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[2009] ZAGPJHC 8
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Replication Technology Group and Others v Gallo Africa Limited In re: Gallo Africa Limited v Replication Technology Group and Others (08/36580) [2009] ZAGPJHC 8; 2009 (5) SA 531 (GSJ) (15 April 2009)
IN
THE SOUTH GAUTENG HIGH COURT
JOHANNESBURG
Case
No. 08/36580
In
the matter between:
REPLICATION
TECHNOLOGY GROUP
First
Applicant
TEPERSON,
SHIMON
Second
Applicant
AZEVEDO,
JOAQUIM TOPA
Third
Applicant
PILLAY,
KAMLESH
Fourth
Applicant
TEPERSON,
POYURS
Fifth
Applicant
SHEIN,
MERVYN
Sixth
Applicant
and
GALLO
AFRICA LIMITED
Respondent
In
re:
GALLO
AFRICA LIMITED
Applicant
and
REPLICATION
TECHNOLOGY GROUP
First
Respondent
TEPERSON,
SHIMON
Second
Respondent
AZEVEDO,
JOAQUIM TOPA
Third
Respondent
PILLAY,
KAMLESH
Fourth
Respondent
TEPERSON,
POYURS
Fifth
Respondent
SHEIN,
MERVYN
Sixth
Respondent
JUDGMENT
Malan
J
:
[1] The
respondent (Gallo) has launched contempt proceedings against the
applicants. In support of its application it wants to
use a number
of documents and certain information derived from those documents,
all of which came to Gallo’s knowledge
in consequence of the
applicants’ having disclosed them on discovery during an
arbitration which preceded the present application.
The applicants
seek an interdict prohibiting Gallo from using those documents in
the contempt proceedings and from using any
information derived from
them. The applicants, in addition, seek the striking out of all such
documents and information from
the founding papers in the contempt
application. The parties have been involved in previous litigation
in different capacities.
The directors of the first applicant are
the second to sixth applicants. Gallo is the applicant in the
contempt application
and
the applicants are the respondents.
Gallo
is
the claimant in the arbitration and the first applicant the
defendant.
[2] On
5 April 2002 the first applicant and Gallo concluded an agreement of
sale in terms whereof Gallo
acquired
the first applicant’s shareholding in CDT, a company.
Pursuant to the sale CDT became a wholly owned subsidiary
of Gallo.
Subsequently, a dispute developed between the parties regarding a
restraint of trade provision in the sale agreement
that led to an
application in the High Court in which Gallo was the applicant and
first applicant in this application, Shimon
Henry Teperson and Next
Video (Pty) Ltd were the respondents. Gallo relies on three court
orders in the contempt application,
all of which emanate from these
proceedings. The court orders were granted on 6 November 2007, 4
December 2007 and 20 February
2008 respectively. During August 2007
the first applicant launched proceedings against Gallo before the
Competition Tribunal
of South Africa. Those proceedings are not
directly relevant in this application. During July 2008 Gallo
launched the arbitration
proceedings against the first applicant
pursuant
to clause 12 of the sale agreement. It is in the course of discovery
in this arbitration that Gallo obtained the documents
relied upon in
the contempt application.
[3] It
is common cause between the parties that the issues raised in the
strike out application are essentially points of law.
The central
issue is whether Gallo
is
entitled to use the arbitration documents in the contempt
application. Gallo contends:
1
‘
3.3.2 There is no
statutory rule or common law in South Africa which supports the
respondents’ contention that documents
disclosed pursuant to
discovery in litigation be used only in the proceedings in which
those documents were discovered.’
[4] The
contempt application was launched, its foundation being solely
information derived from documentation obtained by Gallo
from
the first applicant through the discovery process in the arbitration
proceedings.
2
The arbitration documents are essential for Gallo
to
prove a case of contempt against the first applicant
.
Without
that evidence, the contempt application may well fail.
3
[5] Discovery
is a procedure whereby a party to an action may ascertain what
documents and tape recordings relating to the matter
in issue is in
the possession of the opponent. A litigant is entitled to have
disclosed to him the items discovered and to inspect
and make copies
of them.
4
It was stated in
Rellams
(Pty) Ltd v James Brown and Hamer Ltd
5
that
‘[g]reat weight … is given to these affidavits and they
should not be drawn in so loose a manner as to leave
any avenue of
escape.’ In
Van
Vuuren v Agricura Laboratoria (Edms) Bpk
6
the
court remarked that ‘[b]lootleggingsverklarings is belangrike
dokumente en die voorlegger moet bewustelik die nodige
inligting
verstrek welwetende dat hy met ‘n plegtige verlyding van ‘n
belangrike document te make het wanneer die
eedsverklaring gedoen
word.’ Moreover, in
Ferreira
v Endley
7
the
following was stated: ‘Discovery affidavits are very important
documents in any trial and the party requesting discovery
is
entitled in terms of the Rules to have a full and complete discovery
on oath.’ South African law has often followed
English law in
matters concerning discovery. In
Lenz
Township Co (Pty) Ltd v Munnick and Others
,
8
for example, it was stated:
‘
In evolving
principles of privilege and freedom from discovery or production,
our Courts have over the years with advantage been
constrained to
adopt principles laid down in English decisions on the question.’
[6] The
applicants rely primarily on
Crown
Cork & Seal Co Inc and Another v Rheem South Africa (Pty) Ltd
and Others
contending that Schutz AJ accepted the English law notion of an
implied undertaking by a litigant to whom discovery is made not
to
use the documents disclosed in other proceedings or for an ulterior
purpose. It follows, they contend, that a similar rule
also obtains
in arbitration proceedings. Schutz AJ remarked:
9
‘
The facts in
Riddick
v Thames Board Mills Ltd
(1977) 3 All ER 677
(CA) do not require mention. However, this case
also mentions the ‘balancing act’ which must be
performed between
competing public interests (
per
Lord
DENNING MR at 687D - F). After holding that documents obtained by
means of discovery should not be allowed to be used for
any ulterior
or alien purpose, such as bringing a libel action, Lord DENNING
pointed out that were the law otherwise an order
for discovery would
be counter productive:
“
In order to
encourage openness and fairness, the public interest requires that
documents disclosed on discovery are not to be
made use of except
for the purpose of the action in which they are disclosed.”
(At 687 i f.)
I agree with that
statement.’
[7]
Crown
Cork
dealt with a court’s discretion to impose appropriate limits
on the inspection of confidential documents during discovery,
and
the competing interests of litigants and public policy:
10
‘All that is in issue is whether there should be some measure
of control exercised over inspecting and copying. Confidentially
is
the only ground of objection. The documents are admittedly relevant
and no question of privilege arises.’ The court
recognised
the inherent importance of the discovery process as one of the
cornerstones of litigation and emphasized the importance
and role of
discovery.
11
It said:
12
‘
It will be seen
at once that two principles are in conflict. The one relied upon by
the second plaintiff is that it has property
in confidential
documents, confidential in the sense that they are not the subjects
of public knowledge and such that a reasonable
businessman might
wish to keep to himself ... and that merely because there is an
action in progress they should not be available
to a competitor for
possible misuse, but that its proprietary rights should be
protected. The other principle, relied upon by
the defendants, is
that no limits should be placed upon their procedural rights in
terms of the Rules to make full use of the
relevant documents in the
second plaintiff’s possession in order to present their
defence without being hampered at all.
It is rightly emphasised how
important the steps associated with discovery –trial step. It
is the pre-trial on the documentary
evidence.’
Schutz
AJ approved of English authority where the following was said:
13
‘The object of mutual discovery is to give each party before
trial all documentary material of the other party so that
he can
consider its effect on his own case and his opponent’s case,
and decide how to carry on his proceeding or whether
them on at all
... Another object is to enable each party to put before the Court
all relevant documentary evidence, and it may
be oral evidence
indicated by the documents ...’ He continued that,
14
‘the public interest demands that the truth be discovered’
and referred with approval to
Riddick
v Thames Board Mills Ltd
15
where Lord Denning said that ‘[t]he reason for compelling
discovery of documents in this way lies in the public interest
in
discovering the truth so that justice may be done between the
parties. That interest is to be put into the scales against
the
public interest in preserving privacy and protecting confidential
information. The balance comes down in the ordinary way
in favour of
the public interest of discovering the truth, ie in making full
discovery.’
16
Schutz AJ
17
cited
Halcon
International Inc v The Shell Transport and Trading Co and Others
18
and said:
19
‘
It is also
unnecessary to deal with
Halcon
International Inc
... save to quote the following useful summary (
per
Megaw LJ at 121):
“
But it is in
general wrong that one who is thus compelled by law to produce
documents for purposes of particular proceedings should
be in peril
of having these documents used by the other party for some purpose
other than the purpose of those particular legal
proceedings and, in
particular, that they should be made available to third parties who
may use them to the detriment of the
party who has produced them on
discovery.”’‘
[8] The
arbitrator in the arbitration between the parties has rights of
inspection of any and all the books and records of either
party to
any dispute.
20
Mr De Bruyn on behalf of the applicants submitted that any rules of
a procedural nature, whether Rules of Court or rules of
discovery in
an arbitration, must comply with the Constitution.
21
Rules of discovery constitute an inroad into an individual and a
corporation’s right to privacy in terms of s 14 of the
Constitution. It was further suggested that the judgment in
Crown
Cork
,
although predating the Constitution, accords with the protection in
s 35(5) providing that
‘[e]vidence
obtained in a manner that violates any right in the Bill of Rights
must be excluded if the admission of that
evidence would render the
trial unfair or otherwise be detrimental to the administration of
justice.’
[9] Discussing
the position in litigation in England, Paul Matthews and Hodge M
Malek
22
remark:
‘
The courts have
long since recognised that any party on whom a list of documents is
served or to whom documents are produced on
discovery or pursuant to
an order of court impliedly undertakes to the court that he will not
use them or any information derived
from them for a collateral or
ulterior purpose, without the leave of the court or consent of the
party providing such discovery.
This is part of the wider principle
that “…private information obtained under compulsory
powers cannot be used
for purposes other than those for which the
powers were conferred.”’
The
rationale for the imposition of the implied undertaking is the
protection of privacy:
23
‘Discovery is an invasion of the right of the individual to
keep his own documents to himself. It is a matter of public
interest to safeguard that right. The purpose of the undertaking
has been to protect, so far as is consistent with the proper
conduct
of the action, the confidentiality of a party’s documents. It
is in general wrong that one who is compelled by
law to produce
documents for the purpose of particular proceedings should be in
peril of having those documents used by the other
party for some
purpose other than the purpose of the particular legal proceedings
...’ However, it is also suggested that
the implied
undertaking is owed not only to the court but also to the party
providing discovery since the latter is entitled
to release his
opponent from this undertaking by consenting to a collateral use. A
further basis for the rule is the promotion
of full discovery. The
interests of the proper administration of justice require that there
should be no disincentive to full
and frank discovery.
24
The learned authors continue:
25
‘
Usually, if not
invariably, the use of documents disclosed in one action for the
purposes of another action will be a collateral
or ulterior purpose,
even where the parties to both actions are identical and where the
causes of action are identical. If a
party begins an action based
upon documents disclosed in other proceedings, the action is liable
to be struck out as an abuse
of the process of the Court.’
[10] An
exception would occur where documents disclosed in one action are
used in separate proceedings, the sole purpose of the
separate
proceedings being the furtherance of the party’s case in the
original action.
26
Proceedings for contempt of court in breaching an order or an
undertaking are not ‘collateral’ to the action in
which
they are launched.
27
In
Dadourian
Group International Inc v Simms
28
it was remarked:
’
12. To clear one
point out of the way at the start, the use by DGI of these
transcripts of cross-examination would not involve
any departure
from the undertaking every litigant gives not to use documents
obtained in one set of proceedings for the purposes
of some other
proceedings or otherwise for a collateral purpose. In
Crest
Homes PLC v Marks
[1987]
AC 829
, the House of Lords confirmed that the proper policing and
enforcement of observance of orders made in an action is an integral
part of the action, just like any other step taken by the claimant
in the proper prosecution of his claim. Accordingly proceedings
for
contempt of court are not collateral to the action in which they
were launched. It follows that DGI did not need a release
from its
undertaking not to use documents obtained in the action for a
collateral purpose. A release from this undertaking may
require
special circumstances: see per Lord Oliver in
Crest
Homes plc v Marks
at
page 860. The reason why DGI needed the permission of the court was
that, as a term of the court’s orders for cross-examination
of
Mr and Mrs Dadourian, DGI gave an undertaking to the court that it
would not use the transcripts of evidence in any way without
the
permission of the court.’
In
his speech to the House of Lords Lord Oliver of Aylmerton in
Crest
Homes plc v Marks and others
29
said:
‘
The purpose of an
Anton
Piller
order is, primarily, the preservation of evidence which might
otherwise be removed, destroyed or concealed but it operates, of
course, also as an order for discovery in advance of pleadings. It
is clearly established and has recently been affirmed in this
House
that a solicitor who, in the course of discovery in an action,
obtains possession of copies of documents belonging to his
client’s
adversary gives an implied undertaking to the court not to use that
material nor to allow it to be used for any
purpose other than the
proper conduct of that action on behalf of his client ... It must
not be used for any “collateral
or ulterior“ purpose ...
Thus, for instance, to use a document obtained on discovery in one
action as the foundation for
a claim in a different and wholly
unrelated proceeding would be a clear breach of the implied
undertaking ... It has recently
been held ... and this must ...
clearly be right – that the implied undertaking applies not
merely to the documents discovered
themselves but also to
information derived from those documents whether it be embodied in a
copy or stored in the mind. But the
implied undertaking is one which
is given to the court ordering discovery and it is clear and is not
disputed by the appellants
that it can, in appropriate
circumstances, be released or modified by the court.’
His
Lordship continued:
30
‘
It has been
submitted that proceedings for contempt of court are always to be
regarded, for the purpose of the implied undertaking
on discovery,
as “collateral” to the action in which they are
launched, so that even if the 1985 order had been made
in the 1984
action it would still have been necessary to seek the leave of the
court to use the material thus discovered for
the purposes of the
motion for contempt in that action. My Lords, I find myself quite
unable to accept that submission. The proper
policing and
enforcement or observance of orders made and undertakings given to
the court in an action are, in my judgment, as
much an integral part
of the action as any other step taken by a plaintiff in the proper
prosecution of his claim. The normal
procedure where the contempt
complained of is that of a party to the action is to apply for
committal by motion in that action
as an incidental step in the
action. There is, in my judgment, nothing “collateral”
or “alien” about
enforcement of the court’s order
in the action in which discovery is obtained and I do not entertain
any doubt at all that
documents disclosed on discovery in the action
can perfectly properly be used for the purpose of taking such a step
without in
any way infringing this implied undertaking and without
the necessity of obtaining the prior leave of the court.’
[11] Canadian
courts have adopted the principle of the ‘implied undertaking’
of confidentiality followed by the English
courts so that
documentary and oral evidence disclosed during discovery can be used
only for the purposes of the litigation in
which it was obtained,
unless leave of the court is obtained.
31
The principle was affirmed in
Juman
v Douchette
.
32
The appellant in this matter was a childcare worker who provided
such services at her home. A civil action based on negligence
was
instituted against her after a child in her care suffered a seizure
and later a brain injury. The police also investigated
the matter.
Prior to discovery the appellant moved to prevent the police from
accessing the discovery. The Supreme Court held
that both the
documentary and oral information obtained on discovery, including
information thought by one of the parties to
disclose criminal
conduct, were subject to the undertaking. Binnie J formulated the
rule that
33
‘
both documentary
and oral information obtained on discovery, including information
thought by one of the parties to disclose some
form of criminal
conduct, is subject to the implied undertaking. It is not to be used
by the other parties except for the purpose
of that litigation,
unless and until the scope of the undertaking is varied by a court
order or other judicial order or a situation
of immediate and
serious danger emerges.’
He
said that
34
‘[t]he root of the implied undertaking is the statutory
compulsion to participate fully in pre-trial oral and documentary
discovery. If the opposing party seeks information that is relevant
and is not protected by privilege, it must be disclosed even
if it
tends to self-incrimination.’ He found that there were good
reasons to support the implied or, as he called it, ‘a
court-imposed’, undertaking:
’
[24] In the first
place, pre-trial discovery is an invasion of a private right to be
left alone with your thoughts and papers,
however embarrassing,
defamatory or scandalous. At least one side in every lawsuit is a
reluctant participant. Yet a proper pre-trial
discovery is essential
to prevent surprise or “litigation by ambush”, to
encourage settlement once the facts are
known, and to narrow issues
even where settlement proves unachievable...
[25] The public interest
in getting at the truth in a civil action outweighs the examinee’s
privacy interest, but the latter
is nevertheless entitled to a
measure of protection. The answers and documents are compelled by
statute solely for the purpose
of the civil action and the law thus
requires that the invasion of privacy should generally be limited to
the level of disclosure
necessary to satisfy that purpose and that
purpose alone. Although the present case involves the issue of
self-incrimination
of the appellant, that element is not a necessary
requirement for protection. Indeed, the disclosed information need
not even
satisfy the legal requirements of confidentiality ... The
general idea, metaphorically speaking, is that whatever is disclosed
in the discovery room stays in the discovery room unless eventually
revealed in the courtroom or disclosed by judicial order.
[26] There is a second
rationale supporting the existence of an implied undertaking. A
litigant who has some assurance that the
documents and answers will
not be used for a purpose collateral or ulterior to the proceedings
in which they are demanded will
be encouraged to provide a more
complete and candid discovery. This is of particular interest in an
era where documentary production
is of a magnitude (“litigation
by avalanche”) as often to preclude careful pre-screening by
the individuals or corporations
making production.
[27] For good reasons,
therefore, the law imposes on the parties to civil litigation an
undertaking to the court not to use the
documents or answers for any
purpose other than securing justice in the civil proceedings in
which the answers were compelled
(whether or not such documents or
answers were in their origin confidential or incriminatory in
nature) ...’
[12] In
arbitration proceedings the principle has developed in England that
there is an implied obligation
35
on both parties not to disclose or use for any purpose any documents
prepared for and used in an arbitration or disclosed or
produced in
the course of the arbitration. Matthews and Malek
36
remark that
‘
a practice has
grown up which is analogous to the implied undertaking on discovery.
Arising out of the fact that arbitrations
are intended to be private
and confidential, the principle has developed that there is an
implied obligation on both parties
not to disclose or use for any
other purpose any documents prepared for and used in the
arbitration, or disclosed or produced
in the course of the
arbitration, or transcripts or notes of the evidence in the
arbitration or the award, and indeed not to
disclose in any other
way what evidence has been given by any witness in the arbitration.’
[13] In
English law the limits of the obligation of confidentiality are in
the process of development but four instances may be
stated where
disclosure is permissible:
37
First, where there is express or implied consent; second, where
there is an order or leave of the court; third, where it is
reasonably necessary for the protection of the legitimate interests
of an arbitrating party; and, fourth, where the interests
of justice
require disclosure, and perhaps also where the public interest so
requires.
[14] This general approach in England
to discovery in arbitration proceedings has not been followed in
Australia. In
Esso
Australia
Resources
Ltd v Plowman
38
Mason CJ
distinguished
between the private nature of arbitrations and confidentiality
holding that, while arbitrations are private, the
evidence disclosed
in arbitration proceedings is not confidential.
39
.
The court reasoned
40
that no obligation of confidence attaches to witnesses who appear in
arbitration hearings who are at liberty to tell others what
they
know of the proceedings. Furthermore, arbitration orders and, indeed
arbitration proceedings often come before the courts,
for example,
by way of review; in applications to make an award an order of
court; or by way of an application to recuse or remove
the
arbitrator; or through the determination of a preliminary point of
law, all of which necessarily results in the publication
of the
arbitration proceedings. Moreover, there are often circumstances in
which parties are obliged by statute to disclose matters
arising out
of the arbitration (for example, for insurance purposes). Parties
wishing to ensure confidentiality of the arbitration
proceedings
must therefore specifically contract to that end.
41
.
Mason CJ
said:
42
‘
33. An obligation
not to disclose may arise from an express contractual provision. If
the parties wished to secure the confidentiality
of the materials
prepared for or used in the arbitration and of the transcripts and
notes of evidence given, they could insert
a provision to that
effect in their arbitration agreement. Importantly, such a provision
would bind the parties and the arbitrator,
but not others.
Witnesses, for example, would be under no obligation of
confidentiality.
34. Absent such a
provision, it is difficult to resist the conclusion that,
historically, an agreement to arbitrate gave rise
to an arbitration
which was private in the sense that strangers were not entitled to
attend the hearing. Privacy in that sense
went some distance in
bringing about confidentiality because strangers were not in a
position to publish the proceedings or any
part of them. That
confidentiality, though it was not grounded initially in any legal
right or obligation, was a consequential
benefit or advantage
attaching to arbitration which made it an attractive mode of dispute
resolution. There is, accordingly,
a case for saying that, in the
course of evolution, the private arbitration has advanced to the
stage where confidentiality has
become one of its essential
attributes so that confidentiality is a characteristic or quality
that inheres in arbitration.
35. Despite the view
taken in Dolling-Baker and subsequently by Colman J in Hassneh
Insurance, I do not consider that, in Australia,
having regard to
the various matters to which I have referred, we are justified in
concluding that confidentiality is an essential
attribute of a
private arbitration imposing an obligation on each party not to
disclose the proceedings or documents and information
provided in
and for the purpose of the arbitration.
36. The appellant’s
argument was designed to establish that an agreement to arbitrate
contains an implied term that each
party will not disclose
information provided in and for the purposes of the arbitration. The
argument was that the implication
was to be made as a matter of law
in all private agreements for arbitration unless presumably the
agreement provided otherwise.
There is a clear distinction between
implying a term in a contract as a matter of law and implying a term
in order to give business
efficacy to a contract. ...
37. It follows that the
case for an implied term must be rejected for the very reasons I
have given for rejecting the view that
confidentiality is an
essential characteristic of a private arbitration. In the context of
such an arbitration, once it is accepted
that confidentiality is not
such a characteristic, there can be no basis for implication as a
matter of necessity.’
Mason
CJ did not consider it necessary to define the exceptions to any
implied undertaking forbidding disclosure.
43
[15] There
appears to be no direct authority in Canada that the ‘implied
undertaking’ rule applies to arbitration.
44
The submission has nevertheless been made that:
45
‘
although one
could argue that arbitrations are contractual proceedings and that
it is for the parties to expressly stipulate in
their arbitration
agreement what use can be made of evidence disclosed at any stage of
an arbitration, the fundamental nature
of an arbitration is that of
a private process. Even in the absence of an express provision,
there is no compelling reason why
the protection of an implied
obligation of confidentiality should not apply to all evidence
produced in such a proceeding (even
at the hearing stage), unless
subsequently filed with a court. Since an implied undertaking in a
civil action is given to the
parties and the court is backed by the
court’s contempt power, it follows that this obligation should
not, strictly speaking,
be characterized as an implied “undertaking”
in the context of an arbitration.
A
more appropriate characterization is that of an implied obligation
of confidentiality, arising as an implied term of the arbitration
agreement
.
The different characterization (ie, not an undertaking to the
court), and the different context would also have an impact on
the
potential remedies available for breach’ [my italics].
[16] There
is no legislative basis for the privacy and confidentiality of
arbitration proceedings in South Africa.
46
An arbitration agreement may expressly provide that the proceedings
and the award are private and confidential, but it has been
submitted that ‘even in the absence of an express provision to
this effect, such a term will be implied.’
47
The term suggested seems to be a term
implied
by law as being one of the
naturalia
of the agreement to arbitrate.
48
Courts have the inherent power to develop the law by implying a
term into particular types of agreements thereby formulating
a new
rule of law. This will be done cautiously and on grounds of policy.
49
One of the policy grounds favouring the suggested rule is the
promotion of full and frank discovery but this does not mean that
the term must invariably be implied as one of the
naturalia
in all arbitration agreements.
50
Whether a
tacit
term entailing an obligation to keep confidential documents
disclosed during an arbitration can
necessarily
51
be imported into the arbitration agreement is a different question.
The considerations underlying both the suggested implied
term and
the tacit term could well overlap. However, to import a tacit term
is a factual matter to be determined by the approach
of the
’officious bystander’. The answer to the question in
this matter is not that clear or obvious,
52
- accepting the existence of such a rule in civil litigation as
Schutz AJ did by implication in
Crown
Cork
.
53
Both the agreement of
sale
54
and
s 31
of the
Arbitration Act 42 of 1965
contemplate that an award
of an arbitrator may be made an order of court. The
Arbitration Act
further
provides that a court may remove an arbitrator from office
on good cause shown.
55
Sections 20
and
21
of the
Arbitration Act contemplate
numerous
applications which the parties to an arbitration may make to court,
including in relation to points of law which may
be determined by
way of a special case presented to the court. It seems to follow
that the
Arbitration Act does
not treat arbitration proceedings as
being inherently confidential. There is nothing in the
Arbitration
Act that
suggests that arbitration proceedings are confidential.
The agreement of sale is, similarly, silent on the question. The
parties
could have agreed on a term providing for the
confidentiality of the proceedings had they wanted to. They did
not.
56
Moreover, arbitrators may be called to give evidence as to matters
which occurred during the course of the arbitration.
57
The Commercial Rules of the Arbitration Foundation of South Africa
(under which a significant proportion of arbitrations take
place
(although not this one)) deal specifically with the question of
confidentiality and provide only that the Registrar and
Secretariat,
but not the parties themselves, are bound by obligations of
confidentiality in relation to the arbitration. Even
that is
subject to the qualification ‘save as is required by law or
for the exercise of a party’s rights in a court
of law’:
Arbitrations
under the rules of AFSA are to be private, not necessarily
confidential.
58
[17] However,
I need not determine whether the English ‘implied undertaking’,
whether its source be an implied or a
tacit term of the arbitration
agreement, forms part of South African law. Even if I accept that the
English rule has been accepted
in South Africa, there are a number of
exceptions to the rule just as there are exceptions to a banker’s
obligation of secrecy.
59
Two of these are particularly relevant. First, disclosure is
permitted when, and to the extent to which, it is reasonably
necessary
for the protection of the legitimate interests of an
arbitrating party.
60
.
In the current context, the use of the arbitration documents to found
a cause of action for contempt of court against another
arbitrating
party would be ‘reasonably necessary’. Second, English
law permits disclosure of arbitration evidence and
documents where it
is in the interests of justice to do so.
61
Although it has been said that leave of the court is required before
disclosure may be made,
62
in an application for contempt of court this should not be required.
63
[18] Contempt
of court is the unlawful and intentional disobeiance of a court order
violating the dignity, repute or authority of
the court.
64
Disobedience of a civil order constitutes contempt when the breach of
the order was committed ‘deliberately and mala fide’.
65
In contempt proceedings only the existence of the order; its service
on the respondent and non-compliance with the order need to
be
established. Once these three requisites are satisfied an evidential
burden rests on the respondent to establish reasonable
doubt as to
whether or not non-compliance was wilful and mala fide. In the
absence of such evidence, all the requisites of the
offence will have
been established.
66
Contempt is not ‘an issue inter partes: it is an issue between
the court and the party who has not complied with a mandatory
order
of court.’
67
It was said that
68
’
[i]n the hands of
a private party, the application for committal for contempt is a
peculiar amalgam, for it is a civil proceeding
that invokes a
criminal sanction or its threat. And while the litigant seeking
enforcement has a manifest private interest in compliance,
the court
grants enforcement also because of the broader public interest in
obedience to its orders, since disregard sullies the
authority of the
courts and detracts from the rule of law.’
Moreover,
in contempt proceedings it would be appropriate to regard the
position of the respondent ‘as closely analogous to
that of an
accused person’ granting him or her the protection an accused
in a criminal trial is entitled to.
69
[19] The
applicants sought to introduce the merits of the contempt application
into the answering affidavit in the strike out application.
On
behalf of the applicants it was submitted that the admissibility of
the relevant evidence requires to be decided prior to the
applicants
becoming obliged to deal with it. The notice of motion contains the
alternative prayer that the applicants be directed
to deliver their
answering affidavit in the contempt application within ten days of my
order. This is an unusual request for a
litigant is normally
required to ‘plead over’ and deal with the disputed
allegations.
70
The reasons advanced for the request for an adjournment to file the
answering affidavit in the contempt application are not particularly
impressive. Nor has the delay been adequately explained. In ordinary
motion proceedings I would have refused the application for
an
adjournment. However, these are proceedings for contempt of court and
a refusal of the request would be tantamount to convicting
an accused
without a fair hearing.
[20] The
following order is made:
(a) The
application to strike out is dismissed with costs including the costs
of two counsel;
(b) The
applicants are directed to file their answering affidavit or
affidavits in the contempt application within ten days of this
order;
the Rules of Court to apply thereafter.
Malan
J
Judge
of the High Court
Counsel for applicants:
WJ De Bruyn and M Welz
Attorneys for
applicants: Tugendhaft Wapnick Banchetti
Counsel for respondent:
P Ginsburg SC and G Marriott
Attorneys for
respondent: Webber Wentzel
Date of hearing: 6 March
2009
Date of judgment: 15
April 2009
1
Para 3.3.2 Answering Affidavit and cf para 6.21.1.
2
Answering Affidavit para 6.1.
3
Answering Affidavit para 3.2.5 at 177 and para 4.4 at 180.
4
Herbstein and Van Winsen
The Civil Practice of the Supreme Court of South Africa
4ed
(1997) by the late Louis de Villiers van Winsen, Andries Charl
Cilliers and Cheryl Loots and edited by Mervyn Dendy 582. The
policy
considerations underlying discovery has been described in
Sunderland
Steamship P and I Association v Gatoil International (The Lorenzo
Halcoussi)
[1988] 1
Lloyd’s Rep 180 (QB) 184: ‘Our law ... recognizes that
proper mutual discovery in litigation and arbitration
is in the
public interest in that it promotes settlements; it reduces [the
chances of] a party being taken by surprise; and enables
the Judge
to decide the case in the light of contemporary documentary material
which is often more valuable than the oral testimony.
On the other
hand, our law recognizes that no sensible civil justice system can
be organized on the basis that time, money and
inconvenience [are]
irrelevant. Nevertheless, the scope of discovery ...is wide. It
extends to documents having only a minor
or peripheral bearing on
the issues, and to documents which may not constitute evidence but
which may fairly lead to an enquiry
relevant to the issues. But a
Court may, of course, refuse to order discovery to the extent that
the discovery is not necessary
for fairly disposing of the matter,
and to the extent that it would be oppressive to order it’
(cited by David Butler and
Eyvind Finsen
Arbitration
in South Africa Law and Practice
(1993)
143).
5
1983 (1) SA 556
(N) at 558 E. Also
Maxwell
and Another v Rosenberg & Others
1927
WLD 1
at 6.
6
1974 (2) SA 324 (NC) 327 H.
7
1966 (3) SA 618 (EC) 621 CD.
8
1959 (4) SA 567
(T) at 569 AB. See also
General
Accident Fire and Life Assurance Corporation Limited v Goldberg
1912
TPD 494
500;
Rellams (Pty)
Ltd v James Brown and Hamer Ltd
1983
(1) SA 556
(N) 563H – 564 A;
Federal
Wine and Brandy Co Ltd v Kantor
1958
(4) SA 735
(E) 744 G ff;
Crown
Cork & Seal Co Inc and Another v Rheem South Africa (Pty) Ltd
and Others
1980 (3) SA
1093 (W) 1099 AB.
9
1980 (3) SA 1093 (W) 1098 BE.
10
At 1095 EF.
11
At 1095 H.
12
At 1095 FG.
13
Church of Scientology of
California v Department of Health and Social Security
[1979]
1 WLR 723 (CA) 733 CE.
14
At 1096 AB.
15
[1977] 3 All ER 677
(CA) at 678.
16
At 687g-8a
Lord Denning added: ‘The [document] was obtained by
compulsion. Compulsion is an invasion of a private right
to keep
one’s documents to oneself. The public interest in privacy and
confidence demands that this compulsion should not
be pressed
further that the course of justice requires. The courts should,
therefore, not allow the other party, or anyone else,
to use the
documents for an ulterior or alien purpose. Otherwise, the courts
themselves would be doing injustice ... In order
to encourage
openness and fairness, the public interest requires that documents
disclosed on discovery are not to be made use
of except for the
purpose of the action in which they are disclosed. They are not to
be made a ground for comments in the newspapers,
or for bringing a
libel action, or for any other alien purpose.’
17
At 1098 E.
18
(1997) RPC 79 121.
19
At 1098 EG.
20
Clause 12.2.2 of the sale agreement.
21
Giddey NO v JC Barnard and
Partners
[2006] ZACC 13
;
2007 (2) BCLR 125
(CC) para 16.
22
Disclosure
(2007) at 451. The latter citation is from
Marcel
v Metropolitan Police Commissioner
[1992]
Ch 225
at 237 (and see
Esso
Australia Resources Ltd v Plowman
[1995]
HCA 19
;
(1995) 128 ALR 391
;
(1995) 69 ALJR 404
;
(1995) 183 CLR 10
paras 41-2). The implied undertaking was first clearly articulated
in
Alterskye v Scott
[1948]
1 All ER 469
(Ch D) 470 F ff. The
Civil
Procedure Rules 1998/3132 Part 31
(see
Sweet and Maxwell United
Kingdom Law in Force
(1998)
provide in Rule 31.22 ‘(1) A party to whom a document has been
disclosed may use the document only for the purpose
of the
proceedings in which it is disclosed, except where – (a) the
document has been read to or by the court, or referred
to, at a
hearing which has been held in public; (b) the court gives
permission; or (c) the party who disclosed the document and
the
person to whom the document belongs agree.’
23
Matthews and Malek 453.
24
Matthews and Malek 454.
25
At 459.
26
Matthews and Malek 459.
27
Matthews and Malek 459.
28
[2006] EWCA 1745.
29
[1987] 1 AC 829
(HL) 853 G ff.
30
At 860 E-H.
31
See Richard B Swan ‘The Deemed Undertaking: A Fixture of Civil
Litigation in Ontario’ 2008
The
Advocates’ Journal
16
with reference to the incorporation of the common-law rule in
Ontario Rule 30.1.01(3): ‘All parties and their counsel
are
deemed to undertake not to use evidence or information to which this
Rule applies for any purposes other than those of the
proceedings in
which the evidence was obtained.’
32
[2008] 1 SCR 157.
33
Para 4.
34
Para 20.
35
The
obligation is implied ‘as attaching as a matter of law. It
seems to me that, in holding that as a matter of principle
that the
obligation of confidentiality (whatever its precise limits) arises
as an essential corollary of the privacy of arbitration
proceedings,
the Court is propounding a term which arises “as the nature of
the contract itself implicitly requires”...
‘ (
Ali
Shipping Corporation v Shipyard Trogir
[1977]
App LR 12/19 (CA) para 33 relying on
Scally
and Others v Southern Health and Social Services Board and Another
[1992] 1 AC 294
(HL) 307 where it was said: ’A clear
distinction is drawn ... between the search for an implied term
necessary to give
business efficacy to a particular contract and the
search, based on wider considerations, for a term which the law will
imply
as a necessary incident of a definite category of contractual
relationship.’. In
Emmott
v Michael Wilson & Partners Ltd
[2008]
2 All ER 193
(CA) para 106 it was remarked that the rule ‘is
in reality a substantive rule of arbitration law reached through the
device
of an implied term’.
36
At 474. See
Dolling-Baker v
Merrett
[1991] 1 All ER
890
;
[1990] 1 WLR 1205
(CA) where at 1213 D Parker LJ said: ‘As
between parties to an arbitration, although the proceedings are
consensual and
may thus be regarded as wholly voluntary, their very
nature is such that there must ... be some implied obligation on
both parties
not to disclose or use for any other purpose any
documents prepared for and used in the arbitration, or disclosed or
produced
in the course of the arbitration, or transcripts or notes
of the evidence in the arbitration or the award, and indeed not to
disclose in any other way what evidence had been given by any
witnesses in an arbitration, save with the consent of the other
party, or pursuant to an order or leave of the Court. The
qualification is necessary, just as it is in the case of the implied
obligation of secrecy between banker and customer ... that the
obligation exists in some form appears to me to be abundantly
apparent. It is not a question of immunity or public interest. It is
an obligation of an implied obligation arising out of the
arbitration itself. When a question arises as to production of
documents or indeed discovery by list or affidavit, the Court
must
... have regard to the existence of the implied obligation, whatever
its precise limits might be. If it is satisfied that,
despite the
implied obligation, disclosure and inspection is necessary for a
fair disposal of the action, that consideration
must prevail. But in
reaching a conclusion, the court should consider, amongst other
things, whether there are other and possibly
less costly ways of
obtaining the information which is sought which do not involve any
breach of the implied undertaking.’
37
Emmott v
Michael Wilson & Partners
[2008]
2 All ER 193
(CA) para 107 at 215
hi
where it was remarked that the fact that disclosure may be made
pursuant to a court order ‘does not mean that the court
has a
general discretion to lift the obligation of confidentiality.’
See para 9 above.
38
[1995] HCA 19
;
(1995) 128 ALR 391
;
(1995) 69 ALJR 404
;
(1995) 183
CLR 10.
39
Paras 34 and 35.
40
Para 31.
41
Judgment,
par. 33 and 34.
42
[1995] HCA 19
;
(1995) 128 ALR 391
;
(1995) 69 ALJR 404
;
(1995) 183
CLR 10.
43
See para 38.
44
Richard B Swan ‘The Deemed Undertaking: A Fixture of Civil
Litigation in Ontario’ 2008
The
Advocates’ Journal
16
20 with reference to
Tanner
v Clark
(2003) 63 OR (3d)
508 (CA).
45
Swan 20.
46
David Butler and Eyvind Finsen
Arbitration
in South Africa Law and Practice
(1993)
213-4 and see Des Williams in J William Rowley QC
Arbitration World Jurisdictional Comparisons
2ed
where the following is stated in the chapter on South Africa (para
19): ‘The
Arbitration Act does
not provide for
confidentiality of arbitration proceedings. However, even if the
arbitration agreement does not expressly
provide that the
arbitration proceedings are confidential, such a term will be
implied ... A party may not disclose information
about the
arbitration to an outsider without the consent of the other party
to the arbitration, except for the purpose of court
proceedings
arising from the arbitration. The question whether information
disclosed in arbitral proceedings can be referred
to and/or relied
on in subsequent proceedings against the same parties will
therefore depend on whether the subsequent proceedings
arise from
the arbitration. In practice, a party will often be able to obtain
information disclosed in arbitration proceedings
through the
discovery and disclosure proceedings that are available in the
subsequent proceedings.’
47
Butler and
Finsen 213.
48
See above
para 12.
49
Anglo
Operations Ltd v Sandhurst Estates (Pty) Ltd
2006
(1) SA 350
(T) 374 BG;
Van
Nieuwkerk v McCrae
2007
(5) SA 21(W)
26 DJ;
Ex
parte Sapan Trading (Pty) Ltd
1995
(1) SA 218
(W) 226 J – 227 E
and
South
African Forestry Co Ltd v York Timbers Ltd
2005
(3) SA 323
(SCA) para 28 where the following was said:
‘Unlike
tacit terms which are based on the inferred intention of the
parties, implied terms are imported into contracts
by law from
without. Although a number of implied terms have evolved in the
course of development of our contract law, there
is no numerus
clausus of implied terms and the courts have the inherent power to
develop new implied terms. Our courts’
approach in deciding
whether a particular term should be implied provides an illustration
of the creative and informative function
performed by abstract
values such as good faith and fairness in our law of contract.
Indeed, our courts have recognised explicitly
that their powers of
complementing or restricting the obligations of parties to a
contract by implying terms should be exercised
in accordance with
the requirements of justice, reasonableness, fairness and good faith
... Once an implied term has been recognised,
however, it is
incorporated into all contracts, if it is of general application, or
into contracts of a specific class, unless
it is specifically
excluded by the parties ... It follows, in my view, that a term
cannot be implied merely because it is reasonable
or to promote
fairness and justice between the parties in a particular case. It
can be implied only if it is considered to be
good law in general.
The particular parties and set of facts can serve only as catalysts
in the process of legal development.’
See
the
discussion by Schalk van der Merwe and Gerhard Lubbe ‘
Bona
Fides
and Public Policy in Contract’ (1991) 1
Stellenbosch
Law Review
91
100-1.
50
Cf p
aras 7,
9 and 11 above.
51
Cf
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506
(A) 532-3;
City
of Cape Town (CMC Administration) v Bourbon-Leftley and Another NNO
2006
(3) SA 488
(SCA) paras 19-20.
52
On the
distinction between ‘implied’ and ‘tacit’
terms see Schalk van der Merwe, LF van Huyssteen, MFB
Reinecke and
GF Lubbe
Contract
General Principles
(2007)
3ed 278 ff; and cf
Hassneh
Insurance Co of Israel and Others v Steuart J Mew
[1993]
2 Lloyd’s Rep 243 (QB)
.
53
See para -7 above.
54
C
lause
12.3.3.
55
Sections
13(2)
and
13
(3).
56
Cf, by way of analogy,
Schoeman
v Constantia Insurance Co Ltd
[2003]
6 All SA 642
(SCA) ‘[23] ‘It appears that there is no
authority in the Roman-Dutch law for the implication ex lege of what
is
in essence a penal term. Nor, in my opinion, is there a
compelling social need for the adoption of such a doctrine as an
incident
of the common law. That its adoption would serve the ends
identified in the English cases is of course so but if the cost of
doing so would be that cases would arise in which great inequity
would be the consequence, that is good reason to hesitate. [24]
When
there is added to that
the
fact that insurance companies are masters of their own policies in
the sense that they are free to unilaterally devise them,
the
insured has no say in the process, and that it is a simple matter to
include an appropriate clause to protect the insurer
against
fraudulent claims by providing for forfeiture, there does not appear
to be any pressing need for the law to provide such
protection
’
(my emphasis).
57
DT Zeffertt, AP Paizes and A St Q Skeen
South
African Law of Evidence
5ed (2003) 661.
58
The AFSA Rules provide: 21.2.1 ‘The arbitration proceedings
shall be conducted in private, and a party shall be entitled
to
require the arbitrator to exclude there from any person whose
presence is not reasonably required by another party.’
21.2.2
‘Save as is required by law, or for the exercise of a party's
rights in a court of law, the Secretariat and the
Registrar shall,
unless the parties in writing notify the Secretariat otherwise,
maintain confidentiality in regard to any matter
being dealt with or
dealt with by the Foundation.’
59
See para 13 above and
Malan
on Bills of Exchange, Cheques and Promissory Notes in South African
Law
4ed
(2002) para 212 at 378 ff. In a concurring judgment in
Esso
Australia Resources Ltd v Plowman
[1995] HCA 19
;
(1995) 128 ALR 391
;
(1995) 69 ALJR 404
;
(1995) 183
CLR 10
para 6 Brennan J held that ’in an arbitration
agreement under which one party is bound to produce documents or
disclose
information to the other for the purposes of the
arbitration and in which no other provision of confidentiality is
made, a
term should be implied that the other party will keep the
documents produced and the information disclosed confidential
except
(a) where disclosure of otherwise confidential material is
under compulsion of law; (b) where there is a duty, albeit not a
legal duty, to the public to disclose; (c) where disclosure of the
material is fairly required for the protection of the party’s
legitimate interests; and (d) where disclosure is made with the
express or implied consent of the party producing the material.’
Cf, in this respect,
Tournier
v National Provincial and Union Bank of England
(1924) 1 KB 461
473 and
Hassneh
Insurance Co of Israel and Others v Steuart J Mew
[1993]
2 Lloyd’s Law Reports 243 (QB) 248-9.
60
Ali
Shipping Corporation v Shipyard Trogir
[1977]
App LR 12/19 (CA) para 36.
61
Ali
Shipping Corporation v Shipyard Trogir
[1977]
App LR 12/19 (CA) para 38.
62
Juman v Doucette
[2008] 1 SCC 157
para 6.
63
Crest
Homes PLC v Marks and Others
[1987]
1 AC 829 (HL) 860 GH.
64
Fakie v
CCII Systems (Pty) Ltd
;
[2006] ZASCA 52
;
2006 4 SA 326
(SCA) para 6.
65
Fakie
para
9.
66
Fakie
paras
22, 23 and 38.
67
Federation
of Governing Bodies of South African Schools (Gauteng) v MEC for
Education, Gauteng
2002 (1) SA 660
(T) 673 DE cited in
Fakie
para
38.
68
Fakie
para 8.
69
Fakie
para
25.
70
Gore v Amalgamated Mining
Holdings
1985 (1) SA 294
(C) 296.