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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 9062/18

In the matter between:

DIRECT CHANNEL HOLDINGS (PTY) LIMITED                                            First Applicant

CCI SA HOLDINGS (PTY) LIMITED                                                          Second Applicant

and

SHAIK INVESTMENT HOLDINGS (PTY) LIMITED                                   First Respondent

DIRECT REWARDS (PTY) LIMITED                                                     Second Respondent

AFFORDABLE BENEFITS (PTY) LIMITED                                              Third Respondent

THE ACTIVATION AGENCY (PTY) LIMITED                                          Fourth Respondent

SULEMAN SHAIK                                                                                      Fifth Respondent

CMC NETWORK (PTY) LIMITED                                                              Sixth Respondent

 

JUDGMENT

 

INGRID OPPERMAN J

INTRODUCTION

[1] On 8 March 2018 this Court granted an Anton Piller order and a number of interim interdicts against the Respondents.  These orders were made pursuant to an urgent, in camera, application without notice to the Respondents. The Anton Piller order was subject to immediate execution.  The interim interdicts (which restrain the Respondents from utilizing or divulging the First Applicant’s confidential information and from competing with the First Applicant) were to operate with immediate effect pending the return date of the application.

[2] The Anton Piller order was executed on 9 and 10 March 2018.  Mirror images were made of the hard drives of 8 of the 9 servers described in Schedule A of the order (i.e. items 1, 2, 3, 4, 5 and 8) and of a so-called virtual server (which was not described in the order) found in the Respondents’ possession.  These mirror images are now in the custody of the sheriff.

[3] The Respondents filed their answering affidavit on 16 April 2018.  The Applicants filed their replying affidavit on or about 7 May 2018.  They instituted an action against the Respondents on 12 July 2018 (‘the action’).

[4] This is the extended return date of the application.  It now falls to be determined if the Anton Piller order should be set aside. During the hearing, Mr Kemp SC, representing the Applicants, informed the court that the Applicants would not be persisting with the interdicts, either in their final form or as interim relief pending the finalisation of the action. The application for the final relief contained in paragraphs 9.1.1 a) and b) of the order, i.e. return of confidential information and the alleged stolen servers, was also not sought. This relief is sought in the action.

[5] The Applicants take the view that the decision relating to the Anton Piller relief, should stand over for determination in the action.  The Respondents disagree and contend that the Anton Piller order should be set aside.

[6] The Applicants’ case is based on the allegation that the Respondents stole 9 servers and 1 virtual server from the First Applicant.  The hard drives on these servers are said to contain confidential information which belongs to the First Applicant which the Respondents use unlawfully to compete with the First Applicant.

APPLICABLE LEGAL PRINCIPLES TO ANTON PILLER RELIEF

[7] The sole purpose of the Anton Piller procedure is to preserve vital evidence in the sense of evidence of great importance for use in a forthcoming dispute[1]. The Anton Piller procedure is a drastic and extreme procedure which requires meticulous scrutiny at the stage both of the granting of the order and its execution [2]

[8] The requirements for an Anton Piller 0rder are succinctly set out as follows in the judgment of Mbha JA in Non-Detonating Solutions[3] (ibid) at [18]:

“The use of Anton Piller orders in our law is now well-established.  The requirements that must be satisfied for the granting of such an order were summed up by Corbett JA in Universal City Studios Inc v Network Video (Pty) Ltd, as follows:

‘In a case where the appellant can establish prima facie that he has a cause of action against the respondent which he intends to pursue, that the respondent has in his possession specific documents or things which constitute vital evidence in substantiation of the applicant’s cause of action (but in respect of which the applicant can claim no real or personal right), that there is a real and well-founded apprehension that this evidence may be hidden or destroyed or in some manner spirited away by the time the case comes to trial, or at any rate to the stage of discovery, and the applicant asks the Court to make an order designed to preserve the evidence in some way …’”

[9] The remedy of attachment must be the only practicable method of protecting the Applicants’ rights.  “If the Applicant can obtain the same evidence in some other way without undue hardship, the procedure of attachment without notice should not be permitted”[4]

[10] The requirement to establish a prima facie cause of action requires only that an Applicant should put up evidence which, if accepted, will establish a cause of action.  The mere fact that the evidence is contradicted or the probabilities are against the Applicant will not disentitle the Applicant to the remedy.  It is only where it is quite clear that he has no cause of action that an attachment should be refused.[5]

[11] In dealing with the specificity requirement Binns-Ward J said in Mathias International (ibid) at 368 E – G that:

“… the strict limitation of the use of the procedure to the preservation of evidence, as distinct from, say, a search for evidence (the so-called fishing expedition), is a feature that is essential to the legality of the procedure within the requirements of s36(1) of the Constitution …

The specificity requirement is a material factor in accepting that the limitation of basic rights inherent in the Anton Piller procedure is reasonable and justifiable as required by s36(1) of the Constitution.”

In Roamer Watch (ibid) at 272 (i) it was said that:

“The applicant should be required to identify as best as can be expected of him the documents or other information and articles which he needs to have attached and/or removed …  The applicant should satisfy the Court that he has – as best the subject matter in dispute permits him to do so – identify the subject matter in respect of which he seeks attachment and/or removal and that the terms of the Order which he seeks have been delimited appropriately, and are not so general and wide as to afford him access to documents, information and articles to which his evidence has not shown that he is entitled.”

In Non-Detonating Solutions (ibid) Mbha JA said at 456 H [30] that:

“It is trite that an applicant must establish that the respondent possesses specific documents or things that constitute vital evidence in substantiation of the applicant’s cause of action.  Strict compliance with this requirement is pivotal to the legality of the use of the procedure.”

[12] In regard to the requirement of a well-founded apprehension that the evidence may be hidden or destroyed, there must be ‘a great danger’ or ‘a real possibility that documents will be destroyed’.[6] The Anton Piller Order must be clear and not open to misinterpretation.[7]

[13] One of the procedural safeguards put in place is the appointment of an independent attorney to supervise the execution of an Anton Piller order[8].  The execution of the Anton Piller order must be meticulous and according to the letter.  If there is substantial non-compliance with the order in the process of its execution a Court will set the order aside.[9]

[14] Initially, there was some debate as to what the test was which had to be applied on the return day of an Anton Piller order. At the conclusion of the hearing, the parties were ad idem (and I agree) that all three requirements of the order being 1) the existence of a prima facie cause of action; 2) specified documents vital to the Applicants’ case in the Respondents’ possession and 3) a well-grounded apprehension that the Respondent will conceal or destroy the evidence (and ancillary issues which relate either to the failure to place material evidence before the Court and to the manner of the execution of the Order) fall to be determined on a balance of probabilities on the papers in accordance with the test laid down in Kalil v Decotex (Pty) Ltd[10].  This test requires an Applicant to prove the requirements on a balance of probabilities on all the affidavits, but that the Court retains a discretion to allow the hearing of oral evidence if no such preponderance of probabilities appears from the papers.  Where the probabilities favour the Respondent, a referral to oral evidence will be rare.[11]

THE FACTUAL BACKGROUND

[15] The facts which follow are gleaned primarily from the Respondents’ answering affidavit. These facts are either common cause or stand undisputed.

[16] Nowhere in the founding affidavit does Mr Hanekom deal with the business conducted by the second, third and fourth respondents, nor with the persons with whom they did business at the time when the share purchase agreement was concluded.

[17] It is significant that the Applicants have not provided any information in their founding affidavit as to the nature of the Respondents’ businesses. It follows that they cannot dispute the accurateness of the Respondents’ assertions in this regard. What the Applicants have failed to deal with at all is the factual matter which underpins the allegations by the Respondents that they do not compete with the Applicants at all, let alone unlawfully. I summarise the facts:

The Applicants’ business

[18] As at 11 February 2016 to 23 May 2016 and at all times prior thereto the First Applicant conducted business as a call contact centre (primarily) in the financial services sector with particular emphasis on the insurance industry. At that time (i.e. 11 February 2016 to 23 May 2016) Mr Shaffee Shaik held 45% of the shares in the First Applicant.  Mr Suleman Shaik (the fifth Respondent ) held the remaining 55% of its shares.

[19] The First Applicant’s business was to conclude contracts with insurers (and others) either to sell their products to prospective customers over the telephone or to provide the insurers with leads for the sale of their products by telephoning prospective customers.  In the case of sales, the relevant insurer would provide the First Applicant with a list containing the names and contact numbers of prospective customers.  In other cases the First Applicant would access its database of prospective customers.  The First Applicant’s employees would then contact those prospective customers by telephone with a view to conclude agreements with them on behalf of the relevant insurer in return for an agreed remuneration.

[20] In the case of the generation of leads, the First Applicant would tap into its database of prospective customers, telephone them, ascertain if they fitted a predetermined profile and whether or not they were interested in the relevant insurance products.  If so, they would pass those leads on to the insurer in return for a fee.

[21] As at 11 February to 23 May 2016 Absa Life, Hollard (i.e. Hollard Life Assurance Company Limited and Hollard Insurance Company Limited), Edcon Financial Services and Clientele Life were the First Applicant’s major clients.  They accounted for some 98% of the First Applicant’s turnover.  Absa Life provided lists of prospective customers who the First Applicant was required to telephone with a view to sell Absa Life’s long term insurance products to them.  Hollard advertised on national TV.  The advertisements generated responses by SMS from potential customers to Hollard.  Those SMSes were then routed to the First Applicant’s call centre.  The First Applicant’s employees were then required to telephone the persons who had sent SMSes with a view to sell Hollard’s long term insurance products to them.

[22] Edcon Financial Services provided the First Applicant with lists of customers who held accounts at Edgars and Jet stores.  The First Applicant was required to telephone those persons with a view to sell Edcon’s long term insurance products to them, the cost of which would be debited to their store cards.

[23] In respect of Clientele Life, the First Applicant was required to generate leads for the sale of its long term insurance products.  It would tap into its database of potential customers, telephone them and ask them five relevant questions.  If these questions were all answered in the affirmative, the First Applicant would electronically forward those leads to Clientele Life.  It would be paid an amount for each lead and an additional fee linked to the conversion rate of leads to sales.

[24] It was not a part of the First Applicant’s business to deal with incoming telephone calls from prospective customers at all.  It was also not part of its business to sell products (insurance policies) by means of face-to-face field marketing.

The First Respondent’s business

[25] The First Respondent’s (‘Shaik Holdings’) business is to hold shares in various companies.  Its income is derived solely from dividends it receives from its shareholdings.  Shaik Holdings is not a party to the share purchase agreement which will be dealt with hereinafter.  It has no interest in this matter.

The Second Respondent’s business

[26] The Second Respondent (‘Direct Rewards’) was incorporated in 2014.  Shaik Holdings owns 30% of its shares.  Mr Suleman Shaik holds 30% of its shares. Mr Mahesh Pillay (‘Mr Pillay’) holds 20% of its shares.  Mr Pillay’s family trust (i.e. the Grow for Good Family Trust) holds the remaining 20% of its shares.

[27] Direct Rewards’ business model is simple.  It concludes contracts with suppliers to allow its members to obtain discounts on the products or services marketed by those suppliers.  It then recruits members who (in return for a monthly fee) are entitled to obtain those discounts on those products or services.

[28] The recruitment of members was done (and it continues to be done) by cold canvassing on the telephone and by face-to-face field marketing.  The cold canvassing by telephone was initially undertaken for Direct Rewards by the First Applicant. The First Applicant terminated this service at the end of February 2017 because it did not meet the First Applicant’s profitability criteria.  Direct Rewards performed this service in-house for some three months (i.e. in the period 1 July 2017 to 30 September 2017).  It was then outsourced to Omni Channel Communications (Pty) Limited.

[29] The field marketing was always done (and it continues to be done) by independent resellers (field agents) appointed by Direct Rewards to recruit members (or groups of members) on a commission basis.  Mr Rikash Seetaram (‘Mr Seetaram’) was one such reseller who formerly worked for Direct Rewards.

[30] As at 11 February 2016 to 23 May 2016 the suppliers with whom Direct Rewards did business included Hollard, Edcon Financial Services, Shoprite, Checkers, McDonalds and Cell C some of whom were (or had been) customers of the First Applicant.

[31] As at 11 February 2016 to 23 May 2016 and at all times prior thereto, Direct Rewards carried on its business from the Kent Avenue premises.  It employed three administrative staff members.  They worked under the management of Mr Pillay. Mr Suleman Shaik exercised oversight over all of this.

[32] Direct Rewards used five servers which belong to it in the conduct of its business.  These five servers were housed at the Kent Avenue premises.  They form the subject matter of items 3, 4, 5, 6 and 8 of Schedule A to the order.  They were integrated into the First Applicant’s information technology (‘IT’) system.  It shared these servers with Just Rewards (a company managed by Mr Pillay unconnected to Direct Rewards) which carried on a similar business to Direct Rewards for members of a medical aid scheme called Bestmed.  The First Applicant recruited members for Just Rewards by cold canvassing on the telephone until the end of February 2017 when it terminated that service.

[33] Direct Rewards’ payroll information (VIP payroll) and its financial information (Pastel) was kept on servers which belonged to the First Applicant and which it shared with the First Applicant.  Direct Rewards had access to the First Applicant’s integrated IT system and it shared much of the First Applicant’s software programmes (applications) in the conduct of its business.

[34] Direct Rewards contends that it does not compete with the First Applicant’s business as defined in the share purchase agreement and Mr Suleman Shaik’s contract of employment[12]. On the facts set out in all the affidavits filed and as summarised herein, I conclude that the probabilities favour such a finding and conclude that it probably does not compete with the First Applicant.

 

The Third Respondent’s Business

[35] The third respondent (‘Affordable Benefits’) was incorporated in 2014.  Shaik Holdings owns 25% of its shares.  The Suleman Shaik Family Trust owns 25% of its shares.  Ms Raksha Shaik owns 25% of its shares.  Mr Suleman Shaik owns the remaining 25% of its shares. As at April/May 2016 Affordable Benefits provided field marketing services to Clientele Life (and it continues to do this).  It employs independent commission agents to market Clientele Life’s funeral and legal policies.  This they do through pop-up kiosks regularly set up in shopping centres and malls throughout the Republic and by cold canvassing prospective customers (i.e. face-to-face selling) in the field.

[36] Affordable Benefits’ management and its administration staff which coordinates the work done by its independent agents is housed in offices which Affordable Benefits leases from Clientele Life at Clientele Office Park.

[37] Affordable Benefits contends that it does not compete with the First Applicant’s business as defined in the share purchase agreement and Mr Suleman Shaik’s contract of employment[13]. On the facts set out in all the affidavits filed and as summarised herein, I conclude that the probabilities favour such a finding and conclude that it probably does not compete with the First Applicant.

The Fourth Respondent’s business

[38] The fourth respondent (‘the Activation Agency’), was incorporated in 2008.  Shaik Holdings, the Suleman Family Trust, Ms Raksha Shaik and Mr Suleman Shaik, own its shares in equal proportions.  The Activation Agency was formerly called Direct Channel Field Marketers (Pty) Limited.  It changed its name to The Activation Agency (Pty) Limited on 7 September 2016 to avoid confusion with the First Applicant. 

[39] As at 11 February 2016 to 23 May 2016 the Activation Agency carried on business in partnership with Hollard and it continues to do this.  It did this with effect from 1 October 2015 pursuant to a written business relationship agreement which it concluded with Hollard during October 2015 (‘the Hollard agreement’). In terms of the Hollard agreement read together with certain other agreements, the Activation Agency is authorised to set up and to operate Hollard branch offices throughout the Republic.  It is authorised to market and to conclude long term insurance policies with prospective customers on behalf of Hollard.  It also provides customer services to those insured with Hollard from those branch offices. In addition, the Activation Agency is required to train and to send agents out into the field to educate prospective customers (and groups of prospective customers) in relation to Hollard policies and to conclude long term insurance policies (face-to-face) with them on behalf of Hollard. In return Hollard pays the Activation Agency agreed fees for its services.

[40] As at 11 February 2016 to 23 May 2016 and at all times prior thereto, the Activation Agency had its headquarters (administrative staff) at the Kent Avenue premises.  It employed two administrative staff workers.  Mr Suleman Shaik oversaw the work done by the administrative staff.

[41] The Activation Agency stored its payroll information (VIP payroll) and its financial information (Pastel) on servers which belonged to the First Applicant and which it shared with the First Applicant.  It also stored its field marketing sales information on a server which it shared with the First Applicant.  It had access to the First Applicant’s IT system and it shared various software programmes on that system with the First Applicant in the conduct of its business.

[42] The Activation Agency contends that it does not compete with the First Applicant’s business as defined in the share purchase agreement and Mr Suleman Shaik’s contract of employment[14]. On the facts set out in all the affidavits filed and as summarised herein, I conclude that the probabilities favour such a finding and conclude that it probably does not compete with the First Applicant.

Direct Customer Management’s business

[43] Direct Customer Management was incorporated in 2004.  It is not cited as a party to this litigation.  Shaik Holdings and Mr Suleman Shaik own its shares in equal proportions.  Its business is to provide back-office administration and premium collection services to insurers in return for an agreed fee.  Simply put it prints out insurance policies for insureds with whom the insurer has concluded a contract, it mails the policy by pre-paid registered post to the insured, it collects the premiums due under the policy from the insured and it accounts to the insurer in respect thereof.

[44] It does this for Absa Life (in respect of Absa’s Shembe Group Insurance), Flexible Accident and Sickness Acceptances (FASA) a division of Hollard (in respect of its Personal Accident Insurance) and Retail Credit Solutions (in respect of Funeral and Personal Accident Policies underwritten by Guard Risk).

[45] As at 11 February 2016 to 23 May 2016 and at all times prior thereto, Direct Customer Management conducted its business from the Kent Avenue premises.  It employed two administrative staff members to do this.  They worked under Mr Suleman Shaik’s supervision.

[46] Direct Customer Management stored its business records and its information on servers which belonged to the First Applicant and which it shared with the First Applicant.  It was also in possession of a server which had been allocated to it by the First Applicant (i.e. item 7 on Schedule A) which it did not use.  It had access to the First Applicant’s IT system and it shared a number of software programmes with the First Applicant in the conduct of the business.

The share purchase agreement

[47] Mr Shaffee Shaik and Mr Suleman Shaik sold their shares in the First Applicant to the Second Applicant pursuant to a share purchase agreement (‘the share purchase agreement’) with effect from 23 May 2016 (i.e. the closing date).

[48] The share purchase agreement was negotiated with the Second Applicant over a protracted period of time.  The Second Applicant carried out a full due diligence on the First Applicant prior to the conclusion of the share purchase agreement.  It was fully aware of the nature of the First Applicant’s business.

[49] It was also aware of Mr Suleman Shaik’s interest in the Activation Agency (then known as Direct Channel Field Marketers (Pty) Limited), Direct Rewards, Direct Customer Management and Affordable Benefits.  His interest in the former businesses is disclosed in the share purchase agreement.

The contract of employment – Fifth Respondent

[50] Mr Suleman Shaik (the fifth respondent) was employed by the First Applicant to continue to act as CEO of the First Applicant for an initial period of 12 months with effect from 1 March 2016 in terms of the executive service agreement (‘the contract of employment’). The contract of employment was terminable on three months’ prior written notice subsequent to the 12 month period.

[51] Clause 5.3 of the contract of employment provides that ‘Save for the Disclosed interests …’, Mr Suleman Shaik was not permitted to accept any other work for private gain nor was he permitted to have any interest in any business which might interfere with the performance of his duties with the First Applicant.  The disclosed interests in the contract of employment include his interest in Direct Rewards, the Activation Agency and Direct Customer Management.

[52] Clause 15 of the contract of employment contains a restraint.  It provides that he was not entitled to be interested in any entity ‘… directly or indirectly engaged or interested in a Competitive Activity in the Territory …’ while he worked for the First Applicant and for a period of 12 months thereafter.  ‘Competitive Activity’ is defined in clause 2.4.5 as any activity which:

“2.4.5.1 is similar and/or ancillary to any activity conducted by the Business, in whole or in part;  and

2.4.5.2 which competes directly with the Business in any material respect;”

[53] The ‘Business’ is defined in clause 2.4.2 as a ‘call and contact centre based in Johannesburg undertaking business inter alia in the Financial Services Sector as authorised Financial Service Provider’ which is the same business described in the share purchase agreement.

[54] In terms of clause 15.1.2 Mr Suleman Shaik was restrained from soliciting the custom of and doing business with any entity which was at any time in the 24 months prior to 1 March 2016 a customer of the First Applicant.  In context this meant that he was not to compete with the First Applicant for such custom.  In terms of the contract of employment, his interest in the Activation Agency, Direct Rewards and Direct Customer Management was specifically excluded. He had disclosed his interest in Affordable Benefits to the First Applicant in terms of the share purchase agreement. In terms of clause 15.1.3 he was restrained from employing any employee of the First Applicant for a period of 12 months after the termination of his employment with the First Applicant.

TERMINATION OF RELATIONSHIPS

[55] The relationship between the First Applicant and Mr Suleman Shaik soured.  In January 2017 Mr Suleman Shaik was instructed to terminate the First Applicant’s call centre service contract with Direct Rewards (and Just Rewards) with effect from 28 February 2017 due to the fact that this work did not meet the First Applicant’s profit criteria.

[56] Mr Suleman Shaik found alternate premises at Hurlingham.  The administrative staff employed by Direct Rewards, the Activation Agency and Direct Customer Management moved out of Kent Avenue to Hurlingham during February/ March 2017.

[57] Mr Suleman Shaik gave notice to terminate the contract of employment on 7 March 2017 with effect from 31 May 2017. He instructed the First Applicant’s IT personnel (including one Mr van der Merwe) to reconfigure the IT system used by the existing businesses at Kent Avenue so that it could be moved for use at Hurlingham.  This required them to copy all information which related to Direct Rewards, the Activation Agency and Direct Customer Management off the hard drives of the Applicants’ servers and to put that information onto new servers (‘the copied information’).  It also entailed copying shared software programmes and transferring those programmes onto new servers.  He also instructed them to remove the Direct Rewards cluster (items 3, 4, 5, 6 and 8 on Schedule A) from Kent Avenue.

[58] The copied information was put onto the hard drives in one of the three servers (item 2 on Schedule A) which the First Applicant had scrapped and which the IT personnel refurbished. New hard drives were put onto the scrapped servers.

[59] These nine servers were removed from Kent Avenue to Hurlingham and to premises in Sunninghill.  It is these nine servers which the First Applicant avers the Respondents stole from it and which contain confidential information which belongs to the First Applicant which the Respondents use unlawfully to compete with the First Applicant.

[60] It is against this background that the Applicants brought this application.

THE APPLICATION FOR THE ANTON PILLER ORDER AND OTHER RELIEF

[61] In the founding papers Mr Hanekom (a computer expert in the employ of the Second Applicant) avers that the Respondents stole eight (in fact there are nine) servers and one virtual server from the First Applicant.  He says these servers contain confidential information which belongs to the First Applicant.  He says also that the First to Fifth Respondents use this confidential information unlawfully to compete with the First Applicant.

[62] As to the evidence contained on the servers Mr Hanekom says two things.  The first is that the information described in Schedule B of the order “… would have been stored on the servers”. The second thing he says is that he and a team from the Second Applicant identified that data had been copied onto various servers which belong to the First Applicant.  He does not specify what this data is.

[63] The Anton Piller relief is designed to preserve this evidence (i.e. the confidential information on the stolen servers) for use at a trial at which the Applicants will claim damages ‘in respect of unlawful data removal and breach of fiduciary duties and vindicatory and interdict proceedings (the latter two pending the former) and the Second Applicant where cancellation, damages and breach of the sale contract, return of the purchase price and/or damages, will be addressed’.

[64] Mr Hanekom said the evidence sought to be preserved was vital evidence and that the Anton Piller procedure was the only practical means of securing the evidence. Mr Hanekom said the application was urgent since the Respondents continue to use the First Applicant’s confidential information unlawfully to compete with it.  The application needed also to be heard without notice to the Respondents and in camera since the Respondents had engaged in unlawful actions (i.e. they stole servers belonging to the First Applicant and copied other confidential information).  This being so and if notice was given to them, they ‘will destroy or delete or secret (sic) away the information and equipment in their possession’.

THE APPLICANTS’ FAILURE TO ESTABLISH THAT THE INFORMATION ON THE SERVERS AND THE VIRTUAL SERVER IS CONFIDENTIAL INFORMATION WHICH BELONGS TO IT AND THE ABSENCE OF SPECIFICITY IN THE ORDER

[65] Mr Suleman Shaik’s description of what is contained on the servers stands undisputed. Mr Hanekom accepts that the virtual server contains an Absa NETAPP programme and a ColPay test server i.e. no confidential information belonging to the First Applicant.  In relation to the refurbished servers, in respect of which Mr Hanekom does not deny, the hard drives were replaced, responds by saying (in effect) that those servers once contained valuable client data (it is not said what data) and that they were not sanitised. In relation to items 3, 4 and 6 he simply says that those items are relevant only to a call centre.

[66] The hard drives on item 6 were not copied by the sheriff.  The Applicants later failed to take up an invitation properly to search for information on this server. So much for the allegation that it contains vital evidence to be preserved for use at a trial.  In relation to item 7 Mr Hanekom admits that it is a PABX (i.e. a telephone switchboard) which uses a programme called ‘Asterisk Sangoma’ which is freely available on the web and thus not confidential information.  In relation to item 8 (onto which a Quality Assurance (‘QA’) score data file belonging to the First Applicant was inadvertently copied, he says (in the main) that it has a vast storage capacity and contains details of potential customers.  No details are given. The First Applicant has this QA score data file in its possession since it was copied off its IT system, so there is nothing that requires preservation on this score.  The Respondents invited the First Applicant to inspect it and to oversee a process which would ensure that the First Applicant’s QA score data file could never be accessed by the Respondents. This invitation was ignored.

[67] The Applicants came to court contending that the respondents had copied off their servers. A server is a tool for housing data. No case was made out that the information copied was confidential. Items 3 and 7 relate to software, which is obviously not confidential information. The respondents afforded the applicants an opportunity to remedy and clarify what it is that they wanted preserved for use in the action but this opportunity was not taken. In the founding affidavit Mr Hanekom said that he had determined that some servers were used to house valuable information pertaining to Hollard Life Assurance, Clientele Life and Direct Rewards customer base. The respondents repeatedly stated that Direct Rewards, the Activation Agency and Direct Customer Management were entitled to information which pertained to its clients and its customer base. This stands undisputed. Mr Hanekom nowhere sets out the factual basis for his conclusion that the (confidential) information said to belong to the First Applicant (described in Schedule B) is contained on the servers. There is no evidence that the hard drives on items 3, 4, 5 and 6 (part of the Direct Rewards cluster) and those on the remaining servers contain confidential information which belongs to the First Applicant.  Direct Rewards’ servers (items 3, 4, 5, 6 and 8) are identified in Schedule B as ‘Direct Rewards D1’, ‘Direct Rewards Web’, ‘Direct Rewards DB’, ‘Direct Rewards D2’ and ‘Direct Rewards D3’.

[68] Subsequent to the execution of the Anton Piller order the Respondents obtained an undertaking from the Applicants that they would not access the mirror images without notice to the Respondents.  The parties hereafter concluded an agreement as to how they would access the information on the mirror images to determine whether or not any information belongs to the First Applicant. In the result no inspection took place due to the conduct of the Applicants.  They spurned the opportunity to act in accordance with the agreement reached on 20 March 2018.

[69] This and the Applicants’ failure to take up the invitation properly to carry out the Anton Piller Order in relation to item 6, fortifies my conclusion that on the probabilities the applicants have not shown that any of the servers contain confidential information.

[70] The information sought to be preserved is not specified with sufficient precision to enable it to be identified either as belonging to the First Applicant or at all.  Proper identification is necessary to determine whether or not the information constitutes vital evidence in support of the Applicants’ claims.  It is also required to enable the sheriffs and the computer experts properly to search for the alleged evidence and to preserve it. There was no way that the sheriffs and the computer experts could identify information as belonging to the First Applicant from the descriptions of the data in Schedule B of the Order.  They also could not identify precisely what information they were searching for.  This meant that no search was carried out to identify any information on the servers as belonging to the First Applicant when the Anton Piller Order was executed.

[71] The description of the data said to be contained on the servers in Schedule B of the Order is materially defective.  In some cases it is couched in such wide and vague terms as to render it meaningless (i.e. items 1, 2, 4, 8 and 9).  In other cases it refers to software programmes (i.e. item 3 – “DCH Dialer” and item 7 “PBX”) which are not confidential information which belongs to the First Applicant.  In yet another case it refers to Direct Rewards data (i.e. item 5 – “Database that stores dialing records for Direct Rewards, Key contract that was included in business sale”).  In item 3 it refers to a “FTP Server” with the description “External file transfer, most likely includes client data”.

[72] The Anton Piller order accordingly falls to be set aside for lack of proof that the servers contain information which belongs to and is confidential to the First Applicant and for lack of specificity.

FAILURE TO DISCLOSE

[73] Alligned to the aforegoing is the failure by the applicants to have disclosed to the court granting the Anton Piller order that Direct Rewards is the second respondent, was a client and that the agreement with it, had been cancelled.

[74] It did not tell this Court that the first applicant carried out call centre services for Direct Rewards (and Just Rewards) and that the Direct Rewards cluster was used for this purpose.

[75] It further failed to disclose that the applicants have access to the respondents’ IT system (the nine servers and the virtual servers) since they have Mr van der Merwe’s laptop computer.

[76] There is a duty on an applicant in an ex parte application to act with the utmost good faith.  This requires an applicant to make a full and fair disclosure of all material facts.  The failure to do so (whether wilful or not) may lead a Court to set aside the order made ex parte on this ground alone.[15]

[77] In my view, the fact that the first applicant had a contractual relationship with Direct Rewards or that the applicants had access to the respondents’ IT system, might well have influenced the judge who granted the Anton Piller order. It did not appear from the papers, which served before him. He did not have an inkling of the true nature of the relationship or the information sought.

[78] On this basis too, the order falls to be set aside.

THE IMPROPER EXECUTION OF THE ANTON PILLER ORDER

[79] The Anton Piller order directed the sheriffs and the computer experts to search any computers and storage devices for the purpose of identifying information as belonging to the First Applicant and of its use, past, present or future.  It authorised mirror imaging any relevant information.

[80] The Anton Piller order was executed at Hurlingham and items 1, 2 and 9 on Schedule A were identified on the basis of the information set out under the heading DATA in Schedule B (i.e. Pastel Finance Data, ColPlay application and PBX dialer).  No search was conducted to identify any information either on these servers or at all as belonging to the First Applicant.  The computer expert copied all the information from the hard drives of these items onto three new hard drives.

[81] The computer expert found the virtual server which is not included on Schedule B and which belongs to the Activation Agency. He copied the information on it onto one of these three new hard drives since the word EXCOM came up. The implications of this are serious since one may ask how the computer expert came to do this.  The answer must be that he was independently instructed to do it.

[82] The Order was executed at Sunninghill on 9 and 10 March 2018.  Items 3, 4, 5, 6, 7 and 8 on Schedule B were found.  No search was conducted on these servers to identify information either as belonging to the First Applicant or at all.  All the information on the hard drives of items 3, 4, 5, 7 and 8 was simply copied onto six new hard drives.

[83] All the mirror images are in the custody of the sheriff.

[84] The sheriff copied everything, not just that which the order authorised. The lack of specificity in the order made it very difficult for the sheriff to execute it. The solution however, did not lie in copying all that was on the hard drives.

[85] In my view, the execution process was so seriously flawed that the Anton Piller order falls to be set aside on this basis too.

 

ABSENCE OF A WELL-GROUNDED APPREHENSION THAT THE RESPONDENTS WILL CONCEAL OR DESTROY THE EVIDENCE

[86] There was no reason to fear that the Respondents would conceal or destroy the information on the servers.  This is so because, to the knowledge of Mr Hanekom, the information on the servers is essential to the conduct of their businesses (and the businesses of others associated with them).

[87] The hard drives on item 6 were not copied by the sheriff.  The Applicants later failed to take up an invitation properly to search for information on this server. With an order in hand and a further agreement under the belt, the Applicants failed to copy information. This must be because, on the probabilities, there never was an apprehension that evidence could (or would) be concealed.

[88] There was no reason to suppose that the Respondents would conceal or destroy the information on the servers.  This is so because (to the knowledge of Mr Hanekom) the information on the servers is essential to the conduct of their businesses (and the businesses of others associated with them).

[89] This then, another reason why the Anton Piller order falls to be set aside.

ALTERNATIVE METHOD OF PROCURING EVIDENCE

[90] The remedy of attachment must be the only practicable method of protecting the Applicants’ rights.  “If the Applicant can obtain the same evidence in some other way without undue hardship, the procedure of attachment without notice should not be permitted”[16]

[91] The Activation Agency’s client is Hollard. Any evidence that is required to prove or disprove any fact at the action can be procured by issuing a subpoena. This then another reason why the Anton Piller order falls to be set aside.

APPLICANTS’ POSITION

[92] The applicants propose that the mirror images which were made of the servers, be retained by the sheriff pending determination of the action which has been instituted - the trial court could then be approached for directions as to discovery of these images.

[93] This is exactly what the Supreme Court of Appeal cautioned against in Viziya Corporation[17]:

‘Such information must be measured against what can be obtained through discovery. If a party can obtain information on discovery, then it means that a party does not need an Anton Piller order, unless it shows that what would be discoverable would be concealed or destroyed thereby defeating the purpose of discovery.’

[94] In my view, neither a trial court nor any other court seized with the issue of discovery, will be in a better position than this court to deal with the issue of whether or not the Respondents are in possession of information stored on the mirror images, which constitute vital evidence to substantiate the Applicants’ case. The Respondents, on the probabilities, are not.  There is nothing on the mirror images which is vital to the Applicants’ case.  There may be much on the mirror images which advances the Respondents’ case and if there is, the Respondents will disclose that matter in due course when they make discovery.

[95] The Respondents use the nine servers and the virtual server in the conduct of their businesses.  If the Applicants believe that the Respondents’ discovery is inadequate when it is made, they are of course entitled to specify what they say is information which belongs to them and to call for further discovery.

[96] Further and in any event, the First Applicant should have evidence of the copied information.  This is so since it is common cause on the papers that evidence of what is taken off hard drives, can always be retrieved from those hard drives.  No application was required to procure this evidence.

CONCLUSION

[97] By virtue of all the deficiencies highlighted herein, either individually or collectively, I am driven to conclude that the Anton Piller order falls to be set aside.

[98] I accordingly grant the following order:

98.1. The Anton Piller order granted on 8 March 2018 and its execution is set aside.

98.2. Any interdictory relief granted on 8 March 2018, is set aside.

98.3. The applicants, jointly and severally the one paying the other to be absolved, are to pay the costs, including the costs of senior counsel, where so employed. 

 

___________________________

I OPPERMAN

Judge of the High Court

Gauteng Local Division, Johannesburg

 

 

Heard: 18 & 19 June 2019

Judgment delivered: July 2019

Appearances:

For Applicants:  Adv KJ Kemp SC

Instructed by: Straus Daly Inc.

For Respondents: Adv EA Limberis SC

Instructed by: Cuzen Randeree Attorneys

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