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[2021] ZAGPJHC 409
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C3 Shared Services (Pty) Limited v Grange and Another (2012/10002) [2021] ZAGPJHC 409 (19 August 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
REPORTABLE:
No
OF
INTEREST TO OTHER JUDGES: No
19/8/2021
Case
No.: 2012/10002
In
the matter between:
C3 SHARED SERVICES (PTY)
LIMITED
Applicant
and
NICOLAS
JOHN
GRANGE
First Respondent
XTRAVISION
(PTY)
LIMITED
Second Respondent
JUDGMENT
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email and is deemed to
be
handed down upon such circulation.
Gilbert
AJ:
1.
The applicant seeks wide-ranging relief
against the respondents effectively interdicting and restraining the
respondents from competing
directly or indirectly with the applicant.
Some eleven prayers are directed to this end in the notice of motion.
2.
The respondents have opposed the relief and
full sets of affidavits have been exchanged.
3.
The first respondent had been a
shareholder, director and employee of the applicant. It is common
cause that the applicant and first
respondent concluded a written
agreement pursuant to which the first respondent as the seller sold
his shares in the applicant
for a purchase consideration of R3
million, and resigned as an director and employee.
4.
After selling his shares in the applicant,
the first respondent purchased a 50% shareholding in the second
respondent and became
its managing director.
5.
The agreement contains what is styled
a “Non Compete” clause:
“
7.1
The Seller to hereby warrant and undertake that for a period of 30
(thirty) months, recorded from the effective
date of this agreement
and within South Africa he will not, directly or indirectly,
personally or through any nominee:
7.1.1
Carry on any business in competition to the business sold in terms of
this agreement, for clarity business
include electronic security and
fire detection services and infrastructure related to the services;
7.1.2
Approached any of the clients as per annexure “A” with
the purpose of selling services and/or
products as defined in
clause 8.1.1 above to them;
7.2
The Seller will be liable to pay a penalty of R500 000.00 (Five
Hundred Thousand Rand) in each instance
of breach of this clause 8.
Instances of breach need to be determined via Arbitration or agreed
between the Parties.
”
[1]
6.
Based upon the agreement, particularly this
clause, the applicant seeks the wide-ranging interdictory relief
against the respondents.
7.
The
relief that the applicant seeks is final relief. There appears to
factual disputes that may be material and relevant. This brings
to
the fore the election to be made by an applicant when seeking final
relief by way of motion proceedings where there are material
factual
disputes whether to persist with seeking final relief by way of
motion or whether to seek a referral of the matter either
to trial or
to oral evidence. This election is to be made upfront in the hearing
and not once it becomes clear that the applicant
is failing to
persuade the court on the papers, unless there are exceptional
circumstances.
[2]
8.
At the commencement of the hearing of the
matter, I enquired of Mr de Villiers, counsel for the
applicant, the applicant’s
position in relation to the
election. Both Mr de Villiers, for the applicant, and Mr Grobler were
alive to the election, and the
timing thereof.
9.
At
the request of the parties, I stood the matter down to enable the
respective counsel to take instructions and to engage with
each
other. Upon resumption of the hearing, the parties were agreed that
there was a need for oral evidence but could not agree
on whether
that oral evidence should be adduced consequent upon a referral of
the application to trial or upon a referral of the
application to
oral evidence in the customary
Metallurgical
manner.
[3]
The parties also could not agree on the costs arising from the
hearing before me.
10.
Mr de Villiers for the applicant submitted
that a referral to oral evidence is appropriate rather than a
referral to trial. The
applicant submits that the relevant issue to
be referred to oral evidence would be interpretation of the agreement
and particularly
of the “Non-Compete” clause, and,
inextricably linked thereto, whether there had been a breach of the
agreement by
one or more of the respondents. The applicant further
submitted that as the restraint period was for a fixed term ending in
May
2022, the delays attendant upon a referral to trial which would
require an exchange of pleadings would render the interdictory relief
nugatory as the restraint period would have ended by the time the
matter was heard on trial.
11.
Mr Grobler for the respondents submitted
that as the relief sought was far-ranging, which included relief
against the second respondent
who was not a party to agreement and so
where it was not clear on what basis relief was sought against the
second respondent, it
was more appropriate that the issues be defined
between the parties by way of pleadings and so a referral to trial
was appropriate.
12.
The parties therefore required me to decide
on the appropriate referral, whether to oral evidence or to trial, as
well as the incidence
of costs.
13.
Although there are several disputes between
the parties, the central material factual disputes relate to whether
there has been
a breach of the agreement, which is to be determined
in the context of the parties having different views, it would
appear, on
how the agreement should be interpreted. The respondents
did not argue with any real vigour that the central factual dispute
was
otherwise. The respondents did in their practice note summarise
the issues as being that of the interpretation of the agreement
and
whether the applicant had proven the alleged breach of that
agreement. This accords with what the applicant submitted during
argument was the central issue.
14.
A
court hearing oral evidence pursuant to the typical
Metallurgical
referral on the issue would not only determine that issue after
hearing oral evidence, but would also consider all the relevant
issues between the parties and so whether to grant the final relief
sought by the applicant after considering all the affidavits
together
with the oral evidence.
[4]
The
parties having gone to the effort and expense of filing full sets of
substantive affidavits, and the central factual dispute
is readily
identifiable. To the extent that the applicant has not made out a
legally cognisable case for relief against the second
respondent –
in respect of which I express no view –that deficiency will
remain for the second respondent to raise
in defence in due course if
it has any merit. I am therefore inclined towards a referral to oral
evidence rather than an effective
commencement of the proceedings
de
novo
by way of a referral to trial where the affidavits will play little
role.
15.
Whether a referral to oral evidence rather
than trial will result in a court making a determination before the
restraint period
ends in May 2022 is uncertain but a referral to oral
evidence would at least avoid the costs and delay attendant upon an
exchange
of pleadings.
16.
On the incidence of costs, Mr de Villiers
for the applicant submitted that the usual costs order should follow,
being
costs in the cause. Mr de Villiers also pointed out
that the respondents did not cooperate in complying with the
requirements
of the Practice Manual that the parties engage with each
for purposes of preparing a joint chronology and practice note, and
that
this should be taken into account by the court in its exercise
of its discretion in making an appropriate costs order.
17.
Mr Grobler for the respondents submitted
that the applicant should pay the costs arising from the matter not
proceeding before me
because the applicant had been forewarned by the
respondents’ attorney in a letter on 4 August 2021 that
there was a
distinct risk that there may be a referral to oral
evidence, but the applicant nonetheless persisted with the
application and that
it was only when the election was put to the
applicant’s counsel at the commencement of the hearing that the
election was
then, belatedly, made to seek a referral.
18.
It may transpire, with the benefit of
hindsight following oral evidence, that the factual disputes raised
by the respondents were
opportunistic and had no merit. It may also
transpire after the benefit of oral evidence that the defence resting
on the factual
dispute was well-founded. Or it may transpire after
the benefit of oral evidence that although the factual disputes are
decided
in favour of the applicant, they were of sufficient merit and
genuinely raised that it was overly ambitious of the applicant to
have initiated motion proceedings. Accordingly, the outcome of oral
evidence may inform the incidence of costs.
19.
I also take into account that
Mr de Villiers did, albeit only at the commencement of
argument, make the election and did
not persist in first seeking to
argue the matter on its merits. An overly critical approach should
not, in the present circumstances,
be taken towards this more
circumspect approach adopted by the applicant.
20.
I also considered the exchange of
correspondence in the weeks and then days leading up to the hearing
before me. There is an obligation
on the parties in terms of
paragraphs 120 and 121 of the Revised Consolidated Directive of
11 June 2021 that they must
hold a pre-hearing conference and
prepare a joint practice note addressing various issues. The parties
were reminded of this in
my published roll, which recorded that no
joint practice note and chronology had been filed in the matter.
21.
Having considered the correspondence
leading up to the matter and having afforded the parties an
opportunity to make submissions
in relation to that correspondence
and the requirements of the Consolidated Directive, it is clear that
the respondents unilaterally
decided that because in their view the
parties were so far apart, it would be pointless to have a
pre-hearing conference and prepare
a joint practice note. The
respondents did file their own practice note which sets out the
reasons why in their view a joint practice
note was not necessary. I
am not persuaded by those reasons, which seeks to describe the divide
between the parties. Ordinarily,
the further apart the parties, the
greater the need for, and benefit, of the parties’ counsel
engaging with each other to
see what commonality could be reached,
and a recordal be made of what issues are in dispute and which not.
At the very least, a
constructive attempt should be made in agree
upon a joint chronology.
22.
That engagement would also have afforded
the parties an opportunity to engage in relation to a potential
referral to oral evidence,
such as the terms thereof rather than wait
for this development to unfold during the court hearing and after I
had read all the
papers. The legal practitioners as experienced
litigants would have realised that there was a distinct prospect that
the court
may raise the issue of the election that was ordinarily to
be made whether to seek a referral to oral evidence at the outset
23.
It also appears from the correspondence
that arbitration proceedings were and are still also taking place
between the parties arising
from the agreement and that therefore it
was not a difficulty of one or other of the parties not being
available for purposes of
holding a pre-hearing conference. Rather,
it seems to have been a lack of will coupled with an intransigent
approach by the respondents
that prevented the compilation of a joint
practice note.
24.
In an earlier judgment,
Chongqing
Qingxing Industry SA (Pty) Limited v Ye and others
2021
(3) SA 189
(GJ), I had the following to say, albeit in relation to a
difference instance of non-compliance with the Directive:
“
7.
The September Consolidated Directive cannot be read in isolation. It
is supplementary to and must be
applied together with the Uniform
Rules of Court, the Practice Manuals of the division and such other
directives as may be issued
from time to time. A holistic and
sensible reading of these documents, aimed at advancing the efficacy
of the electronic system,
is required. Legal practitioners are to
embrace the spirit of these procedures. Many legal practitioners have
done so, working
with the judiciary and registrar staff to iron out
teething problems and towards ‘making the system work’.
Other legal
practitioners unfortunately view the procedures as a
series of obstacles, which they with varying degrees of ingenuity
seek to
skirt or simply ignore.
8.
Repeated appeals have been made by the judiciary to adhere to these
procedures. The September
Consolidated Directive also warns of
punitive costs awards for non-compliance.
25.
Taking these factors into account, in my
view, such legitimate complaint that the respondents may have had
that the applicant sought
a referral too late and should be ordered
to pay costs, is countervailed by their lack-lustre approach to
compliance with their
obligations in terms of the Directive.
26.
Although I was included towards ordering
that each party should, in these circumstances, be liable to pay
their own costs, upon
reflection this may work to the prejudice of
the successful party depending on which way the factual dispute goes.
As the factual
dispute features centrally, an appropriate order is
that the costs attendant upon the hearing before me be costs in the
cause.
27.
The following order is granted:
27.1.
The matter is referred for the hearing of
oral evidence, at a date and at a time to be arranged with the
Registrar, on the issue
whether there has been a breach of the sale
of shares agreement, and which includes the interpretation of the
agreement for that
purpose.
27.2.
Unless the court directs otherwise,
in
relation only to the issue referred to oral evidence
:
27.2.1.the
parties are entitled to call any witness who deposed to any affidavit
in these application proceedings;
27.2.2.the
parties are obliged to make available for cross-examination such
witnesses who depose to affidavits in these proceedings
to the extent
that such party persists in seeking to place any reliance on that
person’s evidence in the affidavits;
27.2.3.the
parties are entitled to call any further witnesses who were not
deponents to affidavits in these application proceedings:
27.2.3.1.
provided that such party has at least
thirty court days before the date of the hearing of the oral evidence
served on the other
party a statement of the evidence-in-chief to be
given by such person;
27.2.3.2.
but subject to the court, at the hearing of
the oral evidence, permitting such further witnesses to be called
notwithstanding that
no such statement has been served in respect of
his or her evidence;
27.2.4.the
parties may subpoena any witness to give evidence at the hearing or
to furnish documents whether such person has consented
to furnish a
statement or not in relation to the issue referred to oral evidence;
27.2.5.that
a party has served a witness statement in terms of sub-paragraph
27.2.3
above or has subpoenaed a witness
shall not oblige such party to call the witness concerned;
27.2.6.uniform
rule 35 will apply to the discovery of documents.
27.3.
The remainder of the issues in the
application stand over for determination on the affidavits filed by
the parties to date by the
court referred to in sub-paragraph 27.1.
27.4.
Any costs arising from the hearing of this
application on 16 August 2021 are costs in the cause.
Gilbert
AJ
Date
of hearing:
16
August 2021
Date
of judgment:
19
August 2021
Counsel
for the Applicant:
R F De Villiers
Instructed
by:
Deneys
Zeederberg Attorneys
Counsel
for the First and
Second
Respondents:
C J Grobler
Instructed
by:
Salant
Attorneys
[1]
The cross-referencing to clause 8.1.1 would appear to have been
intended to be a cross-referencing to clause 7.1.1 and the
cross-referencing to clause 8 appears to have been intended to be a
reference to clause 7.
[2]
See the decision of the Full Court of this division in
ABSA
Bank Limited v Molotsi
[2016]
ZAGPJHC36 (8 March 2016), paras 25-27, applying
Law
Society, Northern Province v Mogani
2010
(1) SA 186 (SCA), para 23 and
De Reszke
v Maras and others
2006
(1) SA 401
(C) para 33.
[3]
Metallurgical
and Commercial Consultants (Pty) Limited v Metal Sales Co (Pty)
Limited
1971
(2) SA 388 (W).
[4]
Lekup
Prop Co No. 4 (Pty) Limited v Wright
2012
(5) SA 246
(SCA) at 258I.