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Knox D'Arcy Ltd. and Others v Jamieson and Others (283/95)  ZASCA 58; 1996 (4) SA 348 (SCA);  3 All SA 669 (A); (29 May 1996)
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Case number 283/95 IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between:
KNOX D'ARCY LIMITED First Appellant
KNOX D'ARCY OVERSEAS SERVICES LIMITED Second Appellant
KNOX D'ARCY AG Third Appellant
KNOX D'ARCY LIMITED Fourth Appellant
JONES: MALCOLM EDWARD JAMES HOWARD Second Respondent
KRESTAHAGUE INTERNATIONAL (PTY) LIMITED Third Respondent
KRESTAHAGUE INTERNATIONAL BV Fourth Respondent
OTTLEY: STEPHEN ROBERT Fifth Respondent
CORAM : E M GROSSKOPF, NESTADT,
F H GROSSKOPF, HARMS et SCOTT JJA
13/14 MARCH 1996
DATE OF HEARING : 13 MARCH 1996
DATE OF JUDGMENT : 29 MAY 1996
2E M GROSSKOPF J A: INTRODUCTORY
This is a petition for leave to appeal against a judgment delivered by Stegmann J in the Witwatersrand Local Division on 9 December 1994. The judgment is reported as Knox D'Arcy Ltd and Otners v Jamieson and Others 7995 (2) SA 579 (W). The court a quo refused leave to appeal. The resultant petition to the Chief Justice was referred for argument before this court in terms of section 21(3)(c)(ii) of the Supreme Court Act, 59 of 1959. At the same time counsel were directed to present full argument on the merits of the proposed appeal so that, whatever happened, the matter could be finally disposed of.BACKGROUND
This matter has a long history. The petitioners are companies forming a single group which operates as management consultants, here and overseas. I shall refer to them collectively as Knox D'Arcy. The first respondent
("Jamieson"), the second respondent ("Jones") and the fifth respondent ("Ottley") were employed by Knox D'Arcy (for present purposes it is not necessary to distinguish between the different companies in the group). During 1991 Jamieson and Jones left Knox D'Arcy's employ (on 14 June and 5 July respectively) and floated a group of companies for the purpose of doing business as management consultants in competition with Knox D'Arcy. The third and fourth respondents are the main companies in the group. For convenience I shall refer to them collectively as Krestahague. On 19 July 1991 Ottley left Knox D'Arcy's service and joined Jamieson and Jones.
Knox D'Arcy considered that their former employees were competing with them in an unlawful manner and applied ex parte on 1 9 July 1991 for an urgent interdict to prevent this. A temporary order returnable on 6 August was issued. On 16 August judgment was given (also by Stegmann J) in which certain relief was granted pending "the outcome of an
action for such final relief as the applicants may be advised to seek, or any further order of this court". It should be noted that the nature of the action to be instituted by Knox D'Arcy was not specified. It could accordingly have consisted of, or included, a claim for damages.
The pendente lite relief which is most relevant for present purposes was that the respondents were restrained for four months from soliciting certain named companies for any management consultancy business, and from communicating with any of them with a view to creating opportunities for such business to be offered to the respondents. Among these companies was South African Breweries Limited ("S A Breweries"). Knox D'Arcy was granted leave to deliver further affidavits for the purpose of supplementing the list of companies with the names of any other business entities in respect of which they might consider that they could prove that they had acquired confidential information
(including a confidential customer connection) which was known to the respondents and in respect of which Knox D'Arcy might be able to prove the period it would probably take the respondents to achieve a similar position through their own efforts. Knox D'Arcy was also permitted to adduce further evidence relevant to the question whether the period of four months in respect of the existing list of prohibited companies should be extended. The respondents were further interdicted pendente lite from representing themselves, or the services offered by them, as being connected with the name Knox D'Arcy, and from disseminating injurious falsehoods to the effect that Knox D'Arcy would lose, or had lost, a substantial number of its staff or that it would be unable to perform the services it offered.
Later in the year Knox D'Arcy availed itself of the opportunity to apply, inter alia, for the expansion of the list of prohibited business entities and the extension of
the periods of prohibition. They were partially successful in both respects. One company which they were unable to add to the list of prohibited companies was South African Druggists Limited ("S A Druggists"), a company which figures very prominently in the present proceedings. The relevant judgment, which was delivered on 13 December 1991, is reported at 1992 (3) SA 520 (W).
In accordance with the order of 16 August 1991 Knox D'Arcy instituted an action for a final interdict. No claim for damages was preferred in that action. In January and February 1994, shortly before the trial date, the matter was settled by correspondence between the parties' attorneys. The respondents accepted that the temporary interdicts had been properly granted, and consented to pay Knox D'Arcy's costs of the proceedings, both in respect of the interdicts pendente lite and the trial, on the attorney and client scale. This agreement was incorporated in a court order dated 17 March 1994.
In the meantime Knox D'Arcy had been preparing for the present proceedings. On 10 September 1993 Knox D'Arcy's attorney Mr St J A Bruce-Brand ("Bruce-Brand") consulted with Mr Raymond Bos ("Bos"), a former employee of Krestahague's. Bos provided information which suggested to Bruce-Brand that the respondents had not been open with the court in the 1991 interdict proceedings, and that they were intentionally concealing or dissipating their assets in order to nullify any judgment which Knox D'Arcy might obtain against them. This led to further enquiries which eventually culminated in the present proceedings.THE COURSE OF THE PRESENT PROCEEDINGS
On 13 April 1994 Knox D'Arcy applied ex parte and in camera for an interdict prohibiting the respondents from freely dealing with their assets. On 18 April Stegmann J granted an order which he himself later (in the judgment under appeal) describes as "draconian". "The judgment of 18 April 1994 is reported: 1994 (3) SA 700 (W). The order is
set out at 714D to 720D. It is not necessary to repeat it in full. It was based on the so-called Mareva injunction which is a feature of modern English legal practice. The main aspects may be summarised as follows. Knox D'Arcy first gave certain undertakings, inter alia that it would issue summons in accordance with a draft particulars of claim attached to the application against the respondents. The claim was, broadly speaking, one for damages for alleged unlawful competition by the respondents. Some aspects of the claim will be considered in more detail later. Moreover Knox D'Arcy undertook to abide by any order which the court might make against it as to damages should the respondents, or any of them, suffer any damages by reason of the order. Subject to these undertakings all the respondents' assets in South Africa (up to a maximum of R15 million) were frozen - the respondents were precluded from dealing with such assets save as permitted by the order. In particular, they were no longer allowed to
operate their existing bank accounts. All the income earned after service of the order as a result of management consultancy services provided by the respondents was to be banked in a new bank account referred to in the order as the "designated account", which was to be controlled by a firm of auditors and, if the respondents so wished, their attorneys. Of the income reaching the designated account, 50 per cent was to be released to allow the respondents to pay their operating costs. This they could do by opening and operating (subject to restrictions contained in the order) another new bank account called a "special account". From the income so released to the respondents, Jamieson, Jones and Ottley were to be allowed R5 000 per week each for living expenses. The respondents were also to be allowed R25 000 for legal expenses. Within three days of service of the order the respondents were to disclose all their assets in this country. Moreover they were to disclose on affidavit, with full details, all income
received by them from their consultancy business from 7 July 1991 to the date of service of the order; and all professional contracts concluded by them during that period. Subsequent changes in any of these matters, and subsequent professional contracts, had to be disclosed as they arose.
Leave was granted to Knox D'Arcy to postpone service of the rule nisi for up to 21 days to enable them to seek similar orders in the United Kingdom and Switzerland, where the respondents, or some of them, had assets. On 27 April 1994 an English court granted a parallel order, and a similar order was obtained in Switzerland. On 9 May 1994 the South African order was served on the respondents.
Pursuant to leave reserved to them the respondents applied on several occasions for the amelioration of the order pending the return date. For present purposes nothing turns on these changes. They are summarised in the judgment a quo at 583E to 585B.11
Although the original return date of the rule nisi was 7 June 1994 there were various delays, the nature of which appears from the judgment a quo at pages 5851 to 590D. The hearing of the matter was finally concluded on 5 September 1994. The papers, as embodied in the record on appeal, including the 1991 interdict proceedings, run to 4073 pages. As stated, Stegmann J gave judgment on 9 December 1994. He discharged the interlocutory order (as amended from time to time) with costs, and refused leave to appeal - hence the present petition.THE ISSUES BEFORE US
The court a quo refused leave to appeal on two grounds: first, that an order refusing an application for an interim interdict (which, in effect, the present order was) is not appealable, and second, that in any event Knox D'Arcy had no reasonable prospects of success on the merits, when this court considers a petition for leave to appeal we are of course not sitting on appeal against the
trial judge's refusal of such leave. We exercise an independent judgment, although we naturally give careful consideration to the views of the trial judge. In the instant case it will nevertheless be convenient to deal with the petition by considering whether we agree with the reasons given by the judge a quo for refusing leave.IS THE ORDER APPEALABLE?
The question here is whether the decision of the judge
a quo was a "judgment or order" within the meaning of sec
20(1) of the Supreme Court Act, 59 of 1959. Relying on
Zweni v Minister of Law and Order 1993 (1) SA 523 ( A)the
court a quo held that it was not. In particular, reference
was made to the following passage in Zweni's case (at 532J
"A 'judgment or order' is a decision which, as a general principle, has three attributes, first, the decision must be final in effect and not susceptible of alteration by the Court of first instance; second, it must be definitive of the rights of the parties; and, third, it must have the effect of disposing of at least a substantial portion of the relief claimed in the main proceedings . . . The second is the same as
the oft-stated requirement that a decision, in order to qualify as a judgment or order, must grant definite and distinct relief ...".In applying these principles one must first have
clarity as to what "the main proceedings" are to which
reference is made. If one regards the application for an
interim interdict as merely a procedural step in the action
for damages, and that the action for damages constitutes
the main proceedings, then the grant or refusal of an
interdict would clearly not affect the outcome of the main
proceedings. On that assumption a decision on such an
application would then, applying the passage from Zweni's
case, not be appealable. In my view that would, however,
be a wrong way of looking at it. Although associated with
a main action, the application for an interim interdict
seeks to secure relief which is separate from that claimed
in the action (See Bekker N O v Total SA (Pty) Ltd 7990 (3)
SA 759 (T) at 164 D-G). Its cause of action is different
(as will be shown hereafter) and it may introduce
additional parties. In its separateness it is analogous to the review dealt with in Trakman NO v Livshitz and Others 1995 (1)SA 282 (A) at 289G to 290A and the application for recusal considered in Moch v Nedtravel (Pty) Limited t/a American Express Travel Service (AD), unreported, judgment delivered 22 February 1996).
In argument before us Mr Cohen, for the respondents, did not seriously contest that the application for an interim interdict had to be regarded as a separate proceeding. He contended that its refusal was nevertheless not appealable in the circumstances of the present case. It is trite law that in determining whether a decision is appealable "not merely the form of the order must be considered but also, and predominantly, its effect" (South African Motor Industry Employers' Association v South African Bank of Athens Ltd 7980 (3) SA 91 (A), a passage approved in, inter alia, Zweni's case (supra) at 532I, Trope and Others v South African Reserve Bank 7993 (3) SA
264 (A) at 277 F-G and Trakman's case (supra) at 289E.) In the present case, it was contended, the application was not refused on its merits. The court a quo refused it in the exercise of a discretion. In doing so the court was strongly influenced by its finding that, when bringing the application ex parte, the petitioners had concealed certain facts from the court. The court's grounds of refusal were thus, the argument proceeded, essentially procedural. The application could accordingly be renewed before the court a quo. If full disclosure were then made, the case could be reconsidered on its merits. This argument seems to accept that, after reconsideration on its merits, a refusal of the application would be final and susceptible to appeal.
In my view this argument cannot be sustained. The grounds for refusing the application were not as limited as suggested by counsel. In the next section of this judgment I discuss the basis upon which interim interdicts are
granted or refused, and the sense in which this exercise may be described as discretionary. For purposes of the present argument it is sufficient to say that the learned judge a quo based his decision on a full conspectus of all the factors which are, or may be, relevant in an application of this kind. He did not confine himself to the point of non-disclosure. His decision was not based on a procedural irregularity which would permit a new application if the procedural defect were remedied.
To sum up: the application for an interim interdict was a procedure separate from the action for damages; the application was refused on its merits and this refusal could not be reconsidered by the court a quo. In my view the refusal amounted to a "judgment or order" within the meaning of the Act.
This conclusion is in accordance with authority in our courts stretching back for almost a century. Admittedly these cases were decided under their own statutes which may
17have differed from the present Act. However, the general
principles relating to the appealability of decisions were
originally derived from Roman-Dutch law and have to a large
extent been retained under the different statutes
applicable at various times to various courts. In the oft
quoted words of Schreiner JA in Pretoria Garrison
Institutes v Danish Variety Products (Pty) Limited 1948 (7)
5A 839 (A) at 867
"... comment has overcome construction and to-day it is no longer possible to interpret the present or any corresponding statutory provision by a straightforward application of the ordinary meaning of the words used."See Zweni's case (supra) at 531E-G and Cronshawand Another
v Coin Security Group (Pty) Ltd (AD), unreported, reasons
for judgment delivered on 28 March 1996 at pp 10 to 11.
Earlier cases are accordingly often of great assistance in
determining whether the nature of a particular decision is
such as to endow it with the qualities of a "judgment or
order". See, in addition to Zweni's case and Cronshaw's
case, Trope's case (supra) at 270G, Caroluskraal Farms
(Edms) Bpk v Eerste Nasionale Bank van Suider-Afrika Bpk
 ZASCA 23; 1994 (3) SA 407 (A) at 41 5A to 416E, Trakman's case (supra)
at 289G-I and Wellington Court Shareblock v Johannesburg
City Council 1995 (3) SA 827 (A) at 832 G-I.
I revert now to interim interdicts. The first case in
our law to which we were referred was Donognue and Others
v Executor of Van der Merwe (1897) 4 OR 1. In that case
the court a quo refused an interdict to restrain the
alienation of a certain farm pending action. The Full
Bench of the High Court of the South African Republic was
called upon to determine whether this decision was
appealable. It held that it was. The court reached its
conclusion after analysing the relevant legislation as well
as Roman-Dutch and other common law authorities. The
reasoning of Kotze CJ is in my view particularly apposite.
He said (at p 4):
"An application for an interdict pending action, whereby the opposite party or defendant shall be
restrained from alienating or mortgaging certain immovable property, the subject of the suit, is not of a purely interlocutory character. If the Judge refuses the application, irremediable injury or loss may indeed be caused to the applicant and plaintiff, for the opposite party would be able, pending the action, to alienate or encumber the property, and in this way frustrate the whole object of the suit. It also seems to me that the Judge of first instance, having once refused to grant the provisional interdict pending action, is not competent to grant the application subsequently on the same facts and vary his order once pronounced after having heard both parties. His duty or office is, so far as concerns the request for an interdict, once for all exercised and determined, and the applicant, who feels himself aggrieved by reason of the refusal of the temporary interdict, has no other means of redress than by way of appeal."Donoghue's case was followed in the full bench
decisions of Ex Parte Lewis & Marks 7904 TS 281 and Carlls
v Hertz's Trustee 7904 TS 584. The latter two cases were
in turn followed in Donaldson v Foster's Executors 1909 TS
427. In the last mentioned case Innes CJ to stated firmly
"Now the discharge of the rule [i e, a rule nisi in an interim interdict application] must stand in the same position as an original refusal to grant the interdict; and this Court has twice decided [in the
above mentioned two cases] that such a refusal is a final, and not an interlocutory order. Continuity of practice is very desirable, and we must follow those decisions, and adhere to the rule there laid down ... The refusal of an interdict is always a final refusal to grant that particular form of ancillary relief in the action which is applied for."
It is not necessary to delve further into all the cases. In Davis v Press & Co 7944 CPD 108 at p 113 De Villiers J correctly reflects the previous law by stating "[it] is undisputed law that the refusal of an interdict is always appealable...". The author of Harms on Civil Procedure in the Supreme Court regards this proposition as still constituting good law (see paragraph S20 at p 508. See also LAWSA, Vol 11, para 329.)
In passing it may be noted that the grant of an interim interdict stands, historically, on a different footing. As far back as Prentice v Smith (1889) 3 SAR 28 the court held (at p 29) that an order granting an interim interdict "is an interlocutory order, and that consequently there can be no appeal". On the whole this view was21
followed in the provincial divisions (see Loggenbergr v Beare 7930 TPD 774; Davis v Press & Co, supra, and authorities referred to in those cases) and ultimately prevailed in the appellate division (African Wanderers Football Club (Pty) Ltd v Wanderers Football Club 7 977 (2) SA 38 CA) at p 4 6H to 47A and Crenshaw's case (supra) . Some judges have questioned the validity of the distinction between the refusal and grant of an interim interdict. This distinction cannot be justified by the nature of the proceedings giving rise to the decision - it is the same in both cases (see, e g, Davis v Press & Co, supra, at p 118 per Fagan J) . And it may be argued that the prejudice suffered by the unsuccessful party also does not differ in principle. See Davis's case, supra, at p 112 to 113 (De Villiers J). However, in Loggenberg's case, supra, Greenberg J expressed the view (at p 723) that "there is in fact a real distinction on the question of irreparability between the case of a granting of a temporary interdict and
the refusal of a temporary interdict. " There may also be a difference in the finality of the decision. Thus, as stated above, the refusal of an interim interdict is final. It cannot be reversed on the same facts (I disregard the possibility, discussed above, of a refusal on some technical ground). The same may not be true of the grant of an interim interdict. It may be open to the unsuccessful respondent to approach the court for an amelioration or setting aside of an interdict even if the only new circumstance is the practical experience of its operation. And, apart from the theoretical differences between the grant and the refusal of an interdict, there is also the practical one, discussed in Crenshaw's case at pp 12 to 15, that an appeal against the grant of a temporary interdict would often be inconsistent with the very purpose of this remedy. See also Davis v Press & Co, supra, at p 119 (Pagan J). It is, however, not necessary to pursue this matter any further. The appealability of the grant of
23an interim interdict does not arise directly for decision in this matter and is in any event concluded by authority.
For the reasons given above I consider that the court a quo was wrong in holding that its judgment was not appealable. This conclusion renders it necessary to consider the second basis for refusing leave to appeal, viz, that the petitioners have no reasonable prospect of success on appeal.THE NATURE OF AN APPEAL ON THE MERITS
In assessing the petitioners' prospects of success on appeal it is necessary to consider how a court would approach such an appeal. On behalf of the respondents it was argued that a court of first instance always has a discretion to refuse an interim interdict even if the requisites have been established. Consequently, so it was contended, an appeal court would only be entitled to interfere if it came to the conclusion that the lower court had not exercised a judicial discretion. The issue is not,24
it was said, whether the lower court had arrived at the correct decision, but whether it had exercised its discretion properly. The appeal court is not entitled to interfere because in its opinion it would have come to a different conclusion. This would be substituting its discretion for that of the court a quo.
This argument was not seriously contested by the petitioners but I do not think it should pass unchallenged.
That a court has a discretion whether or not to grant a temporary interdict has often been said. We were however not referred to any case in which an appeal in respect of an interim interdict was dealt with on the basis that the appeal court could not interfere except on the restricted grounds suggested by the respondents. As far as the Appellate Division is concerned, the authority which I have been able to find goes the other way. Thus in Messina ("Transvaal,) Development Co Ltd v Soutn African Railways and Harbours 7929 AD 7 95 at 215 to 216 Curlewis J A said:
"In an application for an interim interdict pending action, the Court has a large discretion in granting or withholding an interdict. Where there is merely a possibility, not a practical certainty, of interference or injury, as in the present case, the Court will be reluctant to grant an interdict, especially if the party seeking the interdict will have other means of redress and will not suffer irreparable damage. And the Court is entitled to and must regard the possible consequences, both to the applicant and to the respondent, which will ensue if an interdict be granted or withheld."It is significant that, despite emphasizing the
discretionary nature of the relief claimed, the learned
judge did not, in the result, decide the case on the
limited basis contended for in the present case. In fact
he did not even consider the question whether the trial
judge had properly and judicially exercised a discretion.
Curlewis J A decided the matter according to his own views
of the merits of the application and came to the conclusion
that "no sufficient case for an interdict has been made
out" (at p 216). Similarly in Goidsmid v The South African
Amalgamated Jewish Press Ltd 1929 AD 441 Curlewis JA, on
this occasion enjoying the concurrence of three of his
26colleagues, went into the merits of an appeal against the
refusal of an interim interdict, and concluded that "the
lower court acted correctly in dismissing the application."
(At p 446).
Much the same happened in Eriksen Motors (Welkom) Ltd
v Protea Motors, Warrenton and Another 7973 (3) SA 685 (A).
At p 691C Holmes J A, who delivered the judgment of the
court, stated that "[the] granting of an interim interdict
pending an action is an extraordinary remedy within the
discretion of the Court". He then (at p 691D-E) set out
the requisites for an interim interdict (on the authority
of Setlogelo v Setlogelo 7974 AD 227 at p 227) as follows:
"(a) a right which, 'though prima facie established, is open to some doubt';
(b) a well grounded apprehension of irreparable
(c) the absence of ordinary remedy".
At p 691E he reverted to the court's discretion. In exercising its discretion, he said, a court weighs inter alia the prejudice to the applicant, if the interdict is
27withheld, against the prejudice to the respondent if it is
granted (the balance of convenience). He then continued (p
"The foregoing considerations are not individually decisive, but are interrelated; for example, the stronger the applicant's prospects of success the less his need to rely on prejudice to himself. Conversely, the more the element of 'some doubt', the greater the need for the other factors to favour him. The Court considers the affidavits as a whole, and the interrelation of the foregoing considerations, according to the facts and the probabilities..."Despite the stress placed on the discretionary nature of
the court's function, Holmes J A proceeded to deal with the
appeal by giving effect to his own view on the merits of
the application for an interdict. His final conclusion (at
p 696E-F) was that "the affidavits do not warrant the
remedy of an interim interdict" and that the judge a quo
"was right in discharging the rule nisi".
See also Cassim and Others v Meman Mosgue Trustees
797 7 AD 754.
It would seem to follow from the above cases that the
word "discretion" was not used in a strict sense. That
this word is capable of different meanings appears from
Media Workers Association of South Africa and Others v
Press Corporation of South Africa Ltd ('Perskor') 1992 (4)
5A 797 (A) at 796 H-I and 800C-G. In the present context
the statement that a court has a wide discretion seems to
mean no more than that the court is entitled to have regard
to a number of disparate and incommensurable features in
coming to a decision. This is also the sense in which, I
take it, Schreiner J . used the word "discretion" in the
following oft-quoted passage from Transvaal Property &
Investment Co Ltd and Reinhold & Co v S A Townships Mining
& Finance Corp Ltd and The Administrator 1938 TPD 572 at
"No doubt the remedy by way of interdict has been said to be unusual; ... it is also described as discretionary ... It seems to me, however, that, apart from cases of interim interdicts, where considerations of prejudice and convenience are of importance, the question of discretion is bound up with the question
whether the rights of the party complaining can be protected 'by any other ordinary remedy' (Setlogelo's case, 1914 AD 221, at p 227)."The courts have not defined the considerations which may be
taken into account in exercising the so-called discretion
save for mentioning the obvious examples such as the
strength or weakness of the applicant's right, the balance
of convenience, the nature of the prejudice which may be
suffered by the applicant and the availability of other
remedies. Whilst this list is not exclusive, it does
indicate what the relevant features are in an application
of this sort. I find it difficult to imagine that
considerations which are entirely unrelated to these
features could be accorded weight in granting or refusing
an application for an interim interdict.
Finally in regard to the so-called discretionary
nature of an interdict: if a court hearing an application
for an interim interdict had a truly discretionary power it
would mean that, on identical facts, it could in principle
choose whether or not to grant the interdict, and that a court of appeal would not be entitled to interfere merely because it disagreed with the lower court's choice (Perskor case at 800D-F). I doubt whether such a conclusion could be supported on the grounds of principle or policy. As I have shown, previous decisions of this court seem to refute it.
In some provincial divisions a different view has been adopted. See, e g, Beecham Group Ltd v B-M Group (Pty) Ltd 1977 (1) SA 50 (T) at 58G-H and 60H-61A.
Since the approach which is to be followed in an appeal against the refusal of an interim interdict was not fully argued before us, it is perhaps best not to express a firm view, particularly since, as will be seen, such a view is not necessary for the determination of this appeal. I shall accordingly assume, in the petitioners' favour, that the respondents' contention is unsound. I propose therefore to follow the course adopted in earlier decisions31
of this division and to approach this application as if a court on appeal would have to decide simply whether the application for an interim interdict was correctly refused.THE CASE FOR AN INTERDICT
Knox D'Arcy's case, as alleged in the papers, may be summarised as follows:
(a) Knox D'Arcy has a well-founded claim against the
respondents for damages arising from unlawful competition;
respondents for damages arising from unlawful competition;
(b) with the intent of frustrating this claim the
respondents are concealing or dissipating their assets.
respondents are concealing or dissipating their assets.
I propose dealing with these two contentions in turn, and thereafter to consider other considerations such as the balance of convenience. In dealing with the factual issues between the parties I have regard, of course, to the evidence appearing on the papers. It was suggested during argument that further evidence may be available on some of the issues but I cannot speculate on these matters.32
KNOX D'ARCY'S CLAIM FOR DAMAGES
Both Knox D'Arcy and Krestahague provide management consultancy services. Their procedures are much the same. The consultancy company's salesmen approach businessmen and try to persuade them that the consultancy has management skills which will enable it to assist the potential customer to run his business more efficiently and profitably. If a potential customer shows an interest in the proposal, an agreement is arrived at in terms of which the consultancy company first conducts, at its own risk and expense, a preliminary survey aimed at identifying areas in which, and the means by which, the potential customer's business may be more efficiently managed. If the potential customer is impressed by the results of the survey he may conclude an agreement in terms of which the consultancy will provide its skill and service to give practical implementation to the proposed changes. The customer will then pay fees for this project, which are, at least to some
33degree, related to the extent to which the consultants succeed in increasing the customer's profitability.
It will be appreciated that the obtaining of customers is a time-consuming and expensive operation. Salesmen are highly qualified and well-paid. Most approaches to potential customers are unsuccessful, and even those that bear fruit normally do so only after many attempts. The preliminary survey requires the services of a number of well-qualified persons and may in the end provide no return. On the other hand, a successful project could be highly profitable.
In this trading milieu business contacts are at a premium. The chief executive officer of a large conglomerate may be the key to a number of lucrative projects. As this case shows, management consultants will, metaphorically speaking, fight to the death to retain or acquire promising business connections.34
In argument before us Knox D'Arcy relied on four claims against the respondents. They are, in the order of apparent importance:The S A Druggists claim.
2. The S A Breweries claim.
3. The empty pipeline claim.
4. The restraint of trade claim. THE S A DRUGGISTS CLAIM
This claim forms the most important part of the petitioners' case for various reasons. First, the amount at issue is large and, on the petitioners' case, can be readily proved. Second, the facts alleged in support of it were not known to the petitioners when they brought the 1991 interdict application and action. The novelty of the facts provides an explanation why an action for damages was not instituted earlier. Third, the petitioners contend that the relevant facts were concealed by the respondents in 1991. This, it is contended, demonstrates the35
respondents dishonesty, and adds credence to the suggestion that they are likely to attempt to frustrate any order that might be obtained against them.
The basis of the SA Druggists claim according to Knox D'Arcy's heads of argument, is "the wrongful and unlawful diversion and misappropriation by the respondents of a customer connection which existed between the Petitioners and S A Druggists, through its chief executive, Van der Walt". The relief claimed by Knox D'Arcy in its particulars of claim was, first, an account of profits earned by the respondents in respect of SA Druggists projects, and an order to pay such profits to the petitioners on the basis that such profits were earned by the respondents while in a fiduciary position vis-a-vis Knox D'Arcy; and, alternatively, damages in the amount of R4 million on the basis that the projects obtained from SA Druggists would, in the absence of unlawful competition by Krestahague, have accrued to Knox D'Arcy. I need not
discuss two further alternatives. They were based on alleged breaches of restraints in the service contracts of some of the respondents and, as I shall show, this aspect has really fallen away.The evidence is to the following effect.
Mr J H van der Walt ("Van der Walt") was the managing director of Sentrachem Limited, a company in the Federals group. On 11 July 1989, while still employed by Knox D'Arcy, Jamieson had a meeting with Van der Walt to solicit business. Van der Walt was apparently impressed by Jamieson, and referred him to some of his subordinates, including one Lovell, the managing director of NCP, a subsidiary (or, more accurately, a division) of Sentrachem. In due course Knox D'Arcy contracted to do a project for NCP.
As from 1 May 1991 Van der Walt became managing director of S A Druggists, another company in the same group. That this move was to take place was common
knowledge. Jamieson referred to it on 19 March 1991 in a report of a meeting relating to NCP. On the same day, i e, 19 March 1991, one Collins telephoned S A Druggists. Collins was employed by Knox D'Arcy as a "tele-marketer". He was based in England. His duty was to telephone business executives, including those in South Africa, to persuade them to see Knox D'Arcy salesmen. When he telephoned S A Druggists Collins was attempting to make an appointment for Jamieson. Collins was told that no meeting could be arranged since the managing director was retiring and the new managing director, Van der Walt, would be starting in May.
Up to this stage the facts are undisputed. Further allegations by the petitioners are not. The founding affidavit in the present application for an interim interdict was made by Mr R J G Steele ("Steele") , who controls Knox D'Arcy. He states, on the basis of evidence allegedly gathered subsequent to the 1991 interdict38
proceedings, inter alia as follows:
"In early May 1991 whilst Jamieson was still in Knox D'Arcy's employ, he had in fact telephonically contacted Van der Walt at S A Druggists;" (emphasis in the original.)
"A couple of weeks later he met with Mr van der Walt. The clear purpose of this meeting was to solicit business from S A Druggists. - not for the benefit of his employer Knox D'Arcy but for the advantage of the competing business Krestahague;"
"On 4 July 1991 Jamieson had a further meeting with Van der Walt."
"In order to make contact with Mr van der Walt he advised Van der Walt's secretary Marianne
[Shawe] that he was from Knox D'Arcy. This was true as during May 1991 he was still in Knox D'Arcy's employ until 14 June 1991. However when speaking to Van der Walt, he misrepresented to him that he had left Knox D'Arcy and was working for a new company Krestahague. In doing so he breached his fiduciary duty to Knox D'Arcy by disseminating a malicious falsehood."The essence of Knox D'Arcy's case in respect of the S
A Druggists claim, therefore, was that Jamieson contacted
Van der Walt during May 1991, while Jamieson was still in
Knox D'Arcy's service, for the purpose of soliciting
business for the respondents. This case was based purely
on hearsay evidence, and more particularly evidence given
by Bruce-Brand of what Van der Walt had told him. In the founding affidavit Steele says that Bruce-Brand had spoken to various present and former employees of relevant companies in the S A Druggists Group in an attempt to obtain evidence from them, but that he "was not able to obtain affidavits from any of these persons". In so far as this statement might be taken to refer to Van der Walt and Shawe it was simply not true. Van der Walt and Shawe were always willing to make affidavits. No other explanation is given in the founding papers for the failure to annex affidavits by Van der Walt and Shawe. In an affidavit filed at the reply stage Bruce-Brand states that he did not obtain an affidavit from Van der Walt or Shawe prior to the institution of the proceedings because he was afraid that Van der Walt would alert the respondents to Knox D'Arcy's intention to apply for an interdict.What then was the information which formed the foundation of Knox D'Arcy's case on this aspect? Bruce-
Brand had a meeting with Van der Walt on 21 October 1993. He testifies that Van der Walt told him inter alia the following:"During May 1991 and shortly after his joining SA
Druggists, Van der Walt received a telephone call from Jamieson who identified himself as having previously been with Knox D'Arcy and Van der Walt recalled having dealt with him previously. Jamieson had explained that he had left Knox D'Arcy and was now with a new group of companies, on whose behalf he was now offering management consultancy services and requested a meeting for this purpose. Van der Walt had agreed to meet with Jamieson because ... companies in the SA Druggists group had problems requiring management consultancy assistance. A meeting was arranged for a couple of weeks later."
Bruce-Brand made attempts to get greater clarity about the date of the meeting which Van der Walt had with Jamieson, but to no avail. In particular Van der Walt was unable to find his relevant diary.
During early December 1993 Bruce-Brand had various further discussions with Van der Walt. During these discussions, he testifies, Van der Walt confirmed that Jamieson had contacted him shortly after he joined S A41
Druggists and that this would have been in May 1991 or at the very latest in early June 1991.
That then was the information regarding Van der Walt. Regarding his then secretary, Shawe, the relevant witness was Collins. He states on affidavit that he telephoned Shawe on 19 July 1991. She told him that Jamieson had been in touch with Van der Walt and had had a meeting with him on 4 July 1991. She said that he had introduced himself by using the name Knox D'Arcy. In January 1994 Bruce-Brand had a discussion with Shawe during which, he says, she recollected having told a representative of Knox D'Arcy (presumably Collins) that Jamieson had mentioned that he was from Knox D'Arcy.
On the basis inter alia of the above hearsay evidence Knox D'Arcy instituted the present proceedings. After the order had been granted but before it was served on 9 May 1994, Bruce-Brand approached Van der Walt for an affidavit. This was on 6 May. He showed Van der Walt his (i e, Bruce-
Brand's) affidavit which formed part of the founding papers. According to Bruce-Brand Van der Walt's comment was that he could not recall the exact dates. Bruce-Brand then handed Van der Walt a short draft affidavit which Bruce-Brand had prepared for signature by Van der Walt. In that draft Van der Walt confirms that he had discussions with Bruce-Brand, and that the contents of Bruce-Brand's affidavit "correctly reflect what I told Bruce-Brand". For the rest the sequence of events is set out as deposed to (on the basis of hearsay) by Bruce-Brand in the passages summarised above.
Van der Walt was not happy with the draft affidavit. He and Bruce-Brand agreed that a further sentence would be added as follows: "However I stress I have no clear recollections of the dates and the meetings with Krestahague may only have taken place as of June 1991 and later." Van der Walt also asked that the word "correctly" be deleted. He was apparently prepared to accept that
43Bruce-Brand's affidavit reflected what he had said, but not that it did so correctly.
We were treated to a great deal of exegetic argument to show that Van der Walt's attitude and his affidavit of 6 May are not inconsistent with the petitioners' case, but this was not convincing. The cornerstone of the petitioners' case was that Jamieson contacted Van der Walt prior to 14 June 1991 while he was still in Knox D'Arcy's service. Dates were accordingly all-important. To suggest, as Bruce-Brand has done, that Van der Walt may have been uncertain as to the date of his first meeting with Jamieson but not as to the date when Jamieson first spoke to him is specious - Van der Walt's recollection clearly was that these dates were close together. But there was no need for Bruce-Brand to speculate about these matters. It was easy enough to ask Van der Walt: Are you certain of the approximate date when Jamieson first contacted you? We know, from an affidavit of Van der