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[2021] ZAGPJHC 97
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Linvatec Corporation d/b/a Comned Linvatec v Flourovizon (Pty) Limited (2019/39697) [2021] ZAGPJHC 97 (20 January 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
Case
No: 2019/39697
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
LINVATEC
CORPORATION
d/b/a
Applicant
CONMED
LINVATEC
and
FLUOROVIZION
(PTY)
LIMITED
Respondent
JUDGMENT
MUNDELL A J
1.
This is an interlocutory application
brought pursuant to Uniform Rules 35(11), (12) and (14) in which
the applicant seeks production
by the respondent of certain documents
which I will describe in more detail below.
2.
The respondent in the interlocutory
application (“
Fluorovizion
”)
is also the respondent in an application which the applicant in the
interlocutory application (“
Conmed
”)
has brought for Fluorovizion’s compulsory winding up.
3.
In the winding-up application Conmed
asserts that Fluorovizion is indebted to it in the sum of US
$437 052.80 which, so says
Conmed, Fluorovizion is unable to pay
as contemplated in section 345(1)(c) of the Companies Act, 1973.
4.
Fluorovizion delivered an answering
affidavit in the winding-up application in response to which Conmed
produced the notice in terms
of Rule 35(11), (12) and (14) dated 9
April 2020 in which is sought disclosure by Fluorovizion of thirteen
different categories
of documents.
5.
Fluorovizion did not produce the required
documents which led to Conmed launching this interlocutory
application dated 10 June
2020 in which it seeks the following
relief:
“
1.
declaring that the respondent is not in compliance with the Uniform
Rules of Court;
2.
ordering the respondent to comply with the applicant’s
Rule 35(11),
(12) and (14) notice, dated 9 April 2020, within
5 days of this order being granted.
3.
In the event that the respondent fails to comply with the order in
paragraph
2, that the respondent’s defence be struck out.
4.
directing that the respondent pay the costs of this application.
”
6.
In support of the application Conmed
delivered an affidavit deposed to by Andrew David Kearns (“
Kearns
”)
who describes himself to be a senior director (export and marketing)
of Conmed.
7.
In that affidavit Kearns says in the
context of the required documents:
“
12.
The documents requested in paragraphs 1 to 7 and 9 to 13 of the Rule
35 notice are expressly mentioned
and/or referred to in the answering
affidavit. An extract of the documents requested in paragraph 8 of
the notice is annexed to
the answering affidavit.
13.
By virtue of their reference, mention and/or incomplete appearance in
the respondent’s
papers, including its annexes, the applicant
is entitled in law to the production of the documents, as requested
in the Rule 35
notice.
”
8.
Mr McKenzie, who appears for Conmed,
conceded in argument that Uniform Rule 35(14) it is not of
application as it is only relevant
to actions.
9.
In
addition, as far as concerns Rule 35(11), Mr McKenzie accepted
that, in order to succeed with relief in terms of that sub-rule
(which is discretionary in nature), it is required that Conmed
persuade me that exceptional circumstances require the production
of
the desired documents.
[1]
10.
In his founding affidavit Kearns makes no
reference to exceptional circumstances and he does not say anything
relevant to the relief
contemplated in Rule 35(11).
11.
That disposes of the issues arising from
Rules 35(11) and (14).
12.
The remaining consideration is the
documents to which the applicant may be entitled as contemplated in
Rule 35(12).
13.
Despite the various affidavits and two sets
of heads of argument, Conmed now limits the essential documents to
those described in
paragraphs 1, 3, 7 and 8 of the Rule 35(12)
notice. It appears to be accepted by the parties that the documents
referred to
in paragraphs 1 and 7 of the notice are identical. In the
result I will limit my references in this judgment to paragraph 1 of
the notice.
14.
Paragraph 1 of the Rule 35 notice refers to
“
the sale agreement between
Medhold and the respondent inclusive of its annexes, mentioned in
paragraph 125 of the answering affidavit,
and further referenced in
paragraphs 115, 116 and 127 of the answering affidavit, as well as
paragraphs 2-3 of annex “GF10”
and paragraphs 4-5 of
annexure “GF17” of the answering affidavit
”
(“
the Medhold sale agreement
).
15.
The Medhold sale agreement is directly
referred to in paragraphs 116 and 125 of the answering affidavit as
well as in annexures
“GF10” and “GF17”
thereto. Paragraph 116 of the answering affidavit reads:
“
It
is inappropriate for the applicant to request that Medhold furnish
confidential information. It is not only inappropriate but
also a
breach of the terms Medhold agreed to with the respondent for Medhold
to provide any information in answer. The confidentiality
of the
terms of the agreement between the respondent and Medhold is provided
for in the written agreement concluded in December
2018. Furnishing
the information sought was a breach of the publicity provisions
thereof
”.
16.
Fluorovizion (represented by Mr Elliott SC)
does not dispute that the Medhold sale agreement is referred to in
its answering affidavit
but has objected to the production of that
document on two bases:
16.1
firstly, that the document is not relevant
to the winding up proceedings;
16.2
secondly, that the contents of the document
are confidential to Conmed.
17.
In the context of relevance, Mr Elliott SC
sought to persuade me that, on a reading of the founding and
answering affidavits in
the winding up application, it is
evident that Conmed has not made out a
prima
facie
case for Fluorovizion’s
winding-up as a consequence of which it does not have the necessary
locus standi
to pursue that application. In those circumstances, he argues, the
Medhold sale agreement is not relevant to the winding-up as
that
application is doomed to failure.
18.
In
addition Mr Elliott SC referred me to correspondence annexed to the
founding affidavit in the winding-up application dated 17
July 2019
in which Ms Roeland, Fluorovizion’s attorney, warned Conmed not
to proceed with the winding-up application as there
would, in that
application, exist irresoluble disputes of fact which would bring
into the play the so-called
Badenhorst
principle.
[2]
19.
I
am not persuaded that the Medhold sale agreement is not relevant to
the winding-up application. That agreement has been introduced
by
Fluorovizion in its answering affidavit as one of the foundations for
its contention that it is not indebted to Conmed and that
Conmed, for
that reason, is not its creditor as contemplated in section 346(1)(b)
of the Companies Act, 1973.
[3]
20.
That opposition is formulated in the
answering affidavit in the following terms:
“
5.
The respondent is owed an amount of R5 million from Medhold
Medical (Pty) Ltd
(‘Medhold’). This substantial amount is
three quarters of the alleged indebtedness to the applicant. The
applicant
has persuaded Medhold to withhold the payment of the amount
due to the respondent pending the determination of this application
for the respondent’s liquidation. The existence of the
undisputed and acknowledged debt by Medhold to the respondent puts
paid to the applicant’s allegation that the respondent is
factually and commercially insolvent
”.
21.
Any
reference in an affidavit to a document will suffice to trigger the
provisions of Rule 35(12) even though no detailed or descriptive
reference may have been made to the document.
[4]
22.
If
the Medhold sale agreement exists and is in Fluorovizion’s
possession Conmed is, in terms of Rule 35(12) entitled to see
it.
[5]
23.
I am of the view that the Medhold sale
agreement is relevant to the issues arising in the main application.
As I have said, the
Medhold sale agreement was introduced into the
answering affidavit by Fluorovizion for the purpose of defeating that
application.
It cannot be expected of Conmed to engage Fluorovizion’s
defences to the main application without sight of the document so
expressly referred to.
24.
In the context of confidentiality
Fluorovizion has not sufficiently explained the reasons or necessity
for the claimed confidentiality.
Mr Elliott SC directed my
attention to a portion of annexure “GF13” to the
answering affidavit in which Ms Roeland
said:
“
We
will address the content of your letter in more detail shortly but
advise that it is inappropriate for your client, Conmed to
request
Medhold furnish (
sic
)
this confidential information. It is not only inappropriate but also
a breach of the terms Medhold agreed to for Medhold to provide
any
information in answer. The confidentiality of the terms of the
agreement between our client and Medhold is provided for in
the
written agreement concluded in December 2018. Furnishing the
information your client seeks will be a breach of the Publicity
provisions thereof. Providing the undertaking your client seeks will
be a breach of the Support undertakings given in the agreement
when
Medhold agreed to do what is necessary to put into effect the terms
of the agreement
”.
25.
My attention was directed to the fact that
Ms Roeland’s email of 11 December 2019 had been addressed to
Cliffe Dekker Hofmeyr
attorneys who were, so I was advised, Conmed’s
attorneys at the time. Mr Elliott SC submitted that these facts
confirm the
confidentiality of the Medhold sale agreement and that
Fluorovizion is consequently entitled to withhold that agreement from
disclosure.
26.
Confidentiality
in itself does not preclude discovery.
[6]
Although business entities may claim the right to privacy entrenched
in section 14 of the Constitution,
[7]
the Constitutional Court has held that the infringement of the right
to privacy brought about as a result of a court process designed
to
arrive at the truth is a reasonable and justifiable limitation of
that right. In a litigation context the contractual commitments
of
confidentiality are outweighed by the public interest in the proper
administration of justice.
[8]
27.
In response to Mr Elliott SC’s
submissions Mr McKenzie advised me that Conmed’s attorneys, in
order to protect whatever
confidentiality may exist in the Medhold
sale agreement, would ensure that its contents, once produced, would
not be made available
to third parties – other than Conmed.
28.
Although
it is available to a court to establish confidentiality regimes such
as that approved by the Supreme Court of Appeal in
Bridon
,
[9]
parties can always agree to an undertaking that a document not be
made available to third parties.
[10]
29.
In these circumstances I am satisfied that
Conmed has made out a proper case for the disclosure of the document
referred to in paragraph
1 (and 7) of the Rule 35(12) notice.
30.
Paragraph 3 of the Rule 35(12) notice is in
the following terms:
“’
The
offer to purchase some of the products from the respondent’,
from Medhold, inclusive of its annexes and/or related documents
(including the documents pertaining to the outcome of the stock-take
conducted by Medhold ‘on its own terms’), mentioned
in
paragraph 64 of the answering affidavit
”.
31.
Rule
35(12) only entitles a party to inspection of those documents to
which reference is made in the affidavit. That entitlement
does not
include documents the existence of which can only be inferentially
deduced from the contents of the affidavit, if at all.
It is the
reference to a particular document that triggers the obligation to
produce.
[11]
32.
In
Protea
Assurance
[12]
Marais J described the concept of “
a document
”
in these terms:
“
The
word ‘document’ is a word which is linguistically capable
of encompassing a very wide variety of things. Among the
meanings of
the word given in the Shorter Oxford English Dictionary are ‘that
which serves to show or prove something, evidence,
proof’ and
‘
Something
written, inscribed, etc which furnishes evidence or information upon
any subject, as a manuscript, title-deed, coin, etc’.
”
33.
Paragraph 64 of Fluorovizion’s
answering affidavit reads:
“
64.
Medhold did a stock take and it decided, on its own terms, to offer
to purchase some of the products
from the respondent. It made
logistical sense that the products remain in southern Africa rather
than being shipped back to the
applicant by the respondent only to be
reordered and transported back to Medhold
”.
34.
I agree with Mr Elliott SC that the
contents of paragraph 64 of Fluorovizion’s answering affidavit
do not entitle Conmed to
draw the inference that the offer to
purchase had been reduced to writing. It is equally feasible that it
had not.
35.
In the result Conmed has not made out a
case in support of paragraph 3 of its Rule 35(12) notice.
36.
Paragraph 8 of the Rule 35(12) notice seeks
the following:
“
8.
A complete copy of the respondent’s annual financial statements
for the years
2017 – 2019. The respondent’s annual
financial statements for the financial year 2018 are expressly
mentioned in annexure
“GF9” of the answering affidavit,
which is an extract thereof.
”
37.
The case made out by Conmed for the relief
sought in paragraph 8 of the Rule 35(12) notice is persuasive. In my
view Conmed is entitled
to access to the remainder of Fluorovizion’s
2018 financial statements which are clearly and directly referred to
by the
latter in its answering affidavit. In seeking to reinforce the
point it wishes to make Fluorovizion deemed it necessary to annex
an
extract from its 2018 financial statements. Its deponent said:
“
112.
However, I confirm that the Respondent is
financially healthy and
stable. As I have already stated, the Respondent is factually and
commercially solvent. A copy of the Respondent’s
audited
balance sheet as at 31 December 2017 and 2018 is attached hereto
marked GF9 which confirms this to be the case.
”
38.
Conmed has not, however, in the context of
the requirements of Rule 35(12), made out a case for the
production by Fluorovizion
of its annual financial statements for the
financial years ending 2017 and 2019. Rule 35(12) is not a method of
extracting discovery
in motion proceedings. That remedy is afforded
by Rule 35(13).
39.
I make the following order:
(a)
the respondent is directed to make
available to the applicant within five days from the date of this
order the sale agreement between
Medhold and the respondent which is
described in paragraph 1 of the applicant’s Rule 35(12)
notice dated 9 April 2020;
(b)
the respondent is to make available to the
applicant within five days from the date of this order the entirety
of the respondent’s
annual financial statements for the
financial year ending 2018, an extract of which is annexure “GF9”
to the respondent’s
answering affidavit in the winding up
application;
(c)
the respondent is to pay the costs of the
application;
(d)
in the event of the respondent failing to
comply with the orders in paragraphs (a) and/or (b) above the
applicant is entitled, on
the same papers duly supplemented as may be
necessary, and on notice to the respondent, to make application for
the striking out
of the respondent’s defence to the winding up
application.
MUNDELL A J
DATE
MATTER HEARD :
4 December 2020
DATE OF JUDGMENT
:
20 January 2021
APPEARANCES:
For
the applicant:
Advocate A C McKenzie
Instructed by
:
Webber Wentzel
For
the respondent :
Advocate G Elliott SC
Instructed by
:
F Roeland Attorneys
[1]
STT
Sales (Pty) Ltd v Fourie
2010
(6) SA 272
(GSJ) at 276D to 277E.
[2]
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956
(2) SA 346 (T).
[3]
Read
with Schedule 5 of
section 9
of the
Companies Act, 2008
.
[4]
Penta
Communication Services (Pty) Ltd v King and Another
2007
(3) SA 471
(C) at
paras
[14] to [15].
[5]
M
V Urgup : Owners of the M V Urgup v Western Bulk Carriers
(Australia) (Pty) Ltd
1999
(3) SA 500
(C) at 515C-I.
[6]
Helen
Suzman Foundation v Judicial Service Commission
2018
(4) SA 1
(CC) at para [17].
[7]
Mistry
v Interim Medical and Dental Council of South Africa and Others
1998
(4) SA 1127 (CC).
[8]
Bernstein
and Others v Bester and Others NNO
[1996] ZACC 2
;
1996
(2) SA 751
(CC) at paras [52] and [90];
Gumede
v Subel NO and Others
2006 (3) SA 498
(SCA) at para [19].
[9]
Bridon
International GMBH v International Trade Administration Commission
2013
(3)
SA
197 (SCA).
[10]
Brynard
v Mogwele Waste (Pty) Ltd
[2015]
ZALCCT 49 (24 July 2015).
[11]
Penta
Communication Services (Pty) Ltd v King
supra
at
476B-C.
[12]
Protea
Assurance Co Ltd and Another v Waverley Agencies CC and Others
1994
(3)
SA 247
(C) at 249H to 250A.