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[2019] ZAWCHC 37
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International Fruit Genetics, LLC v Okran 28 (Pty) Ltd and Another (9963/2018) [2019] ZAWCHC 37 (29 March 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
no: 9963/2018
In
the matter between:
INTERNATIONAL
FRUIT GENETICS,
LLC
Applicant
v
OKRAN
28 (PTY)
LTD
First
Respondent
ANYTIME
INVESTMENTS NO. 2
CC
Second
Respondent
Coram:
Justice J Cloete
Heard:
4 March 2019
Delivered:
29 March 2019
JUDGMENT
CLOETE
J
:
Introduction
[1]
The applicant seeks an order recognising and enforcing a judgment
against the respondents of the United States District Court,
Central
District of California, handed down in its favour on 18 December
2017 (‘
the judgment’
).
[2]
In summary, the judgment declared that two licensing agreements
concluded between the applicant and the respondents respectively
on
17 July 2014 and 12 December 2014 had been validly
cancelled, and directed that the respondents return or destroy
all of
the applicant’s plant material within their possession, custody
or control, including cutting off all vines below
the graft of any of
the applicant’s cultivars.
[3]
The respondents do not dispute the judgment, nor that it is final and
conclusive and that no appeal is pending. They do not
contend that
any attempt has been made to have it rescinded. Their opposition to
the recognition and enforcement of the judgment
is that they have
already complied therewith by removing all commercially useful
portions of vines of the applicant’s varietals
growing on their
farms, and accordingly no purpose would be served in granting the
relief sought.
Background
[4]
The applicant, an American company, is in the business of inventing,
developing and breeding new varieties of table grapes,
which it
licenses to commercial growers in the United States of America and
elsewhere in the world.
[5]
The two respondents are commercial growers in the Paarl and
Malmesbury areas. In terms of the licensing agreements, they were
allowed to plant and grow certain varieties of the applicant’s
proprietary plants in certain quantities, and in certain locations
specified in advance and in writing to the applicant.
[6]
On 21 February 2017 the applicant cancelled each of the
agreements, relying upon an ‘
event of default’
as
defined therein. The respondents contended that the applicant’s
cancellation was a repudiation of the licensing agreements,
which
they accepted and in turn cancelled them. The applicant denies any
repudiation. Be that as it may, it is common cause that
the licensing
agreements have been cancelled.
[7]
Ms Theodora Marcos (‘
Marcos’
), the applicant’s
international business manager, deposed to the founding and replying
affidavits. According to her, the
value of the applicant’s
business lies in the intellectual property rights that it holds in
respect of the proprietary plant
varieties that it develops. Its
income is derived principally from these rights and it is thus of
critical importance to the applicant
that these rights are guarded,
controlled and monitored.
[8]
She also stated that the respondents initially did not respond to the
applicant’s cancellation of the agreements. Nor
did they take
steps to destroy the applicant’s proprietary plants in their
possession or control, as they were obliged to
do in terms of the
post-termination obligations contained in the agreements.
[9]
The applicant accordingly instituted proceedings in the United States
District Court on 27 March 2017 for a declaratory
order and
injunctive (interdictory) relief against the respondents as well as
their directing mind, Mr Pieter Redelinghuys
(‘
Redelinghuys’
).
The latter filed certain documents with the District Court in
response to the summons, purportedly on behalf of himself and the
respondents. These did not comply with the relevant procedural
requirements and on 11 May 2017 the applicant filed an
application
for Entry of Default. After the applicant complied with
certain requirements of the District Court, it issued an order on
22 November
2017 dismissing Redelinghuys from the lawsuit and
granting Entry of Default against the respondents, entering judgment
against
them on 18 December 2017. The default judgment order
reads in relevant part as follows:
‘
IT
IS HEREBY ORDERED AND ADJUDGED
,
that:
1.
Judgment is entered in favour of Plaintiff International Fruit
Genetics, LLC and against Defendants Okran 38 (PTY) Ltd. (“Okran”)
and Anytime Investments, No. 2 CC (“Anytime”), the only
two remaining defendants.
2.
The Court declares: that Defendant Okran violated and breached the
International Fruit Genetics Proprietary Variety Planting
Rights and
Trademark License Agreement it had with Plaintiff (the Okran Planting
Agreement) and Anytime violated and breached the
International Fruit
Genetics Proprietary Variety Planting Rights and Trademark License
Agreement it had with Plaintiff (the Anytime
Planting Agreement)
(Collectively, the “Licensing Agreements”); that the acts
of Defendants constituted Events of Default
under each of the
Licensing Agreements; and, that IFG validly and properly terminated
each of the Licensing Agreements.
3.
That IFG is entitled to an Order directing Defendants to return or
destroy all IFG plant material within their possession custody
or
control
.
4.
Pursuant to the terms of the Licensing Agreements, Defendants are
ordered to immediately: (a)
cease all use of IFG proprietary plant
material
and IFG Confidential Information (including, without
limitation, all Trade Secrets or Trademarks, or labels, packages or
materials
containing any Trademarks) in their possession, custody or
control;
and, (b) destroy all IFG proprietary plant material
including cutting off all vines below the graft of any IFG
Proprietary Cultivar
in Defendants’ possession or control…
’
(my
emphasis)
[10]
The applicant also states that after it instituted proceedings in the
District Court the respondents set about cutting down
the vines on
their farms that carried the applicant’s proprietary cultivars.
The respondents contend that their cutting down
of the vines
represented their acceptance of the applicant’s repudiation.
What is undisputed is that although the respondents
cut their vines,
they did so on the rootstock above the graft with the applicant’s
cultivars. The effect of this, according
to the applicants, is that
they did not destroy all of the applicant’s proprietary plants,
as they were obliged to do –
the part above the graft remains.
The applicant contends that unless the cut is made below the graft,
the applicant’s cultivars
will simply start growing again. What
is required is for the respondents to cut the vines
below
the
graft. That will ensure that the applicant’s proprietary plant
material does not grow on the respondents’ rootstock
again.
[11]
In the answering affidavit Redelinghuys maintained that the
respondents have removed all commercially grown plant sections
of the
applicant’s cultivars from their properties and that they have
done so in accordance with accepted agricultural practice.
He stated
that, because the respondents complied with their obligations in this
regard, the proceedings brought in the United States
were completely
unnecessary and purely academic. It was for this reason, so
Redelinghuys contended, that the respondents did not
wish to waste
money opposing those proceedings.
[12]
Redelinghuys states that he has, through various entities, been
farming table grapes for export successfully for over 30 years,
and
as such is well versed in agricultural practices.
[13]
According to Redelinghuys, most vines grown for commercial purpose
are grafted onto permanent rootstock that is resistant to
certain
diseases and/or soil borne problems. The commercially viable lifespan
of rootstock is between 16 to 25 years on average.
[14]
He stated that farmers graft different varietals onto rootstock. The
applicant’s varietals are some of many such table
grape
varietals available in the market from different developers of
varietals. There exist two common methods of grafting of commercial
table grape varieties onto rootstock. The respondents use both
methods.
[15]
The first method is where a dormant stick of the variety is grafted
onto the rootstock in a nursery. Once the two sticks are
joined after
an incubation period called calusing, the sticks are planted in soil
to develop roots. After growing in the nursery
for one season the
plants are then removed and sold by the nursery to farmers, who then
plant them on the commercial farms in such
a way that the graft point
is just above the ground. This is to ensure that the variety does not
produce its own roots and negate
the grafting advantages. When this
vine is later in life cut below the grafting point it is extremely
likely that the plant will
die. In his experience losses of over 90%
are normal. This level of mortality is plainly something which
commercial farmers must
avoid.
[16]
The second method is known as aerial grafting. The rootstock is
planted one growing season in advance. During the next growing
season
the required commercial variety is grafted onto the pre-existing
rootstock. This grafting point is normally 20-50cm from
the ground.
When this plant is cut below the grafting point later, the
probability of the rootstock dying is very low (usually
less than
15%). This, according to Redelinghuys, is due to the fact that the
exposed section of the rootstock above ground has
numerous dormant
buds which will start growing once the plant is cut.
[17]
Therefore, according to Redelinghuys, nursery grafted plants cannot
commercially be cut below the graft if one intends to re-graft
another variety onto them. However aerially grafted plants can be cut
below the graft with a higher survival rate. To overcome
the dying
back of nursery grafted plants, it is thus necessary to leave a small
section of the stem – usually less than 5cm
– of the
previous top variety on the rootstock, and then to re-graft the new
variety onto this. This is known as a vine with
an intermediary stem,
and is common industry practice. The intermediary stem does not
produce any fruit and therefore has no commercial
value. It is the
varietal which is grafted onto the stem and rootstock which produces
the fruit. Redelinghuys stated that none
of the applicant’s
varietals are currently grafted onto the rootstock and stems of vines
on the respondents’ farms.
[18]
He thus maintains that the applicant is misguided in its view that
the respondents would be able to cut the vines down again
in such a
way as to grow the applicant’s varietals should there not be
strict compliance with the judgment. The varietals
which the
respondents now grow, and which, according to him, have been grafted
onto the rootstock, are all other varietals. Growing
the applicant’s
varietals is of no commercial value to the respondents, given that
the latter would not be able to market
them.
[19]
The respondents repeated an earlier tender (declined by the
applicant) for an inspection by an inspector of the Department
of
Agriculture for the purpose of establishing whether all commercially
useful portions of vines of the applicant’s varietals
have been
removed; and if any commercially useful part of vines bearing the
applicant’s varietals are found, they may be
cut down
appropriately, immediately upon inspection by such an individual who
will ensure that the correct and appropriate method
is used to ensure
survival of the rootstock upon which the vines are grafted.
[20]
It is the respondents’ contention that the purpose of the
judgment was not to destroy all plant materials growing on
the
respondents’ farms, but to prevent them from being able to
produce grapes of the applicant’s varietals. The removal
of
residual stems that cause absolute destruction of the respondents’
plant material – i.e. the underlying rootstock
– is
‘
simply vindictive and unauthorised’.
It is
submitted that the tender which the respondents make achieves the
object of ensuring that no grapes of the applicant’s
varietals are grown on the respondents’ farms without causing
the destruction of the respondents’ rootstock and plant
material not of the applicant’s varietals.
[21]
The respondents do not assert that the effect of the judgment is
punitive, but only that it is contrary to public policy for
the
judgment to be enforced when it will serve no purpose. It should also
be mentioned in this regard that – leaving aside
the issue of
res judicata
– the respondents have instituted a damages
claim against the applicants in South Africa, such damages being
alleged to have
arisen as a consequence of the applicant’s
repudiation of the licensing agreements. On the respondents’
own version
therefore it is not necessary to consider whether the
judgment contains a punitive element which might be contrary to
public policy.
[22]
The applicant’s response to all of this is that in truth, the
respondents have not complied with the judgment, given
that they were
expressly directed therein to ‘
destroy all IFG proprietary
plant material including cutting off all vines
below the
graft
of any IFG Proprietary Cultivar in the respondents’
possession or control’.
[23]
The applicant submits that the respondents’ attempt to argue
that cutting below the graft is not required or would cause
them harm
is in direct conflict with the express terms of the judgment and in
any event irrelevant. This is because the respondents
are attempting
to enter into the merits of the judgment which they are not permitted
to do. The judgment does not give the respondents
a discretion to cut
and remove the applicant’s proprietary plant material as they
consider appropriate. The judgment is clear
regarding what is
required: the respondents must return or destroy
all
IFG plant
material within their possession, custody or control and
all
IFG plant material must be destroyed
including cutting off all
vines below the graft
of any IFG proprietary cultivar in the
respondents’ possession or control. The applicant states that,
in any event, the respondents’
tender is flawed for the
following reasons:
23.1 The Department of Agriculture has
not been joined in these proceedings; nor have the respondents sought
to join it. Even if
an official from that Department could perform
the functions that the respondents would have the court assign to it,
in the absence
of joinder the court cannot make an order directing
the Department to do so;
23.2 The respondents do not explain on
what basis an official from the Department would be qualified to give
effect to the judgment,
particularly to identify the applicant’s
proprietary plant material; and
23.3 The sheriff is the appropriate
official to execute orders of the court and no-one is better suited
than a representative of
the applicant to accompany him for the
purpose of identifying its proprietary plant material.
[24]
The applicant not only submits that the respondents’ attempt to
have the court enter into the substantive merits of the
judgment is
impermissible, it also disputes the opinions proffered by
Redelinghuys in the answering affidavit. The applicant states
that if
the cut is not made below the graft union, the applicant’s
variety, previously grafted to the rootstock, may regrow
at any time.
To prevent this from happening, the cut must be made below the graft
union in order to remove
all
of the applicant’s
intellectual property, which the respondents have been ordered to do.
While Redelinghuys’ general
description of the two types of
grafting is correct, his allegations as to the mortality rate when
vines that are propagated using
the first method are cut below the
graft are extravagantly exaggerated. In fact, the mortality rate can
be expected to be between
5 to 10% and not more than 90% as
Redelinghuys alleges.
[25]
In addition, the two methods of grafting described by Redelinghuys
are not the only methods of effectively propagating grape
vines by
grafting. The respondents can cut the vines below the vine union, and
graft a new vine onto the rootstock without the
rootstock first
having to produce a shoot. This is an established and successful
method of grafting. These allegations were supported
by a
confirmatory affidavit of Mr Johan Teubes, an expert in the
propagation of grape vines.
[26]
The applicant also denied that growing its varietals are of no
commercial value to the respondents. It contends that there
is
significant demand for its varietals and the respondents could easily
sell them on the local market. The only way to ensure
that the
applicant’s varietals do not grow again is to cut the vines
below the graft union. It is for this reason that the
applicant
required, in its licencing agreements, that upon termination the
vines must be cut in this manner.
[27]
Redelinghuys thereafter deposed to what he called a ‘
Rebutting
Affidavit’
in which he sought to introduce new evidence
that cutting vines down below the graft union has caused them to die.
The explanation
provided for the late filing of this affidavit was
that:
‘…
I
drew the issue of actual plant death to the attention of my attorney
when consulting on Tuesday 19 February 2019… I was
not, until
consulting, appreciative of the relevance of this fact to the current
proceedings. My attorney requested me to take
photographs to assist
the court – these are attached and referred to below. I
apologise for filing this affidavit late in
the day, but submit that,
there can respectfully be no prejudice to the applicant by the late
filing of this affidavit since it
addresses a relevant factual issue
introduced in applicant’s reply…’
[28]
Redelinghuys deposed to the answering affidavit on 19 July 2018, and
Marcos to the replying affidavit on 14 August 2018. It
is
inconceivable that, given the detailed explanation furnished by
Redelinghuys in the answering affidavit months earlier, he was
not
aware of the relevance of the ‘
new evidence’
which
he sought to introduce at the eleventh hour. Moreover, the
photographs annexed to the ‘
Rebutting Affidavit’
are of no assistance. It is simply not possible to discern therefrom
what it is that Redelinghuys attempted to convey. He had more
than
sufficient opportunity (between August 2018 and February 2019) to
produce cogent evidence of his belated claim that the vines
had died,
but singularly failed to do so. His explanation for the late filing
of the affidavit is unacceptable and in the circumstances
it is
disregarded.
Discussion
[29]
A foreign judgment is not directly enforceable in South Africa, but
constitutes a cause of action and will be enforced by the
South
African courts provided that:
29.1 The court which pronounced the
judgment had jurisdiction to entertain the case according to the
principles recognised by South
African law with reference to the
jurisdiction of foreign courts (sometimes referred to as
‘
international jurisdiction or competence’
);
29.2 The judgment is final and
conclusive in its effect and has not become superannuated;
29.3 The recognition and enforcement
of the judgment by our courts would not be contrary to public policy;
29.4 The judgment was not obtained by
fraudulent means;
29.5 The judgment does not involve the
enforcement of a penal or revenue law of the foreign State; and
28.6 Enforcement of the judgment is
not precluded by the provisions of the Protection of Businesses Act
99 of 1978 (‘
the
Act’
).
[1]
[30]
The court will not go into the
merits of the case adjudicated upon by the foreign court and will not
attempt to review or set aside
its findings of fact or law.
[2]
[31]
In the present case the
District Court had jurisdiction to grant the judgment by virtue of
the applicant being an
incola
of that court and the respondents having consented,
[3]
and therefore submitted, to its jurisdiction.
[4]
[32]
It is further common cause that
after an initially abortive attempt to enter an appearance before the
District Court, the respondents
elected not to oppose those
proceedings because, they contend, they complied with their
obligations and therefore considered the
proceedings unnecessary and
academic. The respondents accordingly did not raise any formal
objection to the jurisdiction of the
District Court.
[5]
[33]
As previously stated, the
respondents do not dispute the finality of the judgment. It only
needs to be added that a foreign judgment
is final and conclusive for
the purposes of enforcement where it has dealt fully with the merits
of the dispute between the parties
and it cannot be set aside or in
any way varied by the court which pronounced it.
[6]
[34]
The respondents do not suggest that the judgment was obtained by
fraudulent means; that it involves the enforcement of a penal
or
revenue law of a foreign State; or that it is precluded by the
provisions of the Act.
[35]
An analysis of the answering affidavit reveals that the respondents
do not seriously oppose the
recognition
of the judgment in
South Africa but oppose the
execution
thereof on the grounds
that:
35.1 The have complied with their
obligations under the licensing agreements and hence the judgment,
rendering the current application
unnecessary; and
35.2 They object to a representative
of the applicant ‘
supervising’
the sheriff when
executing the judgment once recognised in South Africa.
[36]
This can be narrowed down further to the respondents’ real
issue, namely the requirement that they must destroy the applicant’s
proprietary plant material by cutting off all the vines
below the
graft
of any of the applicant’s proprietary cultivars in
the respondents’ possession or control.
[37]
The unexpressed acknowledgement in the respondents’ version is
that the applicant’s proprietary varietals are still
being
grown on the respondents’ farms, but not – ostensibly –
for commercial purposes.
[38]
The respondents’ removal of what they term the ‘
commercially
useful portion of the vines’
is not in compliance with the
terms of the judgment and ignores – amongst others – the
applicant’s intellectual
property rights in its proprietary
vines.
[39]
The terms of the judgment are plain. It directs that the respondents:
39.1 Return or destroy
all
of
the applicant’s plant material within their possession, custody
or control;
39.2 Cease
all use
of that
plant material; and
39.3 Destroy all such material,
including cutting off all vines below the graft of any of the
applicant’s cultivars in their
possession or control.
[40]
On the respondents’ own version, they have not complied with
the judgment. They have not ceased using the applicant’s
proprietary plant material, irrespective of whether it is directly
for their own commercial gain, and they have not destroyed all
of
that material.
[41]
As previously stated, the respondents do not suggest that the
enforcement of the judgment would be contrary to public policy
because it contains a punitive element. They pinned their colours
squarely to the mast of prior compliance with the judgment in
submitting that its enforcement would thus be contrary to public
policy. That they have not, on a proper analysis of their own
version, complied with the judgment, puts paid to their assertion
that it is ‘
contrary to public policy for judgments to be
enforced which serve no purpose’.
[42]
In any event, to the extent that the respondents complain that they
will suffer harm if the judgment is to be executed in its
plain
terms, the complaint is unspecified in extent and according to the
objective expert evidence, exaggerated. Moreover, they
should not be
permitted to complain,
ex post facto
, that the execution of
the judgment (which follows the express terms of the licensing
agreements) will cause them harm. This is
invariably the case when a
court order is executed against an unsuccessful litigant. The
respondents knew exactly what they were
signing up for when they
entered into the licensing agreements: both were represented by
Redelinghuys who professes to have more
than 30 years’
experience in farming table grapes and being well versed in
agricultural practices.
[43]
As already indicated, the respondents opposed the application on the
further ‘
limited’
ground that the inspection of
their farms to identify the applicant’s grape varietals to be
removed, should not be conducted
under the ‘
supervision’
of a representative of the applicant, but rather by an inspector from
the Department of Agriculture.
[44]
This is a red herring. There is no dispute between the parties
regarding the identification of the applicant’s proprietary
varietals. At issue is where the vines should be cut which, in terms
of the judgment, must occur below the graft. The applicant
does not
seek an order pursuant to which execution would take place under the
‘
supervision’
of one of its representatives. It
seeks an order authorising the sheriff to execute the judgment.
[45]
It is only in anticipation that the sheriff will not be able to
distinguish between the applicant’s plant varietals (to
be
removed) and other grape varietals (to be left intact), that the
applicant seeks an order authorising one of its representatives
to
accompany the sheriff to assist him or her in identifying and
pointing out its own proprietary plant material to be removed
in
accordance with the judgment. Clearly, a representative of the
applicant is best suited to identify its own varietals.
[46]
In the result the following order is made:
1. The judgment and order of the
United States District Court for the Central District of California
under case number 2:17-cv-02371-ODW(MRWx)
granted on 18 December 2017
against the respondents is hereby recognised and enforced.
2. It is declared that:
2.1 The first respondent violated
and breached the International Fruit Genetics Proprietary Variety
Planting Rights and Trademark
License Agreement it concluded with the
applicant on 12 December 2014;
2.2 The second respondent violated
and breached the International Fruit Genetics Proprietary Variety
Planting Rights and Trademark
License Agreement it concluded with the
applicant on 17 July 2014;
2.3 The acts of the respondents
constituted Events of Default under each of the Licensing Agreements;
and
2.4 The applicant validly and
properly terminated each of the Licensing Agreements.
3. The respondents are directed to
return to the applicant or destroy all of the applicant’s plant
material within their possession,
custody or control.
4. Pursuant to the terms of the
Licensing Agreements (clause 11.1 of Exhibit F thereof), the
respondents are directed to immediately:
4.1 Cease all use of IFG
proprietary plant material and IFG Confidential Information
(including, without limitation, all Trade Secrets,
Trademarks, and
labels, packages or materials containing any Trademarks) in their
possession, custody or control; and
4.2 Destroy all IFG proprietary
plant material including cutting off all vines below the graft of any
IFG Proprietary Cultivar in
the respondents’ possession or
control.
5. Capitalised words or terms used
in this order shall, unless defined herein, have the meaning assigned
to them in Exhibit A to
the Licensing Agreements, a copy of which is
attached to the applicant’s notice of motion marked ‘
A’
.
6. In the event that the
respondents, or either of them, fail or refuse to comply with the
terms of paragraph 4 above within 10
(ten) days of date of this
order, the Sheriff of this Honourable Court is authorised and
directed to immediately enter upon that
respondent’s property
or such other property as may be required and to otherwise take all
such steps as may be necessary
to give effect to and implement this
order.
7. Theodora Christina Marcos or
another representative of the applicant appointed by her is to
accompany the Sheriff and to enter
upon the relevant property in
order to assist the Sheriff in giving effect to the order in
paragraph 6 above, by identifying and
pointing out the IFG
proprietary plant material to be destroyed pursuant to this order.
8. The respondents shall be
entitled to appoint a representative to accompany the Sheriff and the
applicant’s representative.
9. The first and second
respondents, jointly and severally, shall pay the costs of this
application, including the costs of two
counsel where employed as
well as any reserved costs orders.
_______________________
J
I CLOETE
[1]
Jones v Krok
[1994] ZASCA 177
;
1995 (1) SA 677
(A) at 685B-C;
Purser
v Sales; Purser and Another v Sales and Another
[2000] ZASCA 135
;
2001 (3) SA 445
(SCA) at paras [11] – [12];
Government
of the Republic of Zimbabwe v Fick
2013 (5) SA 325
(CC) at para [38].
[2]
Jones
(
supra
)
at 685E.
[3]
This is not disputed and is therefore admitted: see
Traut
v Fiorine
[2007] 4 All SA
1317
(C) at para [35]. Moreover, the respondents’
purported contesting that Exhibit F formed part of the licensing
agreement
is bald and unsubstantiated: see
National
Director of Public Prosecutions v Zuma (Mbeki and Another
intervening)
[2009] ZASCA 1
;
2009 (2) SA
277
(SCA) at para
[26]
.
[4]
Purser
(
supra
)
at para [12];
Supercat Inc
v Two Oceans Marine CC
2001 (4) SA 27
(C) at 32A-B.
[5]
Purser
(
supra
)
at para [13].
[6]
Jones
(
supra
)
at 695D-F.