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[2015] ZAWCHC 166
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Blastrite (Pty) Ltd v Mineral Sands Resources (Pty) Ltd and Others (21897/15) [2015] ZAWCHC 166 (9 October 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
WESTERN CAPE DIVISION,
CAPE TOWN
Case number: 21897/15
DATE: 09 OCTOBER 2015
In the matter between:
BLASTRITE (PTY)
LTD
.........................................................................................................
Applicant
And
MINERAL SANDS RESOURCES (PTY)
LTD
.........................................................
First
Respondent
MINERAL COMMODITIES
LTD
.........................................................................
Second
Respondent
GMA GARNET (PTY)
LTD
......................................................................................
Third
Respondent
GARNET INTERNATIONAL RESOURCES (PTY)
LTD
...................................
Fourth
Respondent
MRC TRADING (AUST) (PTY)
LTD
........................................................................
Fifth
Respondent
TORMIN MINERAL SANDS (PTY)
LTD
................................................................
Sixth
Respondent
STEENVAS TRADING
CC
....................................................................................
Seventh
Respondent
PIETER
STEENKAMP
............................................................................................
Eighth
Respondent
JOHAN ANTON
STEENKAMP
................................................................................
Ninth
Respondent
Judgment Delivered: 09 October 2015
LE GRANGE, J
Introduction:
[1] At the heart of this application
for final relief is the interpretation of clause 10 of a
confidentiality agreement concluded
between the Applicant (Blastrite)
and the First Respondent (“MSR”) on 13 June 2008. The
substratum of Blastrite’s
case is that clause 10 of the
confidentiality agreement properly interpreted imposes an obligation,
albeit a negative one, upon
MSR preventing it from dealing with third
parties, other than Blastrite, in regard to the discussion of ideas,
plans, products,
formulations, packaging, processes and operational
arrangements relating to any potential garnet at a mineral sand mine
(“the
Tormin mine”) about 400 km from Cape Town on the
West Coast in respect of which MSR has registered mining rights.
[2] The terms of clause 10 upon which
Blastrite relies records the following:
“Neither Party shall be under any
obligation to accept any offer or proposal related to the Project.
However, the Parties
undertake to deal with each other exclusively in
relation to Project and immediately advise the other Party in writing
of any approach
from a third party which may be construed as being
associated with the Project”.
[3] In terms of the contract “Project”
is defined as follows:
“the discussion and consideration
by Blastrite and MSR of ideas, plans, projects, products,
formulations, packaging, processes
and operational arrangements
relating to any potential garnet and or other abrasive media resource
that may be present in or on
the beach deposit located within the
Tormin mineral sands prospect.”
[4] Blastrite initially sought interim
relief on an urgent basis against the Respondents. At the hearing on
19 December 2014, Blastrite
withdrew the interim Application and
tendered the Respondents’ costs. Blastrite on the same founding
papers re-enrolled the
matter for final relief and the matter was by
agreement set-down for hearing on 25 and 26 February 2015.
[5] On 25 February 2015, at the
commencement of the hearing, Blastrite made an Application that
certain issues be referred to oral
evidence as the Respondents denied
material allegations made by it. According to Blastrite, after having
regard to the papers filed
on behalf of the Respondents, in
particular that of MSR, the Second Respondent (“MCL”) the
Fifth Respondent (“MRC
Trading”) and the Sixth Respondent
(“Tormin”), which were collectively termed the MCL
parties, it came to realize
there are reasonable grounds to doubt the
correctness of the allegations made by the MCL parties. The main
grounds upon which Blastrite
relied for the referral to oral evidence
were encapsulated in its final replying affidavit where the following
was recorded: “In
regard to the circumstances in which clause
10 and the agreement came into being, there is a dispute about
whether Blastrite offered
confidential information and valuable
know-how to MSR. In regard to the extent, manner and timing of the
discharge by the parties
of their obligations, there are disputes
about when the parties discharge their obligations in terms of the
agreement (whether
in 2008 or that they still were exchanging
confidential information in 2014). In regard to the subsequent
conduct of the parties,
there are disputes about the effect of the
MOU [Memorandum of understanding] on the agreement, and whether
Blastrite somehow has
lost its clause 10 rights. In relation to the
MOU, there is also an issue whether or not MSR is or was a subsidiary
of MCL, an
issue which cannot be resolved without oral evidence”.
It was also averred that the version of the MCL parties is
contradicted
by the Seventh to Ninth Respondents (“the
Steenkamps”). The Application for referral to oral evidence was
opposed by
the Respondents. After having heard argument the following
issues were referred to oral evidence, namely:
5.1 whether MSR and MCL intended to
generate revenue from garnet at the time at which they first were
approached by Blastrite in
2008, and at the time of the conclusion of
the contract to which Blastrite and MSR are party in June 2008;
5.2 whether the rationale for clause 10
of the contract was that Blastrite was to commit significant
resources to the project, in
return for which MSR was to keep
disclosure made to it by Blastrite in confidence, and refrain from
dealing with third parties
in relation to garnet;
5.3 when confidential information most
recently was provided by Blastrite to MSR; and
5.4 whether MSR is a party to the MOU,
or estopped from asserting that it is.
The Parties:
[6] Mr. Andrew Lashbrook (“Lashbrook”),
the erstwhile Chief Executive Officer of Blastrite, deposed to the
founding
and replying affidavits on behalf of Blastrite. Lashbrook,
in citing the parties, recorded that Blastrite is a private company
with its registered office in Cape Town. The main business of
Blastrite was indicated as being the manufacturing, processing and
distribution of granular abrasives commodities and it was described
as owning three mineral processing facilities in South Africa,
which
mostly supply shipping, construction, mining and other industries
with its products.
[7] MSR is a private company and has
its registered office in Cape Town. In the founding affidavit it was
recorded that MSR is a
South African registered subsidiary company of
the Second Respondent and holding a portion of the mining rights to
Tormin mine.
Lashbrook until September 2014 was also a director of
MSR. In the first replying affidavit, Blastrite altered its position
and
asserted that MSR is not a subsidiary of the Second Respondent. A
dispute arose between the relevant parties as to whether MSR is
indeed a subsidiary of the Second Respondent. As the issues in casu
unravelled, the question whether MSR is indeed a subsidiary
became
one of the determinant issues for consideration and I will return to
it.
[8] The Second Respondent is (“MCL”)
a company registered and incorporated in Australia and listed on the
Australian
Securities Exchange. The Third Respondent is GMA Garnet
Proprietary Limited (“GMA”) and registered and
incorporated
in Australia. The Fourth Respondent is Garnet
International Resources Proprietary Limited (“Garnet
International”).
Garnet International is a company registered
and incorporated in Australia. The Fifth Respondent is MRC Trading
(Aust) Proprietary
Limited (“MRC Trading”) and registered
and incorporated in Australia. The Sixth Respondent is Tormin Mineral
Sands
(Proprietary) Limited (“Tormin”), a private company
with its offices in Cape Town. According to the Blastrite founding
affidavit, Tormin is a wholly owned subsidiary of MSR and the holder
of the remaining mining rights to the Tormin mine. Despite
the
distinct mining rights, Tormin is being operated as one entity by MSR
and Lashbrook was until September 2014 a director of
Tormin.
[9] The Seventh Respondent is Steenvas
Trading Close Corporation (“Steenvas”), a close
corporation, in terms of the
Close Corporations Act 69 of 1984
, with
its registered address in Vredendal, Western Cape. The Eighth
Respondent is Pieter Steenkamp (“Steenkamp”), and
is
associated with the Seventh Respondent. The Ninth Respondent is Johan
Anton Steenkamp, the sole member of Steenvas, and the
father of
Steenkamp.
[10] According to Blastrite no relief
is sought against MCL, GMA, Garnet International, Tormin, Steenvas,
or the Steenkamps. They
are cited insofar as they have an interest in
this matter.
The relief sought:
[11] Blastrite seeks final interdictory
relief. In the notice of Motion, Blastrite sought, before amending
its relief, inter alia,
an order against MSR to not deal with any
entity or person other than Blastrite in relation to the discussion
and consideration
of ideas, plans, projects, products, formulations,
packaging, processes and operational arrangements relating to any
potential
garnet and or other abrasive media resource that may be
present in or on the beach deposit located within the Tormin mineral
sands
project. Blastrite further sought an order that MSR may not
renew the written garnet off-take agreement to which MSR and MCL (as
seller), and GMA or Tormin (as buyer), are party (“the GMA
agreement”) for the period 1 July 2015 to 30 June 2016 or
thereafter.
[12] According to Blastrite’s
founding affidavit the Steenvas CC and Pieter Steenkamp were cited
because MSR has mooted the
sale of garnet from its Tormin mine to
them.
[13] Blastrite, in its first Replying
Affidavit, amended the initial relief it sought and records that it
now seeks an interdict,
firstly to prevent MSR from dealing with
anyone other than Blastrite in relation to garnet extracted from
Tormin, save that the
Ninth Respondent would be entitled to remove
600 tons of heavy minerals from Tormin and, secondly, that MSR is
prevented from renewing
its agreement with GMA.
Counsel:
[14] Messrs. L Kuschke, SC assisted by
R Patrick appeared for Blastrite. Messrs. P B Hodes, SC assisted by L
C Kelly appeared for
the First, Second, Fifth and Sixth Respondents,
also referred to as the MCL parties. Messrs. I Jamie, SC assisted by
B Studti
appeared for the Third and Fourth Respondents. Messrs. M
Seale and H Jansen van Rensburg appeared for the seventh,
eighth
and ninth Respondent (“the Steenkamps). Comprehensive
heads of argument were filed by Counsel, including supplementary
notes
after argument was heard. I wish to extend my gratitude to
Counsel in this regard as it was of great assistance in preparing the
judgment.
Evidence:
[15] Lashbrook was the only person who
gave viva voce evidence. He was extensively cross-examined by
counsel, in particular by Mr.
Hodes who appeared for the MCL parties.
It was only counsel for the Steenkamps who elected not to
cross-examine Lashbrook. Mr.
Victor Caruso (“Caruso”),
the executive chairman of MCL and director of MSR, MRC Trading and
Tormin, deposed to the
answering affidavits on behalf of the MCL
parties. Mr. Torsten Ketelsen (“Ketelsen”), as group
managing director of
GMA and Garnet International respectively
deposed to the answering affidavit. The opposing affidavit of the
Steenkamps was deposed
to by Mr. Pieter-Lens Steenkamp, the Eighth
Respondent.
The Defences
[16] The Respondents raised a number of
defences and contended that notwithstanding the leading of oral
evidence by Blastrite the
relief sought is without merit and ought to
be dismissed. The main defences raised inter alia are as follows.
Firstly, that clause
10 of the confidentiality agreement does not
confer the right of exclusivity as contended by Blastrite. Secondly,
the commercial
relationship between Blastrite and the MCL parties
changed significantly from June 2008 in that Blastrite and the MCL
parties negotiated
and ultimately concluded a memorandum of
understanding (“MOU”) on 6 August 2012. According to the
MCL parties, GMA
and Garnet International, clause 19 of the MOU is
fatal to Blastrite’s case as it provides that all prior
agreements, which
would include the confidentiality agreement, are
superseded by the MOU. Thirdly, the Steenkamp Respondents contended
they had pre-existing
rights to the mineral resources of which
Blastrite was fully aware before launching these proceedings, and
despite Blastrite’s
partial recognition thereof in its amended
relief, its pre- existing rights prohibit the granting of the final
relief sought. Furthermore,
Blastrite’s application is a
thinly-veiled attempt at engineering and enforcing a restraint of
trade where none is justified.
Lastly, according to the Steenkamps,
the confidentiality agreement relied upon by Blastrite only prohibits
the divulging of confidential
information, if anything, and not trade
in garnet with Third Parties.
Background to the mining rights:
[17] Before dealing with the affidavits
of Blastrite and the viva voce evidence of Lashbrook it is perhaps
convenient to state the
background to the mining rights of MSR and
Tormin that was not seriously challenged and as recorded by Caruso in
his affidavits:
[18] MCL is an Australian public
company and is listed on the Australian Securities Exchange under ASX
Code- MRC. [In certain documents
the Second Respondent is also
referred to as MRC. For ease of reference I will remain with MCL as
reference to the Second Respondent].
MCL is, through a wholly owned
South African incorporated company, MRC Resources (Proprietary)
Limited (“MRCR”), the
legal and beneficial owner of 100
ordinary fully paid shares in the capital of MSR, representing 50% of
the issued share capital
of MSR. The other 50% is being owned by Blue
Bantry Investments 255 (Proprietary) Limited (“Blue Bantry”),
the Black
Empowerment Partner of MCL in the Tormin project.
[19] MSR was granted a mining right WC
162 MR. Tormin Mineral Sands (Pty) Ltd (Tormin), a wholly –owned
subsidiary of MSR,
holds mining right WC 163 MR to the Tormin mine.
In terms of its mining rights and the environmental management
programme dated
July 2007, MSR mines and processes heavy minerals
which include zircon, ilmenite and rutile. By-products of the
processing of heavy
minerals include tailings and concentrates
containing garnet, ilmenite and zircon. MSR and Tormin have therefore
the sole right
to mine and process heavy minerals and garnet from the
Tormin project.
[20] Caruso described the rights of the
Steenkamps as follows. In May 2003 Steenvas CC (“Steenvas
Corporation”) entered
into a written agreement with MSR (“2003
Agreement”) pursuant to which the parties agreed that:
20.1 MSR may apply for a mining licence
in terms of which it would be entitled to mine in an area which is
the subject of an existing
mining right held by Steenvas Corporation;
20.2 the Steenvas Corporation would be
entitled to continue the removal of up to 600 tons per annum of heavy
minerals mined in an
area between the high water mark and low water
mark of the sea without paying any consideration therefor except the
royalties payable
on such heavy minerals to the Government of the
Republic of South Africa; and
20.3 the Steenvas Corporation would
have the sole and exclusive right to extract and remove an amount of
tailings containing garnet
from the MSR plant subject to MSR’s
environmental management plan.
[21] In September 2005 the Steenvas
Corporation was converted into a private company, Steenvas
Proprietary Limited (“Steenvas
Company”). On 12 December
2006 MSR, the Steenvas Company and others entered into an addendum to
the 2003 Agreement, updating
and amend it (“the 2006
Agreement”). In particular it was agreed that:
21.1 MSR would acquire 100% of the
issued share capital of the Steenvas Company;
21.2 MSR granted to Anton Steenkamp,
the Ninth Respondent, the right to continue uninterruptedly and
indefinitely thereafter to
remove up to 600 tons of heavy minerals
per annum without consideration; and
21.3 Anton Steenkamp would have the
sole and exclusive right to extract and remove an amount of tailings
containing garnet from
the MSR plant to be established by MSR.
[22] On 27 November 2008 the Department
of Minerals and Energy (“DME”) converted the mining
licence of the Steenvas
Company in terms of item 7 of Schedule ll to
the MPRDA (Mineral and Petroleum Resources Development Act 28 of
2002) into a mining
right, which was registered on 12 October 2011.
The name of the mining right holder was also changed from the
Steenvas Company
to Tormin.
[23] On 27 November 2008 the DME
granted the MSR Mining Right.
[24] A legal opinion was also sought of
the Steenkamps’ rights in respect of the 2003 and 2006
Agreements between MSR and
Tormin to remove up to 600 tons of heavy
minerals per annum from the Tormin mine. According to the opinion the
Steenkamps’
rights in terms of the agreements were confirmed.
Testimony of Lashbrook:
[25] Lashbrook testified at length
regarding the events leading up to the signing of the confidentiality
agreement on behalf of
Blastrite, the MOU and to certain subsequent
conduct of the parties that ultimately resulted in Blastrite
instituting these proceedings.
Reference was also made to a multitude
of e-mails and other correspondences between the relevant parties.
The testimony of Lashbrook
with reference to Blastrite’s
founding affidavit, briefly stated, was the following. Lashbrook was
admitted in 1993 as an
attorney. He soon left the legal profession to
start his own business in the shoe manufacturing industry. He sold
that business
and joined Rand Merchant Bank as an investment Banker
in mergers and acquisitions and worked there for approximately five
years.
Thereafter he was involved with other successful business
ventures until he joined Blastrite in 2007. He confirmed the contents
of the affidavits he deposed to in this matter. He confirmed
Blastrite’s dealings with MCL which began in 2008. According
to
Lashbrook, garnet is heavy mineral sand, commonly found amongst other
valuable mineral sands such as zircon, rutile and ilmenite.
He
approached MSR as Blastrite needed a supply of garnet in the conduct
of its business. According to Lashbrook at the time he
approached
them in 2008 MCL and Tormin considered garnet a by -product with no
value. As a result MCL and Tormin had no plans at
the time to extract
garnet, produce a garnet concentrate and or to generate revenue from
the garnet, although according to Lashbrook
‘there were obvious
synergies’. Lashbrook testified that Blastrite had the know-how
of considerable value and facilities
to produce a finished garnet
product from garnet concentrate and the Tormin mine offered Blastrite
the opportunity to source a
garnet off-take from it.
[26] Blastrite and MSR concluded the
confidentiality agreement on 13 June 2008. Blastrite was represented
by Lashbrook and MSR by
John Barnes (“Barnes”) –
the general manager of MCL’s interests in South Africa at the
time, in concluding
the agreement. According to Lashbrook the
rationale for the agreement was that Blastrite would make available
to MSR its expertise
in yielding a revenue stream from the garnet.
Blastrite anticipated committing significant resources to the
project, for the prospect
of the garnet off-take. Blastrite, in
return for its commitments, required the assurance that MSR, at the
very least, would keep
disclosures made to it in confidence, would
not make the garnet off-take available to any other person, and for a
period of five
years after the agreement had been terminated for any
reason.
[27] Lashbrook testified that after the
conclusion of the confidentiality agreement, further discussions and
negotiations of potential
opportunities took place between the
parties. Nothing concrete came of these discussions. Lashbrook also
referred to an e-mail
he forwarded on 9 July 2009 to Steemsen of the
MCL parties about concerns that unlawful mining activities were
occurring at Tormin
mine and recorded in the email [letter] that he
wanted to protect Blastrite’s position in the garnet industry
and make sure
no one else obtained garnet in priority to Blastrite.
He further referred to a proposal whereby Blastrite wanted to acquire
the
Tormin mine from the MCL parties via an entity referred to as
NewCo. The NewCo discussions collapsed during 2010 when Lashbrook
was advised by Caruso that the deal was not acceptable and there
would be no need to engage on the issue further.
[28] In November 2010, however, MCL
accepted a proposal from Blastrite to project manage the permitting
process for the Tormin mine.
Blastrite assumed management of this
aspect of the project in January 2011, and obtained the necessary
regulatory approvals for
the Tormin mine in August 2012. This
resulted in Blastrite, represented by Lashbrook, and MCL, represented
by Peter Torre, concluding
a written memorandum of understanding on 6
August 2012 (“the MOU”) to regulate the next stage of
their relationship.
According to Lashbrook the MOU was intended to be
a precursor to a comprehensive written agreement in terms of which
MSR would
supply garnet emanating from the Tormin mine to Blastrite
exclusively. Lashbrook stated that in obtaining the regulatory
approvals
for the Tormin nine, the board of MCL had appointed him as
Chief Executive of MCL in late 2012. According to him until he became
executive there was never any direct relationship between Blastrite
and any of the MCL‘s subsidiaries. He further stated
that he
played a leading role in raising the necessary capital to develop the
project and, with the Blastrite team, managed the
construction of the
mine in 2013.
[29] According to Lashbrook the MOU
provided that it lapsed on 11 September 2013 unless otherwise agreed
and given the focus at
that time was on the construction of the
Tormin mine, the parties indeed agreed otherwise. Lashbrook stated
the parties continued,
after 11 September 2013, in the same manner in
which they previously had done, tacitly extending the period of the
MOU and continued
to negotiate comprehensive written agreements well
into 2014. Lashbrook states that at the official opening of Tormin on
21 March
2014 Caruso confirmed to the chair of Blastrite, John
Haldane, that “the garnet is yours”. According to
Lashbrook,
Blastrite had no doubt that the conclusion of a
comprehensive written agreement, conforming to the provisions of the
MOU, would
be a mere formality. However, negotiations, to conclude a
comprehensive written agreement dealing with the supply of garnet to
Blastrite, shortly thereafter, came to an impasse. Lashbrook in the
founding affidavit recorded that the main reason for this impasse
was
that MCL and or MSR proposed terms that did not conform to the MOU,
such as those terms to do with limitations on the term
of the
agreement, and an annual re-negotiation on key elements, including
the sale price of the garnet. As these terms did not
conform to the
MOU, Blastrite was unwilling to accept them and Lashbrook on 4 July
2014 at a meeting in Cape Town withdrew all
offers in relation to the
purchase of garnet concentrate. Lashbrook testified that he first
became aware of the MCL parties’
intention to conclude the GMA
agreement on or about 26 June 2014.
[30] In the founding affidavit
Lashbrook attached an organogram of the company structure of MCL and
stated that MSR is a subsidiary
of MCL. This was done with reference
to the resolution by Blastrite to institute legal proceedings against
MCL and all its subsidiaries.
Blastrite in its first replying
affidavit changed its position and in paragraph 29.3 records that
“MSR is not named in the
MOU as a party. Nor does the reference
to subsidiaries include reference to it. It is not a subsidiary of
MCL, because it is only
50% owned by MCL’s subsidiary MRC
Resources, and is only 50% controlled by the MCL parties.”
[31] Lashbrook, to affirm the
contention that MSR was not a party to the MOU, also made reference
to discovered documents by the
MCL parties which illustrate that the
shareholders’ agreement, which gave MRCR control of MSR, was
only concluded on 26 September
2014, after the conclusion of the MOU
and that MSR registered its Memorandum of Incorporation after the
signature of the MOU.
[32] Lashbrook further attested that,
in April 2014, MCL and MSR became aware that heavy minerals can be
exported via the Saldanha
Port in South Africa whereas previously the
garnet concentrate needed to be processed in South Africa at a
process plant such as
Blastrite. Furthermore, Blastrite found out
that on 14 July 2014 MCL and its subsidiary company MRC Trading had
concluded the GMA
agreement with GMA and or Garnet International. The
agreement is a non-exclusive supply agreement of garnet, as it makes
provision
for the supply of 60 000 tons of the product to Blastrite.
[33] Lashbrook also gave evidence
regarding a letter written by the MCL parties’ attorneys, Hogan
and Lovells, on 26 November
2014. According to Lashbrook, Blastrite
understood from the letter that MSR was not a party to the MOU and
this resulted in Blastrite
not bringing a winding up application
against MSR and MRCR. Lashbrook further testified that Blastrite
suffered prejudice in that
it has thus far spent millions of rand in
legal fees.
[34] Lashbrook further gave evidence
that a marketing agreement was concluded to give effect to the sale
of MSR’s garnet concentrate
by MRC Trading pursuant to the GMA
agreement and that Tormin is a party to the marketing agreement.
Lashbrook also stated that
in early December 2014 he was informed by
Pieter Steenkamp that the Steenkamps and or Steenvas would acquire
the right to 1000
tons per month of garnet concentrate from MSR.
[35] In the founding affidavit,
Lashbrook recorded that there had been breach of clause 10 of the
agreement in that “..MSR
has not dealt with Blastrite
exclusively. MSR did not advise Blastrite in writing when it was
approached by GMA and or Garnet International,
or Steenvas and or the
Steenkamps.”
[36] In cross- examination a number of
e-mails and other correspondence between the MCL parties and
Blastrite were shown and put
to Lashbrook to, inter alia,
demonstrate: firstly, that MSR is for all intent and purposes a
subsidiary of MCL Trading; and secondly,
that the factual matrix
within which the confidentiality agreement was concluded was with the
purpose of protecting MSR’s
confidential information whilst
Blastrite and MSR explored the possibility of a future commercial
relationship; and, finally, that
Blastrite, prior to the launch of
this application, gave no consideration to the right of exclusivity
but believed it had a claim
that was enforceable against the MCL
parties under the MOU, until it consulted with its legal
representatives when it was established
that it had no rights under
the MOU.
[37] Lashbrook drafted the
confidentiality agreement and signed it on behalf of Blastrite. In
cross-examination he confirmed that
as an ex-investment banker and a
trained lawyer he was ‘acutely aware of public sensitive
information’. He further
confirmed that the confidentiality
agreement was prepared in order to progress forward and that
sensitive public information regarding
studies in terms of the
assessment of garnet, products and production techniques of MSR
needed to be protected. Lashbrook was also
cross-examined regarding
an e-mail he wrote in his capacity as CEO of Blastrite to Barnes of
MSR in April 2008. In this e-mail
the confidentiality agreement was
attached for signature, and the following was recorded by Lashbrook:
“..As a bit of background, I have
made the document quite tight and legalistic on the basis that MSR
forms part of a larger,
listed entity and that it would therefore be
more important to carefully safeguard any information previously
divulged to us or
may be provided to us through visits to the beach
or through discussions with Batemans, etc. The major rationale for
the document
in its current form is therefore my best effort to
ensure that you and MSR feel you are protected than any other devious
intention
of mine.”
[38] Lashbrook confirmed that pursuant
to the abovementioned e-mail, on 3 June 2008 (prior to the conclusion
of the confidentiality
agreement), Blastrite’s Chairperson,
John Haldane, e-mailed Caruso of MCL in relation to the
confidentiality agreement and
referred to the need of a feasibility
study and formal testing of a sample at the Tormin mine. Haldane also
stated that Blastrite
was “keen to enter into a formal
agreement with you on a win–win situation for the mining,
processing and marketing
of Garnet abrasives purposes’. He
further confirmed that Caruso responded in a follow-up e-mail on 4
June 2008 wherein it
was recorded that only upon the conclusion of
the confidentiality agreement would a report of a company named RSV,
who did work
for the MCL parties, be released to Blastrite in order
to “..understand the processing objectives and deliverables
with a
view to present a proposal to process this material.’
[39] It was further conceded by
Lashbrook that pursuant to the conclusion of the confidentiality
agreement on 13 June 2008, the
MCL parties released various expert
reports to Blastrite for consideration, which included, amongst
others, the feasibility study
report by Batemans in respect of the
Tormin Project and information from a firm named MSP Engineering.
[40] Lashbrook was also cross-examined
regarding correspondence between Blastrite and the MCL parties that
had taken place, since
August 2010, including correspondence prior to
the launch of the application. In these e-mails which largely
emanates from Blastrite
no assertion or reliance was placed by
Blastrite on the confidentiality agreement and the purported right to
exclusivity. In this
regard various correspondences were put to
Lashbrook. Reference was made to an e-mail of 13 August 2010 wherein
Blastrite offered
certain services to MCL after establishing MCL
intended to develop the Tormin mine. An email on 9 June 2014 was
delivered, when
Blastrite discovered that the MCL parties were
negotiating the terms of a garnet off-take agreement with GMA. In
this letter Blastrite
recorded inter alia that it was their wish and
objective to acquire all the garnet and attempted to compete with the
pricing offered
by GMA for the garnet product, and it tried to
negotiate an outcome in terms of which it might purchase garnet from
MCL in conjunction
with GMA. Lashbrook also conceded that as early as
April 2014 he had been involved in discussions with the MCL parties
regarding
their intention to conclude a garnet off-take agreement
with GMA. In an e-mail on 30 June 2014 Blastrite delivered a formally
purported
“without prejudice” letter regarding the garnet
concentrate off-take. In this letter Blastrite highlighted the
agreement
as enshrined in the MOU. Similarly, on 19 August 2014
Lashbrook wrote a letter to the board of directors of MCL as a result
of
the conflict that had developed between MCL and Blastrite. In the
letter it was recorded that any claim Blastrite may have against
the
MCL parties derived from the MOU.
[41] Lashbrook responded in different
ways as to why no reference was made in the abovementioned
correspondence to Blastrite’s
right to exclusivity. In one
instance he replied that the letter to MCL’s board of directors
was to provide them with evidence
that the economics did not
necessarily stand in GMA’s favour. In another instance he
responded that the confidentiality agreement
was not a living
document in the way the MOU was between the parties. Lashbrook
conceded that he understood Blastrite had rights
under the MOU
against the MCL parties and although the confidentiality agreement
was taken to Blastrite’s attorneys before
the litigation it was
not the one “he spoke about first”. He also accepted a
proposition put to him by Mr. Hodes that
if he knew Blastrite had
exclusive rights under the confidentiality agreement he would have
said so.
[42] In cross-examination, Lashbrook
accepted that he could not say whether Caruso was aware that garnet
had value in 2008 or before,
as he only met Caruso after the
conclusion of the confidentiality agreement. He also conceded that
Greg Steemson (“Steemson”),
a geologist, who was involved
with MSR, must have known that garnet could have value and could be
used. Lashbrook further conceded
that prior to entering into the
confidentiality agreement, and by implication during the discussions
which preceded it, with reference
to an e-mail from Haldane dated
21 January 2008 to Barnes of MSR wherein it was recorded that, “we
need to get cracking
with the ‘garnet for abrasives’
feasibility study”, the understanding between Blastrite and the
MCL parties must
have been that the garnet had value. Lashbrook
further conceded that when the confidentiality agreement was
concluded the personnel
of MSR was aware that garnet was present on
the beach area.
[43] Lashbrook was also confronted in
cross-examination with Blastrite’s changed position in its
replying affidavits where
it is recorded that MSR is not a subsidiary
of MCL and therefore not a party to the MOU. Lashbrook conceded in
cross-examination
that at all material time the MCL parties had
managing responsibility for MSR. Lashbrook further confirmed that MCL
was entitled
to appoint half of the four directors of MSR and
nominate the chairperson, who does have to a casting vote. Lashbrook
accepted
that as a director of MSR he signed its annual financial
statement ending 31 December 2011 and therein it is recorded that MCL
is the ultimate holding company of MSR. He further agreed that by
signing as director of MSR, readers of the annual financial statement
will accept that he is confirming that MSR is a subsidiary of MRCR
and that MCL is the ultimate holding company. Lashbrook also
conceded
that post August 2012 he considered MSR to be a subsidiary of MCL.
Lashbrook further confirmed in a document dated 31
July 2013 which he
had an input in crafting that MSR is referred to as a subsidiary of
MCL. He accepted that in the document he
and Caruso were telling the
truth to the investing public in stating that MSR is a subsidiary of
MCL. Lashbrook further conceded
the attorneys Bowman and Gilfillan
in October 2013 drafted a management agreement on his instructions
and therein it is recorded
that the MOU was concluded between MCL,
which is the parent company of MSR, and Blastrite. Lashbrook also
suggested that at the
time of signing the MOU “in common
parlance” it was understood that MSR is a subsidiary of MCL.
Lashbrook was also
referred to an e-mail dated 15 May 2014 regarding
funding which he forwarded to the financial controller and financial
director
of MCL wherein he recorded that ‘MRC controls MRCR
100% and by agreement (Shareholders, MOI and Mining Agreement),
controls
MSR”. Lashbrook confirmed he meant what he recorded
in the e-mail. He further confirmed that he understood the difference
between share-ownership and control and understood that MCL had
effective control of MSR.
[44] Lashbrook further testified in
cross-examination that it was under advice of his attorneys that he
had come to the conclusion
that MSR was not a subsidiary of MCL.
Moreover, at some stage shortly before the MOU was concluded, a
discussion between Torre,
Caruso and himself took place where Torre
made it clear that under no circumstances should MSR be a party to
the MOU.
[45] In re-examination, Counsel pointed
Lashbrook to three documents emanating from MCL for the proposition
that the garnet was
exclusively Blastrite’s. The first document
was MCL’s half- year financial report of 30 June 2013. Under
the heading
‘Offtake Agreement’ the following was
recorded, ‘As, previously reported, the Garnet concentrate will
be sold
to Blastrite for secondary treatment’. The second
document was MCL’s annual report of 2013 where under the
heading
‘Directors Report’ the following was recorded,
‘Delivery of the Garnet concentrate to Blastrite will commence
in the first half of 2014 under the terms of the offtake agreement.’
The third document related to MCL’s annual general
meeting in
May 2014, where under the heading ‘Sales and Marketing’
the following was recorded. ‘MRC will sell
garnet concentrate
to Blastrite for secondary treatment. Sale of garnet concentrate to
Blastrite commenced in February 2014’.
[46] The evidence of Caruso, as
recorded in the affidavits, briefly stated are the following: MSR and
Blastrite had been in various
non-binding and informal discussions in
relation to the Tormin mineral sands project leading up to the
confidentiality agreement
in 2008. Furthermore, MSR was not in a
position, directly or indirectly, to offer Blastrite or any other
third party any rights
to garnet product because although MSR had a
mining right it did not have the environmental management plan
(“EMP”)
or the regulatory approvals to enable it to
commence the development of the Tormin mineral sands project.
Moreover, MSR at that
time did not have the rights to extract garnet
and did not require any local expertise or infrastructure to extract
garnet and
produce a garnet concentrate. According to Caruso the
purpose of the confidentiality agreement was not to impose any
restrictions
on MSR’s rights to deal with any third parties in
relation to possible garnet, but to ensure that the parties dealt
with
each other exclusively in discussing and considering ideas,
plans, products, formulations, packaging, processes and operational
arrangements relating to any potential garnet. Furthermore, the
purpose of the confidentiality agreement was solely to protect
the
confidential nature of the information provided to Blastrite by MSR
in the consideration and discussion of ideas, proposals
and processes
in relation to any potential garnet or other abrasive media resources
that may be present on the beach at the Tormin
mine project.
[47] Caruso also stated that when MSR
concluded the confidentiality agreement the personnel of MCL were
also aware that there was
garnet on the beach at Tormin.
[48] Caruso further recorded that MSR
is a party to the MOU and was correctly cited in the founding
affidavit. Furthermore, the
MOU would be unworkable without the
obligation of MSR to undertake certain matters referred to in the
MOU. As such the confidentiality
agreement was cancelled by clause 19
of the MOU.
[49] In the answering affidavit filed
by Ketelsen, the relief sought by Blastrite was opposed on the basis
that clause 10 of the
confidentiality agreement properly interpreted
does not support the relief sought. Moreover, even if it is capable
of the meaning
suggested by Blastrite, the confidentiality agreement
was superseded by the MOU and or cancelled thereby.
[50] The Steenkamps in their opposing
affidavit questioned Lashbrook’s bona fides. The Steenkamps
aver that Lashbrook is
disingenuous to suggest in the founding
affidavit that he only became aware on 3 December 2014 that they were
about to sign an
agreement with MSR. According to the Steenkamps
Lashbrook has known long before December 2014 about their
pre-existing rights to
in relation to the Tormin mine and Garnet from
MSR. In fact, according to the Steenkamps in terms of their rights,
Blastrite at
times has delivered Garnet Concentrate to them on behalf
of MSR in fulfillment of MSR’s obligation and during 2014
delivered
between 20 and 30 tons of Garnet to them. The Steenkamps
further aver that Lashbrook was personally involved long before
December
2014 in extensive negotiations with the Steenkamps in
relation to their mineral rights at Tormin mine. In so doing he was
acting
for both Blastrite and for MSR whilst employed by both
companies. The Steenkamps also requested a punitive costs order
against
Blastrite due to the lack of candour displayed by Lashbrook.
[51] In the replying affidavits
Lashbrook recorded that there are conflicting legal opinions as to
the nature and extent of the
Steenkamps rights. According to him the
issues are complex and the Steenkamps rights remain uncertain.
Lashbrook testified he indeed
proposed a course that would have
achieved certainty. Moreover, he is adamant that it is impermissible
to permit MSR and the Steenkamps
to achieve certainty in a manner
that breaches the exclusivity obligation.
Argument:
[52] Blastrite’s counsel argued
that Lashbrook was a credible and reliable witness, withstanding the
intimidating cross-examination
by counsel for the MCL parties. There
was also the suggestion that in certain instances counsel for the MCL
parties overstepped
the mark in cross-examination and treated
Lashbrook unfairly. Counsel argued that the evidence advanced by
Blastrite demonstrates
that all four issues referred to oral evidence
should be decided in its favour; particularly in the light of all
relevant and admissible
context including the circumstances in which
the confidentiality agreement came into being. Moreover, the quid pro
quo agreed upon
by Blastrite and MSR was such that for everything
that Blastrite has done, MSR undertook to deal exclusively with
Blastrite in
relation to the project, which effectively covered the
broad scope of activities required to bring the mine to the point at
which
it was possible for MSR to monetize garnet. Mr. Kuschke also
referred to a letter by Caruso in March 2014 to Lashbrook, wherein
Caruso records that ‘I am also required to notify you as to
when effectively Garnet is available’, to give credence
to the
argument that it could only be in reference to the confidentiality
agreement. It was further argued that instead of MSR
dealing
exclusively with Blastrite it concluded an agreement with GMA, and
the offer by MSR to Blastrite to meet the GMA terms
after it started
to deal with GMA manifestly discloses the breach. Moreover,
Blastrite enjoys prior rights that cannot be trumped
by the GMA
agreement. In respect of the Steenkamps, Mr Kuschke argued there is
no basis to disbelieve Lashbrook’s version
about the existence
and extent of the Steenkamps’ rights as the latter’s
counsel failed to cross-examine Lashbrook
on these points and such
evidence must accordingly be accepted by this Court. Moreover, the
exclusivity for which Blastrite contends
does not require it to
disclose a protectable interest as a result of the order it seeks. It
was also argued that the matter falls
not to be decided on analogy
with restrain cases. Furthermore, Blastrite indeed disclosed a
business interest as referred to in
Everfresh Market Virginia (Pty)
Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC) at para 40,
and by doing so contends for an interpretation of clause 10 that is
business-like and legally cognizable.
[53] Counsel for the MCL parties had an
entirely different view on Lashbrooke. According to Mr. Hodes he was
an unreliable and an
unimpressive witness and was rightfully
subjected to robust but fair cross-examination. According to him
Lashbrook conceded that
Blastrite, until it consulted its lawyers and
prior to the launch of these proceedings, gave no consideration to
the right of exclusivity
for which it now contends. He argued that
the factual matrix relating to the negotiations and conclusion of the
confidentiality
agreement clearly demonstrates that the agreement did
not confer on Blastrite the right to restrain MSR from dealing with
third
parties in relation to garnet at the Tormin mine. Furthermore,
none of the four issues referred to oral evidence are relevant to
the
interpretation of clause 10 of the confidentiality agreement and the
oral evidence tendered by Lashbrook rather served to reinforce
why
Blastrite’s application must fail. It was also argued that
Blastrite’s belated reliance on the Everfresh case supra
is
misplaced.
[54] Mr. Jamie’s principal
submission was that Blastrite failed to establish it has a
contractual right to justify the relief
sought in paragraph 3 of the
Notice of Motion for the following reasons. First, the
confidentiality agreement was superseded by
the MOU. Secondly, clause
10 does not support Blastrite’s interpretation. Thirdly, even
if clause 10 was capable of the interpretation
sought by Blastrite,
its scope is limited to only “any potential garnet and or
abrasive media resource.. within the Tormin
mineral sands prospect”;
whereas the GMA agreement to which paragraph 3 of the Notice of
Motion applies provides for the
sale of heavy mineral concentrate
which not only includes garnet, but also other minerals. Lastly, the
confidentiality agreement
is at best no more than an agreement to
negotiate because of the absolute discretion vested in the parties to
agree or disagree.
[55] Mr. Seale argued that the evidence
led by Blastrite on the four issues referred to oral evidence has
done nothing to salvage
the merits of Blastrite’s application.
According to him Blastrite conceded in reducing the ambit of its
original prayer that
the Steenkamps have pre-existing rights to the
mineral resources at the Tormin mine, but inexplicably failed to take
into account
the full rights of the Steenkamps in terms of the 2003
and 2006 agreements between Steenvas and MSR wherein it is recorded
that
Steenkamp will have the sole and exclusive right to extract and
remove an amount of garnet tailings containing garnet from the MSR
plant. It was further contended that the confidentiality agreement
does not prohibit trade but only the divulging of confidential
information. Moreover, Blastrite failed to identify the confidential
information which it purportedly disclosed under the confidentiality
agreement in its founding affidavit and oral evidence that is worthy
of protection in law. Furthermore, Lashbrook’s evidence
indicates that the information he gave during negotiations for garnet
off-take was to the MCL parties and not to MSR. Moreover,
Lashbrook
failed to establish that the information given meets the requirements
in law for it to be regarded as confidential as
formulated in
Experian SA v Haynes
2013 (1) SA 135
(GSJ) at 141 para [19] and
other cases referred to therein.
The approach regarding interpretation
of contractual provisions:
[56] The current approach to be adopted
in interpreting contractual provisions and or documents has been
pronounced upon by our
Higher Courts in recent judgments. In this
regard see KPMG Chartered Accountants (SA) & Another v Securefin
Ltd
2009 (4) SA 399
(SCA) at 409 para [39]; Natal Joint Municipal
Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) at 603
para [18] and Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun
Transport (Edms) Bpk
2014 (2) SA 494
(SCA) at 499 para [12].
[57] In the Bothma case supra at para
12, Wallis JA sums it up as follows:
‘Whilst the starting point
remains the words of the document, which are the only relevant medium
through which the parties
have expressed their contractual
intentions, the process of interpretation does not stop at a
perceived literal meaning of those
words, but considers them in the
light of all relevant and admissible context, including the
circumstances in which the document
came into being. The former
distinction between permissible background and surrounding
circumstances, never very clear, has fallen
away. Interpretation is
no longer a process that occurs in stages but is ‘essentially
one unitary exercise’.
[58] In the present instance, given the
fact that four issues were referred to oral evidence, it is also
necessary to consider the
approach to be adopted where evidence is
led in matters of this nature. In KPMG supra at 409 para [39] the
Court articulated four
principles that are relevant to the leading of
oral evidence to ascertain the meaning of a document. One, ‘the
integration
(or parol evidence) rule remains part of our law... If a
document was intended to provide a complete memorial of a jural act,
extrinsic
evidence may not contradict, add to or modify its meaning’.
Secondly, ‘interpretation is a matter of law and not of
fact
and, accordingly, interpretation is a matter for the court and not
for witnesses’. Thirdly, “the rules about admissibility
of evidence in this regard do not depend on the nature of the
document, whether statute, contract or patent’. Fourthly,”
to the extent that evidence may be admissible to contextualize the
document (since ‘context is everything’) to establish
its
factual matrix or purpose or for purposes of identification, ‘one
must use it conservatively as possible’.”
[59] It is also settled law that where
a matter is referred to oral evidence on limited issues, the
affidavits filed of record stand
as evidence, save to the extent that
they deal with dispute(s) of fact referred to oral evidence.
Accordingly all of the disputed
issues other than those referred to
oral evidence fall to be decided in accordance with the ordinary
principles applicable to final
relief sought by way of motion
proceedings. In this regard see Lekup Prop Co NO 4 (Pty) Ltd v Wright
2012 (5) SA 246
(SCA) at 258 para [32]; Trend Finance (Pty) Ltd &
Another v Commissioner for SARS & Another
[2005] 4 All SA 657
(C) at 667 para [25].
Discussion:
[60] In casu, apart from the four
issues referred to oral evidence, there are fundamentally two key
issues for consideration in
the present instance. The first is the
extent of the clause 10 obligation. The second is whether the clause
10 obligation remains
extant. The relevance and importance of the
second issue arises from the fact that the Respondents raised the
effect of clause
19 of the MOU in opposition to Blastrite’s
claim. If it is determined that MSR is a subsidiary of MCL, and
Blastrite failed
to establish the requirements for estoppel, then it
follows that clause 19 extinguishes the confidentiality agreement
and with
it Blastrite’s purported right of exclusivity. Clause
19 reads as follows: “19. Supercession (sic) – This
agreement
supercedes (sic) and cancels all previous agreements,
understandings or arrangements, oral or written between the two
parties referring
to the Tormin project”.
[61] The issue whether MSR is a party
to the MOU, or estopped from asserting that it is, has generated much
debate in this matter.
Although these are important considerations,
the interpretation of clause 10 remains the ultimate issue for
determination and will
I deal with it firstly.
[62] In applying the stated principles
and approach to the interpreting provisions at hand the starting
point remains the words
of the document. However, the process of
interpretation does not stop at a perceived literal meaning of those
words but remains
one unitary exercise taking into account the
relevant and admissible context, including the circumstances in which
the document
came into being.
[63] There was a suggestion by counsel
for Blastrite that Lashbrook was on occasions subjected to hectoring
cross-examination, treated
unfairly and that his evidence should be
‘assessed in that light’. I certainly did not get the
impression that Lashbrook
was intimidated or badgered in the manner
in which he was cross-examined. Lashbrook was indeed subjected to
robust cross-examination
but was given ample opportunity to give his
evidence. He confidently answered the questions put to him. Counsel
for Blastrite,
where necessary, objected to questions that may have
been put unfairly to him. In my view there is no need to evaluate his
evidence
in a different manner.
[64] Lashbrook, however, after being
exposed to cross-examination made material concessions on more than
one occasion that made
Blastrite’s case fundamentally less
plausible. He also contradicted himself in the founding affidavit and
his evidence in
chief. In this regard the following evidence of
Lashbrook is relevant. He conceded the confidentiality agreement was
entered into
between MSR and Blastrite in order to progress forward;
and that sensitive public information regarding studies in terms of
the
assessment of garnet, products and production techniques of MSR
needed to be protected. In the e-mail of 4 April 2008, to which
the
confidentiality agreement was attached, and which was forwarded to
Barnes of MSR for signature, Lashbrook, who drafted the
agreement,
confirmed the purpose of the agreement was as recorded in the mail.
Therein, Lashbrook recorded the importance of safeguarding
any
information MSR may have provided to Blastrite. Moreover, he recorded
that the major rationale for the confidentiality agreement
was to
ensure MSR feels protected. This version materially contradicts the
allegation in the founding affidavit wherein Lashbrook
records the
rationale for the confidentiality agreement as being “that
Blastrite would make its expertise in yielding a revenue
stream from
garnet available to MSR”.
[65] On 3 June 2008, Haldane of
Blastrite sent an e-mail to Caruso attaching the confidentiality
agreement. In the e-mail Haldane
made reference to the need of a
feasibility study and formal testing of a sample at the Tormin mine.
Soon thereafter Caruso responded
and essentially confirmed that he
would only release a report from RSV to Blastrite after the
confidentiality agreement was signed.
It is not in dispute that the
RSV report would allow Blastrite to understand the processing
objectives and deliverables and assist
in it presenting a proposal to
process the material. Lashbrook conceded that after the
confidentiality agreement was signed by
both parties, the MCL parties
released various expert reports to Blastrite for consideration which
included the RSV report. Lashbrook
further conceded that the
information released to Blastrite was indeed confidential
information. The evidence up to this juncture
clearly does not point
to any discussions between Blastrite and the MCL parties of
exclusivity being granted to Blastrite in relation
to garnet at the
Tormin mine. Rather, it shows that the confidentiality agreement came
into existence as a precursor to negotiations
and to protect
confidential information provided by the MCL parties to Blastrite.
[66] It is not in dispute that after
the conclusion of the confidentiality agreement circumstances
changed. In July 2009 Blastrite
and MSR unsuccessfully attempted to
conclude a draft memorandum of understanding regarding the supply of
garnet. Subsequently,
Blastrite was involved in a proposal to acquire
the Tormin mine from the MCL parties via an entity referred to as
Newco. This deal
collapsed in April 2010.
[67] In August 2010, Lashbrook, after
he ascertained that MCL intended to develop the Tormin mine, sent an
e-mail to Caruso to offer
certain services to the MCL parties in the
development of the mine. In this e-mail Lashbrook made no reference
to the alleged right
of exclusivity based on the confidentiality
agreement but relied on their involvement in the Newco deal to
indicate Blastrite’s
interest in the successful implementation
of the Tormin project. Similarly, when Blastrite discovered that the
MCL parties were
negotiating the terms of a garnet off-take agreement
with GMA, it made no reference to the right of exclusivity it now
claims.
Importantly, Lashbrook also conceded that as early as April
2014 he had been involved in discussions with the MCL parties
regarding
their intention to conclude a garnet off-take agreement
with GMA which stands in direct contrast to his evidence in chief
that
he only became aware of it on or about 26 June 2014.
Furthermore, Lashbrook conceded that the letter on 30 June 2014 which
he wrote
to MCL did not refer to the purported right of exclusivity
but reference was made to the MOU to assert Blastrite’s right
to conclude an agreement for the supply of garnet. Similarly, the
letter on 19 August 2014 written by Lashbrook made no reference
to
the confidentiality agreement. Lashbrook conceded the letter records
Blastrite’s belief that any claim it had against
the MCL
parties derived from the MOU. Moreover, Lashbrook conceded that
Blastrite gave no consideration to the purported right
of exclusivity
for which it now contends until Blastrite consulted with its legal
representatives prior to instituting these proceedings.
[68] In support of its purported rights
under the confidentiality agreement Blastrite made reference to an
e-mail from Lashbrook
to Steemson in 2009 about illegal mining
activities at the Tormin mine. Therein Lashbrook recorded that he did
not want anyone
else to obtain garnet in priority to Blastrite.
Lashbrook testified in chief that the e-mail was sent with reference
to the confidentiality
agreement even though no reference was made to
it. Lashbrook’s evidence in this respect is highly improbable
and it can safely
be rejected as a fabrication in light of the
concession he made during cross-examination that no such
consideration was given to
the purported right of exclusivity until
Blastrite consulted with its legal representatives before instituting
these proceedings.
Blastrite also suggested that the e-mail from
Caruso to Lashbrook in March 2014, in which Caruso recorded that, “I
am required
to notify you as to when effectively the Garnet is
available”, should be considered in reference to the
confidentiality
agreement and as such amounts to conduct that favours
Blastrite’s case. This contention is unfounded. Caruso in the
same
e-mail recorded that the parties have ‘no signed
agreements in place’, notwithstanding their relationship and
that
garnet will be available from 1 April. In response Lashbrook was
silent about the confidentiality agreement. If Blastrite genuinely
believed it had a right to exclusivity, as it does now, one would
reasonably have expected Lashbrook to have raised there and then
the
issue with Caruso. Moreover, the only obligation on MSR under the
confidentiality agreement was to notify Blastrite in writing
when it
received an approach from a third party in relation to the Project as
defined. On a plain reading of the letter Caruso
clearly did not
purport to do this in the e-mail.
[69] The overwhelming body of evidence
rather demonstrates that Lashbrook, and for that matter Blastrite, up
until the stage it
instituted these proceedings did not verbally or
in writing mention or assert any of its purported exclusive rights
under the confidentiality
agreement in circumstances where it was
reasonably expected to do so if Blastrite genuinely believed it had
such a right to exclusivity.
Instead the evidence is replete with
examples of subsequent conduct of Blastrite that are at odds with its
case. The most striking
example is Blastrite’s failure to
assert the right for which it now contends when it realized the MCL
parties intended to
conclude an agreement with GMA. The factual
matrix demonstrates rather that the confidentiality agreement was
concluded with the
purpose of protecting MSR’s confidential
information.
[70] The first three issues referred to
oral evidence do not assist Blastrite’s case. In respect of the
first issue, according
to Blastrite the significance of whether MCL
or MSR intended to generate revenue from garnet in 2008 or not is a
factor affecting
the interpretation of a contract. According to
Blastrite if indeed MSR regarded garnet as a valuable commodity when
it concluded
the contract, it would have been unbusinesslike to enter
into such an agreement as it would have restricted the ability of MSR
to monetise garnet other than through Blastrite. This contention is
unsustainable. In the first instance the confidentiality agreement
is
silent about the intention of the parties in relation to generating
revenue from garnet. Given that the body of the evidence
thus far
demonstrates the purpose of the confidentiality agreement was to
protect MSR’s confidential information at a time
when the
parties were exploring the possibility of a commercial relationship,
this can hardly be regarded as unbusinesslike. Furthermore,
Lashbrook
admitted during cross-examination that the commercialization of
garnet was a question of timing and that Haldane’s
e-mail to
the MCL parties on 3 June 2008 evidenced that both parties
appreciated that garnet had value when the confidentiality
agreement
was concluded. This issue can therefore not be resolved in favour of
Blastrite.
[71] In respect of the second issue,
namely, the rationale for the inclusion of clause 10 in the contract
as already stated, the
factual matrix relevant to the conclusion of
the confidentiality agreement overwhelmingly establishes that the
provision was to
protect the MCL parties from the disclosure of
confidential information pertaining to the Tormin mine during
negotiations. There
was also no evidence by Blastrite as to the
nature and extent of the significant resources it alleges were
committed to the Project
in exchange for MSR keeping disclosures made
to it by Blastrite confidential, and for it refraining from dealing
with third parties.
In fact the evidence is that the MCL parties paid
for the various expert studies, reports and engineering work
necessary to develop
the Tormin mine and that Blastrite made no
investments in plant and equipment pursuant to the conclusion of the
confidentiality
agreement.
[72] In respect of the third issue as
to when confidential information most recently was provided by
Blastrite to MSR, Lashbrook
gave a lengthy exposition regarding
optimization of processes and product streams, prices and packaging
details for garnet-based
products amongst others. This information
was however disclosed during negotiations for a garnet off-take
agreement with MCL and
not MSR and no evidence was advanced regarding
the last occasion on which Blastrite allegedly disclosed confidential
information
to MSR in the furtherance of the project as defined in
the confidential agreement. Moreover, Blastrite failed to advance
plausible
evidence that whatever information it disclosed was indeed
confidential information relating to the project as defined that is
worthy of protection. The mere ipse dixit of a person alleging
information is confidential does not make it confidential. It is
trite law that one cannot make something secret by calling it secret.
In this regard see Petre & Madco (Pty) Ltd t/a T-Chem
v
Sanderson–Kasner & Others
1984 SA 850
(W) 858. This issue
can therefore not be decided in favour of Blastrite.
Clause 10 of the confidentiality
agreement:
[73] In my view on an examination of
the confidentiality agreement, its express wording, read as a whole,
and the context in which
the agreement was concluded, one can only
conclude that its purpose was solely to protect the confidential
nature of the information
provided to Blastrite by MSR for the
purpose of Blastrite and MSR to consider and discuss ideas, proposals
and processes relating
to the project as defined in the agreement.
[74] Instructive as to the correct
interpretation of the provision is the wording in the first section
of the confidentiality agreement
under the heading ‘Background’.
As background it records the parties are involved ‘in
discussions in anticipation
of a possible business relationship’
and ‘during these discussions the parties have given and
received and shall give
and receive Confidential Information which
the Parties want to protect.”
[75] Confidential information is
defined in clause 1.1 as ‘..any and all information…of
whatever nature…relating
to the Project… disclosed by
one Party…to…the other Party. The ‘Project’
in clause 1.3 is defined
and is limited by definition. The ‘Project’
entails the ‘discussion’ and ‘consideration’
of
issues pertaining to ‘potential garnet and/or other abrasive
media resources that may be present’ at the Tormin mine.
[76] In my view, properly construed the
wording of clause 10 does not extend to encompass a right of
exclusivity with respect to
the sale of garnet product. The
obligation as set out in clause 10 for MSR to deal with Blastrite
exclusively with the Project,
as defined, can only be read in
conjunction with the verbs used in that definition, namely
“discussion” and “consideration”.
The extent
of the obligation on MSR was therefore to discuss and consider and
certainly no more. The express wording of clause
10 in its proper
context only entails an agreement to negotiate and imposed an
obligation on MSR to advise Blastrite if it received
an approach from
any third party in relation to the project as defined in clause 1.3.
[77] The confidentiality agreement, in
particular clause 10 thereof, is therefore at most an agreement that
Blastrite and MSR will
exclusively discuss and consider or consult
with the aim of possibly concluding another arrangement.
[78] Moreover, and importantly, clause
10 further stipulates that “Neither party shall be under any
obligation to accept any
offer or proposal related to the Project”.
Given the express wording in this regard, the agreement clearly vests
in the parties
an absolute discretion to agree or disagree and to
deal with each other as such in relation to the project. As a result
of the
absolute discretion vested in the parties to agree or
disagree, the confidentiality agreement lacks enforceability. In this
regard
see Premier of the Free State Provincial Government, and
Others v Firechem Free State (Pty) Limited
2000 (4) SA 413
(SCA) at
431 G-H.
[79] In certain instances in the
context of agreements to negotiate our Courts applying the common law
have adopted a liberal approach
in an attempt to save terms seriously
entered into between parties from invalidity. In this regard the
Supreme Court of Appeal
in Southernport Developments (Pty) Ltd v
Transnet Ltd
2005 (2) SA 202
(SCA) at 210 B - 211 A, referred with
approval to Coal Cliff Collieries (Pty) Ltd v Sijehama (Pty) Ltd
(1991) 24 NSWLR 1
, where Kirby J alluded to three categories. The
first category refers to contacts in which it is clear that the
promise to negotiate
is intended to be a binding legal obligation, to
which the court will hold the parties, unless the contract is still
deemed by
the court to be illusory or unacceptably uncertain. The
second category, which would be limited to a small number of cases,
refers
to situations in which the court might be able to add flesh to
a provision which is otherwise unacceptably vague or uncertain. The
third refers to cases in which the promise to negotiate in good faith
will occur in the context of an arrangement which, by its
very
nature, context, other provisions or otherwise, makes it clear the
promise referred to is too illusory, vague, or uncertain
to be
enforceable.
[80] In Southernport Developments, the
Supreme Court of Appeal distinguished the preliminary agreement to
negotiate in good faith,
it was dealing with, from an agreement to
agree of the type dealt with in Firechem, by virtue of the existence
of a dispute resolution
mechanism to which the parties had bound
themselves, which provided that in the event of a dispute arising
between the parties
in respect of certain conditions, the dispute
would be referred to arbitration, and the decision arising therefrom
would be binding
on the parties. The court held that such an
agreement to negotiate was indeed binding as opposed to the type
dealt with in Firechem.
[81] In the present instance, the
confidentiality agreement clearly does not constitute one of the
recognized exceptions to the
general rule that an agreement to
negotiate is unenforceable.
[82] For these reasons Blastrite’s
interpretation of Clause 10 is unsustainable and it does not purport
to limit MSR’s
ability to conclude contracts with third parties
in relation to garnet extracted from the Tormin mine.
[83] In view of the above the fourth
issue referred to oral evidence has evaporated in importance and
relevance. In any event and
without necessary deciding the issue the
bulk of the evidence does not support the contention that MSR at the
time of concluding
the confidentiality agreement was not a subsidiary
of MCL.
[84] There was also evidence by
Lashbrook that MSR does not have the right to sell garnet extracted
from Tormin and that he was
of the view that Blastrite indeed
illegally acquired garnet from MSR. This evidence in my view is
irrelevant to the determination
of this application. In any event MSR
has provided a letter from the Department of Mineral Resources dated
21 May 2015 which confirms
the authority MSR requires to deal with
garnet.
[85] Blastrite also relied on the
principle of ubuntu as discussed in Everfresh Market Virginia (Pty)
Ltd v Shoprite Checkers (Pty)
Ltd
2012 (1) SA 256
(CC) to motivate
for the relief sought by it. Blastrite’s professed reliance on
Everfresh, supra and the principle of ubuntu
is misplaced. In the
first instance, Blastrite did not plead a constitutional cause of
action, or a cause of action based on ubuntu,
but more importantly
there can be no basis to infuse clause 10 of the confidentiality
agreement with the principle of ubuntu, given
that the parties
expressly agreed in that clause that neither of them was under any
obligation to accept any offer or proposal
from one another.
[86] In fact the evidence demonstrates
the parties spent approximately 6 years negotiating with one another,
which negotiations
ultimately broke down. Blastrite is unable to
reach an agreement with MSR. It now seeks to restrain MSR from
deriving revenue from
a productive asset and not because of any harm
that may befall it or any expectation of claiming commercial
advantage from such
a course of action as it has 60,000 tons of
garnet in terms of the GMA agreement. The relief it seeks is
therefore essentially
hollow.
[87] Properly considered the effect of
the ‘negative’ interdict sought by Blastrite can only be
to the prejudice of
MSR (and the MCL parties) and GMA. It would
severely constrain MSR’s commercial freedom by neutralizing
MSR’s ability
to extract and process garnet from Tormin for no
discernible benefit at all.
[88] To sum up, for all of the reasons
set out above Blastrite has failed to establish that it is entitled
to the relief it seeks.
It follows that the Application must fail.
In the result the following order is
made
1. The Application is dismissed with
costs, such cost to include the costs occasioned by the employment of
two counsel, all of the
costs occasioned for the referral to oral
evidence; the costs occasioned by the discovery Applications,
including the costs occasioned
by the MCL parties’ discovery
Application.
LE GRANGE, J