Volvo appointed Yssel to manage its Information Technology Division. Yssel did not, however, want to enter into direct employment with Volvo. He was employed by a labour broker (Highveld Personnel (Pty) Limited) with which he was associated.

Volvo had no direct contract with Highveld Personnel and dealt solely with Yssel, who in turn dealt with Highveld Personnel.

By 2004, Volvo’s IT department had six other personnel similarly employed by labour brokers, who assigned their services to Volvo. Yssel convinced the personnel to transfer to Highveld Personnel.

An agreement between Volvo and Highveld Personnel provided that Highveld Personnel would supply the services of the six personnel to Volvo, in return for a monthly payment. Again Volvo had no direct contact with Highveld Personnel and, at all times, dealt through Yssel.

Unbeknown to Volvo, a large amount of each monthly payment ended up in the pocket of Yssel who was paid a commission by Highveld Personnel for the personnel to transfer to Highveld Personnel.

An internal audit at Volvo revealed that R775 107.00 had been paid to Yssel.

Soon after this was uncovered, Yssel delivered a letter of resignation and the six other IT personnel at Volvo terminated their agreements with Highveld Personnel and became direct employees of Volvo.

The Supreme Court of Appeal reiterated that in our law, monies that are earned secretly in breach of a duty of trust have to be paid to the company at whose instance the secret profits had been earned. Yssel admitted receiving the R775 107.00 but denied that he was liable to repay it to Volvo. The court rejected Yssel’s argument that, because there was no direct employment relationship between him and Volvo, he did not stand in a fiduciary relationship towards Volvo.

The court emphasised that whether a particular relationship should in law be regarded as one of trust depends upon the facts. The question to ask is whether one party could reasonably have expected that the other party would act in the former’s best interests.

The court highlighted that “the discretion that one party may have in relation to the affairs of another, the influence that he or she is capable of asserting, the vulnerability of one person to another, the trust and reliance that is placed in the other” receive frequent mention in judgments dealing with whether a relationship was one of trust.

Contractual duties owed by one party to another may go a long way towards defining whether the relationship is one of trust, but a direct contractual relationship is not the sole determining factor.

Yssel occupied the most senior position in Volvo’s IT Division and it was of little consequence that he was not directly employed by Volvo. It was the position to which he was appointed, rather than the nature of the formal contractual relationship, that defined what Volvo could expect of him.

It was not material that Yssel’s functions did not include recruiting, employing and acquiring staff for Volvo. He engaged himself in arranging matters between Volvo and the IT staff and he did so as an incident of his function as a manager of the IT Division.

Yssel was in a position of trust when he arranged the transfer of the other IT personnel from certain labour brokers to Highveld Personnel and he was therefore not entitled to allow his interests to prevail over those of Volvo. Accordingly, Yssel was obliged to disgorge his secret commissions. He was ordered to pay Volvo R775 107.00 plus interest on that amount at the rate of 15.5% per annum from 12 September 2006 to date of payment and Volvo’s legal costs.

The court will therefore examine the substance of the relationship between the parties as opposed to simply the form of the relationship. This case should serve as a reminder to anyone in any position of trust that the earning of secret profits may not only result in the termination of the relationship with an employer, principal or company, but will also result in being required to repay significant sums of money to the party at whose instance the secret profits were earned.