Premier Medical & Industrial Equipment (Pty) Ltd v Winkler [1971] 4 All SA 94 (W) per Hiemstra J.
The High Court refused to restrain the managing director from continuing certain activities regarded as being in breach of a term in the employment contract. Hiemstra J stated the relevant principles relating to confidential information and an employee’s fiduciary duties, more particularly concerning suppliers who were being approached to transfer agencies to managing director’s new company. Hiemstra J also mentioned the reluctance to imply a restraint clause.
Excerpts
This matter concerns the fiduciary duties of an employee towards his employer. The applicant company carries on business throughout the Republic as importer and supplier of electro-medical and medical equipment. The first respondent was managing director of the applicant company but terminated his employment with effect from 28th February, 1971. He has not formally resigned as director of the applicant company and has not been removed as such. The second respondent is a private company which was registered by the first respondent with a main objects clause to the effect that the company is to carry on the business of importers, wholesalers, retailers and manufacturer’s agents in all types of electrical and electronic goods, equipment and apparatus. He registered this company on 9th February, 1971, i.e. before he terminated his employment with the applicant company. It will carry on business in direct competition with the applicant company.
The first respondent, while still in the employ of the applicant company, attempted to persuade certain of the applicant’s major overseas suppliers of electro-medical and medical equipment to terminate the agency contract which they had with the applicant and to grant agency contracts to himself for his company. It is alleged that he used his position as managing director by making use of confidential information to the prejudice of the applicant and to the advantage of himself and his company. It is also stated that he unlawfully removed certain price lists and other secret and confidential documents from the applicant’s possession and that he continues to attempt to persuade overseas suppliers who were previously under contract with the applicant to appoint himself or his company as their agent. In doing so he, according to applicant, used the confidential information which he obtained while being in its employ. An order is now sought restraining the first respondent and his company from continuing these activities for a period which is to be fixed by the Court.
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There can be no doubt that during the currency of his contract of employment the servant owes a fiduciary duty to his master which involves an obligation not to work against his master’s interests. It seems to be a self-evident proposition which applies even though there is not an express term in the contract of employment to that effect.
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To go marauding among his master’s suppliers and customers in order to build up his own business is certainly one of the grossest breaches of fidelity that can come to mind. A good example of that is Wessex Dairies Ltd. v. Smith, (1935) 2 K.B. 80. In that case an employee who, while still in the service of his master, solicited the customers of his master to transfer their custom to himself, was held liable in damages even though the transfer was to take effect only after the service had terminated. It was held that he committed a breach of his duties to his employer. There are several other cases supporting this proposition but none of them go so far as to lay down that the duty of fidelity persists after the termination of the contract of employment. Such a duty could be introduced in the relationship of master and servant by means of a specific covenant to that effect.
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It was further argued on behalf of the applicant that even if the Court considers that on the present papers it is unable to find as a fact that the restraint provision in the agreement of October, 1965, continued to apply to Winkler’s employment with the applicant, he was in any event precluded from using any confidential information which during his employment with the applicant had come into his possession. Mr. Suzman, for the applicant, called this the “springboard doctrine” and relied upon it on strength of Seager v. Copydex, Ltd., (1967) 2 All E.R. 415 (C.A.). In that case Lord DENNING says the following at p. 417:
“As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the persons who made the confidential communication . . .”
That contention is no doubt correct in regard to information which is indeed a secret and could be used in a way which is detrimental to the company. It seems to me however that the knowledge as to who could supply certain instruments or appliances which are used in the medical field cannot be confidential information. No doubt the suppliers would advertise their products and it could easily be ascertained by anyone, also people who had never been in the employ of the company, where certain products which are intended for the market, are obtainable. I do not regard the identity of suppliers of certain products to be confidential information in the sense in which the expression is used in this part of the law. There were indeed price lists in existence which one could regard as confidential information, but the first respondent has stated that although he had been in possession of these lists, they had been destroyed by him. The applicant had no option but to accept this statement and in so far as his argument was based upon confidential information he could go no further than to rely on the identity of the suppliers.
There is no doubt that the first respondent’s conduct in persuading the applicant’s suppliers to transfer their allegiance to him was unlawful during the time when he was still employed by the applicant company. There is also no doubt that if any damage could be proved by the applicant such damage would be recoverable from the first respondent. It was contended that such damage would be very difficult of proof, but it seems to me not to be impossible of proof. This is not a factor which in the present circumstances can exclude the remedy of damages in favour of an interdict.
These findings seem to be sufficient to dispose of the matter and it is not necessary to deal with the other aspects which were raised on both sides.
The order is that the application is dismissed with costs.