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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 Yüklə 164,11 Kb. Dostları ilə paylaş:
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