Rive and Another v Joubert and Others (743/2004) [2004] ZAFSHC 161 (19 August 2004)

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[2004] ZAFSHC 161
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Rive and Another v Joubert and Others (743/2004) [2004] ZAFSHC 161 (19 August 2004)

N THE HIGH
COURT OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case
No.: 743/2004
In the
matter between:
LOUIS
FRANCOIS RIVé
First Applicant
INDUSTRIAL
PUMPING SYSTEMS
Second Applicant
KLERKSDORP
BK
(CK
97/011405/23)
and
STEPHANUS
FRANCOIS JOUBERT
First Respondent
INDUSTRIAL
PUMPING SYSTEMS BK
Second Respondent
(CK
88/00998/23)
SAREL
FRANCOIS JOUBERT
Third Respondent
_____________________________________________________________________
CORAM:
RAMPAI,
J
_____________________________________________________________________
HEARD
ON:
13 MAY 2004
_____________________________________________________________________
DELIVERED
ON:
19 AUGUST 2004
_____________________________________________________________________
[1] The matter came by way of urgent proceedings. The
proceedings were initiated on 1 March 2004. The urgent application
was served
on the three respondents the next day. The matter served
before Cillié, J on Thursday 4 March 2004. By agreement
inter
partes
he granted a provisional order, fixed
formal deadlines for the filing of the answering affidavit as well as
the replying affidavit,
and then postponed the matter
sine
die
.
[2] Subsequently
the matter was enrolled for argument on Thursday 13 May 2004. Before
me appeared Adv. Marius Esterhuyse for the
applicants and Adv. L.G.F.
Putter for the respondents. The matter was ripe for argument. The
former urged me to confirm the provisional
order. The latter urged me
to discharge it. Having heard both sides of the argument, I reserved
judgment.
[3] The relief sought by the applicants is a prohibitory
interdict. It seeks to prohibit the respondents from representing to
the
world in general and to the applicants’ clients in particular
that they are the representatives of the second applicant. This
is
the one leg of the relief. The other leg thereof seeks to prohibit
the respondents from contacting any clients of the second
applicant
directly or indirectly through any intermediary in connection with
specific aspects of the second applicant’s business,
namely black
economic empowerment, invoicing payments of money due to the second
applicant, receipt of money due to the second applicant,
bank
accounts and administration of the second applicant. This then is the
gist of the provisional order.
[4] I deem it necessary to sketch the background to this
dispute. The history has three distinct eras. Before 1997 the first
respondent
was the sole member of the second respondent. The second
respondent was incorporated in 1988 and became known as Industrial
Pumping
Systems BK. The second respondent provided plastic pipes to
gold mines throughout the country. The second respondent also
provided
plastic pipes to certain platinum mines in the country. The
second respondent had its own distinctive vendor code in respect of
each mine. Here ended the first era.
[5] Nine years later, during 1997 to be precise, the
first applicant was engaged as an employee of the second respondent.
The first
respondent still remained the sole member of the second
respondent. Later on during the course of the same year, Industrial
Pumping
Systems Klerksdorp BK, in other words the second applicant,
came into existence. This close corporation was formed by the first
respondent and the first applicant. The operational business
activities of the second applicant consisted and still consist of the
supply of plastic pipes to the mining industry at large. The two
gentlemen became the sole members of the second applicant. The
equity
stakes of the first respondent and the first applicant in the second
applicant were 2:1
ratio.
After the formation of the second applicant the second respondent
became dormant. However, the second respondent remained as a
registered supplier in the books of the various mines. Therefore the
vendor code of the second respondent remained active, although
the
vendor itself was inactive. The business order sent to the second
respondent by the mines were channelled to the second applicant
who
then supplied the required goods to the mine customer concerned. The
second applicant also obtained its own identificative vendor
code in
respect of each mine. It follows from this that the second applicant
was practically doing business or trading with various
mines by using
its own vendor codes as well as the vendor codes allocated to the
second respondent.
[6] Still in 1997 the first respondent and the first
applicant extended their entrepreneurial operations. They formed two
more close
corporations. These were called Industrial Pumping Systems
Carltonville BK and Industrial Pumping Systems Projects BK. One year
later they formed Industrial Pumping Systems Plant and Machinery BK
which was incorporated in 1998. Two years later in 1999 yet
another
close corporation was formed and called Industrial Pumping Systems
Converters BK. It was also incorporated in 1999. None
of these four
enterprises feature in these proceedings significantly.
[7] The second applicant was an agent of DPI (Edms)
Beperk, the manufacturers of the plastic pipes. The latter had a
competitor called
Amiantit Pipe Systems (Edms) Beperk who tried to
take over the market stake of DPI. The impending take-over
threatened the business
of the second applicant. The first applicant
and the first respondent attempted to avert the take-over by
negotiating with Amiantit.
At that stage the first respondent sold
his equity in the second applicant to the first applicant. The two
gentlemen signed a sale
agreement on 21 November 2001. (See Annexure
“AA” to the founding affidavit on p.48 of the paginated record).
Since the conclusion
of this sale agreement, the first applicant
became the universal stakeholder of the equity in the second
applicant. The annual turn-over
of the second applicant was
R10-million. The purchase price was R1 650 000,00.
[8] On 20 August 2002, the first applicant and the first
respondent signed another agreement described as an amended sale
agreement.
(See Annexure “B” to the founding affidavit, p.57 of
the paginated record). This agreement guaranteed the rights of the
two
applicants in respect of the use of the vendor codes allocated to
the second respondent by the various mining houses in order to
ensure
the continued flow of the requisitions of business orders from mining
customers to the second applicant
via
the vendor codes of the dormant enterprise, in other words, the
second respondent. The same agreement accorded identical commercial
warranty to the third respondent, the son to the first respondent.
On the same day the first applicant, the second respondent and
the
third respondent signed a tripartite agreement described as a
co-operation agreement. (See Annexure “C” to the founding
affidavit on p.66 of the paginated record). The first respondent
signed this co-operation agreement on behalf of the second
respondent.
In terms of this agreement the first applicant and the
third respondent became the exclusive authorised users of the vendor
codes
originally used by the second respondent before it became
dormant.
[9] The third respondent’s enterprise, namely
Industrial Pumping Systems Projects BK did not independently receive
business orders
directly from the mining houses. However, there
existed a practical avenue through which all the business orders from
the various
mine customers for the installation work to be done were
sent through the vendor codes of the second applicant who in turn
channelled
them to the third respondent, Industrial Pumping Systems
Projects BK. The position was that Industrial Pumping Systems
Projects
BK, unlike the second applicant and the second respondent,
did not have identificative vendor codes of its own as a recognised
and
registered supplier of goods or provider of services in its own
right. The business of the Industrial Pumping Systems Projects BK
comprised of the erection and installation of the plastic products
chiefly supplied by the second applicant to the mining customers.

Here ended the second era.
[10] On 6 March 2003 the first respondent through his
lawyers addressed a letter (see Annexure “D” to the founding
affidavit p.72
of the record) to the first applicant informing him
that the first and the second applicants were prohibited by the
aforesaid amended
sale agreement and the multiparty co-operation
agreement from registering the second applicant as a distinct and
separate provider
with any mine, so that only one vendor code could
be used by the Forceflo Group in respect of all the mines.
[11] Three weeks later, on 1 April 2003 to be precise,
the first respondent sent out various notices to the mine houses (see
Annexures
“E1 – E5” on pp. 73-78 of the paginated record). The
notices or the letters referred to the three contracts Annexures
“AA”,
“B” and “C”, the composition of the Forceflo Group,
the relationship between the second applicant and one of the close
corporations
in the group as well as the use of one vendor code by
all the members of the so-called Forceflo Group.
[12] The first applicant convened a meeting for 7 April
2003 to discuss the apparent confusion among mine customers and
especially
the intended use of only one vendor code by all and sundry
in dealings with all the mines – such vendor codes being the one
previously
allocated to the second respondent. The aim of the first
applicant in calling the meeting was to ask the first respondent to
mind
his own business; to refrain from involvement in the business
affairs of the second applicant and to explain the apparent confusion
which was then prevailing on the mines. Apparently he was unaware of
the circular letters which the first respondent had sent out
on 1
April 2003.
[13] On 28 October 2003 Kriek & Van Wyk of Parys,
the first respondent’s lawyers sent out a circular letter to the
members of
the Forceflo Group. The letter contained certain advices
or recommendations regarding the issue of the black economic
empowerment.
The policy of the mining houses required that all the
recognised service providers doing business with the mines should
have a black
economic empowerment partner. The effect of this
requirement was that only service providers or business enterprises
with black
economic empowerment components would be considered by the
mines when business orders for the supply of goods or for the
rendering
of services had to be placed. The lawyer’s critical
advice was that the issue of black economic empowerment should only
be done
by the second respondent, in other words Industrial Pumping
Systems BK and that all the strategies pertaining to the issue be
executed
only with the consent of the second respondent with its
vendor codes. The reaction of the first respondent to this letter
was obviously
positive. He embraced the recommendations by his
lawyer.
[14] Towards the end of the year 2003, the first
applicant took legal advice from his lawyers Sher & Ovsiowitz of
Johannesburg.
Soon thereafter he received an organogram, Annexure
“J”, showing the corporate structure of the Forceflo Group as
visualised
by the first respondent. On 25 January 2004 these lawyers
addressed a letter, Annexure “K”, to the first respondent. The
lawyers
conveyed to the first respondent the complaints and
objections of the first applicant to the following specific issues:
The attempts of the first respondent to portray himself
as the
al supremo
of
the Forceflo Group, the name which the second applicant had always
been using as his trade name with the knowledge and approval
of the
first respondent.
The attempts of the first respondent to re-channel to
the second respondent’s bank account the payment earmarked by the
mines
in favour of the second applicant’s bank account.
The attempts of the first respondent to take the
administration of the second applicant over and to hand it over to
the second respondent
for exclusive control.
The deliberate breach of the restraint of trade clause
as embodied in clause 13, Annexure “AA” to the founding
affidavit.
The cease and desist letter (see Annexure “K” to
the founding affidavit on p.82 of the paginated record) demanded a
written
undertaking from the first respondent that he would refrain
from committing further acts similar to the acts complained of.
The first respondent was also warned that unless he
complied by 4 February 2004 the applicant would sue him for
appropriate relief.
To this Kriek & Van Wyk replied (see
Annexure “L”, founding affidavit on p.84 of the paginated record)
that Sher & Ovsiowitz
did not have any mandate from the first
applicant to address such a letter to their client, in other words,
the first respondent.
[15] On 10 February 2004 the first respondent advised
the first applicant (see Annexure “M”, founding affidavit on p.85
of the
paginated record) about the centralization scheme of the
Forceflo Group and ancillary matters such as the trade mark; the
centralization
of communication channels within the group; the
centralization of the separate bank accounts of the members of the
group; the transparency
concerning the issues of black economic
empowerment and the possible mergers. Three weeks later this urgent
application was launched.
This then is the undisputed factual
background.
[16] Mr Esterhuyse, counsel for the applicant, on the
one hand argued that the applicants have made out a clear case which
justified
the confirmation of the provisional order. He then
referred me to the following authorities for the various submissions
he made:
SETLOGELO v SETLOGELO
1914 on 221 ON 227;
MATTHEWS
AND OTHERS v YOUNG
1922 AD 492
on 507;
STELLENBOSCH WINE TRUST AND OTHERS v OUDE MEESTER
GROUP LTD AND OTHERS
1977 (2) SA 221
(CPD);
R
& I LABORATORIES (PTY) LTD v BEAUTY WITHOUT CRUELTY INTERNATIONAL
(SOUTH AFRICAN BRANCH)
1990 (3) SA 746
(C) on 753-754;
ELIDA
GIBBS (PTY) LTD v COLGATE PALMOLIVE (PTY) LTD
1988 (2) SA 359
(W).
[17] Mr Putter, counsel for the respondents, on the
other hand argued that the applicants had made out no case and that
there was
no provisional order for the court to confirm. He cited
the following authorities in support the various submissions he made:
WELKOM BOTTLING CO (PTY) LTD EN ‘N ANDER v
BELFAST MINERAL WATER LTD
1967 (3) SA
45
(O) at 56C-H;
Section 6 of the Companies
Act No. 61 of 1973.
PLASCON-EVANS PAINTS (PTY) LTD v VAN RIEBEECK
PAINTS (PTY) LTD
[1984] ZASCA 51
;
1984 (3) SA 623
(a)
on 634;
Prest C.B.:
Interlocutory
Intedicts
(1993) 47;
FREE STATE GOLD AREAS LTD v MERRIESPRUIT (OFS)
GOLD MINING CO LTD AND ANOTHER
1961
(2) SA 505
(W) on 524;
DE VILLIERS v SOETSANE
1975 (1) SA 360
(EC) on 602;
BEUKES v CROUS EN ‘N ANDER
1975 (4) SA 215
(NCD) on 219;
MAGNA
ALLOYS AND RESEARCH (SA) (PTY) LTD v ELLIS
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 897I-898A;
BASSON
v CHILWAN AND OTHERS
[1993] ZASCA 61
;
1993 (3) SA 742
(A) on 745I-746B;
SIBEX
ENGINEERING SERVICES (PTY) LTD v VAN WYK AND ANOTHER
1991 (2) SA 483
(T) at 502J-503C;
PETRE
v MADCO LTD t/a T-CHEM v SANDERSON KASNER AND OTHERS
1984 (3) SA 850
(W) on 859C-D;
TURNER
MORRIS (PTY) LTD v RIDDELL
1996 (4) SA
397
(ECD) at 406J-507B;
NATIONAL
CHEMSEARCH (SA) (PTY) LTD v BORROWMAN AND ANOTHER
1979 (3) SA 1092
(T) at 1117C;
NEW
UNITED YEAST DISTRIBUTORS (PTY) LTD v BROOKS AND ANOTHER
1935 WLD 75
on 81;
POOLQUIP
INDUSTRIES (PTY) LTD v GRIFFIN AND ANOTHER
1978 (4) SA 353
(W) on 360;
R.H. Christie:
Law of
Contract
4
th
ed. on 236 fn 253.
[18] On 4 March 2004 Cillié, J granted an interim
relief. The provisional order in question consisted of five legs.
The relevant
portion thereof is its second leg which reads as
follows:
“2. Die respondente tender en onderneem:
(i) om hulle nie voor te doen as verteenwoordigers van eerste of
tweede applikante nie.
(ii) om nie direk of indirek, deur middel van enige ander persoon of
entiteit, insluitende tweede respondent enige van die tweede
applikant se kliënte te kontak met betrekking tot die volgende
aspekte van tweede applikant se besigheid nie, naamlik:
bemagtiging, fakturering, betaling en ontvangs van fondse verskuldig
aan tweede applikant, bankrekenings en administrasie van tweede
applikant.”
[19] The case of the applicants was that the second
applicant was an autonomous commercial enterprise legally entitled to
make use
of the second respondent’s vendor codes and the second
respondent’s trade name Forceflo in his business dealings with the
various
mining houses. On behalf of the applicants it was contended
that the applicants’ right stemmed from the provisions of the
written
contracts as well as from the principles of our common law.
[20] The defence of the respondents was that the second
applicant was not an autonomous legal entity, but a member of a
cluster of
commercial enterprises called “The Forceflo Group” or
lately Forceflo (Pty) Ltd. The contention was that the first
respondent
was at the helm of that group of close corporations.
Moreover, so the argument developed, the applicants were legally
entitled neither
to the exclusive use of the second respondent’s
vendor codes, nor the use of the word “Forceflo” as the second
applicant’s
trade name.
[21] The applicants seek the confirmation of the above
provisional order. The relief they seek is a final interdict. The
law requires
that they should establish the requisites of the
permanent relief they seek on a balance of probabilities. Those
requisites are
that they have a clear right which is worthy of legal
protection; that the respondents have actually injured such a right
or that
the applicants have a reasonable fear that the respondents
are poised to harm such a right; and that the applicants have no
other
alternative, ordinary and effective remedy (
vide
SETLOGELO v SETLOGELO
1914 AD on 227
and
WELKOM
BOTTLING CO v BELFAST MINERAL WATER LTD
1967
(3) SA 45
(O) at 56C-H.
[22] The first leg of the enquiry is whether the
applicants have shown that they have a clear right. It is a matter
of available
evidence whether the alleged right exists or not. It is
a matter of substantive law whether a clear right exists or not (
vide
C.B. Prest:
Interlocutory Interdicts
(1993) p.47).
In order to prove a clear right, it is incumbent upon an
applicant to show on a balance of probability what right he has and
wishes
the law to protect (
vide
NIENABER v STUCKEY
1946 AD 1049
on 1053 – 1054
per Greenberg,
JA;
FREE STATE GOLD AREAS LTD v
MERRIESPRUIT (OFS) GOLD MINING CO LTD
1961 (2) SA 505
(W) at 524C-D
per Williamson,
J;
WELKOM BOTTLING CO (PTY) LTD v BELFAST
MINERAL WATER (OFS) (PTY) LTD
(
supra
)
at
56F-C
per Erasmus,
J;
DE VILLIERS v SOETSANE
1975 (1) SA 360
(ECD) at 362B-C
per Eksteen,
J and
BEUKES v CROUS EN ‘N ANDER
1975 (4) SA 215
(NCD) at 219A-B
per Van den
Heever, J.
The dispute in these proceedings revolved around three
points, namely the vendor code, the trade name and the group
identity. Each
of these issues has a direct impact on the disputed
right I am called upon to evaluate.
[23] In the first place I shall deal with the issue of
the vendor codes. This issue is the heart of the dispute. A vendor
code,
as I understood it, was not merely a sort of a supplier’s
unique business identity code allocated to a supplier by a particular
gold mine or a platinum mine and used at all times to identify such a
supplier in all the business dealings between the two. It
was much
more than that. It was an indispensable method of doing business
with a mine. Broadly speaking, the method and the procedure
entailed
the following aspects, among others:
That the provider must be registered with a particular
mine;
That the provider must be allocated a unique business
code for identificative purpose;
That the provider must comply with certain peculiar
requirements of the mine concerned;
That the provider must promote transformation by having
a black economic empowerment partner;
That the mine must order specific goods from the
provider with a valid vendor code only;
That the mine concerned must use the vendor code in
settling the bills of the provider.
It should be readily appreciated from all these general
features that a vendor code was more than just a mere reference
number. It
was much more than that. The bottom line was that no
supplier could do any business with any mine unless such a provider
was the
holder of a vendor code.
[24] The parties are agreed that the second respondent
who was formed in 1988 was a registered supplier with vendor codes.
Likewise,
the parties are also agreed that when the second applicant
was formed in 1997 it was also registered with the various mines
which
recognised the second applicant as a vendor. The mines
allocated separate vendor codes to the second applicant. Initially
the second
respondent alone had the vendor codes. Later the second
applicant obtained the vendor codes of its own. When the second
respondent
became dormant after the formation of the second
applicant, its vendor codes were not disused. Notwithstanding the
fact that it
was dormant, the second respondent was not deregistered.
The mines carried on placing the business orders in the vendor codes
of
the inactive second respondent. But at times the orders were
placed in the vendor codes of the active second applicant. However,
the second applicant always provided the required goods to the mines
whichever the vendor codes the mine had used to place the order.

For all intents and practical purposes the second respondent was
merely the bearer of the vendor codes through which business was
channelled to the second applicant. The first applicant and the
first respondent were the only members of the second applicant.
[25] The aforesaid entrepreneurial relationship between
the two gentlemen continued for approximately four years. It came to
an end
on 21 November 2001 when the first respondent sold his entire
equity in the second applicant to the first applicant. At the time
Amiantit Pipe Systems (Edms) Bpk was still contemplating the
take-over of DPI Plastic (Edms) Bpk. The lucrative business of the
second
applicant was seriously threatened by the take-over. The
important clauses of the original sale agreement relating to the
vendor
codes were:
That the second applicant would be entitled to use the
vendor codes of the second respondent in connection with the
delivery and
distribution of its products to the various mines;
(
vide
clause 15).
That the first respondent would have no further
interests whatsoever in the business affairs of the second
applicant; (
vide
clause 15).
That the second applicant and the third respondent
would be entitled to use the vendor codes of the second respondent
in their dealings
with the various mines.
[26] It follows from these contractual stipulations that
the second applicant acquired the right to use the vendor codes of
the second
respondent. The first respondent reaffirmed the right of
the applicants in the subsequent sale agreement. He gave the
unconditional
and exclusive right to the first applicant (and the
third respondent) to use the vendor codes of the second respondent in
order to
trade in the name of the second applicant (
vide
clause 1 of the amended sale agreement, Annexure “B” dated 20
August 2002). This clause expressly precluded the first respondent
from using the vendor codes of the second respondent without the
written consent of the first applicant (and the third respondent).

It is not the first respondent’s case (or the second respondent)
that such written consent has ever been sought and granted to
the
first respondent. The third respondent had to pay R75 000,00 to the
first respondent for the right to use the vendor codes of
the second
respondent (
vide
clause 2). Implicit in this contractual stipulation was the
inference that the first applicant acquired such a right by virtue of
the purchase price he paid to the first respondent in terms of the
original sale agreement, Annexure “AA”, dated 21 November
2001.
[27] Mr Putter submitted that the vendor code was not
amenable to the real right of ownership and that it was merely a
contractual
relationship between the supplier and the mine house. The
submission is academic. The fact of the matter is that by signing
the
original sale agreement and the subsequent sale agreement, as he
did, the first respondent substantially diminished or curtailed,
if
not virtually extinguished or alienated, his right in respect of the
vendor codes we are here talking about. The converse is also
true.
By signing such an agreement, the first applicant pragmatically
fortified the right he already had since the formation of
the second
applicant to use the vendor codes belonging to the second respondent.
The first applicant practically became the real
and
de
facto
owner or co-owner of such vendor codes.
In my view the sale of the first respondent’s interest in the
second applicant was inclusive
and not exclusive of the vendor codes
belonging to the second respondent, which vendor codes the second
applicant had been economically
exploiting for almost a four year
period immediately preceding the original sale agreement. There was
no reservation or exclusion
of such commercial interest as was
embodied in the vendor codes from the whole transaction. The first
applicant’s right was only
limited by the right of the third
respondent who had an equal interest in respect of such vendor codes
in terms of the amended sale
agreement. At best for the first
respondent, it may be argued that he still has some potential or
remote prospect of been allowed
to use such vendor codes. To me the
right of the applicants to the vendor codes is perfectly clear.
Therefore I would find in favour
of the applicants on this score.
[28] In the second place I shall proceed to deal with
the issue of the trade name. The marketing name Forceflo was used by
the various
Industrial Pumping Systems close corporations among them
the second respondent and the second applicant. The group of such
close
corporations consisted of the following:
Industrial Pumping Systems BK 1988.
Industrial
Pumping Systems Klerksdorp BK 1997.
Industrial
Pumping Systems Projects BK 1997.
Industrial
Pumping Systems Plant & Machinery 1998.
Industrial
Pumping Systems Carltonville BK 1998.
Industrial
Pumping Systems Converters BK 1999.
As I have already pointed out earlier in this judgment,
the second respondent became dormant since the formation of the
second applicant
in 1997 and has remained dormant until early in
2003. At the time the original sale agreement was signed, the second
applicant was
using the trade name. Prior to the signing of the
original sale agreement the second applicant had already been using
the trade
name. Subsequent to the signing of the original sale
agreement, the second applicant continued using the same trade name,
Forceflo.
The second applicant continues doing so to this day. When
the second respondent became dormant, he ceased using the trade name
or
marketing name. But the second applicant continued using the
marketing name as its trade name at all times as I have just
indicated.
All this was done with the knowledge, consent and the
blessing of the first and the second respondents. For more than half
a decade
the second applicant carried the same marketing flag like
all the Industrial Pumping Systems group of close corporations.
Three
agreements were signed, but none of them precluded the
applicants from using the group trade name, Forceflo.
[29] In his founding affidavit the first applicant
alleged that this particular trade name was transferred from the
second respondent
to the second applicant. In his answering
affidavit the first respondent denied that the trade name was ever
transferred to the
second applicant and averred that the trade name
was used by the different entities, in other words, the various
close corporations
with IPS hallmark. The first applicant’s
allegation is not backed up by any specific contractual stipulation,
but the first respondent’s
allegation is supported by the
documentary material on record. Be that as it may, the original sale
agreement divested the first
respondent of all the business or
commercial interests in all the close corporations with the IPS
hallmark. There can be no question
about it. Such relinquished
interests were inclusive of the first respondent’s right to use the
trade name we are here talking
about (
vide
clause 15 of the original sale agreement). Although the first
respondent also relinquished all his commercial interests in all but
one of those close corporations, the business interests he retained
in one of those close corporations were inclusive of the right
to use
such trade name. In reaching this conclusion I am fortified partly
by the construction of all the contracts and partly by
the long and
open usage of the trade name by the second applicant. I would
therefore find in favour of the applicants on this issue.
[30] In the third place, I now turn to consider the
issue of the group identity. Here the focus of the enquiry is
whether the second
applicant was an autonomous business enterprise or
not. In his founding affidavit the first applicant alleged that on 6
March 2003
the first applicant received a letter (
vide
Annexure “D” on p.72 of the paginated record) which showed that
the first respondent was labouring under the wrong impression
that
the second applicant could not autonomously conduct its business
since, as the first respondent saw things, the applicants were
prohibited by the subsequent sale agreement and the multiparty
corporation agreement from keeping the second applicant registered
with any mine as a separate and independent vendor or provider or
supplier. In his answering affidavit the first respondent denied
the
aforesaid allegation. He countered that the intention of the
Forceflo group was that only one united business front with only
one
common vendor code be presented to the mining customers.
[31] Now perusal of the letter shows that it was a
circular letter addressed to the members of the IPS group. Such an
entity was not
defined by any of the three contracts. The heading
showed that the subject matter was the equity stake in the IPS
group. The first
paragraph showed that the first respondent caused
the letter to be written and circulated seeing that he was unhappy
with certain
problematic aspects of the agreements. The second
paragraph stated that there were indications that the provisions of
the agreement
between the first respondent and the second respondent
had been relaxed. Precisely what those indications were the letter
did not
say. In any event no relaxation of the terms of the
agreement was permissible unless such amendment had been reduced to
writing
and signed by both the first respondent and the first
applicant (
vide
clause
19 Annexure “AA” on p.54 of the paginated record and clause 19
Annexure “B” on p.63 of the paginated record). The
letter went
on to list five problems. I deem it necessary to quote the last
three of the five.
“3. Daar bestaan ‘n persepsie dat Industrial Pumping Systems
Klerksdorp die dienste van kontrakteurs buite die Industrial Pumping
Systems groep gebruik vir projekte wat die ooreenkoms kan beïnvloed
(paragraaf 5 van Drieledige ooreenkoms).
4. Kommunikasie soos bepaal in die kontrak by wyse van
korrespondensie hetsy van lede of mynhuise of owerheid word nie
bespreek of
deurgevoer na die res van die groep nie wat lei tot
nadeel van die groepbelang.
5. Kommunikasie wat wel gevoer word ten opsigte van swart bemagtiging
word eensydig deur Industrial Pumping Systems Klerksdorp hanteer.

Die res van die groep word skynbaar aan hulle eie lot oorgelaat.”
[32] In all these three instances repeated reference was
made to the group interest. The assertion or deduction that could be
made
from all the thrust of the letter as a whole was that the
second applicant, in other words Industrial Pumping System Klerksdorp
CC, was not an independent and a separate business entity but rather
a dependent and familial member of the bigger family or group
of
close corporations. But the impression or the assertion is wrong.
It is contrary to the clear and unequivocal provisions of
the three
agreements. Clause 12.1 Annexure “AA” on p. 52 of the record
reads as follows:
“Die Verkoper se uitvoerende magte en bestuur van die Beslote
Korporasie sal ten einde loop op 21 November 2001 waarna die totale
uitvoerende magte, bestuur en besluitneming by die Koper sal berus.”
Clause 13 Annexure
“B” on p. 61 of the record reads as follows:
“
Die
Verkoper erken en plaas op rekord dat hy na 21 November 2001 nie
verder betrokke sal wees by enige onderhandelinge met Amiantit
of
enige ander vervaardiger of verspreider van plastiese produkte nie,
hetsy as eienaar, vennoot, aandeelhouer, lid, werknemer, konsultant
of in enige ander hoedanigheid hoegenaamd nie, binne die grense van
die Republiek van Suid-Afrika nie, sonder die skriftelike toestemming
van die Koper nie.”
Clause 4 Annexure “C” on p. 69 of the record reads
as follows:
“Die onderskeie Beslote Korporasies sal outonoom en afsonderlik
handeldryf en besigheid doen en elk sal verantwoordelik wees vir
hulle eie bemarking, verspreiding, lewering en handel in die
algemeen. In hierdie opsig sal elkeen se onderskeie onderhandelinge,
kontrakte en die uitvoering daarvan vir die risiko van elke
afsonderlike Beslote Korporasie.”
Clause 6 Annexure “C” on p. 69 of the record reads
as follows:
“Elke party sal verantwoordelik wees vir sy eie administrasie en
hou van rekenkundige rekords. Om die Koöperatiewe entiteit te
beskerm (verw 2) sal die faktuering aan die myn van beide Industrial
Pumping Systems Projekte en Industrial Plant & Machinery
deur
Rive gedoen word. Die faktuering van die nie-myn kliënte vir beide
Industrial Pumping Systems Projekte en Industrial Systems
Plant &
Machinery sal deur Francois gedoen word. Industrial Pumping Systems
Projekte se debiteure sal onmiddellik na ontvangs
van die myn
oorbetaal word.
Dit staan Francois vry om enige tyd direk aan die myn te verkoop
(faktureer) indien hy nie tevrede is met die hantering van sy belange
deur Rive nie.”
[33] The first respondent appeared to have been of the
opinion that the subsequent sale agreement and the multiparty
co-operation
agreement had given him authority over the business of
the second applicant. Neither the subsequent sale agreement nor the
multiparty
co-operation agreement prohibited the second applicant
from retaining its autonomy as a distinct and a separate business
enterprise
with no subsidiary or subordinate or affilial ties to the
so-called Industrial Pumping Systems Group or for that matter the
Forceflo
group. It seems to me that no group of close corporations
or an umbrella company called Forceflo (Pty) Ltd ever formerly
existed
prior to the signing of the three agreements. The phrase
“Forceflo Group” was loosely and repeatedly used in the agreement
without
any defining legal implication. Similarly the names of all
the close corporations were pre-fixed by the same three words
Industrial
Pumping System. Besides the fact that the first and the
second respondents were the stakeholders in almost all of those close
corporations
I could find nothing on the papers before me to show
that there was any firm legal bond to support the contention that
they were
members of the same group. The submission of Mr Esterhuyse
was persuasive and convincing that the second applicant was an
autonomous
business enterprise with a clear right to free trade and
to conduct business as a separate and independent entity responsible
for
its marketing strategies, distribution of its products,
promotion of its own corporate image, appointment of its own black
economic
empowerment partner, appointment of its own management
executives, keeping its own separate records and books of account,
responsible
for its own separate banking account and the separate
administration of it own business affairs in general.
[34] The first respondent’s representation to the
various mine houses before and after the meeting on 7 April 2004 that
he was the
sole member of the second respondent and the authorised
chief representative spokesman of the so-called Forceflo Group was
inaccurate,
misconceived and misleading. It was a misrepresentation
for the first respondent to represent to the mine consumers of the
second
applicant’s products, that the second applicant was an
integral part and parcel of a company which traded on the mines as
Industrial
Pumping Systems t/a Forceflo. On this third issue as
well, I would find in favour of the applicants, that the second
applicant was
an autonomous corporate entity affiliated to no other
group of business entities.
[35] Having consider the three issues I have come to the
conclusion that the applicants have established on a balance of
probability
that they had a clear right. Such right stemmed from
the three contracts I have mentioned previously. The rights of the
applicants
were fully set out in paragraph 37 on p. 9 and paragraph
47 on p. 15 of the record. Among others the first respondent
relinquished
his interest in the second applicant and was handsomely
rewarded. The second applicant was granted a partially exclusive
right to
use the vendor codes of the second respondent. The second
applicant was allowed
to act as the sole agent of DPI Plastic (Edms) Bpk and
the first respondent accepted the status of the second applicant as
an autonomous
corporate entity. The right of the applicants is
perfectly clear in this case.
[36] The second leg of the enquiry is whether the
respondents have committed an injury to the right of the applicants
or whether the
applicants have a reasonable anticipation of such
injury. On 1 April 2003 the first respondent addressed a number of
letters to
the various mines in which he informed the mines, among
others, that the second applicant was a member of his corporate
empire.
He portrayed himself as the group executive of the so-called
Forceflo Group. Moreover, he told the various mines that it had
been
agreed by the group members who, as he said, included the second
applicant that only the vendor codes of the second respondent should
be used by all in doing business with the mines. He told the mines
that it had also been agreed that the vendor codes previously
allocated to the second applicant should be revoked and no longer be
used in the future. All this misinformation boiled down to
wrongful
interference with the trade of another.
[37] The first respondent has disseminated inaccurate
information among the mine customers of the second applicant which
created
the wrong impression that the vendor codes which the second
applicant was using in order to access business from the mine
customers
had to be changed. This was done behind the first
applicant’s back. The first respondent did not have any authority
to do so.
The aim was to gain effective control over the business of
the second applicant.
The first respondent’s representation that the second
applicant was not an autonomous corporate entity but a member of his
Forceflo
Group; that he was the chief executive or representative of
such group; and that the group had decided to use only one vendor
code,
were false and unwarranted interference with the free trade of
the second applicant. In his founding affidavit the first applicant
stated that though he was at first unaware of the letters he became
aware of the state of confusion among the mine customers of the
second applicant. The confusion became so bad that he and the first
respondent held a meeting on 7 April 2003. At the meeting
he called
upon the first respondent to stay out of the business affairs of the
second applicant and to remove the confusion he had
caused on the
mines by disseminating false information. In his answering affidavit
the first respondent relied on this meeting as
the source where a
mandate was given to him to inform the various mines that only the
vendor code of the second respondent was to
be used. This contention
is doubly flawed. Firstly, it implicitly boils down to an admission
by the first respondent that as on
1 April 2003 when he wrote the
letters, he did not have any mandate to do so on behalf of the second
applicant. Secondly, even if
any mandate was given to him on 7 April
2003 as he claims, such mandate was of no binding legal force and
affect. The reason for
my view is that the purported mandate, even
if it was truly given, went out to the very nucleus of the two
agreements, the vendor
codes. Yet it was not reduced to writing let
alone signed by the parties as those two agreements expressly
stipulated. The argument
of Mr Putter that the majority of those
meetings were also attended by the auditors common to the litigants,
and that the auditors
who minuted the proceedings gave the minutes an
objective complexion does not carry the matter any where. However
accurate the minutes
and however objective the auditors might have
been in general, a record of the proceedings in a meeting cannot in
law vitiate a clear
term of an agreement.
[39] The various correspondence exchanged between the
parties showed that the first respondent went flat out in his efforts
to take
complete control of the second applicant and its customers or
business and that the first applicant relentlessly resisted such
attempts.
In my view the first respondent’s case has been standing
on thin ice all along. I could find no substance to the contention
or
suggestions that he derived any competent powers from any
agreement or any meeting to spread such information concerning the
second
applicant and its business. His involvement, actions and
false representations amounted to an interference in the business
affairs
of the second applicant. Such interference was wrongful.
Such interference cannot be sanctioned in law. It constituted breach
of the terms of the agreement. It has the potential to cause serious
harm to the second applicant’s right.
De Villiers AJ in
MATTHEWS AND
OTHERS v YOUNG
(
supra
)
on p. 545 said:
“In the absence of special legal restrictions a person is without
doubt entitled to the free exercise of his trade, profession
or
calling, unless he has bound himself to the contrary.”
[40] Earlier on I have alluded to the paramount
importance of the vendor codes in the mining business world. It
follows therefore
that making false representation about a recognised
and registered vendor may have very harmful consequences on the
business of such
a vendor. Our common law affords a business
enterprise which is a victim of such false and deliberate
representations common law
legal protection (
vide
STELLENBOSCH WINE TRUST LTD AND ANOTHER
v OUDE MEESTER GROUP LTD AND ANOTHER
1977(2)
SA 221 (CPD)
per Theron J
;
R & I LABORATORIES v BEAUTY
WITHOUT CRUELTY INTERNATIONAL
1990 (3)
SA 746
(CPD) on 753J – 754F
per Opperman
A.J and
ELIDA
GIBBS (PTY) LTD v COLGATE PALMOLIVE (PTY) LTD
1988 (2) SA 35O
(WLD)
per Van Schalkwyk J.
I am convinced that the applicants will suffer serious
financial harm if the business orders from the mines no longer come
their way
via
the
vendor codes they are currently using. As a result of the false but
deliberate representations made by the first respondent,
the wrong
perception created among the second applicant’s mine customers that
the first respondent is the authorised and authentic
representative
of the second applicant cannot be allowed to persist unchecked.
In the eye of the law the applicants have proved a
reasonable apprehension of pecuniary harm to the second applicant’s
legal right
resulting directly from the
iniuria
engineered by the first respondent.
[41] I now turn to consider the third requisite of a
final interdict. On the strength of the facts before me it is clear
that the
applicants have no other ordinary and effective remedy. The
underlying purpose of this application is to ensure the continued
survival
of the second applicant in his business dealings in the
mining world. There is no logical manner whereby a claim for damages
may
be quantified in the circumstances of this case, seeing that the
harmful actions of the first respondent cannot be readily detected.

I would therefore confirm
the
provisional order by Cillié J, it being the only effective and
protective remedy available to the applicants.
[
42] After all has been said
and done, I have come to the overall conclusion that the applicants
have, on a balance of probabilities,
established the three requisites
of a final interdict. The respondents on the contrary have no valid
defence either individually
or collectively. I can see no reason in
the circumstances of this case why I should not exercise my
discretion in favour of the
applicants by granting the relief sought.
I have been mindful of the warning of Erasmus J in
WELKOM BOTTLING COMPANY (PTY) LTD EN ANDERE
v BELFAST MINERAL WATERS (OFS) (PTY) LTD
(
supra
)
at 56F–G
that a court must guard against
the danger of blindly giving great consideration to the preservation
of applicant’s legal right
and too little consideration of the
negative impact the granting of the final interdict will have on the
respondents legal right.
Some meaningful balancing act is called
for.
In casu
the
right of the respondents is to have free trade with the mines without
unlawful restrictions. Though the restraint of trade clause
in this
case is unreasonably wide and therefore unlawful in that it
completely prohibits the first respondent from doing similar
business
to that of the applicant with any mine in this entire country, the
applicants are not seeking a order to enforce such a
clause. Indeed
Mr Esterhuyse very wisely did not contend that the applicants were
entitled to rely on clause 13 but conceded that
the clause was
indefensible. He conceded that the first respondent was at liberty
to trade as if clause 13 of the original sale
agreement and amended
sale agreement was
non pro scripto
provided he pursued his trade without any unwarranted interference
with the competing legal right of the second applicant. To interfere
with another in his lawful trade is a wrongful act or an injurious
harm in our law. It is clear and obvious therefore that the granting
of this final interdict will in no way have any adverse impact on the
respondents’ legal right to free trade provided the respondents
keep their business activities within lawful bounds, regard been had
to the terms and conditions of the aforesaid agreements.
[43] I now proceed to deal with the question of costs.
Prior to the institution of these proceedings the first respondent
was urged
to give the applicants an undertaking that he would refrain
from interfering in the business affairs of the applicants pending an
out of court solution of the dispute between the parties. The request
was summarily dismissed. The refusal led to the launching
of these
current proceedings. During the initial hearing, the first
respondent ended up giving the undertaking which, by agreement
between the parties, was made an order of the court. The undertaking
was given before the answering affidavit was filed by the first
respondent.
[44] In his answering affidavit the first respondent
stated that he was withdrawing such an undertaking. Mr Putter relied
on the
case of
JOHANNESBURG TAXI
ASSOCIATION v BARA-CITY TAXI ASSOCIATION AND OTHERS
1989 (4) SA 808
(W)
. In that case the
applicant sought a prohibitory interdict against the respondents.
Before the respondents delivered their answering
affidavit, they gave
the applicant the undertaking that they would not, among others,
assault the applicant’s members or unlawfully
interfere with the
members of the applicant in the conduct of their legitimate business
operations. The applicant accepted the undertaking.
By the consent
between the parties, the judge incorporated the undertaking in the
court order.
The applicant subsequently launched another
application, against the respondent, alleging the disobedience of the
court order, because
as they averred, the first respondent continued
with the behaviour which was contrary to the said undertaking.
Flemming, J reckoned that since the undertaking was so
arranged between the parties and not so ordered by the court itself
after
considering the two versions, in other words the complete
merits of the dispute, such an undertaking did not amount to an
enforceable
order of the court as envisaged in Rule 32(5).
But in the case of
YORK
TIMBERS LTD v MINISTER OF WATER AFFAIRS AND FORESTRY AND OTHERS
2003 (4) SA 477
(T),
the court came to a
different conclusion.
In the latter case,
YORK
TIMBERS LTD
, Southwood, J said the
following at
500G-I:
“I have no doubt that the
ratio
in the
Johannesburg
Taxi Association
case is wrong. In my view, there is no
difference between the legal effect of an undertaking to do something
or refrain from doing
something which is made an order of court and
the legal effect of an order to the same effect made by the court
after considering
the merits and giving judgment. In my view the
effect of an undertaking made an order of court is accurately stated
in
Halsbury’s Laws of England
4 ed vol 9 para 75:
‘An undertaking given to the court by a person or corporation in
pending proceedings, on the faith of which the court sanctions
a
particular course of action or inaction, has the same force as an
injunction made by the court and a breach of the undertaking
is
misconduct which amounts to contempt’.”
[45] I am persuaded by the reasoning in the latter case
and not the former. As I see it, when the answering affidavit was
signed
there was no longer a simple undertaking by the first
respondent. The original status of such an undertaking had undergone
a series
of significant changes. It was tendered to the applicants.
It was considered. It was accepted. Finally, by consent of both
parties
and the sanctioning of the court it was made a binding court
order. In my view, once the character of the private undertaking has
been so judicially transformed it can no longer be withdrawn at the
whim of the party who tendered it into court or the party who
accepted it in court. To allow a litigant to unilaterally circumvent
the due process of the law in this manner can lead to serious
abuse
of the judicial process. I shudder to think of the chaotic situation
which may arise. Our civil legal system may be brought
into disrepute
if litigants are allowed to set aside court orders
mero
motu
without bringing any substantive formal
application fully setting out the facts and the grounds as to why an
undertaking was made
in the first place and why the court order
emanating from it now has to be set aside.
In my view, the earlier order by Cillié J, has to
stand.
[46] In the notice of motion, the applicants indicated
that no order of costs was sought against the second and the third
respondents
unless they too opposed the application. The notice of
opposition showed that they, like the first respondent, also opposed
the
application. The first respondent stated in his answering
affidavit that he was authorised to depose to the answering
affidavit
on behalf of the second respondent and the third respondent
as well.
I am satisfied that had it not been for the recalcitrant
attitude of the respondents, the applicants would probably not have
initiated
these urgent proceedings. They were left with no choice but
to come to court when their reasonable request was turned down by the
respondents. They have finally emerged victorious. They are
entitled to the payment of the costs of the litigation by the
unsuccessful
party which in this case includes all three respondents.
The three respondents are liable for the payment of the taxed costs
of
the applicants on the ordinary scale applicable to contested
motion matters.
[47] Accordingly I make the following order:
47.1 The provisional order by Cillié J dated 4 March
2994 is finally confirmed.
47.2 The three respondents are directed to pay the taxed
costs of this application jointly and severally, the one paying the
others
to be absolved.
47.3 The costs are to be paid on the ordinary scale as
between party and party.
________________
M.H. RAMPAI, J
On behalf of Applicants:
Adv.
M. Esterhuyse
Instructed
by
Israel
& Sackstein
On behalf of Respondents:
Adv.
Putter
Instructed by
Symington
& De Kok
/scd