Phibro Health (Pty) Ltd v Groenewald and Others (12392/2007) [2007] ZAGPHC 255 (2 November 2007)

IN THE HIGH COURT OF SOUTH AFRICA /ES

(TRANSVAAL PROVINCIAL DIVISION)

CASE NO: 12392/2007

DATE: 2/11/2007

NOT REPORTABLE

IN THE MATTER BETWEEN:

PHIBRO HEALTH (PTY) LTD APPLICANT

AND

JOHANNES JACOBUS GROENEWALD 1ST RESPONDENT

ANIMATE ANIMAL HEALTH (PTY) LTD 2ND RESPONDENT

LEANMAR (PTY) LTD 3RD RESPONDENT

RUBINSTEIN 623 (PTY) LTD 4TH RESPONDENT

JUDGMENT

SERITI, J

1. INTRODUCTION

This matter came to court by way of a motion.

In the notice of motion the applicant is applying for an order in the following terms:

1. interdicting and restraining first and second respondents from selling and/or distributing and/or tendering and/or offering for sale and/or marketing TMQ 200 and Zinc Bacitracin or Medicated Feed Additives manufactured from the comparable raw materials to customers of the applicant;

2. interdicting and restraining first and second respondents from approaching and/or communicating with customers or potential customers of the applicant to solicit business from them and/or sell and/or distribute and/or tender and/or offer for sale and/or market products to them that are sold and distributed by the applicant or substitutes thereof;

3. interdicting and restraining first, third and fourth respondents from selling and/or distributing Stafac 500 and all Medicated Feed Additives to customers or potential customers of the applicant;

4. interdicting and restraining first, third and fourth respondents from approaching and/or communicating with customers or potential customers of the applicant to solicit business from them and/or sell and/or distribute and/or tender and/or offer for sale and/or market products to them that are sold and distributed by the applicant, or substitutes thereof;

5. interdicting and restraining first, second, third and fourth respondents from approaching and/or communicating with suppliers or potential suppliers of the applicant;

6. interdicting and restraining first, second, third and fourth respondents from approaching and/or communicating with the applicant's current regulatory consultants;

7. interdicting and restraining first respondent and any other entities, juristic or otherwise, of which he is presently or may in the future be a shareholder, member and/or director, and/or any other entities, juristic or otherwise, which he is presently or may in the future be trading as, and/or their servants, employees or agents, from approaching and/or communicating with customers of the applicant to solicit business from them and/or sell and/or distribute and/or tender and/or offer for sale and/or market products to them that are sold and distributed by the applicant or substitutes thereof;

8. ordering the respondents to pay the costs of the application.

2. FOUNDING AFFIDAVIT

It was attested to during April 2007 by Mr Shawn Patrick Brosnan, who is employed as Vice President, Finance and Administration of Phibro Animal Health Inc, a subsidiary of Phibro Animal Health Corporation and an affiliate of the applicant.

He alleges that this application is based on information gathered in an external investigation conducted by Price Waterhouse Coopers ("PWC"). The investigators have established the following:

(a) The first respondent has been the Country Manager of the applicant since 2000. Since at least 2001 he has established or secured financial interests and/or actively participated in and/or promoted the interests of the second to fourth respondents in conflict with and to the detriment and prejudice of the interests of the applicant.

(b) The first respondent has abused his position as an employee and director of the applicant and breached his fiduciary duties and duties of trust, confidence and good faith owed by him to the applicant, by, inter alia, promoting products through the second to fourth respondents which competes with the products promoted by the applicant, its parent company and its affiliates.

(c) The first respondent has also committed acts which prima facie appear criminal. Through the third and fourth respondents he has directed and facilitated the sale of Stafac 500, a product produced and distributed exclusively worldwide by the applicant and its authorised agents. In one instance first respondent directed the sale of Stafac 500 in the amount of R48 450,00 to the third respondent.

He further alleges that through their unlawful conduct the first, second, third and fourth respondents have gained an unfair competitive advantage over the applicant in circumstances where the products promoted and the information used were unlawfully obtained.

The applicant is a duly registered South African company, and is a wholly owned subsidiary of Phibro Animal Health Corporation, which is incorporated in the United States of America. The Phibro Animal Health Corporation group, which includes the applicant and Phibro Animal Health Inc, operates in the production of animal health and nutrition products and supplying of medicated feed additives ("MFAs"), which are materials included in the animal feeds, feedlot, dairy cattle and swine species markets worldwide.

The applicant is the registered owner and sole approved importer of the MFA named Stafac 500 as well as certain other products in South Africa.

The first respondent was previously an employee of Pfizer Inc, South Africa. The Phibro Animal Health Corporation group acquired the global MFA business of Pfizer Inc, including its MFA business in South Africa on 1 December 2000. Simultaneously and as a direct result of the acquisition, the applicant was created to pursue the Phibro Animal Health Corporation group's interest in South Africa. At that time, the first respondent was appointed as "Country Manager: Southern Africa" of the applicant.

The first respondent was also appointed as a director of the applicant at that time. He resigned at his request as a director of the applicant effective 30 June 2006.

The applicant employs five full-time employees and a part-time pharmacist. Except for an administrative assistant and financial manager, the other employees (including first respondent) are effectively sales persons. They were employed by the applicant to sell medicated feed additives to the South African animal health and nutrition market.

The first respondent is currently the "Country Manager: Southern Africa" of the applicant. He is responsible for the day to day operation of the applicant. Employees of the applicant report to him.

The second, third and fourth respondents are described in full and he further alleges that five of the six directors of the fourth respondent are all South African employees of the applicant and they are the following: first respondent, Messrs Jan Janeke, Richard Nicholson, Chris Cloete (who is the finance manager of the applicant) and Ms Dina Carolina Wessels. The sixth director of the fourth respondent is Mr Hugh Moore, an employee of the third respondent.

Mr Keith Collins, the President of Phibro Animal Health Inc, was alerted after a tip off by some customers to various business irregularities which were occurring within the operations of the applicant, which operations are under Mr Collin's management's responsibility.

During the investigation by PWC referred to above, it was found that the first respondent has the following financial interests:

(i) he is a sole director of the third respondent – this interest was acquired on 16 July 2001, which is a year after he was employed by the applicant;

(ii) a 50% shareholding in the second respondent – in regard to this allegation he relies on information provided to him by Messrs Lionel van Tonder of PWC, Cloete, Ted Swindon, the Managing Director of Avi Pharm, a customer of the applicant and the first respondent's will. In the said will, the first respondent bequeathed his 50% interest in the second respondent to the Groenewald Family Trust.

(iii) A one sixth shareholding in the fourth respondent. This interest was acquired in September 2004, when the first respondent was not only an employee, but also the Country Manager and director of the applicant.

The first respondent did not disclose his interest in any of these companies to his line manager, Mr Michael Murphy or any management of the Phibro Animal Health Corporation group or to the applicant. He also did not seek any permission to have any involvement in the second and fourth respondents, while it is clear that he has a conflict of interest. He did, however, inform Ms Wessels and Mr Cloete that the Phibro Animal Health Corporation group had given permission for the third respondent to operate in the premises of the applicant and make use of its resources. The Phibro Animal Health Corporation group never gave the first respondent permission or approval for him or the applicant to be involved in the business of the second, third or fourth respondent.

As a result of the investigation, the first respondent was charged with inter alia misconduct. The disciplinary hearing will take place on 12 April 2007. It will be chaired by an independent chairperson, Adv Nazeer Cassim SC of the Johannesburg Bar. At the hearing the applicant will seek the immediate dismissal of the first respondent.

The charges relate to the first respondent's breach of his fiduciary duties and his duties of trust, confidence and good faith owed to the applicant and his participation in unlawful competition with the applicant.

As the "Country Manager" of the applicant, the first respondent's contract of employment contains, inter alia, the following confidentiality clause:

"You shall not at any time during or after termination of your employment with the company divulge to any person any confidential information relating to the company business or affairs, including trade secrets to any person without the company's consent …"

0ver the years, the applicant has granted the first respondent independence and authority to conduct its business in South Africa.

Concomitant with this authority the first respondent has a duty to protect the interests of the applicant.

The first respondent was and continues to be not only privy to the most confidential information of the applicant, but also has had control over it. The applicant's other employees were subject to his authority and relied on him to guide the business in the best interest of the applicant and in accordance with his employment contract and generally accepted business practices and ethics. Even today, he not only knows but establishes, subject to his reporting manager's approval, the prices at which the applicant's products are sold in South Africa. He knows all the information about the applicant's competitors, the applicant's pricing strategy and philosophy, customer pricing patterns, the applicant's product development plans and the sources and prices of pharmaceutical raw materials. In some instances, the first respondent knows the larger business strategy and key product strategies of the Phibro Animal Health Corporation Group due to his senior management position in South Africa and in the applicant.

As stated earlier, the first respondent has, according to his last will and testament, bequeathed 50% of his shareholding in the second respondent to a family trust.

The second respondent distributes TMQ or TMQ 200 and Zinc Bacitracin in South Africa. The applicant is the holder of the trade marks and the registration of and is the sole distributor of TM 100 and TM 200 in South Africa. TMQ or TMQ 200 is a direct replacement product of TM 100 and TM 200 as it is based on the same molecule oxytetracyclene. TM 100, TM 200 and TMQ have the same application in terms of treating animal diseases and have comparable efficacy. A customer in possession of TMQ does not need TM 100 or TM 200. The products mentioned above compete with each other directly in the South African MFA market.

The first respondent has actively sold or promoted TMQ to the customers of the applicant.

He was informed that Mr Collins, in the presence of Mr Van Tonder, has been informed by a customer, Mr Swindon, of the following:

(i) he is the MD of Avi-Pharm, a longstanding customer of the applicant, and over the years he has been buying TM 200 from the applicant;

(ii) at the end of 2005 the first respondent informed Mr Swindon that a product similar to TM 200 was available from the second respondent;

(iii) the first respondent informed Mr Swindon that he had joined the second respondent, and that the first respondent advised Mr Swindon to purchase TMQ from the second respondent instead of TM 200 which is produced and distributed by the applicant.

(iv) Since that time Mr Swindon has purchased TMQ from the second respondent.

0n 8 February 2005 Ms Wessels received an order from another customer of the applicant, NVS Biocare. The order was for eight hundred units of TMQ at the total cost of R432 000,00. Ms Wessels enquired from the first respondent about the said order. The first respondent informed Ms Wessels to refer the order to the second respondent, which she did. At that time the applicant had TMQ in stock and could have fulfilled the order that that particular customer placed had it not been unlawfully diverted.

He referred to and attached to the founding affidavit copies of invoices from the second respondent which he obtained from Mr Swindon. The invoices evidence the following:

(i) invoice number 1978 in terms of which third respondent sold Stafac 500 to Avi-Pharm for R48 450,00;

(ii) invoice number 3468 in terms of which fourth respondent sold Stafac 500 to Avi-Pharm Natal for R120 000,00;

(iii) invoice number 3349 in terms of which fourth respondent sold Stafac 500 to Avi-Pharm Natal for R120 000,00.

In addition Mr Swindon informed Mr Collins that the first respondent offered a very attractive deal on Stafac 500. If he purchased ten products through the third respondent, he would get one free. If he purchased twenty products through the third respondent, he would get three free.

The applicant also sells an MFA named Virginiamycin under the brand name Stafac or Stafac 500 for treating swine, cattle, broilers and turkeys. The Phibro Health Corporation Group and the applicant are the only producers of this product worldwide. It is their most important propriety molecule and one of the best performing animal health products in the industry throughout the world.

Stafac is in direct competition with Zinc Bacitracin. Virginiamycin (ie Stafac) and Zinc Bacitracin have the same applications in terms of treating animal diseases and have comparable efficiency. A customer treating animals with one does not need the other.

He referred to documents attached to the founding affidavit which indicates that Avi Pharm purchased 20 000kgs of Zinc Bacitracin from the second respondent on or about 1 December 2005 in the amount of R308 347,20, and alleges that that indicates that the first respondent has promoted and sold Zinc Bacitracin to Avi Pharm.

The applicant is the only licensed producer and distributor of Stafac 500 in the South African market – he was informed by Mr Swindon that during or about 18 July 2006 the first respondent sold Stafac 500 to Avi Pharm. He referred to an invoice, attached to the papers, which indicates that the fourth respondent sold Stafac 500 to Avi Pharm for R120 000,00, and alleges that he finds it unusual that the fourth respondent, which the first respondent told investigators during the investigation that it was in the business of real estate, has in fact sold the applicant's propriety product Stafac 500.

0n or about 1 July 2004 the third respondent sold Stafac 500 to Avi Pharm, and he referred to an invoice attached to the papers indicating that third respondent sold Stafac 500 to Avi Pharm for an amount of R48 450,00. He alleges that he finds the above transaction strange as the first respondent told the investigators that the third respondent was in the business of selling water treatment products, is in fact selling applicant's propriety product Stafac 500.

The first respondent has used confidential company information and the applicant's products without the applicant's consent – the information used includes selling prices and the related cost of goods for each product sold, including costs of raw materials from suppliers, customer lists, pricing information, marketing and trade secrets and product information and key customer relationships to promote the interests of the respondents to the detriment of the applicant. The information is computer generated and stored on computers of the applicant, including first respondent's laptop.

First respondent has unlawfully acted and used his position as an employee, manager and director of the applicant in direct conflict with his fiduciary duties and his duties of trust, confidence and good faith.

First respondent together with other employees of the applicant, set up the fourth respondent for the purpose of obtaining a rental benefit from the applicant without disclosing his interest in the fourth respondent to the applicant and the Phibro Animal Health Care Group.

The first respondent used the fourth respondent in concert with the third respondent to compete unlawfully with the applicant. The third respondent operates out of the premises leased by the applicant from the fourth respondent. The applicant pays for the third respondent's telephone bill.

The third respondent's employee, Mr Hugh Moore, had a trip to Cape Town paid for by the applicant, and in substantiation of this allegation he attached an invoice issued by Club Travel.

He further alleges that the third respondent has utilised the services of the applicant's full time employees – Mr Cloete has confirmed that they performed certain functions for the third respondent during working hours. Confirmatory affidavits of Ms Wessels, Messrs Lambrechts, Collins, Murphy and Van Tonder were attached to the founding affidavit.

3. SECOND RESPONDENT'S ANSWERING AFFIDAVIT

Same was attested to by Mr Hugo Hattingh. He alleges that he is the sole director of the second respondent, and also a trustee of the Triple H Trust which is the sole shareholders of the second respondent.

The second respondent carries on business as a competitor to the applicant in the animal health and nutrition industry, distributing medicated feed additives ("MFA's").

The manufacture and supply of MFA's are governed mainly by the provisions of the Fertilizers Farm Feeds, Agricultural Remedies and Stock Remedies Act 36 of 1947 ("FAAR Act") and in some instances by the Medicines and Related Substances Act 101 of 1965.

In terms of the FAAR Act, no person shall sell any MFA unless such product is registered in terms of the FAAR Act. The person or entity who has applied for the registration and who has been granted a certificate of registration shall be entitled to distribute the MFA either personally or through his duly authorised agents. The second respondent applied and was granted authority to distribute TMQ within the Republic of South Africa to the exclusion of all other unauthorised entities including the applicant and/or the first respondent.

The active ingredient of TMQ is 0xytetracyclene Dihydrate 20% and is used as an antibiotic in food premix for poultry, pigs, calves and lambs.

The applicant holds a registration for a similar product called TM 200. TMQ and TM 200, although similar in nature and usage, are two separate and distinct products each belonging to one registration holder distributing same in competition with the other.

The second respondent also distributes a MFA known as Zinc Bacitracin 15% granulated. This product is an antibiotic performance promoter used for calves and poultry.

The applicant is the registered holder of a product registered as Stafac 500. The active ingredient is Virginiamycin which is a feed additive to improve growth rate. This is a distinct and different product from Zinc Bacitracin 15% granulated. The second respondent does not distribute Stafac 500.

All the products which are mentioned in this application may only be utilised once prescribed by a veterinarian.

He further alleges that the applicant does not identify its so called customers whom it seeks to prevent the second respondent from dealing with. It would be impossible for the second respondent assuming that valid grounds exist for the order which the applicant seeks to continue business should this order be granted.

The second respondent carries on business in competition with the applicant in the stock remedy industry, more particularly in the sourcing, supply and distribution of animal feed additives and medicated feed additives (as prescribed by veterinarians) relating to poultry, feed lot, dairy cattle and swine species. Second respondent commenced business on 1 April 2005 and competes freely and openly with the applicant in the open market.

The applicant distributes products known as TM 100 and TM 200. Although the applicant's TM products and the second respondent's product TMQ may be utilised for the same purpose and may contain the same active ingredient namely "0xytetracyclene", the products are two distinct and different products.

Although some of the products may to some extent be utilised for the treatment of the same ailments, it is common knowledge that veterinarians often change products from time to time. If the animals are kept on the same product, their immune system builds up a resistance to the product which then becomes ineffective. It is therefore necessary to vary the products from time to time.

The applicant has failed to identify its so-called suppliers. Presently the second respondent is dealing with three suppliers from Europe whom he has known for the past twenty years or so. Should the order the applicant is seeking be granted, the second respondent will be unable to deal with any supplier as it may then be in breach of the court order.

He does not know the consultants that the applicant utilises. The consultants which the second respondent utilises have been used by him for a number of years.

He denies that the second respondent has obtained and/or utilised any information belonging to the applicant.

He further alleges that he has known the first respondent for a long time as they operated in the same industry although employed by different companies, and they are friends. At no stage did first respondent disclose any confidential information of his employer to him.

As pointed out earlier Triple M Trust is the sole shareholder in the second respondent. The first respondent has no shareholding or beneficial shareholding in the second respondent.

He is the only director of the second respondent (which is effectively a family business), and he appreciated the need for "continuation" should something happen to him, and consequently he had a discussion with the first respondent and enquired whether he will be able to assist his family to continue with the business in case of his death. He indicated to the first respondent that he will be willing to let him obtain 50% of the shares of the second respondent on his death, as an incentive for him to continue with the business of the second respondent, which would obviously have a substantial benefit for his family.

First respondent has no interest in the second respondent and has not divulged any confidential information of the applicant to him.

It is correct that if one utilises TMQ, one would not need to utilise TM 100 or TM 200. These products compete directly with one another in South Africa as an animal feed additive.

It is correct that Avi-Pharm did become a customer of the second respondent and has purchased TMQ from the second respondent, apparently during December 2005 and January 2006.

It is correct that NVS Biocare is a customer of the second respondent and that the second respondent has provided TMQ to NVS Biocare. If the order attached to the founding affidavit by Biocare was in fact forwarded to the applicant, he is not surprised that the first respondent advised Ms Wessels that the order should be referred to the second respondent. As stated earlier, TMQ can only be prescribed by a veterinarian, and that the second respondent is the only company that can distribute TMQ. The said order was sent to the applicant by error.

He does not understand how Mr Brosnan can allege that the applicant had TMQ in stock.

Stafac and Zin Bacitracin are prescribed by a veterinarian. It is not a question of a customer deciding which of the two products he/she/it prefers to utilise. Zinc Bacitracin is a substantially cheaper product than Stafac 500, and perhaps that explains why veterinarians would prescribe Zinc Bacitracin (where it would suite the purpose) as opposed to Stafac 500.

4. FIRST AND THIRD RESPONDENT'S ANSWERING AFFIDAVIT

Same was attested to by Mr Johannes Jacobus Groenewald.

He alleges that he was previously the Country Manager, Southern Africa of the applicant. He was unfairly dismissed by the applicant during a disciplinary hearing held on Thursday 12 April 2007 and he intends taking further action.

He is the sole shareholder and also sole director of the third respondent and a 16,6% shareholder of the fourth respondent.

He has been involved in the animal health industry for a period of approximately twenty two years.

He was employed by the applicant as a country manager for the last six years.

PWC are his accountants as well as the accountants of the third respondent. The establishment of the fourth respondent was an open topic of conversation between auditors, other employees of the applicant namely Cloete, Jan Janeke, Richard Nicholson, Diana Carolina Wessels and himself.

The third respondent does not compete with the applicant. The third respondent has two products which it markets, distributes and services. The said products are:

(i) Histosol which is a water purification and cleaning product. In certain ways Histosol can be a complimentary product to products sold by the applicant.

(ii) The second product which is sold and marketed by the third respondent is a jet mixer which facilitates the introduction of Histosol into a particular body of water by infusing Histosol with oxygen, making it more effective.

The third respondent is managed completely by Mr Hugh Moore and he has very little involvement in it.

He further alleges that he informed the overseas superiors about the activities of the third respondent and they did not have a problem with that.

The sole shareholder and director of the second respondent is his longtime friend Mr Hugo Hattingh. At some stage Mr Hattingh approached him and said that he was very concerned as to what would happen with his company in the event of his death. Mr Hattingh told him further that he wished to leave half of his shares in the second respondent to him and it is under those circumstances that he dealt with those shares in his will. He dealt with the said shares in his will on advice of one L Smith, a financial advisor, whom he consulted when drafting his will. Presently he does not hold these shares.

He admits that he acquired shares in the fourth respondent during September 2004. The purpose behind the fourth respondent is essentially as an incentive to the employees of the applicant.

It was also necessary to have control over the applicant's landlord as the process of moving the applicant from one set of premises to another, which had happened twice in the past, was extremely expensive and cumbersome.

Establishment of the fourth respondent was in the applicant's interest.

He did not deem it necessary to disclose to anybody his interest in the fourth respondent.

The third respondent does not make use of the applicant's resources. Third respondent has an ordinary commercial relationship with the applicant and pays its full share of rent and all other expenses which are associated with its occupation of part of the premises. Third respondent also has its own resources in the form of computer systems, e mail addresses and cellular telephones, which are paid for by it. Ms Wessels and Mr Cloete did part time ad hoc work for the third respondent which did not in any way detract from their performance of their duties for the applicant. They performed duties for third respondent after working hours.

The disciplinary hearing against him took place on 12 April 2004 and he was dismissed. His dismissal was substantially and procedurally unfair and he intends to take further action.

He denies that he committed any unlawful act.

He is not aware of any pricing strategy that has ever been given to him which he is expected to follow. He is given budgets and have always been at liberty to price the applicant's products within the parametres which would allow him to achieve the budgets.

He admits that the second respondent distributes TMQ and Zinc Bacitracin, and that TMQ and the applicant's TM 100 and TM 200 are competing products but denies that TMQ is a replacement product for the applicant's products. A customer in possession of TMQ would not need TM 100 or TM 200.

He denies that he ever sold or promoted TMQ on behalf of the second respondent.

He further alleges that he did not make the alleged statements to Mr Swindon. In any event, he would not have been in a position to persuade Mr Swindon to purchase TMQ from the second respondent, as the product to be used is prescribed by a veterinary surgeon and the customer is obliged to follow the veterinarian's instructions. He would therefore have had to approach Avi Pharm's veterinarian to convince him to prescribe TMQ, something which he never did and had no reason to do.

He denies that the applicant had TMQ in stock or that it ever had TMQ in stock.

He admits that he told Ms Wessels to refer the order for TMQ received from NVS Biocare to the second respondent.

He is not a signatory on the bank account of the fourth respondent and he has no knowledge of the transactions of the fourth respondent.

Payment of the airticket mentioned in the founding affidavit was the responsibility of the applicant's Finance Manager, Mr Cloete. He was not involved.

He admits that there was an arrangement with Ms Wessels that she would perform certain administrative tasks for the third respondent for which she would be paid R2 000,00 per month by the third respondent. He also admits that the third respondent paid Ms Wessels an amount of R10 000,00 but does not know what amount, if any, is still owing to her.

The business of the third respondent is small and is conducted by Mr Moore who uses his cellular phone for purposes of the business.

If Ms Wessels performed some of the tasks for third respondent during working hours, that was not done in terms of the arrangements concluded with her.

Third respondent had its own computer with which orders and invoices can be generated and printed. Ms Wessels was supposed to use the third respondent's computer. If she made use of the applicant's computer for these purposes, he is not aware of that fact and it was not in terms of the arrangement with her. Confirmatory affidavit of Mr Hugh Moore was attached.

5. APPLICANT'S REPLYING AFFIDAVIT

It was attested to by Mr J M Bendheim, employed by Phibro Animal Health Inc, as Director: Sales and Marketing for the Europe, Middle East and African Regions.

He alleges that the disciplinary hearing against first respondent was fair and chaired by an independent person.

At the time of the first respondent's appointment as Country Manager: Southern Africa, he was also appointed as director of the applicant with effect from 1 December 2000. He resigned as a director with effect from 30 June 2006.

The first respondent does not deny that he made no attempt to disclose his interest in the fourth respondent to his superiors and/or the applicant.

The complaint against the third respondent is, in part at least, not that it sells "Histosol" or "jet mixer" but that it has received proceeds from sales of products which are exclusively manufactured and sold by the applicant.

The first respondent received certain financial benefits from the second respondent.

PWC investigators have found a letter dated 4 July 2006 on the applicant's server written on the second respondent's letterhead. In the letter the first respondent represents that he is a "Director" of the second respondent and writes to Hennie Joubert of Buffalo Freight Systems (Pty) Ltd.

The second respondent has been using Mr Chris Cloete (the applicant's Finance Manager) to reconcile its accounts with a customer of the applicant and of the second respondent.

National Veterinary Suppliers (Pty) Ltd ("NVS") has been communicating with Mr Cloete for some time, since 2006. Representatives of NVS sent e mails to Mr Cloete in relation to substantial sales of Zinc Bacitracin and TMQ. In these e mails which were attached to the replying affidavit, NVS asked Mr Cloete to reconcile the accounts of the second respondent.

Since July 2006 the applicant has not made any sales to NVS. 0n the other hand, the second respondent has during the same period made substantial sales of TMQ (a product which competes directly with TM 200) to NVS. The second respondent sold TMQ for R540,00 per bag to NVS in May and June 2006. During that same period the average selling price of the applicant's TM 200 was R507,00. Despite that, NVS stopped purchasing from the applicant for reasons other than price. The only reasonable inference in the circumstances, and in particular given the affidavit of Mr Swindon, is that NVS were persuaded by the first respondent to purchase TMQ from the second respondent.

The PWC investigators have uncovered further evidence of the use of the applicant's intellectual property and resources by the second respondent. He referred to a series of e mails which were attached to the replying affidavit.

Tandie Rogerson who appears to work for Afripack, sent an e mail on 29 July 2005 to Jeff Cutler (a packaging designer from Stallion Repro) and copied Caroline Wessels. In this e mail Rogerson requested Cutler to "e mail the current design for Phibro TM 200 as the customer wants to make some changes".

Ms Wessels has confirmed that Cutler was responsible for designing the packaging upon the instructions of the first respondent which the applicant uses to distribute TM 200. It paid Cutler for this service.

At all material times Ms Wessels was acting under instructions from the first respondent.

0n 4 August 2005, Ms Wessels responded to Rogerson as follows:

"Thank you for your quick response. Please understand that this is not a replacement bag but an additional bag. We would like a quote on 5 000 bags on exactly the same bag as the TM 200 bag for Phibro but with the following changes: 1. The Phibro logo should be replaced with the Animate Animal Health (Pty) Ltd logo. 0ur printers GR Press, will e mail you the logo as soon as you let me know what format you prefer the logo to be in and the e mail address of the person responsible. 2. The product name TM 200 should be replaced with TMQ. 3. The Company Registration number should be replaced with … 4. The P.O. Box and physical address will stay the same. … 7. The Registration holder should change to Animate Animal Health (Pty) Ltd …"

Ms Wessels confirmed to him that the contents of the e mail were dictated to her by the first respondent.

The first respondent has, at the time of the establishment of the second respondent, assisted the second respondent in a variety of ways, by, inter alia, drafting the distribution agreements on behalf of the second respondent using the distribution agreements of the applicant as a precedent. Some of the draft agreements prepared for the applicant were found by PWC investigators on the applicant's server.

The agreement used by the second respondent for distribution of TMQ was in material respects similar to that used for the distribution of TM 200 by the applicant.

After the establishment of the second respondent, the first respondent diverted sales from the applicant to the second respondent. The first respondent, inter alia, informed customers to purchase TMQ (a competing product) from the second respondent.

From the date it was established the second respondent utilised the resources of the applicant, namely its employees, postal address, office equipment and intellectual property.

What has been discovered so far is, inter alia, that the second respondent has paid for the first respondent's daughter's horse riding lessons, and that Mr Hattingh has agreed to "leave" 50% of the shares in the second respondent to the first respondent. It has also been discovered that the second respondent has also paid an amount of R684 000,00 to the third respondent (in which the first respondent is a sole director and shareholder) for "product development".

He referred to certain documents which were attached to the papers which indicate that on a number of days Mr Cloete and Ms Wessels processed or were asked to process account payments, invoices or other documents relating to the third respondent during office hours. In some of the e mails it was the first respondent who requests, during working hours, that Mr Cloete and Ms Wessels perform work for the third respondent.

He referred to a letter, on the letterhead of the applicant dated 14 November 2001 addressed to a customer by the first respondent. In the said letter the first respondent promotes products of the applicant, together with the products of the third respondent.

He further alleges that the pricing strategy of the applicant is determined in conjunction with the first respondent as the most senior employee of the applicant in South Africa.

The first respondent as the most senior employee of the applicant in South Africa, is in possession of the following confidential information belonging to the applicant:

(i) historic and current selling prices – this information is contained in a document called price list, a copy of which is in his possession;

(ii) itemised lists of sales of products to customers – this information is also documented and the first respondent is in possession thereof;

(iii) sales proposals generated by the applicant;

(iv) the applicant's financial results which include profit and loss statements, price volume reports and expense reports;

(v) the applicant's cost of goods or materials – this information is also documented and was not returned by the first respondent when he was dismissed;

(vi) the applicant's budget and strategic business plans – the first respondent participated in the creation of these documents and he did not return same on his dismissal;

(vii) the applicant's scientific and clinical trials of certain products and registration documents for introducing new products. The new products are in the process of being registered by the applicant.

He denies that TMQ and TM 200 requires a prescription by a veterinarian. He further states that in South Africa stock remedies may be registered for use and distribution either in terms of the Fertilizer, Farm Feeds, Agricultural Remedies and Stock Remedies Act, 36 of 1947, or the Medicines and Related Substances Act 101 of 1965. The Medicines and Related Substances Act, supra, requires prescription by a veterinarian before a stock remedy can be distributed. The Fertilizer, Farm Feeds, Agricultural Remedies and Stock Remedies Act, supra, does not require prescription by veterinarian before a stock remedy can be distributed.

TM 200 and TMQ are both registered in terms of the Fertilizer, Farm Feeds, Agricultural Remedies and Stock Remedies Act, supra. There is therefore no requirement in that Act for prescription by a veterinarian. The same applies to Zinc Bacitracin and Stafac 500.

He referred to the affidavit of Mr Swindon which was attached to the replying affidavit.

The said affidavit of Mr Swindon reads partly as follows:

"3. 0ver the years, I have purchased TM 200, Stafac 500 and other products from the applicant.

4. In 2005, the first respondent informed me that a product similar to TM 200 was available from the second respondent.

5. The first respondent informed me that he had an 'interest' in the second respondent.

6. The first respondent advised me to purchase TMQ 200 from the second respondent instead of TM 200 which is produced and distributed by the applicant.

7. For the period 2005 to 2006 I purchased TMQ 200 from the second respondent. …

9. I was not told by a veterinarian to buy TMQ 200. I did not require a prescription to buy either TMQ 200 or TM 200 as they are interchangeable and I could choose to buy either."

The deponent admits that the applicant did not have TMQ in stock. The reference to TMQ in the founding affidavit is an error. It should have read: TM 200.

The raw materials used in both products, TMQ and TM 200 are the same. Where a customer requires TMQ, the same requirements could be fulfilled by supplying the customer with TM 200.

He referred to documents discovered by PWC, namely invoice and proof of payment by the second respondent to the third respondent of an amount of R684 000,00 for what is termed "services in product development", and alleges that that is part of proof that first respondent was or is benefiting financially from the activities of the second respondent.

He referred to the discussions that he had with Mr Brian Gagiano, who informed him that first respondent and Mr Hattingh approached him with a business proposal during May 2005. First respondent and Mr Hattingh were advancing the interests of the second respondent to the detriment of the applicant.

He further alleges that in the answering affidavit, the first respondent falsely denied that he was a signatory to the banking account of the fourth respondent, and he referred to bank documents he received from bankers of the fourth respondent where first respondent is mentioned as one of the signatories to the said bank account.

He referred to a payment of R273 600,00 made by fourth respondent into the account of third respondent on 14 March 2005.

Mr Brian Gagiano, the Managing Director of Hexachem (Pty) Ltd, alleges that during April 2005 he was approached by Messrs Hugo Hattingh and Hannes Groenewald – they were referred to him by one of their Zinc Bacitracin customers, Mr Ted Swindon of Avi Pharm regarding Hexachem's animal feed items.

Messrs Hugo and Groenewald informed him that they had set up a new company known as Animate to market and distribute in feed products in South Africa.

They also discussed Hexachem entering into a daughter registration agreement with Animate for the distribution of Zinc Bacitracin, as Hexachem was a registered distributor of the product in question with the Department of Agriculture.

They held another meeting on 26 May 2005. His understanding of the discussions was, inter alia, that Mr Groenewald would resign from the applicant and join the second respondent as soon as second respondent has started to grow.

Mr Gagiano further alleges that he was informed that there were other employees of the applicant who were going to join the second respondent at a later stage.

He held several meetings with Messrs Hattingh and Groenewald at various places, and the majority of meetings were held at the applicant's offices situated in Gauteng.

He later received two documents from second respondent being a "Confidentiality and Non Disclosure Agreement". These documents were intended to be agreements to be entered into by Hexachem and the second respondent. At all times during the negotiations Mr Groenewald was involved.

6. COURT HEARING ON 19 JUNE 2007

0n the abovementioned date, on application of the applicant's counsel, the court granted by default an order in terms of prayers 3, 4, 5 and 6 of the notice of motion against the fourth respondent, together with costs on an unopposed scale.

The applicant's counsel and counsel for the first and third respondents, handed to court a settlement agreement. The said settlement agreement was made an order of court. The said court order reads as follows:

"It is ordered that, for a period of one year from date of judgment:

1) The respondent is interdicted and restrained from selling and/or distributing and/or tendering and/or offering for sale and/or marketing TMQ and Zinc Bacitracin and/or substitutes of TM200 or TM100 to customers of the applicant.

2) The respondent is interdicted and restrained from approaching and/or communicating with customers of the applicant in order to sell and/or distribute and/or tender and/or offer for sale and/or market products to them that are sold and distributed by the applicant, or substitutes thereof.

3) Respondent is directed to pay the costs of this application."

After the settlement agreement was made an order of court, the second respondent's counsel advised the court that they intend proceeding with their application to strike out certain portions of the applicant's replying affidavit.

The said application was opposed by the applicant.

The second respondent's counsel submitted, inter alia, that the applicant's replying affidavit contains new information which does not appear in the founding affidavit. It was further submitted on behalf of the second respondent that second respondent has no right to deal with the new matters raised in the replying affidavit.

I should mention that in the affidavit attached to the application to strike out, Mr Hattingh, on behalf of the second respondent, stated that the second respondent would, given permission by the court and sufficient time, be in a position to respond to the new matter raised by the respondent in the replying affidavit.

0n the other hand, the applicant's counsel submitted that if the court finds that the replying affidavit contains new information, then the court should exercise its discretion and allow the second respondent an opportunity to deal with the new information contained in the replying affidavit.

Some of the information contained in the replying affidavit came to the knowledge of the applicant after the current application was issued and served on the respondents. The applicant could not have included the said information in its founding affidavit. The said new information contained in the replying affidavit, in my view is relevant to the issues in dispute and justice and fairness requires that the court should consider said information in order to arrive at a just decision. The said new information amplifies what is contained in the founding affidavit. It does not create a new cause of action.

The second respondent did not have an opportunity, prior to the hearing on 19 June 2007, to deal with the said new information.

The court dismissed the application to strike out and reserved the question of costs.

In order not to prejudice the second respondent, after dismissing the application to strike out, the matter was postponed sine die and the second respondent was given an opportunity to file further affidavits, if so advised.

7. SECOND RESPONDENT'S FURTHER AFFIDAVIT

It was attested to by Mr Hugo Hattingh, a director of the second respondent. He alleges that this affidavit is made in response to new matters raised by the applicant in its replying affidavit.

He alleges that the applicant has sold its distribution rights to Virbac RSA (Pty) Ltd.

The applicant being a locally incorporated company, distributed products of an American company. These are the alleged rights of the applicants which the applicant seeks to protect in terms of this application. The said rights have now been alienated to Virbac RSA (Pty) Ltd. The latter company competes with the applicant in distributing products with its active material being oxytetracyclene and Zinc Bacitracin.

The applicant no longer distributes any products within South Africa. It is the applicant's "parent company" which now distributes products branded as "Phibro" through the agency of Virbac RSA (Pty) Ltd.

The applicant no longer trades, does not have business promises and does not have staff.

He has vast experience in the industry under consideration and there is no product which is in the industry and he is not aware of, nor is there any customer in the industry who is not aware of or alternatively, who he has not dealt with.

He further alleges that Mr Swindon is misleading the court. He has known Mr Swindon for many years. He has dealt with Mr Swindon for many years. The first respondent did not introduce Mr Swindon to him. He has personally advised Mr Swindon about the products which the second respondent distributes.

In the answering affidavit he might have created a misperception by creating an impression that he is of the view that one requires a veterinarian's prescription to distribute TMQ and Zinc Bacitracin. This is not what he intended to convey. A prescription is not a legal requirement, but it is highly unusual that an animal breeder in this industry would utilise the product unless it has been recommended by a veterinarian.

TM 100 as originally distributed by the applicant and now by Virbac RSA (Pty) Ltd needs a prescription from a veterinarian.

He further alleges that he contemplated bequeathing in his will 50% of the shares in the second respondent to the first respondent in the case of his death.

He admits that Ms Wessels in the years 2005 after the incorporation of the second respondent, on ad hoc basis assisted him with some typing – she assisted him after hours or was supposed to do so after hours. He thought she was assisting him as a friend as opposed to a "work obligation".

It is correct that he approached Mr Chris Cloete to assist him with doing the books of the second respondent. The agreement he had with Mr Cloete was that he will do the books in his own time on the second respondent's laptop. Earlier this year Mr Cloete again became involved in the "financial affairs" of the second respondent. A reconciliation statement had to be drawn relating to the time when he (Mr Cloete) attended to the books of the second respondent. Mr Cloete did the books of the second respondent for a period of four months, which ceased in 0ctober 2006.

It is true that the second respondent makes payment to Cornerstone Equestrian Centre on a monthly basis in respect of the riding lessons which the daughter of the first respondent attends. This was done in order to encourage the first respondent to promote the sale of products the second respondent was distributing in the equine industry. The applicant was not involved in the equine industry.

He accepts that the first respondent has represented to Buffalo Freight Systems (Pty) Ltd that he is a director of the second respondent, although the true position is that he is not a director of the second respondent. First respondent was requested by him to sign a letter on his behalf as he (the deponent) was overseas and it was necessary that the said letter is signed by an official of the company.

It is correct that the second respondent required bags and labels to sell its products in. He asked the first respondent as to which suppliers they are utilising in purchasing bags and having labels printed. He discussed the matter with Ms Wessels and asked her for the contact details of Afripack and Stallion Repro, which companies manufacture bags and labels.

He confirmed that he approached Ms Wessels for a copy of the distribution agreement entered into between applicant and Azanian Chemicals (Pty) Ltd after being advised to do so by Dr Catton of Azanian Chemicals (Pty) Ltd after the latter company agreed to grant second respondent distribution rights of one of their products. He personally negotiated with Dr Catton who is his friend. He also personally contacted Mr Swindon and offered him TMQ.

Applicant does not have an exclusive right to distribute products of Azanian Chemicals (Pty) Ltd nor to the services of Dr Catton.

The amount of R684 000,00 which the second respondent paid to the third respondent was in terms of an invoice received for product development in terms of an agreement concluded between the third respondent and the second respondent. Product developed does not compete with applicant's products.

He further alleges that he concedes that a veterinarian prescription is not necessary for the use of TMQ or TM 200 or Zinc Bacitracin. He never intended to convey that it was a legal requirement. He apologises if he created a wrong impression. The customers that the second respondent is dealing with, is as a result of his long experience in the industry and he approached them with a view to market the products of the second respondent.

The list of entities that the applicant alleges that are its customers, have been known to him for many years and he has had business dealings with most and if not all of them on behalf of his previous companies and now on behalf of the second respondent.

The applicant has not identified the specific customers who it contends are its customers and who the second respondent now deals with. Applicant has made reference to two customers, namely Avi-Pharm and NVS Biocare. In annexure "JB37" attached to the papers, the applicant has simply included all entities that operate in the industry, without producing any evidence that they were procuring either TM 200 or Stafac or both from the applicant.

Mr Gagiano and Hexachem were known to him due to the fact that he was involved in the animal feed additive industry. He met Mr Gagiano only once in Pretoria – he cannot recall whether the first respondent was present at the said meeting. They could have discussed the industry but denies that he told Mr Gagiano that together with the first respondent they have set up the second respondent.

They discussed the possibility that the second respondent would also distribute Zinc Bacitracin in South Africa. A verbal agreement was concluded.

He spoke to Mr Gagiano on several occasions although they met only once. The draft agreement was given to Mr Gagiano by him.

Second respondent is distributing Zinc Bacitracin in terms of the verbal agreement as the written agreement was never signed.

He further alleges that he received a telephone call from Mr Chris Cloete and also a copy of a "press release" released by the applicant dated 5 June 2007.

Mr Cloete advised him that all the staff of the applicant have either resigned or have been retrenched with the exception of Ms Caroline Wessels. This is due to the fact that the applicant will no longer distribute products of its own within the Republic of South Africa. All products previously distributed by the applicant will now be distributed by a company known as Virbac RSA.

He was further advised that Ms Wessels will apparently continue for a short period of time, in the mornings only to take further orders from customers of the applicant which orders will then be serviced by Virbac. The products in question are those products manufactured and supplied by Phibro Animal Health in the United States of America.

All stock of the applicant were sold to Virbac.

A further affidavit by Mr Groenewald was filed by the second respondent. In the said affidavit Mr Groenewald, amongst others, states that it is correct that he was at a meeting where Messrs Gagiano and Hattingh were present. The said meeting took place in Pretoria. At the said meeting Messrs Gagiano and Hattingh discussed the distribution of Zinc Bacitracin by the second respondent. He was not involved in the said discussions.

He further alleges that "JB37" is a list of all known potential customers in the industry, some of the names appearing on the list were customers of the applicant before the applicant ceased business.

8. FINDINGS

It is common cause that when the application was launched the applicant was the holder of the trademarks and the sole distributor in South Africa of products called TM 100 and TM 200 and the second respondent distributes TMQ or TMQ 200 and Zinc Bacitracin. TMQ or TMQ 200 is a direct replacement product of TM 100 and TM 200 as they are based on the same molecule oxytetracyclene.

TMQ, TM 100 and TM 200 have the same application in terms of treating animal diseases and have comparable efficacy.

A customer who has TM 100 or TM 200 does not need TMQ. The products compete with each other in the South African market.

Applicant also distributed a product called Stafac 500 and the second respondent distributes a competing product called Zinc Bacitracin. Their applications overlap.

It is also common cause that the second respondent was utilising the services of some of the employees of the applicant, particularly for certain administrative duties and book-keeping duties.

Mr Gagiano alleges that during April 2005 he had a meeting with Messrs Hattingh and Groenewald at which meeting they had certain discussions. Mr Hattingh confirms that he once had a meeting with Mr Gagiano but he cannot recall whether Mr Groenewald was present at the meeting he had with Mr Gagiano.

0n the other hand, Mr Groenewald alleges that he was present at the meeting between Messrs Gagiano and Hattingh, which meeting was held in Pretoria, although he did not participate in the discussions.

The most probable version is that of Mr Gagiano. If Mr Groenewald did not participate in the discussions, what was the purpose of him being present at the said meeting? There is no explanation of his presence at the said meeting.

Mr Groenewald attended the said meeting in order to assist the second respondent to secure a distribution agreement of Zinc Bacitracin, which is a product which competes with Stafac 500 which is distributed by the applicant. As stated earlier by the parties, the application of the two products overlap.

The applicant alleges that first respondent advised Mr Swindon to purchase TMQ from the second respondent instead of TM 200 which is produced and distributed by the applicant.

In response to the above allegation second respondent denied that first respondent advised Mr Swindon to purchase TMQ and further stated that TMQ can only be prescribed by a veterinarian. In the further affidavit, second respondent turned around and said that in fact, what he wanted to convey is that a prescription by a veterinarian is usually obtained before a customer can utilise the said product. The probabilities are that the version of Mr Swindon is the correct version. He was persuaded by the first respondent to switch from the product of the applicant to the product of the second respondent. This explains why the order was sent to the applicant, where first respondent was employed and from there it was redirected to the second respondent.

The first respondent assisted the second respondent to pursue its business dealings and also encouraged or allowed the staff of the applicant to assist the second respondent to the detriment of the applicant.

The first respondent's behaviour as mentioned above was probably as a result of his belief that at some future date, he will acquire 50% shareholding of the second respondent. Whether he was, in law, capable of acquiring the said shareholding as promised by Mr Hattingh, I believe is not relevant for the purpose of this judgment.

The second respondent alleges that the agreement he had with the staff members of the applicant was that they will assist the second respondent during their spare time and not during office hours. There is evidence by the staff of the applicant, particularly Ms Wessels, to the effect that she from time to time assisted Mr Hattingh with typing and also helped his assistant with imports and exports. She used the resources of the applicant to assist Mr Hattingh.

She further alleges that she once received an order for TMQ from Biocare International addressed to the applicant. 0n instructions of Mr Groenewald, she faxed same to the second respondent. The probabilities are that that was done during working hours.

In my view, it is incorrect for the second respondent to utilise the staff and other resources of the applicant in the manner in which the second respondent did. It cannot be said that the second respondent was making his business dealings in a fair or honest manner.

In Grundlingh and 0thers v Phumelela Gaming and Leisure Ltd 2005 6 SA 502 (SCA) at 517 paragraph 40 FARLAM et CONRADIE JJA said:

"The test for the unlawfulness of a competitive action is essentially public policy and the legal convictions of the community. The latter concept ordinarily includes not only right thinking members of the community who might be expected to hold a view on the particular topic but also … those involved in the industry, the business ethics of that section of the community where the norm is to be applied. Apart from these considerations there are elements like an inherent sense of fair play and honesty … the question whether the parties concerned are competitors; …"

In Atlas 0rganic Fertilizers v Pikkewyn Ghwano 1981 2 SA 173 (TPD) at 202 VAN DIJKHORST J said the following:

"A delictual remedy is available to a party to a contract who complains that a third party has intentionally and without lawful justification induced another party to the contract to commit a breach thereof."

In Schultz v Butt 1986 3 SA 667 (AD), while dealing with the question of unfair competition NICHOLAS AJA at p679E stated that fairness and honesty are relevant criteria in deciding whether competition is unfair.

Applying the principles enunciated in the above quoted authorities, I am of the view that the second respondent was involved in an unlawful and unfair competition with the applicant. Mr Hattingh knowingly encouraged the employees of the applicant to perform duties for the second respondent, which duties they were performing utilising the resources of the applicant.

Furthermore, Mr Hattingh, with the assistance of the first respondent, established the second respondent, which was in competition with the applicant. First respondent also encouraged the applicant's customers to purchase products of the second respondent instead of the applicant's products.

The second respondent's counsel submitted that the applicant has no protectable interest.

0n the other hand, the applicant's counsel submitted that the applicant has a protectable interest despite having entered into a distributorship agreement with Verbac SA (Pty) Ltd.

The applicant entered into the agreement mentioned above as a result of the unlawful actions of its employees and the second respondent.

Phibro's products will still be sold to their customers and new customers via Verbac SA (Pty) Ltd. Applicant continues to hold the registration of all Phibro's products sold through Verbac SA (Pty) Ltd.

The said agreement was entered into in order to protect the market share of the applicant and to ensure that its customers continue to enjoy service.

An employee of the applicant, namely Ms Wessels, continues to take orders from customers and products are distributed via Verbac SA (Pty) Ltd.

In Ntsanwisi v Mbombi 2004 3 SA 58 (T) the court was dealing with a case involving a restraint of trade clause contained in a partnership agreement. At p63B BOTHA J said:

"In my view the applicant had a protectable interest in his connections with his patients. That is the interest that was protected by clause 9 of the partnership agreement."

The applicant's counsel, in my view correctly so, submitted that the customers and trade connections of the applicant are protectable interests, as the applicant still has an interest in the market place.

The submission by second respondent's counsel that the applicant does not have customers anymore, except one customer and therefore no protectable interest cannot be sustained.

The second respondent's counsel further submitted that the applicant has failed to demonstrate that the second respondent will continue in the future with the unlawful conduct, and therefore applicant is not entitled to an interdict.

The applicant stated that as a result of the unlawful activities of the respondents, it was obliged to enter into a distribution agreement in order to continue its business. It has terminated the services of all its employees, but one employee. Applicant concluded a distribution agreement with a distributor that has the ability to deploy a sales force and the technical staff in order to supply its products to their customers who might require said products.

As the applicant still has an interest to service its customers it cannot be said it is not possible for the second respondent to continue in the future with its unlawful activities.

The abovementioned submission by the second respondent's counsel cannot be sustained.

The first respondent admitted that some of the names appearing on annexure "JB37" were customers of the applicant. The applicant requires protection that its relationship with those customers should not be interfered with unlawfully.

It is not in dispute that the second respondent sold to Avi Pharm and Bio Care one of its products which competes with one of applicant's products. The said sales were eventuated in an unlawful manner, as amongst others, the resources, both financial and human, of the applicant were utilised.

In order to secure package bags for TM 200, the second respondent utilised the resources of the applicant.

The probabilities are that the first respondent made available to the second respondent the names of the customers of the applicant as the first respondent actively assisted the second respondent to unlawfully compete with the applicant.

My view is that on the papers the applicant has made out a case for a final interdict.

Second respondent apparently started doing business in April 2005. Its unlawful activities against the applicant lasted for over one year.

The applicant's counsel proposed a certain draft order and submitted that the applicant is entitled to an order in the terms proposed in the said draft order. In the proposed draft order the applicant's counsel suggested that the interdict should be for a period of one year.

I am in full agreement with the draft order prepared by the applicant's counsel.

0n 19 June 2007 the matter was postponed in order to give the second respondent an opportunity to file further papers if so advised. In my view, the second respondent should carry the costs of 19 June 2007. There is no reason not to order the second respondent to pay the said costs particularly taking into account the facts of this case and the manner in which the second respondent carried on its business.

The court therefore makes the following order:

It is ordered that for a period of one year from date of this judgment:

(1) The second respondent is interdicted and restrained from selling and/or distributing and/or tendering and/or offering for sale and/or marketing TMQ and Zinc Bacitracin and/or substitutes of TM 200 or TM 100 to customers of the applicant.

(2) The second respondent is interdicted and restrained from approaching and/or communicating with customers of the applicant in order to sell and/or distribute and/or tender and/or offer for sale and/or market products to them that are sold and distributed by the applicant or its agents or substitutes thereof.

(3) The second respondent is ordered to pay the applicant's costs, which costs will include the costs reserved on 19 June 2007.

W L SERITI

JUDGE OF THE HIGH COURT

12392-2007

HEARD ON: 9/10/2007

FOR THE APPLICANT: BRUINDERS SC

INSTRUCTED BY: BOWMAN GILFILLAN INC

FOR THE 2ND RESPONDENT: ADV P F LOUW SC

INSTRUCTED BY: COUZYN HERTZOG & HORAK