BACKGROUND AND SUMMARY
The Application brought before the court concerned the enforcement of a restraint of trade agreement for a period of 12 (Twelve)months within the geographical area of Richards Bay, as well as certain confidentiality undertakings, to be held against Marshall Naidoo (“the First Respondent”), an erstwhile sales representative of North Safety Products (“the Applicant”), as well as the First Respondent’s present employer, Pienaar Bros (Pty) Ltd (“the Second Respondent”).
In the competitive market, both the Applicant and the Second Respondent respective businesses concern the design, manufacture and marketing of personal protection and safety equipment products for use in the workplace.
The court, in contemplation of restraint of trade disputes, must address and satisfy itself of the following questions:
- whether the party who seeks to restrain has a protectable interest;
- if there is a protectable interest, to determine how that interest weighs up, qualitatively and quantitatively, against the interest of the other party to be economically active and productive;
- whether the protectable interest is being prejudiced by the party sought to be restrained; and
- whether there are any other public policy considerations which require that the restraint be enforced
In circumstances where the interest of the employee outweighs the interest of the employer, alternatively, the party seeking the restraint, the court must find the restraint to be unreasonable and unenforceable.
Our law recognizes essentially 2 (Two) types of protectable interests, namely:
- Customer Connections; and
- Trade secrets.
Whilst the Applicant alleged that both of the recognized protectable interests were being threatened by the Second Respondent’s employ of the First Respondent, the court held the following:
Customer Connections
It is not sufficient to say, as it was in argument, that a former employee had satisfactory dealings with clients and that they “may well” thus follow the First Respondent to another employer. The court made use of the endorsement of the ‘customer contact’ doctrine in Rawlins and Another v Caravantruck (Pty) Ltd 1993 (1) SA 537 (A) which stipulated 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”.
Further, in the matter of Meter Systems Holdings Ltd v Venter and Another 1993 (1) SA 409 (W), when considering customer details and pricing lists, the court held that, “…it nevertheless recognises that on termination of an employee’s employment, some knowledge of his former employer’s customers will inevitably remain in the employee’s memory and it leaves the employee free to use and disclose such recollected knowledge in his own interests, or in the interest of anyone else including the new employer who competes with the old one.”
Trade Secrets
In considering the dispute between the parties, pertinent to same was how much of what the First Respondent knows about the industry, which may be useful to a competitor, he has gained uniquely, specifically and confidentially in the employ of the Applicant and how much is background or common knowledge of the industry or is recollected knowledge and weight of experience a person inevitably acquires.
In casu, The Applicant submitted that the crux of the advantage, that the First Respondent had now taken to the Second Respondent, was knowledge of specific requirements of the customers with which he dealt during the course of his employment with the Applicant, and specifically in regard to products which they deemed important to their basket of products.
Of noteworthy import is that, by seeking relief by way of motion proceedings, the Applicant was to be bound subject by the Plascon Evans rule, and, as such, in submitting ‘potential harm’ to be experienced by the Applicant, as a result of 2 (Two) clients of the Applicant indicating their desire to go out to tender for personal protective equipment, in the Applicant’s founding affidavit, the court was in a position to consider same in respect of the questions of protectable interest.
The First Respondent challenged the Applicant’s averments stating that:“knowledge of the specific requirements of a potential or existing client, that goes out to tender, becomes public knowledge by virtue of the nature of the tender process, which demands that such requirements are published for public consumption. Further, all, or the majority portion, of this knowledge and information is readily ascertainable from various internet sources and documents online in the public domain.”
HELD
The application was dismissed with costs as on the papers brought before the court, the Applicant failed to adequately demonstrate that based on the First Respondent’s historical knowledge of their product preferences, that the Applicant would risk being excluded from any potential closed tender lists.
Further, the court ruled that an understanding of a customer’s product preferences, in casu, fell short of confidential information and pertains to recollected knowledge as opposed to prohibited information as obtained through customer connections.
VALUE
The above case demonstrates the application of the court to evaluating what constitutes a protectable interest that would require the enforcement of a restraint of trade agreement in instances where such protectable interests are capable of being exploited by the party sought to be restrained.
Written by Justin Howard and Shaun Piveteau
