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[2014] ZAGPPHC 201
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Terlouw v De Beer and Another (64989/2012) [2014] ZAGPPHC 201 (29 January 2014)
IN THE NORTH
GAUTENG HIGH COURT. PRETORIA
(REPUBLIC OF
SOUTH AFRICA)
CASE
NO: 64989/2012
DATE:
29 JANUARY 2014
In the matter
between:
I E
TERLOUW
.....................................................................................
Applicant
And
J DE
BEER
.............................................................................
First
Respondent
LABORATORY
INFRASTRUCTURE
SOLUTIONS
CC
..............................................................
Respondent
Second
JUDGMENT
JANSEN J
Nature of the
application and counter-applications:
[1] The relief
prayed for in the main application is that the first respondent, in
terms of section 36(1) of the Close Corporation
Act 69 of 1984, be
ordered to sell his 50% interest in the second respondent to the
applicant for an amount of R456 159.99, with
15.5% interest from date
of the court order. Further relief is claimed to the effect that the
applicant be authorised to sign,
on behalf of the first respondent,
an amended founding statement as envisaged in
section 15(1)
of the
Close Corporations Act 69 of 1984
, reflecting the cessation of the
first respondent's membership in the second respondent after the
purchase price has been paid
in full. In the alternative to the
relief set out above, it is prayed that the respondent be wound up
and that the first respondent
be ordered to pay the costs of the
application.
[2] The second
respondent is a close corporation in which the applicant and the
second respondent each held a 50% share.
[3] There are also
counter-applications, one by the first respondent and another by the
second respondent.
[4] The first
respondent’s counter-application against the applicant was also
based on the provisions of section 36(1) of
the Close Corporation
Act.
[5] In his answering
affidavit in the main application the first respondent indicated his
willingness to purchase the applicant’s
50% interest in the
second respondent for an amount of R534 272.08, which he believed to
be a fair and reasonable value for the
applicant’s interest.
The valuation and methodology adopted by the second respondent’s
accountant in order to ascertain
the applicant’s 50% interest
was accepted by the first respondent in his answering affidavit as
accurate, with certain adjustments.
[6] As a result of
the foregoing, the applicant transferred an amount of R572 349.96 to
herself and tendered to transfer her membership
interest in the
second respondent to the first respondent. She also immediately
instructed her attorney to pay the amount of R38
077.28, being the
difference between R572 349.36 and R534 272.08, to the first
respondent.
[7] In essence,
therefore, the main application has been settled, except as far as
the question of costs is concerned. The second
respondent’s
counsel sought costs for the main application which took the
applicant’s counsel by surprise as the main
application had
been settled and the applicant’s counsel believed that the main
application (and the first respondent’s
counter¬application)
had become moot.
[8] During March
2013, about three months after the answering affidavit had been filed
in the main application, the second respondent,
namely the close
corporation, belatedly launched a counter-application against the
applicant seeking repayment of the said amount
of R572 349.92,
alternatively an amount of R158 154.00. In addition, the second
respondent sought to enforce a restraint of trade
clause against the
applicant. (When the counter-application was launched, the first
respondent was the only member of the second
respondent, as appears
from what is set out below.)
[9] No relief was
sought against the close corporation in the main application which
had only been joined as an interested party.
[10] In the result,
the only application which was heard by the court was the second
respondent’s counter-application.
[11] About 15
minutes before the hearing, the applicant’s counsel was
informed that the second respondent was abandoning prayer
2 of its
notice of motion. Nonetheless, the second respondent still claimed
interest on the amounts claimed in its notice of motion.
[12] Prayer 2 reads
as follows: —
“The applicant
is ordered to pay the Second Respondent an amount of R572 349.00
alternatively an amount of R158154.00
(As set out below,
these amounts were subsequently amended during argument for purposes
of the interest still claimed on these amounts.)
Relevant Facts;
[13] Some of the
facts set out in the main application are also set out in what
follows, as the second respondent, in the founding
affidavit deposed
to by the first respondent in the second respondent’s
counter-application, relied on tracts of the evidence
in the first
respondent’s answering affidavit in the main application. To
understand such tracts of evidence one has to have
knowledge of the
facts set out in the founding affidavit in the main application.
[14] The applicant
and the first respondent were both employed “by companies owned
by Toga Laboratories”. The main businesses
of the companies
were the provision of medical testing and training.
[15] The applicant
was the quality and operational manager of the second respondent,
whereas the first respondent was mainly responsible
for the extension
and development of business opportunities and the implementation of
HIV/AIDS laboratories in rural areas.
[16] Whilst still in
the employ of the said companies, the applicant and the first
respondent discussed the possibility of leaving
their employment with
a view to providing similar services. As a result, the second
respondent was incorporated at the instance
of the applicant during
November 2008. The second respondent commenced doing business during
March 2010.
[17] During April
2008 the first respondent left the companies’ employ to join a
non-governmental organisation in rural northern
KwaZulu-Natal. When
the first respondent left the company the applicant took over the
first respondent’s responsibility to
implement the HIV/AIDS
laboratories in the rural areas (which included site inspections,
logistics, feasibility studies, financial
planning, the
administration of agreements, quality control and the overseeing of
projects).
[18] On 25 September
2012, the first respondent announced his resignation at the NGO to
join the second respondent on a full¬time
basis.
[19] During February
2009, the applicant similarly left the companies’ employ and
took up employment with a diagnostic company,
but continued her
active involvement with the second respondent.
The applicant’s
version in the main application:
[20] As stated,
although somewhat inelegant, but necessitated due to the haphazard
way in which the main application and the counter-applications
have
been phrased, the court deems it necessary to set out the applicant’s
and the first respondent’s respective versions.
[21] The main
application was served on the first respondent on 9 November 2012.
The answering affidavit of the first respondent,
with a
counter-application was filed on 14 December 2012. The filing of a
replying affidavit was unnecessary as the applicant and
the first
respondent settled the main application. A counter¬application by
the second respondent was belatedly filed on 20
March 2013, on a
non-urgent basis.
[22] The significant
delay before the second respondent’s counter-application was
launched is highlighted as the second respondent
already commenced
trading during 2010.
[23] During January
2010 the applicant identified a business opportunity of
'"...providing medical infrastructure in the open
market.”
1
The applicant discussed this with the first respondent and suggested
that they use the close corporation. It was agreed that the
applicant
would be involved in the day-to-day running of the close corporation,
and that the first respondent would do the technical
and marketing
side of the business. It was also agreed that the first respondent
would be gradually phased into the business, over
a period of time as
and when the second respondent could financially afford to do so due
to the first respondent’s commitments
towards the NGO in
KwaZulu-Natal.
[24] The business of
the close corporation, so the applicant alleges, would consist of the
provision of expert design and implementation
services for the
development of rapid medical infrastructure and service capacity.
This service would be offered through the design,
supply and
deployment of infrastructure, in particular laboratory and related
facilities and training in Medical ISO standards.
This would be
achieved by, inter alia, converting disused shipping containers into
medical service and research laboratories in
conjunction with other
specialist companies. All of these statements are clearly sweeping
statements lacking particularity.
[25] On 1 July 2011
(the agreement erroneously states 1 July 2010) in Pretoria, the
applicant and the first respondent, without
any legal assistance,
concluded a written association agreement. Although the parties
signed an agreement referring to a company,
they intended it to
relate to a close corporation.
[26] The close
corporation flourished and completed projects in Zambia, Haiti, Peru
and Botswana and had a pending business deal
in Senegal.
[27] From the outset
the first respondent's involvement in the close corporation was
limited to the technical and marketing side
of
the business. From
2011 the first respondent assisted with marketing.
[28] During the
latter part of 2011 the applicant and the first respondent agreed, at
the first respondent’s instance, that
he would work one day per
month for the close corporation for which he would receive a monthly
remuneration equal to his monthly
house rental. The first
respondent’s remuneration was paid as agreed, but despite this,
the first respondent failed to honour
his commitment and did not, to
date, spend a day per week attending to the business of the close
corporation.
[29] Due to various
factors the first respondent was asked to work for the close
corporation only one day per month and he could
not even keep that
commitment.
[30] Notwithstanding
a meeting to address the applicant’s frustrations, nothing was
resolved.
[31] During August
2012 things came to a head and the first respondent stated that he
wished to liquidate the second respondent,
which the applicant
refused to do. The first respondent withdrew R211 000.00, an amount
equal to his loan account from the second
respondent, without
authority from the applicant and without her knowledge.
[32] On 20 August
2012 the applicant’s attorney offered to purchase the first
respondent's 50% interest for R300 000.00. Her
offer was rejected.
The offer was increased to R456 159.99, supported by the valuation of
the second respondent’s accountant
and the second respondent’s
management statements. The first respondent now professed to be the
brainchild of the second
respondent and that he wished to become
involved in the business on a full-time basis. He also professed a
desire to buy out the
applicant.
[33] The applicant
hence avers that her relationship with the first respondent has
broken down irretrievably.
[34] The applicant
also made it clear that she would be willing to waive the provisions
of clause 7.3 of the association agreement
of the second respondent,
to which reference is made below.
The first
respondent’s version in the main application
[35] The first
respondent alleges that in 2002 he designed the first version of the
Togatainer, a self-contained HIV (Human Immunode
Deficiency Virus)
monitoring laboratory in a 12 metre shipping container. The use of
shipping containers for the creation of rapid
infrastructure,
including pathology laboratories, was not unique. The first
respondent alleges that what was unique was the use
of a shipping
container structure for molecular work. No further clarification of
this statement is given in the first respondent’s
affidavit.
The Togatainers were manufactured to standards that he had developed.
What these standards were, are not disclosed.
[36] According to
the first respondent, the applicant had only administrative, and no
design or technical skills and could also
not finalise contract
proposals or formulate cost schedules. The first respondent also
alleges that he and a certain Mr Barry Kosloff
employed by the Centre
for Infectious Diseases Research, Zambia, collaborated on designing,
manufacturing and delivering Containerised
Tuberculosis laboratories.
[37] Allegedly his
interest to become involved in the second respondent full-time was
when the second respondent commenced showing
a profit during July
2012. Prior to that, the first respondent alleges that the second
respondent could not afford to employ him
on a full-time basis and
hence he retained his full-time employment with the KwaZulu-Natal
NGO.
[38] According to
the first respondent he trained the applicant in technical detail and
design and the applicant, although she was
given the title of
managing partner, was only given the designation as a sop for
Cerberus. All final decisions vested in the first
respondent,
according to his version. Apparently the applicant's real role was to
monitor progress and report back to the first
respondent. He was
“developing the applicant's ability”.
[39] However, on the
first respondent’s version, he allowed the applicant “more
freedom” from the beginning of
2012 onwards, and, at her
instance, taught her more of “the technical aspects.”
What the “technical aspects”
were, is not explained.
This, the first respondent now believes, was not an attempt to
acquire knowledge on the part of the applicant
but to marginalise
him.
[40] The first
respondent then recounts the disintegration of his and the
applicant’s relationship, the details of which are
not relevant
save that the thrust thereof is that she allegedly made rash
decisions without the first respondent’s input.
Because his
input was ignored by the applicant he “withdrew a portion of
(his) loan amount to escalate a meeting request”.
The money, he
alleges, was invested in an interest-bearing account. Upon receiving
advice from his attorney he repaid the money
and apologised.
[41] The first
respondent called for a meeting on 19 August 2012, to settle their
differences. Acrimonious correspondence between
the applicant and the
first respondent ensued. The first respondent believed that the
applicant was seeking to take control of
the second respondent,
because she cancelled the second respondent's participation at a
conference in Malaysia on lung health.
[42] On inspection,
the first respondent found, in the second respondent’s archived
e-mails, a reference to the existence
of an entity called
Biocontainment Infrastructure Services (Pty) Ltd. The first
respondent ascertained that the applicant had reserved
the said
company name two days before he withdrew the money from the second
respondent. The second respondent’s promotional
material was
also replicated by the applicant for her new company.
[43] Both the
applicant and the first respondent attended the conference in
Malaysia where Air Filter Maintenance Services, promoted
the
applicant's new company and not the second respondent in its
brochures. The applicant further distributed brochures for the
second
respondent which only referred to her as the contact person. Air
Filter Maintenance Services then concluded an agreement
with the
applicant's new company. (Air Filter Maintenance Services is an
entity which, as a contractor, provided the requisite
air regulation
within the second respondent’s containerised laboratories.)
[44] As stated
above, the first respondent not only filed an answering affidavit but
also a counter-application. The prayers of
the first respondent’s
counter-application were overtaken by the settlement of the
membership and loan account issues relating
to the second respondent.
[45] The second
respondent’s counter-application and founding affidavit were
filed out of time and condonation for the late
filing was sought and
granted due to the fact that there was no opposition thereto. The
first respondent deposed to the affidavit
on behalf of the second
respondent in support of the counter¬application wherein the
relief, sought at the hearing of the counter-application,
in an
amended format, reads as follows: —
1. The Application
instituted by the Applicant is dismissed with costs.
2. The Applicant is
ordered to pay the costs of the First Respondent’s counter
application.
3. The Applicant is
ordered to make payment to the Second Respondent, of the following:
3.1. R38,077.28;
3.2. Interest on the
amount of R572, 349.00 at 15.5% per annum from calculated from 12
December 2012 to date of this order;
3.3. Interest on
R38,077.28 at 15.5% per annum from date of this order to date of
payment;
3.4. Costs of the
Second Respondent’s counter application.
4. The Applicant is
until 2 January 2014 interdicted and prohibited from conducting
within the Republic of South Africa any business
similar to or in
competition with the Second Respondent and in particular:
4.1. any business
that engages in the design and/or manufacturing of Containerised TB
Laboratories and/or Containerised Molecular
Laboratories.
5. The Applicant is
interdicted and prohibited from diyulging details of the Second
Respondent’s
business affairs to
any third party including details pertaining to the design, structure
and composition of the Containerised TB
Laboratories and/or
Containerised Molecular Laboratories
manufactured by the
Second Respondent
[46] The reason for
the late filing of the counter-application was because the applicant
forwarded a letter to the first respondent
(when the first
respondent’s answering affidavit in the main application was
almost ready for signature) notifying him of
the following
developments: —
• ... the sale
to the First Respondent of the Applicant’s 50% shareholding in
the Second Respondent;
• the fact that
the Applicant concluded the transfer of her total equity, as
stipulated in the valuation and management accounts
done by the
Second Respondent’s Auditor, Hugo Roodt, on 31 August 2012;
• a copy of an
amended statement (CK2) duly signed by the Applicant together with
proof of payment of an amount of R572 349.36
from the Second
Respondent’s banking account into the Applicant’s banking
account.
[47] In a letter
addressed to the applicant by the respondents’ attorneys of
record on 20 December 2012: —
• The second
respondent accepted the applicant’s resignation as a member and
employee of the respondent. The first respondent,
however, denied
that the applicant’s full obligations and responsibilities
towards the second respondent had been met;
• The first
respondent extended a counter offer for the purchase of the
applicant’s member’s interest for an amount
of R534
272.08;
• The first
respondent demanded that the applicant immediately repay the amount
of R572 349.36 into the second respondent’s
banking account;
• The first
respondent demanded that the applicant returns all property belonging
to the second respondent with specific reference
to a laptop, TV,
files and folders, promotional, informational and confidential
information and backup drives, as well as any other
equipment owned
by the second respondent;
• Requested
that the applicant confirm in writing that she would adhere to the
contents of clause 7.2 of the second respondent’s
Members’
Association Agreement and also that she would refrain from any
conduct which may be in direct competition with the
second
respondent’s business.
[48] The response by
the applicant was as follows: —
[48.1] The appl
icant: —
• ...insisted
that the value of her interest amounted to R572 349.36 and refused to
repay the first respondent any amount whatsoever;
• refused to
give any undertaking whatsoever;
• demanded that
the relevant documentation be submitted to the Companies and
Intellectual Properties Commission (CIPC).
[49] However,
thereafter, the first respondent indicated that he was willing to pay
the applicant the amount of R534 272.08 for
her membership interest
and the applicant instructed her attorney to accept the counter-offer
and instructed her attorneys to pay
the first respondent the amount
of R38 077.28, being the difference between R572 349.36 and R534
272.08. The first respondent further
undertook to take the relevant
documentation to the Companies and Intellectual Properties
Commission.
The applicant’s
alleged breach of the restraint of trade agreement:
[50] Clause 7.2 and
clause 7.3 of the shareholders agreement (which the parties used as
an association agreement for the second
respondent) contains the
following clause: —
7.2.1 The duties ...
Shareholders ... will be those of the executive officers of the
(corporation) ... and save as herein set out,
such shareholders
shall:
• • •
7.2.1.2 not, either
during the currency of this Agreement or at any time thereafter, be
entitled whether for their own benefit or
that of others, to make use
or avail themselves of or derive any information or knowledge in
relation to the business or affairs
of the Company which they shall
or may have acquired by reason of their position in or association
with the business and affairs
of the Company;
7.3 In the event of
such shareholders leaving the employ of the Company for any reason
whatsoever, and in consideration for the
benefits receive, (sic) and
having regard to the fact that the goodwill pertaining to the Company
is to a large extent based on
services rendered by shareholders and
in respect of the
know-how and
expertise contributed or to be contributed by them they shall not for
a period [of] one (1) year conduct any business
along lines similar
to or in competition with that of the Company, such restraint is to
be applicable within the Republic of South
Africa, such shareholders
acknowledging that the terms of such restraint as to the duration and
extent thereof are reasonable and
necessary for the protection of the
shares of the company and its shareholders
[51 ] The second
respondent relied, in a large part (as set out above) on the contents
of the first respondent’s answering
affidavit in the main
application.
[52] A further
argument was put forward to the effect that the applicant’s
customer base covers the entire Republic of South
Africa and areas
such as Senegal and Mozambique.
[53] It was also
alleged that the second respondent (sic) has spent many hours
perfecting the best approach to integrating equipment
of its
customers into containerised laboratories, the partitioning, exact
location(s) of the ventilation duct connection points
and the
connection flanges (to name but a few).
[54] The alleged
uniqueness of the second respondent’s products was stated to
appear from a document attached to the affidavit.
This documentation
included standard safety measures used in laboratories wherein
biohazardous material is handled, including images
of compartments
and equipment within the containerised laboratory.
[55] It is further
alleged by the second respondent that the applicant, due to her
employment by the second respondent, had acquired
an intimate
knowledge of the second respondent’s trade secrets which are
stated to be the design of the Second Respondent’s
containerised laboratories”. In this regard it should be borne
in mind that information does not become trade secrets or
confidential information by labelling it as such. The information
must be proved to be confidential or to constitute trade secrets.
[56] In terms of a
labour dispute declared by the second respondent, the applicant was
dismissed as an employee of the second respondent
on 2 January 2003.
The applicant failed to attend the disciplinary hearing and was
summarily dismissed.
[57] The first
respondent also referred to an archived e-mail of the applicant which
reads as follows: —
“Please find
enclosed the breakdown of freight costs for the Ghana project. I am
at your disposal in case more assistance
is needed
[58] The first
respondent confirmed that he knew nothing of a Ghana project.
Injury actually
committed or reasonably apprehended and no other satisfactory remedy:
[59] The applicant
refused to provide the second respondent’s attorneys with any
undertaking as requested by him, as set out
above. The first
respondent expressed the fear that the applicant will use or disclose
the second respondent’s trade secrets.
[60] In the
applicant’s answering affidavit to the counter-claim she states
that the main business of the second respondent
was the manufacturing
of movable laboratories. She states that the first respondent used
the unoriginal idea to use shipping containers
to build a laboratory.
However, she states that shipping containers are used for various
purposes, for example, housing, businesses
or storage. All such
laboratories in the shipping containers are customised to a specific
client’s needs usually by way of
a tender. The set-up of the
laboratory is dictated by the needs of a customer. This fact was
stated by the first respondent himself.
[61] The applicant
states that the airflow in the movable laboratories is done by a
contractor, Air Filter Maintenance Services
(“AFMS”). The
electrical installations are also done by electrical contractors.
[62] Furthermore,
the applicant states that the idea to use shipping containers for
laboratories is not unique, and was used in
the United States of
America many years before 2002 and by Toga Laboratories. In any
event, the Toga container was conceptualised
by the first respondent
during the cause and scope of his employment by the second
respondent.
[63] In any event,
the applicant alleges that she did most of the work after the first
respondent had left Toga Laboratories.
[64] The applicant
further states that Mr Barry Kosloff (on her version) is from the
London School of Hygiene and Tropical Medicine
and is the originator
of mobile TB laboratories. She emphasises that Mr Barry Kosloff s
motive is to advance studies in science
and medicine and that he is
not an entrepreneur. He, according to her, taught her the requisite
technical and scientific knowledge
pertaining to TB laboratories.
[65] The applicant
emphasises that the laboratories are custom manufactured to a
client’s specifications. Airflow and electrical
requirements
are in any event catered for by special contractors. She alleges that
the first respondent is simply seeking to exclude
competition and to
prohibit her from using her own personal skills and acquired
expertise over the years.
[66] The applicant
states that clause 7.3 was merely copied from a shareholders
agreement template without any thought given to
the wording by her
and the first respondent. She denies, in any event, that there is any
“protectable interest” which
justifies a restraint
agreement.
[67] As far as
technical assistance is concerned, the applicant admits that the
first respondent assisted her with electrical installations
and
technical design but that she did the cost schedules of the
quotations. Technical specifications of a laboratory are dictated
by
the client’s needs and wishes, according to both the applicant
and the second respondent.
[68] The applicant
also created all the marketing material for the second respondent.
She denies that there were any unique cost
schedules. She also states
that two manufacturers were used situated in Grasmere and Germiston.
[69] According to
the applicant, the so-called confidential information is fully
disclosed in the annex to this judgment and forms
part of the public
domain. By annexing various websites, the applicant sought to
demonstrate that many companies manufacture mobile
laboratories.
[70] The first
respondent alleges, in reply, that he developed “the concept”
of containerised laboratories before joining
Toga Laboratories.
Allegedly the second respondent developed specific templates to
advance client discussions, which are alleged
to be part of the
second respondent’s intellectual property. The second
respondent also allegedly has intellectual property
in the form of
electrical installation templates which form part of the applicant’s
(sic) intellectual property. This evidence,
tendered in reply for the
first time, is ignored for purposes of this judgment.
[71] For the most
part, the first respondent on behalf of the second respondent, denies
most of the applicant’s allegations
made in her answering
affidavit to the second counter application. However, the first
respondent makes a very important concession
in reply namely that
“(t)he use of shipping containers for laboratories is indeed
not unique”.
[72] The first
respondent’s answer to the allegation that the alleged
intellectual property held by the second respondent
belongs to Toga
Laboratories is denied on the basis that Toga Laboratories no longer
exists. The allegations made by the applicant
regarding Mr Barry
Kosloff are allegedly the applicant’s own interpretation.
[73] Furthermore,
for the first time in reply, the first respondent alleges that the
applicant retained the laptop, which belongs
to (the second
respondent) and on union no doubt she has unauthorised access to (the
second respondent’s) client lists, contracts,
templates and
design documentsGiven that this allegation is made in reply only, it
is ignored for purposes of this judgment.
Interpretation of
the evidence:
[74] The evidence
has been set out above for a reason. It has no structure whatsoever.
As can be seen, allegations are made in reply,
which should be in the
founding affidavits. So, for example, the first respondent sets out
more detail of the second respondent’s
alleged intellectual
property - namely how to develop a ventilation system which does not
leak where it connects with a containerised
laboratory, in his
replying affidavit for the very first time. This he is not entitled
to do.
[75] Furthermore,
the document delineating the alleged intellectual property of the
second respondent attached to the founding affidavit
in the second
respondent’s counter-application refers to the known concepts
of biocontainment for purposes of laboratory
biosafety and
biosafety-levels which range from BSC-1 to BSC-4. It is practically
impossible to extract from the document precisely
what the first
respondent claims to be the second respondent’s intellectual
property, as the use of shipping containers for
laboratories is not
unique, the biocontainment laboratories have to comply with
prescribed biosafety levels and the input of clients
as well as
ventilation and electrical contractors is a necessity. In any event,
the document is attached to the papers, thus, resulting
in its
publication.
[76] The court’s
question as to why a confidentiality regime was not agreed upon in
respect of the second respondent’s
alleged intellectual
property, remained unanswered during argument. There are further so
many factual disputes that it is impossible
to decide them on
affidavit evidence. Furthermore, instead of relying on supporting
affidavits, reference was made to e-mails and
documents.
[77] None of the
drafters of the affidavits demonstrates a clear understanding of the
concept of intellectual property. So-called
copyright works are
relied upon as intellectual property without any attempt to
demonstrate that there has been compliance with
the provisions of the
Copyright Act 98 of 1978
in order for the works to attract a
copyright, or to demonstrate who the holders of the ownership of the
copyright are. Simply
by way of example, it is, at times, alleged
that the second respondent (a close corporation) and not individuals
created certain
works. As far as confidential information is
concerned, it is apparently believed that a concept, which appears to
fall within
the common domain, constitutes confidential information.
At times it appears that know-how, which clearly can constitute
confidential
information (but which is not identified with any
precision) is relied upon.
[78] In any event,
it is wholly unclear how containerised laboratories, which are
admittedly not unique, and which are built in
accordance with a
client’s requirements can ever constitute a trade secret,
without further elaboration, which was not forthcoming.
Furthermore,
the first respondent, on behalf of the second respondent, admits that
he was greatly assisted by the inputs of Mr
Barry Kosloff.
[79] Furthermore it
is nowhere stated that the clients’ of the second respondent
had to sign confidentiality agreements, that
workers within the
laboratories were bound by confidentiality agreements or that the
specialist airflow and electrical contractors
used by the second
respondent, were bound by confidentiality agreements. Once this is
so, it seems as though the first respondent,
as did the second
respondent, never endeavoured to keep the precise construction of the
containerised laboratories secret. Given
this fact, the second
respondent cannot now, ex post facto, claim that the design of its
containerised laboratories constitutes
an alleged trade secret. This
point was not even raised in the main application and the first
respondent’s counter-application.
The relevant
legal principles
[80] It is trite
that a restraint of trade clause within an agreement will be
considered unreasonable and against public policy
if, after the
termination of a contractual relationship, there is not a sufficient
protectable interest which will be served by
enforcing a restraint of
trade. This principle was enunciated in Hirt & Carter (Pty) Ltd v
Mansfield and Another
2008 (3) SA 512
(D) at 520 [paragraph 36].
[81] Furthermore, it
is trite that healthy competition is encouraged in case law, as it
will lead to several competitors striving
to reach the same goal and
the public thus receiving superior products at the lowest prices. Van
Heerden and Neethling Unlawful
Competition LexisNexis 2004 (reprint)
at page 130 refer to this principle as follows: —
“The real
competition principle is therefore that the competitor who delivers
the best or fairest (most reasonable) performance,
must achieve
victory, while the one rendering the weakest (worst)) performance,
must suffer defeat
[82] This principle
complies with the basic human right set out in
section 22
of the Bill
of Rights of the Constitution of the Republic of South Africa, 1996.
Closely tied to this principle is the further
principle that a person
is entitled to use the stock of knowledge and skills that she has
obtained in the workplace.
[83] The four
questions to be asked when the enforcement of a restraint of trade is
sought were best formulated by Nienaber JA in
Basson v Chilwan and
Others
[1993] ZASCA 61
;
1993 (3) SA 742
(A) at 767. These questions are: —
[83.1 ] Is there an
interest of the one party which is deserving of protection at the
termination of the agreement?
[83.2] Is such
interest being prejudiced by the other party?
[83.3] If so, does
such interest so weigh up qualitively and quantitively against the
interest of the other party that the latter
should not be
economically inactive and unproductive?
[83.4] Is there
another facet of public policy having nothing to do with the
relationship between the parties but which requires
that the
restraint should either be maintained or rejected?
[84] In the instant
case, the evidence consists of sweeping and vague statements. It is
impossible to answer any of the four questions.
The affidavit in
support of the second respondent’s counter¬application (to
be read with the first applicant’s
answering affidavit in the
main application) neither defines the issues nor places the essential
evidence before the court as required
by our courts, in, for example,
Die Dros (Pty) Ltd & Another v Telefon Beverages CC & Others
2003 (4) SA 207
[C] at paragraph 28.
[85] The onus in
restraint of trade proceedings is on the respondent in the
counter-application (the applicant in the main application)
to show
that enforcement of a restraint of trade clause is against public
policy. This principle was correctly reiterated by Mbha
J in Experian
South Africa v Haynes
2013 (1) SA 135
(GSJ) paragraph [14]. Given the
fact that the applicant in the counter¬application denies that
there is any protectable interest
and has demonstrated that the first
respondent has failed to delineate and prove the existence of a
protectable interest in any
coherent fashion, the counter-application
is doomed to fail.
[86] Once this is
the case, no further enquiry into the enforcement of the restraint of
trade clause is called for.
[87] As far a
permanent interdict is sought to the effect that the applicant may
not convey any of the alleged confidential information
to third
parties, the answer is clear. Once the second respondent has failed
to demonstrated that it possesses any confidential
information, then
no interdict is called for. Confidential information has consistently
been defined by our courts as information
which is confidential and
useful for carrying on a business and which, if disclosed to a
competitor, could be used to gain a competitive
advantage.
[88] It is further
emphasised that the second respondent veiy belatedly brought its
counter-application, on a non-urgent basis after
the applicant had
been trading, allegedly using the second respondent’s
confidential information, for, at the very least,
more than seven
months, and in all probability for much longer, for her own business
purposes, (and not those of a second respondent).
[89] This, in
itself, is significant. No entity or person who wishes to retain the
confidentiality of information, waits until the
horse has bolted
before closing the stable door. Any springboard advantage which may
have been acquired by the applicant, would
have been exhausted by the
time the application was heard in October 2013. Given these
considerations, the counter¬application
must fail, based on the
fact that the second respondent has failed to set out its case with
sufficient particularly to enable the
court to grant an order. This
is borne out by the fact that even though the second respondent’s
counsel was requested by
the court to delineate the relief sought
with precision, the prayer (namely prayer 5 of the
counter-application quoted earlier)
is still so vague as to be
meaningless and clearly includes common domain information, for
example, that the laboratories are contained.
[90] A quotation
from the second respondent’s heads of argument demonstrates
this point trenchantly: —
“The first
respondent emphasises that the second respondent has developed a
unique product and that the applicant acquired
an intimate knowledge
of the second respondent’s trade secrets (i.e. the technical
design and construction of the second
respondent’s
containerised laboratories). ”
[91] However, given
the fact that it is impossible to ascertain what it is that the
second respondent has allegedly compiled as
a stock of confidential
information and what his precise input was, the court is in no
position to treat the “intellectual
property” of the
second respondent as its confidential information.
[92] In order to
escape the consequences of the fact that all the alleged
“confidential information” of the second respondent
appears to fall within the common domain, counsel for the second
respondent relied heavily on the fact that the onus to demonstrate,
on a balance of probabilities, that a restraint of trade agreement is
unenforceable because it is unreasonable, is borne by the
applicant
in the counter-application.
[93] Heavy emphasis
was also placed on the dictum in Reddy v Siemens Telecommunications
(Pty) Ltd
2007 (2) SA 486
(SCA) at paragraph [21] where it was
emphasised that public
policy requires the
enforcement of agreements entered into voluntarily and in the
exercise of freedom to contract.
[94] Reliance was
also, by necessity, placed on Experian v Haynes supra where it was
held that whether information is in the public
domain is irrelevant
where a party has received information within the context of a
confidential relationship, which means that
it is protectable. The
dicta of Terrapin Ltd v Business Supply Co (Hayes) Ltd
1960 RPC 128
at 130 and Van Castricun v Theunissen and Another
1993 (2) SA 726
(T)
at 731 F-14 were also quoted. The latter dictum reads as follows: —
“ ‘What
is clear from the aforesaidis that someone who saves himself the
trouble of going through the process of compilation
of the document,
even where it is compiled from information which is available to
anybody, such a person would be interdicted if
that information had
been obtained in confidence. The reason is simply that confidential
information may not be used as a springboard
for activities
detrimental to the person who made the
confidential
information available. It would remain a springboard even when all
the features have been published or can be ascertained
by actual
inspection by any member of the public. ’ ”
[95] However, it is
impossible to ascertain what the first respondent’s compilation
is which can be attributed to the second
respondent, as numerous
people assisted in making the compilation.
[96] The second
respondent has thus failed to make out a proper case.
Order
In the event, the
following order is made: —
1. No costs order is
made in respect of the main application.
2. In accordance
with the tender, the applicant is ordered to pay the second
respondent an amount of R38 077.28 (only in the event
of such payment
not having been effected).
3. Should the amount
of R38 077.28 not yet have been paid before this court order, it is
ordered that the applicant pays interest
thereon at a rate of 15.5%
per annum from date of this order to date of payment.
4. The second
respondent’s counter-application is dismissed, with costs.
MM JANSEN J
JUDGE O)F THE
HIGH COURT
ATTORNEYS FOR THE
APPLICANT ARTHUR CHANNON ATTORNEYS c/o DE JAGER ATTORNEYS
Menlo Law
Chambers 49-11th Street MENLO PARK Pretoria
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5797 Fax: (012) 346 1512 REF: LDX1406/mb/MR CHANNON
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1
The
affidavits in the main application and counter-applications are
replete with vague sentences with little or no meaning, which
makes
for difficult reading.