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[2021] ZAGPJHC 727
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Zizwe DSD (Pty) Ltd and Another v Jemma Holdings (Pty) Ltd and Others (32030/2018) [2021] ZAGPJHC 727 (25 June 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 32030/2018
NOT REPORTABLE
NOT OF INTEREST TO OTHER
JUDGES
NOT REVISED
25 JUNE 2021
In
the matter between:
ZIZWE
DSD (PTY)
LTD First
Applicant
RIVIGAN
INFRASTRUCTURE SOLUTIONS (PTY) LTD Second
Applicant
and
JEMMA
HOLDINGS (PTY)
LTD First
Respondent
LEONARD
LYNDON JOHNSON Second
Respondent
PETRO
RIECKERT Third
Respondent
JUDGMENT
Delivered:
By transmission to the parties via email and
uploading onto Case Lines
the
Judgment are deemed to be delivered. The date for hand-down is deemed
to be
25 June
2021
SENYATSI
J:
[1] On
9 October 2019, I handed down an order in terms of which an interdict
was issued against the respo
ndents. The reasons for the order
are as set out below.
[2] The
applicants provide electrical services to public and private
entities. They also install, upgrade and maintain
electrical
infrastructures for municipalities and other public utilities such as
Eskom. They are therefore involved in a variety
of projects in the
electrical business sector.
[3] Due
to their business activities, the applicants have traded with
Government entities located in Bloemfontein,
Johannesburg City Power,
Ekurhuleni Municipality, Emfuleni Municipality, Beaufort West and
George Municipalities.
[4] The
second respondent Mr Leonard Johnson was employed by both applicants
as their Chief Principal Officer.
He however concluded an employment
agreement with the second applicant although, in practice, he worked
for both applicants.
[5] The
second respondent is a director and shareholder of the first
respondent. He holds shares with his wife
and daughter. The first
respondent trades in direct competition with the applicant. The
second respondent was employed as a chief
executive officer of the
applicants.
[6] The
third respondent is also actively involved in the business of the
first respondent and was also employed
by the applicants. Both the
second and third respondents were served with the suspension letters
at the same time and resigned
at the same time from the applicants.
[7] The
respondents have not opposed the majority of the prayers in the
notice of motion. There are only three
points opposed in the
application, namely:
(a) The
lack of
locus standi
in respect of the relief sought in
prayers 1.3 and 1.7 of the notice of motion by the first applicant;
(b) the
averment that the Bulk of the information used as evidence was
obtained illegally and that
the court should- ignore same;
(c) the
illegality of the restraints.
[8] I
will now deal with the protection afforded by section 35 (5) of the
South African Constitution Act No 108
of 1996 (“The
Constitution”). Section 35(5) of the South African Constitution
Act 108 of 1996 provides thus:
“
Evidence
obtained in a manner that violates any right in the Bill of Rights
must be excluded if the admission of that evidence would
render the
trial unfair or otherwise detrimental to the administration of
justice.”
[9] The
provisions of section 35 (5) relate, in the main, to evidence of
self-incrimination in criminal proceedings.
In
Ferreira
v Levin and Others, Frejenhoek and Others v Powell and Others
[1]
it
was held that the Court has discretion to exclude otherwise
admissible evidence if the evidence was improperly obtained. However,
it should always be remembered that the pronouncement on
Constitutional imperatives of section 35 (5) deals with evidence in
the
criminal trial.
[10] I
have not been provided with the basis for contending that the
evidence found in the flash drive was stolen.
What is undeniable is
that the second respondent who was in a position of trust as the CEO
of the applicants took advantage of
his authority. He floated a
competing company whilst in the employ of the applicants who were
paying him a handsome monthly nett
salary of R100 000 and abused
his position by using all the information to unlawfully compete with
the applicants in a clear
breach of this fiduciary duty. In so doing,
the second respondent sought and obtained the assistance of the third
respondent. This
behaviour in my view, calls for sanction by this
Court.
[11] In
Ferreira
v Levin and Others Frejenhoek and Others
[2]
, the two Constitutional
cases that had been consolidated to consider the validity of the
self-incriminating evidence obtained in
the course of the liquidation
inquiry, in terms of section 417 and 418 of the Companies Act of
1873, the court correctly held that
the provisions of section 417 (2)
(b) of the Companies Act is inconsistent with the right against
self-incrimination in terms of
the Constitution to the extent that
such evidence is used in the subsequent criminal trial.
[12] There
is no suggestion in the present case that the evidence found in the
flash drive is going to be used
in the criminal trial. In fact, I
have not been provided with evidence that a criminal charge had been
laid on account of evidence
derived from the flash drive. In my view,
the flash drive which was used within the premises of the applicants,
could not be possibly
stolen by the applicants, but have possibly
handed to the first and second respondent as a tool of trade such as
any assets like
computers and telephones allocated to the employees
of any company. Therefore, I find it highly unlikely that the
applicants had
illegally obtained the flash drive containing the
evidence with probative value to these proceedings.
[13] It
is only evidence that is to be used in the criminal trial which is
covered by section 35 (5) of the Constitution
which must be excluded.
In such a case the court hearing the criminal trial has no discretion
to admit the evidence illegally obtained.
This is so to ensure that
self-incrimination by an accused person is impermissible and that the
trial should always be fair and
in accordance with the principle of
legality.
[14] In
the instant case, as already stated, no evidence has been led in the
papers that the information contained
in the flash drive is going to
be used in the criminal trial. Again, I restate that no criminal
charges have been laid by the applicants
against the second and third
respondents. The contention that the evidence obtained from the flash
drive should be ignored by this
court, must in my respectful view
fail.
[15] The
second respondent contends as a second point that the first applicant
has no
locus standi
to bring the application as he was only
employed by the second applicant in terms of the written contract of
employment.
[16] The
closer perusal of the papers reveal that the second respondent
managed the business of both applicants.
This is confirmed by what
the second respondent who says in paragraph 5.9 of the opposing
affidavit where he states the following:
“
In
my capacity as CEO of the second applicant it was also expected of me
to oversee and manage the business activities of the first
applicant.
Prior to my appointment as CEO, the applicants' bank accounts were
all in overdraft. During the period between March
to September 2013,
I managed to transform the applicants' negative bank balances into
positive bank balances cumulatively in excess
of R20 000 000.00
(twenty million rands).”
[17] The
concession by the second respondent that he managed the business
activities of both applicants is proof
that he worked for both
applicants. In my respectful view, the contention that the first
applicant has no
locus standi
to bring the application must
therefore fail.
[18] The
evidence adduced in the papers before me is overwhelmingly in favour
of the applicants. The second respondent
whilst a CEO of both
applicants conspired and engineered the high jacking of the business
of the applicants. He used the applicants’
letterheads to
appoint the first respondent as a sub-contractor on projects the
applicants had with the clients; ensured that the
first respondent
unfairly competed directly with the applicants whilst he was still
employed by them. This is confirmed, for instance
by the Johannesburg
City Power tender where the first respondent also tendered for the
work and the second respondent ensured that
the applicants do not
become preferred service providers by reducing the number of
technicians who were to be briefed by Johannesburg
City Power. This
omission, despite being short-listed, led to the applicants losing
the tender due to the illegal conduct of the
first and second
respondents.
[19] A
CEO of a company occupies a special position within the company.
Consequently, whilst he is in that position,
he is always expected to
act in the best interests of the company he manages. This is a trite
principle of our company law. In
this case, the second and by
extension, the third respondent acted in direct conflict with their
employment contract with the applicants.
[20] The
resignations by the second and third respondents from the employ of
the applicants do not, in my view,
make their conduct lawful. I say
this because, on merits, the respondents contend they should not be
restrained from engaging in
competition.
[21] In
opposing the application, the second respondent sought to challenge
Mr Zami Nkosi and Mr Brian Johnson
and alleged that the two
transferred millions of rands of the applicants’ money to fund
their lifestyles. The second respondent
called upon them to make
available to these proceedings their personal bank accounts
statements. I fail to understand the relevance
of the demands as the
two gentlemen are not parties before this Court. This is not an
inquiry into the personal lifestyle of Mr
Nkosi and Mr Johnson.
[22] I
now deal with the restraint of trade. It is trite that every person
has a right to carry on his trade without
wrongful interference from
others. In
Schultz
v Butt
[3]
the court held as follows:
“
In
order to succeed in an action based on unfair competition, the
plaintiff must establish all requisites of acquilian liability,
including proof that the defendant has committed a wrongful act. In
such a case, the unlawfulness which is a requisite of acquilian
liability may fall into a category of clearly recognised illegality
as in the illustrations given by Corbett J in Dunn and Bradstreet
(Pty) Limited v SA Merchants Combined Credit Bureau (Cape) (Pty)
1968
(1) SA 209
(C) at 216 F-H, namely trading in contravention of an
express statutory prohibition, that the making of fraudulent
misrepresentations
by the rival trader as to his own business; the
passing off by a rival trader of his goods or business as being that
of his competitor,
the publication by the rival trader of
injurious falsehoods concerning his competitors business; and the
employment of physical
assaults and intimidation designed to prevent
a competitor from pursuing his trade, but it is not limited to
unlawfulness of that
kind.”
[23] In
this case, the respondents have made all concessions regarding the
following:
(a)
passing
off the business of the first respondent as that of the applicants;
(b) leaning
on the applicants’ goodwill and reputation in the promotion of
their own business;
(c) appropriating
the applicants’ business ideas, acquisition and use of the
applicants’
trade secrets and confidential information;
(d) misappropriating
i.e. adopting or copying the applicants’ performance;
(e) interfering
with the applicants’ contractual obligations and/or
relationship with co-contracting
parties and/or customers whether
potential or existing.
[24] In
Cochrane
Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd and Another
[4]
,
the Court held as follows:
“
No
one can claim an absolute right to exercise of his or her trade,
profession or calling, or competition often brings about interference
in one way or another about which rivals cannot legitimately complain
(Matthews v Young
1922 AD 492
at 507). All that a person can,
therefore, claim is the right to exercise his calling without
unlawful interference from others.
As Corbett J pointed out Dunn and
Bradstreet at 216 (E) [o]ne of the “rights” comprehended
in the general right to
carry trade is the right to attract custom
competition by a rival trader necessarily involves an interference
with the exercise
of this right in that it results, to some degree,
in the diversion of such customs to the rival trader. Thus, the main
difficulty
in this branch of law is to determine the dividing line
between lawful and unlawful interference with the trade of another.”
[25] Having
given consideration to the facts of this matter, I am satisfied that
the line for lawful competition
has been crossed. This is
demonstrated by the lies perpetrated by the first respondent that it
has been appointed as a sub-contractor
to carry out work on behalf of
the applicants, the interference relating to tender processes for
Johannesburg City Power tenders
which was lost by the applicants
owing to failure to meeting the minimum number of technicians
specified in the tender document.
[26] The
last point to be considered is that of costs on a punitive scale. The
second respondent occupied the most
important position as the CEO of
the applicants. He owed his fiduciary duty towards both applicants in
running their business.
I am of the view that he abused his position
by conducting wrongful acts through the first respondent. In my view,
the first respondent
was his alter ego in that he controlled it,
although his wife and daughter were also shareholders,
[27] It
follows in my judgment that the conduct of the respondent should be
visited upon by the respondents on
many of the prayers, it is not
necessary to issue a punitive costs order.
ORDER
The following order is
made:
The respondents are
hereby interdicted from:
(a)
passing of the business of the applicants
as that of the respondents
(b)
leaning on the applicants’
goodwill and reputation in promotion of their own business;
(c)
appropriating any of the applicants’
business ideas, acquisition and use of the applicant’s trade
secrets or confidential
information;
(d)
misappropriating i.e. adopting or copying
the applicant’s performance;
(e)
interfering with the applicant’s
contractual obligations and relationships with contracting parties
and/or customers whether
potential or existing;
(f)
entering into or attempting to enter into
any contract whereby the object set out in paragraphs as above is
sought to be achieved;
(g)
as against the second respondent by
competing with the applicants in the business of the applicants in a
personal capacity or by
use of the first respondent as a vehicle to
do so;
(h)
the respondents are directed to hand
over any computer program material, manuals, tender documents,
contract and/ or any other documents
generated unlawfully for use by
the business of the of the first respondent whilst the second and
third respondents were in the
employment of the applicants;
(i)
the respondents are ordered to pay the
costs of suit on a party and party scale.
SENYATSI
ML
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
REPRESENTATION
Date
of hearing:
09
October 2019
Date
of Judgment:
25
June 2021
Applicants
Counsel:
Adv
AP Den Hartog
Instructed
by:
Marques
Soares Fontens Attorneys
Respondents
Counsel:
Adv
JA Du Plessis
Instructed
by:
Van
Velden-Duffey Incorporated
[1]
1996
(1) SA 984 (CC)
[2]
supra
[3]
1986
(3) SA 667
(AD) at 678 H-I
[4]
2016
(6) SA 1
(SCA) at para [18]