National Chemsearch (SA) (Pty) Ltd v Borrowman and Another

• Jurisdiction: South Africa
• Court: Transvaal Provincial Division
• Judge: Botha J, Vermooten J and Spoelstra AJ
• Judgment Date: 30 May 1979
• Citation: 1979 (3) SA 1092 (T)
• Hearing Date: 07 March 1979

Botha J:

This appeal raises a number of problems relating to the enforcement of agreements in restraint of trade.

The two respondents were formerly employed by the appellant. Shortly after the termination of their employment with the appellant, the latter

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sought to enforce against them certain restraint clauses appearing in their written contracts with the appellant. The appellant did so by A applying as a matter of urgency in the Witwatersrand Local Division for an interdict restraining the respondents from carrying on certain activities, the details of which will be noted later. The application was opposed, and NESTADT J dismissed it with costs (except for certain costs relating to applications to strike out, to which it is not necessary to refer).

The affidavits filed on behalf of the parties disclose a number of B disputes of fact that cannot be resolved on the papers. There was no request for the matter to be referred to evidence, and the interdict applied for was final in form. In these circumstances it was common cause, both in the Court a quo and in this Court, that the application should have succeeded only if the facts as stated by the respondents, together C with such facts advanced by the appellant as were admitted by the respondents, justified the order sought (Stellenbosch Farmers' Winery Ltd v Stellenvale Winery (Pty) Ltd 1957 (4) SA 234 (C) at 235E - G). Accordingly, in what follows, I shall confine myself to the facts alleged or admitted by the respondents and disregard the disputed issues of fact.

D It was also common cause that, in order to succeed, the appellant was required to establish a clear right, injury actually committed or reasonably apprehended, and the absence of similar protection by any other ordinary remedy (Setlogelo v Setlogelo 1914 AD 221 at 227). The learned Judge a quo found against the appellant on the first of these E requirements, and dismissed the application on that ground. He held that the restraint clauses in question were unenforceable because the appellant had failed to prove that their provisions were reasonable in a number of respects that will be discussed later. I proceed to deal with this issue, which was the main issue in the appeal, and which comprises a number of different facets calling for consideration. In doing so, I shall at first confine myself to the facts relating to the first respondent; his F position, factually, differs in some respects from that of the second respondent, and it will be convenient first to limit the discussion to the first respondent and thereafter to consider whether there is reason to come to a different conclusion in respect of the second respondent.

G The appellant is a company which is engaged in the distribution and sale of disinfectants, soaps, detergents, cleaners and "other like specialities and related products" for use in industry and by institutions. The first respondent emigrated to this country in August 1975, and took up employment with the appellant as a salesman, working for a basic salary plus commission on the sale of the appellant's products. On 24 September 1976 the first respondent entered into a written agreement with the H appellant, which contains the restraint clauses upon which the appellant's case is based, and which will be quoted in a moment. The agreement is headed "Independent Agent Agreement". In terms of it, the first respondent was appointed as an independent sales agent of the appellant in any "agency district" which could be assigned to him by the appellant from time to time. He was to be remunerated on a commission basis. His duties were stated in clause 2 of the agreement to be such as were assigned to him from time to time by certain officers of the

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appellant "in relation to the sale and exploitation of chemical specialities". The first respondent in his affidavit describes his duties as "independent agent" of the appellant as follows:

"(i)

A To canvass customers for the applicant.

(ii)

To sell the company's products to existing customers and customers which I had canvassed.

(iii)

To act in an advisory capacity to prospective purchasers of applicant's products and to promote the sale of such products."

B According to the first respondent, he worked as an "independent sales agent" for the appellant in the following areas: Durban, Johannesburg, Isando, Modderfontein, Spartan (in the district of Kempton Park), Edenvale, Elandsfontein, Witbank and Wadeville. He was later verbally promoted to sales management trainee, and thereafter to sales supervisor; whether these promotions had any effect on the restraint clauses in C question will be reserved for separate consideration later in this judgment.

The preamble of the agreement between the appellant and the first respondent needs to be quoted in extenso. I reproduce it exactly as it appears in the record:

"Whereas:

D (1) The company is or may be hereafter become engaged in the manufacture, distribution and sale of disinfectants, soaps, detergents, cleaners, insecticides, chemical specialties, paints, water, treatments, maintenance chemicals for industry and institutions, degreasing and sanitary supply and floor maintenance materials and equipment and related products (all or any of which whether manufactured or sold by the company or not are hereinafter called 'chemical specialties') in the agency district.

E (2) The company has established and developed in other countries and now intends developing in the undermentioned agency district a valuable and extensive trade in the said chemical specialties and valuable and extensive business connections and customers.

(3) The agent desires appointment as an agent by the company and by virtue of such appointment he will both in the ordinary course of his F appointment by personal acquaintance, and as a result of the conferences, seminars, information pooling sessions and courses for agents of the company which are intended to be held, and by other types of instruction, become familiar with and possessed of confidential information pertaining to the company's business and that of its subsidiaries, affiliates, successors or associated companies.

(4) Such information (all or any part of which information is hereinafter called the company's confidential information) will include:

(a)

G Technical information, that is to say information relating to compositions, formulae, processes, methods, manufactures, machines and inventions (any improvements thereof).

(b)

Commercial information, that is to say information relating to the precise products offered for sale, and the prices thereof and profits thereon, and the volume of sales thereof, and the number, names and location of independent sales agents.

(c)

H Customer information, that is to say information as to the names and addresses of customers of the company and of their representatives with whom the company has dealt and of the requirements for types of goods for which the company has solicited their custom.

(5) The sales aids and other property hereinafter mentioned as having been furnished by the company to the agent at no expense to him, have been carefully developed by or on behalf of the company over long periods of time and at great cost and expense and loss and damage will result to the company if they should fall into the hands of unauthorised persons.

(6) The company will suffer great loss and damage if during the agent's appointment tenure by the company or at any time subsequent to the termination

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of such appointment the agent should do any of the things which by clauses 11 to 14 inclusive hereof he agrees not to do, or if he should fail to do anything which by these clauses he agrees to do."

A (I have not interpolated the word "sic" to point to the errors of grammar, punctuation and style in the quotation, because there are too many such errors in this badly drafted agreement).

The provisions in restraint of trade which are germane to the present proceedings appear in clause 12 of the body of the agreement. I quote the B relevant portions thereof, again exactly as they appear in the record, except for the addition of the word "and" as italicized in the first few lines of the clause, counsel having agreed upon the necessity of the addition:

"12. The agent expressly covenants, as separate and independent covenants, that during the term of his appointment by the company and for a period of 12 months immediately following the termination of his employment for any cause whatsoever:

(a)

he will not directly or indirectly for himself or on behalf of any C other person sell, offer for sale or solicit the sale of any chemical specialty to any customer or prospective customer of the company with whom he has dealt while in the employ of the company or to whom he was known as an agent of the company.

(b)

He will not directly or indirectly for himself or on behalf of any person sell, offer for sale or solicit the sale of any chemical specialty of the type he has sold, offered for sale or solicited during his D appointment as an agent by the company, in any district, industrial area or village in the said area where he has made aforesaid sales, offers for sale or solicitation on behalf of the company.

(c)

He will not directly or indirectly enter the employment of or go into partnership with or become consultant to any person engaged in the distribution or sale of chemical specialties which he the agent has sold on behalf of the company which employment, partnership or consultancy involves him in assisting such person by giving information to such person E relating to any customers of the company, that is their names, addresses, representatives, agents name or requirements for chemical specialties, as are situated in any part of the territory at any time...