Sibex Construction (SA) (Pty) Ltd and Another v Injectaseal CC and Others

• Jurisdiction: South Africa
• Judge: Goldstone J
• Judgment Date: 23 November 1987
• Court: Transvaal Provincial Division
• Hearing Date: 03 November 1987

Goldstone J:

The first applicant ('Sibex') is a wholly owned subsidiary of the second applicant ('Turner and Newall'). During June 1984, Sibex was incorporated at the request of the fourth respondent ('Sasol Industries'), the sixth respondent ('Sasol III') and the fifth respondent ('Natref'). The sole business of Sibex has been on-line maintenance leak sealing. This is a process where on-line leaks in plant C or equipment are sealed without the necessity of shutting down such plant or equipment. This is done by using clamps, boxes and leak sealing equipment. A compound is used to actually seal the leak. The specific compound to be used is determined by the contents of the line which has to be sealed.

Turner and Newall is a public company quoted on the Johannesburg Stock D Exchange. It is a subsidiary of Turner and Newall plc, a company registered and carring on business in the United Kingdom. The latter is also the holding company of Sibex (Construction) Ltd ('Sibex UK'). Sibex UK carries on business in the same field as Sibex and is the source of its expertise.

At the instance of Turner and Newall, the second respondent ('Bodell') E was appointed as the managing director of Sibex on 15 January 1985. Prior thereto he had been the managing director of another company in the Turner and Newall group and also the managing director of its Industrial Products Division. He was so employed until he resigned with effect from 31 July 1987. He physically left the employ of Sibex on 3 July 1987. For the purpose of this judgment I shall assume that Bodell F in fact ceased to be the managing director of Sibex on 3 July 1987.

When Sibex commenced its operations in 1984, two technicians were seconded to Sibex from Sibex UK, namely George Anthony Mousdell and the third respondent ('Canty'). Two months later a further technician and six months thereafter a fourth technician were seconded to Sibex. Those G four men constituted the technical work force of Sibex. These technicians also trained the local staff of Sibex as on-line sealing technicians.

According to the uncontested evidence of Mousdell, it is not possible to effect the on-line leak sealing process without sufficient experience, know-how and knowledge to judge whether a specific leak is H of such a nature that it can be sealed. The process is a dangerous one because of the high temperatures, pressures and toxic substances involved. It takes 18 months properly to train a technician as a senior on-line leak sealing technician.

On 1 July 1986, Canty was appointed general manager of Sibex. The latter paid the immigration, travelling and other expenses relating to I the move to South Africa of Canty and his family.

During the first half of 1987 the management of the affairs of Sibex was under the control of Bodell in his capacity as its managing director. The day-to-day operations of the company were controlled by Canty as its general manager. It is common cause that the control included the allocation of work, the furnishing of quotations, J purchasing, and customer

Goldstone J

A and supplier liaison. Canty was also responsible for the training of local staff. There were four technicians in the employ of Sibex, namely, Messr Bender, Duffy, Botes and McCartney. All four had been trained, over a period of 18 months, by Canty and Sibex UK technicians. The latter returned in due course to the UK.

B The board of directors of Sibex comprised Bodell, Mr M C Pretorius, the chief executive officer of Turner and Newall, and Mrs G Cayeux, the financial director of an associate company in the Group. Neither Mr Pretorius nor Mrs Cayeux have any knowledge or expertise in respect of the technical operations of Sibex.

C Sibex has at all material times been virtually dependent for its business upon Sasol and Natref. Of the company's 1986 income of R1 413 132, only R45 634,41 did not emanate from those two sources. The same is true of its business in the current year.

Sasol and Natref call for tenders in respect of on-line leak sealing services required by them. The Sasol I and Natref contracts are awarded D on an annual basis and those of Sasol II and Sasol III on a biennial basis. The contracts are not awarded on an exclusive basis and more than one contractor is appointed. In practice, until August 1987, the only two companies which tendered for the work were Sibex and Furmanite (Pty) Ltd. As I understand the position, the effect of the 'tenders' was to fix the prices at which Sasol and Natref could call upon the companies E to perform the work referred to in such tenders. The tenders of Sibex to Sasol I and Natref were due to expire at the end of July 1987. Those in respect of Sasol II and Sasol III were due to expire at the end of August 1987.

During May 1987, Bodell gave notice of termination of his employment with Sibex with effect from 31 August 1987. By mutual agreement that F date was brought forward and, as mentioned earlier, he left the employ of Sibex on 3 July 1987. On 24 June 1987, Canty tendered his resignation with effect from 31 July 1987. At a meeting held on 30 July 1987, Canty indicated to the present managing director of Sibex, Robert Warren Bird, that he and his family intended returning to the United Kingdom. G According to Canty

'he did not wish to disclose at that stage that he intended going into opposition with Sibex'.

Duffy and Bender, two of the four technicians in the employ of Sibex, tendered their resignations to Canty on 29 July 1987. They gave the H company 24 hours' notice of termination of their contracts. Their letters of resignation were handed to Canty at a meeting called by Bird to announce the temporary appointment of the new general manager, George Anthony Mousdell. The latter had been seconded to Sibex by Sibex UK as a matter of urgency when the resignation of Canty became known to Turner and Newall. Approaches to Duffy and Bender to reconsider their I resignations turned out to be of no avail and they confirmed their intention to leave Sibex on 31 July 1987. On 3 August 1987, the remaining two technicians, Botes and McCartney, also resigned.

The effect was that Sibex was left with Mousdell who had then recently been sent to South Africa by Sibex UK and a certain Van Aswegen who was J not then fully trained as a technician.

Goldstone J

A On 9 July 1987 the first respondent ('Injectaseal') was registered and incorporated. The founding statement of the close corporation was signed by Bodell and Canty on the previous day. Its business is in direct competition with Sibex. The interest in the corporation is held in equal shares by Bodell and Canty. Upon termination of their service with Sibex, Messrs Duffy, Bender, Botes and McCartney became employed by B Injectaseal.

In order to meet the emergency created for Sibex, Sibex UK early in August 1987 seconded to Sibex four of its technicians. They arrived on 10 August 1987 and they are still in the employ of Sibex.

C In July 1987 Canty was responsible for submitting the tender of Sibex for the work of Sasol I and Natref. In consequence of a discussion between Canty and Bird it was agreed that the tender of Sibex should be 7% higher than its previous tender. It was submitted by telex on 27 July 1987. For reasons which are in dispute on the affidavits, this tender was sent not to Sasol I but to the telex number of Sasol II. In consequence of an enquiry from Sasol I, the Sibex tender was submitted D before the end of July 1987. During October 1987 Sibex submitted tenders to Sasol II and III.

It is against that background that Sibex has approached this Court for interim relief pending an action which it proposed to institute for a final interdict. The relief claimed is in the following terms:

'2.1

E ordering the first respondent to withdraw its tender to fourth, fifth and sixth respondents for the whole of the on-line leak sealing contracts with fourth, fifth and sixth respondents and prohibiting the first, second and third respondents from carrying out any services in the event of the said tender being awarded to it;

2.2

F ordering the second and third respondents to cause first respondent to withdraw its tender for the whole of the on-line leak sealing contracts with fourth, fifth and sixth respondents;

2.3

an order prohibiting first, second and third respondents from submitting any further tender to fourth, fifth and sixth respondents for the on-line leak sealing contracts with fourth, fifth and sixth respondents as follows:

2.3.1

G Sasol I and Natref: the 1987/1988 contract;

2.3.2

Sasol II and Sasol III: the 1987/1988 contract

and prohibiting the first, second and third respondents from carrying out any work or from performing any services in the event of the said tenders being awarded to them.'

H Costs are sought only from the first, second and third respondents.

In the light of the dispute which has arisen, the Sasol companies and Natref, understandably and properly, have refused to award any tenders and have indicated that they will not do so until this application has been decided.

I The basis relied upon by Sibex for the relief claimed appears from the following paragraph of the founding affidavit of Bird:

'51.

Whilst still in the employ of Sibex SA, Canty and Bodell submitted a tender for the Sasol I contract on behalf of the first respondent in competition to Sibex SA's tender. I was told that the said tender price was approximately 30% lower than the tender price submitted by Sibex SA. In this regard, I respectfully point out that both Bodell and Canty, as J the members and

Goldstone J

A employees of first respondent, committed a breach of their fiduciary duties in competing against Sibex SA in the manner aforementioned. I further respectfully submit that it is a director's duty, and more so the duty of a managing director, to act in...