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[2016] ZAWCHC 101
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Carnilinx (Pty) Ltd v Tobacco Institute of Southern Africa and Others (4928/2015) [2016] ZAWCHC 101 (18 August 2016)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 4928/2015
Before
the Hon. Mr Justice Bozalek
Hearing:
15 & 16 August 2016
Judgment
Delivered: 18 August 2016
In the
matter between:
CARNILINX
(PTY) LTD
Applicant
and
THE
TOBACCO INSTITUTE OF SOUTHERN AFRICA
1
st
Respondent
FORENSIC
SECURITY SERVICES (PTY) LTD
2
nd
Respondent
STEPHANUS
JOHANNES HOFMEYER BOTHA
3
rd
Respondent
JUDGMENT
BOZALEK
J
[1]
The applicant in this
matter is a manufacturer and distributor of cigarettes and a member
of the Fairtrade Independent Tobacco Association
(‘FITA’).
In March 2015 its instituted motion proceedings against the
respondents seeking a final interdict in relation
to a wide range of
activities relating to the allegedly unlawful surveillance by the
respondents of its manufacturing facilities,
suppliers, directors,
employees, distributors, sellers, retailers, agents; surveillance of
or interference with its vehicles or
those of its suppliers and
distributors or soliciting law enforcement agencies or SARS to
conduct such activities; the interception
and/or monitoring of its
communications with all the above named parties with whom it conducts
trade; the searching, seizing or
detaining its stock through its
manufacturing and distribution cycle; the interference in its trade
or business through law enforcement
officers of SARS, the providing
of false information and tip-offs to such parties, the provision of
false and misleading information
through pamphlets and material to
such bodies; the offering of free assistance to such bodies in
fighting ‘
illicit’
tobacco products in South Africa, the false holding out of the
respondents to be experts in the checking and verifying of tobacco
products and in impersonating SAPS and SARS officials.
[2]
First to third
respondents are respectively the Tobacco Institute of South Africa
(‘TISA’), an industry organisation
and a non-profit
organisation, representing part of the tobacco industry sector in
South Africa, Forensic Security Services (Pty)
Ltd, a company which
was alleged to provide security services to first respondent and its
director and shareholder one Stephanus
Botha.
[3]
All the respondents
opposed the application, the second respondent stating almost from
the inception that it was wrongly cited because
it was a dormant
company.
[4]
Over a period of some
18 months the papers grew until they numbered some 1200 pages
involving numerous affidavits of persons on
one side or the other of
what appears to be a long running partly public, partly subterranean
struggle between on the one hand
commercial interests who consider
themselves as forming the established tobacco/cigarette manufacturing
industry in South Africa
and another group which, broadly speaking,
constitutes manufacturers who produce what are termed, ‘
value’
products or cigarettes i.e. cigarettes which appear to sell for
considerably less than the established brands. Again broadly
speaking,
the former grouping are members of TISA and its principal
member is British American Tobacco of South Africa (‘BATSA’),
a large listed public company in South Africa with its parent
overseas whilst the latter grouping are members of and represented
in
this struggle or propaganda battle by FITA.
[5]
First respondent is
much concerned about the trade in so-called illicit products i.e.
cigarettes not properly packaged, labelled
or compliant with local
laws relating to such products or in respect of which the various
duties or taxes have not been paid. To
this end first respondent
directs much of its efforts to combat such activities and in so doing
works with law enforcement agencies,
SARS and private security
services providers in which the third respondent appears to play a
prominent role. FITA and its members,
amongst them the applicant,
appears to view first respondent’s mission as little more than
an attempt to drive them and other
‘
value’
manufacturers from the market place through fair means or foul and
thereby eliminate them as competition and a threat to the monopoly
said to be held by first respondent’s members and in particular
BATSA.
[6]
The broad thrust of the
applicant’s case is that first respondent’s and its
alleged security arm ‘FSS’ have
engaged in wide ranging,
unlawful conduct involving the surveillance and the tracking of its
vehicles with electronic devices in
an apparent attempt, as I have
said, to protect TISA and its members against competition from the
applicant in the tobacco products
(cigarette) market. It seeks to
rely on ‘
incidents
and information’
which allegedly illustrates this conduct. However, many of the
allegations are vague, amount to or contain hearsay or are of
doubtful
relevance and many were the subject of separate striking
applications brought by both first and third respondents. Most of
these
incidents were either denied by the respondents or only partly
admitted and, save for one or two rare instances, all allegations
or
illegality i.e. unlawful conduct were likewise denied.
[7]
By the time the matter
was set down for hearing the parties were in agreement that the
matter could not be determined on paper by
reason of the numerous
disputes of fact. The applicant sought the referral of the matter to
trial but this was opposed by the respondents
who contended that the
application should be dismissed out of hand. This question, as well
as the two striking out applications,
are thus the issues which fall
to be determined by the Court.
[8]
Prior to argument the
order sought by the applicant in this regard was simply that the
matter be referred to trial, that the applicant
file its declaration
within a certain period and that thereafter the rules of Court would
apply to the further conduct of the litigation
between the parties.
In his argument on behalf of the applicant, Mr Vermeulen sought a
much more detailed order including provisions
that the notice of
motion would stand as a summons, that the trial would proceed on the
basis that the pleadings were closed and
that the trial court would
deal with certain defined issues, namely, whether the first
respondent’s conduct ‘
vis-a-vis’
the applicant over the relevant period involved:
1.
reporting the cigarette
products manufactured by the applicant as illicit or probably illicit
to SARS or SAPS;
2.
disseminating
information to SARS or SAPS identifying the applicant’s
products as illicit or probably illicit;
3.
procuring the covert
electric surveillance of the applicant’s business premises,
delivery vehicles and distributors;
4.
procuring the
interception, detention and/or seizure of the applicant’s
products.
[9]
A further issue was
whether such conduct, if proved, was activated by a lawful motive or
the motive of breaching the applicant’s
right to goodwill in
its business. The role of the third respondent was also defined as an
issue, namely, whether the first respondent
acted through him in any
of its alleged conduct, whether third respondent either directly or
through any corporate entity acted
in the manner ascribed to the
first respondent, whether such conduct was lawful, whether the first
respondent was vicariously liable
therefor and, ultimately, whether
the applicant was entitled to the protection of an interdict.
[10]
It will be noted that
no mention at all is made in this defining of the issues of the
second respondent and it would appear that
to all intents and
purposes the applicant has abandoned its case against the second
respondent.
[11]
Provision is made of
the request for trial particulars, a pre-trial conference and for the
joinder of Forensic Security Services
(Kwa-Zulu Natal) CC,
(‘FSS(KZN)CC’), the corporate entity which third
respondent stated in his affidavit was the vehicle
largely through
which he provided services to first respondent. Finally, the order
provided that the third respondent should procure
the joinder of such
other corporate entities as are under his direction and/or control as
may have an interest in the proceedings.
[12]
Rule 6(5)(g) of the
Uniform Rules of Court provides as follows:
‘
Where
an application cannot properly be decided on affidavit the Court may
dismiss the application or make such order as it deems
fit with a
view to ensuring a just and expeditious decision. In particular but
without the effecting the generality of the aforegoing
it may direct
that oral evidence be heard on specified issues with a view to
resolving any dispute of fact and to that end may
order any deponent
to appear personally or grant leave for such deponent or any other
person to be subpoenaed to appear and be
examined and cross-examined
as a witness or it may refer the matter to trial with appropriate
directions as to pleadings or definition
of issues, or otherwise’.
[13]
A litigant who proceeds
on notice of motion where a material dispute of fact is foreseeable
or who should have realised when launching
the application that a
serious dispute of fact was bound to develop, does so at his peril
because a Court may, in the exercise
of its discretion, decide to
dismiss the application in its entirety. As stated in
Room
Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949 (3) SA 1155
(T) at page 1162:
‘
It
is certainly not proper that an applicant should commence proceedings
by motion with knowledge of the probability of a protracted
enquiry
into disputed facts not capable of easy ascertainment, but in the
hope of inducing the Court to apply (what is now Rule
6) to what is
essentially the subject of an ordinary trial action’.
[14]
In
Standard
Bank of South Africa Limited v Neugarten
1987 (3) SA 695
(WLD) the Court held that when in motion proceedings
an order is granted referring the matter for the hearing of oral
evidence
it should not be formulated in such a fashion that a hearing
as on trial is authorised. It is the more desirable method, also in
the interest of certainty, that the order state which issues will be
determined by the hearing of oral evidence and defines who
may or
must be called as a witness or as witnesses. At page 699 Fleming J
stated:
‘
But
the hearing of oral evidence remains generally appropriate only to
cases where it is found 'convenient', where the issues are
'clearly
defined', the dispute is 'comparatively simple' and a 'speedy
determination' of the dispute is 'desirable'.
[15]
As is noted in Erasmus’
Superior Court Practice Vol 2 D1-79 178, a referral of a matter
to trial is appropriate if the
dispute of fact is incapable of
resolution on the papers and too wide ranging for resolution by way
of a referral to oral evidence.
It is an alternative procedure to
dismissal of the application in such circumstances, and is
appropriate where the applicant when
launching his application could
not reasonably have foreseen that a serious dispute of fact,
incapable of resolution on the papers
was bound to develop.
[16]
In arguing for a
referral to trial the applicant contended that it could not
reasonably have foreseen that the factual disputes
which have emerged
in this matter relating to first respondent’s business
relationship with second respondent, to the relationship
between the
respondents, FSS(KZN)CC and alleged ‘
sub-contractors’
and to the various incidents of unlawful conduct on which incidents
it seeks to rely but which the respondents deny.
[17]
For its part first
respondent opposed the referral application on five grounds –
firstly, that the main application was bad
in law and on the facts;
secondly, that the disputes of facts which were raised were
reasonably foreseeable and the motion proceedings
were therefore
misplaced; that the applicant had failed to properly identify the
issues to be referred to trial, fourthly, that
the applicant had not
joined FSS(KZN)CC and other entities as respondents. Second and third
respondents likewise submitted that
applicant should have realised
that material disputes of fact were bound to arise. It was also
contended on their behalf that since
the applicant effectively
abandoned its case against the second respondent, on a proper
analysis the case as alleged against third
respondent should also
fail.
[18]
I shall proceed to deal
with these grounds in evaluating whether they support a referral to
trial or not.
NO
CASE MADE OUT IN THE APPLICATION
[19]
I do not agree with the
submission made on behalf of the first respondent that no case is
made out against it in the application.
The legal underpinnings of
the case are certainly not made explicit in the applicant’s
papers and it was only during argument
that counsel for the applicant
set out his client’s reliance on breaches of its right to
privacy and to be protected from
injurious falsehood as a species of
unlawful competition which interfered with the goodwill in its
business. Nonetheless, given
the lack of any clear delineation in its
papers a concise setting out of its case as would be required by a
declaration or particulars
of claim would greatly facilitate the just
and expeditious resolution of any litigation. There is perhaps more
to be said for the
second and third respondents’ argument that
given the manner in which applicant set out its case in its founding
papers coupled
with its virtual abandonment of its case against the
second respondent, its case against the third respondent is at the
very least
considerably weakened. It is clear, however, that the
applicant has proceeded against the third respondent as the
controlling mind
behind the various FSS entities of which there are a
good number and which it alleges committed the various dealings
against it
at the behest of TISA.
[20]
It is clearly in the
interest of the efficient and orderly litigation of this matter that
all interested parties be cited, most
notably, FSS(KZN)CC. In this
regard the provisions in the draft order sought by the applicant that
FSS(KZN)CC is forthwith joined
to the proceedings and that the third
respondent should procure the joinder of any such other corporate
entities that are under
his direction and/or control as may have an
interest in the proceedings, strike me as prima facie undesirable.
The applicant must
join those parties it considers may have an
interest in the matter and not leave this to the third respondent.
Similarly, should
FSS(KZN)CC be joined this should be done at the
behest of the applicant either by direct citation or following the
joinder process.
THE
FORESEEABILITY OF THE DISPUTES OF FACT
[21]
In my view the
applicant must have foreseen the disputes of fact or, at the very
least, should have foreseen the many disputes of
fact. These disputes
are too numerous to mention but many of them involve covert and
allegedly unlawful conduct on the part of
the respondents either
independently or acting on the instructions of first respondent. It
would have been well known to the applicant
that first respondent’s
stated position is that it is a body which operates within the
confines of the law in its proclaimed
goal of combatting the illicit
trade in cigarettes and in so doing sometimes acts through
contractors.
[22]
It was utterly
unrealistic of the applicant to have expected that the respondents
would have admitted to unlawful activity or to
have been activated by
the motive of eliminating the applicant as a competitor, for example,
giving false tip-offs and impersonating
SARS or SAPS officials.
[23]
One major area of
dispute is the nature of the relationship between the first and
second respondent. In this regard the applicant
initially alleged
that the second respondent was a company owned and run by the third
respondent but at the same time acknowledging
that there were several
entities registered in this name or deratives thereof affiliated with
the second and third respondent.
It stated that it was citing second
respondent since that entity appeared to be the umbrella entity of
the conduct complained of.
Without going into detail I consider that
the applicant’s grounds for making this assumption were not
well founded even on
its own limited knowledge. Even when the dormant
nature of the second respondent was pointed out the applicant
appeared to disregard
this until the eleventh hour.
[24]
The second major area
of dispute is the relationship between first respondent, second
respondent/FSS, and its sub-contractors. In
its application the
applicant alleges that FSS is the ‘
security
arm’
of the
first respondent and that the unlawful activities of which applicant
complains are undertaken by first respondent and/or
FSS which acts
under the instruction and mandate of first respondent and/or its
members. These allegations are denied by the respondents
which, in
broad terms, allege that second respondent (or related corporate
entities) assists first respondent in gathering information
regarding
unlawful activities in relation to cigarettes and in doing so works
with the law enforcement authorities in any subsequent
action but
only when requested to do so. Furthermore, third respondent’s
case is that use is made of sub-contractors who
are properly trained
and who are not permitted to act unlawfully.
[25]
The applicant must have
foreseen that the first respondent would dispute that in effect all
activities undertaken pursuant to these
relationships in
allegedly combating the illicit cigarette trade could not simply be
ascribed to it regardless of contractual
arrangements and the nature
of the relationship between it and the person or parties effecting
such action. This much is evident
alone from applicant’s
disparate descriptions of various persons as ‘
FSS/TISA
employees’
or
‘
FSS persons’
.
[26]
It is clear from the
affidavits as a whole that, as I have observed earlier, the two
groupings which are represented in these proceedings
have been at
loggerheads with each other directly or indirectly over a
considerable period of time. This impression is reinforced
by a
reading of the affidavit of the applicant of one Ms Belinda Walters
who occupied a leading position in FITA but who was at
the receiving
end of litigation from the applicant in 2014 in which she filed an
affidavit accusing the applicant of dishonesty,
perjury and launching
a malicious and vexatious and defamatory application against her.
Therein she accused the applicant of spying
on and ‘
ratting
out’
its
competitors and fellow FITA members, obtaining information illegally
and generally made her opinion clear that the ‘
value’
cigarette industry can best be described as murky.
THE
ISSUES FOR TRIAL ARE NOT PROPERLY DEFINED
[27]
The applicant’s
initial draft order did not specify any issues for trial although its
subsequent draft does so. I am by no
means persuaded, judging by the
papers in the application, that the issues between the parties are
defined with the necessary clarity
and comprehensiveness which the
ordinary process of pleading would bring. They are defined in
relation to unspecified ‘
conduct’
which a process of pleading would properly bring to the fore. Other
criticisms are that other issue relates to the ill-defined
or elusive
concepts of the ‘
motive’
which actuated the first respondent as well as vicarious liability.
Although provision is made for requests for trial particulars
in the
draft order, in my view a clear and precise delineation of the issues
between the parties is far more likely to be produced
by a process of
pleading for which the draft order makes no provision.
[28]
I asked Mr Vermeulen
what the status of the voluminous affidavits and annexures would be
on trial and he confirmed that they would
not stand as either
evidence or pleadings. The question inevitably arises, in the event
of the Court granting a full referral to
trial, as to what was the
purpose of exchanging these affidavits over a period of 18 months if
they are simply to be discarded
or merely used for the purposes of
cross-examination in a full-fledged trial. Will the trial judge have
to read the voluminous
papers again in order to understand the
defined issues but on the other hand give that material no
evidentiary weight?
[29]
Granting an order for
referral in these circumstances could have the indirect effect of
encouraging parties to engage in drawn out
motion proceedings without
properly considering whether this is appropriate only to abandon them
at the eleventh hour and ask for
a referral to trial without any
proper pleading process being conducted. The application proceedings,
notwithstanding that numerous
persons have deposed to affidavits, has
not even served the purpose of limiting the persons who will testify
in any forthcoming
trial.
NON-JOINDER
OF FSS(KZN)CC AND OTHER ENTITIES
[30]
As I have already
indicated, the citation or joinder of parties remains the primary
responsibility of the applicant which also has
the advantage of all
the information which it had gleaned in these proceedings as to which
parties may be responsible for the conduct
which it complains of. The
proposed arrangements for the citation of parties in the draft order
do not in my view deal adequately
with this question whereas were the
matter to start afresh through action proceedings instituted by the
applicant it will have
to make the usual choice which a plaintiff has
to make as to which parties to cite or join.
CONCLUSION
[31]
For all these reasons I
consider that there is little value, if any, to be gained by
referring this matter to trial as opposed to
requiring the applicant
to start afresh with action proceedings. Furthermore, in my view this
course of action should have been
adopted by the applicant from the
very outset since it must have foreseen or at the very least should
have foreseen the numerous
disputes of facts which have arisen and
which could never have been resolved by way of motion proceedings.
[32]
On behalf of the
applicant, Mr Vermeulen, urged me to consider the necessity for a
just and expeditious resolution of the matter
and emphasised that I
enjoyed a discretion, should I refer the matter to trial, to make a
cost order which would act as salve for
the respondents in respect of
the applicant’s misguided decision to initially proceed by way
of application. In this regard,
however, I note that several of the
more serious incidents upon which the applicant relied happened
several years before these
proceedings were even instituted which,
even then, were not pursued by the applicant with any sense of
expeditiousness or urgency.
The time lost by the applicant having to
commence afresh with an action is not material in these circumstances
and, as I have indicated,
the benefits and advantages both to the
parties and to the Court in resolving the disputes in this litigation
between the parties
through action proceedings far outweigh any such
prejudice caused by a delay.
[33]
Ultimately, however,
the principal reason for not ordering a referral to trial is that
this matter presents itself as a prime example
of a cause of action
which should have been pursued by way of action proceedings given the
inevitable disputes of fact which lay
ahead.
[34]
I should make it clear
that this order should not be understood as suggesting that there is
no merit in the applicant’s case.
The main application falls to
be dismissed without dealing with its intrinsic merits but rather on
the procedural grounds that
it should never have been brought by way
of motion proceedings.
THE
STRIKING OUT APPLICATIONS
[35]
The applicant conceded
that various passages which the respondents sought to strike out were
inadmissible for one or other reason.
In view of the conclusion which
I have reached I do not find it necessary to deal with the balance of
the striking out application.
The papers have now become largely
irrelevant and would be so even on the applicant’s formulation
of the order of referral
for trial. Suffice to say that I would reach
the same conclusion as I have done in regard to the application for
referral to trial
even if none of the allegedly offending passages
were struck out.
[36]
In the result for these
reasons the application for a referral to trial cannot succeed and
must be dismissed with costs. As a result
the main application is
also dismissed with costs, in the case of the first respondent with
such costs to include the costs of
two counsel. Such costs are to
include the costs of the striking out applications.
____________________
BOZALEK
J
APPEARANCES
For the
Applicant:
Mr W Vermeulen (SC)
Ms
L Ferreira
Instructed
by:
Tanya Nöckler Attorneys
For the
1
st
Respondent:
Mr L Rose-Innes (SC)
Ms
C De Villiers
Instructed
by:
Webber-Wentzel
For the
2
nd
& 3
rd
Respondent:
Mr F Van Zyl (SC)
Instructed
by:
Werksmans
Attorneys