drawn is that the dismissal of the respondent was to effect savings.
66. It seems to me that oral evidence at the arbitration will have clear
up the precise relationship between the employment and sale
agreements. Prima facie the one refers to the other which includes
no mention of the first. What appears to have occurred is that the
sale agreement was prepared by lawyers and the employment
agreement by the parties themselves, without recourse to lawyers.
Doubtless lawyers would have pointed out the anomalies.
67.What is clear is that respondent would work for the applicant for a
21
minimum of two years and thereafter for a longer period as a
consultant as agreed between the parties. There would have been
advantages to both parties in this arrangement. The applicant would
have his dynamic sales abilities at its disposal and the respondent
would be in receipt of a substantial salary. Both would suffer if the
relationship was terminated.
68. I will have to try and read the two together. In general if a restraint
clause forms an integral part of a contract of employment, the
wrongful termination of the contract will also terminate the restraint
clause (see Drewtons (Pty) Ltd v Carlie 1981 4 SA 305 (C) at 308;
Chubb Fire Security (Pty) Ltd v Greaves supra 362; Botha v
Carapax Shadeports (Pty) Ltd supra 215; Basson v Chilwan 1993 3
SA 742 (A) 772), unless there are terms to the contrary: Reeves v
Marfield Insurance Brokers CC 1996 3 SA 766 (A) 771–774.
69. In Drewtons case at page 308 the court held that
‘An employer cannot repudiate his obligations under the contract of employment and at the same time claim to enforce the restraint clause (vide General Billposting Co Ltd v Atkinson 1909 AC 118). In so far as it is suggested that the restraint was unreasonable because the contract of employment might only have endured for a very short time, it seems to me that whether one judges the reasonableness with reference to what the parties foresaw at the time of contracting (vide Allied Electric (Pty) Ltd v Meyer and Another 1979 (4) SA 325 (W) ) or in the light of what subsequently happened (vide National
22
Chemsearch (SA) (Pty) Ltd v Borrowman and Another (supra)) the restraint was no more than reasonable.’
70. In Chubb Fire Security (Pty) Ltd v Greaves supra 362–364 the court
held that where A bought a business (cum goodwill) from B subject
to a restraint of trade, simultaneously employing B in the business,
the restraint would be enforced against B even if he was later
unlawfully dismissed by A, in order to protect the goodwill bought by
A.
71.The facts in that matter were as follows. G (Pty) Ltd, a company
which carried on a business selling, servicing and distributing fire
protection equipment, and which was effectively controlled by the
respondent, in March 1989 entered into a tripartite agreement with
the respondent and the applicant in terms of which G (Pty) Ltd sold
its business to the applicant. The agreement contained a pactum
de contrahendo in terms of which the respondent bound himself to
enter into an employment contract with the applicant. The
employment contract was entered into on the same day as the sale.
Both agreements contained restraints of trade which restricted the
respondent from carrying on a business relating to the manufacture,
sale and distribution of fire protection equipment in a certain area
for the duration of his employment with the applicant and for a
period of two years thereafter.
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72.Due to certain disagreements between the applicant and the
respondent, the applicant unlawfully dismissed the respondent
about six months later. In an application in a Local Division for an
order interdicting the respondent from being employed with any
competitor of the applicant in contravention of the covenant in
restraint of trade, it was common cause that the agreement was
terminated as a result of the applicant's repudiation thereof. The
applicant, relying on the restraint contained in the employment
agreement, contended that although it was so that the applicant's
breach had caused the cancellation, it was nevertheless entitled to
rely on the restraint clause because it provided that the restraint
would operate 'for a period of two years as from the date of
termination of (respondent's) employment for whatever reason'.
73.The respondent countered, firstly, that the words 'for whatever
reason' had to be interpreted to refer only to the grounds for
termination of the contract enumerated in the agreement itself;
secondly, that the applicant could not rely on the restraint because
that would amount in the circumstances to the applicant profiting
from its own wrong; and, thirdly, that the restraint could in any case
not be enforced because it was contrary to public policy.
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74. It was held in Greaves case that as to the respondent's first point,
that the words 'for whatever reason' in the restraint clause had a
very wide meaning, there being no indication that the parties
intended to in any way restrict the plain meaning of the words so as
to apply only to termination of employment on the grounds
enumerated in the agreement.
75. It was held, further, as to the respondent's second point, that it had
to be kept in mind that the principle that contracts should be
construed so as not to allow a party to profit from his own wrong
was no more than a rule of construction: there was no authority to
the effect that, as a matter of substantive law, parties could not
agree that some advantage or another would accrue to one of them
as a result of that party's own breach of contract.
76. It was held, further, that because the words 'for whatever reason'
bore their plain and unrestricted meaning, there was no room for
the application of the abovementioned rule of construction, so that
the agreement itself allowed the applicant to rely on the restraint.
77. It was held, further, as to the respondent's third point, that it had to
be taken into account (1) that the employment agreement was part
of the larger transaction in terms of which the applicant bought the
25
business, including the goodwill, from G (Pty) Ltd, and (2) that the
respondent, as a man with a considerable reputation in the fire
protection industry, was in a position, by competing with the
applicant, in effect to take back the goodwill sold if not restrained.
78. It was held finally that the present restraint was accordingly
imposed not only as a quid pro quo for the providing of
employment, but equally, if not primarily, in order to protect the
goodwill bought by the applicant, and that it would not, in the factual
context of the present agreement, be contrary to public policy to
enforce the restraint.
79. This matter does not have such a clause and can be distinguished
from that case. There is no provision in the sale contract for his
dismissal or the termination of his services.
80. If the applicant, in respondent’s view, repudiated the employment
contract that did not bring it to an end. Respondent had an election
to reject the unilateral repudiation and sue for specific performance
and get his job back, or accept the repudiation and seek damages
or compensation in the Labour Court. See Venter v Livni 1950(1)
SA 524 (T) at 528.
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81. It is clear the respondent elected to challenge his dismissal and to
seek compensation which he was paid as is set out above. He
accepts that the employment contract came to an end. He records it
as being an acceptance of the repudiation of the contract by the
applicant.
82.What took place was a settlement at the CCMA of his employment
situation. What was not addressed was the effect such had on his
relationship with applicant via the restraint clause. What is clear is
that the acceptance of the settlement constituted much less than he
could have expected to receive had he continued in employment.
83. Mr Callum referred to the following passage in Reeves and Another
v Marfield Insurance Brokers CC and Another 1996(3) SA 766 AD
at 776 G – H to persuade me that the dismissal should be taken
into account as one of the factors in determining whether to grant
interim relief on the restraint provisions.
‘Whereas in the present case, the restraint may be invoked even following the wrongful termination of the contract of employment by the employer, there would seem to be no reason in principle why the existence of such a provision in the restraint agreement and the circumstances in which the employment relationship came to be terminated should not be included in what Botha JA in the Basson case supra at 777D, described as ‘the multitude of factors to be taken into account in the inquiry as to the reasonableness of the restraint’. In the absence of fraud or wilful wrongdoing the termination of the contract of employment in consequence of a breach or an unfair labour practice on the part of the employee would not on its own, I think, ordinarily carry much weight. In appropriate circumstances, however, such
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conduct, eg the repudiation of the contract by the employer and the nature thereof, may well serve to tip the scales in favour of the conclusion that it would be contrary to the public interest to enforce the restraint.’
84. Mr Callum submitted that it would be iniquitous to enforce the
restraint in the light of the circumstances in which the respondent’s
contract was repudiated.
85. This is of course posited on the basis that theft will never be proved
and that the small amount of compensation should be taken into
account in determining matters of public interest in enforcing the
restraint.
Reasonableness of restraint
86. In Reddy v Siemens 2007 2 SA 486 (SCA) 493 et seq Malan AJA
set out the present position of the law including the application of
the Constitution. This case and the cases quoted by the Court may
be summarized in the following manner. Much of this is verbatim
from the judgment or a précis thereof.
87.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
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should comply with their contractual obligations, a notion expressed
by the maxim pacta servanda sunt.
88.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 commonlaw
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.
89. In applying these two principal considerations, the particular
interests must be examined. A restraint would be unenforceable if it
prevents a party after termination of his or her employment from
partaking in trade or commerce without a corresponding interest of
the other party deserving of protection. Such a restraint is not in the
public interest. Moreover, a restraint which is reasonable as
between the parties may for some other reason be contrary to the
public interest.
90.The following questions should be looked at in determining these
issues
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(a) is there an interest of the one party which, after coming to end of
agreement, is worthy of protection;
(b) is such interest being threatened by the other party;
(c) if so, does such interest weigh up qualitatively and quantitatively
against the interest of the other party to the extent that the other
party must remain economically inactive and unproductive;
(d) is there any other facet of public interest that has nothing to do
with the relationship of the parties but which nevertheless
requires the restraint to be enforced or not; and
(e) does the restraint go further than what is necessary in order to
protect the interest?
91. As the applicant is seeking an interim interdict he must show either
a clear right or a right which, though prima facie established, is
open some doubt. In that event the applicant will have to show that
the balance of convenience favours him. I have already set out my
reasons for concluding that a prima facie right has not been made
out that customers left the applicant because of respondent’s
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machinations.
92.The test for the grant of relief involves a consideration of the
prospects of success and the balance of convenience the stronger
the prospects of success, the less need for such balance to favour
the applicant; the weaker the prospects of success the greater the
need for the balance of convenience to favour him. By balance of
convenience is meant the prejudice to the applicant if the interdict
be refused, weighed against the prejudice to the respondent if it be
granted.
93.Even if there are material conflicts of fact the Courts will still grant
interim relief. The proper approach is to take the facts as set out by
the applicant, together with any facts set out by the respondent,
which the applicant cannot dispute, and to consider whether, having
regard to the inherent probabilities, the applicant should on those
facts obtain final relief at a trial.
94. I have set out respondent’s case on the customer connections and
explained why it has to prevail at the level of interim relief.
95.The facts set up by the applicant allege a poaching of customers.
This is adequately refuted in my view and needs no further
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attention.
96.Secondly the facts alleged by the applicant posit a breach of the
restraint by the respondent being employed in the liquor industry.
He puts up facts relating to his dismissal and how he is prejudiced
by not receiving his salary of R525 000 per annum. If he were
employed he would make his undoubted services available to the
applicant.
97.The respondent maintains that he needs some R40 000 for his
monthly expenses and that if he is deprived of his employment he
will suffer seriously.
98.The applicant in reply points to various other interests of the
respondent including property holding, financial intermediation,
insurance, real estate and other business interests. All this was put
up in reply and as such cannot be properly considered. The
respondent has not however applied to file any further affidavit and I
must conclude the allegations paint a picture of a man with
widespread interests.
99.He also defended himself on the theft allegations on the basis that
he was earning some R250 000 per month taking into account all
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his business interests.
100.The applicant has dismissed him I believe to effect savings in its
salary budget. Whatever one says about the two contracts it seems
to me that they worked in tandem and by dismissing the respondent
he was deprived of a greater benefit than the loss the applicant
suffered.
101.I believe the balance of convenience does not favour the applicant.
It dismissed a man who was the ‘milk cow’ of the business and now
complains that he works for someone else and causes that
business to flourish. It settled a case with him that related only to
his employment relationship.
102.It seems to me that the arbitration proceedings should be the
forum for the proper determination of this matter. If these are
instituted expeditiously any prejudice to applicant can be
ameliorated. No interim relief should be granted.
103.The application is dismissed with costs.
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