Jonsson Workerwear (Pty) Ltd v Williamson and Another (D 426/2013) [2013] ZALCD 24 (12 August 2013)

Principle:

  1. party seeking to enforce or oppose a restraint of trade agreement in motion proceedings, must provide sufficient, credible proof in its supporting affidavits to substantiate its version of events.

  2. Where the assertions or denials in a party's version are bald, implausible, or far-fetched the court is justified in rejecting that version.

  3. The Labour Court has a discretion to decide whether to refer motion proceedings to oral evidence where there is a dispute of fact that needs to be resolved. In exercising this discretion, a litigant applying for a matter to be referred to oral evidence should at least advance reasonable grounds at the beginning of the litigation to support this discretion being exercised.

Facts:

This case concerned the basis on which a court decides to make an order restraining an ex-employee from acting in violation of a restraint of trade agreement. It provides very useful indicators of what an employer needs to establish before the court to get an interdict.

The business of the employer (the applicant) is the manufacturing of about 850 different work garments and corporate uniforms for corporate customers. An ex-employee (the first respondent) was initially employed as what was called a "sample set manager". At the time of termination of employment he held the position of head of garment technology, being a position he held for about a month following restructuring. There was a written contract of employment which contained a restraint of trade covenant, which prohibited him from being employed and having any interest in any competing business for a period of 12 months from termination of employment, and for the area of the Republic of South Africa.

Prior to commencing employment, the ex-employee obtained a diploma in clothing production management. He then held several clothing production positions at a number of clothing manufacturers in the period between 1990 and 2008, when he joined the employer. In this time, he accumulated substantial experience in working with a large variety of clothing production machines, attending to machine maintenance, quality control on work processed, allocation of work-loads, and general management of factory staff. The ex-employee had all the technical ability, skills and experience in the clothing industry in place when he joined the applicant in 2008 and brought these skills and experience with him. The ex-employer acquired no special skills or experience from the employer.

There is nothing confidential and unique about the manufacturing of clothes in the employer's business: it used the same manufacturing processes used by all clothing manufacturers. The clothing made is also "graded" is ensure that universal sizes are applied, and this applies commonly, is an industry standard, and is not confidential. The nature of clothing is such that it is not possible to keep as "confidential" any makeup of the clothing.

The ex-employee was not responsible for clothing design, nor did he deal with customers or have any customer relationships. When he resigned from his employment he disclosed that he would take up employment with the new employer, a direct competitor of the applicant. His role with the new employer is that of quality control. The new employer does not conduct its own manufacturing of garments, and this function is outsourced to a third party. As such, the ex-employee would not have to become involved in the manufacturing process, and any knowledge that he may have about manufacturing processes and methods of the ex-employer were of no interest at all to the new employer.

In trying to enforce the restraint of trade agreement, all the ex-employer recorded is that the ex-employee "knows everything there is to know" about its products, the special material used, the sourcing of its fabrics, garment assembly and sequence of operations, the art work, the manufacturing processes, the technical packs of the garments, and all aspects of the manufacture and design of the applicant's products. These general statements were not amplified by any particularity and are clearly bald and general in nature. The ex-employer then contended that the ex-employee's employment with the new employer as direct competitor of the applicant is breach of the protectable interest.

In reply, the ex-employee said that he had no particular knowledge of the makeup of fabric other that what he could ascertain from the label. He also said that the fabric was purchased from third party manufacturers and these manufacturers also supply to many other purchasers. He stated that he did not source any fabrics, trims or finishes, and there is nothing confidential about garment assembly. The artwork referred to comes from third parties engaged by customers for that purpose and for branding purposes. He said he had nothing to do with design in any event. He said he was not responsible for the costing, pricing or selection of materials in the production process. The content of the technical packs is recorded on the central drive accessible to anyone. There is nothing unique in the ex-employer's quality control processes; garments are made in standard sizes and is consistent throughout the entire industry, and is not confidential.

The ex-employee stated that the clothing industry in South Africa has diminished substantially, with most clothing production now being done overseas and job opportunities being limited. The clothing industry is all the ex-employee knew, making a nation-wide restraint unreasonable.

The ex-employer realised it was in trouble and made application to lead oral evidence (which is allowed in special circumstances). The court refused. It said that the applicant had not made out a basic case that the restraint was reasonable in its affidavit. (Incidentally the court accepted that an ex-employee bore the onus of establishing the restraint is unreasonable, but acknowledged a number of decisions which have said that this is unconstitutional).

The Labour Court held that the ex-employee's replying affidavits established that the restraint agreement was unreasonable. This case is very helpful because it confirms that where an employer in motion proceedings seeks to enforce a restraint of trade agreement, it is the facts stated by the ex-employee in his/her affidavit together with the admitted or undenied facts in the ex-employer's affidavit which provide the factual basis for the determination.

Extract from the judgment:

Snyman AJ:

[6]   I accept that there is a material factual dispute between the parties on the two issues of the existence or not of a protectable interest and whether such protectable interest (if it exists) has been infringed. The question is whether it is appropriate and proper to resolve this factual dispute by a referral to oral evidence, considering the above conduct of the applicant and considering the normal principles applicable to factual disputes in motion proceedings (which will be addressed hereunder).

[7]   I agree with Mr Smithers, who appeared for the first respondent, that there is no particular magic in a restraint of trade application that per se necessitates it being dealt with in a manner other than any other interdict application. After all, a restraint of trade application is nothing but an interdict. The unique requirements of a restraint of trade to be enforced all relate to the issue of the existence or not of a clear right as the first requirement of any interdict application. There is simply no compelling reason why a restraint of trade must be determined differently to any other application for an interdict dealt with by the Courts on a daily basis.

[8]   Before I deal with the principles applicable to the determination of an application for referral to oral evidence, I will firstly consider the principles applicable to the determination of factual disputes in restraint of trade motion proceedings in the normal course. In fact, it is perhaps appropriate to first look at the issue of the onus, which seems to be somewhat controversial in restraint disputes. In Magna Alloys and Research (SA) (Pty) Ltd v Ellis it was held that: it was held that: 'Acceptance of public policy as the criterion means that, when a party alleges that he is not bound by a restrictive condition to which he had agreed, he bears the onus of proving that the enforcement of the condition would be contrary to public policy.'.... On the other hand, some authorities have held that in the new constitutional dispensation, there has been a shift in the onus to the effect that the party seeking to enforce the restraint has the onus to prove that it is enforceable...I do not intend to get involved in this issue in this judgment, and for the purposes of this application, I will accept that the correct position in law is that the onus is on the first respondent to prove the restraint of trade is unreasonable and not enforceable.

[9]   What I must however point out that no matter where the onus may lie, this does not change the principle and approach on how factual disputes in motion proceedings should be determined, and in particular, how this restraint application should be determined.... What is clear is that the issue of an onus plays no role in exercising a value judgment in order to determine if the restraint is reasonable or not.... Therefore, and in deciding which facts to accept in exercising this value judgment referred to, the normal principles applicable to resolving factual disputes in motion proceedings where final relief is sought apply, even if the onus is on the first respondent.

[10]   The normal principles to resolve factual disputes in motion proceedings where final relief is sought was enunciated in the now regularly quoted judgment of Plascon Evans Paints v Van Riebeeck Paints. In Thebe Ya Bophelo Healthcare Administrators (Pty) Ltd and Others v National Bargaining Council for the Road Freight Industry and Another this test was most aptly described, where the Court said: 'The applicants seek final relief in motion proceedings. Insofar as the disputes of fact are concerned, the time-honoured rules ...... are to be followed. These are that where an applicant in motion proceedings seeks final relief, and there is no referral to oral evidence, it is the facts as stated by the respondent together with the admitted or undenied facts in the applicants' founding affidavit which provide the factual basis for the determination, unless the dispute is not real or genuine or the denials in the respondent's version are bald or uncreditworthy, or the respondent's version raises such obviously fictitious disputes of fact, or is palpably implausible, or far-fetched or so clearly untenable that the court is justified in rejecting that version on the basis that it obviously stands to be rejected.'

[11]   The difficulty the applicant in this matter faces is that none of the disputes of fact as raised by the first respondent can be considered to be bald or fictitious or implausible or lacking in genuineness. The issues raised by the first respondent in the answering affidavit are properly raised, and with all the requisite particularity. I may mention that the first respondent took it upon himself to provide a detailed answer to what was a founding affidavit lacking in sufficient particularity. There is accordingly no basis or reason for me to reject any of the versions of the first respondent raised in the answering affidavit. I thus intend to determine this matter on the basis of the admitted facts as ascertained by the founding affidavit, the answering affidavit and the replying affidavit, and as far as the disputed facts are concerned, what is stated in the first respondent's answering affidavit.

[12]   This then brings me to the applicant's application to refer this matter to oral evidence, being the only other basis upon which factual disputes can be resolved. Rule 7(7)(b) of the Rules for the Conduct of Proceedings in the Labour Court makes provision for this where it is provided that: 'The court must deal with an application in any manner it deems fit, which may include - .... (b) referring a dispute for the hearing of oral evidence'......

[13]   The general principles with regard to applications to refer motion proceedings to oral evidence was set out in Kalil v Decotex (Pty) Ltd and Another where the Court said the following:

'The applicant may, however, apply for an order referring the matter for the hearing of oral evidence in order to try to establish a balance of probabilities in his favour. It seems to me that in these circumstances the Court should have a discretion to allow the hearing of oral evidence in an appropriate case..... Naturally, in exercising this discretion the Court should be guided to a large extent by the prospects of viva voce evidence tipping the balance in favour of the applicant. Thus, if on the affidavits the probabilites are evenly balanced, the Court would be more inclined to allow the hearing of oral evidence than if the balance were against the applicant. And the more the scales are depressed against the applicant the less likely the Court would be to exercise the discretion in his favour. Indeed, I think that only in rare cases would the Court order the hearing of oral evidence where the preponderance of probabilities on the affidavits favoured the respondent.'

And further held as follows:

'It has been held in a number of cases that an application to refer a matter to evidence should be made at the outset and not after argument on the merits.... This is no doubt a salutary general rule, but I do not regard it as an inflexible one...

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[16]   Based on the above, it is clear that as a general principle, the Court has a discretion to decide whether to refer motion proceedings to oral evidence where there is a dispute of fact that needs to be resolved. In exercising this discretion, a litigant applying for a matter to be referred to oral evidence should at least advance reasonable grounds to support this discretion being exercised in favour of the litigant. Proper and formal application must be made in this regard. It should at least be set out what evidence presented by the other litigating party in the affidavit is lacking in credibility and how the referral to oral evidence will resolve this. The Court should consider to what extent this referral to oral evidence could tip the scales in support of the litigant seeking the referral. The final issue to consider is convenience to the Court.

[17]   The applicant has unfortunately not make out a case for the matter to be referred to oral evidence in terms of the above principles. The applicant has not made a proper application for this relief, and has simply asked for this to happen in heads of argument. The applicant has further not sufficiently motivated as to which of the contentions of the first respondent in its answering affidavit could be successfully discredited by a referral to oral evidence and what kind of evidence would be led to establish this. Considering the nature of the dispute, being that of a restraint of trade and all its consequences, it is simply not convenient to delay its determination any further by a referral to oral evidence. The applicant has thus simply not convinced me to exercise the wide discretion that I have in this regard in its favour.

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[19]   In a restraint of trade dispute, the applicant must surely have anticipated a material factual dispute. The prior correspondence between the parties before this application was brought must surely further confirm that a material factual dispute should have been anticipated from the outset. The applicant should have preempted this with a request for the matter to be referred to oral evidence as an alternative prayer from the outset, should the Court not be inclined to determine the factual dispute on the papers in favour of the applicant party. In not doing this, the applicant in fact indicates that it is satisfied that any factual disputes be determined in terms of the normal principles applicable to motion proceedings, referred to above... By not anticipating the factual dispute that was inevitable in arising in this matter and dealing with it accordingly, it is my view that the applicant cannot now be allowed to remedy this defective conduct by a referral to oral evidence.

[20]   I shall now deal with the final issue in this regard, being the failure by the applicant to make out a proper case on the founding affidavit, and then seeking to make out a proper case in the replying affidavit. In Betlane v Shelly Court CC the Court said: 'It is trite that one ought to stand or fall by one's notice of motion and the averments made in one's founding affidavit. A case cannot be made out in the replying affidavit for the first time.' This approach applies equally in the Labour Court, and I refer to De Beer v Minister of Safety and Security and Another where it was held that 'It is trite law that an applicant must stand or fall by his or her founding affidavit. The applicant is therefore not permitted to introduce new matter in the replying affidavit. The courts strike out such new matter.' The above being the relevant principle, I am thus entitled to exclude any new material in the replying affidavit insofar as it seeks to make out a new case and not simply replying to what is set out in the answering affidavit.

[21]   I conclude by pointing out that what the applicant in fact is seeking to do is to establish a proper case though a request for oral evidence, considering the difficulties with its case made out in the founding affidavit......

[22]   I shall therefore, based on the reasons as set out above, exercise my discretion against referring this matter to oral evidence, and decline to do so. I shall further determine this matter on the basis of the normal principles applicable to factual disputes in motion proceedings where final relief is sought. Insofar as new material is sought to be introduced in the replying affidavit, I shall not consider it. Based on these conclusions, I shall now set out the background facts that properly would form the factual matrix for the purposes of the determination of this matter.