Brief Summary

Civil Procedure — Discovery — Application to compel production of documents — Plaintiff seeking to compel defendants to produce documents related to the development of specialty chemicals — Plaintiff alleges that defendants used its confidential information to develop competing products — Defendants required to provide detailed documentation and particulars regarding the development processes and personnel involved — Court finds that the requested documents are relevant to the plaintiff's case and necessary for trial preparation.

Comprehensive Summary

Summary of Judgment

1. Introduction

This judgment concerns an interlocutory application brought in motion proceedings within the framework of a pending consolidated action. The application sought to compel the production of documents and the furnishing of further particulars for trial preparation, relying on Rule 35(3) and Rule 21(4) of the Uniform Rules of Court.

The plaintiff was Chemsystems, a division of AECI Limited. The defendants were Quintin Marais (first defendant), Andrew Lang (second defendant), Paseka Vincent Kganyago (third defendant), and Rolfe’s Chemicals (Pty) Ltd (fourth defendant).

As to procedural history, the dispute originated in an earlier application for interdictory and ancillary relief which was referred to oral evidence. Before that application was determined on its merits, the plaintiff instituted an action for damages on 20 November 2015 based on alleged breaches of fiduciary duties alternatively unlawful competition. By agreement, the two matters were consolidated on 26 May 2016 and thereafter proceeded together. The present judgment dealt only with the interlocutory attempt to obtain additional documentation and information prior to trial.

The general subject matter of the underlying dispute concerned whether certain formulae used in the formulation of speciality chemicals referred to as the “Simitri recipe” constituted the plaintiff’s trade secrets alternatively confidential information, and whether the defendants (including the plaintiff’s competitor, the fourth defendant) had made improper use of that information in developing competing products.

2. Material Facts

The court proceeded from the pleadings and the nature of the dispute as described in the papers. The plaintiff’s pleaded case in the main action was that, during 2005–2007, employment contracts were concluded with the first to third defendants, appointing them in management roles within the plaintiff’s business. The plaintiff alleged that it formulated chemical “recipes” for supply to tanneries, and that those recipes were confidential and not public property. The fourth defendant was described as a competitor.

The interlocutory application arose because the plaintiff contended that it needed contemporaneous documentation to investigate how the fourth defendant developed its speciality products and whether that development occurred without use of the plaintiff’s confidential information. The plaintiff’s position was that access to such material would allow it to prepare for trial and avoid being taken by surprise by explanations offered later at trial (for example, reliance on licensed technology).

It was common cause that the plaintiff served notices seeking production of extensive categories of documents under Rule 35(3) and sought further particulars under Rule 21 (invoked via Rule 21(4) for compulsion). The documentation requested included, in substance, documents evidencing steps and processes in product development, competitor-product analyses, laboratory notebooks, testing procedures and results (efficacy and stability), equipment used and acquired for testing, and invoices to customers.

The defendants resisted on multiple grounds, which the court treated as material to the interlocutory outcome. The defendants asserted that certain material was confidential business information; that the requests were an attempt to elicit evidence enabling the plaintiff to decide whether it still had a case; that the documents were not relevant to the issues raised by the pleadings; and that some of the requested documents did not exist or were not in their possession.

A further fact relied upon by the court was the evidentiary limitation identified in the papers: the plaintiff did not depose to its own founding and replying affidavits, and the deponent for the plaintiff (a managing director, Mr Sean Perry) was found to be unable to refute the defendants’ affidavit evidence regarding the non-existence and/or irrelevance of certain categories of documents.

3. Legal Issues

The central legal questions concerned the proper application of the discovery and particulars rules in an interlocutory context, specifically whether the plaintiff was entitled to compel production and disclosure beyond what had already been discovered.

The first issue was whether the defendants could resist discovery on the basis that the documents were confidential, and whether confidentiality constituted a basis to avoid disclosure.

The second issue was whether the categories of documents sought were relevant (including indirectly relevant) to any “matter in question” in the action, as determined from the pleadings, and therefore discoverable under Rule 35(3).

The third issue was whether the court should “go behind” the defendants’ discovery affidavit and denial of relevance and/or possession, and on what threshold. This required the court to determine whether a probability had been shown that the deponent was mistaken or false in the denial of relevance or possession.

These issues were primarily questions of application of legal standards to the facts presented in the affidavits and the pleadings, together with an evaluative judgment about whether the plaintiff had met the required threshold to override the defendants’ discovery affidavit.

4. Court’s Reasoning

The court first addressed the contention that confidentiality justified non-disclosure. It applied the settled principle that confidentiality does not per se confer privilege against discovery. On the authorities cited, the mere fact that information is confidential is not a legally recognised ground to refuse discovery. The court noted, however, that where appropriate a court may craft a confidentiality regime for the disclosure of documents, and it recorded that the defendants had proposed such a regime in the discovery affidavit. The court nevertheless treated such a regime as unnecessary to decide the application because the decisive questions were relevance and possession.

The court then turned to the defendants’ primary objection: irrelevance. It restated the approach that courts are generally reluctant to go behind a discovery affidavit, but that an affidavit denying relevance is not automatically conclusive where the court, upon examining recognised sources, is persuaded that relevant documents probably exist and are being withheld. The court relied on the accepted line of authority that a denial of relevance will not be rejected unless there is a probability that the deponent is mistaken or false.

In determining relevance, the court adopted the established, broad test: a document is relevant if it is reasonable to suppose it contains information which may (not must), directly or indirectly, enable the requesting party to advance its case or damage the case of its adversary, including by leading to a train of enquiry. At the same time, the court emphasised the limiting concept that discovery must relate to a “matter in question,” which is determined by the pleadings.

The plaintiff argued that the requested documents would establish how the defendants developed the relevant products and whether lawful methods were used, and that the plaintiff was entitled to greater precision to prepare for trial. The defendants countered that the requests were directed at eliciting evidence of a denial and at exploring matters not grounded in the pleadings, and that some requested categories (such as competitor-product analyses) were not founded on any pleaded allegation by the defendants.

A key part of the court’s evaluation was that the defendants’ affidavit evidence included an account of product development involving trials and sourcing of raw materials, said to indicate that no confidential information was used. The court held that the plaintiff’s deponent was not positioned to refute aspects of the defendants’ evidence bearing on whether certain documents existed and whether they would support the plaintiff’s claim or undermine the defence. The court treated this as reinforcing the difficulty for the plaintiff in meeting the threshold to displace the defendants’ affidavit stance on relevance.

On the totality of the admissible sources, the court concluded it was not reasonably satisfied that the defendants’ denial of relevance was incorrect. It further concluded that the plaintiff had not shown a probability that the defendants were mistaken or false in asserting irrelevance. In that posture, the court held it could not find it reasonable to suppose that the requested documents would directly or indirectly advance the plaintiff’s case or damage the defendants’ case within the meaning of the discovery relevance test.

The court separately addressed the objection relating to possession and existence of certain categories of documents (particularly those said to underlie analysis of competitor products and related results). It applied the principle that a discovery affidavit is generally treated as conclusive as to possession unless the applicant shows a probability of mistake or falsity, and it held that the plaintiff had not met that threshold on the permissible sources. Accordingly, the court accepted the defendants’ discovery affidavit as conclusive regarding possession of those documents.

5. Outcome and Relief

The court dismissed the plaintiff’s interlocutory application to compel production of documents and furnishing of further particulars.

The plaintiff was ordered to pay costs on the scale as between attorney and own client, including the costs of two counsel.

Cases Cited

Rutland v Engelbrecht 1956 (2) SA 578 (C).

Van der Linde v Calitz 1967 (2) SA 239 (A).

S v Naicker and Another 1965 (2) SA 919 (N).

Crown Cork and Seal Co Inc v Rheem South Africa (Pty) Ltd 1980 (3) SA 1093 (W).

Bridon International GmbH v International Trade Administration Commission 2013 (3) SA 197 (SCA).

Rellams (Pty) Ltd v James Brown & Hamer Ltd 1983 (1) SA 556 (N).

Lenz Township Co (Pty) Ltd v Munnick 1959 (4) SA 567 (T).

Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of South Africa and Others 1999 (2) SA 279 (T).

Marais v Lombard 1958 (4) SA 224 (E).

Richardson’s Woolwasheries Ltd v Minister of Agriculture 1971 (4) SA 62 (E).

Continental Ore Construction v Highveld Steel & Vanadium Corporation Ltd 1971 (4) SA 589 (W).

Caravan Cinemas (Pty) Ltd v London Film Productions 1951 (3) SA 671 (W).

Federal Wine and Brandy Co Ltd v Kantor 1958 (4) SA 735 (E).

SA Neon Advertising (Pty) Ltd v Claude Neon Lights (SA) Ltd 1968 (3) SA 381 (W).

Schlesinger v Donaldson and Another 1929 WLD 54.

Carpede v Choene NO and Another 1986 (3) SA 445 (O).

Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55.

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

Uniform Rules of Court, Rule 35(3).

Uniform Rules of Court, Rule 21(4) (in relation to compulsion of further particulars requested under Rule 21).

Uniform Rules of Court, Rule 21.

Held

The court held that confidentiality of documents is not, on its own, a recognised basis to avoid discovery, although a confidentiality regime may be fashioned where appropriate.

The court held further that it was not persuaded that the categories of documents sought were shown to be relevant to the matters in question as determined by the pleadings, and that it was not reasonably satisfied that the defendants’ denial of relevance was incorrect. The plaintiff did not demonstrate a probability that the defendants were mistaken or false in their assertions of irrelevance.

On the question of possession/existence, the court held that the defendants’ discovery affidavit had to be accepted as conclusive in the absence of a probability showing that the defendants were mistaken or false in denying possession of the specified categories, and that the plaintiff had not made such a showing.

LEGAL PRINCIPLES

The judgment applied the principle that confidential information is not privileged merely because it is confidential, and therefore confidentiality does not per se justify refusal of discovery. Where necessary, courts retain a discretion to implement measures regulating access to confidential material, but such measures do not replace the relevance inquiry.

The judgment applied the established approach that courts are generally reluctant to go behind a discovery affidavit, and that an affidavit denying relevance (or possession) will not be rejected unless a probability is shown that the deponent is mistaken or false. The permissible sources for assessing whether to go behind the affidavit include the affidavit itself, documents referred to therein, the pleadings, admissions, and the nature of the case and documents in issue.

The judgment applied the broad relevance test associated with Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, namely that a document may be relevant if it is reasonable to suppose it may directly or indirectly advance the requesting party’s case or damage the opponent’s case, including by leading to a train of enquiry. This breadth is nonetheless constrained by the requirement that the document relate (or may be relevant) to a “matter in question”, which is determined from the pleadings.

Chemsystems a division of AECI Limited v Marais and Another (93685/2015) [2019] ZAGPPHC 127 (28 February 2019)