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[2020] ZAWCHC 60
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In Time Marketing & Supply (Pty) Ltd v Budgetmart (Pty) Ltd t/a BM Solutions and Others (22149/19) [2020] ZAWCHC 60 (2 July 2020)
THE
HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION)
JUDGMENT
Case
No: 22149/19
In
the matter between
IN
TIME MARKETING & SUPPLY (PTY) LTD
APPLICANT
And
BUDGETMART
(PTY) LTD t/a BM SOLUTIONS
FIRST
RESPONDENT
NAVREEN
RAJ CHALLA
SECOND
RESPONDENT
BHUPENDER
SINGH
THIRD
RESPONDENT
Coram:
Rogers J
Heard
:
23 June 2020
Delivered:
2 July 2020 (by email
to the parties and release to SAFLII)
JUDGMENT
Rogers
J
[1]
This is an application by
In Time Marketing & Supply (Pty) Ltd (‘ITM’) to hold
in contempt, and sanction, the second
and third respondents for
non-compliance with
an
order granted by Erasmus J on 10 February 2020. The second respondent
is Navreen Raj Challa (‘Challa’). The third
respondent is
Bhupender Singh (‘Singh’), who is the sole director of
the first respondent, Budgetmart (Pty) Ltd t/a
BM
Solutions (‘BMS’). The respondents in the main
application were BMS as first respondent and Challa as second
respondent.
[2]
Erasmus J’s order,
granted on a long-form notice of motion to which there was no
opposition, reads thus :
‘
1. The
Applicant, within 24 hours of this Order, shall be placed in
possession and control of the entire software solution
and database
referred to and known as the e-commerce platform Great Offers, which
comprises out of a Fintech Mobile application
and the crypt token
business known as Security Africa (collectively referred to herein as
the “software solution”)
in the following manner:
1.1. The First and
Second Respondents (“Respondents”) are directed to
provide the Applicant with all usernames and passwords
required to
gain access to, and take possession and control of, the software
solution which is currently in control of the Respondents.
1.2. The Respondents
are directed to inform the Applicant in writing of the exact location
of the servers on which the software
solution is to be hosted.
1.3. The Respondents
are directed to provide to the Applicant physical access to any and
all servers and platforms on which the
software solution is hosted
and assist the Applicant in the manner contemplated in paragraph 2
below, to the extent that it is
in the Respondents’ control to
give to the Applicant possession and control of the software
solution, supervised by such
experts as may be appointed by the
Applicant, at the Applicant’s costs.
2. Respondents’
assistance, as envisaged in paragraph 1.3 above, shall include (but
not be limited to):
2.1. Resetting the
usernames and passwords allowing the Applicant remote and all access
to the software solution;
2.2. Disconnecting
the servers hosting the software solution from the First Respondent’s
network, and providing the Applicant
with remote access via the
Internet;
2.3. Permitting the
Applicant to add additional equipment wherever the software solution
is located in order to enable the recovery
of access to and
possession and control of the entire solution; and
2.4. Allowing the
Applicant physical access to the servers and, insofar as it may be
necessary, access to the solid state of conventional
drivers in order
to remove such drives, to reconfigure all passwords and usernames and
reactivate and reconnect the software solution
for use by the
Applicant and its clients.
3. Directing that
the First and Second Respondents pay the costs of this application
the one to pay the other to be absolved.
[3]
In the founding affidavit
in the main case, ITM’s deponent,
Dhevanand
Munnynund
Panday
(‘Panday’), stated that he had been involved in the
software development industry for five years, particularly
in
projects aimed at empowering previously disadvantaged individuals in
Africa. He had met Challa in 2013 and had taken him under
his wing by
involving him in Panday’s projects.
[4]
Challa introduced Panday
to Singh, and negotiations began for the development of application
solutions in the e-commerce sector.
Panday established ITM as a
special purpose vehicle to host and become the owner of the
application and related software. Challa’s
role was that of an
intermediary between Panday and Singh’s company, BMS, which
would be the developer and engineer of the
solution. The application
was intended to provide users and customers in rural areas with an
efficient method of selling and buying
goods and services and of
transmitting funds.
[5]
The negotiations gave rise
to a written contract between ITM (represented by Panday) and BMS
(represented by Singh), signed in Cape
Town on 28 September 2017.
This agreement confirmed that BMS had been appointed by ITM to design
and develop the Great Offers e-commerce
portal and that BMS had
transferred all rights and intellectual property in the related
software and platform to ITM. Panday alleged
that because BMS was
mandated to develop the software solution, BMS was at all times in
possession of all the information necessary
to develop, access and
alter the solution.
[6]
When the main application
was launched in December 2019, BMS had invoiced ITM R1,9 million for
its services. Panday alleged, further,
that although BMS had
confirmed that the solution had been developed for ITM, BMS and
Challa had, despite demand, withheld all
information regarding the
software solution. ITM had been unable to access the solution or to
exercise any control over it. Panday
expressed uncertainty as to BMS
and Challa’s intentions but drew the inference that they were
trying to sell the solution
to a third party.
[7]
Erasmus J’s order
was served on Challa on 26 February 2020 and at BMS’ registered
office and principal place of business
on 28 February 2020. ITM’s
attorneys, O’Reilly Law Inc (‘ORL’), also emailed
the order to Challa and Singh.
[8]
On 29 February 2020, and
in response to the email attaching the order, Feke-Myeko Attorneys
(‘FMA’) wrote to ORL to
say that they had been instructed
by Challa that compliance with the order ‘will attract costs in
the amount of R175 000
and this can be done in two months’.
MFA furnished details of its bank account ‘wherein the fund[s]
must be transferred
in order to comply with the court order’.
Work would start ‘with immediate effect once the amount has
been paid’.
[9]
In its reply of 2 March
2020, ORL stated that ITM would not make the requested payment. If
there were costs involved to comply with
the order, such costs were
for Challa’s account. ORL stated, further, that Challa had had
ample opportunity to deliver the
software solution and that if the
solution had been ready for delivery, Challa would previously have
advised ITM of the additional
cost involved in handing it over. ITM
thus drew the inference that the solution either was not complete or
did not exist at all.
Contempt proceedings were threatened if Challa
failed to deliver the solution within 24 hours.
[10]
It is unclear what
happened over the next two and a half months. On 18 May 2020 the
present application was launched for hearing
on 23 June 2020. The
notice of motion required the respondents to file their answering
papers on or before 17 June 2020. On 29
May 2020 the respondents
delivered a notice of opposition.
[11]
It appears that there were
settlement discussions, because on 3 June 2020 MFA wrote to ORL as
follows:
‘
I have been
in touch with [Challa] in terms of how this matter must be dealt
with.
Our client is
requesting an extension of time and as part of the settlement, kindly
prepare a settlement agreement that will be
signed and our client
will at his cost transfer the necessary files that will enable this
matter to be settled out of court. As
part of the settlement our
client will only be able to commence in June to transfer the system,
kindly send us a notice of withdrawal.
By the end of
October the system would have been transferred.
The agreement will
include all that is needed to ensure the smooth transfer.
Kindly revert
whether this is acceptable or not.’
[12]
No settlement eventuated.
On Friday 19 June 2019 MFA wrote to ORL to say that the respondents’
opposing papers would be filed
on Monday 22 June, adding: ‘The
clients are working on a number of systems to present the systems
availability and that will
have an impact on the affidavit.’ On
the morning of 23 June ITM filed a replying affidavit, and I heard
argument on the same
day by audio-visual link.
[13]
Challa made the main
answering affidavit. There was a confirmatory affidavit from Singh.
Challa gave a somewhat different account
of the background. He said
there was a verbal agreement between himself and ITM to develop the
software solution. It was Challa
who was responsible for the
development of the solution. ITM requested the use of one of Challa’s
‘developers accounts’
into which to deposit funds for the
development because Challa did not have a business account. Challa
approached BMS and Singh
for this purpose. Challa ‘issued
agreements on [BMS] and [Singh) with [ITM]’. Funds received by
BMS/Singh from ITM
were transferred to Challa and to developers
identified by Challa, because Challa had a ‘network of
developers he was working
with’. BMS and Singh acted only on
instructions from Challa and their sole responsibility was the
disbursement of funds on
his instructions.
[14]
Challa admitted that the
agreement was that the respondents would hand over the entire
solution to ITM which would at all times
be the rightful owner of the
solution, but added the qualification that there were to be ‘shares
in the form of tokens distribution
to other parties in the social
security solution’. The blockchain technology used in the
solution could not be held in a
single server; it was a ‘distributed
system which has to be transparent to all the role players’.
The call centre and
e-commerce solution were ‘hosted on a cloud
server’.
[15]
In regard to the
respondents’ alleged failure to hand over the solution, Challa
said that the main cause of delay was that
ITM would no longer agree
to the distribution of tokens as initially agreed with Challa. A
further cause of delay was the cost
referred to in FMA’s letter
of 29 February 2020. ITM had failed to assist Challa to finance these
costs. Challa’s failure
to deliver was not deliberate: ‘The
respondents have always been in touch and informed the applicant of
the costs and time-frames
to transfer the system.’ (In
confirmation of this latter statement, Challa referred to FMA’s
letter of 29 February
2020, which postdated the granting of the
order.)
[16]
Challa denied that the
respondents had ‘refused’ to transfer the solution; it
had been practically impossible for Challa
to do so without the
funds. When funds were available to pay the developers, the transfer
would be executed on ITM’s instructions.
The respondents
proposed that the necessary funds be paid into the trust account of
their attorneys. Once the platform was handed
over, the money would
be released to the respondents so that they could fulfil their
obligations to third parties.
[17]
Challa alleged that the
system was ‘fully developed’ but that in order for it to
be ‘operational and live’
the respondents needed to
‘activate the smart contract which would hold the crypto
currency’. This would require ITM
to open ‘a main
Ethereum wallet which should be funded by no less than 15 Ethereum
for transaction charges’. Even if
transferred to ITM, the
system would not be functional ‘until this part is concluded by
[ITM]’. (Ethereum is a crypto
currency platform similar to
Bitcoin.) Challa expressed himself willing and available to assist
ITM ‘for a smooth transition
of the transfer of the software’.
[18]
As to urgency, Challa said
that ‘by their very nature, software systems are developed and
transferred over time’; the
transfer could not be done in a few
hours. Technicians had to be employed to undertake the transfer of
the system. This included
‘verifying server configuration,
testing [and] resolving bugs that exist in any software solution once
the transfer is initiated’.
The timeframe was two to six
months, and it was necessary for Challa and ITM ‘to work
together to find an amicable way for
the transition to take place’.
[19]
The replying affidavit was
made by ITM’s attorney, Mr Brent Petersen. He reiterated that
ITM would not pay any further funds
to the respondents. He attached
his firm’s letter of 2 March 2020 and FMA’s letter of 3
June 2020, pointing out, with
reference to the latter, that Challa
had therein accepted the costs associated with a transfer of the
system. He denied that BMS
was simply an account used by Challa. ITM
made deposits to BMS based on invoices rendered by the latter. ITM’s
contract was
with BMS. Challa was merely an intermediary.
[20]
Petersen said that the
functionality of the software solution must be capable of being
demonstrated in a controlled environment.
The respondents had not
submitted any evidence to demonstrate the existence and capabilities
of the solution.
[21]
It is beyond reasonable
doubt that the respondents, upon whom the Erasmus J order was duly
served and of which they had knowledge,
failed to comply with it. In
order to avoid the penal consequences of contempt (committal or a
fine), they bear an evidential burden
to put up evidence casting
reasonable doubt on the conclusion that their non-compliance was
deliberate and
mala
fide
(the latter
meaning knowledge that the non-compliance was unlawful). See
Fakie
NO v CCII Systems (Pty)
[2006] ZASCA 52
;
2006
(4) SA 326
(SCA) paras 9-10 and 42.
[22]
Several points need to be
made about the import of Erasmus J’s order. The first is that
it did not require the respondents
to undertake further development
or to guarantee the handing over of a fully functioning software
solution. The entire system,
such as it was as at 10 February 2020,
had to be handed over. If it was an incomplete system, or a system
which was unable to function,
or which had bugs, so be it. Once ITM
was in possession of the system such as it was, ITM could assess
whether it had received
value for money or whether it wished to
pursue financial remedies against one or more of the respondents.
[23]
The second is that the
order did not leave scope for the respondents to demand payment as a
precondition for compliance. If the
respondents had wished to make
the case that they were contractually entitled to an additional
payment before the system was handed
over, they should have opposed
the main application. Erasmus J’s order does not necessarily
exclude a claim by one or more
of the respondents for an additional
contractual payment but it does exclude the putting up of such a
claim as an excuse for non-compliance.
Any such claim would have to
be pursued independently of compliance with the order.
[24]
The third point, similar
to the second, is that the order does not entitle the respondents to
insist that ITM distribute ‘tokens’
as a precondition to
handing over the system. Once again, if the respondents wished to
advance the case that they were not obliged
to hand over the system
until tokens were distributed, they should have done so in answer to
the main case.
[25]
Erasmus J’s order is
not ambiguous in any of these respects. The respondents do not say
that they erroneously interpreted
the order to require some
additional work by them or to entitle them to demand payment or the
distribution of tokens as a precondition
for compliance. This
disposes of the respondents’ allegations about the further
steps needed to make the solution ‘operational
and live’
and to verify server configuration, test, resolve bugs and the like.
It also disposes of their complaint that ITM
failed to pay the
demanded sum of R175 000 or to agree to the distribution of
tokens.
[26]
The absence of payment
from ITM might, however, be relevant if the respondents’
evidence were that they are unable to comply
with the order because
they lack the financial resources to pay third parties whose
cooperation is needed in order to transfer
the system in its current
state. If the respondents were financially unable to comply with the
order, their failure would not be
wilful.
[27]
I do not think that the
respondents’ evidence is of a quality which raises a reasonable
doubt in this respect. MFA’s
letter of 29 February 2020 did not
say that the respondents lacked the money to comply with the order.
The assertion was that compliance
would ‘attract costs’,
and a demand was made that ITM pay R175 000 in this regard. The
demanded sum was not explained.
No breakdown was furnished. It was
not said whether and to what extent the amount represented fees
demanded by the respondents
or amounts payable to third parties.
[28]
The answering papers do
not take this much further. Challa does not state that the amount
required is still R175 000. He provides
no breakdown of costs
supposedly involved or to whom they are payable. Having regard to
other allegations in his affidavit, it
seems that some of these costs
must relate to further development which (according to the
respondents) is required in order for
the system to be ‘operational
and live” and to be fully configured, tested and debugged. As I
have said, that is not
work which the Erasmus J order requires to be
done. Since the respondents do not dispute that the system has always
belonged to
ITM, and since they do not say that ITM has failed to pay
for all work actually done to date on the development of the
solution,
it is unclear to me why handing over the system
as
is
should attract any
significant cost, and the respondents’ papers fail to
elucidate.
[29]
The respondents have
furnished no information as to their respective financial positions.
Furthermore, and as pointed out in the
replying affidavit (with
reference to FMA’s letter of 3 June 2020), they seem to have
been prepared at that stage to transfer
the system at their own cost.
In the answering papers, filed about three weeks later, the
respondents made the proposal that the
money be paid into FMA’s
trust account so that once the platform was handed over, funds might
be released so that the respondents
could fulfil their obligations to
third parties. This indicates that the respondents do not need money
upfront in order to hand
over the system.
[30]
The answering papers do
not contain evidence indicating, as a reasonable possibility, that
the respondents are objectively unable
to hand over the system
because of ITM’s alleged refusal to distribute tokens. The need
for tokens to be distributed was
not alleged in MFA’s letters
of 29 February 2020 and 3 June 2020. The identity of persons to whom
tokens are supposedly owed
has not been disclosed. Since it is not in
dispute that the respondents have throughout developed the solution
on the basis that
ITM is the sole owner, it is not apparent on what
basis a distribution of tokens to third parties could be a
precondition for ITM
to exercise its sole ownership.
[31]
As to the time it takes to
hand over a software system, the respondents’ allegations are
vague in the extreme. No information
is supplied as to the steps that
will have to be taken to hand over the system as is. The estimate of
‘two to six months’
is unacceptably broad. One does not
know to what extent this estimate presupposes the performance of
further work in order to enhance
the system beyond its current state.
The respondents have failed to explain why, if it was not possible to
hand over the system
promptly, they did not oppose the main
application and provide the court with information as to what period
would be reasonable.
They do not set out exactly what steps have to
be taken and how long each step takes.
[32]
During argument I pointed
out to Mr Feke-Myeko that Erasmus J’s order had not required
the respondents to hand over a fully
functioning system and that the
obligation was simply to hand over the system as it exists. I asked
him why handing over the system
as it exists, warts and all, should
take so long. He agreed that this ought not to take long. I asked him
to take instructions.
After the lunch adjournment he told me that his
instructions were to ask for 45 days but I am still left in the dark
as to why
so long is needed.
[33]
In fairness to the
respondents, I note that the notice of motion in the main case did
not include a provision that such handover
should occur ‘within
24 hours’ of the order. No time was specified. Presumably
Erasmus J was persuaded that it was
desirable to specify a time
within which there should be compliance. Assuming, however, that 24
hours was unrealistic, the respondents
could and should have applied
to court in terms of rule 42(1)(
a
)
or under the common law to have the order amended in accordance with
a more realistic time-limit.
[34]
It also needs to be
emphasised that even if the 24-hour period was unrealistic, the
contempt application was only launched about
three months after the
granting of the order. The question is not whether the respondents
are in contempt by failing to comply
within 24 hours but whether they
are in content by failing to do so by the time the contempt
application was launched.
[35]
Furthermore, although the
main focus has fallen on the handing over of the entire solution,
Erasmus J’s order required the
respondents to do a number of
specific things, even though in themselves they might not amount to
the handing over of the entire
system. The respondents have not
explained why they have failed to provide to ITM with (a) the
usernames and passwords required
to gain access to the software
solution; (b) information in writing as to the exact location of the
servers on which the solution
is hosted; (c) physical access to the
servers and relevant hard drives. Even now, these matters remain
undisclosed. One can understand
why ITM entertains suspicions that
the system may not exist at all and that it has been ‘fleeced’.
[36]
In the circumstances, I am
satisfied beyond reasonable doubt that the respondents have displayed
a contemptuous attitude towards
their obligations under the order and
that they have done so deliberately and with knowledge that they were
acting in wrongful
violation of the order. Singh, as the sole
director and controlling mind of BMS, may permissibly be found in
contempt, even though
he was not in his personal capacity a party to
the main application (
Twentieth
Century Fox Film Corporation & others v Playboy Films (Pty) Ltd &
another
1978 (3) SA
202
(W) at 203C-D;
Readam
SA (Pty) Ltd v BSB International Link CC & others
2017
(5) SA 183
(GJ), where the second respondent, Slim, who was the
controlling mind of the first respondent company, was found guilty of
contempt
and sentenced to suspended incarceration).
[37]
For unexplained reasons,
ITM’s notice of motion only seeks findings of contempt against
Challa and Singh, not also against
BMS. Although a finding of
contempt is also justified as against BMS, I will not make an order
directly against it, since none
was sought.
[38]
Although the respondents’
contempt calls for sanction, the primary focus at this stage,
particularly since this is the first
(and hopefully only) contempt
application that will be required in this matter, must be to bring
about compliance with Erasmus
J’s order. Although the
respondents have by now had four months to comply and have not
justified any significant extension
of time, ITM’s counsel
submitted a draft order which would give the respondents a further
two weeks. Since this judgment
has, due to my other commitments,
already been delayed by slightly more than a week, this will give the
respondents more than three
weeks from the date of the hearing to
achieve compliance.
[39]
Although the respondents’
allegations about the time and money they need are flimsy, I intend
to include, in my order, directions
for the filing by the respondents
of detailed affidavits if for any reason they are unable to comply
with any part of the order
within the specified period. This is not
because, at present, they have adduced satisfactory evidence to raise
a reasonable doubt
as to their financial and/or technical ability to
comply but to ensure that if they hereafter claim such an inability,
the court
and ITM are given proper particulars of the inability.
[40]
As to sanction, IMT in its
notice of motion proposed a fine of R100 000, failing payment of
which committal to prison for 30
days. In the alternative, IMT
proposed that the said sanction be suspended for three years subject
to compliance with my order
and Erasmus J’s order. In the draft
order submitted by IMT’s counsel, it is proposed that the
respondents be committed
to prison for a period of 30 days, suspended
for six months subject to compliance with my order and Erasmus J’s
order.
[41]
I have come to the
conclusion that I should not order incarceration, even suspended, at
this stage. Hopefully the present judgment
and order will be enough
to bring the respondents to their senses. I therefore intend to
impose a fine of R30 000, suspended
on appropriate conditions.
[42]
IMT has asked for costs on
the attorney and own client scale. On my understanding, the insertion
of the word ‘own’ adds
nothing to an order for the
payment of costs on the attorney and client scale. Subject to this,
it is customary in contempt applications
for costs to be awarded on
the attorney and client scale (cf
Readam
supra
para 45) and I
see no reason not to do so in this case.
[43]
I make the following
order:
(a) It is declared that the
second and third respondents have committed contempt of the order
granted in this matter by Erasmus
J on 10 February 2020 (‘the
Erasmus order’) and they are found guilty of such contempt.
(b) Each of the second and third
respondents is sentenced to a fine of R30 000, which sentence is
suspended for a period of
one year on condition that the said
respondents, as well as the first respondent as represented by the
third respondent,
(i) timeously comply with the
terms of this order and with the Erasmus order;
(ii) do not, during the period of
suspension, commit contempt of this order or of the Erasmus order.
(c) The respondents (including
the first respondent) must comply with the Erasmus order by not later
than Monday 20 July 2020.
(d) If the respondents fail to
comply with the Erasmus order by Monday 20 July 2020, and if they
claim that they were unable to
do so, they must nevertheless comply
with so much of the Erasmus order as it is within their power to do.
(e) In the eventuality envisaged
in para (d) above, the respondents must, by not later than Friday 24
July 2020, deliver affidavits
containing the following information:
(i) If the respondents claim that
they can only comply with the order by spending money and that they
lack the necessary financial
resources, their affidavits must contain
the following details:
(aa) a breakdown of the amounts
that have to be paid in order to achieve compliance;
(bb) the names, physical
addresses, email addresses and telephone numbers of the persons to
whom money has to be paid;
(cc) the services for which each
such payment is required;
(dd) sufficient information about
each such respondent’s financial position to establish that
they are unable to effect the
payments required.
(ii) If the respondents claim
that compliance requires cooperation from third parties which such
third parties have refused to give,
the affidavits must contain the
following details:
(aa) the names, physical
addresses, email addresses and telephone numbers of the persons whose
cooperation is required;
(bb) the nature of the
cooperation required from each such person;
(cc) particulars of when the
cooperation was requested and when it was refused.
(iii) If the respondents claim
that there are technical obstacle making compliance impossible, the
affidavits must contain the following
details:
(aa) precise particulars of the
technical obstacles;
(bb) the actins needed to
overcome the obstacles;
(cc) the anticipated date by
which each such obstacle will be overcome.
(f) The respondents, jointly and
severally, are ordered to pay the applicant’s costs of suit on
the attorney and client scale.
______________________
O L
Rogers
Judge
of the High Court
Western
Cape Division
APPEARANCES
For
Applicant
G
Potgieter
Instructed
by
O’Reilly
Law Inc, Tygervalley
c/o
England Slabbert Attorneys Inc
1
st
Floor, Equity House
107
St Georges Mall
Cape
Town
For
Respondent
T
Feke-Myeko
Feke
Myeko Attorneys
102
Lapa Building
380
Bosman Street
Pretoria