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[2019] ZAECPEHC 24
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Sizonke Trading Nelspruit (Pty) Ltd and Another v Stander and Others (675/2019) [2019] ZAECPEHC 24 (30 April 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
Case
No: 675/2019
Date
heard: 23 April 2019
Date
delivered: 30 April 2019
NOT
REPORTABLE
In
the matter
between:
SIZONKE
TRADING NELSPRUIT (PTY) LTD First
Applicant
SIZONKE
TRADING PORT ELIZABETH (PTY) LTD
Second
Applicant
And
JOHAN
ANDRE STANDER
First Respondent
ANDRE
STANDER
Second
Respondent
SURFACE
PREPARATIONS EQUIPMENT
AND
COATINGS (PTY)
LTD
Third Respondent
__________________________________________________________________
JUDGMENT
___________________________________________________________________
Goosen
J:
[1]
This is an application to compel production of certain documents
pursuant
to Rule 35(12). The application is made in the context of an
urgent application to restrain the first and second respondents from
breaching contracts in restraint of trade pending the institution of
action to enforce such contracts. It will be appropriate,
in this
application, to refer to the parties as cited in the main
application.
[2]
The main application was launched by the applicants on 15 March 2019.
The notice of motion set out truncated time periods for the delivery
of a notice of opposition and answering affidavits and enrolled
the
matter for hearing on 26 March 2019. The relief,
inter alia
,
sought against the first and second respondents consists of an
interdict restraining each of them for a period of twelve (12)
months
(operative from different dates) from directly or indirectly carrying
on or being interested or engaged in or being employed
in any
company, close corporation, or an undertaking which makes available
products or products provided by the applicant from
the operative
date. This relief is founded upon the terms of a contract concluded
by the first and second respondents as employees
of the applicants.
The contract incorporates terms which, it is alleged, constitutes an
enforceable restraint of trade against
the first and second
respondents.
[3]
As against the third respondent, the applicant seeks orders
interdicting
it from directly or indirectly encouraging or enticing
any employee of the applicants to terminate his or her employment
with the
applicant. It also seeks to restrain the third respondent
from taking any action which directly or indirectly is designed or
calculated
to result in the applicants’ customers terminating
their association with the applicant or transferring business to the
third
respondent. This relief is founded upon the allegation that the
third respondent, having engaged or employed the first and second
respondent, has sought to utilize their knowledge of the business
practices of the applicants to advance its own business.
[4]
In
the main application, the applicants seek interim relief pending the
institution of an action in which final interdictory
relief will be
sought. On 26 March 2019, the application was postponed by agreement,
to 16 April 2019. An order was made regulating
the filing of
answering and replying affidavits
[1]
.
The reason therefor relates to the application to compel which is
before this court.
[5]
On 20 March 2019, the respondents filed a notice in terms of Rule
35(12)
in which they required certain documents to be produced for
inspection. The items listed related to documents alleged to have
been
referred to in the founding affidavit or annexures thereto. The
applicants replied to the Rule 35(12) notice on 29 March 2019. In
respect of certain items (items 1 and 7-10, the details whereof will
be dealt with hereunder), the applicants refused to make them
available contending that they are irrelevant. In relation to those
documents sought under item 1, the applicants also alleged
that they
comprise confidential information of the sort which the application
seeks to protect.
[6]
On 2 April 2019, the respondents initiated the application to compel
production
of the documents. It was enrolled for 9 April 2019. The
application is supported by a founding affidavit which incorporates a
“provisional
answering affidavit” in the main
application. The notice of motion in the application to compel
includes an order seeking
to “amend” the order of 26
March 2018 (the so-called postponement order) by further postponing
the main application
and permitting the respondents to file an
answering affidavit seven (7) days after the applicants have complied
with the Rule 35(12)
notice and after they have effected the joinder
of all interested parties. The respondents also seek an order that
the filing of
a replying affidavit be filed and that the main
application be postponed
sine die
.
[7]
The applicants filed an answer to the application to compel and a
reply to the “provisional”
answering affidavit on 8 April
2019. When the application to compel was called on 9 April 2019 it
was postponed to 16 April 2019
to enable the respondents to file a
reply and for the matter to proceed in conjunction with the main
application. As it is to be
gathered from what is set out above both
the interlocutory application to compel and “postponement”
application and
the main application served before this court. Mr
Richards
, for the applicants, took the stance that insofar as
the court is able to rule upon the interlocutory applications, the
main application
ought also to be adjudicated. Mr
Nepgen
, for
the respondents, took the stance that a ruling in favour of
production of the documents would necessarily require postponement
in
order to facilitate such order. He also submitted that, in any event,
the respondents should be allowed to file a “complete”
answering affidavit since they had only filed a “provisional”
answer under reservation of the right to inspect the
documents
sought.
[8]
I turn now to the application to compel compliance with the Rule
35(12)
notice. Rule 35(12) provides that:
“
(12) Any party to
any proceeding may at any time before the hearing thereof deliver a
notice as near as may be in accordance with
Form 15 in the First
Schedule to any other party in whose pleadings or affidavits
reference is made to any document or tape recording
to produce such
document or tape recording for his inspection and to permit him to
make a copy or transcription thereof. Any party
failing to comply
with such notice shall not, save with the leave of the court, use
such document or tape recording in such proceeding
provided that any
other party may use such document or tape recording.”
[9]
The Rule
contains no time periods within which production is to occur. Indeed
it is accepted that it imposes no positive obligations
to produce
documents for inspection. The sanction imposed for non-compliance
with the Rule is that the party failing to produce
same is precluded
from using such documents in the proceedings, the consequence of
which may be that the party is unable to prove
its case
[2]
.
It is the reference to a document which gives rise to the entitlement
to seek its production
[3]
. In
the event that the requested party does not respond to the notice or
refuses to make a requested document available the requesting
party
may seek an order compelling production. It does so in terms of the
provisions of Rule 30A
[4]
.
The filing of a Rule 35(12) notice does not suspend the operation of
the time periods within which a party is required to
file a plea or
answering affidavit
[5]
.
[10]
In
Centre
for Child Law v Hoërskool Fochville
[6]
the Supreme Court of Appeal set out the basis upon which an
application to compel compliance with a Rule 35(12) notice is to be
approached, as follows:
“
For my part, I
entertain serious reservations as to whether an application such as
this should be approached on the basis of an
onus. Approaching the
matter on the basis of an onus may well be to misconceive the nature
of the enquiry. I thus deem it unnecessary
to attempt to resolve the
disharmony on the point. That notwithstanding, it is important to
point out that the term onus is not
to be confused with the burden to
adduce evidence (for example, that a document is privileged or
irrelevant or does not exist).
In my view the court has a general
discretion in terms of which it is required to try to strike a
balance between the conflicting
interests of the parties to the case.
Implicit in that is that it should not fetter its own discretion in
any manner and particularly
not by adopting a predisposition either
in favour of or against granting production. And, in the exercise of
that discretion, it
is obvious, I think, that a court will not make
an order against a party to produce a document that cannot be
produced or is privileged
or irrelevant.
[11]
Mr
Nepgen
submitted that distinction drawn between an onus and a burden to
adduce evidence is consistent with earlier decisions which suggest
that the burden falls upon the party refusing to produce the
document
[7]
. Mr
Richards
,
on the other hand, argued that the determination of the entitlement
to inspect is not to be approached on the basis of an assumption
of
relevance which is to be rebutted by adducing evidence. It is equally
necessary that the party seeking production of the document
lay a
basis for the need to produce the document
[8]
.
[12]
In my view, the dictum in
Fochville
quoted above
provides adequate guidance. It requires a court which considers an
objection to the production of a document on the
basis, for example
of relevance, to consider,
inter alia
, the context and
circumstances in which reference is made; the nature of the case made
out in the pleading or affidavit; and, where
relevance is denied, the
reasons advanced for its required production. All of these factors
are to be considered in the exercise
of the court’s discretion.
[13]
It is with this in mind that I turn to a consideration of the
documents which the respondents
seek.
Item
1
[14]
This refers to “customer contracts” to which reference is
made in paragraphs
22.4; 26.8; 28 and 48 of the founding affidavit.
The applicant disputes entitlement to these documents on the basis of
relevance
and confidentiality. In regard to the latter, it is
contended that the contracts it had with customers necessarily
contain crucial
proprietary information the disclosure of which will
harm the applicant’s interests. It was argued that should same
be produced
the very purpose of the protection of its interests by
way of the application will be defeated. In answer to this, the
respondents
tender that the documents be redacted to delete/obscure
information relating to pricing to avoid such a breach of
confidentiality.
[15]
It is well
established that, in the context of a claim to confidentiality of
documents to which a party is entitled, the court retains
a
discretion to protect confidential information by balancing the
interests of the parties by imposing limits upon the form and
manner
in which production of documents is to occur
[9]
.
[16]
In the circumstances of this matter, the applicants’ objection
to production of the
documents on the basis of confidentiality can,
it seems to me, be addressed by an appropriate order as to the form
in which they
are to be produced.
[17]
That, however, is not the only consideration. The applicants object
to the production on
the basis that the contracts, such as are
referred to in the relevant passages, are not relevant. The
applicants point out that
in paragraph 26.8 and 48 references are not
made to “contracts” but rather to the prescribed
customers of the applicants,
some of which are listed. In regard to
the reference to “contracts” made in paragraphs 22.4 and
28, this reference
occurs in the context of the establishment of a
customer base by the applicants. The applicants submit that the
reference to contracts
concluded with customers serves no more than
to establish the reasonableness of the period of restraint upon which
it relies. The
terms of the contracts, where concluded, are not
relevant.
[18]
The respondent seeks to meet the objection by submitting that the
reference to the “contracts”
must be construed in the
context of the founding affidavit as a whole and since the applicants
assert a proprietary interest it
seeks to protect it is necessary
that the applicants produce the contracts in order to enable the
respondents to determine whether
such protectable interest exists.
[19]
In my view the contention by the respondents is without substance.
The applicants’
case against the first and second respondents
is premised upon a contractual term imposing a restraint,
inter
alia
, in respect of the customers of the applicants as at the
date of commencement of the restraint period (the prescribed
clients).
It is for the applicants to prove its customer base and
that the first and second respondents have acted in breach of the
established
terms of the restraint relied upon. The terms of
the contractual arrangements with clients are not generally relevant
to
that issue. Even if it is accepted that the existence of a
protectable interest is an issue, it is for the applicants to prove
its existence. In my view, therefore, the documents sought under item
I are irrelevant and accordingly the applicants are not obliged
to
produce them.
[20]
In any
event, the respondents also misconstrue the ambit of Rule 35(12) in
regard to what constitutes a reference to a document.
The entitlement
to seek disclosure is not triggered when the existence of a document
is to be inferred from an allegation that
there is likely to be a
document
[10]
. That is so in
this instance. Their existence is to be inferred from the process by
which the applicants have established a customer
base. While the
applicants state that contracts were concluded with certain
customers, I am not persuaded that such generalised
reference
triggers the entitlement in terms of Rule 35(12).
Item
7
[21]
This concerns “contracts” which were transferred to the
applicants pursuant
to a sale of business agreement which is annexed
to the founding affidavit in the main application. In the founding
affidavit,
the applicants provide an outline of the group of
companies of which the first and second respondents form part. In
1995, Uni-Trading
(Pty) Ltd (Uni-Trading) was incorporated. In 1998,
Uni-Trading was appointed as a distributor of the products of
Chesterton International
Inc (Chesterton International). Chesterton
International is a foreign company and a manufacturer and distributor
of Industrial
lubricants, corrosion protection products, seals,
gaskets and related products. It is based in the United States. Over
the course
of time, Uni-Trading was appointed by Chesterton
International as a distributor of its products in various parts of
the country.
Chesterton International had incorporated a company in
South Africa, Chesterton Industries Pty Ltd (Chesterton Industries)
which
was responsible for the distribution of Chesterton products in
Gauteng.
[22]
The sale of business agreement relates to the purchase by the first
applicant of the business
of Chesterton Industries. This occurred in
2011.
[23]
The sale of business agreement refers to contracts entered into by
Chesterton Industries,
operative as at the date of the sale, which
were ceded and assigned to the purchaser, the first applicant. The
applicants state
that the contracts referred to were transferred
almost eight (8) years ago. It is to be doubted that the applicants
are still in
possession of said contracts. In any event, it is
submitted that these contracts are irrelevant to issues raised in the
present
application.
[24]
The respondents submit that the applicants rely upon a bald denial of
relevance and that
they do not set out any basis for that assertion.
The objection, it was submitted, amounts to no more than an assertion
that the
respondents do not require the documents to set out their
defences. It is so that the denial of relevance is baldly stated.
However,
regard must be had to the applicants’ founding
affidavit. In it, the applicants state that the restraint upon which
it relies
relates to the provision of certain prescribed services and
its prescribed customers, such services and customers as existed at
the time of termination. It is in this context that the assertion of
irrelevance is to be understood.
[25]
In argument, however, Mr
Nepgen
submitted that since the
cardinal issue relates to whether the applicants enjoy a protectable
interest in respect of its customer
base, the requested documents are
relevant to the issue. It is not for the applicants to decide what
may be relevant to the defences
thus far raised. Since there is no
contention that the documents are protected by considerations of
confidentiality, and no substantive
reason for failing to make the
documents available has been advanced, the court ought to exercise
its discretion in favour of the
respondents. The effect will be to
not unduly halter the respondents in the presentation of their case.
[26]
This court is in an invidious position in determining the relevance
of a requested document.
It can only base its assessment upon what is
before it. That includes the applicants’ founding affidavit and
the documents
annexed thereto. It includes also the content of the
affidavits in the application to compel.
[27]
The documents that are sought are those referred to in an annexure to
the affidavit. A
reading of the annexure indicates that the contracts
referred to include all contracts entered into by the seller prior to
the
sale of the business. The ambit of the definition extends beyond
agreements with customers. It is in this light that the assertion
of
relevance to the determination of the existence of a protectable
interest must be viewed. Having regard to this the assertion
is, in
my view, no more than that. I have already pointed to the nature of
the applicants’ case and its duty to establish
its protectable
interest as at the date of termination of the employment of the first
and second respondents. I am not persuaded
that the broad category of
documents constituting contracts transferred from Chesterton
Industries to the first applicant on sale
of the business in 2011 is
relevant to the issues now raised. In these circumstances, the
disclosure must be refused.
Item
8
[28]
This relates to an Annual Business Plan and Performance Review
envisaged in the Distribution
Agreement which forms part of the sale
of business agreement. The Distribution Agreement referred to is a
pro forma
agreement that it was envisaged would be concluded
between Chesterton International and the first applicant. That
agreement provides
for an annual review of the performance of the
distributor “
year-to-date against the current year Business
Plan and objectives, including a year-end forecast respecting same
”.
The respondent seeks disclosure of these reviews from 2011 until
2019.
[29]
The respondents contend that these are relevant since they will go to
show that the applicant
acted in breach of its obligations to
Chesterton International and therefore that the applicant does not
enjoy a protectable interest.
It is difficult to conceive how a
business plan review, such as that described above, may be relevant.
The terms in which the assertion
of relevance is made is in itself
speculative. The deponent states that he “anticipates”
that the documents may demonstrate
the alleged breach. Against this
must be weighed the applicants’ denial that these documents are
relevant to the enforcement
of its contractual rights against the
first and second respondents.
[30]
Similar considerations apply to this category of documents as apply
to Item 7. I am accordingly
of the view that the requested documents
are irrelevant and the request for disclosure is to be refused.
Item
9
[31]
In Item 9 the respondents seek disclosure of “written consents”
envisaged in
Clause 28, the
pro forma
Distribution Agreement
annexed to the sale of business agreement. The clause makes provision
for the distributor (the first applicant)
to enter into contractual
agreements with affiliated or subsidiary entities to fulfil its
obligations to Chesterton International,
with the consent of
Chesterton International.
[32]
This set of documents it is alleged will establish the applicants’
rights to distribute
Chesterton products to its customers.
Accordingly, they are relevant to a central issue, namely the
lawfulness of the interests
the applicants seek to protect. Whether
that is so or not cannot be definitively determined at this stage.
The consent of Chesterton
International to distribute its products by
entities within the Group of companies of which the first and second
applicants are
part, may bear upon the enforceability or ambit of the
restraint relied upon by the applicants. The mere assertion that this
is
not so and that the documents are irrelevant is insufficient to
find that they are irrelevant. In these circumstances, the
respondents
are entitled to inspection of the documents described
under Item 9.
Item
10
[33]
These concern a list of Distribution Agreements which were terminated
by Chesterton International
on 17 January 2019. In my view, similar
considerations apply to these specified agreements as apply to Item
9. The applicants contend
only that they are irrelevant and not that
their disclosure is protected by considerations of confidentiality.
In the circumstances,
the respondents are entitled to inspect these
documents.
[34]
It follows from what is set out above that the respondents are
entitled to some of those
documents sought by way of the application
to compel. In the light of this conclusion it necessarily
follows the hearing
of the main application ought to be postponed in
order to enable the applicants to comply with the order to be made.
The order
seeking to “amend” the Order of 26 March 2019
is ill-conceived. All that is required is that the main application
be
postponed for an appropriate period. It should be mentioned that
the respondent’s initially sought the further
postponement
also on the basis of an alleged non-joinder. At the
hearing of the matter this point was quite properly not persued.
[35]
As indicated at the outset the respondents have filed a provisional
answering affidavit.
They seek leave to file a “complete”
once the documents have been made available. Although there was some
argument
about the competence of such approach, practical
considerations favour it. During argument respondents’ counsel
accepted
that the court ought, however, to make provision for the
early enrolment of the main application since the applicants are
entitled
to its early adjudication.
[36]
In regard to costs both parties have in my view achieved success in
relation to the application.
The final determination, however, will
depend upon the established relevance of the documents to be
disclosed and the content of
the final answering affidavit.
Accordingly, the court hearing the main application will be in a
better position than this court
to determine the costs of this
application.
[37]
In the result I make the following order:
1. The
Applicants are ordered to produce for inspection the documents
referred to in paragraphs 9 and 10 of the
Respondents’ Rule
35(12) Notice and to allow the Respondents to make copies thereof
within 5 (five) days from date hereof.
2. The
Respondents shall complete the filing of their answering affidavit
within 5 (five) days after the Applicants
have complied with
paragraph 1 above.
3. The
Applicants shall file their replying affidavit within 5 (five) days
after receipt of the answering affidavits
of the Respondents.
4. The
main application is postponed
sine die
to be enrolled on the
opposed roll on a preferential date on no less than 5 (five) days’
notice after filing the Applicants’
reply.
5. The
costs of the application to compel are reserved for determination by
the Court hearing the main application.
6. The
wasted costs occasioned by the postponement of the application on 26
March 2019 are postponed for determination
by the Court hearing the
main application.
________________________
G.G
GOOSEN
JUDGE
OF THE HIGH COURT
Obo
the Applicants: Adv
G. Richards
Instructed
by Schoeman
Oosthuizen, 167 Cape Road, Mill Park, Port Elizabeth
Ref:
S Oosthuizen
Tel:
(041) 373 6878
Obo
the Respondents:
Adv J.J Nepgen
Instructed
by
JGS, 173 Cape Road, Port Elizabeth
Ref:
MC Botha
Tel:
(041) 396 9200
[1]
It was agreed that the respondents would file answering affidavits
on 2 April 2019 and that the applicants would file replying
affidavits (if any) by 10 April 2019.
[2]
Potpale Investments (Pty) Ltd v Mkhize 2016 (5) SA 96 (KZP)
[3]
Protea Assurance Co Ltd v Waverley Agency CC
1994 (3) SA 247
(C)
249B-D
[4]
Minister of Safety and Security v Tembop Recovery (0016/15)
[2016] ZASCA 52
; Machingawuta and Others v Mogale Alloys (Pty) Ltd
and Others
2012 (4) SA 113
(GJS) par [17] and [18].
[5]
Cf Machingawuta (supra); Tembop Recovery (
supra
);
Centre of Child Law v Hoërskool Fochville
2016 (2) SA 121
(SCA)
par [16]; Potch Boudienste CC v Firstrand Bank Limited (Unreported)
Case 23898/15 GNP 22 April 2016 at par [20].
[6]
See Potpale Investments (
supra
)
at par 18 – 21.
[7]
Garfunkel v Gross Hendler and Frank
1987 (3) SA 766
(C) at 774G;
Unilever PLC v Polagric (Pty) Ltd
2001 (2) SA 329
(C) at 336.
[8]
See Centre for Child Law v Hoërskool, Fochville (
supra
)
(at ) where the court noted that the applicant who
had merely denied an allegation that the documents were
not
required, had not explained why this was so.
[9]
See Fochville (
supra
)
referring to Masetla v President of the Republic of South Africa and
Another
2008 (1) SA 31
(CC) at par 27.
[10]
See Penta Communication Services (Pty) Ltd v King and Another
2007
(3) SA 471
(C)at par 15 -15; Holdsworth and Others v Reuner Ltd
2013
(6) SA 244
(GNP) par 12 as referred to in Potch Boudienste CC
(
supra
)
at par 23