Atlas Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Van Dijkhorst J
• Judgment Date: 26 November 1980
• Court: Transvaal Provincial Division
• Citation: 1981 (2) SA 173 (T)

Atlas Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd and Others
1981 (2) SA 173 (T)

1981 (2) SA p173

Citation	1981 (2) SA 173 (T)
Court	Transvaal Provincial Division
Judge	Van Dijkhorst J
Heard	August 18, 1980; August 19, 1980; August 20, 1980; August 21, 1980; August 22, 1980; August 23, 1980; August 24, 1980; August 25, 1980; August 26, 1980; August 27, 1980; August 28, 1980; August 29, 1980; August 30, 1980; August 31, 1980; September 1, 1980; September 2, 1980; September 3, 1980; September 4, 1980; September 5, 1980; September 6, 1980; September 7, 1980; September 8, 1980; September 9, 1980; September 10, 1980; September 11, 1980; September 12, 1980; September 13, 1980; September 14, 1980; September 15, 1980; September 16, 1980; September 17, 1980; September 18, 1980; September 19, 1980; September 25, 1980; September 26, 1980; September 27, 1980; September 28, 1980; September 29, 1980; September 30, 1980; October 1, 1980; October 2, 1980; October 3, 1980
Judgment	November 26, 1980

Flynote : Sleutelwoorde

F Trade and trade mark — Trade — Unlawful competition — Action for based on lex Aquilia — Norm to be applied in such action is one of public policy — Approach of Court in determination and application of such norm.

G Trade and trade mark — Trade — Unlawful competition — Inducing an employee to leave his employment lawfully — Not unlawful competition — But it is unlawful competition to induce employees to terminate their employment not to benefit from their services but to cripple the competitor.

H Master and servant — Breach of confidence by servant — Action by master — Nature of — Such based on Aquilian action on unlawful competition — Principles applicable.

Master and servant — Inducing emplyees to leave their employment — When and when not such conduct would amount to unlawful competition.

Company — Director — Breach of trust by — Action by company — Law restated.

Company — Director — Managing director — Breach of fiduciary relationshipship

1981 (2) SA p174

— What constitutes — Managing director, during period of notice of termination of his services, initiating incorporation of competing company — Not a breach of such fiduciary relationship — But such relationship breached by canvassing employees of company he was leaving for new company.

A Contract — Breach of — Breach induced by a third party — Remedy to which aggrieved party to contract entitled — Such party entitled to a delictual remedy.

Headnote : Kopnota

B The law of South Africa recognises and grants a general action in the case of unlawful competition based on the principles of the lex Aquilia.

The norm to be applied in such a case is the objective one of public policy. This is the general sense of justice in the community, the boni mores, manifested in public opinion. In determining and applying this norm in a particular case, the interests of the competing parties have to be weighed, bearing in mind also the interests of society, the public weal. As this norm cannot exist C in vacuo, the morals of the market place, the business ethics of that section of the community where the norm is to be applied, are of major importance in its determination.

It is not unlawful competition to induce an employee to terminate his contract of employment lawfully. But public policy would dictate that, where the aim in inducing a competitor's employees to terminate their employment is not to benefit from their services but to cripple or eliminate the business competitor, this action be branded as unlawful competition.

D A delictual action on "breach of confidence" can only be a manifestation of the Aquilian action on unlawful competition and it has to be determined according to the principles applicable to such an Aquilian action on unlawful competition.

The law on the position of trust occupied by a director in relation to his company restated.

E It is inconceivable that the freedom to hold directorships in competing companies can exist in the case of a managing director actively so employed. It is impossible for one to advance the conflicting interests of two actively competing businesses as managing director of both. On the F other hand, common sense dictates that the mere creation by a managing director, whose services have been terminated and who is serving his month's notice, of a future alternative means of employment, albeit in competition with his present company, need not necessarily create a conflict of interests greater than that of an ordinary director serving on the boards of two competing companies.

Accordingly, the Court held that the mere incorporation of a company during the period of notice of the managing director of a competing company, on the initiative of such managing director, could not be regarded as a breach of the managing director's fiduciary relationship with the company he was leaving to become managing director of the new company. G Nor did the mere preparatory work which the managing director did for the new company transgress the requirements of his duty to the company which he was about to leave. The Court held, however, that he had breached his fiduciary duties by canvassing certain employees of the company he was leaving for the new company during the period of notice.

H 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.

Case Information

Trial action for an interdict and damages. Facts not material to this report have been omitted from the reasons for judgment.

W P Schutz SC (with him M S Stegmann) for the plaintiff.

M M Joffe (with him P Ginsburg) for all the defendants on the first five days, and thereafter for the first and fourth defendants.

Second and third defendants in person after the fifth day.

1981 (2) SA p175

Cur adv vult.

Postea (November 26). A

Judgment

Van Dijkhorst, J.:

The plaintiff, a manufacturer and seller of a product known as "ghwamis", claims against its main competitor, the first defendant, an interdict restraining it from manufacturing and against the second and fourth defendants an interdict restraining them from causing and/or permitting the first defendant to manufacture its competing product B "ghwanomix". It further claims an interdict restraining the first, second, third and fourth defendants from selling and/or causing and/or permitting the sale of the defendants' competing product under the name of "ghwamis", "ghwamix", "ghwanomix" or any other name whatsoever. The plaintiff also claims damages against the defendants jointly and severally in an amount of R1 542 248 with interest and costs.

C The causes of action can be described by the generic term unlawful competition and will be specified in more detail hereunder. For the sake of brevity I will refer to the plaintiff as Atlas, the first defendant as Pikkewyn, the second defendant as Lion-Cachet, the third defendant as Papenfus and the fourth defendant as Hedderwick. Where reference is made to Papenfus' father he will be referred to as Papenfus senior.

D Atlas was incorporated in 1966 and has its principal place of business at Meyerton, Transvaal. It is engaged in the manufacture and sale of ghwano (guano) based fertilisers. The evidence indicates that its blended product is unique in South Africa. It consists of a mixture of seabird E ghwano, chemicals and organic material in the form of fowl manure. The nature of the material which is blended caused Atlas to experience technical difficulties in moulding the ghwano and fowl manure into a material suitable for spreading onto lands through mechanical planters. Ghwano is sticky and contains feathers and stones. Fowl manure contains F feathers and sometimes woodshavings and other unwanted substances. This gives rise to difficulty in milling and screening. Over a long period Atlas experimented and, by trial and error, evolved its present process. (The process now in use differs to a certain extent from that used in 1978 when the cause of action arose.)

In the blended half organic fertiliser described above first grade ghwano is used. This fertiliser is called a group I fertiliser, which is a G fertiliser the content of which is prescribed by Government regulation. It is therefore more expensive than ghwamis, upon which attention is focused in this case. Ghwamis is a group II fertiliser which is not subject to such stringent controls as group I fertilisers and is therefore considerably cheaper. Ghwamis is the registered trade mark of Atlas. It is a soil conditioner that improves the structure of the soil.

H In 1976 Atlas started manufacturing and marketing ghwamis because it had a large stock of grade 2 ghwano from its concession island, Bird Island, available. Ghwamis originally contained 5 per cent ghwano and 95 per cent fowl manure but as it was difficult to store and handle, calcium silicate (known as agrosil) was added to the mixture to improve its handling characteristics. Despite this additive the product was throughout the evidence described as an organic fertiliser, to distinguish it from the group I mixture which is a half organic fertiliser; both products do however contain ghwano and fowl manure.

1981 (2) SA p176

Van Dijkhorst J

According to the evidence there was, prior to the manufacturing activities of Pikkewyn, no other product in the world like ghwamis, being a blend of ghwano and fowl manure.

A Lion-Cachet joined Atlas in 1974 as general manager and was its managing director from 1975 to 31 March 1978 when he resigned. As remuneration he received a salary and a share of the profits. He was able, full of ideas, energetic and had the capacity to build up a good sales team, the members of which had a degree of loyalty to him personally.

B ...