The newly formed Mr Tekkie lifestyle retail chain can continue trading and expanding – provided that it doesn’t sell the same shoes that Tekkie Town (TT) had in stock two years ago, or more specifically, on 1 October 2016, when TT became part of Steinhoff.
Judge Elizabeth Baartman of the Western Cape High Court yesterday granted Pepkor a modified cut and trimmed version of the urgent interdict they sought against the former Tekkie Town shareholders. “The respondents would be able to continue operating Mr Tekkie stores and roll out as envisaged,” she ruled – except that they may not stock or sell footwear listed on annexure A – a confidential list of the footwear that TT sold on 1 October 2016 and before. The list was not produced in court.
Pepkor and Pepkor Speciality, the current TT owners, originally asked the court to restrain Braam van Huyssteen, Bernard Mostert, Dawie van Niekerk, Michael Brown and Gert Claassen from trading or engaging in any business similar to that operated by Steinhoff, which became the new owner of TT in October 2016. At that stage Steinhoff, which subsequently created STAR (now Pepkor) for their African businesses, had interests in a very wide variety of local business operations.
Mr Tekkie was not mentioned in the interdict but featured prominently in the court proceedings.
“I agree with the respondents’ submission that the restraint is unreasonably wide,” said the judge in her ruling. “The applicants realised that the over-breadth complaint had merit and have attempted to bring the relief sought within reasonable limits. At the hearing, Mr (Leon) Kuschke (Pepkor’s council) handed up a draft order which sought substantially less than the applicants did in the Notice of Motion.”
The date 1 October 2016 is significant because that is when the former TT shareholders joined Steinhoff after a share swop – and signed an agreement not to utilise or disclose any intellectual property, expertise, or confidential information about the TT business they had on that date, or before.
“Despite the obvious skill the respondents have, their knowledge of the Tekkie Town brands and pricing, among others, is an interest worthy of protection. That interest is threatened,” the judge agreed with Pepkor.
But, she also said the interest can be protected without too much interference in the respondents’ economic activities. “Prior to that date, the respondents have employed entrepreneurial skill, talent, and have achieved much success. They provide much needed employment. They should not be hampered in their economic activity beyond the effective date.
“Mr Tekkie is projected as much more than a branded shoe outlet,” she continued. “It envisages a head-to-toe outfit. There is no indication that Mr Tekkie would be without shoes if the restraint is modified. In its modified form the restraint would also allow the respondents to engage in their trade of choice with limited restrictions.”
Interestingly, the subsequent press releases from Pepkor as well as the respondents, who are now busy rolling out the Mr Tekkie chain, both claim victory.
In a statement headed Pepkor wins interim court order against Mr Tekkie, the new TT owners say, “Mr Tekkie has been interdicted from selling similar footwear as those sold by Tekkie Town and must remove all such stock from its stores, while the dispute is referred to trial.” It does not mention that the order only applies to footwear on the stock list of 1 October 2016, and before.
“Today’s outcome demonstrates that we have a prima facie case to enforce the restraint of trade provisions against the founders of Mr Tekkie,” Pepkor CEO Leon Lourens said in the statement, which continued: The court order serves to protect the Tekkie Town business while further action is taken to enforce Pepkor’s legal rights against Mr Tekkie in court.
The respondent’s press release, titled Pepkor fails in restraint pursuit against Mr. Tekkie Founders, says the founders of Mr. Tekkie are elated to announce that Steinhoff-controlled Pepkor failed in their application seeking to kill the start-up business by restraining five of Mr. Tekkie’s founders from any involvement in retail.
“Steinhoff, through Pepkor, came to the court wanting to bully a group of individuals into submission. They failed comprehensively,” Mostert is quoted as saying. “It is also regrettably, but no surprise, that Pepkor – true to the Steinhoff culture of misrepresentation – put out a press release claiming that a restraint was granted against Mr. Tekkie. This is a complete lie. No order was granted against Mr. Tekkie and Mr. Tekkie was never a respondent in the case.”
He also commented that it is unclear which shoes Mr Tekkie is prohibited from selling, as Pepkor has not provided them with the stock list of 1 October 2016.
It would, however, be surprising if many (if any) of the suppliers who provided stock to the three Mr Tekkie stores opened in October and the 12 to follow on Black Friday, offered the fashion outlet SKUs from two years ago.
A court date has not yet been set for the restraint of trade hearing – one of 11 court cases relating to the share swop between TT and Steinhoff and subsequent disputes between shareholders and employees. Prominent among them is the application to have the acquisition of TT by Steinhoff set aside – which also featured in the urgent interdict application. “I have considered [that] the litigation for the return of Tekkie Town is pending. An orderly flow of the legal process must be allowed to take place,” Judge Baartman said in her ruling.
In the mean time there will be 50 new Mr Tekkie stores opened per year, following the 15 opened before the end of November, promises TT founder Braam van Huyssteen.