Movie Camera Company (PTY) Ltd v Van Wyk and Another (8333/2001, 2284/2002) [2002] ZAWCHC 72; [2003] 2 All SA 291 (C) (17 December 2002)

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[2002] ZAWCHC 72
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Movie Camera Company (PTY) Ltd v Van Wyk and Another (8333/2001, 2284/2002) [2002] ZAWCHC 72; [2003] 2 All SA 291 (C) (17 December 2002)

IN THE HIGH COURT OF
SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
Case
no.: 8333/2001 +
2284/2002
In
the matter between:
THE
MOVIE CAMERA COMPANY (PTY) LTD
Plaintiff/Applicant
and
JAN
BAREND VAN WYK
1
st
Defendant/Respondent
MEDIA
FILM SERVICE SOUTH AFRICA (PTY) LTD
2
nd
Defendant/Respondent
JUDGMENT GIVEN THIS
TUESDAY, 17 DECEMBER 2002
­­­­­­­­­­
CLEAVER
J:
[1] In April 1993 the first defendant (“Van
Wyk”) was employed as a technical supervisor in the lighting
division of a company
known as Movie Camera Company Limited
(Registration number 84/08463/06) (“the old MCC”). The plaintiff
was then some six years
out of school and had,
in addition to gaining experience in
the field of lighting for the movie camera industry, achieved a
qualification in electrical engineering
from the Cape Technicon. The
old MCC was a company controlled by one M S van Tonder (“Van
Tonder”) who was to play a leading
role in the events to follow.
The old MCC was at the time mostly concerned with the renting of
motion picture camera equipment.
At that stage the old MCC dealt in
the main with Arri camera equipment purchased from a German
company Arnold and Richter Cine Technik
GmbH (“Arri Germany”) and was based in Johannesburg. It
also rented out Arri lighting
equipment, which was procured from a British company Arri GB Limited
(“Arri GB”), which in turn
was a wholly owned subsidiary of Arri
Germany.
[2] In
about August of 1993 Van Wyk moved to Cape Town in order to set up a
lighting division for the old MCC in that city. He was
effectively
in charge of the Cape Town branch and reported directly to Van
Tonder. His father, Corrie van Wyk, was also involved
in the old MCC
as managing director
of
the company in Johannesburg. In 1994 sole distributor agreements
were concluded between the old MCC and Arri GB and Arri Germany
in
terms whereof with effect from 1 January 1995 the old MCC was
appointed the sole sales distributor in South Africa for Arri camera
and lighting equipment. Arri Germany manufactures Arriflex cameras
and Arri lighting equipment in Germany. It sells these products
worldwide. Arri GB has the rights to sell Arri lighting in Europe
and various other parts of the world including South Africa.
Neither
Arri Germany nor Arri GB rents equipment out. Arri GB has two
British based subsidiaries, Arri Media that rents out Arri
cameras
and Arri Lighting that rents out Arri lighting. There never was
any agreement in place between the old
MCC and Arri Media or Arri Lighting regulating their relationship,
whether in the form of distributor
agreements or otherwise. The
occasions on which the plaintiff rented cameras from Arri Media were
ad hoc
and
isolated.
[3] Towards the end of 1996 a public company
quoted on the JSE Johannesburg Securities Exchange, Sasani Limited
(“Sasani”), appeared
on the scene and started making inroads in
the movie camera and lighting field. It first acquired a business
known as Video Lab,
the business of which was the developing and
editing of film into its final form. We are concerned in this case
with movie film
productions used for advertising purposes. In
December 1996 Sasani entered into negotiations to purchase the old
MCC. Van Wyk testified
that at that time
he met the chairman of Sasani Limited,
Mr Frangos (“Frangos”), and a Mr Smit
who
was
previously the managing director of Video Lab, together with Van
Tonder and other senior employees of the old MCC. He had nothing
to
do with the arrangements for the sale of the business which were
conducted on behalf of the old MCC by Van Tonder. A document
recording the sale of the business to a company termed Investment
Facility Company 530 (Pty) Limited (96/12855-07), a subsidiary
of
Sasani Limited which thereafter changed its name to The Movie Camera
Company (Pty) Ltd (“the new MCC”) was signed on 7 February
1997.
The document recorded that the sale of the business was effective as
from 1 January 1997 (the effective date) and provided
inter
alia
that four specified employees of
the old MCC were to sign restraint of trade agreements with the
purchaser on terms to be agreed
between them and the purchaser.
These were Van Tonder, Corrie van Wyk, Sean Ryan and Van Wyk. The
purchase price was some R67 million
plus the value of certain assumed
liabilities and the agreement provided
that a balance of R25 million
outstanding after certain specified payments had been made would be
payable only in the event of certain
profit warranties set out in the
agreement being attained by the new MCC in successive years as at 30
June 1997, 30 June 1998 and
30 June 1999.
[4] Van Wyk testified that Van Tonder explained to
him that the entities which controlled the old MCC would receive
payment of the
balance of the purchase price only in the event of the
profit warranties being met. He accordingly asked Van Wyk whether he
would
be prepared to stay on with the new company until June 1999 in
order to ensure that the profit warranties were met. Van Wyk agreed
to do this, for as will be seen, he had considerable trust and
confidence in Van Tonder who he regarded as his mentor and who had
treated him very well in the past. At
the time of the sale of business Van Wyk’s employment with the old
MCC was not subject to
any restraint of trade agreement.
[5] Van Wyk became a director of the new MCC on 25
March
1997,
but it was not until 10 June 1997 that he signed a restraint
agreement. More about the circumstances under which this agreement
was signed in due course, but for the present it is sufficient to
note that in the agreement which Van Wyk signed, the restraint
period
was a period calculated from 1 January 1997 and enduring until a date
30 months after the termination of his employment.
This was not what Van Wyk had in mind.
He was under the impression that his restraint was to be similar to
Van Tonder’s, namely
for a period of thirty months from the
effective date (i.e. until 30 June 1999). Van Wyk testified that he
first became aware of
the fact that he had signed a restraint
agreement in the terms set out at the time of the board meeting of
the new MCC which took
place in November 1997. He says that after
the meeting he, his father, Sean Ryan and Johan Haupt (the financial
director) were standing
around when he was asked whether he realised
that his restraint agreement was binding for 30 months after the date
of the termination
of his employment with the new MCC. Van Wyk says
that he immediately went to see Van Tonder in his office to discuss
this development.
He says that Van Tonder informed him that he had
understood that Van Wyk’s restraint was to have been in the same
terms as his,
namely for 30 months from the effective date and not
for 30 months from the date of the termination of his employment.
Van Tonder
said that he would look into the matter. Van Wyk
testified that he then raised the matter with Mr Frangos on 24 March
1998 when
the latter came down to Cape Town from Johannesburg in
order to meet with the staff of the Cape Town office. The meeting
took place
at the Table Bay hotel and Van Wyk says that he told
Frangos that the agreement was incorrect in that the restraint should
have been
recorded as 30 months from the effective date. According
to Van Wyk, Frangos said that he would look into the matter, but
nothing
transpired.
[6] On 1 April 1999 Mr Ennio Cervo (“Cervo”)
became the CEO of the new MCC and Van Wyk immediately raised his
concern about the
restraint agreement with him. By then his
unhappiness had extended beyond the incorrectly recorded restraint
(according to him) and
matters
came
to a head on 1 September when officials of Sasani refused to release
to him share certificates for Sasani shares which belonged
to him.
These shares had been procured for him through the good offices of
Van Tonder, who had lent
him
R1 million in order to acquire the shares on the understanding that
he would repay the loan out of a bonus share scheme which
the new MCC
had concluded with him. See paragraph 32 infra.) This occurred on 1
September and led to Van Wyk drafting a letter
of resignation. He
then telephoned Cervo and advised him
that he intended to resign. Cervo met with him at breakfast the next
morning in order to discuss
the matter when Van Wyk handed him his
letter of resignation. Unsurprisingly, in view of Van Wyk’s
importance to the plaintiff,
Cervo
suggested that he should not be hasty
and should take some time off before making a final decision. Van
Wyk accepted the invitation
to take some time off and decided to ask
his wife who was then overseas, to extend her stay for about a week
so that he could join
her, which he did. Before doing so, however,
he returned to Cape Town and on 2 September held a management meeting
with his staff
during the course of which he informed them that he
had resigned.
[7] He then travelled to London the next day where
he joined his wife. While in London he made contact with Mr Derrick
Ross (“Ross”)
who had been a friend of the Van Wyk family for
many years. Ross was then the chairman of Arri GB. He asked Ross
whether there
was any work in England for him and Ross suggested that
he should meet with Mr Graham Anderson (“Anderson”), the managing
director
of Arri Media
which
dealt with the rental side of the business.
Van Wyk made an appointment to meet
Anderson, whom he had not met before, but prior to meeting Anderson
he received a telephone
call from representatives of a competitor
known as VFG who asked him to see them. This he arranged to do on
Wednesday, 8 September.
[8] Van Wyk met with Anderson on 7 September and
was advised that Anderson
did
not have a position for him in England. Anderson’s attitude,
however,
was
that it was a pity that Van Wyk wanted to leave South Africa, for he
was well known in the business in that country and he
asked Van Wyk whether it was not worth
looking at Arri Media doing something in South Africa. Van Wyk
revealed to
Anderson
that representatives
of
VFG had asked him to meet them.
Anderson’s response was that that was not
surprising since everyone in the
business knew that VFG were keen on establishing themselves in South
Africa. His attitude was that
it would be nice if Arri Media could
establish itself in South Africa and suggested Van Wyk might consider
something along those
lines.
[9] Van Wyk met representatives from VFG the
following day. They were very interested in doing a deal with him
and in fact offered
him a salary in the vicinity of R1 million per
annum plus 20% of the profits if he would establish a business for
them in South Africa.
The salary offered was considerably higher
than
that
which he was earning in South Africa. He indicated to them that he
would consider the offer.
[10] Van Wyk met Ross and Anderson once more
before returning to South Africa. This was at Ross’s home. He told
them of the approach
from VFG and their attitude was that if he was
still interested, they would be prepared to
find a way in helping him to set up
something in South Africa so that Arri Media could establish a
presence in this country. According
to him, this is as far as the
discussions went. Before he returned home he met with Cervo who had
telephoned him and asked him to
meet him. The meeting took place in
a shopping complex near Watford. During the course of the discussion
Cervo told him that he
had established that Van Wyk was being
underpaid and that he ought to be earning more than his salary at the
time. He indicated
to Van Wyk that he intended to address this issue
once he returned to South Africa.
[11] On 22 September and back in South Africa
Cervo offered Van Wyk an increased remuneration package, subject
however to him signing
a two-year restraint effective from 1 October
1999 and subject to payment to Van Wyk of a consideration of R250 000
in respect of
the restraint. (It would seem that throughout the
meetings with Cervo, the latter was under the impression that Van
Wyk’s complaint
was that he was not earning enough. Van Wyk
testified however that the
amount
of his salary was never his main concern and that he had never in
fact asked to be paid more. His unhappiness was due to
other
factors.) Van Wyk was not happy with the offer and was not
prepared to sign a new restraint of trade in circumstances
where he
was, in his view, not subject to any existing restraint, and
conveyed this in a meeting which he had with Cervo on 30
September.
On that day he wrote out a second resignation, dating it 1 October
and handed the letter to Cervo later that day. On
1 October Cervo
sent an e-mail to his superior on the Board, Sandra Gordon, advising
her of what had happened. Significantly, the
message contains the
following:
“
He will undoubtedly in my opinion, move to have his present
restraint null and voided.”
[12] It
is clear from Cervo’s evidence that he accepted Van Wyk’s
resignation, but Cervo was still anxious to retain his services.

After discussion with his superior he in informed Van Wyk that they
would agree to release him from any restraint. On 12 October
the
plaintiff confirmed this in writing, namely that the restraint would
be regarded as null and void upon signature of a new contract
of
employment and on 26 October the plaintiff and Van Wyk concluded a
new written contract of employment which provided for termination
thereof upon three months notice. According to Van Wyk, this was a
clear indication that the plaintiff conceded that it had been
wrong
about the restraint. Van Wyk then tendered his resignation on 1
November 1999 effective as from 1 February 2000.
[13] This
caused the plaintiff to launch an urgent application against Van Wyk
in the Witwatersrand Local Division for relief in the
form of
specific enforcement by way of an interdict of the original agreement
in restraint of trade and thereafter on the same papers
duly
supplemented, for
other relief. The application for interim
relief was unsuccessful and the application for final relief was
transferred to this court
and consolidated at the trial before me.
The only remaining question in the application is one of costs.
[14] In
the action instituted against Van Wyk and the second defendant the
plaintiff claims damages in the amount of R37 211 827.
The claim is
premised upon two causes of action which are pleaded in the
alternative, namely a breach of the restraint agreement
and a breach
of fiduciary duties owed by Van Wyk to the plaintiff arising from the
fact that he was a director and employee of the
plaintiff. In
respect of the latter cause of action the plaintiff’s case is that
Van Wyk enticed certain employees of the plaintiff
to leave the
employ of the plaintiff and to take up employment with the second
defendant, a company in which Van Wyk is the guiding
force and
managing director and also that Van Wyk procured for the second
defendant a corporate opportunity to which the plaintiff
was lawfully
entitled, namely a so-called split rental agreement which was
concluded between the UK company Media Film Service (Pty)
Ltd trading
as Arri Media and the second defendant, effective from 1 March 2000.
This latter cause of action was described in counsel’s
opening
address as being based on unlawful competition, but as the case
unfolded, it became clear that it was based on an alleged
breach of a
fiduciary duty owed by Van Wyk in his capacity as director and
employee.
[15] As
to the restraint agreement, Van Wyk’s case is that when the
agreement was signed on 10 June 1997 the old MCC had no business,
goodwill or reputation relating to its
business, which by that
stage had been sold and transferred to the plaintiff. Furthermore,
he contends that he was not paid the restraint
consideration referred
to in the restraint. He pleads further that if it is found that the
restraint subsequently became enforceable
as between him and the
plaintiff, it was terminated by mutual consent. Van Wyk also pleads
that the restraint in any event falls
to be rectified in that the
restraint period of 30 months was to run from the effective date of
the sale of the business, namely
1 January 1997 and not from the
termination of his employment with the plaintiff. It is also pleaded
that the restraint is unenforceable
as being unreasonable and
contrary to public policy. As to the cause of action based on an
alleged breach of his fiduciary duty,
Van Wyk denies that his actions
amounted to such a breach.
[16] At the commencement of the trial the parties
agreed to and I ordered a separation of the issues concerning the
merits and the
quantum
and I heard evidence only on the merits. Also, by agreement, I was
requested to deal with the following issues:
Was the restraint binding?
Is Van Wyk entitled to rectification of the restraint?
Is the restraint void for unreasonableness?
Is
the first defendant entitled to avoid obligations under the
restraint by reason
of
alleged non-payment of the
consideration?
What precisely are the first defendant’s duties as a director and
employee?
Is the plaintiff entitled to avoid the second employment contract by
reason of the first defendant’s fraud?
The first defendant’s wrongful conduct.
The second defendant’s liability for such wrongful conduct.
[17] It will be expedient to deal first with the defendant’s prayer
for rectification so as to establish what the agreement between
the
parties actually was. A finding for the defendant on the
rectification issue will obviously affect the outcome of the
plaintiff’s
claim.
THE
SIGNING OF THE RESTRAINT AGREEMENT:
[18] Van Wyk was the only witness who testified as
to the circumstances under which the restraint agreement was signed.
He was due
to fly out of Johannesburg on the evening of 10 June 1997
in order to attend a trade show in Los Angeles. While still in Cape
Town
on that day, he received a telephone call from Van Tonder asking
him to come up to Johannesburg that day in order to sign some
contracts.
He says that he assumed that Van Tonder realised that he
was leaving for Los Angeles that day and wanted to have the
contracts
signed before he left. In order to accommodate Van Tonder he
rearranged his schedule for the day and flew up to Johannesburg
earlier
than he had planned to do.
[19] On arriving at the new MCC’s offices in Sandton, he found that
his father, Ryan and Haupt were also present. Van Tonder,
Van Wyk,
his father, Ryan and Haupt were of course the persons who were in
terms of the agreement for the sale of the business of
the old MCC to
sign restraint agreements. He says that Mr D Erwin, the financial
director of Sasani, had brought a number of documents
to the meeting,
which were handed to Van Tonder. The latter handed out these
documents to those at the table in the boardroom and
asked them to
sign them. He also indicated to each person what date was to be
inserted as the ostensible date of signature. On
Van Tonder’s
instruction he signed the restraint of trade agreement and recorded
the date of signature thereof as being 19 December
1996. The
restraint agreement makes no reference to the period of Van Wyk’s
employment by the plaintiff or the old MCC. Van Wyk’s
evidence was
that his employment with the old MCC was subject to one month’s
notice of termination. Apparently no other agreement
of employment
was concluded with Van Wyk when the business was sold to the new MCC.
[20] The following documents were also signed by him at the same time
and in each case the date indicated in brackets is the date
which Van
Tonder instructed him to record as the date of signature:
* A document recording the cancellation of the so-called phantom
shares/bonus participation scheme (19/2/97).
* An
agreement recording the sale of 1 428 571 Sasani shares by the old
MCC to Van Wyk (21/11/96).
* An
agreement recording the sale of 428 571 Sasani shares by the old MCC
to Van Wyk (21/11/96).
* A
bonus agreement recording the payment of bonuses by the old MCC to
Van Wyk dependent upon the profit warranties in the written
agreement
of sale being met (19/2/97).
* A
document recording the renunciation of shares accruing to Van Wyk in
terms of the bonus agreement in favour of his close corporation
Jes-Tech Investments CC (19/2/97).
RECTIFICATION
[21] The restraint period is defined in clause 1.1 of the agreement
signed by Van Wyk as
“
...means a period calculated from the effective date and
enduring until a date 30 (thirty) months after the termination of the
restrainee’s
employment with the proposed purchaser as hereinafter
defined in the recordal.”
(The effective date was 1 January 1997.)
For a party to succeed with a claim for rectification of a written
agreement, he/she must prove a common intention which the parties
intended to express but by mistake failed to express.
Humphrys v Laser Transport Holdings Ltd and
Another
1994 (4) SA 388
(C) 395H-I and
398D-399I
Brits
v Van Heerden
2001 (3) SA 257
(C) at
268C-F.
The two signatories to the agreement in question were Van Wyk and Van
Tonder. Van Wyk testified that the signing of the documents
took
place in something of a rush. He says that he did not pay particular
attention to the documents which he signed for in his
mind he was
merely completing the paperwork necessary after a fairly lengthy
negotiation which he had had with Van Tonder relating
to the
so-called phantom shares. He says that he glanced at the paperwork
which Van Tonder wished him to sign, namely the various
documents
referred to in paragraph 20. He says that he was concerned to see if
the restraint agreement referred to the 30 month
period, which he had
agreed with Van Tonder, would apply and that he turned to Van Tonder
and asked him whether the period was 30
months from the effective
date. Upon receiving Van Tonder’s assurance that this was so, he
signed the document. He was not at
all concerned about going through
the document carefully – he regarded the signing of the various
documents as part of a family
business with Van Tonder and signing
was merely confirmation of what they had agreed upon. He says it was
one of the first formal
things that they had ever done. He testified
that he would not have signed the agreement if he had been aware of
the implications
thereof and pointed out that in ten years time he
would still have been subject to a 30 month restraint period,
something which had
never been envisaged.
[22] It is clear from Van Wyk’s evidence that
Van Tonder asked him to remain on in the employ of the old MCC after
the sale of business
for a period of 30 months coinciding with the
period of the profit warranty set out in the sale of business. Van
Tonder’s period
of restraint was to be co-existent with the period
of the profit warranty and according to Van Wyk’s evidence there
was never any
suggestion that he would be subject to a restraint
longer than this period. Van Tonder did not give evidence, but
testified to an
affidavit filed in support of Van Wyk’s defence in
the application proceedings. The relevant portions of this affidavit
which contain handwritten alterations,
said by counsel to be in Van Tonder’s handwriting, read as follows:
“
I
confirm that the restraint agreement, Annexure ‘B’ to the
founding affidavit, was signed in Sandton in June 1997 in my
presence.
I confirm also that it was during negotiations of the sale
agreement, my understanding and therefore the understanding of the
old
MCC that a restraint agreement would be concluded between the
proposed purchaser and Van Wyk for a period of 30 months from the
effective
date of the date of the sale of business agreement, i.e. 1
January 1997, as per the restrained
(sic)
clause in the sale agreement.
…
I
confirm also that on a number of occasions Van Wyk raised the issue
of the restraint agreement with me and that I agreed with him
that my
understanding was that it endured only until 30 June 1999.”
[23] Van Tonder was at all material times the chairman of the old
MCC and thereafter the chairman of the new MCC, the plaintiff.
He
signed the document on behalf of the old MCC. His presence at court
was secured by the plaintiff by the issue of a subpoena,
but he was
not called by the plaintiff. In all the circumstances, I consider the
inference to be justified that he would not have
given evidence of a
nature different to that contained in his affidavit.
[24] Factors which may serve as
corroboration for the defence are the following:
* The acquisition of the business of the old MCC was modelled on an
earlier acquisition of the Video Lab business. The restraint
of
trade agreement relating to the Video Lab acquisition made provision
for a restraint period of 30 months calculated from the effective
date and Mr Erwin testified that he had handed a copy of the Video
Lab restraint agreement to Van Tonder and had indicated that the
terms contained therein would be those applicable to Van Wyk.
* A
business acquired shortly after the acquisition of the old MCC
involved the purchase of the business of Professional Film and
Lighting (Pty) Ltd. That agreement also made provision for a
restraint of trade effective for 30 months from the effective date.
* The first draft of an agreement to be concluded
between the old MCC and Van Wyk, which was given to Van Wyk but
ultimately not signed, anticipated that
Van Wyk would continue to be employed by the business for the
duration of the profit warranty
period.
* The profit warranties contained in the sale of business agreement
related to the period of 1 January 1997 up to 30 June 1999.
* The
new bonus agreement signed by Van Wyk also made provision for him to
be employed and his bonus to be calculated up to 30 June
1999.
* Van
Wyk had conveyed to Van Tonder, Cervo and Frangos his view that his
restraint was to last only until 30 June 1999.
* If
the plaintiff believed that the restraint had been correctly
recorded, it is difficult to understand why it would have offered
to
conclude a new restraint agreement with Van Wyk in September 1999.
[25] In the light of these facts Mr
van
Blerk
,
who together with Mr
Slon
appeared for the plaintiff,
sought
to avoid the conclusion that
rectification ought to be ordered by submitting that since the
plaintiff was not a party to the conclusion
of the contract
rectification should not be granted as
it would adversely affect the rights of
an innocent party, the plaintiff. While Van Tonder was the chairman
of the old MCC, i.e.
the party with whom the restraint was concluded,
he was of course at the time of the signing of the agreement in fact
the chairman
of the plaintiff. In this regard I agree with Mr
Rose-Innes
’s
submission that in the reference to innocent third parties the word
‘innocent’ means
“innocent of
knowledge”.
Were
this not so, a party having knowledge
of a particular state of affairs would be able to snatch at a bargain
by ignoring such knowledge.
Humphrys v Laser Transport Holdings and Ano
(
supra
) at
396D
Industrial
Finance and Trust Co v Heitner
1961 (1)
516 at 522E-F.
Furthermore
the test is that rectification will
be
granted where the requirements therefor been met
“if
innocent third parties will not be unfairly affected thereby”.
Meyer
v Merchants Trust Ltd
1942 AD 244
at
254.
[26] The onus resting on Van Wyk is for him to
establish a
prima facie
case. The failure of the plaintiff to rebut the evidence placed
before me will result in the first defendant establishing his case
on
a balance of probabilities unless the evidence is so weak and
improbable that it must be regarded as mere conjecture or is so
vague
and ineffective that I can only by a process of speculation and very
dubious inferential reasoning attempt to find the facts.
Marine and Trade Insurance Co Ltd v Van der
Schyff
1972 (1) SA 26
(A) at 49F-
in
fine
.
[27] Mr
van Blerk
submitted that I should find it
improbable that Van Wyk did not resolve the matter with Van Tonder.
However, the impression which
I gained of Van Wyk was that he was a
dynamic young man, more concerned with getting work for the company
and doing his work well
than by attending to paperwork. He testified
that with
Van
Tonder and Frangos both in Johannesburg and him in Cape Town, there
were not many opportunities for him to speak to them. Matters
dragged on and he thought that they would be sorted out and did not
see the lack of resolution of the problem as being something
which
required urgent attention.
[28] In my view the evidence is not so vague and ineffective or so
improbable that it must be regarded as mere conjecture. The
defendant’s
plea for an order for rectification is accordingly
granted with the result that clause 1.1.11 in the restraint agreement
is altered
to read:
“‘
restraint period’ means a period of 30 months calculated
from the effective date.”
As will appear from paragraph 31, it is not the defendant’s case
that he was entitled to receive any payment in consideration for
the
restraint undertaken.
[29] My finding in favour of the defendant on the rectification issue
means that the defendant was not under any restraint after
30 July
1999. However, in case I am wrong about the restraint, I will also
deal with the defences put up to the plaintiff’s case
on the
restraint agreement as pleaded, namely that the defendant was not
paid the consideration referred to, that the restrain became
unenforceable as between him and the plaintiff and that it was
terminated by mutual consent.
THE PAYMENT OF THE RESTRAINT CONSIDERATION:
[30]
Clause
4 of the restraint agreement reads
“
In
consideration for the restraint undertaken by the restrainee, the
restrainee shall receive from the company or the proposed purchaser
a
consideration of R300 000,00 (three hundred thousand rand) payable no
later than 30 June 1997.”
(The
company referred to is the old MCC and the proposed company is Sasani
Limited or its nominee.)
No evidence in relation to the
payment of the consideration was led by the plaintiff on whom the
onus of proving payment rests. The
only evidence furnished in
relation to the payments was that of Van Wyk. It was common cause
that Van Wyk did not receive any cash
in respect of the restraint
payment. Van Wyk’s evidence established clearly that prior to the
business being sold to the new
MCC, he and other key employees had
participated in what was known as the phantom share scheme. Van
Tonder was averse to permitting
minority shareholdings in the
company, but wished to compensate his key employees for their
performances by rewarding them in some
way or another. He
accordingly evolved a scheme whereby the employees would notionally
be awarded shares in the company and would
also be awarded a share of
profits by way of notional dividends. The intention was to share in
the profits without being shareholders.
Provision
was made
for them to be credited with capital and interest. At the time of
the sale of the business, it was agreed that the phantom
share scheme
would be replaced by a new agreement.
[31] Van Wyk testified that he was to receive Sasani shares worth
R300 000,00 for which he paid no purchase consideration in settlement
of certain amounts owing to him in terms of the phantom share scheme.
He explained that he was owed some R103 000 in terms of the
scheme
for the financial year ending June 1996 and it was calculated
that in addition he would be entitled to an amount of R225
000 if the
scheme continued up till June 1999. It seems that Van Tonder agreed
that R225 000 would be payable if he agreed to remain
on in the
business until 30 June 1999.
In round figures the total
amount due to him in respect of the capital and interest was
accordingly R325 000, but Van Tonder advised
him that in order to be
tax effective, R300 000 of this would be reflected as a restraint
consideration. Precisely how this was
to work is not clear, for his
evidence is further that the R300 000 which was to accrue to him on
this basis was utilised to effect
payment for the 428 571 Sasani
shares, the sale of which was recorded in one of the agreements which
he signed on 10 June 1997.
Sasani shares with a value at the time of
R300 000 were accordingly issued to him
and it is clear from
his evidence that he was not to receive any further payment for this
restraint.
[32] The balance of R25 000, after applying the R300 000 to the
purchase of the Sasani shares, was set off against a loan which he
obtained from Van Tonder to purchase additional Sasani shares. One
of the documents signed by Van Wyk on 10 June was an agreement
providing for the sale of those
shares by the old MCC to him.
He
testified that Van Tonder had agreed to lend him R1 000 000
to acquire these shares. The Sasani shares were valued at 70 cents
per
share at the time that the agreements were signed. Accordingly
the R1 000 000 lent to him by Van Tonder was used to acquire 1 428
571 Sasani shares and one of the agreements signed by him recorded
this purchase.
It is
clear that no payment of R300 000 as such was made to the defendant
in terms of clause 4 of the restraint.
[33] Mr
van Blerk
, sought to counter Van Wyk’s evidence by
relying on the following clause in the agreement cancelling the old
phantom share scheme
arrangement.
“
Jan
acknowledges and agrees that all bonuses and claims in respect of
bonuses payable to him under and in terms of the scheme remaining
outstanding and unpaid as at 1 January 1997 shall be cancelled and he
shall have no claim against old MCC in respect thereof…”
(Jan
is Van Wyk.)
The fact
that the agreement records that all bonuses and claims are cancelled
and that Van Wyk shall have no claim against the old
MCC in respect
thereof simply brings to an end the agreement relating to the old
phantom share scheme and does not in my view preclude
Van Wyk from
establishing that simultaneously with the cancellation of the old
agreement, a new agreement was entered into which
may well have had
as its basis amounts which were due to him under the old agreement.
It was also submitted on behalf of the plaintiff
that Van Wyk’s
evidence should not be accepted because it its at variance with what
is contained in his affidavit in the interdict
proceedings, namely:
“
Clause 4 of the restraint
agreement makes provision for the payment of a consideration of R300
000,00 by no later than 30 June 1997.
This consideration was payable
by the old MCC or the proposed purchaser, i.e. the applicant. The
amount of R300 000,00 referred
to herein was never paid to me. What
I did receive was 321 400 shares in Sasani Limited, which shares were
valued at 70c each.
The shares were never a true restraint
consideration.”
Inasmuch as 428 571 Sasani shares (valued at R300 000) were
issued to Van Wyk, Mr
van Blerk
argued that the portion of the
affidavit referred to is entirely inconsistent with Van Wyk’s
version that 428 571 were awarded
in respect of the phantom share
scheme. However, further on in Van Wyk’s affidavit he expands on
the 321 400 shares in the following
manner:
“
I have received the 321 400
shares referred to in ‘JVW 3’ as well as the further 100 000
shares referred to as the share portion
of the payment of Van
Tonder’s bonus on profit targets in respect of June 1996, half of
which are still subject to the restraint
of sale. This consideration
bears no relation to the value of a restraint operating for 30 months
after the termination of my employment
at some future date.”
Van Wyk has clearly rounded off the number of shares in these two
paragraphs and the final figure of 421 400 is to my mind not so
disparate as to reject the direct evidence which he gave. I was also
referred to the fact that the number of Sasani shares issued
to other
restrainees coincided precisely with the restraint consideration paid
to each of them, but that, to my mind takes the matter
no further.
[34] Van Wyk raised with Cervo
the fact that he had not been paid for
the restraint. If he had in fact been paid by means of the sale of
428 571 Sasani shares as
submitted on behalf of the plaintiff, it is
difficult to understand why the plaintiff was prepared to offer to
pay him an additional
R250 000 in consideration of a new restraint.
[35] The plaintiff bears the onus of proving that
the restraint consideration has been paid and the direct evidence
given by Van Wyk,
supported by certain documentary evidence which he
identified, is sufficient for me to conclude that the plaintiff has
not discharged
the onus which rests on it in respect of the payment
of R300 000. On the basis of the
exceptio
non adimpleti contractus
Van Wyk would
accordingly be entitled to treat the contract as at an end and would
not be obliged to perform in terms thereof.
THE TRANSFER FROM THE OLD MCC TO THE PLAINTIFF OF PERFORMANCE RIGHTS
IN TERMS OF THE RESTRAINT
[36]
Clause 2 of the restraint agreement
headed ‘Recordal’ contains the
following sub clause 2.3.
“
In
order to render effective the proposal that the restrainee take up
employment with the proposed purchaser, the company wishes to
enter
into a restraint agreement with the restrainee with the intention
that when the restrainee takes up employment with the purchaser,
the
restraint agreement now entered into with the restrainee will be
ceded to the proposed purchaser contemporaneously with the conclusion
of the sale of business agreement.”
The
restraint is then set out in clause 3. Clause 3.3 provides that:
“
The restrainee acknowledges
and agrees that –
…
this agreement is entered into
upon the basis and it is a material term of this agreement that
the proposed purchaser would
be entitled to the benefit of the
restraints set out in this agreement interpreted in their widest
sense as contemplated in
clause 3.3.5.
the stipulations in this agreement are separate, severable and
independent stipulations in favour of –
the company; and
any successors-in-title of the company, and
the proposed purchaser,
which are capable of acceptance and enforcement by any of the
aforegoing at any time hereafter by any one or any combination of
them;”
The plaintiff clearly initially approached this
matter on the basis set out in the recordal, namely that the
restraint agreement had
been ceded to it. The application
proceedings were premised entirely on this basis. When the action
was instituted the plaintiff
relied principally upon a cession of the
rights flowing from the restraint agreement but pleaded in the
alternative that the restraint
constituted a
stipulatio
alteri
capable of acceptance by the
plaintiff. In May of this year notice was given of the plaintiff’s
intention to amend its particulars
of claim by pleading further that
clause 3.3.3 constituted a
stipulatio
alteri
and adding the further
alternative that in the event of the court finding that the rights
arising from the restraint were not ceded
and that the restraint did
not constitute a
stipulatio alteri
a tacit restraint agreement had been concluded. These amendments
were effected. At the trial the plaintiff formally abandoned any
reliance on a cession of rights arising from the restraint agreement
and relied on the contention that clause 3.3.3 was a
stipulatio
alteri
or alternatively that a tacit
restraint agreement had been concluded.
[37] For a
stipulatio
alteri
to be enforced it is necessary
for the plaintiff to prove that it has accepted the benefits thereof.
No express acceptance of the
stipulatio
was proved or contended for and the plaintiff relied for such
acceptance on the letter of demand written by its attorneys to Van
Wyk in February 2000 which preceded the interdict proceedings. In
that letter no specific acceptance of the
stipulatio
is expressed. The portion of the letter which is relied upon is
presumably that which reads:
“
In
terms of a restraint agreement signed by you on 21 January 1997,
which our client is entitled to enforce, your said conduct
constitutes
breach of the provisions of clauses 3.1 and 3.2 of the
said agreement.”
Interestingly, no reference is made to clause 3.3,
which is the clause that can be said to contain the
stipulatio
alteri
. The provisions of clause
3.3.3. are of course inconsistent with what is set out in the
recordal, but I will accept, for the purposes
of the judgment, that
it is open to the plaintiff to rely on a
stipulatio
alteri
.
[38] It was submitted on behalf of the plaintiff
that in terms of the final portion of clause 3.3.3, it was open to
the plaintiff
to accept the benefit of the stipulation at any time.
Clearly, the portion of the letter addressed by the plaintiff’s
attorneys
to Van Wyk does not constitute an express acceptance of the
stipulatio
and at best it can be said to be only a tacit acceptance. R H
Christie in ‘The Law of Contract’ (4
th
Edition) at 309 is of the view that where no time limit for
acceptance is stipulated,
“it will not
remain open for acceptance after an unreasonably long time has
elapsed”.
In
Mutual Life Insurance Co of New York
v Hotz
1911 AD 556
Innes
J, as he then was, expressed himself as follows at 567
“
The length of time during which a contract in favour of a third
person remains open for acceptance must depend upon the circumstances
of each case.”
In the present case the agreement in question was
signed in June 1997 and was to be effective as from 1 January 1997.
Even when Van
Wyk informed Cervo shortly after the latter joined the
plaintiff’s company that he disputed the restraint clause, the
plaintiff
took no steps
to
accept the
stipulatio.
In my view, by February 2000 it was too late for there to be a valid
acceptance of the
stipulatio
.
[39] In paragraph 6.3 of the particulars of claim
the plaintiff pleads the conclusion of a tacit contract during or
about February
1997 in terms of which Van Wyk became bound by
provisions of the relevant clause. No evidence was submitted to
support this allegation,
which is premised on the signing of the
restraint on 10 June 1997. The tacit contract is stated to be one
concluded between the
plaintiff, represented by Cervo, Gordon and/or
a duly authorised employee/er representing the plaintiff, and Van
Wyk. Cervo did
not testify directly to the conclusion of any tacit
agreement, but it
was submitted on behalf of the plaintiff that the following conduct
on the part of Van Wyk was conduct from which the existence of
a
tacit contract was to be inferred:
* The fact that Van Wyk became employed by the plaintiff;
* The fact that Van Wyk signed and backdated the restraint knowing
that it would be presented to the plaintiff; and
* The fact that the parties at all times acted as if the restraint
was binding on Van Wyk in favour of the plaintiff.
Mr
van Blerk
also submitted that these three factors should be viewed
cumulatively.
[40] In my view, the fact that the first defendant
became employed by the plaintiff does not in any way support the
inference contended
for and since Van Wyk explained in evidence why
the contract was backdated, that fact also
does not justify the inference sought.
As to the third contention, Van Wyk’s evidence established that he
did not conduct himself
as if the restraint was binding upon him and
Cervo confirmed that he had complained that the restraint had been
incorrectly drafted
and the restraint period incorrectly stated. In
addition Van Wyk also testified that from the very first time that he
became aware
of the mistake in the restraint he raised it with Van
Tonder and thereafter with Frangos. Frangos was not called to
disprove this
evidence. In the circumstances I am satisfied that a
tacit contract was not established, particularly if one has regard to
the extent
to
which plaintiff must go in order to discharge the onus, namely
“…
to
show by a preponderance of probabilities, unequivocal conduct which
is capable of no other reasonable interpretation and that the
parties
intended to, and did in fact, contract on the terms alleged. It must
be proved that there was in fact consensus
ad
idem
…”
Standard Bank of South Africa Ltd v Ocean Commodities Inc
1983 (1) SA
276
(A) at 292B-C.
[41] The defendants also pleaded that the duration
of the restraint which the plaintiff seeks to rely on is
unreasonable. A further
defence was that since the old MCC neither
employed Van Wyk nor had any business to which the restraint could
apply at the time that
the restraint was signed, it created no rights
capable of being ceded. The restraint precluded the respondent from
engaging in any
competitive activity, defined as
“any
activity which is the same or similar to or directly competitive with
the subject businesses”
of the old
MCC. Since the old MCC carried on no activities at the time, it was
submitted that the contract gave no rights whatever
to the old MCC.
In the light of my findings in respect of the
stipulatio
alteri and the tacit contract, it is
not necessary to deal further with these defences.
THE ALLEGED BREACH OF A FIDUCIARY DUTY
[42] I was urged to find that the evidence established that Van Wyk
had breached his duties of good faith as a director and employee
to
the plaintiff in the following manner.
1. In setting up the
competitive business of the second defendant by
* negotiating for the
plaintiff’s corporate opportunity; and
* soliciting the
plaintiff’s employees;
2. by fraudulently
securing a release from his restraint of trade; and
3. by disclosing
confidential information to the Arri Media group.
NEGOTIATING
FOR THE PLAINTIFF’S CORPORATE OPPORTUNITY
[43] It is a generally accepted principle that a
director of a company should not place himself in a position where
his personal interests
conflict with his duty to the company as a
director. The breach of a director’s fiduciary duty in relation to
corporate opportunities
and competition is not an issue which has
enjoyed much attention in our law. An early case in which the issue
was dealt with is
that of
Robinson v
Randfontein Estates Gold Mining Co Ltd
1921
AD 168.
This had to do with what was termed ‘secret profits’
appropriated by a director whose duty it was, so the court found, to
acquire
a property for the company if he acquired it at all. In
Bellairs v Hodnett
1978 (1) SA 1109
(A) the then Appellate Division held that the
existence of a corporate opportunity was to be determined by
reference to the actual
business carried on by the company or the
business which it intended to carry on. In
Atlas
Organic Fertilisers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd and Others
1981 (2) SA 173
(T), a ground-breaking decision, the managing
director of a company had, as in the present case, resigned his
office while serving
out his period of notice and taken steps to
create a new company under which he intended to do business. That
was in order, the
court found, but his actions in sabotaging the
company’s chances of obtaining long-term favourable raw material
contracts and concluding
these contracts for his own benefit as well
as inducing employees of the company to join his own company were
regarded as being in
breach of his fiduciary duties as managing
director.
[44] In view of the paucity of decisions on the
subject, reference to the development of the law in other
jurisdictions may be helpful.
In this regard, valuable contributions
have been made by Prof M Havenga, writing in the South African
Mercantile Law Journal (Corporate
Opportunities: South African
Update) (SA Merc LJ 1996 (8) 40-55 (Part 1) and 233-251 (Part 2)) and
Prof M S Blackman who contributed
the chapter in The Law of South
Africa, First Reissue, Vol 4 Part 2 at paragraph 135
et
seq.
[45] In Part 1 of Prof Havenga’s work she suggests that the tests
which the courts have adopted in order to establish whether a
corporate opportunity has been available to a company may be
classified as follows:
* The
“position”
test – here the court considers the position in which the director
acted, i.e. whether in his capacity as director or in his personal
capacity.
* The
“conflict”
test
– where the director’s private interests conflict with that of
the company.
* The
“expectancy”
test – where the corporate opportunity is one in which the company
has an expectancy flowing from an existing right.
* The ‘present interest’ test – i.e. whether the company has
an existing interest in the opportunity.
* The
‘line of business’ test – which requires the opportunity to
correspond with the existing and prospective interests or
activities
of the company.
* The
“fairness”
test – which applies ethical
standards of what is fair and equitable in the particular
circumstances.
After listing these tests Prof Havenga sums up the position as
follows at 46:
“
South
African courts have not yet laid down conclusive guidelines in
respect of defining a corporate opportunity. However, decisions
here
and in other Commonwealth countries indicate that generally the test
that should be applied is whether an opportunity can in
all the
circumstances be said to actually belong to the company, or whether
the company was justifiably relying upon the director
either to
acquire the opportunity
for it, or to give the company
the chance of acquiring it, or
at least of attempting to acquire it. The opportunity should
therefore not only be in the line of business
of the company, but in
all the circumstances the company should be seen to have been
justifiably relying upon the director(s) to
acquire it or to assist
in its acquisition for the company.”
[46] Prof Blackman in LAWSA suggests in paragraph 135 at p224 that
there are at least three situations in which the duty attaches
to a
director. These are
1) If the director has been given expressly or impliedly a specific
mandate either to acquire a particular opportunity for the company
or
to inform the company as to its suitability.
2) If
he alone, or together with other directors, is given expressly or
impliedly a general mandate to acquire opportunities for the
company,
or to pass on information to it about opportunities, or if he in fact
controls the company or those in power to manage its
affairs.
If he usurps an opportunity which the company is actively pursuing
or an opportunity which at least in so far as its directors
are
concerned can be said to belong to the company.
[47] Prof Havenga expresses the view at page 54
that the approach thus far adopted by South African courts indicates
that the
“line of business”
test will be applied and she points out that this approach was also
followed in the first report of the King Commission.
A decision which is often referred to in this
regard is the Canadian decision in
Canadian
Aero Service Ltd v O’Malley
(1974) 40
DLR 3d 371
(SC). In this case the emphasis is laid on a maturing
business opportunity.
“
An
examination of the case law in this court and in the courts of other
like jurisdictions on the fiduciary duties of directors and
senior
officers shows the pervasiveness of a strict ethic in this area of
the law. In my opinion, this ethic disqualifies a director
or senior
officer from usurping for himself or diverting to another person or
company with whom or with which he is associated a
maturing business
opportunity which his company is actively pursuing; he is also
precluded from so acting even after his resignation
where the
resignation may fairly be said to have been prompted or influenced by
a wish to acquire for himself the opportunity sought
by the company,
or where it was his position with the company rather than a fresh
initiative that led him to the opportunity which
he later acquired.”
(at 382)
[48] It is clearly impossible and indeed unwise to
lay down any conclusive guidelines which are to be applied in
assessing whether
or not one is dealing with a corporate opportunity
which rightfully belongs to a company. A careful examination of all
the relevant
factors is necessary in order to arrive at a conclusion.
However, the approach laid down by
Laskin
J in the
Canadian Aerospace
case (
supra
)
at 391 may well serve as a very useful starting point.
“
I
am not to be taken as laying down any rule of liability to be read as
if it were a statute. The general standards of loyalty, good
faith
and avoidance of a conflict of duty and self-interest to which the
conduct of a director or senior officer must conform, must
be tested
in each case by many factors which it would be reckless to attempt to
enumerate exhaustively. Among them are the factor
of position or
office held, the nature of the corporate opportunity, its ripeness,
its specificness and the director’s or managerial
officer’s
relation to it, the amount of knowledge possessed, the circumstances
in which it was obtained and whether it was special
or, indeed, even
private, the factor of time in the continuation of fiduciary duty
where the alleged breach occurs after termination
of the relationship
with the company, and the circumstances under which the relationship
was terminated, that is whether by retirement
or resignation or
discharge.”
This passage was quoted with approval in
Sibex
Construction (SA) (Pty) Ltd v Injectaseal CC
1988
(2) SA 54
(T) at 67.
[49] To return now to the facts of the case. Although an important
figure in the Cape Town branch of the plaintiff, Van Wyk was
not the
managing director of the plaintiff but merely a director in charge of
the Cape Town branch. He certainly had no mandate
to acquire the
opportunity or to inform the plaintiff of the suitability thereof.
He did not control the plaintiff nor did he have
any mandate, express
or implied, to acquire opportunities for the company or to pass on
information to it about opportunities. He
was clearly involved in
setting up the second defendant in its present form. The second
defendant was a shelf company and was set
up in its present form
through the efforts of Van Wyk. He has no financial interest in the
company, the financial backing being
supplied by a friend of his, but
is a director and is responsible for running and managing the
company.
[50] The
plaintiff’s business is the renting out of motion picture, camera
and lighting equipment. It rents out Arri cameras and
lighting
equipment as well as Panavision camera equipment. The bulk of the
Arri equipment was purchased by the plaintiff, the cameras
from Arri
Germany and the lighting equipment from Arri GB. The agreements
which had been concluded between the old MCC and Arri
Germany and
Arri GB in terms whereof the old MCC was appointed as sole
distributor in South Africa for Arri cameras and Arri lighting
equipment were terminated as at 31 December 2000 by written notice
from Arri Germany and Arri GB. Arri equipment was not generally
sold
by the plaintiff or the old MCC, but rented out.
[51] The
motion picture industry worldwide, and also in South Africa, is
dominated by Arri and Panavision cameras and equipment.
Panavision
cameras are manufactured by Panavision International LP
(“Panavision”), a Californian based partnership. Unlike Arri
Germany it does not sell its cameras and equipment, but rents these
out, either directly or to agents in terms of what are known
as split
rental agreements whereby the rental income is shared. A South
African Company known as Logical Designs (Pty) Ltd (“Logical
Designs”) had the sole agency to rent out Panavision camera
equipment in South Africa and in other countries in Southern Africa
on the split rental basis. Its agreement with Panavision contained a
clause permitting Panavision to terminate the agreement should
any of
certain named, key personnel in Logical Designs leave its employ or
there be any change in the structure, ownership or control
of Logical
Designs or should Logical Designs enter into a fee splitting
arrangement with anyone other than Panavision.
[52] In 1998 the plaintiff acquired Logical
Designs. Van Wyk testified that at all times there was fierce
competition between Arri
and Panavision, resulting in the plaintiff
and Logical Designs regularly bidding against each other for
business. Understandably,
therefore, the acquisition by the
plaintiff of Logical Designs was a matter of concern to both Arri and
Panavision. Van Wyk and
his father, then the managing director of
the plaintiff, met representatives of Arri at a trade fair in Los
Angeles in July 1998.
So as to ensure that Arri’s products were
properly marketed in South Africa, Arri’s representatives insisted
that the management
of the plaintiff should remain unchanged and that
the plaintiff’s Arri business should be conducted separately from
the Panavision
business conducted by Logical Designs. Panavision in
turn insisted that at least two of three named parties were to remain
as the
operating management of the Panavision rental business, which
by then had been transferred from Logical Designs to another wholly
owned subsidiary of Sasani. In addition Panavision required that no
additional non-Panavision sync-sound cameras, other than those
owned
by Logical Designs and the plaintiff could be acquired, purchased or
leased under any split rental agreement. During the 1999
Los Angeles
trade show Van Wyk
and
his father again met with Arri representatives. At that stage it was
known that Van Wyk’s father
would
be retiring as the
managing
director and the purpose of the meeting was to assure Arri’s
representatives that Arri’s interests would continue to
be served
by the plaintiff and its management.
[53] Van
Wyk was an Arri man through and through. He had no background in
Panavision and did not know any of the people involved
in Panavision
and their support. He testified that fairly soon after Cervo’s
appointment as CEO, it was apparent to him that Cervo
favoured
Panavision and favoured putting Logical Designs under the same roof
as MCC. This Van Wyk did not favour. He pointed out
that although
the old MCC and Logical Designs were in the same stable, they
competed against each other for different jobs and often
MCC had to
pull out of the competition so as to allow Logical Designs to gain a
contract at a higher price. By August of 1999 the
plaintiff was
experiencing financial problems in that it was not meeting its
budget. Accordingly, a moratorium was placed on capital
expenditure.
Van Wyk testified that Cervo was under pressure from his superior on
the board, Sandra Gordon (“Gordon”), to get
costs down and that
Cervo felt that it would be more cost effective and profitable to
rent Panavision equipment rather than incur
the capital expense of
acquiring Arri camera equipment in terms of their distributor
agreement. A number of meetings took place
to discuss the way
forward and on 22 August, following on a meeting which the plaintiff
had with Cervo and Van Tonder, Cervo sent
him an e-mail under the
heading of ‘The Future’ reading
“
I
have a vision. It looks something like this.
In
Johannesburg:
We accept Sean’s resignation.
We
dump Arri (They will dump us if this goes ahead)
We
consolidate Logical and MCC under one roof.
Robert
Russell takes over Sean’s place.
We
move ahead with Panavision as our corner stone.
Neville/Tink
become Technical directors
…”
Robert
Russell was the leading figure in Logical Designs and a long-standing
friend of Cervo’s. During his evidence Cervo said
that his vision
as articulated in the e-mail was merely one of many options, but it
does seem clear that he favoured the Panavision
route and an internal
memo from him dated 27 November 1999 reflected a proposed restructure
by merging the businesses of the plaintiff
and Logical Designs.
[54] Upon a consideration of all the evidence I make the following
findings, having regard to the principles previously mentioned.
Van Wyk had no intention to resign before 1 September 1999. His
resignation was brought about by his unhappiness working for the
plaintiff and in particular their failure to deal with the period of
his restraint and their refusal to hand him his Sasani shares.
His resignation was not part of any deliberate strategy or intention
to set himself up in competition with the plaintiff.
He made contact with Derrick Ross in England because of the latter’s
long-standing relationship with his family. On asking Ross
whether
there was any work for him in England, he was fortuitously referred
to Anderson. His contact with Ross and Anderson was
in his personal
capacity and did not relate to his position as a director of the
plaintiff.
The fact that he had resigned his position is a relevant factor.
It was never within the contemplation of Cervo and the plaintiff
that the plaintiff would enter into a split rental agreement with
Arri or that such an opportunity could realistically have been
pursued. Cervo had by 22 August a vision to strengthen the
Panavision
side of the business and to dump Arri. This was in fact
pursued.
There is no question of the opportunity being in any way ripe when
Van Wyk met Anderson.
After his resignation, Van Wyk considered other options as well. He
was in fact offered a lucrative position with VFG.
He continued to work diligently and faithfully for the plaintiff
during his notice period.
[55]
As I have already mentioned, it was
held in the
Atlas Organic Fertiliser
case that a director who
has resigned his position is entitled during his period of notice to
take steps to set up in competition
with the company. In this
regard,
Van Dijkhorst
J held at 198
in fine
to 199C
“…
common sense dictates that the mere creation by a managing
director, whose services have been terminated and who is serving his
month’s
notice, of a future alternative means of employment, albeit
in competition with his present company, need not necessarily create
a conflict of interest greater than that of an ordinary director
serving on the boards of two competing companies.
The mere incorporation of Pikkewyn during March 1978 on the
initiative of Lion-Cachet can therefore in my view not be regarded as
a breach of the fiduciary relationship that existed between
Lion-Cachet and Atlas. Nor did the mere preparatory work Lion-Cachet
did for Pikkewyn in, for example, finding accommodation for its
factory, transgress the requirements of his duty to Atlas.
Nor do I think that the setting up of Pikkewyn per se can be
regarded as an act of unfair competition. Lion-Cachet was entitled
to
take up other employment, even with a competitor of Atlas, after
due termination of his services. The planning of his future and
the
preparatory steps taken to enable him to obtain alternative
employment and earn a living even if taken during his month of notice
cannot be regarded as against public policy and therefore unlawful.
It can therefore not be branded as unfair competition. On this
aspect Atlas fails.”
The
position is similar in English law.
“
In the absence of some special circumstances (for example a
prohibition in a service contract) a director commits no breach of
his
fiduciary duty to the company of which he is a director merely
because, while a director, he takes steps so that, on ceasing to be
a
director (and, if he is one, an employee of that company), he can
immediately set up in business in competition with that company
or
join a competitor of it. Nor is he obliged to disclose to that
company that he is taking those steps.”
(
Framlington Group plc and Another v Anderson and Others
[1995] 1 BCLC 475
(ChD) J at 498A-B.)
[56] With that as a starting point I must now decide whether the
plaintiff has established on a balance of probabilities that Van
Wyk’s actions in taking steps to set up the new business after he
had resigned placed him in a situation of conflict of interest
and
duty.
In the
Canadian
Aero
Service
case,
Laskin
J held at 382
“
Descending from the generality, the fiduciary relationship goes
at least this far: a director or senior officer like O’Malley or
Zarzycki is precluded from obtaining for himself, either secretly or
without the approval of the company (which would have to be
properly
manifested upon full disclosure of the facts), any property of
business advantage either belonging to the company or for
which it
has been negotiating; and especially is this so where the director or
officer is a participant in the negotiations on behalf
of the
company.
An examination of the case law in this court and in the courts of
other like jurisdictions on the fiduciary duties of directors and
senior officers shows the pervasiveness of a strict ethic in this
area of the law. In my opinion, this ethic disqualifies a director
or senior officer from usurping for himself or diverting to another
person or company with whom or with which he is associated a
maturing
business opportunity which his company is actively pursuing; he is
also precluded from so acting even after his resignation
where the
resignation may fairly be said to have been prompted or influenced by
a wish to acquire for himself the opportunity sought
by the company,
or where it was his position with the company rather that a fresh
initiative that led him to the opportunity which
he later acquired.”
[57] I am aware of authority to the fact in English law that it is
not relevant whether the plaintiff could have pursued the opportunity
(
Regal (Hastings) Limited v Gulliver
[1942] 1 AER 378
at 389
and 395). As against this there is what seems to be the tendency in
our law to decide whether or not the opportunity is one
which can be
said to be in the line of business of the company. There may well be
a very fine line dividing these two approaches,
but I have come to
the conclusion that having regard to all the circumstances, the
relationship which Van Wyk established with the
second defendant at
Arri Media was not a corporate opportunity available to the
plaintiff, particularly in view of the relationship
which existed
between the plaintiff and Panavision. I say this notwithstanding
Cervo’s evidence to the effect that the business
set up by the
second defendant with Arri Media represented a business opportunity
which the plaintiff could have pursued. In expressing
this view,
Cervo conceded that it did not represent a business opportunity to
the plaintiff as structured at the present time, but
would at the
very least have required a totally separate company to be set up.
The full bench of the Appeal Court held in
Bellairs v Hodnett
(
supra
) that the existence of a corporate opportunity is to be
determined by reference to the actual business of the company or the
business
which it
intended to carry on (1128G) and
that
the scope of the business depends on the contemplation of the parties
at the time (1131H-1132F). In my view the line of business
which was
eventually set up with Arri Media was clearly
not within the
contemplation of the parties at the time. Having regard to the view
expressed in the
Canadian Aero Service
case, I am also
satisfied that Van Wyk’s resignation was not prompted or influenced
by a wish to acquire for himself any opportunity
sought by the
company or indeed an opportunity which was within the contemplation
of the parties at the time. I also do not consider
that it has been
established that the plaintiff was justifiably relying on Van Wyk to
acquire the opportunity for it or to assist
in acquiring
it.
ALLEGED
ENTICING OF EMPLOYEES
[58]
In the pleadings the plaintiff averred
that Van Wyk had enticed three of the plaintiff’s employees, namely
Longmuir, Du Toit and
Morrison, to leave the plaintiff’s employ and
to join the second defendant. At the conclusion of the case,
reliance was sought
only on the departure of Longmuir and Du Toit. I
consider that the plaintiff has not established this aspect of its
case. The employment
of both Longmuir and Du Toit was subject to one
month’s notice (as had been the case with Van Wyk and the old MCC).
Longmuir and
Du Toit testified that Van Wyk informed them of his
resignation on 2 September at the meeting called by him in Cape Town
on his return
from Johannesburg. Longmuir’s attitude was that if
Van Wyk was leaving, he too would leave, but Van Wyk told him that it
was his
(Van Wyk’s) problem and not Longmuir’s. Du Toit was new
in the position of second in charge of the Cape Town branch and was
somewhat unsure of his ability. He wanted to work for at least two
years to see if he could cope with the position and had told
Van Wyk
that if the latter ever intended to leave, he too would leave.
Longmuir and Du Toit left this meeting on the understanding
that Van
Wyk had resigned. Both were only aware of his first resignation, but
Cervo told Longmuir that Van Wyk was confused and
that he would get
him to remain on.
[59] On 2 October the two of them initiated a meeting with Van Wyk at
a steakhouse in Noordhoek. They had heard rumours about what
his
plans were and wanted to find out what he intended doing. Both were
under the impression that Van Wyk was interested in doing
something
in the aviation industry – he was fond of flying, had obtained his
pilot’s licence and had piloted Van Tonder’s aeroplane
on company
business. At the meeting of 2 October, Van Wyk did not tell them
what he intended to do, but both asked him to bear them
in mind
should he do anything connected with the film industry and in this
regard they pledged their support to him.
[60] Van Wyk told Du Toit some time in October
that he was definitely leaving and Du Toit thereafter
resigned
on 4 January 2000. He says that he did
so for three reasons, namely
* He did not want to head up the department,
* his wife, who was a medical doctor, had an
opportunity to work in London,
which
might have resulted in them moving to the United Kingdom; and
* he did not want to work with Panavision equipment. Like Van Wyk
he was an Arri man.
He told Van Wyk that if he ever went overseas he would like to come
with him so that he could be introduced to Arri Media, VFG and
other
people known to Van Wyk. He felt that it would be easier for him to
seek employment if he had contacts in London. He accordingly
travelled with Van Wyk to London at the beginning of February 2000.
There he met various people from Arri. By that time he knew
that
there was a strong possibility that Van Wyk might be starting up a
rental facility with Arri or VFG. Although Van Wyk had a
meeting
with Anderson he was not present or involved. After Van Wyk’s
meeting with Anderson, Van Wyk informed him that he had
arranged a
deal with Anderson and asked him if he would deal with the technical
aspects of setting up the operation in Cape Town.
Du Toit
accordingly phoned Longmuir and informed him that Arri Media were
going to back Van Wyk and asked Longmuir to join the new
venture.
Longmuir had already resigned at this stage because he was unhappy
working with the plaintiff. After certain e-mail correspondence
was
discovered on Van Wyk’s computer, Longmuir was told to leave
immediately and told not to work out his resignation period.
[61] The plaintiff produced no evidence to show that Van Wyk enticed
Longmuir and Du Toit, but relied solely on the contents of Van
Wyk’s
e-mail and a discrepancy between Van Wyk’s evidence and a portion
of his answering affidavit in the application proceedings.
The
portion reads:
“
It
is correct that Longmuir resigned from his employment with the
applicant in order to work for the new business. He had approached
me prior to doing so and I had agreed that if he resigned the new
business would employ him. I did not entice him away from the
applicant.”
Van Wyk
explained that at the meeting in Noordhoek that Longmuir and Du Toit
had pledged their support to him should he venture into
the film
industry and that he was referring to that pledge in his affidavit.
As far as Longmuir was concerned, it was never put to
him that his
evidence was untruthful and there is in my view no reason not to
accept it. There is nothing in the facts to justify
an enticement
and indeed the remuneration packets of Longmuir and Du Toit with the
second defendant are less favourable than they
were with the
plaintiff. In any event it is not unlawful to persuade an employee
to resign his employment lawfully. It is only
where the inducement
is done with the object of crippling or eliminating the competitor
that it becomes unlawful. (The
Atlas Organic Fertilisers
case
at 200 E-G.)
THE LOSS OF THE SOLE AGENCY
[62]
Additional bases for the plaintiff’s claim
for damages are pleaded. They are that the first and/or second
defendants unlawfully
1. acquired the plaintiff’s business relationship with the Arri
Media companies and with Arri Germany;
acquired a sole agency agreement with the Arri Media companies
and/or Arri Germany;
3. caused plaintiff to lose its sole agency agreement with the Arri
Media companies and Arri Germany.
[63] As to 1, the plaintiff had no business
relationship with Arri Media in Great Britain. Any contact with Arri
Media was on an
ad hoc
basis. The defendants have not acquired any business with Arri
Germany.
[64] As to 2, the defendants have not acquired any
sole agency agreement with Arri Germany. The agreement which the
second defendant
has acquired with Arri Media is not a sole agency
agreement, but a split rental agreement in terms whereof Arri
equipment is taken
on hire by the second defendant. The sole agency
agreements which the plaintiff previously enjoyed were agreements in
terms whereof
the plaintiff was entitled to
purchase
Arri cameras and lighting equipment.
[65] As to 3, Mr R Louka (“Louka”), the
managing director of Arri GB Limited testified. He was appointed to
that position in
July 2001. Prior to that the managing director had
been Mr Derrick Ross. Mr Louka has also been a director of Arri
Media since
July 2001. Mr Ross has been ill since some time in 2000
and has been working from home. Louka was accordingly responsible
for the
day-to-day running of the business of Arri GB and Arri Media.
He never had any contact with the old MCC or the new MCC. The
agreements
with Arri Germany and Arri GB were terminated upon six
months notice
in
letters to the plaintiff dated 18 and 15 May 2000
respectively. He gave the notice on
behalf of Arri GB while the notice on behalf of Arri Germany was
given by Mr Horst Bergmann,
but
clearly he and Bergmann communicated with one another before the
decisions to terminate the contracts were made. He says he took
the
decision to terminate the Arri GB’s sole distributorship agreement
with the plaintiff for the following reasons
1. Its association with Panavision.
2. He had no evidence of any sales or marketing activities within
the plaintiff to promote Arri products.
3. Changes
within the plaintiff’s organisation, in particular its association
with Panavision, which brought about changes in the
management
structure as well as the fact that there was no continuity or
relationship with anyone at the plaintiff.
4. The
last straw was the ‘rude and threatening’ correspondence
emanating from Cervo after Van Wyk had resigned.
[66] Mr
van Blerk
submitted that I should not accept Louka’s evidence as the reasons
given by Louka were unconvincing. Arri GB always had the right
to
terminate the agreement with the plaintiff and even if Van Wyk was
the source of the information concerning the plaintiff’s
preference
for Panavision, that would not be enough to justify the conclusion
that Van Wyk caused the plaintiff to lose its contract
with Arri GB.
There is certainly no evidence to suggest that anything that Van Wyk
may have done was done with the object of causing
plaintiff to lose
its contract. The fact that changes occurred in the plaintiff after
Van Wyk left also does not justify such a
conclusion.
[67] THE DUTY TO DISCLOSE AN ALLEGED FRAUD
It is of course implicit in the plaintiff’s case that the new
employment agreement was concluded at a time when there was a binding
restraint agreement in force. Having found that the restraint
terminated at the end of June 1999, the plaintiff’s claim that the
new agreement was concluded as a result of fraud falls away. I will
however deal with this aspect of the claim in case I am wrong
about
the rectification.
[68] The fraud as initially pleaded was that when Van Wyk
concluded the new employment agreement he had a duty to disclose the
following
facts to the plaintiff:
* That he intended to set up a competitive business prohibited in
terms of the restraint;
* That
he had commenced negotiations with certain of the suppliers with a
view to setting up the competitive business;
* That
he intended to conclude the new agreement solely in order to give
notice to terminate it so as to achieve a position where
he was not
bound by the restraint.
By 26 October 1999 when Van Wyk signed the new employment agreement,
no final decision had been made as to what he would do in the
future.
[69] When the matter was argued, Mr
van
Blerk
shifted his position slightly and
postulated that at the very least Van Wyk had a duty to disclose the
fact that he was no longer
interested in negotiating and wished to
proceed to terminate his employment. The plaintiff led no evidence
in rebuttal of Van Wyk’s
evidence as to what he did after his
initial resignation in September 1999. His evidence was however
challenged on the basis of
inferences which Mr
van
Blerk
asked me to draw from a number of
e-mail messages which passed between Van Wyk and Anderson, Ross and
Mr John Parsons-Smith (‘Parsons-Smith’).
The latter was the
managing director of Kodak in London. He too was a longstanding
friend of the Van Wyk family. From these he
submitted that I should
find that Van Wyk deliberately and fraudulently concealed from the
plaintiff that he was negotiating with
Anderson to set up a
competitive business and that he went through the farce of getting
the plaintiff to enter into a second employment
agreement knowing
that he would give notice of his resignation immediately thereafter.
In regard to this latter aspect it was submitted
that Van Wyk was
under the duty to disclose at least that he was no longer interested
in negotiating a new employment contract and
wished to proceed to
terminate his employment.
[70] As to the duty to disclose, there is no doubt
that no duty to disclose information rested on Van Wyk
“at
law”
. It is only when one has to do
with contracts
uberrimae fides
where such a duty arises. See R H Christie, ‘The Law of Contract’
(4
th
Edition) p320-324 and
Hoffman v Moni’s
Wineries Limited
1948 (2) SA 163
(C) at
168.
[71] Although Mr
van
Blerk
emphasised the fact that Van Wyk
was at the time an employee and a director, I do not consider that
his capacity as a director is
particularly relevant or that it
requires any special consideration to apply. The contract which was
concluded was one of employment
and did not relate to Van Wyk’s
position as a director. His position as a director is better
considered when dealing with the
alleged breach of fiduciary duty as
a director.
[72] In
Gollach &
Gomperts v Universal Mills & Produce Co
1978 (1) SA 914
(A),
Miller
JA in dealing with a pleading to the effect that errors in the
appellant’s books had been concealed from it, held at 924A
“
The
word ‘concealed’ , in the context of the appellant’s pleading,
does not in my view convey anything more than intentional
non-disclosure in circumstances where frank disclosure was clearly
called for – or, as it has frequently been said, where there
was a
duty to disclose. (Cf.
Meskin,
N.O. v. Anglo-American Corporation of S.A. Ltd.,
1968
(4) S.A. 793
(W) at pp. 796, 802D-G.)”
According to Spencer-Bower’s ‘The Law of
Actionable Misrepresentation’ (3
rd
Edition
by
A K Turner (1974)) a duty of disclosure arises in three situations:
“
(a) Where one of the negotiating parties enters upon the
negotiation laden with the duty of revealing his own previous fraud
in relation
to the subject of the contemplated contract or
transaction;
Where, during the negotiation, one of the negotiating parties
says or does something, or something happens which, having regard to
his previous declarations or acts, requires him to speak, in order
to correct or remove a delusion in the mind of the other party
for
the creation of which he is responsible;
(c) Where one of such parties is in the course
of negotiation asked a question by the other party in respect of any
matter, whereupon
a duty is incumbent on the first party, if he
answers the question at all, to answer it truthfully and fully.”
(At p206.)
[73] For the plaintiff to succeed it must at the
very least
establish
that when Van Wyk concluded the
new
employment agreement, he intended to set up a business in competition
with the plaintiff as soon as the new contract would permit.
To
overcome the evidence given by Van Wyk to the effect that this was
not so, Mr
van Blerk
submitted that plaintiff’s intention was to be inferred from
certain e-mail communications which had passed between him and
Anderson,
Ross and Parsons-Smith during September and October. The
first was addressed to Anderson on 15 September on his return to
South
Africa. Under the heading ‘New Beginnings – Media headed
south’, it reads
“
Dear Graham
Just a word to catch up. I see my lawyer tomorrow morning. I
have prepared everything for him today. So hold thumbs, as soon as
he gives me the go-ahead we are on!
Before
we pursue a dream, I want to make dead certain that I do not end up
letting you down on a technicality.
Once
again, thank you for your support.
Regards Jannie”
Anderson’s reply on 16 September reads
“
Dear Jannie,
Good
luck with the lawyer and I will do everything I can this end to make
your venture a success, I can assure you of that.
I
am preparing some costings and found your price list very
interesting.
Could
you advise me about something? How many days per week do you charge
for your 16 and 35mm Equipment?
Would
have a need for DVW700 cameras on a regular basis?
Look
forward to hearing from you.
Regards,
Graham.”
Van Wyk in turn responded on the same day in the following terms
“
Dear Graham
Thank you for your prompt response.
4-day
week is normal.
For
shoots of less than 2 weeks, the max discount is 30%. For features
of 5 weeks plus, discounts of about 50-60% are the order.
The
Sony 700’s are very popular, would definitely work.
Look
after yourself,
Jannie.”
Then on 25 September the following communication was addressed to
Ross
“
It was wonderful to speak with you today. I trust that I will
have more news soon and that I do not frustrate you in the process.
Please
reply to this email, as it is a test.
Please
convey our kind regards to Susan.
Regards
Jannie”
On 3
October under the heading ‘Standby!!!’ the following
communication was addressed to Parsons-Smith.
“
Dear John
With sadness and disappointment I resigned from MCC on Friday. I
have a lot of legal issues to work through, but I am proceeding
as
fast as possible. I should conclude my services to MCC at the end of
the month.
I
am in touch with Derrick, and have filled him in on all the detail so
far. I should be in a far better situation to comment at
the end of
this coming week. Neil, Bryan and Johan have decided to join Media
Film Services, and look forward to the future challenges.
I
will make contact shortly
Thank
you for you support!!!!
Regards
Jannie”
(
“Neil”
is du Toit.
“Bryan”
is Longmuir.)
On the same day, also under the heading Standby the plaintiff wrote
as follows to Anderson.
“
Dear Graham
I hope that you are well. I am sorry about the delay in
communication but I have been in touch with Derrick and maintaining a
low
profile.
I
tendered my resignation on Friday and am preparing myself for any
legal dispute. I have filled Derrick in with an up to date version
of
the overall plan, but I will be in a much better position to comment
at the end of this coming week, so please do not lose patience
with
me.
I
have defined a team, and a plan. It is now up to me to action them.
Equipment lists are in the process of being compiled and will
be
ready at the end of the week. I am ever cautious not place this
project in jeopardy and am pursuing every possible route to ensure
the best solution.
I may be in a position to assist you with your Ireland project for
a month or two while my team sets-up the company in Cape Town.
But
lets see how things pan out from here.
Look after yourself
Regards
Jannie”
Then on
24 October under the heading ‘Gear List’ the following
communication to Anderson
“
Dear Graham
Thank you for your E-mail.
I
had dinner with Derrick and Susan last night. It was great to see
him. I have compiled an absolute first prize list, some of which,
I
am sure you don’t have even after all this time.
This
equipment will immediately make us independent and very, strong.
In
the real world it does not work like that I know, but this is the
high road which we will always strive towards.
Please
look at this dream list and indicate the equipment which you can
definitely assist us with, so that we can begin to source
the balance
of equipment and the necessary cash to purchase what ever sundries
are not available.
The plan would be to be up and running by 1
March 1999.
(This should obviously be 1
March 2000.)
I resigned on 1 October 1999, but after long negotiations
regarding my contractual obligations to MCC, it was agreed to declare
any
such contracts null and void, on condition I sign a new contract
with a 3 month resignation clause. So now that I received the
original
paper work from them yesterday, I will repeat the process of
resignation on 1 November 1999, to be totally free as of 1 February
2000.
Derrick
indicated that this may actually be a better arrangement as it allows
more time to accrue the equipment.
The
biggest problem is that it does not give us the whole season to
maximise our turnover. The plan may be to bring in the equipment
that is always in demand and bring in the remainder of the gear as
and when it is required. The biggest bonus will be that VFG shall
remain out of the market, AFM will be even more conservative and we
will have made our mark. People and clients are expecting big
things. The client base will support us if we can deliver and do not
jeopardise their jobs by not being able to supply. We shall
market
ourselves as high end rental, and we can rely on client loyalty.
Once all our clients realise that we are trading, we will be in
great shape for the following season, after servicing some
commercials
and TV dramas in the dead of winter. With Kodak, lights,
grips and camera we turned 150 000 pounds in our worst month, so 80K
pounds
is the number to reach for.
I
am compiling a business plan as we go along and especially now that I
will become unencumbered, the dream becomes reality.
Have a look into the Dream gear list, try not
to laugh to
(sic)
loud,
and lets see where we get to on a first run.
Have
a great weekend. Thank you for your help.
Regards
Jannie
PS
NEW news – AFM has bought Filmair Cameras.”
[74] His explanations in regard to the e-mails to
Anderson were that the correspondence in September was intended to
make it clear
that he would seriously consider the offer which
Anderson intended to make and that the correspondence in October was
addressed with
the view to exploring the viability of the proposed
venture. As far as Longmuir and Du Toit were concerned, his
explanation was
that he had accepted that they
would join him if he decided to go on
his own and it was for that reason that his e-mails were to the
effect that an agreement had
been reached that they would join in,
although he had in fact made no specific and final arrangements with
them at the time. He
says that he did not give the price list to
Anderson, but that this was readily available to him from various
sources. He ultimately
needed to know what equipment Arri Media
would be prepared to supply in order to make a final decision as to
whether he could go
ahead with Arri Media. His evidence was further
that in October considerable discussion was taking place amongst the
plaintiff’s
senior staff about the possibility of a management
buy-out. This was being investigated by Cervo who reported to him
from time to
time and who would himself have been involved in the
buy-out had it eventuated. Towards the end of October, Van Tonder,
Van Wyk
and Cervo also
met
and discussed the possibility of starting another rental company. At
that time there was also a possibility of Sasani being taken
over by
the financial institution known as Coronation.
[75] Cervo
confirmed that when Van Wyk finally resigned, the issue of the
management buy-out was still very much alive and he accordingly
asked
Van Wyk not to make his resignation public until the issue of the
management buy-out had been finalised and until certainty
had been
obtained about the Coronation bid. Van Wyk testified that if the
management buy-out had eventuated he would certainly have
been part
of it and would not have proceeded along the new route with Arri
Media. When nothing came of the management buy-out his
resignation
was made public on 14 December 2000. He says that while the
discussions were taking place he had no further contact
with Arri
Media and that the discussions with the latter were only resumed on
16 December.
[76] The
fact that he intended to work the minimum period the new contract
would allow does not make his conduct unlawful. When he
resigned in
terms of the new agreement his resignation was certainly not regarded
as being unlawful on the basis which is now argued.
It did not
surprise Cervo and in the last week of January the management gave a
farewell party for him and Cervo himself presented
him with the
laptop computer which he had been using. This conduct by the
plaintiff is certainly inconsistent with a subsequent
election by the
plaintiff to avoid the new contract on the grounds of fraud.
[77] A decision on this aspect of the case depends
on my assessment and evaluation of Van Wyk’s evidence and his
performance in
the witness box. He gave evidence for the best part
of three and a half days during which I obviously had ample
opportunity to observe
him. I found him to be a satisfactory witness
who had no difficulty in remembering events, figures and
conversations. His explanation
as to why his e-mail messages were so
positive is less satisfactory, but the wording may well have been
designed simply
to
make a good impression. The fact is, however, that he never regarded
himself as being bound to the plaintiff after 30 June 1999
and Cervo
knew, certainly by
no
later than 3 October, that Van Wyk was likely to challenge any
attempt to hold him to the restraint. The conclusion of the new
contract of employment was not of Van Wyk’s making. He had
resigned and had indicated that he was leaving and had told his staff
this. The initiative for
the
new contract came from Cervo. That being so, why should it be
fraudulent to conclude a contract, which, as far as he was concerned,
simply placed him in the position which he believed he should have
been in
all
along? The fact that the new contract brought with it the removal of
the threat of the restraint agreement meant of course that
he would
not have to challenge the validity of the restraint, but I fail to
see why in the peculiar circumstances which led up to
the signing of
the new agreement he should have been obliged to say to the plaintiff
that he did not wish to sign the new agreement.
Van Wyk’s attitude
was that by offering him a new contract free of any restraint, the
plaintiff was simply indicating that it
had been wrong about the
restraint. I also cannot find, as I was urged to do by Mr
van
Blerk
, that by 1 October 1999 Van Wyk
had devised a specific strategy to rid himself of the restraint
agreement. In any event, it is difficult
to imagine what that
strategy would have been. I accordingly conclude that the plaintiff
has failed to establish fraud on the part
of Van Wyk.
[78]
COSTS
It follows from the aforegoing that the defendants are entitled to
an order for costs, including the costs of the application and
the
costs of bringing two witnesses from the United Kingdom to testify in
this court. The matter was a lengthy and complicated one,
which
clearly justified the costs of employing two counsel
[79] To
return to the issues which I was requested to deal with, I find as
follows:
The restraint was not binding to the extent that it purported to
bind the first defendant beyond 30 June 1999.
The first defendant is entitled to rectify the restraint agreement
by altering clause 1.1.11 to read:
“ ‘
restraint period’ means a period of 30 months calculated
from the effective date”
In
the light of my findings in regard to the rectification of the
restraint, payment of the restraint consideration and the
stipulatio
alteri
, it is not necessary to decide
whether the restraint would be void for unreasonableness.
In view of my finding in regard to the rectification the defence of
alleged non-payment of the consideration falls away. Should
I be
wrong in respect of the rectification, the first defendant would be
entitled to avoid the obligations under the restraint
by reason of
the non-payment of the consideration.
I should add that in such event the first
defendant would also be entitled to avoid the restraint by reason of
the failure by the
plaintiff timeously to accept the benefits of the
stipulatio alteri.
The first defendant did not breach his duties as director and
employee for the reasons set out in the judgment. For the purposes
of the judgment it is not necessary to decide precisely what the
defendant’s duties as a director and employee were.
Since fraud on the part of the first defendant was not established,
the plaintiff is not entitled to avoid the second employment
contract.
The first defendant’s conduct, as described in the judgment, was
not wrongful.
Since the first defendant is not liable to the plaintiff, the second
defendant is also not liable.
[80] The plaintiff is ordered to pay the defendants’ costs,
including the costs of the application in case number 5270/2000 in
the High Court of South Africa (Witwatersrand Local Division) and
case no 2284/2002 in this court, such costs to include the costs
attendant on the employment of two counsel. Messrs Anderson and
Louka are declared to be necessary witnesses for the defendants.
___________________
R B CLEAVER