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

IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

Case no.: 8333/2001 +

2284/2002

In the matter between:

THE MOVIE CAMERA COMPANY (PTY) LTD Plaintiff/Applicant

and

JAN BAREND VAN WYK 1st Defendant/Respondent

MEDIA FILM SERVICE SOUTH AFRICA (PTY) LTD 2nd Defendant/Respondent

JUDGMENT GIVEN THIS TUESDAY, 17 DECEMBER 2002

­­­­­­­­­­

CLEAVER J:

[1] In April 1993 the first defendant (“Van Wyk”) was employed as a technical supervisor in the lighting division of a company known as Movie Camera Company Limited (Registration number 84/08463/06) (“the old MCC”). The plaintiff was then some six years out of school and had, in addition to gaining experience in the field of lighting for the movie camera industry, achieved a qualification in electrical engineering from the Cape Technicon. The old MCC was a company controlled by one M S van Tonder (“Van Tonder”) who was to play a leading role in the events to follow. The old MCC was at the time mostly concerned with the renting of motion picture camera equipment. At that stage the old MCC dealt in the main with Arri camera equipment purchased from a German company Arnold and Richter Cine Technik GmbH (“Arri Germany”) and was based in Johannesburg. It also rented out Arri lighting equipment, which was procured from a British company Arri GB Limited (“Arri GB”), which in turn was a wholly owned subsidiary of Arri Germany.

[2] In about August of 1993 Van Wyk moved to Cape Town in order to set up a lighting division for the old MCC in that city. He was effectively in charge of the Cape Town branch and reported directly to Van Tonder. His father, Corrie van Wyk, was also involved in the old MCC as managing director of the company in Johannesburg. In 1994 sole distributor agreements were concluded between the old MCC and Arri GB and Arri Germany in terms whereof with effect from 1 January 1995 the old MCC was appointed the sole sales distributor in South Africa for Arri camera and lighting equipment. Arri Germany manufactures Arriflex cameras and Arri lighting equipment in Germany. It sells these products worldwide. Arri GB has the rights to sell Arri lighting in Europe and various other parts of the world including South Africa. Neither Arri Germany nor Arri GB rents equipment out. Arri GB has two British based subsidiaries, Arri Media that rents out Arri cameras and Arri Lighting that rents out Arri lighting. There never was any agreement in place between the old MCC and Arri Media or Arri Lighting regulating their relationship, whether in the form of distributor agreements or otherwise. The occasions on which the plaintiff rented cameras from Arri Media were ad hoc and isolated.

[3] Towards the end of 1996 a public company quoted on the JSE Johannesburg Securities Exchange, Sasani Limited (“Sasani”), appeared on the scene and started making inroads in the movie camera and lighting field. It first acquired a business known as Video Lab, the business of which was the developing and editing of film into its final form. We are concerned in this case with movie film productions used for advertising purposes. In December 1996 Sasani entered into negotiations to purchase the old MCC. Van Wyk testified that at that time he met the chairman of Sasani Limited, Mr Frangos (“Frangos”), and a Mr Smit who was previously the managing director of Video Lab, together with Van Tonder and other senior employees of the old MCC. He had nothing to do with the arrangements for the sale of the business which were conducted on behalf of the old MCC by Van Tonder. A document recording the sale of the business to a company termed Investment Facility Company 530 (Pty) Limited (96/12855-07), a subsidiary of Sasani Limited which thereafter changed its name to The Movie Camera Company (Pty) Ltd (“the new MCC”) was signed on 7 February 1997. The document recorded that the sale of the business was effective as from 1 January 1997 (the effective date) and provided inter alia that four specified employees of the old MCC were to sign restraint of trade agreements with the purchaser on terms to be agreed between them and the purchaser. These were Van Tonder, Corrie van Wyk, Sean Ryan and Van Wyk. The purchase price was some R67 million plus the value of certain assumed liabilities and the agreement provided that a balance of R25 million outstanding after certain specified payments had been made would be payable only in the event of certain profit warranties set out in the agreement being attained by the new MCC in successive years as at 30 June 1997, 30 June 1998 and 30 June 1999.

[4] Van Wyk testified that Van Tonder explained to him that the entities which controlled the old MCC would receive payment of the balance of the purchase price only in the event of the profit warranties being met. He accordingly asked Van Wyk whether he would be prepared to stay on with the new company until June 1999 in order to ensure that the profit warranties were met. Van Wyk agreed to do this, for as will be seen, he had considerable trust and confidence in Van Tonder who he regarded as his mentor and who had treated him very well in the past. At the time of the sale of business Van Wyk’s employment with the old MCC was not subject to any restraint of trade agreement.

[5] Van Wyk became a director of the new MCC on 25 March 1997, but it was not until 10 June 1997 that he signed a restraint agreement. More about the circumstances under which this agreement was signed in due course, but for the present it is sufficient to note that in the agreement which Van Wyk signed, the restraint period was a period calculated from 1 January 1997 and enduring until a date 30 months after the termination of his employment. This was not what Van Wyk had in mind. He was under the impression that his restraint was to be similar to Van Tonder’s, namely for a period of thirty months from the effective date (i.e. until 30 June 1999). Van Wyk testified that he first became aware of the fact that he had signed a restraint agreement in the terms set out at the time of the board meeting of the new MCC which took place in November 1997. He says that after the meeting he, his father, Sean Ryan and Johan Haupt (the financial director) were standing around when he was asked whether he realised that his restraint agreement was binding for 30 months after the date of the termination of his employment with the new MCC. Van Wyk says that he immediately went to see Van Tonder in his office to discuss this development. He says that Van Tonder informed him that he had understood that Van Wyk’s restraint was to have been in the same terms as his, namely for 30 months from the effective date and not for 30 months from the date of the termination of his employment. Van Tonder said that he would look into the matter. Van Wyk testified that he then raised the matter with Mr Frangos on 24 March 1998 when the latter came down to Cape Town from Johannesburg in order to meet with the staff of the Cape Town office. The meeting took place at the Table Bay hotel and Van Wyk says that he told Frangos that the agreement was incorrect in that the restraint should have been recorded as 30 months from the effective date. According to Van Wyk, Frangos said that he would look into the matter, but nothing transpired.

[6] On 1 April 1999 Mr Ennio Cervo (“Cervo”) became the CEO of the new MCC and Van Wyk immediately raised his concern about the restraint agreement with him. By then his unhappiness had extended beyond the incorrectly recorded restraint (according to him) and matters came to a head on 1 September when officials of Sasani refused to release to him share certificates for Sasani shares which belonged to him. These shares had been procured for him through the good offices of Van Tonder, who had lent him R1 million in order to acquire the shares on the understanding that he would repay the loan out of a bonus share scheme which the new MCC had concluded with him. See paragraph 32 infra.) This occurred on 1 September and led to Van Wyk drafting a letter of resignation. He then telephoned Cervo and advised him that he intended to resign. Cervo met with him at breakfast the next morning in order to discuss the matter when Van Wyk handed him his letter of resignation. Unsurprisingly, in view of Van Wyk’s importance to the plaintiff, Cervo suggested that he should not be hasty and should take some time off before making a final decision. Van Wyk accepted the invitation to take some time off and decided to ask his wife who was then overseas, to extend her stay for about a week so that he could join her, which he did. Before doing so, however, he returned to Cape Town and on 2 September held a management meeting with his staff during the course of which he informed them that he had resigned.

[7] He then travelled to London the next day where he joined his wife. While in London he made contact with Mr Derrick Ross (“Ross”) who had been a friend of the Van Wyk family for many years. Ross was then the chairman of Arri GB. He asked Ross whether there was any work in England for him and Ross suggested that he should meet with Mr Graham Anderson (“Anderson”), the managing director of Arri Media which dealt with the rental side of the business. Van Wyk made an appointment to meet Anderson, whom he had not met before, but prior to meeting Anderson he received a telephone call from representatives of a competitor known as VFG who asked him to see them. This he arranged to do on Wednesday, 8 September.

[8] Van Wyk met with Anderson on 7 September and was advised that Anderson did not have a position for him in England. Anderson’s attitude, however, was that it was a pity that Van Wyk wanted to leave South Africa, for he was well known in the business in that country and he asked Van Wyk whether it was not worth looking at Arri Media doing something in South Africa. Van Wyk revealed to Anderson that representatives of VFG had asked him to meet them. Anderson’s response was that that was not surprising since everyone in the business knew that VFG were keen on establishing themselves in South Africa. His attitude was that it would be nice if Arri Media could establish itself in South Africa and suggested Van Wyk might consider something along those lines.

[9] Van Wyk met representatives from VFG the following day. They were very interested in doing a deal with him and in fact offered him a salary in the vicinity of R1 million per annum plus 20% of the profits if he would establish a business for them in South Africa. The salary offered was considerably higher than that which he was earning in South Africa. He indicated to them that he would consider the offer.

[10] Van Wyk met Ross and Anderson once more before returning to South Africa. This was at Ross’s home. He told them of the approach from VFG and their attitude was that if he was still interested, they would be prepared to find a way in helping him to set up something in South Africa so that Arri Media could establish a presence in this country. According to him, this is as far as the discussions went. Before he returned home he met with Cervo who had telephoned him and asked him to meet him. The meeting took place in a shopping complex near Watford. During the course of the discussion Cervo told him that he had established that Van Wyk was being underpaid and that he ought to be earning more than his salary at the time. He indicated to Van Wyk that he intended to address this issue once he returned to South Africa.

[11] On 22 September and back in South Africa Cervo offered Van Wyk an increased remuneration package, subject however to him signing a two-year restraint effective from 1 October 1999 and subject to payment to Van Wyk of a consideration of R250 000 in respect of the restraint. (It would seem that throughout the meetings with Cervo, the latter was under the impression that Van Wyk’s complaint was that he was not earning enough. Van Wyk testified however that the amount of his salary was never his main concern and that he had never in fact asked to be paid more. His unhappiness was due to other factors.) Van Wyk was not happy with the offer and was not prepared to sign a new restraint of trade in circumstances where he was, in his view, not subject to any existing restraint, and conveyed this in a meeting which he had with Cervo on 30 September. On that day he wrote out a second resignation, dating it 1 October and handed the letter to Cervo later that day. On 1 October Cervo sent an e-mail to his superior on the Board, Sandra Gordon, advising her of what had happened. Significantly, the message contains the following:

“He will undoubtedly in my opinion, move to have his present restraint null and voided.”

[12] It is clear from Cervo’s evidence that he accepted Van Wyk’s resignation, but Cervo was still anxious to retain his services.

After discussion with his superior he in informed Van Wyk that they would agree to release him from any restraint. On 12 October the plaintiff confirmed this in writing, namely that the restraint would be regarded as null and void upon signature of a new contract of employment and on 26 October the plaintiff and Van Wyk concluded a new written contract of employment which provided for termination thereof upon three months notice. According to Van Wyk, this was a clear indication that the plaintiff conceded that it had been wrong about the restraint. Van Wyk then tendered his resignation on 1 November 1999 effective as from 1 February 2000.

[13] This caused the plaintiff to launch an urgent application against Van Wyk in the Witwatersrand Local Division for relief in the form of specific enforcement by way of an interdict of the original agreement in restraint of trade and thereafter on the same papers duly supplemented, for other relief. The application for interim relief was unsuccessful and the application for final relief was transferred to this court and consolidated at the trial before me. The only remaining question in the application is one of costs.

[14] In the action instituted against Van Wyk and the second defendant the plaintiff claims damages in the amount of R37 211 827. The claim is premised upon two causes of action which are pleaded in the alternative, namely a breach of the restraint agreement and a breach of fiduciary duties owed by Van Wyk to the plaintiff arising from the fact that he was a director and employee of the plaintiff. In respect of the latter cause of action the plaintiff’s case is that Van Wyk enticed certain employees of the plaintiff to leave the employ of the plaintiff and to take up employment with the second defendant, a company in which Van Wyk is the guiding force and managing director and also that Van Wyk procured for the second defendant a corporate opportunity to which the plaintiff was lawfully entitled, namely a so-called split rental agreement which was concluded between the UK company Media Film Service (Pty) Ltd trading as Arri Media and the second defendant, effective from 1 March 2000. This latter cause of action was described in counsel’s opening address as being based on unlawful competition, but as the case unfolded, it became clear that it was based on an alleged breach of a fiduciary duty owed by Van Wyk in his capacity as director and employee.

[15] As to the restraint agreement, Van Wyk’s case is that when the agreement was signed on 10 June 1997 the old MCC had no business, goodwill or reputation relating to its business, which by that stage had been sold and transferred to the plaintiff. Furthermore, he contends that he was not paid the restraint consideration referred to in the restraint. He pleads further that if it is found that the restraint subsequently became enforceable as between him and the plaintiff, it was terminated by mutual consent. Van Wyk also pleads that the restraint in any event falls to be rectified in that the restraint period of 30 months was to run from the effective date of the sale of the business, namely 1 January 1997 and not from the termination of his employment with the plaintiff. It is also pleaded that the restraint is unenforceable as being unreasonable and contrary to public policy. As to the cause of action based on an alleged breach of his fiduciary duty, Van Wyk denies that his actions amounted to such a breach.

[16] At the commencement of the trial the parties agreed to and I ordered a separation of the issues concerning the merits and the quantum and I heard evidence only on the merits. Also, by agreement, I was requested to deal with the following issues:

Was the restraint binding?

Is Van Wyk entitled to rectification of the restraint?

Is the restraint void for unreasonableness? Is the first defendant entitled to avoid obligations under the restraint by reason of alleged non-payment of the consideration?

What precisely are the first defendant’s duties as a director and employee?

Is the plaintiff entitled to avoid the second employment contract by reason of the first defendant’s fraud?

The first defendant’s wrongful conduct.

The second defendant’s liability for such wrongful conduct.

[17] It will be expedient to deal first with the defendant’s prayer for rectification so as to establish what the agreement between the parties actually was. A finding for the defendant on the rectification issue will obviously affect the outcome of the plaintiff’s claim.

THE SIGNING OF THE RESTRAINT AGREEMENT:

[18] Van Wyk was the only witness who testified as to the circumstances under which the restraint agreement was signed. He was due to fly out of Johannesburg on the evening of 10 June 1997 in order to attend a trade show in Los Angeles. While still in Cape Town on that day, he received a telephone call from Van Tonder asking him to come up to Johannesburg that day in order to sign some contracts. He says that he assumed that Van Tonder realised that he was leaving for Los Angeles that day and wanted to have the contracts signed before he left. In order to accommodate Van Tonder he rearranged his schedule for the day and flew up to Johannesburg earlier than he had planned to do.

[19] On arriving at the new MCC’s offices in Sandton, he found that his father, Ryan and Haupt were also present. Van Tonder, Van Wyk, his father, Ryan and Haupt were of course the persons who were in terms of the agreement for the sale of the business of the old MCC to sign restraint agreements. He says that Mr D Erwin, the financial director of Sasani, had brought a number of documents to the meeting, which were handed to Van Tonder. The latter handed out these documents to those at the table in the boardroom and asked them to sign them. He also indicated to each person what date was to be inserted as the ostensible date of signature. On Van Tonder’s instruction he signed the restraint of trade agreement and recorded the date of signature thereof as being 19 December 1996. The restraint agreement makes no reference to the period of Van Wyk’s employment by the plaintiff or the old MCC. Van Wyk’s evidence was that his employment with the old MCC was subject to one month’s notice of termination. Apparently no other agreement of employment was concluded with Van Wyk when the business was sold to the new MCC.

[20] The following documents were also signed by him at the same time and in each case the date indicated in brackets is the date which Van Tonder instructed him to record as the date of signature:

* A document recording the cancellation of the so-called phantom shares/bonus participation scheme (19/2/97).

* An agreement recording the sale of 1 428 571 Sasani shares by the old MCC to Van Wyk (21/11/96).

* An agreement recording the sale of 428 571 Sasani shares by the old MCC to Van Wyk (21/11/96).

* A bonus agreement recording the payment of bonuses by the old MCC to Van Wyk dependent upon the profit warranties in the written agreement of sale being met (19/2/97).

* A document recording the renunciation of shares accruing to Van Wyk in terms of the bonus agreement in favour of his close corporation Jes-Tech Investments CC (19/2/97).

RECTIFICATION

[21] The restraint period is defined in clause 1.1 of the agreement signed by Van Wyk as

“...means a period calculated from the effective date and enduring until a date 30 (thirty) months after the termination of the restrainee’s employment with the proposed purchaser as hereinafter defined in the recordal.”

(The effective date was 1 January 1997.)

For a party to succeed with a claim for rectification of a written agreement, he/she must prove a common intention which the parties intended to express but by mistake failed to express.

Humphrys v Laser Transport Holdings Ltd and Another 1994 (4) SA 388 (C) 395H-I and 398D-399I

Brits v Van Heerden 2001 (3) SA 257 (C) at 268C-F.

The two signatories to the agreement in question were Van Wyk and Van Tonder. Van Wyk testified that the signing of the documents took place in something of a rush. He says that he did not pay particular attention to the documents which he signed for in his mind he was merely completing the paperwork necessary after a fairly lengthy negotiation which he had had with Van Tonder relating to the so-called phantom shares. He says that he glanced at the paperwork which Van Tonder wished him to sign, namely the various documents referred to in paragraph 20. He says that he was concerned to see if the restraint agreement referred to the 30 month period, which he had agreed with Van Tonder, would apply and that he turned to Van Tonder and asked him whether the period was 30 months from the effective date. Upon receiving Van Tonder’s assurance that this was so, he signed the document. He was not at all concerned about going through the document carefully – he regarded the signing of the various documents as part of a family business with Van Tonder and signing was merely confirmation of what they had agreed upon. He says it was one of the first formal things that they had ever done. He testified that he would not have signed the agreement if he had been aware of the implications thereof and pointed out that in ten years time he would still have been subject to a 30 month restraint period, something which had never been envisaged.

[22] It is clear from Van Wyk’s evidence that Van Tonder asked him to remain on in the employ of the old MCC after the sale of business for a period of 30 months coinciding with the period of the profit warranty set out in the sale of business. Van Tonder’s period of restraint was to be co-existent with the period of the profit warranty and according to Van Wyk’s evidence there was never any suggestion that he would be subject to a restraint longer than this period. Van Tonder did not give evidence, but testified to an affidavit filed in support of Van Wyk’s defence in the application proceedings. The relevant portions of this affidavit which contain handwritten alterations, said by counsel to be in Van Tonder’s handwriting, read as follows:

“I confirm that the restraint agreement, Annexure ‘B’ to the founding affidavit, was signed in Sandton in June 1997 in my presence. I confirm also that it was during negotiations of the sale agreement, my understanding and therefore the understanding of the old MCC that a restraint agreement would be concluded between the proposed purchaser and Van Wyk for a period of 30 months from the effective date of the date of the sale of business agreement, i.e. 1 January 1997, as per the restrained (sic) clause in the sale agreement.

…

I confirm also that on a number of occasions Van Wyk raised the issue of the restraint agreement with me and that I agreed with him that my understanding was that it endured only until 30 June 1999.”

[23] Van Tonder was at all material times the chairman of the old MCC and thereafter the chairman of the new MCC, the plaintiff. He signed the document on behalf of the old MCC. His presence at court was secured by the plaintiff by the issue of a subpoena, but he was not called by the plaintiff. In all the circumstances, I consider the inference to be justified that he would not have given evidence of a nature different to that contained in his affidavit.

[24] Factors which may serve as corroboration for the defence are the following:

* The acquisition of the business of the old MCC was modelled on an earlier acquisition of the Video Lab business. The restraint of trade agreement relating to the Video Lab acquisition made provision for a restraint period of 30 months calculated from the effective date and Mr Erwin testified that he had handed a copy of the Video Lab restraint agreement to Van Tonder and had indicated that the terms contained therein would be those applicable to Van Wyk.

* A business acquired shortly after the acquisition of the old MCC involved the purchase of the business of Professional Film and Lighting (Pty) Ltd. That agreement also made provision for a restraint of trade effective for 30 months from the effective date.

* The first draft of an agreement to be concluded between the old MCC and Van Wyk, which was given to Van Wyk but ultimately not signed, anticipated that Van Wyk would continue to be employed by the business for the duration of the profit warranty period.

* The profit warranties contained in the sale of business agreement related to the period of 1 January 1997 up to 30 June 1999.

* The new bonus agreement signed by Van Wyk also made provision for him to be employed and his bonus to be calculated up to 30 June 1999.

* Van Wyk had conveyed to Van Tonder, Cervo and Frangos his view that his restraint was to last only until 30 June 1999.

* If the plaintiff believed that the restraint had been correctly recorded, it is difficult to understand why it would have offered to conclude a new restraint agreement with Van Wyk in September 1999.

[25] In the light of these facts Mr van Blerk, who together with Mr Slon appeared for the plaintiff, sought to avoid the conclusion that rectification ought to be ordered by submitting that since the plaintiff was not a party to the conclusion of the contract rectification should not be granted as it would adversely affect the rights of an innocent party, the plaintiff. While Van Tonder was the chairman of the old MCC, i.e. the party with whom the restraint was concluded, he was of course at the time of the signing of the agreement in fact the chairman of the plaintiff. In this regard I agree with Mr Rose-Innes’s submission that in the reference to innocent third parties the word ‘innocent’ means “innocent of knowledge”. Were this not so, a party having knowledge of a particular state of affairs would be able to snatch at a bargain by ignoring such knowledge.

Humphrys v Laser Transport Holdings and Ano (supra) at 396D

Industrial Finance and Trust Co v Heitner 1961 (1) 516 at 522E-F.

Furthermore the test is that rectification will be granted where the requirements therefor been met “if innocent third parties will not be unfairly affected thereby”.

Meyer v Merchants Trust Ltd 1942 AD 244 at 254.

[26] The onus resting on Van Wyk is for him to establish a prima facie case. The failure of the plaintiff to rebut the evidence placed before me will result in the first defendant establishing his case on a balance of probabilities unless the evidence is so weak and improbable that it must be regarded as mere conjecture or is so vague and ineffective that I can only by a process of speculation and very dubious inferential reasoning attempt to find the facts.

Marine and Trade Insurance Co Ltd v Van der Schyff 1972 (1) SA 26 (A) at 49F-in fine.

[27] Mr van Blerk submitted that I should find it improbable that Van Wyk did not resolve the matter with Van Tonder. However, the impression which I gained of Van Wyk was that he was a dynamic young man, more concerned with getting work for the company and doing his work well than by attending to paperwork. He testified that with Van Tonder and Frangos both in Johannesburg and him in Cape Town, there were not many opportunities for him to speak to them. Matters dragged on and he thought that they would be sorted out and did not see the lack of resolution of the problem as being something which required urgent attention.

[28] In my view the evidence is not so vague and ineffective or so improbable that it must be regarded as mere conjecture. The defendant’s plea for an order for rectification is accordingly granted with the result that clause 1.1.11 in the restraint agreement is altered to read:

“‘restraint period’ means a period of 30 months calculated from the effective date.”

As will appear from paragraph 31, it is not the defendant’s case that he was entitled to receive any payment in consideration for the restraint undertaken.

[29] My finding in favour of the defendant on the rectification issue means that the defendant was not under any restraint after 30 July 1999. However, in case I am wrong about the restraint, I will also deal with the defences put up to the plaintiff’s case on the restraint agreement as pleaded, namely that the defendant was not paid the consideration referred to, that the restrain became unenforceable as between him and the plaintiff and that it was terminated by mutual consent.

THE PAYMENT OF THE RESTRAINT CONSIDERATION:

[30] Clause 4 of the restraint agreement reads

“In consideration for the restraint undertaken by the restrainee, the restrainee shall receive from the company or the proposed purchaser a consideration of R300 000,00 (three hundred thousand rand) payable no later than 30 June 1997.”

(The company referred to is the old MCC and the proposed company is Sasani Limited or its nominee.)

No evidence in relation to the payment of the consideration was led by the plaintiff on whom the onus of proving payment rests. The only evidence furnished in relation to the payments was that of Van Wyk. It was common cause that Van Wyk did not receive any cash in respect of the restraint payment. Van Wyk’s evidence established clearly that prior to the business being sold to the new MCC, he and other key employees had participated in what was known as the phantom share scheme. Van Tonder was averse to permitting minority shareholdings in the company, but wished to compensate his key employees for their performances by rewarding them in some way or another. He accordingly evolved a scheme whereby the employees would notionally be awarded shares in the company and would also be awarded a share of profits by way of notional dividends. The intention was to share in the profits without being shareholders. Provision was made for them to be credited with capital and interest. At the time of the sale of the business, it was agreed that the phantom share scheme would be replaced by a new agreement.

[31] Van Wyk testified that he was to receive Sasani shares worth R300 000,00 for which he paid no purchase consideration in settlement of certain amounts owing to him in terms of the phantom share scheme. He explained that he was owed some R103 000 in terms of the scheme for the financial year ending June 1996 and it was calculated that in addition he would be entitled to an amount of R225 000 if the scheme continued up till June 1999. It seems that Van Tonder agreed that R225 000 would be payable if he agreed to remain on in the business until 30 June 1999. In round figures the total amount due to him in respect of the capital and interest was accordingly R325 000, but Van Tonder advised him that in order to be tax effective, R300 000 of this would be reflected as a restraint consideration. Precisely how this was to work is not clear, for his evidence is further that the R300 000 which was to accrue to him on this basis was utilised to effect payment for the 428 571 Sasani shares, the sale of which was recorded in one of the agreements which he signed on 10 June 1997. Sasani shares with a value at the time of R300 000 were accordingly issued to him and it is clear from his evidence that he was not to receive any further payment for this restraint.

[32] The balance of R25 000, after applying the R300 000 to the purchase of the Sasani shares, was set off against a loan which he obtained from Van Tonder to purchase additional Sasani shares. One of the documents signed by Van Wyk on 10 June was an agreement providing for the sale of those shares by the old MCC to him. He testified that Van Tonder had agreed to lend him R1 000 000 to acquire these shares. The Sasani shares were valued at 70 cents per share at the time that the agreements were signed. Accordingly the R1 000 000 lent to him by Van Tonder was used to acquire 1 428 571 Sasani shares and one of the agreements signed by him recorded this purchase.

It is clear that no payment of R300 000 as such was made to the defendant in terms of clause 4 of the restraint.

[33] Mr van Blerk, sought to counter Van Wyk’s evidence by relying on the following clause in the agreement cancelling the old phantom share scheme arrangement.

“Jan acknowledges and agrees that all bonuses and claims in respect of bonuses payable to him under and in terms of the scheme remaining outstanding and unpaid as at 1 January 1997 shall be cancelled and he shall have no claim against old MCC in respect thereof…”

(Jan is Van Wyk.)

The fact that the agreement records that all bonuses and claims are cancelled and that Van Wyk shall have no claim against the old MCC in respect thereof simply brings to an end the agreement relating to the old phantom share scheme and does not in my view preclude Van Wyk from establishing that simultaneously with the cancellation of the old agreement, a new agreement was entered into which may well have had as its basis amounts which were due to him under the old agreement. It was also submitted on behalf of the plaintiff that Van Wyk’s evidence should not be accepted because it its at variance with what is contained in his affidavit in the interdict proceedings, namely:

“Clause 4 of the restraint agreement makes provision for the payment of a consideration of R300 000,00 by no later than 30 June 1997. This consideration was payable by the old MCC or the proposed purchaser, i.e. the applicant. The amount of R300 000,00 referred to herein was never paid to me. What I did receive was 321 400 shares in Sasani Limited, which shares were valued at 70c each. The shares were never a true restraint consideration.”

Inasmuch as 428 571 Sasani shares (valued at R300 000) were issued to Van Wyk, Mr van Blerk argued that the portion of the affidavit referred to is entirely inconsistent with Van Wyk’s version that 428 571 were awarded in respect of the phantom share scheme. However, further on in Van Wyk’s affidavit he expands on the 321 400 shares in the following manner:

“I have received the 321 400 shares referred to in ‘JVW 3’ as well as the further 100 000 shares referred to as the share portion of the payment of Van Tonder’s bonus on profit targets in respect of June 1996, half of which are still subject to the restraint of sale. This consideration bears no relation to the value of a restraint operating for 30 months after the termination of my employment at some future date.”

Van Wyk has clearly rounded off the number of shares in these two paragraphs and the final figure of 421 400 is to my mind not so disparate as to reject the direct evidence which he gave. I was also referred to the fact that the number of Sasani shares issued to other restrainees coincided precisely with the restraint consideration paid to each of them, but that, to my mind takes the matter no further.

[34] Van Wyk raised with Cervo the fact that he had not been paid for the restraint. If he had in fact been paid by means of the sale of 428 571 Sasani shares as submitted on behalf of the plaintiff, it is difficult to understand why the plaintiff was prepared to offer to pay him an additional R250 000 in consideration of a new restraint.

[35] The plaintiff bears the onus of proving that the restraint consideration has been paid and the direct evidence given by Van Wyk, supported by certain documentary evidence which he identified, is sufficient for me to conclude that the plaintiff has not discharged the onus which rests on it in respect of the payment of R300 000. On the basis of the exceptio non adimpleti contractus Van Wyk would accordingly be entitled to treat the contract as at an end and would not be obliged to perform in terms thereof.

THE TRANSFER FROM THE OLD MCC TO THE PLAINTIFF OF PERFORMANCE RIGHTS IN TERMS OF THE RESTRAINT

[36] Clause 2 of the restraint agreement headed ‘Recordal’ contains the following sub clause 2.3.

“In order to render effective the proposal that the restrainee take up employment with the proposed purchaser, the company wishes to enter into a restraint agreement with the restrainee with the intention that when the restrainee takes up employment with the purchaser, the restraint agreement now entered into with the restrainee will be ceded to the proposed purchaser contemporaneously with the conclusion of the sale of business agreement.”

The restraint is then set out in clause 3. Clause 3.3 provides that:

“The restrainee acknowledges and agrees that –

this agreement is entered into upon the basis and it is a material term of this agreement that the proposed purchaser would be entitled to the benefit of the restraints set out in this agreement interpreted in their widest sense as contemplated in clause 3.3.5.

the stipulations in this agreement are separate, severable and independent stipulations in favour of –

the company; and

any successors-in-title of the company, and

the proposed purchaser,

which are capable of acceptance and enforcement by any of the aforegoing at any time hereafter by any one or any combination of them;”

The plaintiff clearly initially approached this matter on the basis set out in the recordal, namely that the restraint agreement had been ceded to it. The application proceedings were premised entirely on this basis. When the action was instituted the plaintiff relied principally upon a cession of the rights flowing from the restraint agreement but pleaded in the alternative that the restraint constituted a stipulatio alteri capable of acceptance by the plaintiff. In May of this year notice was given of the plaintiff’s intention to amend its particulars of claim by pleading further that clause 3.3.3 constituted a stipulatio alteri and adding the further alternative that in the event of the court finding that the rights arising from the restraint were not ceded and that the restraint did not constitute a stipulatio alteri a tacit restraint agreement had been concluded. These amendments were effected. At the trial the plaintiff formally abandoned any reliance on a cession of rights arising from the restraint agreement and relied on the contention that clause 3.3.3 was a stipulatio alteri or alternatively that a tacit restraint agreement had been concluded.

[37] For a stipulatio alteri to be enforced it is necessary for the plaintiff to prove that it has accepted the benefits thereof. No express acceptance of the stipulatio was proved or contended for and the plaintiff relied for such acceptance on the letter of demand written by its attorneys to Van Wyk in February 2000 which preceded the interdict proceedings. In that letter no specific acceptance of the stipulatio is expressed. The portion of the letter which is relied upon is presumably that which reads:

“In terms of a restraint agreement signed by you on 21 January 1997, which our client is entitled to enforce, your said conduct constitutes breach of the provisions of clauses 3.1 and 3.2 of the said agreement.”

Interestingly, no reference is made to clause 3.3, which is the clause that can be said to contain the stipulatio alteri. The provisions of clause 3.3.3. are of course inconsistent with what is set out in the recordal, but I will accept, for the purposes of the judgment, that it is open to the plaintiff to rely on a stipulatio alteri.

[38] It was submitted on behalf of the plaintiff that in terms of the final portion of clause 3.3.3, it was open to the plaintiff to accept the benefit of the stipulation at any time. Clearly, the portion of the letter addressed by the plaintiff’s attorneys to Van Wyk does not constitute an express acceptance of the stipulatio and at best it can be said to be only a tacit acceptance. R H Christie in ‘The Law of Contract’ (4th Edition) at 309 is of the view that where no time limit for acceptance is stipulated, “it will not remain open for acceptance after an unreasonably long time has elapsed”.

In Mutual Life Insurance Co of New York v Hotz 1911 AD 556 Innes J, as he then was, expressed himself as follows at 567

“The length of time during which a contract in favour of a third person remains open for acceptance must depend upon the circumstances of each case.”

In the present case the agreement in question was signed in June 1997 and was to be effective as from 1 January 1997. Even when Van Wyk informed Cervo shortly after the latter joined the plaintiff’s company that he disputed the restraint clause, the plaintiff took no steps to accept the stipulatio. In my view, by February 2000 it was too late for there to be a valid acceptance of the stipulatio.

[39] In paragraph 6.3 of the particulars of claim the plaintiff pleads the conclusion of a tacit contract during or about February 1997 in terms of which Van Wyk became bound by provisions of the relevant clause. No evidence was submitted to support this allegation, which is premised on the signing of the restraint on 10 June 1997. The tacit contract is stated to be one concluded between the plaintiff, represented by Cervo, Gordon and/or a duly authorised employee/er representing the plaintiff, and Van Wyk. Cervo did not testify directly to the conclusion of any tacit agreement, but it was submitted on behalf of the plaintiff that the following conduct on the part of Van Wyk was conduct from which the existence of a tacit contract was to be inferred:

* The fact that Van Wyk became employed by the plaintiff;

* The fact that Van Wyk signed and backdated the restraint knowing that it would be presented to the plaintiff; and

* The fact that the parties at all times acted as if the restraint was binding on Van Wyk in favour of the plaintiff.

Mr van Blerk also submitted that these three factors should be viewed cumulatively.

[40] In my view, the fact that the first defendant became employed by the plaintiff does not in any way support the inference contended for and since Van Wyk explained in evidence why the contract was backdated, that fact also does not justify the inference sought. As to the third contention, Van Wyk’s evidence established that he did not conduct himself as if the restraint was binding upon him and Cervo confirmed that he had complained that the restraint had been incorrectly drafted and the restraint period incorrectly stated. In addition Van Wyk also testified that from the very first time that he became aware of the mistake in the restraint he raised it with Van Tonder and thereafter with Frangos. Frangos was not called to disprove this evidence. In the circumstances I am satisfied that a tacit contract was not established, particularly if one has regard to the extent to which plaintiff must go in order to discharge the onus, namely

“…to show by a preponderance of probabilities, unequivocal conduct which is capable of no other reasonable interpretation and that the parties intended to, and did in fact, contract on the terms alleged. It must be proved that there was in fact consensus ad idem…”

Standard Bank of South Africa Ltd v Ocean Commodities Inc 1983 (1) SA 276 (A) at 292B-C.

[41] The defendants also pleaded that the duration of the restraint which the plaintiff seeks to rely on is unreasonable. A further defence was that since the old MCC neither employed Van Wyk nor had any business to which the restraint could apply at the time that the restraint was signed, it created no rights capable of being ceded. The restraint precluded the respondent from engaging in any competitive activity, defined as “any activity which is the same or similar to or directly competitive with the subject businesses” of the old MCC. Since the old MCC carried on no activities at the time, it was submitted that the contract gave no rights whatever to the old MCC. In the light of my findings in respect of the stipulatio alteri and the tacit contract, it is not necessary to deal further with these defences.

THE ALLEGED BREACH OF A FIDUCIARY DUTY

[42] I was urged to find that the evidence established that Van Wyk had breached his duties of good faith as a director and employee to the plaintiff in the following manner.

1. In setting up the competitive business of the second defendant by

* negotiating for the plaintiff’s corporate opportunity; and

* soliciting the plaintiff’s employees;

2. by fraudulently securing a release from his restraint of trade; and

3. by disclosing confidential information to the Arri Media group.

NEGOTIATING FOR THE PLAINTIFF’S CORPORATE OPPORTUNITY

[43] It is a generally accepted principle that a director of a company should not place himself in a position where his personal interests conflict with his duty to the company as a director. The breach of a director’s fiduciary duty in relation to corporate opportunities and competition is not an issue which has enjoyed much attention in our law. An early case in which the issue was dealt with is that of Robinson v Randfontein Estates Gold Mining Co Ltd 1921 AD 168. This had to do with what was termed ‘secret profits’ appropriated by a director whose duty it was, so the court found, to acquire a property for the company if he acquired it at all. In Bellairs v Hodnett 1978 (1) SA 1109 (A) the then Appellate Division held that the existence of a corporate opportunity was to be determined by reference to the actual business carried on by the company or the business which it intended to carry on. In Atlas Organic Fertilisers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd and Others 1981 (2) SA 173 (T), a ground-breaking decision, the managing director of a company had, as in the present case, resigned his office while serving out his period of notice and taken steps to create a new company under which he intended to do business. That was in order, the court found, but his actions in sabotaging the company’s chances of obtaining long-term favourable raw material contracts and concluding these contracts for his own benefit as well as inducing employees of the company to join his own company were regarded as being in breach of his fiduciary duties as managing director.

[44] In view of the paucity of decisions on the subject, reference to the development of the law in other jurisdictions may be helpful. In this regard, valuable contributions have been made by Prof M Havenga, writing in the South African Mercantile Law Journal (Corporate Opportunities: South African Update) (SA Merc LJ 1996 (8) 40-55 (Part 1) and 233-251 (Part 2)) and Prof M S Blackman who contributed the chapter in The Law of South Africa, First Reissue, Vol 4 Part 2 at paragraph 135 et seq.

[45] In Part 1 of Prof Havenga’s work she suggests that the tests which the courts have adopted in order to establish whether a corporate opportunity has been available to a company may be classified as follows:

* The “position” test – here the court considers the position in which the director acted, i.e. whether in his capacity as director or in his personal capacity.

* The “conflict” test – where the director’s private interests conflict with that of the company.

* The “expectancy” test – where the corporate opportunity is one in which the company has an expectancy flowing from an existing right.

* The ‘present interest’ test – i.e. whether the company has an existing interest in the opportunity.

* The ‘line of business’ test – which requires the opportunity to correspond with the existing and prospective interests or activities of the company.

* The “fairness” test – which applies ethical standards of what is fair and equitable in the particular circumstances.

After listing these tests Prof Havenga sums up the position as follows at 46:

“South African courts have not yet laid down conclusive guidelines in respect of defining a corporate opportunity. However, decisions here and in other Commonwealth countries indicate that generally the test that should be applied is whether an opportunity can in all the circumstances be said to actually belong to the company, or whether the company was justifiably relying upon the director either to acquire the opportunity for it, or to give the company the chance of acquiring it, or at least of attempting to acquire it. The opportunity should therefore not only be in the line of business of the company, but in all the circumstances the company should be seen to have been justifiably relying upon the director(s) to acquire it or to assist in its acquisition for the company.”

[46] Prof Blackman in LAWSA suggests in paragraph 135 at p224 that there are at least three situations in which the duty attaches to a director. These are

1) If the director has been given expressly or impliedly a specific mandate either to acquire a particular opportunity for the company or to inform the company as to its suitability.

2) If he alone, or together with other directors, is given expressly or impliedly a general mandate to acquire opportunities for the company, or to pass on information to it about opportunities, or if he in fact controls the company or those in power to manage its affairs.

If he usurps an opportunity which the company is actively pursuing or an opportunity which at least in so far as its directors are concerned can be said to belong to the company.

[47] Prof Havenga expresses the view at page 54 that the approach thus far adopted by South African courts indicates that the “line of business” test will be applied and she points out that this approach was also followed in the first report of the King Commission.

A decision which is often referred to in this regard is the Canadian decision in Canadian Aero Service Ltd v O’Malley (1974) 40 DLR 3d 371 (SC). In this case the emphasis is laid on a maturing business opportunity.

“An examination of the case law in this court and in the courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.” (at 382)

[48] It is clearly impossible and indeed unwise to lay down any conclusive guidelines which are to be applied in assessing whether or not one is dealing with a corporate opportunity which rightfully belongs to a company. A careful examination of all the relevant factors is necessary in order to arrive at a conclusion. However, the approach laid down by Laskin J in the Canadian Aerospace case (supra) at 391 may well serve as a very useful starting point.

“I am not to be taken as laying down any rule of liability to be read as if it were a statute. The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director’s or managerial officer’s relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge.”

This passage was quoted with approval in Sibex Construction (SA) (Pty) Ltd v Injectaseal CC 1988 (2) SA 54 (T) at 67.

[49] To return now to the facts of the case. Although an important figure in the Cape Town branch of the plaintiff, Van Wyk was not the managing director of the plaintiff but merely a director in charge of the Cape Town branch. He certainly had no mandate to acquire the opportunity or to inform the plaintiff of the suitability thereof. He did not control the plaintiff nor did he have any mandate, express or implied, to acquire opportunities for the company or to pass on information to it about opportunities. He was clearly involved in setting up the second defendant in its present form. The second defendant was a shelf company and was set up in its present form through the efforts of Van Wyk. He has no financial interest in the company, the financial backing being supplied by a friend of his, but is a director and is responsible for running and managing the company.

[50] The plaintiff’s business is the renting out of motion picture, camera and lighting equipment. It rents out Arri cameras and lighting equipment as well as Panavision camera equipment. The bulk of the Arri equipment was purchased by the plaintiff, the cameras from Arri Germany and the lighting equipment from Arri GB. The agreements which had been concluded between the old MCC and Arri Germany and Arri GB in terms whereof the old MCC was appointed as sole distributor in South Africa for Arri cameras and Arri lighting equipment were terminated as at 31 December 2000 by written notice from Arri Germany and Arri GB. Arri equipment was not generally sold by the plaintiff or the old MCC, but rented out.

[51] The motion picture industry worldwide, and also in South Africa, is dominated by Arri and Panavision cameras and equipment. Panavision cameras are manufactured by Panavision International LP (“Panavision”), a Californian based partnership. Unlike Arri Germany it does not sell its cameras and equipment, but rents these out, either directly or to agents in terms of what are known as split rental agreements whereby the rental income is shared. A South African Company known as Logical Designs (Pty) Ltd (“Logical Designs”) had the sole agency to rent out Panavision camera equipment in South Africa and in other countries in Southern Africa on the split rental basis. Its agreement with Panavision contained a clause permitting Panavision to terminate the agreement should any of certain named, key personnel in Logical Designs leave its employ or there be any change in the structure, ownership or control of Logical Designs or should Logical Designs enter into a fee splitting arrangement with anyone other than Panavision.

[52] In 1998 the plaintiff acquired Logical Designs. Van Wyk testified that at all times there was fierce competition between Arri and Panavision, resulting in the plaintiff and Logical Designs regularly bidding against each other for business. Understandably, therefore, the acquisition by the plaintiff of Logical Designs was a matter of concern to both Arri and Panavision. Van Wyk and his father, then the managing director of the plaintiff, met representatives of Arri at a trade fair in Los Angeles in July 1998. So as to ensure that Arri’s products were properly marketed in South Africa, Arri’s representatives insisted that the management of the plaintiff should remain unchanged and that the plaintiff’s Arri business should be conducted separately from the Panavision business conducted by Logical Designs. Panavision in turn insisted that at least two of three named parties were to remain as the operating management of the Panavision rental business, which by then had been transferred from Logical Designs to another wholly owned subsidiary of Sasani. In addition Panavision required that no additional non-Panavision sync-sound cameras, other than those owned by Logical Designs and the plaintiff could be acquired, purchased or leased under any split rental agreement. During the 1999 Los Angeles trade show Van Wyk and his father again met with Arri representatives. At that stage it was known that Van Wyk’s father would be retiring as the managing director and the purpose of the meeting was to assure Arri’s representatives that Arri’s interests would continue to be served by the plaintiff and its management.

[53] Van Wyk was an Arri man through and through. He had no background in Panavision and did not know any of the people involved in Panavision and their support. He testified that fairly soon after Cervo’s appointment as CEO, it was apparent to him that Cervo favoured Panavision and favoured putting Logical Designs under the same roof as MCC. This Van Wyk did not favour. He pointed out that although the old MCC and Logical Designs were in the same stable, they competed against each other for different jobs and often MCC had to pull out of the competition so as to allow Logical Designs to gain a contract at a higher price. By August of 1999 the plaintiff was experiencing financial problems in that it was not meeting its budget. Accordingly, a moratorium was placed on capital expenditure. Van Wyk testified that Cervo was under pressure from his superior on the board, Sandra Gordon (“Gordon”), to get costs down and that Cervo felt that it would be more cost effective and profitable to rent Panavision equipment rather than incur the capital expense of acquiring Arri camera equipment in terms of their distributor agreement. A number of meetings took place to discuss the way forward and on 22 August, following on a meeting which the plaintiff had with Cervo and Van Tonder, Cervo sent him an e-mail under the heading of ‘The Future’ reading

“I have a vision. It looks something like this.

In Johannesburg:

We accept Sean’s resignation.

We dump Arri (They will dump us if this goes ahead)

We consolidate Logical and MCC under one roof.

Robert Russell takes over Sean’s place.

We move ahead with Panavision as our corner stone.

Neville/Tink become Technical directors

…”

Robert Russell was the leading figure in Logical Designs and a long-standing friend of Cervo’s. During his evidence Cervo said that his vision as articulated in the e-mail was merely one of many options, but it does seem clear that he favoured the Panavision route and an internal memo from him dated 27 November 1999 reflected a proposed restructure by merging the businesses of the plaintiff and Logical Designs.

[54] Upon a consideration of all the evidence I make the following findings, having regard to the principles previously mentioned.

Van Wyk had no intention to resign before 1 September 1999. His resignation was brought about by his unhappiness working for the plaintiff and in particular their failure to deal with the period of his restraint and their refusal to hand him his Sasani shares.

His resignation was not part of any deliberate strategy or intention to set himself up in competition with the plaintiff.

He made contact with Derrick Ross in England because of the latter’s long-standing relationship with his family. On asking Ross whether there was any work for him in England, he was fortuitously referred to Anderson. His contact with Ross and Anderson was in his personal capacity and did not relate to his position as a director of the plaintiff.

The fact that he had resigned his position is a relevant factor.

It was never within the contemplation of Cervo and the plaintiff that the plaintiff would enter into a split rental agreement with Arri or that such an opportunity could realistically have been pursued. Cervo had by 22 August a vision to strengthen the Panavision side of the business and to dump Arri. This was in fact pursued.

There is no question of the opportunity being in any way ripe when Van Wyk met Anderson.

After his resignation, Van Wyk considered other options as well. He was in fact offered a lucrative position with VFG.

He continued to work diligently and faithfully for the plaintiff during his notice period.

[55] As I have already mentioned, it was held in the Atlas Organic Fertiliser case that a director who has resigned his position is entitled during his period of notice to take steps to set up in competition with the company. In this regard, Van Dijkhorst J held at 198 in fine to 199C

“…common sense dictates that the mere creation by a managing director, whose services have been terminated and who is serving his month’s notice, of a future alternative means of employment, albeit in competition with his present company, need not necessarily create a conflict of interest greater than that of an ordinary director serving on the boards of two competing companies.

The mere incorporation of Pikkewyn during March 1978 on the initiative of Lion-Cachet can therefore in my view not be regarded as a breach of the fiduciary relationship that existed between Lion-Cachet and Atlas. Nor did the mere preparatory work Lion-Cachet did for Pikkewyn in, for example, finding accommodation for its factory, transgress the requirements of his duty to Atlas.

Nor do I think that the setting up of Pikkewyn per se can be regarded as an act of unfair competition. Lion-Cachet was entitled to take up other employment, even with a competitor of Atlas, after due termination of his services. The planning of his future and the preparatory steps taken to enable him to obtain alternative employment and earn a living even if taken during his month of notice cannot be regarded as against public policy and therefore unlawful. It can therefore not be branded as unfair competition. On this aspect Atlas fails.”

The position is similar in English law.

“In the absence of some special circumstances (for example a prohibition in a service contract) a director commits no breach of his fiduciary duty to the company of which he is a director merely because, while a director, he takes steps so that, on ceasing to be a director (and, if he is one, an employee of that company), he can immediately set up in business in competition with that company or join a competitor of it. Nor is he obliged to disclose to that company that he is taking those steps.”

(Framlington Group plc and Another v Anderson and Others [1995] 1 BCLC 475 (ChD) J at 498A-B.)

[56] With that as a starting point I must now decide whether the plaintiff has established on a balance of probabilities that Van Wyk’s actions in taking steps to set up the new business after he had resigned placed him in a situation of conflict of interest and duty.

In the Canadian Aero Service case, Laskin J held at 382

“Descending from the generality, the fiduciary relationship goes at least this far: a director or senior officer like O’Malley or Zarzycki is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property of business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company.

An examination of the case law in this court and in the courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather that a fresh initiative that led him to the opportunity which he later acquired.”

[57] I am aware of authority to the fact in English law that it is not relevant whether the plaintiff could have pursued the opportunity (Regal (Hastings) Limited v Gulliver [1942] 1 AER 378 at 389 and 395). As against this there is what seems to be the tendency in our law to decide whether or not the opportunity is one which can be said to be in the line of business of the company. There may well be a very fine line dividing these two approaches, but I have come to the conclusion that having regard to all the circumstances, the relationship which Van Wyk established with the second defendant at Arri Media was not a corporate opportunity available to the plaintiff, particularly in view of the relationship which existed between the plaintiff and Panavision. I say this notwithstanding Cervo’s evidence to the effect that the business set up by the second defendant with Arri Media represented a business opportunity which the plaintiff could have pursued. In expressing this view, Cervo conceded that it did not represent a business opportunity to the plaintiff as structured at the present time, but would at the very least have required a totally separate company to be set up. The full bench of the Appeal Court held in Bellairs v Hodnett (supra) that the existence of a corporate opportunity is to be determined by reference to the actual business of the company or the business which it intended to carry on (1128G) and that the scope of the business depends on the contemplation of the parties at the time (1131H-1132F). In my view the line of business which was eventually set up with Arri Media was clearly not within the contemplation of the parties at the time. Having regard to the view expressed in the Canadian Aero Service case, I am also satisfied that Van Wyk’s resignation was not prompted or influenced by a wish to acquire for himself any opportunity sought by the company or indeed an opportunity which was within the contemplation of the parties at the time. I also do not consider that it has been established that the plaintiff was justifiably relying on Van Wyk to acquire the opportunity for it or to assist in acquiring it.

ALLEGED ENTICING OF EMPLOYEES

[58] In the pleadings the plaintiff averred that Van Wyk had enticed three of the plaintiff’s employees, namely Longmuir, Du Toit and Morrison, to leave the plaintiff’s employ and to join the second defendant. At the conclusion of the case, reliance was sought only on the departure of Longmuir and Du Toit. I consider that the plaintiff has not established this aspect of its case. The employment of both Longmuir and Du Toit was subject to one month’s notice (as had been the case with Van Wyk and the old MCC). Longmuir and Du Toit testified that Van Wyk informed them of his resignation on 2 September at the meeting called by him in Cape Town on his return from Johannesburg. Longmuir’s attitude was that if Van Wyk was leaving, he too would leave, but Van Wyk told him that it was his (Van Wyk’s) problem and not Longmuir’s. Du Toit was new in the position of second in charge of the Cape Town branch and was somewhat unsure of his ability. He wanted to work for at least two years to see if he could cope with the position and had told Van Wyk that if the latter ever intended to leave, he too would leave. Longmuir and Du Toit left this meeting on the understanding that Van Wyk had resigned. Both were only aware of his first resignation, but Cervo told Longmuir that Van Wyk was confused and that he would get him to remain on.

[59] On 2 October the two of them initiated a meeting with Van Wyk at a steakhouse in Noordhoek. They had heard rumours about what his plans were and wanted to find out what he intended doing. Both were under the impression that Van Wyk was interested in doing something in the aviation industry – he was fond of flying, had obtained his pilot’s licence and had piloted Van Tonder’s aeroplane on company business. At the meeting of 2 October, Van Wyk did not tell them what he intended to do, but both asked him to bear them in mind should he do anything connected with the film industry and in this regard they pledged their support to him.

[60] Van Wyk told Du Toit some time in October that he was definitely leaving and Du Toit thereafter resigned on 4 January 2000. He says that he did so for three reasons, namely

* He did not want to head up the department,

* his wife, who was a medical doctor, had an opportunity to work in London, which might have resulted in them moving to the United Kingdom; and

* he did not want to work with Panavision equipment. Like Van Wyk he was an Arri man.

He told Van Wyk that if he ever went overseas he would like to come with him so that he could be introduced to Arri Media, VFG and other people known to Van Wyk. He felt that it would be easier for him to seek employment if he had contacts in London. He accordingly travelled with Van Wyk to London at the beginning of February 2000. There he met various people from Arri. By that time he knew that there was a strong possibility that Van Wyk might be starting up a rental facility with Arri or VFG. Although Van Wyk had a meeting with Anderson he was not present or involved. After Van Wyk’s meeting with Anderson, Van Wyk informed him that he had arranged a deal with Anderson and asked him if he would deal with the technical aspects of setting up the operation in Cape Town. Du Toit accordingly phoned Longmuir and informed him that Arri Media were going to back Van Wyk and asked Longmuir to join the new venture. Longmuir had already resigned at this stage because he was unhappy working with the plaintiff. After certain e-mail correspondence was discovered on Van Wyk’s computer, Longmuir was told to leave immediately and told not to work out his resignation period.

[61] The plaintiff produced no evidence to show that Van Wyk enticed Longmuir and Du Toit, but relied solely on the contents of Van Wyk’s e-mail and a discrepancy between Van Wyk’s evidence and a portion of his answering affidavit in the application proceedings. The portion reads:

“It is correct that Longmuir resigned from his employment with the applicant in order to work for the new business. He had approached me prior to doing so and I had agreed that if he resigned the new business would employ him. I did not entice him away from the applicant.”

Van Wyk explained that at the meeting in Noordhoek that Longmuir and Du Toit had pledged their support to him should he venture into the film industry and that he was referring to that pledge in his affidavit. As far as Longmuir was concerned, it was never put to him that his evidence was untruthful and there is in my view no reason not to accept it. There is nothing in the facts to justify an enticement and indeed the remuneration packets of Longmuir and Du Toit with the second defendant are less favourable than they were with the plaintiff. In any event it is not unlawful to persuade an employee to resign his employment lawfully. It is only where the inducement is done with the object of crippling or eliminating the competitor that it becomes unlawful. (The Atlas Organic Fertilisers case at 200 E-G.)

THE LOSS OF THE SOLE AGENCY

[62] Additional bases for the plaintiff’s claim for damages are pleaded. They are that the first and/or second defendants unlawfully

1. acquired the plaintiff’s business relationship with the Arri Media companies and with Arri Germany;

acquired a sole agency agreement with the Arri Media companies and/or Arri Germany;

3. caused plaintiff to lose its sole agency agreement with the Arri Media companies and Arri Germany.

[63] As to 1, the plaintiff had no business relationship with Arri Media in Great Britain. Any contact with Arri Media was on an ad hoc basis. The defendants have not acquired any business with Arri Germany.

[64] As to 2, the defendants have not acquired any sole agency agreement with Arri Germany. The agreement which the second defendant has acquired with Arri Media is not a sole agency agreement, but a split rental agreement in terms whereof Arri equipment is taken on hire by the second defendant. The sole agency agreements which the plaintiff previously enjoyed were agreements in terms whereof the plaintiff was entitled to purchase Arri cameras and lighting equipment.

[65] As to 3, Mr R Louka (“Louka”), the managing director of Arri GB Limited testified. He was appointed to that position in July 2001. Prior to that the managing director had been Mr Derrick Ross. Mr Louka has also been a director of Arri Media since July 2001. Mr Ross has been ill since some time in 2000 and has been working from home. Louka was accordingly responsible for the day-to-day running of the business of Arri GB and Arri Media. He never had any contact with the old MCC or the new MCC. The agreements with Arri Germany and Arri GB were terminated upon six months notice in letters to the plaintiff dated 18 and 15 May 2000 respectively. He gave the notice on behalf of Arri GB while the notice on behalf of Arri Germany was given by Mr Horst Bergmann, but clearly he and Bergmann communicated with one another before the decisions to terminate the contracts were made. He says he took the decision to terminate the Arri GB’s sole distributorship agreement with the plaintiff for the following reasons

1. Its association with Panavision.

2. He had no evidence of any sales or marketing activities within the plaintiff to promote Arri products.

3. Changes within the plaintiff’s organisation, in particular its association with Panavision, which brought about changes in the management structure as well as the fact that there was no continuity or relationship with anyone at the plaintiff.

4. The last straw was the ‘rude and threatening’ correspondence emanating from Cervo after Van Wyk had resigned.

[66] Mr van Blerk submitted that I should not accept Louka’s evidence as the reasons given by Louka were unconvincing. Arri GB always had the right to terminate the agreement with the plaintiff and even if Van Wyk was the source of the information concerning the plaintiff’s preference for Panavision, that would not be enough to justify the conclusion that Van Wyk caused the plaintiff to lose its contract with Arri GB. There is certainly no evidence to suggest that anything that Van Wyk may have done was done with the object of causing plaintiff to lose its contract. The fact that changes occurred in the plaintiff after Van Wyk left also does not justify such a conclusion.

[67] THE DUTY TO DISCLOSE AN ALLEGED FRAUD

It is of course implicit in the plaintiff’s case that the new employment agreement was concluded at a time when there was a binding restraint agreement in force. Having found that the restraint terminated at the end of June 1999, the plaintiff’s claim that the new agreement was concluded as a result of fraud falls away. I will however deal with this aspect of the claim in case I am wrong about the rectification.

[68] The fraud as initially pleaded was that when Van Wyk concluded the new employment agreement he had a duty to disclose the following facts to the plaintiff:

* That he intended to set up a competitive business prohibited in terms of the restraint;

* That he had commenced negotiations with certain of the suppliers with a view to setting up the competitive business;

* That he intended to conclude the new agreement solely in order to give notice to terminate it so as to achieve a position where he was not bound by the restraint.

By 26 October 1999 when Van Wyk signed the new employment agreement, no final decision had been made as to what he would do in the future.

[69] When the matter was argued, Mr van Blerk shifted his position slightly and postulated that at the very least Van Wyk had a duty to disclose the fact that he was no longer interested in negotiating and wished to proceed to terminate his employment. The plaintiff led no evidence in rebuttal of Van Wyk’s evidence as to what he did after his initial resignation in September 1999. His evidence was however challenged on the basis of inferences which Mr van Blerk asked me to draw from a number of e-mail messages which passed between Van Wyk and Anderson, Ross and Mr John Parsons-Smith (‘Parsons-Smith’). The latter was the managing director of Kodak in London. He too was a longstanding friend of the Van Wyk family. From these he submitted that I should find that Van Wyk deliberately and fraudulently concealed from the plaintiff that he was negotiating with Anderson to set up a competitive business and that he went through the farce of getting the plaintiff to enter into a second employment agreement knowing that he would give notice of his resignation immediately thereafter. In regard to this latter aspect it was submitted that Van Wyk was under the duty to disclose at least that he was no longer interested in negotiating a new employment contract and wished to proceed to terminate his employment.

[70] As to the duty to disclose, there is no doubt that no duty to disclose information rested on Van Wyk “at law”. It is only when one has to do with contracts uberrimae fides where such a duty arises. See R H Christie, ‘The Law of Contract’ (4th Edition) p320-324 and Hoffman v Moni’s Wineries Limited 1948 (2) SA 163 (C) at 168.

[71] Although Mr van Blerk emphasised the fact that Van Wyk was at the time an employee and a director, I do not consider that his capacity as a director is particularly relevant or that it requires any special consideration to apply. The contract which was concluded was one of employment and did not relate to Van Wyk’s position as a director. His position as a director is better considered when dealing with the alleged breach of fiduciary duty as a director.

[72] In Gollach & Gomperts v Universal Mills & Produce Co 1978 (1) SA 914 (A), Miller JA in dealing with a pleading to the effect that errors in the appellant’s books had been concealed from it, held at 924A

“The word ‘concealed’ , in the context of the appellant’s pleading, does not in my view convey anything more than intentional non-disclosure in circumstances where frank disclosure was clearly called for – or, as it has frequently been said, where there was a duty to disclose. (Cf. Meskin, N.O. v. Anglo-American Corporation of S.A. Ltd., 1968 (4) S.A. 793 (W) at pp. 796, 802D-G.)”

According to Spencer-Bower’s ‘The Law of Actionable Misrepresentation’ (3rd Edition by A K Turner (1974)) a duty of disclosure arises in three situations:

“(a) Where one of the negotiating parties enters upon the negotiation laden with the duty of revealing his own previous fraud in relation to the subject of the contemplated contract or transaction;

Where, during the negotiation, one of the negotiating parties says or does something, or something happens which, having regard to his previous declarations or acts, requires him to speak, in order to correct or remove a delusion in the mind of the other party for the creation of which he is responsible;

(c) Where one of such parties is in the course of negotiation asked a question by the other party in respect of any matter, whereupon a duty is incumbent on the first party, if he answers the question at all, to answer it truthfully and fully.” (At p206.)

[73] For the plaintiff to succeed it must at the very least establish that when Van Wyk concluded the new employment agreement, he intended to set up a business in competition with the plaintiff as soon as the new contract would permit. To overcome the evidence given by Van Wyk to the effect that this was not so, Mr van Blerk submitted that plaintiff’s intention was to be inferred from certain e-mail communications which had passed between him and Anderson, Ross and Parsons-Smith during September and October. The first was addressed to Anderson on 15 September on his return to South Africa. Under the heading ‘New Beginnings – Media headed south’, it reads

“Dear Graham

Just a word to catch up. I see my lawyer tomorrow morning. I have prepared everything for him today. So hold thumbs, as soon as he gives me the go-ahead we are on!

Before we pursue a dream, I want to make dead certain that I do not end up letting you down on a technicality.

Once again, thank you for your support.

Regards Jannie”

Anderson’s reply on 16 September reads

“Dear Jannie,

Good luck with the lawyer and I will do everything I can this end to make your venture a success, I can assure you of that.

I am preparing some costings and found your price list very interesting.

Could you advise me about something? How many days per week do you charge for your 16 and 35mm Equipment?

Would have a need for DVW700 cameras on a regular basis?

Look forward to hearing from you.

Regards,

Graham.”

Van Wyk in turn responded on the same day in the following terms

Thank you for your prompt response.

4-day week is normal.

For shoots of less than 2 weeks, the max discount is 30%. For features of 5 weeks plus, discounts of about 50-60% are the order.

The Sony 700’s are very popular, would definitely work.

Look after yourself,

Jannie.”

Then on 25 September the following communication was addressed to Ross

“It was wonderful to speak with you today. I trust that I will have more news soon and that I do not frustrate you in the process.

Please reply to this email, as it is a test.

Please convey our kind regards to Susan.

Regards

Jannie”

On 3 October under the heading ‘Standby!!!’ the following communication was addressed to Parsons-Smith.

“Dear John

With sadness and disappointment I resigned from MCC on Friday. I have a lot of legal issues to work through, but I am proceeding as fast as possible. I should conclude my services to MCC at the end of the month.

I am in touch with Derrick, and have filled him in on all the detail so far. I should be in a far better situation to comment at the end of this coming week. Neil, Bryan and Johan have decided to join Media Film Services, and look forward to the future challenges.

I will make contact shortly

Thank you for you support!!!!

(“Neil” is du Toit. “Bryan” is Longmuir.)

On the same day, also under the heading Standby the plaintiff wrote as follows to Anderson.

I hope that you are well. I am sorry about the delay in communication but I have been in touch with Derrick and maintaining a low profile.

I tendered my resignation on Friday and am preparing myself for any legal dispute. I have filled Derrick in with an up to date version of the overall plan, but I will be in a much better position to comment at the end of this coming week, so please do not lose patience with me.

I have defined a team, and a plan. It is now up to me to action them. Equipment lists are in the process of being compiled and will be ready at the end of the week. I am ever cautious not place this project in jeopardy and am pursuing every possible route to ensure the best solution.

I may be in a position to assist you with your Ireland project for a month or two while my team sets-up the company in Cape Town. But lets see how things pan out from here.

Look after yourself

Then on 24 October under the heading ‘Gear List’ the following communication to Anderson

Thank you for your E-mail.

I had dinner with Derrick and Susan last night. It was great to see him. I have compiled an absolute first prize list, some of which, I am sure you don’t have even after all this time.

This equipment will immediately make us independent and very, strong.

In the real world it does not work like that I know, but this is the high road which we will always strive towards.

Please look at this dream list and indicate the equipment which you can definitely assist us with, so that we can begin to source the balance of equipment and the necessary cash to purchase what ever sundries are not available.

The plan would be to be up and running by 1 March 1999. (This should obviously be 1 March 2000.)

I resigned on 1 October 1999, but after long negotiations regarding my contractual obligations to MCC, it was agreed to declare any such contracts null and void, on condition I sign a new contract with a 3 month resignation clause. So now that I received the original paper work from them yesterday, I will repeat the process of resignation on 1 November 1999, to be totally free as of 1 February 2000.

Derrick indicated that this may actually be a better arrangement as it allows more time to accrue the equipment.

The biggest problem is that it does not give us the whole season to maximise our turnover. The plan may be to bring in the equipment that is always in demand and bring in the remainder of the gear as and when it is required. The biggest bonus will be that VFG shall remain out of the market, AFM will be even more conservative and we will have made our mark. People and clients are expecting big things. The client base will support us if we can deliver and do not jeopardise their jobs by not being able to supply. We shall market ourselves as high end rental, and we can rely on client loyalty.

Once all our clients realise that we are trading, we will be in great shape for the following season, after servicing some commercials and TV dramas in the dead of winter. With Kodak, lights, grips and camera we turned 150 000 pounds in our worst month, so 80K pounds is the number to reach for.

I am compiling a business plan as we go along and especially now that I will become unencumbered, the dream becomes reality.

Have a look into the Dream gear list, try not to laugh to (sic) loud, and lets see where we get to on a first run.

Have a great weekend. Thank you for your help.

Regards Jannie

PS NEW news – AFM has bought Filmair Cameras.”

[74] His explanations in regard to the e-mails to Anderson were that the correspondence in September was intended to make it clear that he would seriously consider the offer which Anderson intended to make and that the correspondence in October was addressed with the view to exploring the viability of the proposed venture. As far as Longmuir and Du Toit were concerned, his explanation was that he had accepted that they would join him if he decided to go on his own and it was for that reason that his e-mails were to the effect that an agreement had been reached that they would join in, although he had in fact made no specific and final arrangements with them at the time. He says that he did not give the price list to Anderson, but that this was readily available to him from various sources. He ultimately needed to know what equipment Arri Media would be prepared to supply in order to make a final decision as to whether he could go ahead with Arri Media. His evidence was further that in October considerable discussion was taking place amongst the plaintiff’s senior staff about the possibility of a management buy-out. This was being investigated by Cervo who reported to him from time to time and who would himself have been involved in the buy-out had it eventuated. Towards the end of October, Van Tonder, Van Wyk and Cervo also met and discussed the possibility of starting another rental company. At that time there was also a possibility of Sasani being taken over by the financial institution known as Coronation.

[75] Cervo confirmed that when Van Wyk finally resigned, the issue of the management buy-out was still very much alive and he accordingly asked Van Wyk not to make his resignation public until the issue of the management buy-out had been finalised and until certainty had been obtained about the Coronation bid. Van Wyk testified that if the management buy-out had eventuated he would certainly have been part of it and would not have proceeded along the new route with Arri Media. When nothing came of the management buy-out his resignation was made public on 14 December 2000. He says that while the discussions were taking place he had no further contact with Arri Media and that the discussions with the latter were only resumed on 16 December.

[76] The fact that he intended to work the minimum period the new contract would allow does not make his conduct unlawful. When he resigned in terms of the new agreement his resignation was certainly not regarded as being unlawful on the basis which is now argued. It did not surprise Cervo and in the last week of January the management gave a farewell party for him and Cervo himself presented him with the laptop computer which he had been using. This conduct by the plaintiff is certainly inconsistent with a subsequent election by the plaintiff to avoid the new contract on the grounds of fraud.

[77] A decision on this aspect of the case depends on my assessment and evaluation of Van Wyk’s evidence and his performance in the witness box. He gave evidence for the best part of three and a half days during which I obviously had ample opportunity to observe him. I found him to be a satisfactory witness who had no difficulty in remembering events, figures and conversations. His explanation as to why his e-mail messages were so positive is less satisfactory, but the wording may well have been designed simply to make a good impression. The fact is, however, that he never regarded himself as being bound to the plaintiff after 30 June 1999 and Cervo knew, certainly by no later than 3 October, that Van Wyk was likely to challenge any attempt to hold him to the restraint. The conclusion of the new contract of employment was not of Van Wyk’s making. He had resigned and had indicated that he was leaving and had told his staff this. The initiative for the new contract came from Cervo. That being so, why should it be fraudulent to conclude a contract, which, as far as he was concerned, simply placed him in the position which he believed he should have been in all along? The fact that the new contract brought with it the removal of the threat of the restraint agreement meant of course that he would not have to challenge the validity of the restraint, but I fail to see why in the peculiar circumstances which led up to the signing of the new agreement he should have been obliged to say to the plaintiff that he did not wish to sign the new agreement. Van Wyk’s attitude was that by offering him a new contract free of any restraint, the plaintiff was simply indicating that it had been wrong about the restraint. I also cannot find, as I was urged to do by Mr van Blerk, that by 1 October 1999 Van Wyk had devised a specific strategy to rid himself of the restraint agreement. In any event, it is difficult to imagine what that strategy would have been. I accordingly conclude that the plaintiff has failed to establish fraud on the part of Van Wyk.

[78] COSTS

It follows from the aforegoing that the defendants are entitled to an order for costs, including the costs of the application and the costs of bringing two witnesses from the United Kingdom to testify in this court. The matter was a lengthy and complicated one, which clearly justified the costs of employing two counsel

[79] To return to the issues which I was requested to deal with, I find as follows:

The restraint was not binding to the extent that it purported to bind the first defendant beyond 30 June 1999.

The first defendant is entitled to rectify the restraint agreement by altering clause 1.1.11 to read:

“ ‘restraint period’ means a period of 30 months calculated from the effective date”

In the light of my findings in regard to the rectification of the restraint, payment of the restraint consideration and the stipulatio alteri, it is not necessary to decide whether the restraint would be void for unreasonableness.

In view of my finding in regard to the rectification the defence of alleged non-payment of the consideration falls away. Should I be wrong in respect of the rectification, the first defendant would be entitled to avoid the obligations under the restraint by reason of the non-payment of the consideration.

I should add that in such event the first defendant would also be entitled to avoid the restraint by reason of the failure by the plaintiff timeously to accept the benefits of the stipulatio alteri.

The first defendant did not breach his duties as director and employee for the reasons set out in the judgment. For the purposes of the judgment it is not necessary to decide precisely what the defendant’s duties as a director and employee were.

Since fraud on the part of the first defendant was not established, the plaintiff is not entitled to avoid the second employment contract.

The first defendant’s conduct, as described in the judgment, was not wrongful.

Since the first defendant is not liable to the plaintiff, the second defendant is also not liable.

[80] The plaintiff is ordered to pay the defendants’ costs, including the costs of the application in case number 5270/2000 in the High Court of South Africa (Witwatersrand Local Division) and case no 2284/2002 in this court, such costs to include the costs attendant on the employment of two counsel. Messrs Anderson and Louka are declared to be necessary witnesses for the defendants.

___________________

R B CLEAVER