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REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: 2013/9906

DATE:14/06/2013

In the matter between:

VALUE LOGISTICS LIMITED...............................................................Applicant

and

PAULA SMIT …..........................................................................First Respondent

DPD LASER EXPRESS LOGISTICS (PTY) LIMITED

TRADING INTER ALIA AS DAWN WING COURIERS..Second Respondent

JUDGMENT

MAYAT J

THE PARTIES

[1] The applicant in this matter is a company, which conducts business in the sphere of “retail logistics”. The first respondent (“Smit”) is a former employee of the applicant, who is presently employed by the second respondent, a company named DPD Laser Express Logistics (Pty) Ltd (“DPD”), trading inter alia as Dawn Wing Couriers (“Dawn Wing”).

RELIEF SOUGHT

[2] The relief, which the applicant seeks, is premised upon a covenant in restraint of trade. In seeking to enforce the said covenant, the applicant seeks a final interdict to restrain Smit from:

i) utilising any confidential information concerning the business affairs of the applicant, which may have come to her knowledge during her employment with the applicant;

ii) being employed by DPD, either directly or indirectly, for a period of two years from the 8^th of March 2013; and

iii) soliciting or touting for any clients of the applicant, also for a period of two years from the 8^th of March 2013.

[3] It was contended by counsel for the applicant at the hearing of this matter that there were no bona fide disputes of fact, and this matter could accordingly be determined merely on the papers. Be that as it may, the applicant also seeks in the alternative, an interim interdict, substantially in the same form as above, pending the outcome of an action to be instituted by the applicant.

[4] The applicant further requests the court to direct that a “confidentiality affidavit” containing certain information with documents annexed thereto, not be retained in the court file and be returned to the applicant’s attorneys at the conclusion of this matter.

[5] Even though no relief is sought against DPD, it is cited as an interested party. Both DPD and Smit oppose the present application.

PERTINENT BACKGROUND

[6] As already indicated, the applicant’s core business is described as “logistics” or “retail logistics”. The scope of this core business, as described in the founding affidavit, relates specifically to warehousing and distribution by the applicant on behalf of chain stores and retail customers, such as Pick ‘n Pay, Edgars, Game, etc. The notion of “retail logistics” in the sphere of warehousing and distribution is accordingly explained in the applicant’s founding papers on the basis that the applicant specializes in processing deliveries to chain stores as well as retail stores, on behalf of customers, who utilise the applicant’s warehousing facilities. To this end, it is not in dispute that the applicant has established “in-houses” in the form of small branches for retail customers at the applicant’s premises. Whilst Smit indicates in her answering affidavit that the applicant’s monthly turnover was not in her knowledge, it is not in dispute, as stated in the applicant’s founding affidavit, that the turnover generated by the applicant from retail customers and chain stores, which have “in-house” branch accounts with the applicant, constitutes some R400 000-00 a month. Thus, Smit does not dispute the assertion in the founding affidavit that such turnover comprises 80% of the revenue stream of the applicant’s “logistics” division.

[7] It is further stated in the founding affidavit that the business of the applicant includes express courier services, including a same day service, overnight delivery, express economy delivery and international courier services.

[8] After Smit filed an answering affidavit relating to the nature of the business operated by Dawn Wing, it is stated in the applicant’s replying affidavit that in addition to the retail component from the applicant’s warehouse to retail chain stores, as set out in the applicant’s founding affidavit, “logistics” also incorporates a “front door component” for deliveries from the applicant’s warehouse to independent stores.

[9] It is not in dispute that each in-house branch operated by the applicant is fully functional with employees, drivers, computer personnel, furniture, computer equipment, trucks, advertising material, packaging, stationary, security, forklifts, pallets and labeling.

[10] It is common cause that the applicant employed Smit from May 2010, as the branch manager of the applicant’s Klerksdorp branch. She was subsequently transferred to Johannesburg, where she was promoted, with effect from the 1^st of January 2012 to the position of manager of the applicant’s in-house branches. She held the said position in Johannesburg until the 7^th of March 2013.

[11] It is also not in dispute that at the time Smit was initially employed by the applicant in 2010, her employment contract with the applicant included a clause relating to confidentiality as well as a clause relating to a restraint of trade. Specifically, clause 14 of her employment contract made reference to the applicant’s confidentiality policy, which was annexed and initialed as an annexure to her employment contract. It is not in dispute that in terms of the said policy, confidential information was defined to include:

“the company’s trade secrets and confidential information including, inter alia, but without limiting the generality of the aforegoing, the following matters: the company’s systems, data marketing information records, client and price lists, formulae, specifications, photographs, computer programmes, professional secrets, technology, methods and costs of operation, trade secrets, design, know-how, projections, feasibility studies, knowledge of an (sic) influence over the company’s customers and business associates, the contractual arrangements between the company and its business associates, the financial details of the company’s relationship with its business associates, the financial detail (including credit and discount terms) relating to the company’s customers, the names of prospective customers and their requirements, details of the company’s financial structure and operating results, details of remuneration paid by the company to various employees and their duties, or any other information of any kind whatsoever disclosed to or obtained by the employee during the course of his/her employment in any manner whatsoever and any other matters which relate to the business of the company and in respect of which information is not readily available to a competitor of the company, or any reference thereto.”

[12] In terms of clause 15.1 of her employment contract, Smit agreed that by virtue of the nature of her employment with the applicant, she would have confidential information relating to the applicant and would also develop relations with the applicant’s customers. Clause 15.2.1 of her employment contract further provided that for a period of two years after the termination of her employment with the applicant for any reason, she would not:

“ knowingly be directly or indirectly employed, have an interested (sic) in or be engaged within a radius of 75 kilometers of any of the Company’s [the applicant’s] business premises with any company, firm or business which competes with the business of the Company; anywhere in South Africa.”

In terms of clause 15.2.2 of her employment contract, Smit was also precluded from soliciting or touting for any clients of the applicant or suppliers or other connections of the applicant, and from seeking to solicit, tout for or entice away any of the staff for the time being of the applicant.

[13] Smit’s job description as manager of the in-house branches was recorded in a document dated the 1^st of March 2012. In terms of the said document, Smit’s job specifications and duties included inter alia conducting operational audits of in-house branches; ensuring that the requirements of customers are met; checking standard operating procedures, including those relating to marking and labeling of files and boxes; updating in-house organograms, reflecting herself as the in-house manager; monitoring the cost and supply of stationary utilised at in-house branches; dealing with issues of staffing at in-house branches; enforcing daily site operation meetings; ensuring minutes are taken at meetings with the applicant’s customers; ensuring that customer complaints are properly logged; investigating “no charge” requests from customers; ensuring quality control; ensuring that floor walks are done on a regular basis by all customer managers; conducting site operations; assisting with invoicing; checking outstanding credits and claims during customer visits; communicating with customers on a daily basis in respect of all aspects of the supply chain; ensuring staff comply with standard operating procedures; visiting the applicant’s customers on a regular basis and building relationships with such customers, (The frequency of this duty was specifically stipulated to be “daily”); and setting up internal meetings with all key players at the in-house branches to address and discuss challenges.

[14] It appears from a document on record that the applicant gave Smit certain monthly incentives and Smit also received performance bonuses in relation to her management goals. Such goals included inter alia “relationship building and increased revenue” as well as “customer retention”.

[15] As regards Smit’s obligation to visit the applicant’s customers daily, Smit emphasizes that she was required to manage 32 in-house branches. The applicant concedes in this respect that practically speaking she was only able to visit two or three customers a day. The sales director of the applicant further confirms in the founding affidavit that when Smit was promoted, she was introduced to the main contact person at each of the 32 customers for whom the applicant managed in-house branches. Against this background, it is reiterated in the founding affidavit that Smit was required to visit customers on a regular basis, hold regular meetings with key representatives of the applicant’s customers (such as chief executive officers, financial directors, operations managers, warehouse managers and logistics managers) to discuss issues relating to the operation and administration of in-house branches, and to build relationships with the applicant’s customers.

[16] Against this background, it is emphasized in the founding papers that Smit’s actual activities included inter alia maintaining in-house operational efficiency; handling operational queries; monitoring all operational performance; checking vehicles; meeting in-house branch administrative procedures; “actioning” audit results; ensuring adequacy of systems to meet the requirements of customers; ensuring weekly operational reports are timeously received; assisting with budgets and forecasts relating to her in-house function; maintaining costs in in-house branches; addressing accounting queries; addressing all queries from customers and staff; adhering to cut-off times at different branches; holding meetings with key representatives of the applicant’s customers to discuss issues relating to the operation and administration of in-house branches; identifying problems; implementing procedures to deal with customer complainants; maintaining existing business; arranging activities between the departments in relation to matters such as computers, furnishing, stationary, and vehicle requirements; reporting on marketing opportunities; meeting relevant departments; maximizing the use of equipment; appointing staff in in-house branches; being in charge of detailed aspects of human resources at in-house branches, including dealing with attendance/absenteeism; and being in charge of the financial control of all in-house branches.

[17] The sales director of the applicant avers in the founding affidavit that as manager of the applicant’s in-house branches, Smit obtained “substantial” confidential information of the applicant, which information is not in the public domain, and was accordingly in a position to enable “a competitor” of the applicant to gain an unfair advantage in competing with the applicant. It is further averred that Smit had acquired substantial knowledge of the applicant’s in-house customers including a history of the industry in which the customer is involved; the type of product the said customer is selling; how the customer’s product is stored, packaged and handled; the layout of the customer’s premises; the mode of transport required by the customer; the type of equipment required by the customer; the personnel required for the vehicles servicing the customer; the customer’s peak months; distribution information relating to the customer such as frequency of deliveries; the infrastructure of each customer; the security requirements of the customer as well as the revenue each customer brings to the applicant.

[18] It is also contended in relation to confidential information that Smit was aware of contractual arrangements between the applicant and its customers, including pricing arrangements, discounts and payment arrangements with customers. It was further averred that Smit was aware that the applicant charged different rates to different customers.

[19] The sales director of the applicant also avers in the founding affidavit that Smit has knowledge of how the applicant “reaches” its prices/costings and can also work out such costing on the basis of volumes, which go out of each in-house branch as well as payments received by the applicant. Thus, it is further averred that “a competitor” (and not DPD specifically) armed with this information would be able to undercut the applicant. In addition, it is stated that the applicant has knowledge of how the applicant’s quotes are calculated as well as in-house costing of the applicant. As such, it is averred that Smit is in a position to approach the applicant’s customers and to offer in-house services at a lower rate than that of the applicant, particularly so as she has knowledge of key contact persons of the applicant’s top customers.

[20] It is further stated in relation to confidential information that Smit has acquired knowledge inter alia of problems experienced by customers of the applicant; areas of the in-house branches, which were not performing well; processes involved in setting up new in-house branches; prospective new customers (sent to Smit by email); the identity of the applicant’s ad hoc customers; future plans of the applicant; lead times for different locations; the weak and strong points of the applicant’s depots; the applicant’s statements and account queries. It is accordingly contended that all this information could be used to obtain an improper advantage over the applicant.

[21] It is further contended that Smit is in a position to advise “a competitor” (again not DPD specifically) how to implement the applicant’s methods on the basis of confidential information in her knowledge. Similarly, it is contended that Smit’s knowledge of turn-around times and related information of the applicant would place her in a prime position to exploit such information to the detriment of the applicant. In addition, it is contended that Smit can use her knowledge of the applicant’s computer systems to the detriment of the applicant. It is further averred in the founding affidavit that as Smit has knowledge of the applicant’s charges for certain services, she is in a position to approach the applicant’s customers with such knowledge, alternatively to impart this knowledge to DPD, which will in turn, be in a position to approach the applicant’s customers.

[22] It is common cause that Smit resigned from the employ of the applicant on the 7^th of March 2013. To the extent that it is relevant in this context, Smit stated in her letter of resignation to the applicant that:

“I acknowledge my restraint and will honour this restraint in so much that I will not contact or target any of the Value Logistics clients, divulge any information about Value’s client base or do anything that would prejudice Value logistics in any manner or form whatsoever as stipulated by the restraint”

As already indicated, Smit’s last working day with the applicant was the 7^th of March 2013.

[23] It is also common cause that after leaving the employ of the applicant, Smit was employed by Dawn Wing, from March 2013. She states in her answering affidavit that she has been employed as the client retention manager of Dawn Wing, which is one of two divisions of DPD. She further states that she does not have any sales responsibilities with Dawn Wing and was specifically employed by DPD to retain existing clients of Dawn Wing. This is supported by a document annexed to her employment contract, which sets out her key responsibilities primarily on the basis that she has to “Manage and lead business retention team”. She confirms in her affidavit that Time Freight is also a division of DPD, which provides express freight collection services.

[24] It appears not to be in dispute from the papers that a certain Evans Mandawe (“Mandawe”), who was previously responsible for the applicant’s ad hoc customers, and who previously reported to Smit, took over the management of the applicant’s in-house branches, after Smit left the applicant. Smit states in her answering affidavit, and it is not disputed that Mandawe had already established relationships with all clients she serviced, and accordingly simply continued servicing the 32 customers allocated to her.

[25] Against this background, the sales director of the applicant makes reference in the founding papers to websites, which are apparently linked, relating to companies which fall under the umbrella of a company named Laser Group (Pty) Ltd (“Laser Group”). Extracts from the said websites and related marketing material of Laser Group are annexed to the applicant’s founding affidavit. It appears from the said websites and marketing material that Laser Group, which was established in 1990, markets itself as a leading diversified transport and “logistics” group. It also appears from the extracts annexed to the founding affidavit that Laser Group is made up of a number of divisions, which apparently conducts business in airfreight, movement of bulk goods, clearing and forwarding, express road freight, refrigerated distribution as well as other related “logistics services”. The said extracts also reflect that Laser Group’s services extend to “traditional courier services or specialized logistics services.”

[26] It is not in dispute on the basis of the websites referred to by the applicant that as from the 1^st of January 2007, the Dawn Wing division was transferred to DPD. Dawn Wing is described in the relevant website as a leading domestic courier company, trading both locally and internationally, which provides “a comprehensive suite of express delivery solutions including same day, overnight, economy and road freight service and express warehousing.”

[27] On the basis of the above information, the sales director of the applicant states in her founding affidavit that:

“I firmly believe that Dawn Wing itself does retail logistics but even if Dawn Wing itself does limited retail logistics, its associated companies offer retail logistics.”

It is also stated in this context that Electrolux and Bosch-Siemens are customers of Laser Group. The said director further states that the services of Dawn Wing include road freight services, as well as express delivery services and “additional services”, including specialized “logistic services” via one of its divisions. It is also suggested that Dawn Wing’s services include warehousing and “logistics”. Thus, it is stated that:

“It is abundantly clear that the …. subsidiaries [of the Laser Group ] … work in conjunction with one another and that they all, including the Second Respondent and Dawn Wing Division, perform the same services as the Applicant, in direct competition with the Applicant”

[28] The respondents deny that all the members of Laser Group perform the same services as the applicant and deny further that all the members of Laser Group collectively are in competition with the applicant. Whilst it was suggested on behalf of the respondents that aspects of the information, obtained from the above websites were outdated, it is not in in dispute that DPD is affiliated to Laser Group.

[29] Smit confirms in her answering affidavit that for the purposes of the present proceedings, she ascertained information pertaining to Laser Group from the chief executive officer of Dawn Wing, a certain Eduard Christian Vosloo (“Vosloo”) on the basis of an organogram, which is on record. It is not in dispute on the basis of such organogram that Laser Group has a 25% shareholding in DPD, with the remaining 75% shareholding in DPD being held by a French company, named Geo Post, a member of the La Poste Group. As already indicated, DPD comprises two divisions, including Dawn Wing. It is not in dispute that Laser Group also has a number of other interests, including a 100% shareholding in a company named Laser Logistics (Pty) Ltd (“Laser Logistics”), as well as a 50% shareholding in a company named GAC Laser International (Pty) Ltd (“GAC”), with the remaining 50% being held by an entity named the Gulf Agency Company.

[30] Smit denies that she is in breach of her restraint of trade agreement with the applicant, and denies further that either DPD or Dawn Wing competes with the applicant. She further states that the client base of her present employer is completely different to that of the applicant. She emphasizes in this respect that the core business of the applicant is retail distribution, essentially comprising the distribution and transportation of goods for the applicant’s customers, whilst the core business of Dawn Wing is courier services.

[31] Smit makes reference in her answering affidavit to the applicant’s annual report for 2012, which indicates that the applicant (Value Logistics) forms part of a group structure, which includes Value Logistics, Namibia; Value Logistics, Botswana; Value Logistics Personnel Services; Value Specialised Logistics; and Value SA. The said annual report also stipulates that the two business components of the said group structure are firstly, “general distribution” and secondly, truck rental and “other”. Whilst no further details are given of the truck rental and “other” component, the general distribution services are stated to include “courier break bulk and single party distribution and warehousing services to a wide range of customers.” The general distribution segment is divided in turn into four operational areas in the annual report: these are Value Logistics (for supply chain solutions, warehousing and national distribution); Freight Pak (for “integrated logistics” and supply chain service for dangerous goods, primarily in the chemical sector); Specialised Logistics (for mining and mineral transportation solutions); and Value Express (offering inter alia same day delivery, overnight delivery, express delivery and international courier). Thus, as already indicated, it is contended by the applicant in the context of the present application, that Dawn Wing competes with the Value Logistics operational division of the applicant.

[32] Smit confirms in her answering affidavit that she had distinct operational functions with the applicant, in the sphere of distribution only, and not warehousing. She emphasizes that the applicant had a separate sales team, which was responsible for signing up new clients, and negotiating rates, quotations and possible discounts. She also emphasizes that her role did not include any responsibilities pertaining to signing up new clients or the development of strategies to gain new clients. As such, her role was limited to the operational aspects of distribution and she only advised the sales team on such aspects as the costs of running an in-house branch. She also states that in executing her duties, she was never privy to contractual arrangements between the applicant and its customers.

[33] Smit admits that in the course of her employment with the applicant, she was privy to certain information relating to the 32 customers allocated to her, which can be classified as confidential to competitors. Thus, she does not deny that she has knowledge of certain information such as the applicant’s lead times, problem areas and audits. However, she states that such information has no relevance in her present position with Dawn Wings, and accordingly presents no potential risk to the applicant.

[34] As regards other confidential information, Smit denies that she had access to information relating to the applicant’s pricing strategies, discounts and methodologies followed with respect to the rates charged by the applicant from time to time. She explains in this context that she was not in the applicant’s sales department. In addition, she states in relation to emails sent to her on the computer used by her at the time, that the said computer was confiscated before she left the employ of the applicant.

[35] As regards Dawn Wing, as already indicated, Smit explains in her answering affidavit that DPD has two divisions, namely Dawn Wing and a division named Time Freight. She states that Dawn Wing is a domestic and international courier company, which is not involved in logistics at all. She further states that Dawn Wing simply does not have the infrastructure to provide transport logistics on the same scale as the applicant, as it is only involved in the distribution of small items by express courier.

[36] As regards Time Freight, Smit states that this division of DPD provides express freight collection services, relating to bulk deliveries on an urgent basis. She further states that this division of DPD is also not a competitor of the applicant, as its business is also completely different from that of the applicant. She explains in an additional affidavit that Time Freight does cash deliveries, but does not do warehousing. She specifically states in this respect that Time Freight does not specialize in retail deliveries, on a similar basis to that carried out by the applicant and Laser Logistics.

[37] As regards the relationship between Dawn Wing and Laser Group, Smit admits that Laser Logistics, which is not a party to the present proceedings, provides “logistics services”. She further states that even though Dawn Wing and Laser Logistics from part of the same group of companies, Laser Logistics operates completely autonomously from DPD and Dawn Wing in a completely different geographic area. Smit also states that there is no financial or managerial integration between the above three entities, whether upstream or downstream. This is so despite the fact two individuals serve on the board of DPD as well as Laser Group and Laser Logistics. As such, she states that she has no contact on a day to day basis with the employees of Laser Logistics, which is linked to DPD by a common shareholder. Moreover, she states that the management of DPD is not expected to contribute to the success of Laser Logistics. In these circumstances, Smit denies that either Dawn Wing or DPD is a competitor of the applicant, in the sense of providing “logistics services” in the sphere of warehousing and distribution.

[38] In these circumstances, Smit confirms that Dawn Wing forms part of a group of companies, which all operate autonomously of each other. As regards Laser Logistics, whilst the respondents’ counsel suggested that the word “logistics” can obviously cover a wide spectrum and range of activities, for the purposes of the present proceedings, Smit does not dispute that Laser Logistics competes with the applicant in certain respects. Thus, Smit admits in her answering affidavit that Electrolux and Siemens were customers of Laser Logistics, at a certain stage. However, she emphasizes that Laser Logistics is an autonomous company, which operates completely separately from Dawn Wing, with no shared or centralised resources. She also emphasizes that the only link between Laser Logistics and DPD is a common shareholder, which plays a significantly lesser role in DPD, as compared to its role in Laser Logistics.

[39] In reply, the applicant relies on an affidavit by a person named Natalie Shireen James (“James”), who was previously employed by Dawn Wing, and is currently employed by the applicant as the national sales manager of the Value Express and international division of the applicant. James further states that DPD, Laser Logistics and GAC Laser all effectively operate as divisions of Laser Group as a whole. She also asserts that Dawn Wing’s express and international delivery service is precisely the same as that conducted by the applicant’s express and international division. In addition, she asserts that Time Freight and Laser Logistics conduct precisely the same business as that conducted by the applicant’s logistics division in road freight and economy delivery services.

[40] James further states in reply that her duties at Dawn Wing included securing business and referrals for Laser Group. In addition, she states that call-centers operated by Laser Logistics, Dawn Wing and Time Freight are instructed to refer any leads for business, which are not directly related to each of them, to one of the other companies linked to Laser Group. James accordingly states that she attended numerous strategy meetings and conferences where representatives of Laser Logistics attended and they were all taught to “cross-trade.” She also indicated that call centers of each company referred business to the other companies.

[41] James further states that Smit introduced her to key contact persons in approximately 10 of the applicant’s Gauteng in-house branches, to enable James, on behalf of the applicant’s Value express and international division, to procure their express services. Thus, James states in her affidavit that she successfully obtained business from the majority of those 10 in-house branches to which she was introduced, and the applicant’s international division continues to render such services.

[42] James further states in reply that she was aware that Dawn Wing operated an in-house division of the Bosch-Siemens Home Appliances Midrand branch. As such, she states that as an employee of Dawn Wing she attended key management meetings at the said in-house branch of Bosch-Siemens on numerous occasions.

[43] In response to the applicant’s replying affidavit, Smit filed a further affidavit on the basis that the applicant’s reply incorporated new evidence, which did not form part of the founding papers. Smit confirms in the said further affidavit that she was not employed by the applicant’s express division and reiterates that she was employed by the logistics division of the applicant, specialising in retail logistics, in the sphere of distribution. Moreover, Smit states that unlike James, neither the applicant nor DPD employed her in a sales capacity. However, Smit does not deny that the applicant has an express and international division. She also reiterates that Dawn Wing provides no services to Electrolux and Bosch-Siemens and asserts that the allegation by the applicant pertaining to Laser Group providing services to Electrolux and Bosch-Siemens is misleading to the extent that it is suggested that Dawn Wing provides services to these companies.

[44] As regards the allegation of “cross-trading” or “cross-selling” in James’ affidavit, Smit states that she confirmed from Vosloo that cross-selling was contemplated by Dawn Wing for a short period prior to February 2012, on the basis that this presented a potential opportunity to grow Dawn Wing. Thus, it is not denied that for a limited period in the past, James was expected to establish relations with Laser Group on the basis of the said strategy of cross-selling. However, Smit further states that DPD did not pursue this strategy, as it was not proved to be financially feasible. Therefore, since the departure of James in February 2012, no new regional sales manager for Dawn Wing has been appointed. Smit also points out that notwithstanding James’ assertions relating to cross-selling, James does not disclose a single instance of cross-selling, which resulting in Dawn Wing referring a “logistics” client to Laser Logistics. She also denies call-center referrals, as suggested by James. Be that as it may, Smit emphasizes that even when cross-selling was pursued as a strategy in the past, each company linked to Laser Group was run completely separately and was managed autonomously at all relevant times.

[45] The “confidentiality affidavit” of the applicant makes reference inter alia to key performance indicator management reports relating to in-house branches, which deal in great detail with aspects such as the number of consignments and parcels delivered per month by the applicant. Reference is also made to operational processes and procedures for an in-house branch, which relates inter alia to the type of product of the customer concerned, checking processes, computer equipment, and so forth. Attached to the said affidavit are a whole range of documents including inter alia audit reports; graphs of volumes per month; graphs of service levels; the number of consignments for a certain period; the volume distribution per area; business procedures; operating procedures; a freight quote request; “sign off forms”; “take on checklists”; a document with the title “Process Flow New Account Take on Logistics”; as well as an email sent to Smit in May 2012. Smit states that some of the information such as audit reports are confidential and known to her, but reiterates that such information cannot be used by Dawn Wing or DPD, simply on the basis that DPD and Dawn Wing have no interest in the business of the applicant. She also describes certain email communications to her, which she no longer possesses as a “wish list” of the applicant at the time for the future and states that these communications are also irrelevant to DPD, and are accordingly not capable of use and application by DPD.

[46] To the extent that it is relevant in this context, there was also reference in the papers to a quotation being obtained from an employee of Dawn Wing, telephonically, by an attorney, who is apparently a professional assistant employed by the applicant’s attorney of record, apparently under misleading circumstances. The transcript of the telephonic conversation between the said attorney and the Dawn Wing employee is annexed to Smit’s later affidavit.

[47] Pursuant to a notice in terms of rule 35(12) by the applicant, DPD provided the applicant with a copy of James’ employment contract with Dawn Wing. The said contract incorporates a restraint of trade in favour of Dawn Wing in relation to customers or prospective customers of Dawn Wing as at the termination date of James’ employment with Dawn Wing. Dawn Wing’s “prescribed services” in terms of the said restraint of trade are defined to include courier, transport and related services.

LEGAL FRAMEWORK

[48] At a general level, it is well established in our law that final relief in motion proceedings can only be granted if the facts stated by the respondents together with admitted facts in the applicant’s affidavits justify such relief.¹ However, if a court is satisfied with the inherent credibility of the factual averments in an applicant’s affidavits, and if the allegations or denials by a respondent are so far-fetched and untenable, that court is justified in rejecting such respondent’s version merely on the papers.

[49] The requisites of a final interdict are also well established in our law. Thus, since the leading case of Setlogelo v Setlogelo 1914 AD 221, it is trite that an applicant seeking a final interdict must establish a clear right, an injury actually committed or reasonably apprehended, and the absence of any other remedy.

[50] As regards the enforceability of a restraint of trade agreement, in the leading case of Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A), the Appellate Division held that English law to the effect that a covenant in restraint of trade is prima facie unenforceable, is not part of our common law. Therefore, a person who objects to the enforcement of a covenant in restraint of trade must prove that the enforcement of such covenant is contrary to public policy. A few years after this judgment, Grosskopf JA in the case of Sunshine Records (Pty) Ltd v Frohling and Others 1990 (4) SA 782 (A) at 794B-D summarized the relevant considerations on the basis firstly, that public interest generally requires parties to comply with their contractual obligations (in terms of the doctrine of pacta sunt servanda), even if such obligations are unreasonable or unfair, and secondly, that all persons, should be permitted, as far as possible, to engage in commerce. As regards the latter consideration, the learned Judge stated that it is detrimental to society if an unreasonable fetter is placed on a person’s freedom of trade. In the subsequent case of Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA) Malan AJA (as he then was) restated the position in post-Constitutional South Africa and held that in matters of this nature, the court has to make a value judgment with respect to the above two policy considerations on the basis of the common law and the Constitution.

[51] A covenant in restraint of trade must protect some proprietary interest of an employer, who seeks to enforce it. As stated in the case of Sibex Engineering Services (Pty) Ltd v Van Wyk and Another 1991 (2) SA 482(T) at 486I-488D, such interest can take the form of customer connections, or confidential information in the form of trade secrets, which is useful for carrying on the business of the employer and which could potentially be used by a competitor.

[52] The legal position relating to the risk of harm to an employer’s customer connections was authoritatively set out by Nestadt JA in the case of Rawlins and another v Caravantuck (Pty) Limited [1992] ZASCA 204; 1993 (1) SA 537 (AD) at 541C-H in the following terms :

“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 (Joubert General Principles of the Law of Contract at 149). Heydon The Restraint of Trade Doctrine (1971) at 108, quoting an American case, says that the ‘customer contact’ doctrine depends on the notion that :-

‘the employee, by contact with the customer, gets the customer so strongly attached to him that when the employee quits and joins a rival he automatically carries the customer with him in his pocket’.

In Morris (Herbert) Limited v Saxelby [1916] 1 AC 688 (HL) at 709 it was said that the relationship must be such that the employee acquires

‘such personal knowledge of and influence over the customers of his employer ... as would enable him (the servant or apprentice), if competition were allowed, to take advantage of his employer’s trade connection...”

This statement has been applied in our Courts (for example, by Ecksteen J in Recycling Industries (Pty) Ltd v Mohammed and Another 1981 (3) SA 250 (E) at 256C-F). Whether the criteria referred to are 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 association 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 (Heydon (op cit at 108-120); and see also Drewtons (Pty) Ltd v Carlie 1981 (4) SA 305 (C ) at 307 G-H and 314C and G”.

[53] Therefore, as Wallis AJ (as he then was) further found in the case of Dan Braven SA (Pty) Ltd v Pillay and Another 2008 (6) SA 229, a protectable interest in the form of customer connections does not simply come into being merely by virtue of the fact that a former employee had contact with his previous employer’s customers in the course of carrying out his duties.

[54] As regards information, which constitutes trade secrets, it was restated in the case of Walter McNaughton (Pty) Ltd v Schwartz & Others 2004 (3) SA 381 (C) at 388J-389B that for information to be classified as confidential, three requirements must be satisfied: firstly, such information must be capable of use and application in the industry concerned; secondly, such information must not be public knowledge and should be available to a restricted group of people or to a closed circle only; and thirdly, such information must be of economic value to the person seeking to enforce it.² Thus, if these requirements are not met, the nature and classification of such information are irrelevant. Therefore, general information relating to a business will also not be rendered confidential, because an employer chooses to call it confidential.

[55] The prevailing test for an employer’s proprietary interest in confidential information in the form of trade secrets is whether the employer in question has proved that the employee concerned can in theory transmit such information to a competitor, should the said employee desire to do so.³ Thus, the employer concerned does not have to rely on the bona fides of the employee concerned or the lack of retained knowledge on the part of the employee concerned, when it is demonstrated that the said employee can hypothetically disclose confidential information to a competitor.

LEGAL ISSUES

[56] Against this background, this court has to determine whether the applicant has a protectable interest in any confidential information, whether in the form of customer connections or trade secrets, or a combination of both. The court must also determine whether Smit is in breach of clause 15.2 of her employment contract with the applicant.

[57] In the event that the applicant is held to have a protectable interest in the confidential information referred to in the papers, and Smit is found to be in breach of clause 15.2 of her employment contract, then it is also necessary for this court to consider whether the restraint of trade imposed upon Smit is unenforceable on the basis that it is against public policy and/or unreasonable, as averred by the respondents. It is accordingly only necessary in these circumstances for me to deal with public policy consideration, if the issues pertaining to customer connections, trade secrets and breach of contract are determined in favour of the applicant.

[58] As regards confidential information, I shall deal with the relevant issues pertaining to customer connections and trade secrets separately.

Customer Connections

[59] Leaving aside for the moment the issue whether DPD is a competitor of the applicant, I deal at the outset with the question whether the applicant has a proprietary interest in the form of customer connections against Smit, pursuant to her employment with DPD.

[60] It is not in dispute that Smit’s extensive functions in the in-house branches of the applicant over a period of approximately one year from the 1^st of January 2012, extended to the management and administration of all aspects of distribution for 32 customers. Thus, such extensive duties in relation to 32 in-house branches included inter alia dealing with audits, accounting, organograms, stationery, staffing, information technology, quality control, site inspections, invoicing, insurance claims, internal meetings, operational efficiency, operational queries, vehicle utilisation, operational reports, budgets, costs, queries, customer complaints, equipment, appointment of staff and human resources.

[61] In addition, even though Smit was also obliged to visit unspecified representatives of the 32 customers allocated to her on a regular basis, she explains that her responsibilities did not include signing up new clients, nor was she involved in strategies to gain new clients. She further plausibly explains that the applicant had a separate sales team, who procured new business. As such, it appears that customer representatives, whom she was obliged to meet in the sphere of distribution, were in all probability directly involved in distribution and/or the accounting aspects thereof, and not with sales per se or the conclusion of contractual arrangements with the applicant. It is my view that Smit’s assertions in this regard are all the more probable, as it is not suggested in the founding papers that the unnamed customer representatives with whom she had contact, were also responsible for passing business to the applicant.

[62] In these circumstances, given Smit’s extensive duties over a limited period to 32 customers, it is my view that she probably did not establish any significant relationships with representatives of the 32 customers involved. Thus, unlike for example, the salesperson referred to by Malan AJA in the case of Reddy, supra, and unlike the highly successful salesperson with a lengthy track record in a particular market, dealt with by Wallis AJ (as he then was), in the Dan Braven case, supra, there is no evidence to suggest that Smit procured business for the applicant from the 32 customers allocated to her.

[63] The papers are silent on the specific contractual arrangements between the applicant and each of the 32 customers allocated to Smit, and as already indicated, she states that she was not privy to such arrangements. It is possible in my view that some or all of these customers have fixed-term contracts in relation to the services of the applicant. This is borne out by the fact that it is not suggested that the customers who dealt with Smit, terminated their relationship with the applicant after she left. Moreover, Smit plausibly states in this regard that if any customers had terminated their relationship with the applicant as a result of her departure, her successor Mandawe would have informed the applicant accordingly.

[64] It is also significant that the applicant gave no evidence in reply to substantiate the suggestion that the 32 customers allocated to Smit were “in Smit’s pocket”. This is so despite the fact that Smit gives a tenable explanation in her answering affidavit relating to her contact with these 32 customers. Moreover, as already indicated, Smit plausibly presumes in her answering affidavit that the applicant must have already advised all 32 customers dealt with by her, that she had left the company and that she had been replaced.

[65] In these circumstances, even if it is accepted that DPD is a competitor of the applicant (which issue is dealt with hereunder), given Smit’s duties and functions as an in-house manager for a limited period, I am satisfied that the applicant was not dependant on Smit performing any sales function, nor did she play any significant role in securing the applicant’s customer base. She is accordingly not in a position to induce the applicant’s customers to follow her to DPD. Moreover, given her tenable explanation pertaining to the manner in which Laser Logistics and Laser Group are managed, it is improbable that she can potentially influence customers of the applicant to contract with these companies, which are in any event, not joined as parties to the present application. Furthermore, as already indicated, there is no evidence at all to suggest that a single one of the 32 customers allocated to Smit, was in fact induced by her to terminate the relationship with the applicant.

[66] Therefore, on a balance of probabilities, it is my view that Smit’s contact with certain representatives of the 32 customers allocated to her over a period of one year, was not sufficient for her to build any meaningful connection with them. The applicant has accordingly not discharged the onus of establishing the existence of customer connections, which can be exploited by Smit for the benefit of DPD.

Trade Secrets

[67] As regards the applicant’s proprietary interest in confidential information in the form of trade secrets, it may be mentioned that in line with the case authorities set out above, the applicant’s policy relating to confidential information is subject to the express proviso that such information “is not readily available in the ordinary course of business to a competitor of the company”, (my emphasis). In these circumstances, it is asserted more than once in the founding affidavit, generically in relation to the “substantial” confidential information, allegedly in the possession of the applicant, that such information is not in the public domain, and would enable “a competitor” of the applicant (not DPD specifically) to gain an unfair advantage in competing with the applicant. It is also suggested that DPD and other companies linked to it could potentially gain an unfair advantage in competing with the applicant on the basis of Smit’s averred knowledge of such information.

[68] For the most part, the information set out in the applicant’s founding papers is dealt with in the same way on a generic basis. Thus, as already indicated, it is generally stated that such information can be used to the detriment of the applicant, for the benefit of “a competitor”. As also indicated, whilst it is suggested in some instances that the information, which Smit possesses, can potentially be used by DPD, more often than not, the applicant makes no attempt to link the information which the applicant seeks to protect to DPD and/or Dawn Wings.

[69] Objectively assessed, it is my view that all the information set out in the founding papers is not capable of use and application with respect to Smit’s present position relating to express courier services. Thus, for example, her knowledge of lead time in different locations in the context of retail distribution and the mode of transport used to retail outlets has no application in providing same day or overnight courier services.

[70] Similarly, much of the information set out in the founding papers, objectively assessed, constitutes common knowledge. Such information is accordingly not restricted to a group of people or to a closed circle in the applicant’s industry. Thus, for example, knowledge of the type of products sold by the applicant’s customers at chain stores and the personnel required for vehicles used for distribution can hardly be presumed to be restricted to a closed circle of people.

[71] Furthermore, the applicant has not demonstrated objectively speaking, its reasons for suggesting that certain kinds of information would have any economic advantages to DPD, at the expense of the applicant. Thus, for example, all the information incorporated in the applicant’s “confidential affidavit” as well as information relating to the applicant’s computer systems, personnel required by the customer and pricing for warehousing and distribution, has no economic value in the sense that Dawn Wing cannot potentially use such information in the sphere of courier services. Moreover, to the extent that it is suggested that any confidential information retained by Smit could potentially be used for the benefit of Laser Group and/or Laser Logistics, Smit correctly points out that these companies are not parties to the present application.

[72] Therefore, even if it is accepted that DPD is a competitor of the applicant (which is debatable, as indicated hereunder), the information specified in the founding papers is either not capable of use and application by a business involved in express courier services; and/or such information is common knowledge; and/or such information has not been shown to be of economic value to the applicant.

Breach of restraint

[73] As to whether Smit’s employment with DPD constitutes a breach of clause 15.2.1 of her employment contract, as already indicated, the said clause precludes Smit for a period of two years after the termination of her employment with the applicant from being employed, directly or indirectly, by any company, which competes with the applicant. As such, it is necessary for me to consider whether the applicant competes with DPD and/or whether, Smit is effectively employed indirectly by a company, which competes with the applicant.

[74] It is not in dispute in this regard that the applicant’s core business is described as “logistics” or “retail logistics”. It is also not in dispute that the ambit of the applicant’s core business is limited to warehousing and distribution for retail customers. It is accordingly common cause that the applicant carries on business in “retail logistics” in the sphere of warehousing and distribution and that three of the applicant’s four divisions in the sphere of “general distribution” are involved in the distribution and transportation of goods to retail outlets, the distribution and transportation of dangerous goods and the distribution and transportation of minerals for clients. Specifically, as stated in the founding affidavit, the “logistics” division of the applicant specialises in processing deliveries to chain stores as well as retail stores on behalf of customers who utilise the applicant’s facilities. To this end, it is not in dispute that the applicant has established small in-house branches for customers, which comprises 80% of the revenue stream of the applicant’s “logistics” division.

[75] It is not in dispute on the papers that DPD and Laser Logistics are linked to a group of companies by a common shareholder. Whilst it is further not in dispute that Laser Logistics is a wholly owned subsidiary of Laser Group, the latter company has a minority shareholding in DPD only. It is also significant that the applicant’s annual report characterizes the applicant’s business segments into “general distribution” and truck rental. As already stated, it is further significant that three of four operational areas of general distribution relate to supply chain solutions and transportation in different sectors, and a fourth operational area relates inter-alia to same day deliveries, overnight deliveries and international courier services. It can accordingly be accepted from the papers that even though Smits admits that the applicant has a division involved in express deliveries, this is not a defining feature of its business.

[76] As regards Time Freight, as its name indicates, this division of DPD (unlike the Pak Freight division of the applicant) is involved primarily with express freight collection services. Against this background, James’ assertion in reply that Time Freight and Laser Logistics conduct precisely the same business as the applicant’s logistics division in road freight and economy delivery services, is clearly incorrect. The applicant’s annual report specifies in this regard that the Freight Pak division of the applicant offers integrated logistics and supply chain service for dangerous goods, primarily in the chemical sector.

[77] As the applicant cannot dispute that DPD, Laser Group and Laser Logistics are three separate legal persons with different shareholding, and as it is undisputed that Laser Group only has a minority shareholding in DPD, it is my view that it is not legally appropriate to lift the corporate veil of DPD on the basis suggested by the applicant. Therefore, despite linked websites of these separate companies and despite the fact that some of the same individuals serve as directors on more than one board of the separate, affiliated companies, each company remains a separate legal entity. Therefore, it is very significant that apart from the fact that certain individuals are directors of Laser Group, Laser Logistics as well as DPD, there is no evidence to suggest that the Laser Group and/or Laser Logistics effectively control or manage DPD. To the contrary, given the fact that a completely autonomous foreign shareholder is the majority shareholder of DPD, it is more probable than not that DPD is controlled or managed by the said majority shareholder.

[78] I also agree with the respondents’ counsel that no special significance can be attached to the word “logistics” on the websites and marketing material referred to by the applicant, nor is it significant that the word “logistics” forms part of the names of DPD as well as Laser Logistics. The word “logistics” and derivatives of the said word, which I understand were used historically in relation to military manoeuvres, is generally so widely used today in all industries to describe a vast array of activities, that this word almost has no defining characteristics in the sphere of business. Thus, for all intents and purposes, the word “logistics” can be morphed to encompass different activities in different contexts in different industries. More importantly, in my view, the main business of the applicant is “general distribution” as stated in its annual report. Whilst one division out of four divisions of this business is involved in courier services, the other three divisions appear more closely related by providing respectively “supply chain solutions” with warehousing and distribution; “integrated logistics and supply chain service” for dangerous goods in the chemical sector; and “mineral transportation solutions”, abnormal load transportation and “tailored solutions”. In distinct contrast, the defining aspects of DPD’s business are express and courier services (through Dawn Wing) and freight services (through Time Freight), despite the fact that a completely separate affiliate of DPD, Laser Logistics, is involved in retail distribution.

[79] The Appellate Division in dealing with the question whether two businesses were competing, postulated in the case of Capnorizas v Webber Road Mansions 1967(2) 426 (AD) that the said two businesses had to be considered “as a composite whole.” The court in that case considered the phrase “substantially the same business” in a restraint in a lease agreement. Thus the court made reference to an English case where it was held in relation to a similar restraint that it is “wholly artificial” to state that a grocer, who sells bread and confectionary, together with other items commonly sold by a grocer, is carrying on the trade or business of “bread and confectionary.”⁴

[80] Counsel for the respondent also placed reliance on the case of Kelly Group Ltd v Capazorio 2011 (JDR) 0221 (GSJ), where Kathree-Setiloane AJ (as she then was) dealt with a restraint of trade clause, which prohibited employment of an employee by any concern or entity which carries on the “same” business, or a “similar” business, or a business, which is “alike” the business of the applicant in that case. The learned Judge held in the circumstances of that case that the mere fact that the applicant in that case had provided some of the services provided by a respondent in that matter, did not mean that the respective businesses of the applicant and the respondent in that case, viewed in their entirety, were the same, similar or alike.

[81] Similarly, the respective businesses of the applicant and DPD viewed in their entirety do not compete, despite the fact that some of the services rendered by a separate company affiliated to DPD are similar to the applicant’s core activities. Moreover, despite the fact that a division of the applicant, apparently provides the same services as DPD, the applicant’s core business (provided by three of its four divisions), is not the same or similar to that of DPD. In these circumstances, the applicant has not proved that it competes in any material respect with DPD and/or Dawn Wings, as the applicant’s core business is completely different to that of DPD. Moreover, to the extent that it is suggested that DPD is affiliated to the autonomous company Laser Logistics, as already stated, there is no reason to pierce the corporate veil of DPD. This is particularly so as there is nothing to suggest that Laser Logistics and DPD have common management and/or are controlled by the same people.

[82] The further assertion made by James that she secured express services for the applicant’s from the majority of the in-house branches, to whom she was introduced, on behalf the applicant’s Value express and international division does not, in my view, assist the applicant, as James indicates that she only secured business from the majority of approximately 10 of 32 customers. This supports my finding that the applicant’s courier services constituted a small component of its other general distribution divisions. Therefore, despite the reference to “front-door” deliveries by the applicant in reply, the main business of the applicant’s logistics division “as a composite whole” related to the distribution of products and goods to retail outlets, as correctly stated in the applicant’s founding affidavit. This is materially different to DPD’s business “as a composite whole” in the sphere of courier services.

[83] Against this background, it is my view that Smit’s explanation of “cross-selling” is tenable and probable in the circumstances. Thus, the court is compelled to accept the respondents’ assertions relating to cross-selling being a past experiment, which turned out not to be financially feasible. This is particularly so as James does not give a single example of cross-selling which resulted in business being referred to Laser Logistics, and it is undisputed that James’ previous position as regional sales manager of Dawn Wing, was not subsequently filled by Dawn Wing, after James had left Dawn Wing. It is also my view that Smit’s assertions pertaining to the business of the applicant, in its entirety, being materially different to that of DPD, are supported by the fact that Dawn Wing does not appear to have enforced its restraint of trade relating to James, even though James states that she now works for the express division of the applicant.

[84] Therefore, the applicant and DPD do not compete with each other in any material respect. Furthermore, DPD and its two divisions are totally separate legal entities from the Laser Group as well as Laser Logistics. One cannot therefore suggest in these circumstances, as a matter of law, that Smit’s employment with DPD effectively constitutes indirect employment by either Laser Group and/or Laser Logistics, which are, in any event not parties to the present proceedings. Smit is accordingly not in breach of clause 15.2.1 of her employment contract.

[85] My finding in this regard also means that the applicant has, of course, not proved that there is any risk of the applicant’s confidential information being used by DPD as a competitor of the applicant.

[86] As regards the relief sought by the applicant on the basis of clause 15.2.2 of Smit’s employment contract, there was nothing in the founding papers to suggest that Smit had solicited or touted business from the applicant’s customers either on behalf of DPD, or for that matter, on behalf of Laser Group or Laser Logistics, nor did the applicant prove a well-grounded apprehension in this regard. Moreover, it appears that Smit’s successor at the applicant knew all the applicant’s customers with whom Smit dealt, and presumably continued dealing with these customers after Smit’s departure in March 2013. As such, the applicant also did not make out a case for the relief requested in this respect.

CONCLUSION

[87] In these circumstances, the applicant has not proved any proprietary interest in customer connections or trade secrets for the purposes of enforcing Smit’s restraint of trade. The applicant has also not discharged the onus of proving that Smit is in breach of the provisions of the said restraint.

[88] My judgment is obviously premised upon my view that there are no material disputes of fact on the papers. Thus, the interim relief sought by the applicant in the alternative, pending the determination of this matter by way of an action, falls away. In view of my findings, it is also not necessary for me to consider whether the restraint imposed upon Smit is against public policy or unreasonable.

ORDER

[89] Based on the aforegoing, the following order is made:

1. The application in this matter is dismissed; and

2. The applicant is directed to pay the costs of the first and second respondents.

[90] Finally, it is directed that the applicant’s “confidential affidavit” as well as all annexures thereto shall not be retained in the court file and shall be returned by my registrar to the applicant’s attorney of record.

DATED AT JOHANNESBURG THIS 14^th DAY OF JUNE 2013.

___________________________

MAYAT J

JUDGE OF THE HIGH COURT

OF SOUTH AFRICA

Applicant’s Counsel : J L Kaplan

Applicant’s Attorneys : Ian Levitt Attorneys

First and Second Respondents’ Counsel : T Ngcukaitobi

First and Second Respondents’ Attorney: Cliff Dekker Hofmeyer

Date of Hearing : 14^th May 2013

Date of Judgment : 14^th June 2013

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