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[2016] ZAGPPHC 621
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Information Kinetics CC and Others v Ungerer and Others (73914/2014) [2016] ZAGPPHC 621 (21 April 2016)
REPUBLIC
OF SOUTH AFRICA
IN THE
HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
DATE:
21/4/2016
CASE
NO: 73914/2014
(1)
REPORTABLE: NO
(2) OF
INTEREST TO OTHER JUDGES: NO
In the matter between:
INFORMATION KINETICS
CC FIRST
APPLICANT
ICT RECRUIT
CC SECOND
APPLICANT
JOSEPH
EVELEIGH THIRD
APPLICANT
LODEWIKUS JACOBUS
BOTHA FOURTH
APPLICANT
and
MONIQUE
LINGERER FIRST
RESPONDENT
ARMAND VAN DER
WALT SECOND
RESPONDENT
DEWALD VAN
HEERDEN THIRD
RESPONDENT
BLUE LABLE
RECRUITMENT FOURTH
RESPONDENT
JUDGMENT
THOBANE
AJ,
[1]
This is an application wherein the applicant seeks the following
relief in concise form;
1.1.
Interdicting and prohibiting the first to fourth respondents from
acting in breach of their employment contracts with the first
applicant;
1.2.
Interdicting and prohibiting the first to fourth respondents from
deriving any benefit from the alleged confidential information;
1.3.
Directing the first to fourth respondents to treat as confidential
all information in accordance with their contracts of employment;
1.4.
Directing the first to fourth respondents to surrender any documents
or records relating to confidential information of the
first or
second applicant;
1.5.
Directing the first to fourth respondents to furnish a certificate
confirming that all confidential information has not been
stored on
any electronic devices or systems and that copies thereof have not
been made;
1.6.
Interdicting and restraining the first to fourth respondents from
acting in accordance with paragraphs 7(a), (b) and (c), of
the notice
of motion;
1.7.
Directing the first respondent to cease to be a member of the second
applicant against payment of a nominal value of the first
respondents
member's interest in the second applicant;
1.8.
Directing first to fourth respondents to pay the costs of this
application.
[2]
It must be mentioned from the onset that the parties agreed that the
points raised
in limine
be argued together with the merits of
this application. This was of course despite it being clear that the
points
in limine
raised were dispositive of the matter. It
must further be mentioned that the applicant abandoned prayer seven
which dealt with restraint
of trade as it had become moot.
POINTS
IN LIM/NE
[3]
The respondents have raised the following points
in limine;
3.1.
That this court lacks jurisdiction to hear this application;
3.2.
That the applicants do not have
locus standi
in the current
proceedings.
[4]
Before dealing with the merits and the demerits of the point
in
limine
as well as that of the application, a brief background,
which is uncontested, is necessary;
4.1.
The first applicant appointed the first respondent as a recruitment
manager and towards that end concluded a contract of employment
on
the 19th March 2012.
4.2.
After the aforementioned contract of employment was concluded in June
2012, the second applicant was registered. The third
applicant,
fourth applicant and first respondent became members of the second
applicant. The first respondent became both a member
and an employee
of the second applicant.
4.3.
It is further common cause that there was no written agreement or
contract of employment concluded between the second applicant
and the
first respondent.
4.4.
What is further accepted as common cause is that on the 27th
September 2013 the first respondent resigned as an employee of
the
second applicant, whereupon an "exit agreement" was
concluded. The exit agreement stipulated that the first respondent
would abide by and comply with the restraint of trade provisions
thereof.
4.5.
On the 18th October 2013, the first and second applicant were
converted from close corporations to private companies. Subsequently
first, second and third respondent formed an entity of their own, the
fourth respondent.
ISSUES
IN DISPUTE
[5]
What is understood to be in dispute is the following;
5.1.
Whether the employment of the first respondent was transferred from
the first applicant to the second applicant in terms of
section 197
of the Labour Relations Act 66 of 1995;
5.2.
Whether the restraint of trade is enforceable·
5.3.Whether
there was confidential information worthy of protection.
5.4.
Whether the shares held by the first respondent may be ceded to the
applicants.
JURISDICTION
[6]
The respondents contend
in limine
that this court lacks
jurisdiction to entertain this application. The applicants' case is
that this court has jurisdiction in that
the first, second and third
respondent are employed within its area of jurisdiction and further
that the fourth respondent has
its registered address at the same
address, within the area of jurisdiction of this court. Applicants
argue that when a CIPC search
was done on the 1st January 2014, the
addresses of the respondents were as cited in the application, and
that the fact that they
subsequently changed is irrelevant.
[7]
In assessing whether this court has jurisdiction certain key
indicators must be examined, the first of which is the question
as to
where were the respondents resident or even employed at the time of
commencement of the proceedings. Coupled with the above
question is
examination of the date on which the application was launched. The
pertinent question therefore is, how is jurisdiction
founded in this
application. The application bears the court stamp of 7 October 2014
and
ex facie
the founding affidavit, it was commissioned on 6
October 2014. The CIPC report in respect of the fourth respondent
shows that the
fourth respondent was registered on 18 September 2013.
[8]
The version of the respondents is that the applicants are off the
mark on three fronts;
8.1.
Firstly, the respondents submit that they are not resident within the
area of jurisdiction of this court in that the first
and second
respondent are resident in Jeffrey's Bay, Eastern Cape and the third
respondent is residing in Cape Town, Western Cape
Province.
8.2.
Secondly, the first and second respondent are employed in Port
Elizabeth, Eastern Cape Province whereas the third respondent
is
employed in Cape Town.
8.3.
Thirdly, the fourth respondent has its registered address in Port
Elizabeth.
[9]
One must therefore consider the provisions of the
Superior Courts Act
10 of 2013
, in particular
section 21
which reads as follows;
"21.
(1) A Division has jurisdiction over all persons residing or being
in, and in relation to all causes arising and all offences
triable
within, its area of jurisdiction and all other matters of which it
may according to law take cognisance, and has the power-
(a)
to hear and determine appeals from all Magistrates' Courts within its
area of jurisdiction, ·
(b)
to review the proceedings of all such court in its discretion, and at
the instance of any interested person, to enquire into
and determine
any existing, future or contingent right or obligation,
notwithstanding that such person cannot claim any relief
consequential upon the determination.
(2)
A Division also has jurisdiction over any person residing or being
outside its area of jurisdiction who is joined as a party
to any
cause in relation to which such court has jurisdiction or who in
terms of a third party notice becomes a party to such a
cause, if the
said person resides or is within the area of jurisdiction of any
other Division."
[10]
It is significant to point out that in view of the above,
jurisdiction is founded on residence and on causes of action. With
regard to a corporate entity, it resides where its registered office
is and also in its principal place of business. See
(Bison
Board Limited v Braun Wood Working Machinery (Pty) Ltd
[1990] ZASCA 86
;
1991 (1) SA
482
(A); Kruger NO v Boland Bank Bpk
1991 (4) SA 107
at 112).
The
phrase 'causes arising' in the section has been interpreted not to
mean 'causes of action arising' but 'legal proceedings duly
arising',
that is proceedings arising from or originating within the area of
jurisdiction in terms of common law. In order for
the cause to be one
'arising' within the area of jurisdiction of the court, one of the
recognised jurisdictional factors of the
common law have to be
present
( Furniture
Manufacturers v MEG
Department of Education
&
Culture, Eastern
Cape
&
Others
1998 (4) SA
908
(TkD) at 930 A-CJ.
[11]
Van der Westhuizen J delivering the judgment in
Gcaba v
Minister for Safety and Security
201 (1) SA 238
(CC)
at para
75 observed that:
"Jurisdiction
is determined on the basis of the pleadings,
as
Langa CJ held in Chirwa, and not the substantive merits of the
case... In the event of the Court's jurisdiction being challenged
at
the outset (in time), the applicant's pleadings are the determining
factor. They contain the legal basis of the claim under
which the
applicant
has
chosen to
invoke the court’s competence. While the pleading
-
including in motion proceedings, not only the formal
terminology of the notice of motion, but
also
the contents of the supporting affidavits
-
must be interpreted to establish what the legal basis of the
applicant's claim is, it is not for the court to say that the facts
asserted by the applicant would also sustain another claim,
cognisable only in another court. If however the proceedings,
properly
interpreted, establish that the applicant is asserting a
claim under the LRA, one that is to be determined exclusively by the
Labour
Court, the High Court would take jurisdiction".
[12]
The applicants' pleaded case with regard to the first to the third
respondents is that jurisdiction is derived from employment
whereas
with regard to the fourth respondent that it is derived from its
registered address. It is my view that in this matter
place of
employment does not found jurisdiction and also that the registered
address of the fourth respondent, as at the date of
instituting
current proceedings, was Port Elizabeth and not Centurion.
Consequently I find that on the pleaded case this court
does not have
jurisdiction to entertain this matter.
[13]
Counsel for the respondents drew my attention to the fact that the
applicants have in their replying papers sought to rely
on the place
of signature of the agreements as founding jurisdiction. In argument
before me he asked that such reliance be struck
out. In any event, so
he argued, the agreement has been left blank where the place of
signature ought to be. It is trite that the
applicant must set out
its case in the founding papers. It is impermissible to do so in
reply. The attempt to seek to rely on the
place of signature of the
agreement as founding jurisdiction must be seen for what it is, an
attempt to change horses in midstream.
It also must fail.
LOCUS
STANDI
[14]
A party instituting legal proceedings must allege and prove that he
has the requisite
locus standi.
The onus therefore rests
squarely upon the applicant. See
Mars Incorporated v Candy
World (Pty) Ltd
[1990] ZASCA 149
;
1991 (1) SA 567
(A) AT 575H-I).
[15]
This point
in Iimine
is premised on the contention by the
respondents that a company derives its authority to participate in
litigation from directors
who must pass a resolution authorizing such
participation and also granting authorization to an individual to
sign all requisite
papers. The submission by counsel for the
respondents is that whereas resolutions are attached to the founding
papers, they are
not specific to these proceeding in that
inter
alia
they refer to an action to be instituted, while these
proceedings were already underway and also that these are motion
proceedings
and not action proceedings which the resolutions purport
to authorize. They further argue that it was open to the applicants
to
ratify proceedings that were already launched and to also ratify
the authority of the deponent to the founding affidavit. Therefore,
in their view absent proof of authority to launch these proceedings
or at the least ratification of same at the time when they
were
already underway, is fatal to the application.
[16]
According to the applicants when the first and second applicant were
converted from close corporations to companies, the first
to third
respondents were members thereof. The effect of the conversion, so
they argue, is that the juristic person that existed
before the
conversion remained the same albeit in the form of a company. They
argue that the offices, premises, duties and staff
remained exactly
the same and that out of operation of the law, there was nothing
untoward in the conversion.
[17]
In motion proceedings it is usual and desirable for the resolution of
the record of directors of a company authorising litigation
to be
annexed to and proved by the founding affidavits. See
Industries
(Pty) Ltd V Griffin
&
another
1978 (4) SA 353
(W)
at 356 E.
In this matter the first and second applicants are
juristic persons. Nowhere in the founding affidavit is it alleged
that there
has been authorization granted, by way of resolution as it
would apply to the first and the second respondents, for these
proceedings
to be instituted. The deponent to the founding affidavit,
Joseph Eveleigh, simply states the following;
"1.1.
I am
a
major male businessman and a member of both the first
and second applicants, employed as such at
(................. .).
I am the third applicant in this application.
2.2.
The contents of this affidavit fall within my personal knowledge
unless clearly otherwise indicated and are true and correct.
"
[18]
The obligation to establish the aforesaid authority only arises when
the authority to prosecute the process is challenged.
In this matter
the challenge was twofold. Firstly, that there was no resolution by
the first and second applicants authorising
these proceedings and
secondly that the third respondent lacks the authority to depose the
founding affidavit on behalf of the
first and second applicant.
[19]
In the answering affidavit the applicants annexed two resolutions
dated 4 December 2014 in terms of which a firm of attorneys
is
instructed to institute "action" in respect of breach of
contract and also authorising the third and fourth respondents
to
sign all documents to enable the attorneys to finalize the matter.
These proceedings were instituted on 7 November 2014,
ex facie
the
notice of motion. Only a month later on 5 December 2014, was a
resolution, in respect of each entity, passed authorising institution
of an action, appointing a firm of attorneys to do, and appointing
signatories to all documents to enable institution of such action.
[20]
This dicta by Watermeyer, J. in
Mall (Cape) (Pty) Ltd vs Merino
Ko-operasie Bpk,
1957 (2) SA 347
(D) at 351 D to 352 B,
while
very long it is nevertheless apt;
"I
proceed now to consider the case of an artificial person, like a
company or cooperative society. In such a case there is
judicial
precedent for holding that objection may be taken if there is nothing
before the Court to show that the applicant has
duly authorised the
institution of notice of motion proceedings (see for example in
Royal
Worcester Corset Co v Kesleris Stores,
1927 CPD 143
; Langeberg
Ko-operasie Beperk v Folscher and Another,
1950 (2) SA 618
(C)).
Unlike an individual, an artificial person can only function
through its agents and it can only take decisions by the passing of
resolutions in the manner provided by its constitution. An attorney
instructed to commence notice of motion proceedings by, say,
the
secretary or general manager of a company would not necessarily know
whether the company had resolved to do so, nor whether
the necessary
formalities had been complied with in regard to the passing of the
resolution. It seems to me, therefore, that in
the case of an
artificial person there is more room for mistakes to occur and less
reason to presume that it is properly before
the Court or that
proceedings which purport to be brought in its name have in fact been
authorised by it.
There
is a considerable amount of authority for the proposition that, where
a company commences proceedings by way of petition,
it must appear
that the person who makes the petition on behalf of the company is
duly authorised by the company to do so (see
for example Lurie
Brothers Ltd v Arcache,
1927 NPD 139
, and the other cases mentioned
in Herbstein and van Winsen, Civil Practice of the Superior Courts in
South Africa at pp. 37, 38).
This seems to me to be
a
salutary
rule and one which should apply also to notice of motion proceedings
where the applicant is an artificial person. In such
cases some
evidence should be placed before the Court to show that the applicant
has duly resolved to institute the proceedings
and that the
proceedings are instituted at its instance. Unlike the case of an
individual, the mere signature of the notice of
motion by an attorney
and the fact that the proceedings purport to be brought in the name
of the applicant are in my view insufficient.
The best evidence that
the proceedings have been properly authorised would be provided by an
affidavit made by an official of the
company annexing a copy of the
resolution but I do not consider that that form of proof is necessary
in every case. Each case must
be considered on its own merits and the
Court must decide whether enough has been placed before it to warrant
the conclusion that
it is the applicant which
is
litigating
and not
some
unauthorised person on its behalf'.
[21]
In
Merlin Gerin (Pty) Ltd v All Current and Drief Centre (Pty)
Ltd
1994 (1) SA 659
(C) 13,
the Respondents objected to the
lack of authority of the Applicant's director who at the time of
signing the founding affidavit
had no authority to do so. The
Applicant's board of directors subsequently ratified the director's
actions. Explaining the situation,
Conradie J on page 660 FG stated
that:
"For
the enforcement of this right, the respondent has only one remedy, to
move for dismissal of the application. Moving for
dismissal
is
not itself
a
right, but
a
remedy for the right not
to be unfairly proceeded against. And applicant now has two options.
If he had no authority to begin with
he would attempt to defeat the
remedy (dismissal of his application) by obtaining authority by way
of ratification and by putting
proof of that before the court. Or he
might put better proof of pre-existing authority before the court.
Once the applicant has
done this, he will be bound by an order for
costs
against him. In this way, ratification would not harm
but benefit the respondent, and so would be unequivocal proof of
pre-existing
authority "
[22]
It is settled law that an applicant can, in circumstances where there
was no prior authorisation, obtain a resolution ratifying
steps that
would have been already taken. The applicants were unwavering in
their contention that resolutions passed were sufficient,
for
purposes of proving
locus standi.
This is despite the obvious
fact that the resolutions were taken after the proceedings had
commenced. The resolutions relied upon
do not evidence pre-existing
authority. The applicants were alerted to the disputed authority very
early in the proceedings. They
had ample time to seek ratification,
in which event the only consideration would have been consideration
of prejudice and the costs
implications of such ratification in these
proceedings. This was also highlighted by the respondents counsel
during argument. I
find that the applicants have failed to prove on a
balance that there is
locus standi,
and that the third
applicant has been authorized to act on behalf of the juristic
entities in this matter. When the these proceedings
were launched and
sequent thereto the, the case number, the court, the parties as well
as the nature of proceedings were known
to the applicants. The
resolutions therefore would have been specific. In the result the
point
in limine
is upheld.
[23]
The balance of issues relate to the merits of this matter. The
parties argued at length before me on them. The issues are contained
in paragraph 5 above. In light of the view that I take on the matter,
I do not deem it necessary to deal with them.
COSTS
[24]
Ordinarily costs follow the event. I have been asked by the
respondents, in the event I find in their favour to award costs
on a
punitive scale. They advance reasons which cover both the points
in
limine
as well as the merits of the matter. They argue that
applicants proceeded to seek an order of restraint of trade at a time
when
the restrained covenant had lapsed only to later concede that
their claim had become moot. That the applicants wanted to interdict
disclosure of information yet they failed to identify such
information as required by case law. That the applicants proceeded to
seek an incompetent order as reflected in paragraph 8 of the notice
of motion. That the applicants flip flopped and placed reliance
on
the provisions of section 163 of the Companies Act when it was in
their view not applicable in this matter. Finally that the
founding
papers contain bald allegations which are factually and legally
incorrect.
[25]
In having regard to costs requested by the applicant, I consider the
fact that an award of costs on an scale between attorney
and client
scale is done as a measure of displeasure at the conduct of
proceedings or the parties involved. At times the award
is made in
circumstances where the applicant has been guilty of dishonesty or
fraud or had vexatious, reckless and malicious or
frivolous motives
or committed a grave misconduct, either in the transaction under
scrutiny or in the conduct a case.
In
Ward v Sulzer 1973(3J SA 701 (ADJ at 706 H
the Court,
with reference to the leading case regarding attorney and client
costs is, namely
Nel v Waterberg Landbouwers Ko-operatiewe
Vereeniging
1946 AD. 597
,
stated the following:
"For
example vexatious, unscrupulous, dilatory or mendacious conduct (this
list is not exhaustive) on the part of an unsuccessful
litigant may
render it unfair for his harassed opponent to be out of pocket in the
matter of his own attorney and client costs".
[26]
The Court's discretion to order the payment of attorney and client
costs is not limited to cases of dishonest, improper or
fraudulent
conduct. It can also be justified by special circumstances and/or
considerations which justify the granting of such
an order. (See,
inter alia,
Van Dyk v Conradie 1963(2J SA
413(CJ at
418, Pienaar v Boland Bpk 1986(4J SA 102 (0) at 116(C)
Attorney
and client costs have also been awarded where the defence was
frivolous and was taken for the sole purpose of gaining time
and
where the defendant produced a plethora of unmerited defences and
where the defendant was in default and it seemed to the Court
that
the defence was dilatory and not
bona fide.
See
Suzman
Ltd v Pather
&
Sons
1957 (4J SA 690
(DJ.
In my view, there is no reason why an applicant or plaintiff
whose conduct is similar to that of the defendant as depicted above,
cannot suffer the same fate.
[27]
I consider a punitive costs order merited for the following reasons;
27.
1. Six of the eight prayers in the notice of motion deal with breach
of contract as well as information management, in whatever
form, its
use, deriving benefit therefrom, its non-disclosure, confidentiality,
delivery, duplication and storage. The seventh
prayer is about the
restraint of trade and the eighth about the members interest.
27.2.
The objections that were raised by the respondents against the
applicants are in my view elementary. The applicant in motion
proceedings must set out its claim in clear detail in the founding
papers. Where a juristic person is involved, a proper basis
must be
laid about authority and
locus standi.
Establishing a court's
jurisdiction is elementary. What is even more elementary is to
reflect and introspect whenever objections
are raised and to the
extent that our court rules allow, correct where defects are
identified.
27.3.
There are five issues that right from the onset formed streams for
argument, namely,
27.3.1.
The points
in limine.
27.3.2.
The contract of employment,
27.3.3.
The management of information,
27.3.4.
The restraint of trade and,
27.3.5.
Cessation of membership of a CC against payment of money,
27.4.
It is elementary that the first point
in limine,
that of lack
of jurisdiction, was dispositive of the matter. The second point
in
limine,
that of
locus standi
was not immediately
dispositive in that the applicants still had recourse to ratify. The
applicants were warned, very early in the
proceedings, about the
course the chose to take. Their posture during trial that
jurisdiction had been properly established when
in reality their
founding papers showed otherwise is a classical example of but one
instance where the court should show its displeasure
at a party to
proceedings before it. The same displeasure must equally be visited
upon the applicants for failing, when early in
the proceedings they
were alerted to the disputed
locus standi,
but failed to heed
such alert.
27.5.
The restraint of trade covenant had lapsed even before the
proceedings were instituted. That the applicants belatedly, but
correctly, at the eleventh hour conceded that the covenant had lapsed
does not, in my view, in the context of this matter insulate
the
applicants from the court taking a robust view, and expressing its
disapproval through an award of costs;
ORDER
[28]
In the result I make the following order;
1.
The points
in limine
are upheld,
2.
The application is dismissed
3.
The applicants are jointly and severally, directed to pay the costs
hereof, the one paying the other to be absolved.
_____________________
SA
THOBANE
ACTING
JUDGE OF THE HIGH COURT
APPEARANCES
ATTORNEYS
FOR THE APPLICANT
: TIAAN JOUBERT ATTORNEYS
COUNCIL
FOR THE APPLICANT
:ADV. T.P. KRUGER
ATTORNEYS
FOR THE RESPONDENT
: STROMBECK PIETERSE ATT.
COUNSEL
FOR THE DEFENDANTS
:ADV. K.D. WILLIAMS