Truworths Ltd v de Bruyn

Protectable interests examined and high court decided that while the skills and experience developed as a buyer while in the employ of Truworths will be of practical benefit to adidas under her new employment they are personal to her, and “not proprietary to her employer, even if that employer might have expended time and money on training her”.

Essence

Protectable interests examined and decided by high court that it would be unreasonable in the peculiar circumstances for the restraint agreement to be enforced.

Decision

(2174/2020) [2020] ZAWCHC 11 ; (2020) ILJ 1617 (21 February 2020)

Order:

1. Insofar as remains necessary, the applicant’s non-compliance with the time periods, forms and manner of service ordinarily prescribed in terms of the rules of court is condoned and the application is entertained as one of urgency in terms of rule 6(12)(a) of the Uniform Rules of Court.
2. The application is dismissed with costs, including the fees of two counsel.

Judges

Ashley Binns-Ward J.

Date of hearing: 20 February 2020
Date of judgment: 24 February 2020

Reasons

“Truworths seeks in these proceedings to obtain an order enforcing a six-month restraint of trade agreement that was concluded between itself and Ms de Bruyn as part and parcel of the latter’s terms of employment. The company contends that Ms de Bruyn’s employment by adidas has put her in breach of the restraint. Initially, only an interim interdict was sought as a matter of urgency. But as the issues had been fully ventilated on the papers by the time the matter came to a hearing on 20 February 2020, the application was prosecuted on the basis that a final interdict should be granted. Notice of opposition was given by Webber Wentzel attorneys on behalf of both of the respondents. Their answer to the founding papers was given in an affidavit by adidas’s Senior Director: Direct to Consumer Adidas Emerging Markets. Ms de Bruyn deposed to a confirmatory affidavit, verifying, insofar as she was able, the averments made in the principal answering affidavit. It goes almost without saying that because final relief is sought the evidence falls to be assessed on the now well entrenched principles set forth in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51 (21 May 1984); 1984 (3) SA 623 (A) at 634E-635C.” [para 3] . . . . 

“Accepting, as I do, that Truworths did have an interest that deserved protection after termination of the contract of employment between itself and Ms de Bruyn, the enquiry concerning whether the restraint should be enforced or not in the given circumstances must move on to the second and third questions in the check list devised by Nienaber JA in Basson v Chilwan that is set out in the quotation, above, from Zero Model Management, viz.

(2) ‘is that interest threatened by the other party?’, and

(3), if it is, ‘does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?’.

The evidence suggests, in line with common experience, that fashion is a constantly changing phenomenon, and that consequently any proprietary information that Ms de Bruyn is able to take with her concerning Truworths’ strategies and planning concerning its ‘Hey Betty’ range could be of only very limited usefulness to a competitor beyond the end of 2020. If anything, assuming, as I think one reasonably might, that the duration of the agreed restraint had been calculated with regard to the need for Truworths’ proprietary interests to be adequately protected, the six-month period of the restraint, which in this case would lapse at the end of July 2020, serves to verify that impression.
The evidence also demonstrates that any knowledge concerning the ‘Hey Betty’ range that Ms de Bruyn has taken with her from her employment at Truworths is unlikely to have any practical application in her work at adidas, where she will be involved in working with a quite distinguishable range of women’s clothing in the context of an entirely different work model, and where the marketing plans and strategies for the 2020 calendar year have already been settled. The skills and experience that Ms de Bruyn has developed as a buyer while in the employ of Truworths will, of course, be of practical benefit to adidas under her new employment, but it is trite that those are personal to her, and not proprietary to her employer, even if that employer might have expended time and money on training her. In all the circumstances I do not consider that Truworths’ protectable interests are threatened by Ms de Bruyn’s employment by adidas.

But were I wrong in my conclusion that the applicant’s interests are not threatened, I would in any event consider that in the given circumstances, and for the same reasons as those recorded in the previous paragraph, that Truworths’ interest in being protected did not weigh sufficiently, qualitatively or quantitively, against that of Ms de Bruyn not to be economically inactive or unproductive.

I therefore hold that it would be unreasonable in the peculiar circumstances for the restraint agreement to be enforced. It was not suggested in argument that there is any aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected.

The fourth question in the Basson v Chilwan checklist therefore does not call to be answered.” [paras 24 ans 25]

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] The applicant, Truworths Limited, is described in the founding affidavit as ‘a leading retailer of fashion, clothing, footwear, homeware and related merchandise in the ladies’ men’s and children’s markets’. It has 728 stores throughout South Africa. The company has a range of ‘specialised retail formats and brands’. The deponent to the founding affidavit averred that ‘[t]hose relevant to this application are not only “Hey Betty”, but also “OBR Sport”, “Outback Red”, “TRNY”, “TRS”, [and] “Hemisphere Sport”’. The ‘Hey Betty’ brand of women’s clothing is proprietary to Truworths. It is what I would call an ‘inhouse brand’. Some of the other brands just mentioned, such as ‘Outback Red’ and ‘Hemisphere’, would be recognisable to retail trade cognoscenti as overseas brands. The deponent pointed out that ‘Truworths also sells “Adidas”, “Reebok” and “Puma” branded footwear’ and proceeded to explain that ‘[t]he additional brands are relevant because their target market and offering compete with Adidas, and because [Danielle] De Bruyn had access to being exposed to Truworths styles and purchasing for them.’

[2] Danielle de Bruyn is the first respondent. Having then recently graduated from the Durban University of Technology with a national diploma in fashion, she was engaged by Truworths as a trainee buyer in January 2014. She underwent a two-year period of inhouse training before being promoted by the company to the positions of ‘designate buyer’, and thereafter, buyer. She terminated her employment with Truworths with effect from the end of January 2020, at the conclusion of the four-month notice period that she had been obliged to serve out in terms of her contract of employment. Ms de Bruyn’s last working day was 17 January, after which she proceeded on leave. She thereafter, with effect from 17 February 2020, took up a position as a buyer with adidas (South Africa) (Pty) Ltd, which is the local manifestation of the well-known multinational business of the German company, Adidas AG. Adidas (South Africa) (Pty) Ltd is the second respondent. For convenience, I shall refer to the second respondent simply as ‘adidas’.

[3] Truworths seeks in these proceedings to obtain an order enforcing a six-month restraint of trade agreement that was concluded between itself and Ms de Bruyn as part and parcel of the latter’s terms of employment. The company contends that Ms de Bruyn’s employment by adidas has put her in breach of the restraint. Initially, only an interim interdict was sought as a matter of urgency. But as the issues had been fully ventilated on the papers by the time the matter came to a hearing on 20 February 2020, the application was prosecuted on the basis that a final interdict should be granted. Notice of opposition was given by Webber Wentzel attorneys on behalf of both of the respondents. Their answer to the founding papers was given in an affidavit by adidas’s Senior Director: Direct to Consumer Adidas Emerging Markets. Ms de Bruyn deposed to a confirmatory affidavit, verifying, insofar as she was able, the averments made in the principal answering affidavit. It goes almost without saying that because final relief is sought the evidence falls to be assessed on the now well entrenched principles set forth in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51 (21 May 1984); 1984 (3) SA 623 (A) at 634E-635C.

. . . . .

[20] The approach to be taken by the courts when determining applications for the enforcement of restraint of trade agreements has been settled in a number of appeal court judgments handed down over the last 35 years. I was referred in argument to an earlier judgment of this court (per Breitenbach AJ) in Zero Model Management (Pty) Ltd v Barnard and Another [2009] ZAWCHC 232 (18 December 2009), which, in paras. 34-38, provides the following accurate summary of the import of the pertinent case law that I am grateful, in the context of preparing this judgment under the exigency of urgency, to be able to adopt:

“34. In Magna Alloys and Research (SA) (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A) the Appellate Division (as it was then known) held that the principle, followed in many earlier South African judgments, that a restraint of trade agreement is prima facie invalid or unenforceable stemmed from English law and not our common law, which contains no rule to that effect. The correct approach is to examine a restraint of trade agreement with regard to its own circumstances to ascertain whether enforcing it would be contrary to public policy, in which case it would be unenforceable. When a party alleges that he is not bound by a restraint of trade to which he had agreed, he bears the onus of proving that the enforcement of the agreement would be contrary to public policy. Although public policy requires that agreements freely entered into should be complied with, it also requires, generally, that everyone should be free to seek fulfilment in the business and professional world and, consequently, an unreasonable restriction of a person’s freedom to do so will not be enforced. The court must have regard to the circumstances obtaining at the time when it is asked to enforce the restriction. The court is not limited to a finding in regard to the agreement as a whole, but is entitled to declare the agreement partially enforceable or unenforceable.

35. In Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA) at paragraph 11, the Supreme Court of Appeal (“SCA”) endorsed the summary of the effect of the Magna Alloys judgment in J Louw and Co (Pty) Ltd v Richter and Others 1987 (2) SA 237 (N) at 243B to C [per Didcott J]:

“Covenants in restraint of trade are valid. Like all other contractual stipulations, however, they are unenforceable when, and to the extent that, their enforcement would be contrary to public policy. It is against public policy to enforce a covenant which is unreasonable, one which unreasonably restricts the covenantor’s freedom to trade or to work. Insofar as it has that effect, the covenant will not therefore be enforced. Whether it is indeed unreasonable must be determined with reference to the circumstances of the case. Such circumstances are not limited to those that existed when the parties entered into the covenant. Account must also be taken of what has happened since then and, in particular, of the situation prevailing at the time enforcement is sought.”

36. In Reddy the SCA added that determining whether a restraint agreement unreasonably restricts the freedom to trade or to work of the “covenantor” (i.e. the party resisting enforcement), is a value judgment which the court must make with two principal policy considerations in mind (paragraph 15):

“The first is that the public interest requires that parties should comply with their contractual obligations, a notion expressed by the maxim pacta servanda sunt.

The second is that all persons should in the interests of society be productive and be permitted to engage in trade and commerce or the professions.

Both considerations reflect not only common-law but also constitutional values. Contractual autonomy is part of freedom informing the constitutional value of dignity, and it is by entering into contracts that an individual takes part in economic life. In this sense, freedom to contract is an integral part of the fundamental right referred to in s 22.

Section 22 of the Constitution guarantees ‘[e]very citizen … the right to choose their trade, occupation or profession freely’ reflecting the closeness of the relationship between the freedom to choose a vocation and the nature of a society based on human dignity as contemplated by the Constitution. It is also an incident of the right to property to the extent that s 25 protects the acquisition, use, enjoyment and exploitation of property, and of the fundamental rights in respect of freedom of association (s 18), labour relations (s 23) and cultural, religious and linguistic communities (s 31).”

37. In Reddy the SCA explained the manner in which these two principal considerations should be applied, as follows (at paragraph 16):

“In applying these two principal considerations, the particular interests must be examined. A restraint would be unenforceable if it prevents a party after termination of his or her employment from partaking in trade or commerce without a corresponding interest of the other party deserving of protection. Such a restraint is not in the public interest. Moreover, a restraint which is reasonable as between the parties may for some other reason be contrary to the public interest.

In Basson v Chilwan and Others [1993] ZASCA 61; [1993 (3) SA 742 (A) at 767G to H[ ]], Nienaber JA identified four questions that should be asked when considering the reasonableness of a restraint:

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

(b) If so, is that interest threatened by the other party?

(c) In that case, does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?

(d) Is there an aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected?

Where the interest of the party sought to be restrained weighs more than the interest to be protected, the restraint is unreasonable and consequently unenforceable. The enquiry which is undertaken at the time of enforcement covers a wide field and includes the nature, extent and duration of the restraint and factors peculiar to the parties and their respective bargaining powers and interests”.

38. In Reddy at paragraph 17 the SCA added a fifth question to the four set out in Basson, which it said was implied by question (c) and corresponds with the factor in s 36(1)(e) of the Constitution of the Republic of South Africa, 1996 (“the Constitution”), namely whether the restraint goes further than necessary to protect the interest of the party that deserves protection after termination of the employment agreement.

[21] The respondents contended that the restraint was indiscriminately wide. It has been held before that restraint agreements that are unduly oppressive are contrary to public policy and unenforceable. The respondents point out that on a literal construction of the agreement Ms de Bruyn would be prohibited from taking up any position whatsoever with any of Truworths’ competitors or their suppliers, even if the work involved there bore no relationship whatsoever to that which she had been doing, or any proprietary information she had been exposed to, whilst employed at Truworths. It is possible to construe the agreement to that effect, but I do not think that to do so would give a sensible or businesslike construction of it.

On the contrary, I think it is evident, when the relevant agreements are construed holistically and in the manner enjoined in Endumeni Municipality, that the object of the restraint would have been commonly understood by the contracting parties to have been directed at affording protection to Truworths’ legitimate proprietary interests should the employee have the opportunity within the first six months after leaving Truworths’ employment to take up a position with a competitor or a competitor’s supplier.

[22] To the extent that certain averments by the deponent to Truworths’ founding affidavit appear to suggest that he considered the restraint agreement might be applied merely to protect Truworths against competition he was misguided.

If that were the intended effect of the agreement, it would not be enforceable; cf. Basson v Chilwan supra, at 767E-F (SALR).

The only legitimate object to which a covenant in restraint of trade can be directed is the protection of a legally cognisable proprietary interest of the covenantee (‘vermoënsbelang’) such as confidential information, customer connections or goodwill;

cf. e.g.

[23] I think it has been established in the current case that Truworths does indeed have a proprietary interest notionally deserving of protection by means of the imposition of restraint of trade agreements on its employees engaged in the planning, design and marketing of its inhouse ‘Hey Betty’ range. I can readily accept that its confidential information in this connection might well be useful if disclosed to competitors in affording them an unfair competitive advantage.

The likelihood of such an advantage actually being provided in any given situation will, of course, depend on the peculiar circumstances of the case. It is recognition of that axiom that no doubt explains the approach enunciated in Magna Alloys supra, that it is the circumstances that prevail when a covenant in restraint of trade is sought to be enforced, rather than those pertaining when it was entered into, to which particular regard will be had when determining whether or not it would contrary to public policy to give it effect.

[24] Accepting, as I do, that Truworths did have an interest that deserved protection after termination of the contract of employment between itself and Ms de Bruyn, the enquiry concerning whether the restraint should be enforced or not in the given circumstances must move on to the second and third questions in the check list devised by Nienaber JA in Basson v Chilwan that is set out in the quotation, above, from Zero Model Management, viz.

  • (2) ‘is that interest threatened by the other party?’, and
  • (3), if it is, ‘does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?’.

The evidence suggests, in line with common experience, that fashion is a constantly changing phenomenon, and that consequently any proprietary information that Ms de Bruyn is able to take with her concerning Truworths’ strategies and planning concerning its ‘Hey Betty’ range could be of only very limited usefulness to a competitor beyond the end of 2020. If anything, assuming, as I think one reasonably might, that the duration of the agreed restraint had been calculated with regard to the need for Truworths’ proprietary interests to be adequately protected, the six-month period of the restraint, which in this case would lapse at the end of July 2020, serves to verify that impression.

The evidence also demonstrates that any knowledge concerning the ‘Hey Betty’ range that Ms de Bruyn has taken with her from her employment at Truworths is unlikely to have any practical application in her work at adidas, where she will be involved in working with a quite distinguishable range of women’s clothing in the context of an entirely different work model, and where the marketing plans and strategies for the 2020 calendar year have already been settled.

The skills and experience that Ms de Bruyn has developed as a buyer while in the employ of Truworths will, of course, be of practical benefit to adidas under her new employment, but it is trite that those are personal to her, and not proprietary to her employer, even if that employer might have expended time and money on training her. In all the circumstances I do not consider that Truworths’ protectable interests are threatened by Ms de Bruyn’s employment by adidas.

[25] But were I wrong in my conclusion that the applicant’s interests are not threatened, I would in any event consider that in the given circumstances, and for the same reasons as those recorded in the previous paragraph, that Truworths’ interest in being protected did not weigh sufficiently, qualitatively or quantitively, against that of Ms de Bruyn not to be economically inactive or unproductive.

I therefore hold that it would be unreasonable in the peculiar circumstances for the restraint agreement to be enforced. It was not suggested in argument that there is any aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected.

The fourth question in the Basson v Chilwan checklist therefore does not call to be answered.

[26] In the result, the following orders are made:

1. Insofar as remains necessary, the applicant’s non-compliance with the time periods, forms and manner of service ordinarily prescribed in terms of the rules of court is condoned and the application is entertained as one of urgency in terms of rule 6(12)(a) of the Uniform Rules of Court.
2. The application is dismissed with costs, including the fees of two counsel.