Econ Oil and Energy (Pty) Ltd v TWN Petroleum Services and Another (61265/15) [2015] ZAGPPHC 671 (17 September 2015)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

CASE NO: 61265/15

DATE: 17/9/2015

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

In the matter between:

ECON OIL AND ENERGY (PTY) LTD APPLICANT

and

TWN PETROLEUM SERVICES FIRST

RESPONDENT

THEMBA SIMON MOLOI

SECOND RESPONDENT

JUDGMENT

RANCHOD J:

[1] In this matter the applicant launched an urgent application in which it seeks interdictory relief, pending final determination of the application on the return date as set out in the notice of motion as follows:

“1. That this application be heard as urgent and that the non-compliance of the applicant with the Uniform Rules of Court pertaining to time periods be condoned;

2. Pending final determination of this application on the return date on 15 September 2015:-

2.1 The first and second respondents are interdicted from contacting any of the applicant’s clients with a view to solicit and/or entice such clients to negotiate, conclude or conduct business with first and second respondents in the industry or heating fuels, automotive fuels, liquefied petroleum gas (LPG), lubricants, transformer oils and illuminating paraffin.

2.2 First and second respondents are interdicted from competing with the applicant by the use of applicant’s confidential information, business secrets and business model in order to advance first and second respondents’ business interest and activities at the expense of the applicant.

2.3 First and second respondents are ordered to suspend the first respondent’s application for a license to undertake petroleum wholesale activities, with reference number D/2015/05/15/003 to the Department of Minerals & Energy (via the controller of petroleum products at facsimile number (012) 341-4228 and petroleum.controller@energy.gov.za; with physical address at The Controller of Petroleum Products Department of Energy, 192 Visagie Street, cnr Paul Kruger & Visagie Street, Pretoria, Gauteng) and provide proof of the receipt of such suspension letter to the Department of Minerals & Energy to the applicant’s attorney within 3 days of date of this order.

2.4 First respondent is interdicted from commencing with its business activities in the industry of heating fuels, automotive fuels, liquefied petroleum gas (LPG), lubricants, transformer oils and illuminating paraffin, alternatively and in the event that first respondent has commenced its business activities as aforesaid, the first respondent is interdicted from continuing with its business activities.

2.5 The first and second respondents are ordered to hand to the applicant’s representatives within 3 days of date of this order, all information belonging to the applicant, whether stored electronically or in hard copy or otherwise.

2.6 The first and second respondents are ordered to pay the applicant’s costs on a scale as between attorney and client, jointly and severally.

3. The order in paragraph 2.1, 2.2, 2.3, 2.4 and 2.5 supra, operates as an interim interdict with immediate effect, pending finalization of this application.

4. The first and second respondents, jointly and severally, are ordered to pay the costs on a scale as between attorney and client.”

[2] The facts, briefly, are as follows.

[3] The applicant is in the business of wholesaling petroleum and oil products according to the specifications of its clients. One of its main clients is Eskom. The applicant supplies its products to a number of Eskom’s power stations. The second respondent is the erstwhile employee of the applicant. The applicant employed the second respondent in terms of an employment contract entered into between them dated 6 August 2014 for a period of three years from 1 August 2014 to 31 July 2017. It was subject to renewal for a period of two years at the discretion of the Managing Director of the applicant. Second respondent was employed initially as an energy advisor, but in February 2014 his position was elevated to that of operations manager.

[4] The second respondent resigned on 26 July 2015. The applicant is of the view that the second respondent resigned ‘probably’

as a result of the applicant having served notice on second respondent that it intended to hold a disciplinary hearing regarding

misconduct of the second respondent. (The second respondent had first been suspended on 10 July 2015 pending an investigation into his alleged misconduct).

[5] I do not deem it necessary to go into great detail about the alleged misconduct of the second respondent save to say that it seems to be primarily based on the common cause fact that the second respondent registered the first respondent (TWM Petroleum Services (Pty) Ltd), of which he is the sole director and shareholder, whilst he was still employed by applicant. Second respondent also caused a website of the first respondent to be posted on the internet on which is stated that:

“TWM Petroleum Services sources and supplies South Africa and its neighbouring countries with clean and non-polluting fuel.”

[6] The applicant says although the impression is created on the website that the first respondent is already trading, it probably is not, as it (first respondent) is still awaiting the outcome of its application to the Controller of Petroleum Products in the Department of Minerals and Energy for a licence to wholesale petroleum products. In any event, second respondent says in his answering affidavit that the first respondent has to date not been licensed as a wholesaler in terms of the [Petroleum Products] Act [120 of 1977] and is accordingly not trading.

[7] The applicant seeks the interdict on several grounds – as appears from the founding affidavit, the heads of argument, and in oral submissions during the hearing. They are to interdict the respondents “from infringing on applicant’s business by unlawfully competing with applicant; passing off applicant’s business model; trade secrets; confidential information as its own”.[1]

[8] This brings me to the nub of this application.

[9] The applicant seeks an interlocutory interdict as it appears from the notice of motion. An interlocutory interdict is one which is granted pendente lite. “It is a provisional order designed to protect the rights of the complaining party pending an action or application to be brought by him to establish the respective rights of the parties.”[2]

[10] The interlocutory interdicts sought are a prohibitory interdict (prayers 2.1, 2.2 and 2.4) as well as mandatory interdicts (mandamus) (prayers 2.3 and 2.5).

[11] A prohibitory interdict is one requiring a person to abstain from committing a threatened wrong or from continuing an existing one. A mandatory interdict is one requiring a person to do some positive act to remedy a wrongful state of affairs for which he is responsible, or to do something which he ought to do if the complainant is to have his rights.[3] This distinction between prohibitory and mandatory interdicts is of little practical value except that a court when exercising its discretion whether or not to grant an interdict will have regard to the fact that it is more difficult to enforce a mandatory interdict.[4] Both the prohibitory and the mandatory interdict may be either final or interlocutory.[5]

[12] The respondent says the applicant is seeking interim relief pending the seeking of identical relief on the same papers. There is no reason to approach the court twice on the same papers and the effect of the relief sought is thus final. I agree.

[13] The applicant has not sought a rule nisi returnable on the date specified in the notice of motion, as would be the case when interim relief is sought pending determination of an action or application to be instituted. It seems to me the relief sought is framed in the way that it is because the practice manual of this Division of the High Court provides that in urgent applications, save in exceptional circumstances, the applicant should not frame the relief sought in the form of a rule nisi which has, in whole or in part, interim effect. It provides further that where applicable, the urgent relief should be sought pending the determination of the application.

[14] The applicant seeks an order in perpetuity that first respondent be prohibited from trading. This is apparent from the relief sought. If this court was to grant the relief as sought in the notice of motion, on the return date the very same relief will be sought to be made final on the same papers. In effect, what the applicant is seeking at the interim stage is final relief. I proceed then to deal with the application on the basis that the applicant is seeking final relief.

[15] The difference between an interim and final interdict is well known. The test for the grant of the one is quite different to the test for the grant of the other. Since the balance of convenience plays no role in the grant of a permanent interdict, such an interdict is not usually sought on notice of motion, although of course it might be if no dispute of fact is anticipated.[6] A final interdict is a final determination of the rights of the parties to the litigation. It is usually applied for by action but may be granted upon application.[7]

[16] An applicant for a permanent interdict must show[8]:

(a) a clear right;

(b) an actual or threatened invasion of that right; and

(c) an absence of any other suitable remedy.

[17] The applicant has not demonstrated an actual invasion of its right not to be competed against unlawfully as the first respondent has not commenced trading as yet. However, the second respondent admits that first respondent intends to commence trading as soon as a license is obtained and that it will do so in competition with the applicant. To that extent there may be a threatened invasion of that right if the applicant can show that first respondent will compete unlawfully with it.

[18] The threatened invasion of applicant’s right is sought to be demonstrated by showing that the second respondent clandestinely,

whilst in its employ, registered the first respondent of which he is the sole director and shareholder. Further, that he created a website for the first respondent where he creates the impression that it is already trading. It is said on first respondent’s website that it trades within and beyond the borders of South Africa. But, in the opposing affidavit the respondents say first respondent intends to trade only beyond the borders of South Africa.

[19] Respondents deny that they will be competing unlawfully with the applicant. Second respondent contends, as I understand him to say, that he will be utilising his own qualification as a chemical engineer and the experience he has gained over the years – including his employment with Sasol for eight years – in running the business of the first respondent. This, he contends, is not unlawful. However applicant’s contention is that he will be utilising its business model, trade secrets, client lists and other intellectual property which respondents deny. These are disputes of fact, which applicant should have foreseen. “The authorities are to the effect that an application may be dismissed where a dispute of fact which cannot be resolved on paper should have been anticipated by an applicant. In the present case the first applicant could have brought an application for an interim interdict pending an action for a permanent interdict but he chose not to do so.”[9] (My emphasis.)

[20] Of importance also is the common cause fact that first respondent will not commence trading until its application for a licence is granted.

[21] The starting point with regard to unlawful competition is that, as a general rule, every person is entitled freely to carry on his (or her) trade or business in competition with his or her rivals.[10] The applicant’s claim lies in the limitation of that right in the form of interdicting unlawful competition as a delict. The applicant’s claim against the respondents is accordingly governed by the development of the lex Aquilia to cater for the misuse of confidential information and trade secrets to advance one’s own business at the expense of a competitor. To succeed, the applicant must establish:

(a) that the first respondent is a competitor of the applicant;

(b) that the respondents are utilising (or that there exists a reasonable apprehension that they may utilise) its information or trade secret that constitutes a protectable intellectual property interest;

(c) to advance the business of the first respondent at the expense of the applicant.

[22] If first respondent is granted a licence then the applicant and first respondent would be competitors as petroleum product wholesalers.

[23] The applicant has lodged an objection (in the same broad terms as in this application) to the first respondent’s application for a wholesale petroleum product licence. From the papers it appears that the Petroleum Controller of the Department of Minerals and Energy has yet to make a decision on that application. The first respondent cannot trade in competition with the applicant until it has been duly licenced to do so. If that application is refused then this application would be rendered moot. If that application is granted, the applicant before me would have a right of appeal to the relevant Minister (of petroleum and energy affairs) - so would the first respondent have a right of appeal against the refusal of a licence.[11] The granting of an order (as the applicant seeks) that the first respondent withdraw its application to the Petroleum Controller is in my view an impermissible intrusion in an administrative power. A court would be slow to, and have in fact declined to usurp the powers of the authorities to whom legislation has vested a decision making power.[12]

[24] If the orders sought were granted it would mean that the respondents cannot trade in the same field as the applicant at all. I am of the view that this is an impermissible restriction on the respondent’s right to trade in fair competition with the applicant. It is unlawful competition that is proscribed, not a lawful one.

[25] The applicant alleges that the respondent’s conduct inter alia includes passing-off. Passing off is where a rival trader passes-off his goods or business as being that of a competitor. There

is no evidence that the respondents have engaged in such conduct hence the relief sought on that ground must fail.

[26] The applicant has an alternative remedy. It could claim damages for unlawful competition. As I said, unlawful competition is actionable under the lex Aquilia. I therefore deem it unnecessary to deal with the other issues raised such as an alleged conflict of interest between the second respondent’s duties toward the applicant and his conduct in planning to commence trade in competition with it, and a purported transgression by the second respondent of his employment contract with the applicant, which are in any event all denied by him.

[27] In all the circumstances, the application falls to be dismissed with costs.

_________________________

N. RANCHOD

JUDGE OF THE HIGH COURT

Appearances:

Counsel on behalf of Applicant : Adv J Roux

Instructed by :

Stegmann’s Inc

Counsel on behalf of Plaintiff : Adv Gosslett

Instructed by :

R.E Makgale Attorneys

Date heard

: 26 August 2015

Date delivered

: 17 September 2015

[1] Applicant’s Heads of Argument page 1 para 1.

[2] Erasmus: Superior Court Practise, [Service 41, 2013] and [Service 45, 2014] at E8-2 – E 8-3.

[3] Erasmus E8-3.

[4] Erasmus E8-3.

[5] Erasmus E8-3.

[6] Hall and Another v Heyns and Others 1991(1) SA 381 (CPD) 395 D-E.

[7] Buckingham v Doyle and Others 1961(3) SA 384 (TPD) 388 A-F.

[8] Hall and Another at 395 E-F.

[9] Hall and Another at 397.

[10] Schultz v Butt 1986(3) SA 667 (A) at 678 G; s22 of Constitutions Act 108 of 1996.

[11] Section 12A(1) of the Petroleum Products Act 120 of 197 provides: “Any person directly affected by a decision of the Controller

of Petroleum Products may, notwithstanding any other rights that such a person may have, appeal to the Minister against such

decision.”

[12] University of the Western Cape and Others v Member of the Executive Committee for Health and Social Services and Others 1998(3) SA 124 (C) 130.