---

IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

Case No: 6145/05

In the matter between:

TECHNICAL FLEET MANAGEMENT (PTY) LTD First Applicant

DIGICORE FLEET MANAGEMENT (PTY) LTD Second Applicant

DIGICORE HOLDINGS LIMITED Third Applicant

and

MALCOLM HENRY ROUSSEAU First Respondent

FLEET & TIME CONTROL (GEORGE) CC Second Respondent

JUDGMENT: 1 DECEMBER 2005

VAN ZYL J:

INTRODUCTION

[1] On 21 July 2005 the applicants brought an urgent application in terms of which they sought a final interdict against the first respondent on the basis of a restraint of trade. The interdict was directed at restraining him, for a period of three years commencing on 1 May 2005, from being involved in any business competing with that of the second applicant. It required also that he refrain from disclosing trade secrets or confidential information pertaining to the second applicant or to any of the companies belonging to the DigiCore group of companies ("DigiCore"). Finally it required that he desist from inducing any licensor, supplier or customer of DigiCore to purchase, from a competitor of DigiCore, any products supplied by DigiCore. In the alternative the applicants sought an interdict in the same terms pending the institution and finalisation of arbitration proceedings.

[2] When the matter came before me on 21 July 2005, I issued an order by agreement, postponing it for hearing on a date to be arranged with the registrar of this court. Pending such further hearing the respondents would be permitted to sell certain products known as hubodometers, templogs, Safestop management systems and Safestop speed limiters to clients in the Western Cape. This was subject thereto that no such products were to be sold to any party to whom DigiCore had sold such products during the twelve months preceding the order.

[3] On 31 October 2005, being the date allocated by the registrar for the further hearing, the matter was once again referred to me for consideration. Adv F C Terblanche SC, assisted by adv R D van Helden, appeared for the applicants, while adv A C Oosthuizen SC represented the respondents. The court expresses its appreciation to them for the able presentation of their respective cases.

BACKGROUND

The Parties

[4] The first and second applicants are companies with limited liability and are wholly owned subsidiaries of the third applicant, which is the holding company of all their issued shares. As such they are members of the DigiCore group of companies, which operate throughout South Africa and supply components to the transport industry for the purposes of fleet management.

[5] The first respondent is a businessman who was previously employed by the first applicant, and subsequently by the second applicant, before his resignation on 14 April 2005. He is presently in the employ of the second respondent, a close corporation of which he is the sole member.

[6] Prior to his employment by the first applicant, the first respondent had substantial interests in six businesses involved in the supply and sale of fleet management components to the transport industry. He operated such businesses out of close corporations or partnerships under the name and style of “Fleet & Time Control”. On 11 November 1998 the first applicant purchased all six businesses. The first respondent received consideration totalling R2 432 500,00, together with a total of 3 172 500 listed shares in the third applicant at a par value of R1,00 per share.

[7] On the same day the first respondent entered into a contract of employment with the first applicant in terms of which he was employed as an executive and regional director of the first applicant in the Western Cape. Clause 9 of the contract contained comprehensive provisions relating to restraints against the disclosure or use of confidential information (clause 9.1), the "pirating" of fellow employees (clause 9.2) and approaching (in the sense of influencing or interfering with) licensors, suppliers and customers (clause 9.3). Clause 9.4 (“On Employment”) provided:

9.4.1 The executive records that in the course of providing services to the company, he will acquire certain confidential information relating to the company’s trade secrets and confidential information of the company. In the circumstances, he agrees that it is fair and reasonably necessary for the protection of the company’s business and proprietary interests that he should be restrained from competing with the company for a reasonable period.

9.4.2 The executive accordingly undertakes not at any time while he is employed in any capacity by the company, and should the executive leave the employ of the company for a period of 3 (THREE) years from the date of resignation, to be interested or engaged, whether directly or indirectly, and whether as proprietor, partner, shareholder, member, director, employer, executive, agent, consultant or otherwise, in any firm, business or undertaking which carries on any activity, either solely or in conjunction with any other party, in competition with the business carried on by the company or any of its holding, subsidiary or associated companies, if any, to the extent that such competition is detrimental to the interests of the company and its holding, subsidiary or associated companies, if any, unless otherwise agreed to by the company in writing.

[8] Subsequently, with effect from 1 July 1999, the entire business of the first applicant was sold and transferred to the second applicant as part of a rationalisation process set afoot by the third applicant. The first respondent hence became an employee of the second applicant.

[9] On 14 April 2005 the first respondent resigned from his employment with the second applicant. This gave rise, on 15 April 2005, to an agreement in terms of which he undertook to remain bound by the restraints contained in clause 9 of his contract of employment with the first applicant.

The Case for the Applicants

[10] Mr N H Vlok, the chairman of the board of directors of the first and second applicants and the chief executive officer of the third applicant, deposed to the founding affidavit on behalf of the applicants. Therein he averred that the second respondent is involved in the “transport solutions business” in direct competition with the business of the second and third applicants. This, he said, was in conflict with the restraint of trade covenant subsisting between the first respondent and second applicant.

[11] Mr Vlok alleged that the applicants became aware, during June 2005, that the first respondent was involved with and employed by the second respondent. As a shareholder of the third applicant and as the executive director of the first and second applicants successively, he had, by that time, acquired a comprehensive knowledge of every facet of DigiCore’s business and products. This included the manner in which it did business with its customers, the functionality and workings of its products, its price structures, customer lists and a detailed knowledge of its customer contacts.

[12] In his capacity as regional director for the Western Cape, the first respondent had developed personal relationships with employees of the first and second applicants and was responsible for determining marketing strategies in, and broadening the client base for, the Western Cape. This gave him an intimate knowledge of the product needs and requests of clients, and assisted him in developing and customising products for the benefit of each individual client.

[13] In this regard Mr Vlok averred that the second respondent had, during May 2005, sold ten hubodometers for R5 850,00 to Slabbert Burger Transport, one of the second applicant's existing clients. The second applicant had itself, during the period 26 March 2004 to 13 June 2005, sold goods to the value of R86 765,16 to such client. [14] For the rest the first respondent had been privy to agreements between DigiCore companies and their suppliers of computer hardware and other products. He had been aware of their product pricing structures, just as he had been aware of the salary and commission structures of employees of all the DigiCore companies. With this information he was enabled to entice staff away from the second applicant.

[15] As regional representative for the Western Cape the first respondent attended monthly operational meetings and planning sessions in which he was involved in planning strategy for his region and for the country as a whole, relating to every aspect of DigiCore business. He in fact attended all the meetings held during the first four months of 2005, the last such meeting being on 6 April 2005, approximately a week before his resignation as executive director of the second applicant.

[16] Mr Vlok hence alleged that the first respondent was in breach of the said restraints by being involved in the transport business and supplying clients of the second applicant with components sold by it. For purposes of an interdict, he averred that, on the basis of these facts, the applicants had established a clear right and had suffered injury by the respondents' doing business with existing clients of the second applicant. In the process the respondents had taken business away from the second applicant and acted to its detriment.

[17] Mr Vlok averred further that the applicants had no alternative remedy, save for an interdict, to protect their "substantial interests" throughout South Africa from being "jeopardised" by the first respondent's conduct. Such conduct, he said, would benefit the respondents financially and, reciprocally, would be financially detrimental to the second and third applicants. It would be impossible, however, to assess their loss in monetary terms in view of their lack of knowledge of the nature and extent of the business of the respondents and of the number of transactions they might have concluded with existing clients of the second applicant.

[18] In response to a letter from the attorneys of the applicants demanding that he undertake to desist from such conduct, the first respondent denied having been in breach of the said restraints which, he averred, were in any event unenforceable.

The Case for the Respondents

[19] In his answering affidavit on behalf of the respondents, Mr M H Rousseau, the first respondent, suggested that the supply of components, such as Safestop engine management systems, Safestop speed limiters, templogs, tachographs and hubodometers, constituted an "insignificant part" of DigiCore's business. Its current annual turnover of these products in the Western Cape was some R184 406,00 - a negligible amount for a business that generated an annual turnover of approximately R220 million. This was because its core business was directed at the supply and installation of C-Track vehicle tracking systems, for purposes of which it supplied Nokia cellular hardware, and Co-Driver onboard computer systems. It also acted as distribution agents for Startrak satellite tracking systems.

[20] By contrast the core business of the second respondent was to supply wireless documented computer tracking systems. This would enable a company "to electronically capture details relating to the delivery of products and the placing of orders" and "to electronically keep track of such deliveries and orders, thus avoiding much of the documentation and paperwork which would otherwise be necessary”. None of the DigiCore companies supplied such "software systems" to clients.

[21] The first respondent emphasised that the second respondent's activities were restricted to the Western Cape and that it did not plan to expand to other parts of the country. He admitted that the second respondent had, over the previous few weeks, sold a limited number of hubodometers, Safestop speed limiters and Templog temperature systems to a handful of customers in this area. In addition to these products it wished also to sell tachographs, Motorola cellular hardware and Safestop engine management systems to its Western Cape customers. This would constitute only a limited part of its business, being intended primarily to generate "immediate turnover" for purposes of establishing, and expanding on, its main business. The cellular hardware would be used to enable truck drivers to communicate with the home base, an entirely different market niche than that serviced by the second applicant or any of the other companies under the DigiCore umbrella.

[22] The first respondent pointed out that, prior to his taking up employment with the first applicant, he had been involved in the transportation industry for some twelve years, during which period he had built up extensive knowledge and expertise in such field. Before signing the agreement containing the restraints, he had discussed the matter with two directors of the applicants. They indicated that the restraints were directed at preventing his competing with DigiCore companies in respect of their core business. At that stage the tachograph business was being phased out of their core business and replaced by the C-Track satellite tracking system. They assured the second respondent that the restraints would not apply to competition in "non-core" business, which would not be detrimental to the interests of DigiCore. This intention, the second respondent averred, was embodied in paragraph 9.4.2 of the 11 November 1998 agreement, where it was expressly stated that the restraint applied in so far as such competition was "detrimental to the interests" of the DigiCore companies..

[23] The second respondent admitted that he had full knowledge of the applicants' range of products, services and prices, much of which could not be regarded as confidential since it was freely available in the market place by virtue of advertising by DigiCore or otherwise. He admitted, however, that confidential matters, such as company policy, marketing campaigns and strategies, budget reviews and problems, were discussed at the monthly meetings he attended.

[24] He denied having built up a close relationship with any of the applicants' approximately six hundred customers. That was the terrain of his sales team consisting of four persons who reported back to him and whom he supervised.

[25] An alternative argument raised by the second respondent was that the three-year period of the restraint was unreasonable in that it was far in excess of the period reasonably required by DigiCore to protect its interests. In the case of sales personnel the period was more realistic, being limited to twelve months. There was no reason why the restraint in his case should not also be restricted to such period.

[26] Finally the first respondent denied that the applicants had made out a case for an interdict. They had established neither a clear right nor injury suffered or reasonably apprehended. Furthermore they had an alternative remedy, namely an action for damages for the alleged breach of the restraint.. The second respondent's accurate bookkeeping system would make it a simple exercise to ascertain details as to the number and types of products sold by the second respondent.

The Response of the Applicants

[27] In his replying affidavit on behalf of the applicants, Mr Vlok denied that the second applicant's supply of hubodometers and various other products constituted an insignificant part of its business. In the period 1 July 2004 to 30 June 2005 its national sale and supply of Protech (Safestop), cellular hardware, hubodometers, templog and tachograph units and spares, together with cellular income and labour expenses related thereto, amounted to R52 235 459,58. This was not, he stated, “a minor or insignificant part of the business activities of the DigiCore Group”.

[28] In this regard Mr Vlok suggested that there was no reason why the second respondent should not expand its business to other parts of the country, since the customers of the second applicant operated throughout South Africa. He persisted in his averment that the conduct of the respondents, in selling products in direct competition with those sold by the second applicant, was detrimental to the interests of the second applicant and other DigiCore companies.

[29] Mr Vlok rejected the first respondent’s denial that he had built up close relationships with DigiCore customers. It was one of his functions to remain in touch with key customers of the second applicant and, as regional director for the Western Cape, he was in overall charge of the entire operation in the Western Cape, including sales staff, who reported directly to him. There were also monthly customer meetings which he would have attended and where he would have met customers with whom he must have forged close relationships.

[30] Mr Vlok denied that a three-year restraint period was unreasonable. The second respondent’s position, as a director of the second applicant and as a member of DigiCore’s senior management, was not comparable with that of sales staff. The latter did not have a fraction of his knowledge and expertise.

[31] On 30 June 2005 the first respondent sent Mr Vlok an electronic mail message from which it appears that he attempted to patch up the worsening relationship between them. Mr Vlok attached it to his replying affidavit, ostensibly for purposes of demonstrating the first respondent's confidence in his Digicore shareholding. There is no indication that Mr Vlok replied to the message, the relevant part of which reads:

I am writing this e-mail in an attempt to restore the relationship and to try to establish exactly what it is that has offended you and DigiCore.

I spent some time with Deon Coetzee yesterday and in our discussion, it became apparent that the real issue may not have been the sale of Hubodometers but other underlying issues.

I am also under the impression that Mark may not have communicated to you that I informed him of my intention to operate under the name Fleet & Time Control, and that in addition to specific products mentioned, I also informed him that I would be doing peripheral products. Since I received no objection to my plans, I naturally concluded that there was no problem in this regard.

It was never my intention to deter from my restraint. I would not have intentionally done anything to destroy or damage our relationship, especially as you had agreed to consider allowing me to sell C-track Secure in the future [and] I was excited about selling this product. (You said we must leave it until July and then you would make a final decision.)

I am also still a share holder and I consider the share to be a good one so [I] intend keeping my shares for as long as possible.

I believe we have a long standing relationship and would hate it to be ruined due to misconceptions and a lack of communication.

I look forward to hearing from you soon.

THE MAIN ISSUES

[32] The primary issue is whether the first respondent, as an employee of the second respondent, is in breach of the restraint resting on him. In considering this issue it must be established whether the second respondent is conducting a business in competition with that of the second applicant and, if so, whether it is detrimental to the interests of the second applicant and other members of DigiCore. It must likewise be established whether the applicants have made out a case and complied with the prerequisites for interdictory relief. A secondary issue is whether the three-year period of the restraint is unreasonable and should be reduced to a period of twelve months, as suggested by the first respondent.

PRINCIPAL SUBMISSIONS ON BEHALF OF THE APPLICANTS

[33] In his argument on behalf of the applicants Mr Terblanche submitted that the restraint should not be limited to the second respondent's business activities which might be in competition with the "core business" of the second applicant. By supplying and selling the same products as those supplied and sold by the second applicant, including a sale to at least one of the second applicant's existing customers, the second respondent was competing with the business currently conducted by the second applicant. It was irrelevant what proportion this might constitute of its business as a whole.

[34] Mr Terblanche submitted further that, in assessing whether the business being conducted by the second respondent was detrimental to the interests of the second applicant, consideration should be given not only to the second applicant's patrimonial interests, but also to its interest in ensuring that restraint covenants are enforced.

[35] As for the reasonableness of the restraint period, Mr Terblanche argued that the respondents had to prove that it was unreasonable and contrary to public interest. The entrenchment of free economic activity in terms of section 22 of the Constitution (Act 108 of 1996), he said, had not affected these common law principles. In any event the first respondent had expressly agreed, in clause 9.4.1, to a restraint "for a reasonable period", which was determined, in clause 9.4.2, as three years. At all relevant times, when so agreeing, he enjoyed equality of bargaining power.

[36] Finally Mr Terblanche submitted that the applicants had complied with the prerequisites for a final interdict on the basis of what was set forth in their founding and replying affidavits and in the annexures thereto.

PRINCIPAL SUBMISSIONS ON BEHALF OF THE RESPONDENTS

[37] In his argument on behalf of the respondents, Mr Oosthuizen emphasised that the restraint provision on which the applicants rely is, on a proper interpretation thereof, clear. It allows the first respondent to compete with the applicants, provided such competition is not detrimental to their interests. The applicants bear the onus of proving that any such competition is in fact detrimental to their interests.

[38] Mr Oosthuizen pointed out in this regard that clause 9.4.1 of the employment agreement records that a restraint is imposed in order to protect the second applicant’s confidential information. This, he submitted, should provide guidance as to the meaning of “detrimental” in clause 9.4.2 thereof. The restraint would not apply in cases where, in competing with the second applicant, the first respondent was not making use of such confidential information and was not posing any substantial threat to the “actual” interests of the second applicant. In the present matter no case was made out for any such use.

[39] This interpretation, he submitted, underlay the court’s function to weigh up, both qualitatively and quantitatively, the interests the applicants seek to protect against the prejudice the respondents will suffer should they be precluded from the economic activity in question. In the instant matter, he suggested, the interests of the respondents far outweighed those of the applicants.

[40] The applicants did not, Mr Oosthuizen submitted, gainsay the express intention of the respondents to limit their operations to the Western Cape, nor did they dispute the annual turnover of R184 406,00 which the DigiCore companies were enjoying in that area in respect of the products in question. This constituted a small proportion of their national turnover for such products, namely R52 235 459,58. In any event the major portion of this turnover related to income from cellular connections, airtime, handling fees and commission, activities in which the respondents conducted no business. Their supply and sale of cellular hardware serviced an entirely different market niche and did not constitute competition with the applicants. In any event they made use of no confidential information in doing so.

[41] The said product turnover of R184 406,00 attributed to DigiCore’s operations in the Western Cape, Mr Oosthuizen submitted, constituted an even smaller proportion of its business turnover as a whole, namely 0.071% of DigiCore’s national turnover of some R220 million. Mr Oosthuizen described this as infinitesimal and wholly insignificant. The second respondent’s trading activities in such products could hence not be regarded as being detrimental to the interests of the second applicant or DigiCore.

[42] In regard to the reasonableness of the restraint period Mr Oosthuizen invited the court to analyse the facts closely with a view to determining whether such a lengthy period was justified. The applicants failed, he submitted, to indicate what kind of confidential information remained confidential for a period of three years and why such period should be three times as long as that required of sales personnel who leave the employ of the second applicant. Mere seniority and greater knowledge and expertise could not, in law or logic, justify so lengthy a restraint period.

THE RELEVANT LEGAL PRINCIPLES

Interpretation of Restraint Provisions

[43] A restraint provision in a contract is interpreted no differently from any other provision: the intention of the parties must be determined with reference to the ordinary grammatical meaning of the words used by them. This must be done in the context of the contract as a whole and in the light of the circumstances existing at the time it was concluded. See Joubert v Enslin 1910 AD 6 at 37-38; Richter v Bloemfontein Town Council 1922 AD 57 at 69; West Rand Estates Ltd v New Zealand Insurance Co Ltd 1925 AD 245 at 261; Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 454G; Swart en ‘n Ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C; Cinema City v Morgernstern Family Estates and Others 1980 (1) SA 796 (A) at 803G-806A; Coopers & Lybrand and Others v Bryant [1995] ZASCA 64; 1995 (3) SA 761 (A) at 767E-768E.

[44] Should there be any uncertainty as to the meaning of a provision, it should, in accordance with the contra proferentem rule, be construed against the author thereof. See the authorities cited in Cairns (Pty) Ltd v Playdon & Co Ltd 1948 (3) SA 99 (A) at 122-123.

Enforceability of Restraint Provisions

[45] In South African law covenants in restraint of trade are enforceable provided they are not contrary to public policy. See Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A) at 892E. A party wishing to avoid the operation of such a covenant must prove that its enforcement would be in conflict with public policy. See National Chemsearch (SA) (Pty) Ltd v Borrowman and Another 1979 (3) SA 1092 (T) at 1107E-H and BHT Water Treatment (Pty) Ltd v Leslie and Another 1993 (1) SA 47 (W) at 52F. See also the Magna Alloys case (supra) at 892G.

[46] In this regard the reasonableness of the restraint will be taken into account in assessing whether the restraint conforms to public policy. See the Magna Alloys case (supra) at 893G and Basson v Chilwan and Others [1993] ZASCA 61; 1993 (3) SA 742 (A) at 762B-H and 767C-D.

[47] It is in the public interest that agreements freely concluded should be honoured (pacta sunt servanda). It is equally in the public interest that all persons should be free to participate in business and professions and to exercise the right of freedom to trade. An unreasonable limitation placed on this freedom will not be in the public interest and will hence be contrary to public policy. See the Magna Alloys case at 897I-898B; Sibex Engineering Services (Pty) Ltd v Van Wyk and Another 1991 (2) SA 482 (T) at 498H-501E.

[48] If the restraint has been imposed with a view to curtailing or restricting fair competition rather than protecting proprietary interests such as confidential information, trade secrets or goodwill, it will be held to be unreasonable. See the Sibex case (supra) at 502J-503B, where Stegmann J said:

A contractual restraint curtailing the freedom of a former employee to do the work for which he is qualified will be held to be unreasonable, contrary to the public interest and therefore unenforceable on the grounds of public policy if the ex-employee (the covenantor) proves that at the time enforcement is sought, the restraint is directed solely to the restriction of fair competition with the ex-employer (the covenantee); and that the restraint is not at that time reasonably necessary for the legitimate protection of the covenantee’s protectable proprietary interests, being his goodwill in the form of trade connection, and his trade secrets.

[49] In Basson v Chilwan and Others (supra) at 767C-768E, Nienaber JA dealt with the issue from the point of view that an unreasonable restraint is against the public interest and hence against public policy. Whether or not a restraint is unreasonable should, he opined, be assessed with reference to both the broad interests of the community and the individual interests of the contracting parties. With regard to the broad community interest there is a conflict between the consideration that contracts should be honoured (pacta sunt servanda), even if it should promote a lack of productivity, and the consideration that productivity should be encouraged, even if it leads to failure of the agreement. As far as the parties are concerned a restraint is unreasonable if it has the effect that one of the parties is prevented, after termination of the agreement, from participating freely in the commercial and professional sphere without the other party having an interest which requires protection.

[50] In order to determine whether a restraint is reasonable or not, the learned judge of appeal suggested (at 767G-I) that four questions should be asked:

(a) Does the one party have an interest that requires protection on termination of the agreement?

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

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

(d) Is there another aspect of public interest which has nothing to do with the relationship between the parties but which requires that the restraint be enforced or not?

Should the interest described in question (c) outweigh that described in question (d), the restraint would, as a rule, be unreasonable and hence unenforceable. See also CTP Ltd and Others v Argus Holdings and Another [1995] ZASCA 32; 1995 (4) SA 774 (A) at 784B; Pam Golding Franchise Services (Pty) Ltd v Douglas 1996 (4) SA 1217 (D) at 1223D-1224B. In Tor Industries (Pty) Ltd v Gee-Six Superweld CC and Others 2001 (2) SA 146 (W) at 161J-162A Wunsh J suggested that a further question should be asked, in addition to those appearing from the Chilwan case (supra), namely whether the restriction is necessary to protect the interests of the covenantee or whether it goes further than is reasonably necessary for the purpose.

[51] These principles have not, it would appear, been affected by section 22 of the Constitution (Act 108 of 1996), which provides for the unfettered right to choose a trade, occupation or profession, subject thereto that the practice of such trade, occupation or profession "may be regulated by law". In this sense "law" is not restricted to legislative or statutory enactments, but must clearly include common law and jurisprudence. For a similar approach, with reference to the corresponding section 26 of the Interim Constitution, Act 200 of 1993, see Waltons Stationery Co (Edms) Bpk v Fourie en 'n Ander 1994 (4) SA 507 (O) at 511B-E; Kotzé en Genis (Edms) Bpk v Potgieter en Andere 1995 (3) BCLR 349 (C) at 352E-353A; Knox D'Arcy Limited and Another v Shaw and Another 1995 (12) BCLR 1702 (W) at 1708C-J and also at 1712A-E. These cases were followed in Fidelity Guards Holdings (Pty) Ltd t/a Fidelity Guards v Pearmain (1997) 4 All SA 650 (SE) at 658b-659b, where the effect of section 22 of the current Constitution had to be assessed.

[52] On the issue whether or not the period of the restraint is reasonable, I respectfully associate myself with the following dictum of Conradie AJ in Petre & Madco (Pty) Ltd t/a T-Chem v Sanderson-Kasner and Others 1984 (3) SA 850 (W) at 858D-E:

If the covenant purports to restrain the covenantor over an area or for a time which is not co-extensive with the interest, it is said to be unreasonable and therefore against public policy. This makes it void.

A similar approach was adopted by Lord Wilberforce in Stenhouse Australia Ltd v Phillips [1973] UKPC 1; [1974] 1 All ER 117 (PC) at 123 g-h:

The question is not how long the employee could be expected to enjoy, by virtue of his employment, a competitive edge over others seeking the clients’ business. It is, rather, what is a reasonable time during which the employer is entitled to protection against solicitation of clients with whom the employer had contact and influence during employment and who were not bound to the employer by contract or by stability of association.

[53] The fact that the parties have agreed to a certain period as being reasonable is not conclusive evidence that such period is in fact reasonable, although it may be a factor to be taken into account for purposes of establishing the reasonableness thereof. See Van de Pol v Silbermann and Another 1952 (2) SA 561 (A) at 571E-H; Wohlman v Buron 1970 (2) SA 760 (C) at 762H-763A; Roffey v Catterall, Edwards & Goudré (Pty) Ltd 1977 (4) SA 494 (N) at 500B-E; Stewart Wrightson (Pty) Ltd and Another v Minnitt 1979 (3) SA 399 (C) at 404H-405C.

APPLICATION OF THE LAW TO THE FACTS

[54] It is quite correct that the first respondent was able, during the period of his employment by the first and subsequently the second applicant, to build up a store of knowledge and confidential information relating to the DigiCore group of companies. He likewise had contact, directly or indirectly, with a substantial number of their employees and customers, in respect of whom he doubtless acquired information.

[55] There is, furthermore, no doubt that the second respondent did in fact sell a number of hubodometers to one of the second applicant’s existing clients (see par [13] above). In addition it sold hubodometers, Safestop speed limiters and Templog temperature systems to a number of unnamed customers in the Western Cape. In admitting this, the first respondent did not also admit that such customers were existing clients of the second applicant. Nor did Mr Vlok, in his replying affidavit on behalf of the applicants, advert to any sales made by the second respondent to any other existing customer of the second applicant or, for that matter, of the DigiCore group of companies. He simply made the broad allegation (par [16] above) that the respondents were doing business with existing clients of the second applicant and in the process had taken business away from the second applicant, thereby acting to its detriment.

[56] It is not disputed that the second applicant’s current annual turnover in regard to the five components in issue amounted to R184 406,00 for the Western Cape. It is likewise undisputed that DigiCore’s national annual turnover for all its products, including the said five components, amounts to approximately R220 million. Its national turnover for the five components, according to Mr Vlok’s replying affidavit, was R52 235 459,58. The Western Cape turnover is clearly a very small, if not a negligible, percentage of its national turnover for such components.

[57] It is true that there is some competition, however limited, between the second respondent and the first applicant in regard to at least four of the five components mentioned. There is, however, a difference in their business relating to the sale of cellular hardware (see par [21] above) inasmuch as the second respondent apparently services a market different from that serviced by the second applicant. There may be an overlap, but the difference remains significant, the second applicant’s cellular income constituting by far the major portion of its income from the five components.

[58] Accepting, as I do, that the second respondent is in fact conducting a business, however limited, in competition with that of the second applicant, I must give consideration to the proviso inserted by the parties in clause 9.4.2 of the first respondent’s employment agreement (par [7] above). That proviso restrains the first respondent from being involved with the second respondent in so far as its competing business is “detrimental to the interests” of the second applicant or any member of the DigiCore group, unless agreed to by the second applicant in writing. The second applicant clearly furnished no such written agreement, in which event it remains for this court to determine whether the competition emanating from the second respondent is “detrimental” to the interests of the said parties.

[59] In considering this issue I must needs take cognisance of the preceding clause, clause 9.4.1, in which the second applicant’s protectable interest is described as confidential information and trade secrets. This is also the interest mentioned in clause 9.1 of the restraint provision. Significantly no mention is made in the restraint provisions, or elsewhere in the agreement, to the goodwill of the second applicant or DigiCore, nor is any mention made of intellectual property rights which may attach to the name and style of the second respondent’s business. In Mr Vlok’s founding and replying affidavit reliance is likewise placed only on confidential information and trade secrets. Mr Terblanche’s suggestion (par [34] above) that the applicants also had an interest in ensuring that restraint covenants are enforced, sounds like an incipient class action by covenantees against covenantors. There is no merit in this submission.

[60] It is quite correct that the applicants do not have to demonstrate that there has indeed been a disclosure of confidential information or trade secrets in order to substantiate an application for a restraint interdict. Nor does it have to make out a case that the respondents intend expanding their business beyond the borders of the Western Cape, despite the first respondent’s declared intention not to do so. It is not in dispute, however, that the sale of the five components did not constitute the “core business” of the second respondent, and simply served to generate turnover for purposes of expanding its main business. Nor is it in dispute that the first respondent had, prior to his taking up employment with the first and later the second applicant, built up a wealth of knowledge and expertise in the transportation industry (par [22] above). In addition, much of what might have been confidential information had become freely available by way of advertising and the like. That being the case, the question must inevitably arise as to what confidential information and trade secrets pertaining to the second applicant and DigiCore still require protection.

[61] In considering the context in which the present scenario has taken place, a perusal of the e-mail message sent by the first respondent to Mr Vlok indicates a sincere attempt by the first respondent to patch up his relationship with Mr Vlok. Of course his discussions regarding the restraint provisions with other directors of the second applicant or DigiCore cannot be regarded as an amendment of the restraint, since it was never put in writing. On the other hand it does demonstrate a possible misunderstanding based on good faith. In this regard it is significant that, when the matter came before me on 21 July 2005, the parties agreed to an order permitting the second respondent to trade in four of the five said components, excluding sales to persons who had been customers of DigiCore during the preceding twelve months.

[62] When all the aforementioned facts and circumstances are considered, it is difficult to escape the impression that the main aim of the applicants is to exclude the first respondent from participating in the open market in a field in which he has built up considerable knowledge and expertise over a long period of time. In weighing up the relative interests of the parties, both qualitatively and quantitatively as this court is enjoined to do, it cannot otherwise be held than that the interests which the applicants seek to protect are substantially eclipsed by the prejudice which the respondents will undoubtedly suffer should the restraint be enforced against them. I am quite satisfied that the extremely limited competition emanating from the second respondent in its current trading activities cannot be regarded as detrimental to the interests of the second applicant or Digicore. In any event, to enforce the restraint would not, in my view, be in the public interest or in line with the demands of public policy. It would clearly place an unjust, unfair and unreasonable limitation on the right of the respondents to participate freely in the open market. In view of this finding it is not necessary to consider the issue of the reasonableness of the restraint period.

CONCLUSION

[63] It follows that the application must be dismissed with costs.

D H VAN ZYL

Judge of the High Court

---