Basson v Chilwan and Others

• Jurisdiction: South Africa
• Court: Appellate Division
• Judge: Botha JA, Van Heerden JA, Milne JA, Eksteen J, Nienaber JA
• Judgment Date: 17 May 1993
• Citation: 1993 (3) SA 742 (A)
• Hearing Date: 08 March 1993

I Eksteen, JA.:

This appeal concerns the enforceability of a restraint of trade clause in an agreement entered into between the appellant and the first four respondents. The respondents brought an application on notice of motion before the Cape Provincial Division against the appellant to enforce this clause. The application succeeded and the present appeal is J against that order.

Eksteen JA

A The appellant failed to file his power of attorney and lodge the record of the proceedings before the Court a quo timeously, and was also out of time in providing security for the respondents' costs of appeal. He was therefore compelled to bring an application for the condonation of his failure to comply with the Rules of this Court. The respondents oppose the condonation solely on the basis that the appellant is unable to show a B prospect of success on the merits of the appeal. This entails a consideration of the merits and therefore of the appeal itself.

From the papers filed it appears that the first four respondents ('the Chilwans') were the owners of Chilwan's Bus Service 'which at the time operated approximately 100 buses countrywide in South Africa'. The C appellant ('Basson') was a man with a wealth of experience in the design and construction of bus and coach bodies. From his answering affidavit it appears that he obtained a Technical Matriculation Certificate at the Technical High School at Oudtshoorn in 1958. He then became an apprentice plate metal worker at the factory of African Explosives at Somerset West. D On completion of his apprenticeship in 1961 he entered the employ of a company called Busaf. They were bus body builders in Port Elizabeth. He seems to have remained in their employ for 18 years - at first in Port Elizabeth, then in Germiston and ultimately in Letaba. He describes Busaf as one of the largest bus body builders in the country. While stationed in E Germiston he trained personnel in the construction of bus bodies with a view to establishing a bus body construction industry for Busaf in Letaba, and then he worked for them in Letaba for seven years. He does not say what prompted him to terminate his employment with Busaf but in 1980 he and 'some others' took over a bus building company in Randfontein. This F venture was not a success, and so in 1982 he went to work for Muller Engineering - another bus construction company - in Pretoria. He progressed in their employ to the position of production manager and designer of buses, but in 1986, after a mere four years, he left. He then went to work for the Sentraal-Suid Koöperasie in Swellendam as their workshop manager. This only lasted for a year. In 1987 he joined Du Preez G Busdienste in Stellenbosch where he designed and built buses for them. While thus employed, he says, the Chilwans approached him and asked him to build a bus for them. He did, and they were apparently so satisfied with his work that discussions were set in train with a view to Basson joining the Chilwans in setting up a bus construction firm which would build buses H on a large scale.

In their replying affidavits the Chilwans say they met Basson while he was working for a firm called Neurock Engineering in Paarl and that it was Neurock Engineering that built a bus for them. They also attach to their replying affidavits an affidavit by one Joubert who alleges that during 1970 or 1971 Basson worked for a firm called Gelding Investments in the I Strand, and that thereafter he established a firm called Basson's Crafts in Mossel Bay where he built boats and made glass-fibre canopies. These allegations, however, are not contained in the Chilwans' founding affidavits but have been raised for the first time in their replying affidavits. Basson did not apply for leave to file further answering affidavits as he could well have done. In fact, in the circumstances of J this case, where the

Eksteen JA

A Chilwans were simply relying on Basson's breach of his contractual undertaking for the relief they sought, and where the onus was on Basson to justify such breach, one might have expected Basson to have applied for leave to file further replying affidavits, and such relief could hardly have been refused him (cf Minister van Wet en Orde v Matshoba 1990 (1) SA 280 (A) at 293B-E). He did not, however, do so and I am prepared, for the B purposes of this judgment, to accept that the matter must be decided on the three sets of affidavits before us, and that the ordinary rules of procedure in such a case will apply. These rules have been crystallised in the well-known dictum by Corbett JA in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634H-635C where he held C that,

'where in proceedings on notice of motion disputes of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent, together with the facts alleged by the respondent, justify such an order . . . In certain D instances the denial by respondent of a fact alleged by the applicant may not be such as to raise a real, genuine, or bona fide dispute of fact . . . If in such a case the respondent has not availed himself of his right to apply for the deponents concerned to be called for cross-examination under Rule 6(5)(g) of the Uniform Rules of Court . . . and the Court is satisfied as to the inherent credibility of the applicant's factual averment, it may proceed on the basis of the correctness thereof and E include this fact among those upon which it determines whether the applicant is entitled to the final relief which he seeks . . . .'

Applying these principles in the present matter, I shall not have regard to those allegations to which I have referred and which were raised for the first time in the replying affidavits. On Basson's own showing, F however, it appears that in the nine or ten years immediately preceding the conclusion of the agreement presently under consideration, and after he had left the employ of Busaf, he had been associated with four different firms, one of which was not engaged in bus construction at all.

The negotiations between Basson and the Chilwans, aimed at the establishment of a joint venture to construct buses on a large scale, G would seem to have commenced late in 1988 and to have been concluded early in 1989. From the agreement itself it appears that during the negotiations it was contemplated by the parties that the proposed business would be conducted as a close corporation in which the four Chilwans and Basson H would have an equal interest. This close corporation ('Coach-Tech'), which is the fifth respondent, was incorporated on 16 January 1989, so the negotiations must have commenced before this date. The agreement itself was only concluded after that date. The Chilwans simply aver that it was concluded 'early in 1989' whereas Basson says to the best of his recollection it was signed in 'about May 1989'. Nothing, however, turns on I the exact date. Each of the parties is referred to in the agreement by his first name - Basson being referred to as 'Willem'.

The agreement provided inter alia that the interest of each member - ie the four Chilwans and Basson - would be 20% (clause 3.1) and that each member would pay a nominal contribution of R20 'to the corporation' J (clause 3.3). Each of them was 'hereby appointed and employed by the

Eksteen JA

A corporation' as an 'executive' of Coach-Tech (clause 4.1) with equal rights 'to participate in the carrying on of the business of the corporation' (clause 4.2.1) and 'to manage the business of the corporation' (clause 4.2.3). It also provided in clause 4.5.3 that:

'4.5 Each executive shall for the duration of each executive's employment -

B . . .

4.5.3 exercise the utmost good faith towards the corporation and use his best endeavours to promote its interests both in carrying out his duties hereunder and also in all his dealings with the corporation; in this regard he shall not devote any time or attention to any other concern or business unless so authorised by resolution of members; . . . .'

C The restraint clause which gives rise to the central issue in this case is clause 11 which reads as follows:

'Confidentiality and restraint

11.1

Willem acknowledges that, it is in the interest of the protection and maintenance of the corporation's trade secrets (which for the purpose hereof means the corporation's goodwill, technical and business D know-how, trade secrets, confidential information and the corporation's intellectual property in general), to maintain confidentiality and therefore Willem undertakes to the corporation that -

11.1.1

he shall not during or at any time after his employment by the corporation, either himself utilise and/or directly or indirectly E divulge and/or disclose to any third party (except as may be necessary in accordance with the nature of Willem's employment as executive with the corporation ("employment")) any of the corporation's trade secrets;

11.1.2

any trade secrets, including those acquired by the corporation from a third party or any documents or records (including written instructions, drawings, notes or memoranda) pertaining to the F trade secrets of the corporation which are made by Willem or which came into Willem's possession during the period of Willem's employment with the corporation, shall be deemed to be the property of the corporation, and shall be surrendered to the corporation on demand, and in any event on the termination of Willem's employment with the corporation and Willem will not retain any copies thereof or extracts therefrom;

11.1.3

G he shall not, within a period of five years of the termination date (as hereinafter defined) and within the territory (as...