Arysta Lifescience South Africa (Pty) Ltd and Another v Adams and Adams Attorneys and Others (41074/12) [2015] ZAGPPHC 942 (9 October 2015)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Case Number: 41074/12

9/10/2015

In the matter between:

ARYSTA LIFESCIENCE SOUTH AFRICA (PTY) LTD 1st APPLICANT

VILLA CORP PROTECTION 2nd APPLICANT

and

ADAMS & ADAMS ATTORNEYS 2st

RESPONDENT

SUMITOMO CHEMICAL COMPANY LTD 2nd RESPONDENT

PHILAGRO SOUTH AFRICA (PTY) LTD 3rd RESPONDENT

ALMOND AGROCHEMICALS (PTY) LTD 4th RESPONDENT

THE REGISTRAR OF FERTILIZERS, FARM FEEDS,

AGRICULTURAL REMEDIES AND STOCK REMEDIES 5th RESPONDENT

Coram: HUGHES

JUDGMENT

Heard on: 24 August 2015

Delivered on: 9 October 2015

HUGHES J

[1] The first and second applicant's (applicant's) applied for a declaratory to restrain the first respondent from continuing to act as attorneys for the second respondent, Sumitomo Chemical Company Ltd, and the third respondent, Philagro South Africa (Propriety), as they contend that a conflict of interest has arisen by virtue of the first respondent's takeover of the Intellectual property department of Bowman Gilfillan Inc., the applicant's previous attorneys at that time. The second and third respondent's, as appears in the papers, will be collectively referred to as 'Sumitomo'.

Background

[2] On 19 July 2005 the second and third respondent's commenced urgent proceedings against both applicant'. In this urgent application the relief sought was final with interim relief in the alternative. Sumitomo alleged that the applicant's infringed on their rights and registration of their pesticide product containing pyriproxyfen marketed under the name Nemesis.

[3] The applicant's contend that they filed an answering affidavit, on 15 September 2005, which only addressed the issue of urgency and the interim relief sought by Sumitomo. The final relief sought was not addressed however it is disputed by the first respondent.

[4] On 20 September 2005 the application was heard and the interim relief sought was dismissed with the final relief pending. An application for condonation for the late filing of Sumitomo replying affidavit was filed in February 2007 and their replying affidavit was filed in December 2007. The applicant contends that this was done in the absence of them filing their answering affidavit to the final relief sought.

[5] The applicant's responded by filing a Rule 30 application where they alleged that Sumitomo had committed an irregular step by filing their replying affidavit. On 14 September 2007 this Rule 30 application was dismissed as well as the application for leave to appeal heard on 18 October 2007. The Supreme Court of Appeal (SCA) was approached and leave was granted to the full Court of this division.

[6] On 17 June 2011 the full court dismissed the Rule 30 application. On 20 December 2011 Sumitomo filed a supplementary affidavit explaining the late filing for the replying affidavit. The applicant's contend that this was in respect of condonation for the filing of late evidence as directed by the full court and not as contended by Sumitoto.

[7] These proceedings are referred to by the parties as the 'concurrent litigation' proceedings. It is evident from these proceedings that the parties were in dispute as to how far the proceedings had progressed in the concurrent litigation.

[8] On the one hand Sumitomo was of the view that the applicant's had filed an answering affidavit in the concurrent litigation answering to the case made out for both the interim and final relief sought. Sumitomo states that as at 8 February 2012 their heads of argument had been finalised and was ready for service upon the applicant's.

[9] The applicant's view somewhat differs. They state that the condonation sought by Sumitomo necessitated the applicant's

filing their answering affidavit, concluding in the hearing of an application for condonation. If condonation was granted, the

applicants were then obliged to file an answering affidavit to the final relief sought in the concurrent litigation.

[10] In the concurrent litigation, the first respondent, with Alan Smith (Smith) being the instructing attorney represented Sumitomo. Bowman Gilfillan Inc. (BGI), with the instructing attorney being Llewellyn Parker (Parker), represented the applicant's. During the course of the concurrent litigation Parker tragically died on 19 June 2011. Whilst the matter was still in the hands of BGI, Kevin lies, advised the first respondent that he would be 'taking over the future conduct of the matter'. Thereafter, Frank Joffe (Joffe), a senior director, together with Theo du Preez (du Preez), a junior attorney of BGI took over the applicant's matter.

[11] On 1 March 2012 an announcement was made of a merger between BGl's Intellectual property department (Bowman's IP) and the first

respondent. Joffe, du Preez and an overwhelming majority of the professional and secretarial staff of Bowman's IP department were

absorbed by the first respondent.

[12] At the time that the merger was announced, the applicants were advised by Joffe and du Preez that they could no longer represent

them in the concurrent litigation and this would also apply to the other staff moving over to BGI. Essentially, the applicant's had to engage new attorneys to assist them in the concurrent litigation.

[13] The first respondent states that the hard and electronic copies of all the files in Bowman's IP department were transferred when the merger took place.

[14] The first respondent further states that the applicant's terminated BGl's mandate prior to the move of Bowman's IP department and that all the applicant's files, but for two, were transferred to the applicant's erstwhile attorneys. On 8 May 2012 the two outstanding files, which the first respondent contends were archived as they were inactive, were then handed to the applicant's attorney.

[15] BGI used the 'Patricia' database and this database was only merged with that of that of the first respondent on 7 September 2012. Prior to this date the first respondent states that they were unable to access the database of BGI. Further, the first respondent states that the records pertaining to the concurrent litigation on 'Patricia' had been deleted prior to the merger.

[16] On 20 August 2015 the concurrent litigation was withdrawn by Sumitomo with a tender of costs. However, in the current application the first respondent seeks that each party pay their own costs. The applicant's persist with their prayer that a punitive costs order is awarded against the first respondent, inclusive of the costs of the employment of two counsels. I am seized with the issue of costs.

The Law Applicable

[17] It is trite that the victorious party is entitled to its costs. The discretion of awarding such costs lies with the Court hearing the matter and in doing so the Court must exercise this discretion judicially taking into account all the facts of the case. See Graham v Odendaal 1972 (2) AD 611 at 616A.

[18] In circumstances where a dispute has been settled by the parties in respect of the merits with the issue of costs remaining, the Court, in determining the issue of costs should not hear evidence on the disputed issues in order to determine who ought to be liable to pay the costs. In fact, the Court ought to deal with the material before it to arrive at a determination of who should be liable for the costs.

[19] This was appositely stated by Van Niekerk J in Garn/an Investments (PTY) LTD v Tri/ion Cape (PTY) LTD 1996 (3)SA 629 at 700G-701H, where he refers to the dicta in Jenkins v SA Boiler Makers, Iron & Steel Workers & Ship Builders Society 1946 WLD 15, as set out in;

"the Court held that where a disputed application is settled on a basis which disposes of the merits except insofar as the costs are concerned, the Court should not have to hear evidence to decide the disputed facts in order to decide who is liable for costs, but the Court must, with the material at its disposal, make a proper allocation as to costs.

I would respectfully associate myself with the conclusion to which the Court came, and more particularly with the approach adopted by Price J at 1 where he states that:

'It seems to me to be against all principle for the Court's time to be taken up for several days in the hearing of a case in respect of which the merits have been disposed of by the acceptance of an offer, in order to decide questions of costs only.'

The learned Judge goes on to state:

'I cannot imagine a more futile form of procedure than one which would require Courts of law to sit for hours, days, or perhaps even for weeks, trying dead issues to discover who would have won in order to determine questions of costs, where cases have been settled by the main claims being conceded.'

The learned Judge adds at 18 that:

'When a case has been disposed of by an offer which concedes the main claim and the costs of the whole case have still to be decided, I think the Court must do its best with the material at its disposal to make a fair allocation of costs, employing such legal principles as are applicable to the situation. This is much to be preferred to laying down a principle which requires courts to investigate dead issues to see who would have won on such issues. In most such cases the litigants would be required to incur far greater costs than those at stake.'

Costs, the learned Judge went on to point out, must be decided on broad general lines and not on lines that would necessitate a full hearing on the merits of a case that has already been settled. This approach is certainly to be commended. Costs, particularly at present, play a very important role in litigation and the presiding judicial officer should, in my view, discourage the incurring of unnecessary costs by making an appropriate order in this respect. A party must pay such costs as have been unnecessarily incurred through his failure to take proper steps or through his taking wholly unnecessary steps: see Herbstein and Van Winsen (op cit at 483); De Villiers v Union Government (Minister of Agriculture) 1931 AD 206 at 214.

In Fripp v Gibbon & Co 1913 AD 354, an appeal only on costs, De Villiers JP at 363 dealt with the matter as follows:

'I agree that as a rule it is fair and just that the costs should follow the event, whether of claim or of counterclaim. But I cannot agree with the view that the unsuccessful party should bear the burden of all the costs simply on the ground that in the final result he is the unsuccessful party. To me it seems more in accordance with the principles of equity and justice that costs incurred in the course of litigation which judged by the event or events, prove to have been unnecessarily or ineffectively incurred should, as a rule, be borne by the party responsible for such costs.'

Even where the decision in respect of costs is 'separate' from the merits, as is the case where a decision on the merits is no longer sought, this does not mean that the decision on costs must of necessity be totally isolated from the merits.

Indeed, in an appeal against a costs order, the Court's decision, in the absence of other relevant factors, would in the normal course be largely based on whether or not the appellant would have been successful on the merits: see Erasmus v Grunow en 'n Ander 980 (2) SA 793 (0) at 7978-H and 7980-H.

The material before this Court for consideration

[20] This application is premised on the applicant's contention that the first respondent during the course of the concurrent litigation found itself in a position of conflict of interest. The first respondent argues that as the concurrent application has been withdrawn the question as to this application, of conflict of interest, is now moot. What is apparent from the applicant's argument is that they are confident that they would have succeeded in proving that the first respondent was in a conflict situation on the merits.

[21] In my view, who would have at the conclusion of the application been the victor is not the test to be applied in circumstances where the merits were disposed of with only the issue of costs remaining for determination. See Gamlan Investments (Pty) Ltd (supra) at 700G-J. My view is that the correct approach is to examine that material before the Court presently, and from this exercise make a decision as to costs. However, in appeal proceedings where a costs order is sought and the merits had been settled, one would take into account the prospects of success of the parties on the merits.

[22] It appears from the material before the Court that the applicant's had to launch this conflict of interest application as a result of the merger that took place where the first respondent had a direct interest. It is not in dispute that the applicants were not consulted with regards to the merger. It therefor stands to reason that their input regarding their legal standing with BGI was not taken into account before the merger was embarked upon. It has not been disputed that Joffe and du Preez, of BGI, advised the applicant's to seek other attorneys as a consequence of the merger.

[23] The first respondent is adamant that no conflict arose when they took over BGI IP department. This is so they say, even in the face of the allegations that the applicant's had to move their file to another attorney after the announcement of the merger. This conduct high lights the applicant's concerns, that their matter would not be given the attention it deserved, because the first respondent represented Sumitomo in the concurrent litigation from as far back as 2005.

[24] The first respondent argued that the issue of conflict is now moot and the merits of the concurrent litigation have been disposed of. In my view, even though this maybe so, the conflict of interest application could have been avoided, had the first applicant

approached the merger with much more consideration with regards to the applicant's position, as the parties had been locked in

litigation for a very long time.

[25] It was not sufficient for the first respondent to say that the dispute in the concurrent litigation is no longer alive so the

conflict is moot, thus the applicant's should go away, as this was the very issue that they had been aggrieved about and which brought the parties to court in this application.

[26] The fact that Sumitoto withdrew the concurrent litigation, though relevant, does not dispel the fact that conflict dispute arose as a result of the first respondent's conduct. Whether a decision on the merits would have been made for or against the first respondent's, in my view, is not necessary to determine in the exercise of my discretion, but with the material at hand, this is sufficient for me to come to a conclusion on the issue of costs.

[27] In broad general terms this application would not have been initiated but for the first respondent's conduct in the merger process. Not to say that the applicant's had a right to preclude the first respondent from engaging in the merger with BGI IP department. However, they should have anticipated concerns from those clients whom that they were litigating against represented by BGI, seeking reassurance to dispel the issue of conflict. This being the case, I am obliged to examine the conduct of the parties prior to the merger and thereafter. The applicants were well within in their rights in seeking out the Court's assistance as they were of the view that their position in the concurrent litigation had been compromised because their confidential and private information was now in the hands of their opponent.

[28] The first respondent in my opinion was ill advised to allow the issue to escalate to the Courts, knowing full well that the concurrent litigation had not been finalised. I say this as the first respondent employed Joffe and du Preez, who had worked on the applicant's case and would have had knowledge of the confidential and privileged information of the applicant's case. In my view, logic dictates that the first respondent would have gained access to the necessary data and files of the applicant's defence in the concurrent litigation.

[29] During the transfer of the files to the applicant's attorney, the first respondent failed to transfer two files, which were eventually transferred at a much later stage, long after the merger had taken place. This was done even though the first respondent had reassured the applicant's that a Chinese wall had been put in place to circumvent any issues that would render them in a position of conflict regarding the applicant's confidential and private information.

[30] In exercising my discretion with the aforesaid material before me I found it necessary to look at the conduct of the parties before and after this application was launched. In addition, I take into account whether anyone of the parties adopted any irrelevant and I or unnecessary steps in the application itself. In this regard I refer to Nkume v Firstrand Bank LTD tla First National Bank 2012 (4) SA 121 (ECM) at 1240-G where it was held that:

"In the exercise of the court's discretion I have to consider the manner in which the parties conducted themselves in this application, both before and after the application was brought. See First National Bank of Southern Africa t/a Wesbank v First East Cape Financing (Ply) Ltd 1999 (4) SA 1073 ( SE) at 10790 - 1080G. And see generally Cilliers et al Herbstein and Van Winsen: The Civil Practice of the High Courts in South Africa 5 ed at 961; Union Government (Minister of Railways and Harbours) v Heiberg 1919 AD 477 at 484; Griffiths v Mutual & Federal Insurance Co Ltd1994 (1) SA 535 (A) at 549A - D; and Graham v Odendaal1972 (2) SA 611 (Al at 616. I must also consider which of the parties took unnecessary steps or adopted a wrong procedure, any misconduct by a party, and any other relevant factors. See De Villiers v Union Government (Minister of Agriculture) 1931 AD 206 at 214."

[31] This application is an interlocutory application which emanates from the concurrent litigation. In the circumstances set out in the material before me and in broad general lines, I view the launching of this application by the applicant's as necessary. The concurrent litigation had been going on for 10 years and on the first respondent's version the only step left to finalise the concurrent litigation was the serving and filing of their heads of argument. Further, the concurrent litigation coming to an abrupt end with no coercion on the part of the applicant's with this application hanging over the first respondent's head, these factors together with those mentioned in the preceding paragraphs, to my mind, should have alerted the first respondent to desist at an earlier stage.

[32] In my judgment it could only be the pressure of the conflict application that induced Sumitoto, who contends that it was in an advantageous position prior to this application, to the withdraw the concurrent application with a tender of costs. All the factors referred to have been taken into account in the exercise of my discretion. See Merber v Merber 1948 (1) SA 446 (A) at 452 -453 where the Court made reference to the earlier authorities which address what is meant by the exercise of one's discretion:

"In Ritter v Godfrey (1920, 2.K.B. 47) the Master of the Rolls said:

'The discretion must be judicially exercised and therefore there must be some grounds for its exercise, for a discretion exercised on no grounds cannot be judicial. If however there be any grounds, the question of whether they are sufficient is entirely for the Judge at the trial and this Court cannot interfere with his discretion.'

I presume that 'any grounds' mean any grounds on which a reasonable person could come to the conclusion arrived at. This passage was cited with approval by the House of Lords in Donald Campbell and Company v Pollak (1927, A.C. 732) by the LORD CHANCELLOR (at pp. 809 and 811) and by LORD ATKINSON (at p. 814). In Penny v Walker (supra) this Court, in laying down what was meant by a judicial discretion referred to p. 60 of the report of Ritter v Godfrey (supra). What ATKIN, L.J., there said was:

'In the case of a wholly successful defendant, in my opinion, the Judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains.' "

[33] In conclusion, taking all the material before me cumulatively I am of the view that it will be just in the circumstances to award the applicants their costs in this application. I must hasten to add that I am not convinced that the applicant's made out a case for punitive costs.

[34] Consequently the following order is made:

[34.1] The first respondent is ordered to pay the costs of this application such costs to include the costs of the employment of two counsel.

____________________

W. Hughes

Judge of the High Court