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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

Case Number: 27697/2018

Not reportable

Not of interest to other judges

In the matter between:

KATAY RACING CC                                                                                      Applicant

and

SUSAN NICKEL                                                                               First Respondent

GUS MARINE (PTY) LTD                                                           Second Respondent

JUDGMENT

FISHER J:

INTRODUCTION

[1] This application comes before me in urgent court. The applicant, Katay seeks to enforce a contract in restraint of trade against the first respondent, Ms Nickel who has recently become employed by the second respondent, Gus.

[2] Katay contends that this employment is in breach of the restraint contract. It seeks that Ms Nickel and Gus be ordered to terminate their employment contract with each other and that she be interdicted from taking up employment with any other competitor of Katay in the Krugersdorp, Roodepoort, North Riding, Randburg and Meyerton areas, for the next 5 months.

[3] Katay further alleges that Gus unlawfully competes with it due to the employment of Ms Nickel and on the basis that she has obtained what are alleged to be confidential documents from Katay which may be used in the conduct of the business of Katay.

 

BACKGROUND

[4] Katay and Gus both conduct the business of selling and servicing marine craft and all-terrain vehicles (“ATVs”). Katay trades mainly in Krugersdorp, Roodepoort, North Riding and Meyerton. Gus trades from a premises in Roodepoort which is approximately 12 kilometeres from Katay’s Roodepoort shop. Both concerns cater to sales and service requirements of the ‘man in the street’. It seems that they are somewhat niche in their operations.

[5] The restraint in issue is part of a written employment contract. It prohibits Ms Nickel from being employed by any concern operating in competition with Katay or who is a customer of Katay in Gauteng for 6 months from date of termination of employment.  Such termination occurred as from 30 June 2018.

[6] Ms Nickel was employed by Katay in a clerical/ administrative role. She has been employed in a similar position by Gus.

[7] Katay says that Ms Nickel was trained when employed by it in a particular regulatory position being a financial and insurance (F&I) manager.  It complains that this training has equipped Ms Nickel to act in this special managerial position. It says that furthermore she had access to information of customers and that she was in a “front of house” position.

[8] A central complaint of Katay is that it has lost the custom of Gus. It blames the employment of Ms Nickel by Gus for this loss. Gus and Katay did business with each other on the following basis: Katay has a relationship with Wesbank in terms of which Wesbank will enter into finance agreements in relation to goods sold by Katay to clients. Wesbank has given Katay dealer approval, in the form of what the parties refer to as a “dealer code”. This approval allows for transactions to be entered into in relation to the purchase of the vehicles sold by Katay to its customers on the basis that Wesbank will provide finance. Gus thus refers customers to Katay if they require finance and there is a profit share arranged which ensue.

[9] Katay states that it took approximately eight years for it to be awarded this dealer code by Wesbank. It alleges that a requirement for the award of the dealer code is the employment by the dealer of a F&I manager. It states that it had Ms Nickel trained by Wesbank as a F&I manager, at its cost, over a period of a year so that it could be issued with the dealer code. The suggestion appears to be that now that Ms Nickels is employed by Gus, it will no longer have a need for the services of Katay. It is not clear why this should be the case. Ms Nickel makes the point that it is not she who was awarded the dealer code and that she cannot take it with her to Gus. This does not appear to be disputed.  Mr Gustav Meiring, who is the sole director and shareholder of Gus, states that, in fact, he still requires the services of Katay and would have continued with the arrangement if the relationship had not been soured by the bringing of this application. Mr Meiring confirms that Ms Nickel is employed to perform general administrative functions and that she does not conclude or structure any business deals and nor does she deal with any applications for finance. He states that when he employed Ms Nickel he did not know of any restraint agreement.

[10] Ms Nickel, in any event, denies that she received the training alleged. She contends that she only participated in an entry level course with a view to becoming an F&I manager but never completed the course and that she is thus not so qualified. She states, furthermore, that she chose to participate in the course and did not do so on the instruction of Katay. These contentions are not dealt with by Katay in reply. I find this strange in that they are so central to the case.

[11] Ms Nickel states that she was not a key employee. She worked in an administrative capacity only. Her salary as set out in the contract was R7 650 per month. This would be relatively low for a key employee,  In reply, Katay seeks to state that she also earned a commission which took her income to approximately R 20 000.  It is not explained why this alleged commission was not raised as part of the founding papers.

[12] The managing member of  Katay, Mr Andrew Katay is a qualified buoyancy  surveyor and as such is authorised to inspect marine craft and issue required buoyancy flotation certificates. Such certificates are required to be issued by law before a marine craft may be used in South African waters. It is not in dispute that Ms Nickel obtained an electronic copy of Mr Katay's buoyancy certificate from an employee of Katay after she left the employ of Katay. Mr Katay expresses the concern that this will be put to use by Gus as a template. He even goes so far as to suggest that he has a fear that this document will be used to forge buoyancy certificates in his name. I must point out that there is no basis made out for the latter assertion. Furthermore, it seems clear that the form and requirements of the certificate are public.

[13] Katay also reports that Ms Nickel contacted the same employee and requested that she be emailed a template of what is referred to by Katay as a “multi- checkpoint service inspection list”  for jet-skis and boats, which was duly done. This is not disputed. Mr Katay  developed the inspection list over time. He states that its purpose is to provide Katay's service department and its customers with an efficient and comprehensive list of service requirements. Mr Katay expresses the concern that the respondents intend to use this service template which is his property. Reference to this service template shows that it is no more than a “to do” list of items to be ticked off when a service is being effected on a jet -ski or boat.

[14] Mr Meiring states that he has not seen the certificate or the service template in issue and has no use for these documents in any event. He alleges that he uses the services of an expert to attend to Gus’s buoyancy certification needs. He states also that there is nothing unique about the service check list as this information is well known to persons who perform service functions of jet-ski’s and boats.

[15] From a more general perspective, Mr Katay alleges that, by virtue of her position, Ms Nickel had access to the following confidential Information belonging to Katay: customer lists; suppliers lists; business methods including marketing and sales strategies; pricing structures; document templates, business and administrative contracts with licensing and other statutory bodies and finance houses; and restructuring of financial and insurance deals for clients with financial institutions.

 

Legal Principles and Discussion

[16] It is well settled that restraints of trade are enforceable unless they are unreasonable^[1]  The question of reasonableness is a value judgment involving the weighing up of two policy considerations: the public interest which requires that parties to a contract comply with their contractual obligations (pacta servanda sunt) and the principle that a citizen should be free to follow a trade, occupation or profession of her choice^[2].

[17] The test for reasonableness remains that set out in Basson v Chilwan and others ^[3] where the court held that the facts are to be assessed with reference to the following questions:

“a) Is there an interest of the one party which is deserving of protection at the termination of the agreement?

(b) Is such interest being prejudiced by the other party?

(c) If so, does such interest so weigh up qualitatively and quantitatively against the interest of the other party that the latter should not be economically inactive and unproductive?

(d) Is there any other facet of public policy which requires that the restraint be maintained or rejected.”

[18] In Kwik Kopy (SA) (Pty) Ltd v Van Haarlem and another^[4] the court added a further consideration, namely whether the restraint is wider than that necessary to protect the protectable interest.

[19] Protectable interests fall broadly into two kinds:  (1) the relationships with customers, suppliers and other trade connections and (2) confidential matter (also called trade secrets) which could be used by a competitor to gain a relative competitive advantage.^[5]

[20] The court in Experian SA (Pty) Ltd v Haynes and Another^[6], stated:

“Whether information constitutes a trade secret is a factual question. For information to be confidential it must be capable of application in the trade or industry, that is, it must be useful and not be public knowledge and property; known only to a restricted number of people or a close circle; and be of economic value to the person seeking to protect it.”

[21] As far as trade connections are concerned, it is well established that a protectable relationship exists where an employee has personal knowledge of, and influence over, the customers or suppliers of her employer so as to enable her to induce the customer or supplier to follow her to the new employer^[7].

[22] It seems to me that Katay has attempted to elevate the position of Ms Nickel to one which suggests that she was more important to the business and more immersed in confidential aspects than was actually the case. The nature of the competing businesses is that they both deal in watercraft and ATVs – either used or new. They also attend to the accessory, certification of such watercraft in accordance with the applicable regulations. The businesses cater to sales to individual customers who purchase these vehicles and the repair, servicing, and regulatory facilities which are naturally accessory to such business. This fact limits the customer connection aspect in that there is no substantial wholesale relationship with any one customer. The business methods, marketing, and pricing structures can hardly be said to be unique. In essence what is involved is simply the sale of used vehicles of a recreational nature and on a relatively moderate scale.

[23] It has not been established that Ms Nickel’s skills or qualifications would be of any assistance in relation to obtaining a foothold for a dealership finance relationship with Wesbank. In any event, even if this were so such training and acumen as may have been acquired by Ms Nickel is not of a type that she can be prevented from using in her trade.

[24] In relation to the certificate – there can be no doubt that the form thereof is part of the public domain. The requirements which must be certified are, after all, a matter of law. As to the service template, it is clear that there is little acumen involved in listing the checks and actions which are required to service vehicles such as those in issue. I am not satisfied that  either of these documents have been shown to be of a nature such as would yield any competitive advantage to Gus or any other competitor.

 

Conclusion

[25] It appears clear on all the facts that Ms Nickel was not an employee who was privy to such confidential information as could be of any use to Gus or another competitor of the applicant. Neither was she possessed of any customer or trade connections which could render a restraint against her justifiable. The respondents have successfully shown that there is no interest worthy of protection under the contract. To my mind this is a classic attempt to stifle competition.

 

ORDER

[26] I thus order as follows:

1. The application is dismissed;

2. The applicant is to pay the costs.

                                     

 

  ________________________________

 FISHER J

HIGH COURT JUDGE

GAUTENG LOCAL DIVISION

 

 

Date of Hearing: 10 August 2018.

Judgment Delivered:  16 August 2018.

 

APPEARANCES:

For the Applicant: Adv R Caine.

Instructed by: Martin Henning Attorneys.

For the 1^st and 2^nd Respondent: Adv R Bhima.

Instructed by : Swanepoel Van Zyl Attorneys.

 

[1] Magna Alloys and Research SA (Pty) Ltd v Ellis 1984 (4) SA 874 (A)

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