Oil Well (Pty) Limited v Protec International Limited and Others (44835/08) [2010] ZAGPPHC 7 (17 February 2010)

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[2010] ZAGPPHC 7
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Oilwell (Pty) Limited v Protec International Limited and Others (44835/08) [2010] ZAGPPHC 7; 2010 BIP 116 (GNP) (17 February 2010)

IN
THE HIGH COURT OF SOUTH AFRICA
/ES
(
NORTH
GAUTENG HIGH COURT. PRETORIA
)
CASE
NO: 44835/08
DATE:
17/02/2010
IN
THE MATTER BETWEEN
OILWELL
(PTY) LIMITED APPLICANT
AND
PROTEC
INTERNATIONAL LIMITED 1
st
RESPONDENT
PROTEC
AUTO CARE LIMITED 2
nd
RESPONDENT
REGISTRAR
OF TRADE MARKS 3
rd
RESPONDENT
JUDGMENT
PRINSLOO.
J
[1]
In this application, essentially for certain declaratory relief, Mr
Dunn
SC,
assisted
by Ms Joubert, appeared for the applicant and Mr Ellis SC appeared
for the first and second respondents. The third respondent
did not
take an active part in the proceedings.
Background
and Brief Synopsis
[2]
The applicant, a South African company, was previously the proprietor
of various trade mark registrations and applications for
the mark
PROTEC ("the PROTEC marks") in South Africa and abroad.
[3]
During 1985, the applicant commenced manufacturing and selling auto
motive engine fuel additives (such as lubricants, fuel line
cleaners
and oil boosters) under the trade mark PROTEC. The products were sold
world-wide and, in time, various distributors were
appointed in other
countries. The applicant registered its PROTEC trade mark in various
European countries, as well as in South
Africa and the USA.
[4]
In 1997, an agreement ("the 1997 Incorporation Agreement")
was entered into between four individuals. They were Anthony
Elgar
Saville ("Saville"), Vernon Meier, Michael Robert Smith and
Werner Urban. Saville and Meier were directors of the
applicant and
Smith and Urban were previous distributors of the PROTEC products in
Europe.
It
appears that Saville, at all relevant times, was resident in
California in the United States of America. Meier stayed in South

Africa, Smith in the United Kingdom and Urban in Germany.
[5]
The underlying motive for entering into this 1997 Incorporation
Agreement appears from the preamble:
"Having
evaluated the world-wide marketing and sales possibilities for this
product, the parties have decided to form a new
joint company between
them and it is their intention to pool relevant and necessary assets
and resources to develop further the
sales potential of this
product." "The product" means the range of engine
additive products referred to.
[6]
The "new joint company" was duly incorporated as PROTEC
International Ltd (the first respondent) and it was at all
relevant
times registered in Guernsey.
[7] In order to
define the assets of the new joint company (the first respondent) the
parties, in clause 4.1 of the 1997 Incorporation
Agreement, agreed
"to transfer their shareholdings in any Controlled Company (as
appropriate) and shall procure that any Controlled
Company shall
transfer or assign their or its entire assets and business relating
to the Product carried on respectively by them
prior to the date of
signature of this Agreement to the Joint Company". A "controlled
company" is a company in which
any of the parties holds a
majority shareholding or exercises substantial control over its
business activity or assets.
Clause
4.2 is designed to define more closely the assets which each of the
parties would transfer to the new joint company. It also
specifies
assets which are excluded from the obligation and which do not have
to be transferred.
Clause
4.2 is designed to define more closely the assets which each of the
parties would transfer to the new joint company. It also
specifies
assets which are excluded from the obligation and which do not have
to be transferred.
In
the case of Smith and Urban, for example, they had to transfer "the
user rights in relation to the Trade Mark pursuant to
assignment of
the exclusive licence previously granted in favour of MLF Knowles".
They also had to transfer their shareholdings
in some of the
distributors of the product.
"The
Trade Mark" is defined as "the trade mark 'PROTEC or
colourably similar marks registered or in the course of
registration
in any jurisdiction or supranationally in the name of any party or
any controlled company including all user rights
in respect of the
Trade Mark".
In
the case of Saville and Meier they, for example, had to transfer "all
intellectual property rights of whatsoever nature
in the trade mark
owned by Oilwell (Pty) Ltd" and "the distribution
arrangements and all rights in the trade mark held
by PROTEC USA
Incorporated throughout North, Central and South America".
[8]
Perhaps of some significance for purposes of this application, clause
4.3 reads as follows:
"The
parties acknowledge that the matters envisaged in clause 4.2 may (as
appropriate) be conditional on requisite consents
and approvals being
obtained from relevant national Revenue and other authorities and
each agrees promptly to apply for and to
use his best endeavours to
obtain all such consents and approvals. However nothing herein shall
require any party to effect any
such transfer where this may be
illegal under any applicable national law."
("Clause
4.3 of the 1997 Incorporation Agreement.")
It
should be noted that these, rather cryptically described "consents
and approvals", would be applied for and obtained
by the four
parties to the agreement. No obligation in this regard was placed on
the first respondent or, for that matter, on the
second respondent.
[9]
Clause 11 of the 1997 Incorporation Agreement provides for the
considerations due to the four gentlemen in exchange for the

transfers they had undertaken to make to the joint company: Saville
would get 25% of the shares of the joint company "to be
held by
Additive Distributors Ltd" as beneficial owner thereof, Smith
would get 25%, Urban would get 25% and Meier would also
get 25% "to
be held by Additive Distributors Ltd as beneficial owner thereof ..."
The new joint company (first respondent)
would issue appropriate
share certificates.
The
new joint company would be financed from the reserves generated in
the course of the Business which means the manufacture, purchase,

marketing, promotion and sales of the Product throughout the world to
be undertaken by the Joint Company.
[10]
Pursuant to the 1997 Incorporation Agreement, and to give full effect
thereto, the "1998 Assignment Agreement" was
entered into
on 4 July 1998, more than a decade before this application was
launched in September 2008.
The
assignment of the trade mark to the first respondent was the subject
of the 1998 Assignment Agreement.
The
joint "Assignor" consisted of the four gentlemen who were
parties to the 1997 Incorporation Agreement as well as the
applicant
company, another company known as Oilwell Manufacturing (Pty) Ltd,
PROTEC USA Incorporated of California and Euro-Oil
Ltd of West
Midlands, England.
"The
Assignee" was the first respondent with registered office in St
Peter Port, Guernsey. Channel Islands.
[11]
The 1997 Incorporation Agreement is also mentioned, as is the
intention to give effect thereto.
[12]
In the preamble it is certified that the Assignor "is the
proprietor and beneficial owner of the registered trade marks

particulars of which are set out in part I of the schedule hereto".
It is also certified that the Assignor has applied to
register trade
marks set out in part II and there is a reference to community trade
marks described in part III.
Part
I lists no less than thirteen PROTEC marks registered in Germany,
Switzerland, Austria, France, Italy, the USA, South Africa,

Indonesia, Israel, the UK and Argentina. The applicant, Oilwell (Pty)
Ltd, is listed as the proprietor of most of them but there
are other
proprietors too, including PROTEC USA Incorporated and Euro-Oil Ltd.
The registration dates range from 1987 to 1995.
[13]
Of the thirteen PROTEC marks, only one is a South African trade mark.
The applicant is the proprietor, and the mark is "PRO
TEC LOGO".
The number is 87/10281 and it was registered on 15 December 1987.
This is the only mark which features in the notice
of motion, to
which I shall refer later. The marks listed in part II are Australian
and German marks with foreign proprietors and
I do not consider it
necessary to deal with the community trade marks mentioned in part
III.
[14]
The actual assignment is described as follows:
"In
pursuance to the said agreement the Assignor does hereby assign and
transfer with full title guarantee all right, title
and interest in
the Trade Marks, including all statutory and common law rights
attaching thereto and the right to sue for past
infringements and to
retain any damages obtained as a result of such action, to the
Assignee.
The
Assignor confirms that this assignment is made with the goodwill
attaching to the Trade Marks and the goodwill of the business
in
which the Trade Marks have been used by the Assignor."
[15]
The Assignor also gives the following guarantee:
"The
Assignor warrants to the Assignee as follows in respect of each of
the registered Trade Marks:
that
all renewal fees due in respect of the registrations have been paid;
that
the Assignor is unaware of any infringement of the registration of
anv of them or of any reason why any registration may be
capable of
being expunged from any Register of Trade Marks for any reason
whatsoever:
that
there are no circumstances known to the Assignor arising out of this
or any earlier Assignment which may result in the use
of the Trade
Marks being liable to mislead the public;
that
save in respect of the Licence the Assignor has not given any other
person any permission to use any of them."
(Emphasis
added.) ("The warranty in the 1998 Assignment Agreement").
[16]
The 1998 Assignment Agreement is silent on the "requisite
consents and approvals" mentioned in clause 4.3 of the
1997
Incorporation Agreement.
[17]
By all accounts, the 1997 Incorporation Agreement and the 1998
Assignment Agreement were duly implemented in all respects,
and the
first respondent, as proprietor of the trade marks continued to
conduct the business for almost ten years, until, in August
2007, it
assigned the trade marks to the second respondent. Until shortly
before the commencement of these proceedings, the South
African
registration (no 1987/10281
[18]
It seems that a considerable amount of enmity was generated between
the applicant on the one side (in effect, Saville) and
the first and
second respondents before this application was launched by the
applicant.
In
the founding affidavit, Saville glibly, and in passing, refers to the
"demise of the relationship between the applicant
and the first
respondent" but the deponent to the answering affidavit on
behalf of the first and second respondents, Mr William
Thomas Stout,
a director of both the companies, is far more outspoken. He says the
following:
"7.2
After the assignment of the various trade mark rights included in
annexure AS4 (note: this is the 1998 Assignment Agreement)
to the
founding papers, Saville and his cohorts embarked on a
deliberate
and concerted campaign to compete unlawfully with PROTEC. This
unlawful campaign may synoptically be described as non-payment
of
trading accounts, trade mark violations, gross interference with the
business of PROTEC, passing off and unlawful competition
in a number
of jurisdictions. As a consequence of this conduct on the part of,
inter
alia,
Saville
and Oilwell, PROTEC has been compelled to seek relief in various
jurisdictions to interdict,
inter
alia,
Saville
and Oilwell from certain unlawful conduct. To avoid prolixity I do
not annex hereunto the full applications brought by PROTEC
in this
regard, but I annex heretomarked ... an order granted by His Lordship
Mr Justice Kirk-Cohen on 11 April 2002 in terms of
which,
inter
alia,
Saville
and Oilwell were interdicted and restrained from unlawfully competing
with PROTEC and from infringing PROTEC's rights in
trade mark no
87/10281. To my knowledge, Saville and Oilwell have repeatedly
flouted this order;
7.
3 Furthermore, Saville has a raft of court orders against himself
personally in the United States of America and I annex hereto
marked
... a bundle of such orders granted by various American courts.
Saville has also repeatedly been found in contempt of court
in
America and has also been declared bankrupt in that jurisdiction.
7.4
I respectfully submit that it is against this background that the
present ill-conceived ploy on the part of Saville and
Oilwell should
be seen. It is an opportunistic attempt by Saville to regain
intellectual property which was legitimately
transferred to
PROTEC and in respect of which the trade marks were assigned to
Oilwell in consideration for shares in PROTEC
International Ltd
issued to a company, (the shares of which, to the best of my
knowledge are owned by Saville) namely Additive
Distributors Ltd
it
[19]
The "opportunistic attempt by Saville to regain intellectual
property which was legitimately transferred to PROTEC"
is the
present application, to which I shall shortly refer in greater
detail.
[20]
Stout then proceeds to attach the relevant court order containing the
interdict referred to as well as other court papers including
a
"restraining order and injunction" against Saville, issued
by a court in Tennessee, USA,
inter
alia
restraining
Saville from "manufacturing, selling, distributing and actively
inducing others to manufacture, sell, or distribute,
within the
United States or from any location within the United States, any
additive or other automotive product displaying the
PROTEC trade mark
name or logo, which trade mark name or logo are owned by the
plaintiff ..." The plaintiff in that case is
the first
respondent.
[21]
In a replying affidavit, Saville does not dispute these allegations,
but he states that the parties and their various companies
have been
involved in litigation regarding the PROTEC mark in many
jurisdictions around the world. Some cases he won and some he
lost.
His conduct, held against him by the first respondent and some of the
foreign courts, was the result of the fact that he
still believed
that he was the owner of the relevant intellectual property. Details
of this "belief manifested themselves
in the launching of the
present application.
[22]
Before turning to the relief claimed and the disputes between the
parties, I point out that the jurisdiction of this court
over the
first respondent, a Guernsey company, and the second respondent, a
United Kingdom company, has been confirmed by virtue
of an attachment
of shares owned by the first respondent in a company in Pinetown, and
the attachment of the trade mark registration
no 1987/10281 PROTEC
owned by the second respondent. This was properly done on the
authority of court orders issued by this court
and the Durban and
Coast Local Division. Nothing further turns on this.
The
relief claimed, and the disputes between the parties
[23]
Briefly stated, the applicant's case amounts to the following:
1.
Regulation 10(l)(c)
of the
Exchange Control Regulations, 1961
,
as promulgated by
Government
Notice RJlll
of
1 December 1961 and
issued
in terms of section 9 of the Currency and Exchanges Act, 1933 (Act no
9 of 1933) ("the Exchange Control Regulations")
reads as
follows:
"10(1)
No person shall, except with permission granted by the Treasury and
in accordance with such conditions as the Treasury
may impose -
(a) ...
(b) ...
(c) enter into any transaction whereby capital or any right to
capital is directly or indirectly exported from the Republic."
The
assignment of the trade marks (and, for present purposes,
particularly the South African trade mark 1987/10281 PROTEC)
in
terms of the 1998 Assignment Agreement amounted to such a
"transaction whereby capital or any right to capital was

directly or indirectly exported from the Republic".
It
is common cause that no permission to enter into such transaction was
granted by the Treasury as intended by the requirements
of regulation
10(1) prior to the transaction being entered into (or thereafter, for
that matter).
Because
the transaction was illegal, in the sense that it was entered into in
contravention of regulation 10(l)(c), it is null and
void,
ah
initio
so
that
the trade mark was, in law, never assigned to the first respondent
and is
still
the
property of the applicant.
6. In the result, the applicant crafted the first two
prayers of the notice of motion as follows:
"1.
Declaring the Assignment Agreement entered into between the applicant
and the first respondent on 4 July 1998 to be void
ab
initio;
2.
Directing
the third respondent to rectify the Register of TradeMarks in terms
of section 24 of the Trade Marks Act to reflect the
applicant as the
proprietor of trade mark registration no
19^1/102^1
PROTEC."
There
is also a prayer for costs, in the event of the application being
opposed.
[24]
The respondents offer the following arguments
in
limine
in
their opposing affidavit:
1.
The cause of action is based upon an alleged "debt" as
intended by the
Prescription Act 68 of 1969
. The debt arose, on the
applicant's version, as at the date of the assignment, namely 4 July
199S
and
would have become prescribed, in terms of
section 11
(d) of the
Prescription Act, three
years after the date of assignment.
2.
The application is bad for non-joinder because some of the parties to
the 1998 Assignment Agreement, who have an interest in
the outcome of
this application, have not been joined as parties. They include
Saville, Meier, Oilwell Manufacturing (Pty) Ltd,
PROTEC USA
Incorporated, Urban. Smith, Euro-Oil Ltd and PROTEC International
Ltd.
[25]
As to the second point
in
limine,
the
question of the non-joinder, the applicant, in reply, alleged that
all these parties that were not joined were duly consulted
and
indicated that they were aware of this application and were not
interested in joining in the proceedings. Verifying affidavits
on
behalf of all these parties were attached to the replying affidavit.
Mr
Ellis, correctly in my view, did not press this issue any further
during his address. I do not recall Mr Ellis expressly abandoning

this argument, but, in my view, the initial non-joinder was
adequately cured by the applicant, although belatedly, as I
described.
[26]
As to the defence of prescription, I, at the outset, considered that
this issue had to be decided one way or the other before
the merits
of the case could receive attention, but I was ultimately persuaded
by counsel that I would have to consider the merits,
and particularly
the question as to whether or not the assignment falls to be declared
null and void, before the question of prescription
can be properly
adjudicated upon. I will revert to this issue at a later stage.
[27]
As to the merits of the application, the defence offered by the
respondents is twofold:
the
assignment did not amount to a transaction as intended by
regulation
10(l)(c)
, so that there was no contravention of the
Exchange Control
Regulations and
no need to obtain Treasury permission; alternatively
if
it is held that there was such a contravention, the Assignment
Agreement is not rendered null and void,
ah
initio,
as
a result of such contravention.
Did
the 1998 Assignment Agreement, entered into without prior Treasury
approval.
constitute
a contravention of
regulation 10(l)(c)
?
[28]
It is convenient to quote the wording of
regulation 10:
'TO(l)
No person shall, except with permission granted by the Treasury and
in accordance with such conditions as the Treasury may
impose-(a)
export from the Republic during any period of twelve months a total
quantity of goods which exceeds in value R20,00
or such greater
amount as the Treasury may determine, if-
(i) no
payment for such goods has been or is to be received in
the
Republic from a person outside the Republic; or
(ii) such
goods are exported at a price which is less than the
value
thereof; or
(iii)
the period within which payment for such goods is to be made exceeds
six months from the date of shipment from the Republic
or such
shorter period as an authorised dealer may determine in respect of
such goods;
(b) take
out of the Republic goods, including personal apparel, household
effects, and jewellery which have a value in excess of
R600,00 or of
such greater amount as the Treasury may determine;
(c) enter
into any transaction whereby capital or any right to capital is
directly or indirectly exported from the Republic.
2. The
provisions of subregulations (3), (4) and (5) of
regulation 3
shall
apply
mutatis
mutandis
to
goods referred to in subsection (l)(b) of this regulation.
For
the purposes of this regulation Value' shall mean the value for
customs purposes as defined in section 108 of the Customs
Act, 1955
(no 55 of 1955)."
[29]
It is also of relevance, in my view, to take note of regulation 22
which is the penalty provision:
"22.
Every person who contravenes or fails to comply with any provision of
these regulations, or contravenes or fails to comply
with the terms
of any notice, order, permission, exemption or condition made,
conferred or imposed thereunder, or who obstructs
any person in the
execution of any power or function assigned to him by or under these
regulations, or who makes any incorrect
statement in any declaration
made or return rendered for the purposes of these regulations (unless
he proves that he did not know,
and could not by the exercise of a
reasonable degree of care have ascertained, that the statement was
incorrect) or refuses or
neglects to furnish an yinformation which he
is required to furnish under these regulations, shall be guilty of an
offence and
liable upon conviction to a fine not exceeding R250
000,00 or to imprisonment for a period not exceeding five years or to
both
such fine and such imprisonment: Provided that where he is
convicted of an offence against any of these regulations in relation

to any security, foreign currency, gold, bank note, cheque, postal
order, bill, note, debt, payment or goods, the fine which may
be
imposed on him shall be a fine not exceeding R250 000,00, or a sum
equal to the value of the security, foreign currency, gold,
bank
note, postal order, bill, note, debt, payment or goods, whichever
shall be greater."
[30]
The regulations contain definitions for, for example, "bond",
"financial assistance", "foreign currency",

"gold", "goods", "money" and
"security".
[31]
With reference to the provisions of regulation 10(l)(c), on which the
application is based, there are no definitions for "transaction",

"capital" or "exported".
[32]
According to submissions made by counsel for the respondents, there
is no reference, anywhere in the regulations, to intellectual

property. I accept the submissions to be correct.
[33]
The long title of the
Currency and Exchanges Act no 9 of 1933
, in
terms of which the regulations were promulgated, reads as follows:
"To amend the law relating to legal tender, currency,
exchanges
and banking."
There
does not appear to be a formal preamble to this Act.
What
is plain, is that there is nothing in the long title which appears to
remotely have a bearing on intellectual property.
[34]
By all accounts, the applicant was inspired to move this application
as a result of the findings in
Couve
& Another v Reddot International (Pty) Ltd & Others
2004
6 SA 425
(W) ("Couve").
I
find it convenient to summarise details of this judgment by referring
to the headnote, and the relevant passages from the main
text as
listed in the headnote.
In
Couve,
the
plaintiffs sought specific performance of a written agreement in
terms of which the one defendant was to assign its rights in
and to
certain patent applications to another defendant, and was also to
issue and allot certain shares to some of the defendants
and the
first and second plaintiffs. The fourth defendant, to which shares
were also to be allotted, was a company incorporated
in the British
Virgin Islands and stood to be allocated 60% of the shareholding in
the particular (first) defendant.
The
defendants excepted to the particulars of claim as disclosing no
cause of action as the agreement upon which they sought judgment
was
void
ab
initio
and
unenforceable because it contravened the provisions of regulation
10(l)(c).
The
learned judge held, at 430E-H, that, although the word "capital"
was not defined in the regulations or the Act it
should be understood
as meaning anything that had a monetary value. As authority for this
proposition, the learned judge relied
on the words of A N Oelofse,
Suid-Afrikaanse
Valutabeheerwetgewing
l
sl
edition (1991) at 63-70, where he says,
inter
alia:
"Regulasie
10(l)(c) is baie wyd bewoord. Dit verbied die aanvang van enige
transaksie (sonder die Tesourie se toestemming)
wat tot gevolg sal he
dat kapitaal of enige reg op kapitaal regstreeks of onregstreeks
vanuit die Republiek uitgevoer word. Die
woord 'kapitaal' word nerens
in die regulasies omskryf nie, en die regspraak bied ook nie eintlik
hulp in hierdie verband nie.
Al wat reeds uitdruklik in hierdie
verband beslis is, is dat geld wel 'kapitaal' is [sien
S
v De Castro
1979
2 SA 1
(A) 21H, en vergelyk
Sv
Runds
1978
4 SA 304
(A)]. In hierdie beslissings word nie onderskei tussen geld
wat van 'n kapitale aard of nie van 'n kapitale aard is nie, soos
bedoel
in die omskrywing van 'bruto inkomste' in die
Inkomstebelastingwet 58 van 1962. Die wel bekende betekenis van die
woord 'kapitaal'
vir doeleindes van die Inkomstebelastingwet help 'n
mens dus nie by die uitleg van regulasie 10(l)(c) nie. Beskou teen
die agtergrond
van die algemene doel van die Valutabeheerregulasies
blyk dit dus of kapitaal' op enigiets met 'n geldelike waarde
betrekking het."
The
learned judge went on to find, at 431I-J, that an agreement in terms
of which shares were issued and allotted to a person or
entity
outside the Republic was one whereby capital was exported, whether
directly or indirectly, from the Republic and, as such,
contravened
regulation 10(l)(c).
I
interpose to record the issue before me, does not involve the
question whether the allotment of shares contravened regulation

10(l)(c). It purely involves the question whether the assignment of
the trade mark by the applicant, a South African company, to
the
first respondent, a Guernsey company, constituted a contravention of
regulation 10(l)(c). I pointed out earlier in this judgment
that in
terms of the 1997 Incorporation Agreement, shares in the first
respondent would be allotted to the four gentlemen who were
parties
to the 1997 Incorporation Agreement. The shares would not emanate
from South Africa or a South African company.
[35]
The learned judge held further, at 430H-I and 433C, that the rights
in and to the patent applications themselves had a monetary
value and
were thus "capital". It was also held that the net effect
of the agreement was therefore the export of the
rights in and to the
patent applications, in contravention of regulation 10(l)(c) - at
433D-G.
[36]
It was held that the agreement contravened regulation 10(l)(c) on a
further basis: allied to the fourth defendant's rights
in and to the
patent applications was a right to receive royalties. Cession of a
right to receive royalties to a foreign entity
was, in itself,
regarded as a transaction whereby capital, or a right to capital, was
exported from the Republic - at 432D-J.
Although
the 1998 Assignment Agreement makes no specific mention of royalties,
it should be noted that it records that the trade
mark is assigned
and transferred "with full title guarantee all right, title and
interest in the Trade Marks including all
statutory and common law
rights attaching thereto and the right to sue for past infringements
and to retain any damages obtained
as a result of such action, to the
Assignee". The 1998 Assignment Agreement also stipulates that
the assignment is made with
the goodwill attaching to the trade marks
and the goodwill of the business in which the trade marks have been
used by the Assignor.
[37]
In
Couve,
the
learned judge then goes on to find that in all the circumstances the
agreement which contravened regulation 10(l)(c) was null
and void -
at 438H-1.
I
interpose again to record that the dispute before me does not concern
the cession or transfer of rights in and to patent applications,
but
only the assignment of trade marks.
[38]
It is fair to state that the applicant's arguments before me were
based almost entirely on what was found in
Couve.
[39]
The applicant also relied, to some extent, on findings made by
BERTELSMANN, J in
Pratt
v First Rand Bank Ltd & Another
[2004]
4 All SA 306
(T). That case did not involve the transfer or
assignment of intellectual property. In that sense, it is in my view
distinguishable
from the present dispute. The plaintiff had entered
into an agreement of loan with the first defendant and alleged that
portions
of the agreement, namely a suretyship, a cession and a
pledge, had been concluded in contravention of regulations 3(l)(e)
and 10(l)(c).
She alleged that as a result the transaction was null
and void
ah
initio.
The
relevant funds, which were to be paid to a close corporation of which
the plaintiff was the sole member, were intended to be
used to
purchase the balance of shares in a private company in which the
plaintiff had a 30% shareholding. The 70% shareholding
was at the
time held by a trust in the Isle of Man. The trust had bound itself
as surety, in terms of the loan agreement, and had
ceded and pledged
investments in an offshore account, to the first defendant. The
plaintiff contended, successfully, that the total
effect of the
agreements was the export of capital out of the Republic without the
approval of the Treasury in contravention of
the regulations. The
learned j udge also held, at 316b-h, that the agreement was null and
void
ah
initio.
For
this conclusion, he also relied on the judgment in
Couve
-
at 316f-g.
It
appears that in certain follow-up proceedings before another judge of
this division, the finding that no Treasury permission
had been
obtained was overturned and the latter finding was upheld on appeal -
see
Pratt
v First Rand Bank
[2008] ZASCA 92
;
2009
2 SA 119
(SCA). I do not believe that, for present purposes, the
last-mentioned judgment can be of much assistance in arriving at the
correct
conclusion. I will, however, return to some of the remarks
made by the learned judge in the first
Pratt
judgment
when he dealt with the issue of whether or not agreements in
contravention of the regulations are null and void.
[40]
Counsel on behalf of the respondents also referred me to
Southern
Wilwatersrand Exploration Co Ltd v Bisiehi Mining
1998
4 SA 767
where, at 771D-E reference is made to a situation where a
South African company ceded part of its royalties to a London based
company
in contravention of regulations 3 and 10. This did not
involve intellectual property.
[41]
In
Fethard
International Ltd v Rwayitare
[2004]
JOL 13151
(W) it was also held by JAJBHAY, J, who also presided over
the
Couve
case,
that a scheme whereby the defendant was to have paid the plaintiff, a
South African based architectural firm, for work performed
by the
firm in an offshore account in the Isle of Man from funds which were
held in offshore accounts either in Switzerland or
Brussels was an
agreement in contravention of regulation 10(l)(c). This finding was
upset in a judgment by the full bench of the
WLD (as it then was) in
case no A5052/05 which appears to have remained unreported.
[42]
Against this background, it seems that the only South African
reported judgment dealing with intellectual property in the context

of regulation 10(1 )(c) is
Couve._
[43]
It was argued on behalf of the respondents that, notwithstanding the
decision in
Couve,
it
was not necessary for Treasury approval to have been sought and
granted in respect of the transfer of the intellectual property
that
is in issue in this matter.
Even
though
Couve
deals
with rights in and to patents, as opposed to the question of the
assignment of trade marks, it was accepted, on behalf of
the
respondents, that the submissions made on their behalf would also
apply to the transfer of rights in and to patents. I express
no firm
view in this regard, but I deal with the arguments offered on behalf
of the respondents.
[44]
It was submitted on behalf of the respondents that in order to
determine whether or not the assignment of a patent or a trade
mark
can constitute an export of capital (for the purpose of regulation
10) one must look at the rights vesting in the patentee
by virtue of
the patent and then assess whether any of these rights move out of
the Republic (are "exported") by virtue
of the agreement.
It was argued that the nature and effect of a South African patent,
and thus its value and consequent possible
categorisation as
"capital", has a bearing on the operation of
section 45(1)
of the
Patents Act no 57 of 1978
which, under the heading "effect
of patent", reads as follows:
"(1)
The effect of a patent shall be to grant to the patentee
in
the Republic
,
subject to the provisions of this Act for the duration of the patent,
the right to exclude otherpersons from making, using, exercising,

disposing or offering to dispose of, or importing the invention, so
that he or she shall have and enjoy the whole profit and advantage

accruing by reason of the invention." (The emphasis is that of
the respondents.)
[45]
The argument was developed further by a submission that it is trite
that trade mark rights are also purely territorial. Whilst
no
authority was placed before me in this regard, I find it useful to
refer to the following words by the learned authors Webster
and Page:
South
African Law of Trade Marks
3
rd
edition p85:
"In
the light of the foregoing, a question which pertinently arises is
whether,
having
regard to the fact that a trade mark is. in the present state of the
law, a purely territorial concept,
there is anything to prevent a person from asserting a proprietary
right in a trade mark in relation to which no one else has
in
the same territory
asserted a similar right." (Emphasis added.)This question was
answered in the negative by BOSHOFF, J, as he then was, in
P
Lorillard Co
v
Rembrandt
Tobacco Co Ltd
1
967
4
SA
353
(T) at 356H-357D.
[46]
It was with this territorial concept in mind, that it was submitted
on behalf of the respondents that a patent (and a trade
mark) thus
entitles the patentee to nothing more than the right to exclude
others from a forbidden field, namely the South African
market in the
claimed invention or the use of the trade mark. The value of a patent
is a result of the patentee's control of this
forbidden field. Every
issue pertaining to the patent or trade mark - from its origin to its
expiry - is determined under South
African law, with exclusive
jurisdiction of a South African court in respect thereof. It was
further argued that to the extent
that the patent itself is the
"capital" in question, it is clear that all rights in and
to this capital exist entirely
in the Republic of South Africa alone,
and are incapable of being exported.
[47]
A further submission in this regard was that it is not correct to
assume that the assignment of a patent or a trade mark gives
any
foreigner control over the South African market in an invention or
trade mark so that the movement of this control is effectively
an
export of "capital". That is because the control exists and
is exercised in the Republic. The fact that a foreign
entity becomes
entitled to exercise rights in the Republic, does not mean that these
rights have been exported. An analogy offered
in this regard on
behalf of the respondents was the sale of a home in South Africa to a
foreigner. The purchase does not result
in the export of capital. The
seat of the capital, ie the home, remains in South Africa.
This
line of reasoning offered by the respondents, was countered as
follows by counsel for the applicant: the regulations are not
focused
on where the right can be exercised or enforced (as a matter of law),
but rather where the proceeds generated by the exercise
of their
right can beearned (as a matter of fact). In the course of the 1998
Assignment Agreement, the capital (being the trade
mark registrations
as such)
and
the right to the capital, previously held by a local company, were
removed from the country to an entity in a foreign country.
Any
revenue earned or proceeds acquired from the capital asset or the
right to capital will now be earned in Guernsey and no longer
in
South Africa.
In
the course of their argument, counsel for the applicant also
emphasised what they consider to be an important distinction between

the wording of regulation 10(l)(c) (already quoted) and the wording
of regulation 3(l)(c).
Because
regulation 3 will be referred to again later in this judgment, it is
convenient to quote the whole of regulation 3(1):
"3(1)
Subject to any exemption which may be granted by the Treasury or a
person authorised by the Treasury, no person shall,
without
permission granted by the Treasury or a person authorised by the
Treasury and in accordance with such conditions as the
Treasury or
such authorised person may impose -
(a) take
or send out of the Republic any bank notes, gold, securities or
foreign currency, or transfer any securities from the
Republic
elsewhere; or
(b) send,
consign or deliver any bank notes, gold, securities or foreign
currency to any person for the purpose of taking, sending
or
removing such bank notes, gold, securities or foreign currency out of
the Republic; or
(b)bis
take
any South African bank notes into the Republic or send or consign any
such notes to the Republic; or
(c) make
any payment to, or in favour, or on behalf of a person resident
outside the Republic, or place any sum to the credit
of such
person; or
(d) draw
or negotiate any bill of exchange or promissory note, transfer any
security or acknowledge any debt, so that a right
(whether actual
or contingent) on the part of such person or any other person to
receive a payment in the Republic is created
or transferred as
consideration -
(i) for
the receiving by such person or any other person of a payment or the
acquisition by such person or any other person of property,
outside
the Republic; or
(ii) for
a right (whether actual or contingent) on the part of such person or
any other person to receive a payment or acquire property
outside the
Republic; or make or receive any payment as such consideration; or
(e) grant
any financial assistance to any person in the Republic, where as
security for such financial assistance, the person granting

the
financial assistance in turn relies on any security,
guarantee,undertaking or financial assistance, directly or indirectly
furnished
by-
(i) any
person resident outside the Republic; or
(ii) an
affected person;
(f) grant
any financial assistance to any person in the Republic, where such
person-
(i) is
not resident in the Republic; or
is
an affected person."
[48]
Regulation 3 was promulgated under the heading: "Restriction on
the export of currency, gold, securities, etc, and the
import of
South African bank notes."
Regulation
10 was promulgated under the heading: "Restriction on export of
capital."
In
terms of regulation 10(2), the provisions of regulations 3(3), 3(4)
and 3(5) shall apply
mutatis
mutandis
to
goods referred to in regulation 10(1 )(b) (already quoted). These
subregulations of regulation 3 relate to the duty to declare
the
position of relevant articles to port authorities, the duty to
produce such offending articles on request, rights of seizure,
rights
to search possible offenders and the question of forfeiture for the
benefit of the National Revenue Fund any bank notes,
gold, etc which
the offender attempted to unlawfully remove from the Republic.
[49]
The distinction between regulation 3(l)(c), as quoted, and regulation
10(l)(c), as quoted, is. according to counsel for the
applicant,
that:
"It
is the mere entering into the transaction, aimed at a certain
consequence (ie the export of the capital from the Republic),
which
-unless duly consented to - becomes legally punishable. In other
words, it is not necessary for the actual export to have
taken place
before regulation 10(l)(c) ... can be said to have been contravened."
In
the context of the opposing arguments,
supra,
about
whether or not the assignment of a patent or trade mark amounts to
the exporting of capital as intended by regulation 10(1
)(c), counsel
for the applicant now argue that this difference in wording is
relevant because the fact that no physical exportation
of the capital
in question is required, underlines the argument that it is possible
that capital (in the sense of a trade mark
or patent registration)
can be exported, even though the right to enforce the trade mark or
patent remains valid only in the country
in which it is registered.
I,
with respect, consider this to be a somewhat artificial argument: the
transaction prohibited in terms of regulation 10(l)(c)
must still be
aimed at the export of capital. I fail to see how this perceived
difference in wording, such as it is, can meaningfully
contribute to
the decision as to whether or not the mere assignment of a trade mark
constitutes a contravention of regulation 10(l)(c)
if it was done
without Treasury permission.
[50]
Returning to the main contesting arguments,
supra,
I
am of the view that there is much to be said for the approach
advanced on behalf of the respondents namely that the fact that
a
foreign entity becomes entitled to exercise rights in the Republic,
does not mean that these rights have been exported. The territorial

nature of the right seems to me to be decisive. The complaint
advanced on behalf of the applicant that "any revenue earned
or
proceeds acquired from the capital asset or the right to capital will
now be earned in Guernsey and no longer in South Africa",
seems
to me to relate not to the assignment of the trade mark itself, but
to the fruits or profits generated by the business conducted
under
the protection of the trade mark. If it becomes necessary or
desirable, once some or other profit had been generated, to
transfer
the proceeds to Guernsey, it may become necessary to obtain Treasury
permission as, for example, intended by the provisions
of regulation
3(l)(a), (b) or (c),
supra.
Such
permission will become necessary, not only if the proceeds of the
sale of engine additives protected by a trade mark are to
be
transferred out of the country, but if such bank notes, gold,
securities or foreign currency are to be transferred out of the

Republic for any other reason whatsoever. This state of affairs, in
my view, does not mean that the assignment of a trade mark
to an
overseas entity
per
se
constitutes
a contravention of regulation 10(l)(c).
[51]
Perhaps an even more persuasive argument advanced on behalf of the
respondents is that the learned judge in
Couve
erred
in adopting an expansive rather than a narrow interpretation of the
words "capital" and "right to capital"
as used in
regulation 10(l)(c).
I
have pointed out that intellectual property is nowhere mentioned in
the regulations as a whole. "Capital" is not defined
in the
regulations. The long title of Act 9 of 1993 pronounces the purpose
of the Act "to amend the law relating to legal
tender, currency,
exchanges and banking".
On
a general reading of, for example, regulations 3 and 10, one is left
with the impression that they are aimed at controlling the
movement
of currency, financial instruments, precious metals and the like
within a system of authorised currency exchange. Regulation
10(l)(b)
also refers to "goods, including personal apparel, household
effects and jewellery". The penalty clause, regulation
22,
refers to "security, foreign currency, gold, bank note, cheque,
postal order, bill, note, debt, payment or goods".
"Goods"
is only defined as including "any immovable goods or security".
I have pointed out that the regulations
contain definitions for
financial instruments such as "bond", "foreign
currency", "gold", "money"
and "security".
None of these definitions or collections of instruments listed in
these regulations come anywhere near
dealing with intellectual
property.
The
Concise
Oxford Dictionary,
at
pi 36 of the 7
Ih
edition, describes "capital" as "stock with which
company or person enters into business; accumulated wealth especially

as used in further production".
In
the
HAT
(Verklarende Handwoordeboek van die Afrikaanse Taal)
5
th
edition on p527 "kapitaal" is given the following
descriptions:
"
1. geldsom wat bele is om rente te verdien ...
2.
aanvanklike noodsaaklike bedrag wat in 'n handelsonderneming gesteek
word wat duursame winste moet oplewer ... vermoe, geldelike
besitting
... groot som geld ... in die ekonomie, goedere wat nie vir verbruik
nie, maar vir produksie van ander goedere bestem
is, dit wil se
produktief gebruik moet word ..."
In
the present context, it seems that the capital would rather relate to
the business of selling additives under the protection
of the trade
mark than to the mere assignment of the trade mark itself.
[52]
Against this background, and in the specific context of these
Exchange Control Regulations, the
whole range of financial
instruments and currency items therein identified (to the total
exclusion of intellectual property) and
the long title of the
empowering Act, I have come to the conclusion, and I find, that to
interpret regulation 10(1 )(c) as including
the assignment of a trade
mark, amounts to an approach that is too expensive and broad, and,
consequently, an approach that is
erroneous.
[53]
I am of the view that this conclusion is fortified by the existence
of a rule of interpretation of statutes which dictates
that where a
contravention is visited by a penalty (in the present instance, in
terms of regulation 22, a fine of R250 000.00 or
five years
imprisonment or both) the wording of the prohibition must be narrowly
and strictly interpreted.
[54]
I find it convenient to quote a few extracts from a discussion on
this subject in L C Steyn
Die
Uitlegvan Wette
5
th
edition (1981) pi 11: "(iii) Verbods- en strafbepalings
In
Boll
Cons
word
die reel vermeld dat by strafbepalings die strengste betekenis van
die woorde aangeneem moet word:
'in
poenis striciissima verborum significatio accipienda est'
(my
note: this expression, according to Hiemstra and Gonin.
Trilingual
Legal Dictionary,
2
nd
edition p213 means: 'In the case of penal laws the strictest
interpretation of their terms should be accepted.')
Volgens
Gluck
bestaan
billikheid by die toepassing van wette onder andere daarin dat die
regter by kriminele gevalle meer geneig is om vry te
spreek as om te
veroordeel, en die straf eerder versag as verswaar. In
Nieuw
Nederlandsch Advyshoek
word
aangevoer dat wat nie by 'n verbodsbepaling uitdruklik en in soveel
woorde
(expresse
et totidem verbus)
verbied
word nie. geoorloof bly.
Aan
hierdie sienswyse is herhaaldelik deur ons howe gevolg gegee
In
R
v Ackerman
1931
OPD 69
word daarop gewys dat 'A section creating a criminal offence
should not lightly have its final scope extended beyond the plain
meaning of its language', terwyl in
R
v Taweel & Another
1937
TPD 389
in verband met 'n sekere strafbepaling verklaar word: 'If
there is a reasonable interpretation which will avoid the penalty in
any particular case the Court should adopt that construction.'
Hieraan
word in
R
v Oberholzer & Others
1941
OPD 60
toegevoeg dat 'In the interpretation of a penal provision it
is not competent for the Court to extend the meaning of words so as

to cover crimes of an equal atrocity or of a kindred character.'"
[55]
The following is also stated by JRde Ville,
Constitutional
and Statutory
Interpretation
at
p198:
"Penal
provisions or provisions interfering with the liberty of individuals
are as a rule restrictively construed (in the case
of ambiguity), in
other words, in favour of the accused or individual."
[56]
It was submitted to me on behalf of the respondents that there is no
law which explicitly requires Treasury approval for a
transfer of
intellectual property rights from a South African to a foreigner as a
condition of the validity of such transfer.
[57]
It was also submitted on behalf of the respondents that at common
law, and also in terms of the
Patents Act, no 57 of 1978
, and in
terms of other intellectual property laws, intellectual property
rights are freely transferable, also in respect of foreigners.
See,
for example,
sections 59
and
60
of the
Patents Act and
sections 39
and
40
of the
Trade Marks Act, no 194 of 1993
.
[58]
There is also a reference in the opposing affidavit to certain terms
of the Trade Related Aspects of Intellectual Property
Rights
Agreement ("TRIPS"), which has been duly domesticated into
South African law (see,
inter
alia,
the
Intellectual Property Laws Amendments Act, Act 39 of 1997). This
agreement,
inter
alia,
provides
that there shall be no discrimination against foreigners in respect
of their power to acquire intellectual propertyrights
in South
Africa.
[59]
In the opposing affidavit it was also emphasised, as I already
mentioned, that in the empowering statute and the regulations
under
discussion there is no provision requiring approval for international
transfers of intellectual property rights. On behalf
of the
respondents it is emphasised that the regulations have no explicit
reference to, or mention of intellectual property rights,
even though
they are quite lengthy and deal with subject-matters in great detail.
[60]
What should not be overlooked, is a relatively recent (November 2006)
amendment to an
Exchange
Control Manual
published
by the Treasury which was presumably introduced as a result of the
judgment in
Come.
This
manual was referred to by both sides during the proceedings before
me. The following passage is found in module K of the
Exchange
Control Manual
dated
November 2006 (which is, of course, some eight years after the
transaction now under attack was concluded):
"4.3.2
Disposal of patents, copy-rights, trade marks, franchises and/or
intellectual property in general
The
disposal of any of the aforegoing requires prior Exchange Control
approval. Applications should be supported by the agreement
or
contract of sale. If not evident therefrom, a clear explanation of
how the values were arrived at must accompany the application."
Counsel
from both sides conceded that this
Exchange
Control Manual
has
no legal status and therefore is a mere internal guideline, and not
the source of any legislative powers for discretion.
In
any event, as it was quite rightly contended on behalf of the
respondents, even if it did have legal force, this requirement
would
not apply in respect of the assignment under debate, which preceded
its "enactment" by some eight years, in view
of the
presumption against retrospectivity.
[61]
It was also contended on behalf of the respondents that the drafters
of these
Exchange Control Regulations never
considered intellectual
property at all. It was submitted that commercial sense, in any
event, suggests the contrary, namely that
regulation 10(l)(c)
was not
intended to apply to intellectual property rights because the
commercial impact of such application would obviously be
restrictive
of trade and industry.
[62]
In view of the aforegoing, I have come to the conclusion that the
applicant has failed to make out a case for its contention
that the
1998 Assignment Agreement, without prior Treasury approval,
constituted a contravention of
regulation 10(l)(c).
[63]
It should also be borne in mind that the declaratory relief,
supra,
as
crafted in prayer 1 of the notice of motion, is only aimed at
declaring the Assignment Agreement between the applicant and the

first respondent to be void
ab
initio.
As
I pointed out earlier in this judgment, there were at least two other
proprietors listed in
part I
of the Assignment Agreement namely
PROTEC USA Incorporated and Euro-Oil Ltd. The Assignment Agreement,
in
part I
thereof, also lists nine other trade marks of which the
applicant was the proprietor in a number of countries including
Germany,
Switzerland, Austria, France, Italy, Indonesia, Israel and
the United Kingdom. No case is made out in the papers with regard to

those marks. Moreover, in
part II
of the Assignment Agreement,
pending trade mark applications in the name of two other proprietors,
based in Australia and Germany
respectively are listed.
Part III
contains applications for community trade marks by two proprietors
including the applicant.
The
relief for rectifying the Register of Trade Marks, only involves the
South African mark 87/10281, let alone the seven marks
listed in
part
II
and
part III
of the Assignment Agreement schedule.
It
is also appropriate, in my view, to quote the wording of paragraph
8.4 of the founding affidavit:
"8.4
The applicant requires a declaratory order so that, on the strength
of such an order, applications may also be made to
the various
relevant foreign trade mark registries to have the recordal of any
purported assignment to the First or Second Respondents
reversed."
I
am
alive to the fact that the other members of the Assignor group,
listed in the Assignment Agreement, indicated by affidavit,
supra,
that
they do not wish to be joined as parties to this application.
Nevertheless,
if the relief, as prayed for, were to be granted, it may also have an
impact on the nine other marks, listed in
part I
,
supra,
with
the applicant as proprietor but registered in a host of foreign
countries. If the Assignment Agreement between the applicant
and the
first respondent is to be declared null and void, the status of these
last-mentioned marks, must also, in my view, inevitably
be affected.
The foreign registries may also have an interest in the matter.
Although this issue was not canvassed in the papers
or in argument
before me, I feel obliged to express serious reservations, without
formally pronouncing on the issue, as to whether
it is competent to
grant the declaratory relief, as prayed for, on a piecemeal basis as
illustrated.
[64]
Inasmuch as it can be argued that the conclusion I have arrived at as
to the contravention, or lack thereof, of
regulation 10(1
)(c). is in
conflict with the findings of the learned judge in
Couve,
I,
respectfully, decline to follow that judgment, for the reasons
mentioned.
[65]
On the assumption that my conclusions may be wrong, and that there
was indeed a contravention of
regulation 10(l)(c)
, it is necessary to
turn to the alternative defence offered on behalf of the respondents,
supra,
namely
that such a contravention, if there was one, did not render the 1998
Assignment Agreement null and void
ah
initio.
Would
a contravention of reflation IQ(l)fc). for lack of prior Treasury
approval, have rendered the 1998 Assignment Agreement null
and void
ab
initia
l
[66]
In
Couve
it
was held, at 438D, that the mere fact that a contravention of
regulation 10(l)(c)
is visited with a criminal sanction, does not
detract from the intention of the legislature to render a transaction
concluded in
contravention thereof to be null and void. The learned
judge then went on to hold, at 438H-I, that the particular written
agreement
in that case, which had been held to contravene the
provisions of
regulation 10(l)(c)
, was null and void.
[67]
It appears that a question of this nature must be decided by
attempting to apply the correct interpretation of the statutory

prohibition.
A
useful discussion on the subject is to be found in J R de Ville,
Constitutional
and Statutory Interpretation
paragraphs
2.3.2, 2.3.3 and 2.3.4 on pp261-264.
At
261, the learned author puts it as follows:
"The
question arises in this context whether the sanction imposed is a
sufficient 'punishment' for non-compliance and whether
the
legislature also wished to provide for invalidity in the case of
non-compliance. In answering this question the purpose of
the
legislation is to be considered as well as the mischief that the
legislature wished to remedy. It needs to be asked whether
the
purpose of the legislation will be achieved by invalidating the
action concerned or whether the imposition of the (penal) sanction

will suffice in obtaining this purpose. If (the provision is couched
in positive form and) no sanction is added if the requirements
are
not met. the provision will usually be regarded as being directory
only."
The
learned author then refers to some reported judgments on the subject.
In
Pot
tie
v
Kotze
1954
3 SA 719
(A) it was, for example, held that it had not been the
legislature's intention to punish non-compliance with the
requirements of
a traffic ordinance with a fine as well as declaring
the transaction null and void. The ordinance, in that case, was
couched in
peremptory terms - see the judgment at 723C-E. It was held
that the transaction could not be said to be void due to
non-compliance.
Another example quoted by the learned author is the
case of
Kuhne
& Nagel (Ply) Ltd v Elias & Another
1979
1 SA 131
(T) where the question was whether the non-compliance with
section 61(3)(b) of the Deeds Registry Act no 47 of 1937(which
provided,
in peremptory terms, that every notarial bond shall
disclose the place where the debtor resides) would lead to the
nullity of the
bond. It was held that although the word "shall"
was used, if one had regard to the consequences of determining the
provisions
to be peremptory grave injustice could result if the bond
was held to be invalid - see the judgment at 134G-H.
In
the same judgment, at 133F-H, the learned judge said the following:
"The
use of the word 'shall' and the word 'moet' in the A.frikaans version
is a strong indication, in the absence of considerations
pointing to
another conclusion, that the legislature is issuing a statutory
command and intends disobedience to be visited with
nullity. See
Sutter
v Scheepers
1932
AD 165
at 173. In the last-mentioned case, WESSELS JA suggested
certain useful guides, which were not intended to be exhaustive, to
test
whether provisions are peremptory or directory:
'If
a provision is couched in a negative form it is to be regarded as
peremptory rather than as a directory mandate, but this is
not
conclusive.
If
a provision is couched in positive language and there is no sanction
added in case the requisites are not carried out, then the

presumption is in favour of an intention to make the provision only
directory.
If.
on a consideration of the scope and objects of the provision, it is
found that its terms would, if strictly carried out, lead
to
injustice, and even fraud, and if there is no explicit statement that
the act is to be void if the terms are not complied with,
or if no
sanction is added, then the presumption is rather in favour of the
provision being directory
.'"
(Emphasis added.)
[68]
On a general consideration of these authorities, it seems to be clear
that one of the guidelines to be applied in order to
decide whether
nullity was intended by the legislature in enacting a particular
prohibition, is whether the consequences of such
a declaration of
nullity would lead to grave injustice. As the learned author,
De
Ville, op cit
at
p262, puts it:
"A
finding of invalidity may in certain instances lead to greater
inconvenience and impropriety than the prohibited act itself."
This
was also illustrated in the passage from
Kuhne,
supra,
quoting
Sutter
v
Scheepers,
supra:
"...
if, on a consideration of the scope and objects of the provision, it
is found that its terms would, if strictly carried
out, lead to
injustice, and even fraud, and if there is no explicit statement that
the act is to be void if the terms are not complied
with ..."
It
also appears that the question whether or not a penalty for
non-compliance was imposed is not conclusive. As
De
Ville, supra,
puts
it at 261:
"The
question arises in this context whether the sanction imposed is a
sufficient 'punishment' for non-compliance and whether
the
legislature also wished to provide for invalidity in the case of
non-compliance."
In
Pottie,
supra,
a
penalty was imposed, yet it was held that non-compliance did not
render the transaction null and void. In
Kukfte,
the
same conclusion was arrived at, in a case where no penalty was
imposed.
The
following useful summary of this question is found in L C Steyn,
Die
Uilleg
van
Wette,
5
th
edition pi98:
"(5)
Waar die bepalings van die wet, as hulle streng uitgevoer moes word,
tot onreg en selfs bedrog sou lei, en geen uitdruklike

nietigheidsbepaling en geen sanksie bygevoeg is nie, dan is die
vermoede ten gunste van 'n geldigheidsbedoeling. Vir sover hierdie

stelling nie deur die verwysing na 'n sanksie vertroebel word nie,
druk dit eintlik maar net dieselfde gedagte uit wat ons by
Voet
en
ander skrywers vind. naamlik dat ons tot 'n uitsonderingsgeval van
geldigheid kan konkludeer waar nietigheid groter ongerief
en meer
onwenslike gevolge (waarby seker onreg, bedrog, benadeling van
derdes, ens inbegryp kan word) tot gevolg sou he as die
verbode of
afwykende handeling self. In
Eastern
Transvaal
Garage v Harland
1950
2 SA 778
(T) word op grond van die oorwegings deur
Voet
genoem,
geldigheid aangeneem, ondanks die bestaan van 'n strafhepaling."
The
reference to
Voet
(1.3.16)
is found at 781 of the
Eastern
Transvaal Garage
judgment:
"But
that which is done contrary to law is not
ipso-jure
null
and void, where the law is content with a penalty laid down against
those who contravene it. ... The reason of all this I take
to be that
in these and the like cases greater inconveniences and impropriety
would result from the rescission of what was done,
than would follow
the act itself done contrary to the law."
[69]
In the instant case, the
Exchange Control Regulations, as
far as I
can make out, contain no explicit statement that the relevant Act is
to be void if the terms are not complied with. The
penalty imposed is
a steep one (R250 000,00 or five years or both) and one would, in my
view, tend to conclude that the legislature
intended the sanction
imposed as a sufficient "punishment" for non-compliance and
that the legislature did not also wish
to provide for invalidity in
the case of non­compliance - to quote the phrases used by
De
Ville, supra.
On
a further consideration of these guidelines, it is clear, in my view,
that a grave injustice would result if the 1998 Assignment
Agreement
were to be declared to be null and void
ab
initio:
the
agreement was concluded more than eleven years ago. A great deal of
business activity would have been conducted over that period
on the
strength of the assignment by the Assignee, the first respondent.
Since the assignment, the present applicant, and/or Saville
himself,
was or were interdicted by this court and others from passing off the
trade mark. Years after the assignment, the first
respondent, in
turn, assigned the trade marks to the second respondent, who
continued trading in the relevant protected products
on the authority
of the last-mentioned assignment. Certain legal consequences would
have resulted from these activities and certain
rights would have
been established (so much so that the applicant, in paragraph 8.4 of
the founding affidavit,
supra.
expresses
the need to apply to various relevant foreign trade mark registries
to have the recordal of the assignment "to the
first or second
respondents" reversed). This is the very applicant, which, as
part of the "Assignor", issued the
following guarantee,
supra,
when
entering into the 1998 Assignment Agreement which it now wishes to
nullify:
"The
Assignor warrants to the Assignee ... that the Assignor is unaware of
any infringement of the registration of any of them
or of any reason
why any registration may be capable of being expunged from any
Register of Trade Marks for any reason whatsoever
..."
To
aggravate the grave injustice which, in my view, would flow from a
declaration of invalidity, it appears that there is no duty
on the
applicant to tender any form of restitution in exchange for the
return of the intellectual property - see
Laco
Parts (Pry) Ltd t/a AC A Clutch v Turners Shipping (Pty) Ltd
2008
1 SA 279
(W) at 284C-E, where it was also held that the only remedy
might be an enrichment action. Such a claim, after eleven years,
might
be very difficult to quantify and enforce.
[70]
It is against this background, that I find myself in complete and
respectful agreement with the approach adopted by KRIEK.
J in
Barclays
National Bank Ltd
v
Brownlee
1981
3 SA 579
(D&CLD). This case did not involve the assignment of
intellectual property, but it involved the contravention of
regulation 3(l)(e)
of the
Exchange Control Regulations.
The
full text of
regulation 3(1)
has already been quoted,
supra,
but
it is convenient to repeat the relevant portion:
"Subject
to any exemption which may be granted by the Treasury or a person
authorised by the Treasury, no person shall, without
permission
granted by the Treasury or a person authorised by the Treasury and in
accordance with such conditions as the Treasury
or such authorised
person may impose -
(e)
make a loan or grant credit to any person in the Republic, or
guarantee such loan or credit, where, as security for the repayment

of the loan or credit, the lender or guarantor relies on any
security.
guarantee
or undertaking, explicit or implied, furnished by a person or
personsresident outside the Republic."
Of
course, contravention of this regulation is also subject to the
penalty provision in
regulation 22.
The
issue before the learned judge was also whether or not contravention
of this regulation rendered the underlying agreement null
and void.
The
learned judge revisited the relevant authorities, some of which,
including
Pottle
v
Kotze,
supra,
I
have dealt with. The learned judge also carefully considered some of
the
dicta
in
Swart
v
Smuts
1971
1 SA 819
(A) where it was held that a deed of sale allegedly entered
into in conflict with
section 23(1
)(b) of Act 28 of 1966 is not,
because of such conflict, void or voidable. The learned judge of
appeal revisited the relevant principles,
inter
alia
with
reference to
Sutter
v
Scheepers,
supra,
and
Pottie
v
Kotze,
supra,
at
829C-H. He said the following at 829H:
"As
'n strafbepaling of soortgelyke sanksie ten opsigte van 'n oortreding
van die statutere bepaling bygevoeg word, dan ontstaan
natuurlik die
vraag of die wetgewer dalk volstaan het met die oplegging van die
straf of sanksie dan wel daarbcnewens bedoel het
dat die handeling
self as nietig beskou moet word."
At
830C, after revisiting
Pottie
v
Kotze,
the
learned judge of appeal said:
"Nog
'n belangrike oorweging wat hier ter sprake kom is die feit dat
nietigheid soms groter ongerief en meer onwenslike gevolge
('greater
inconveniences and impropriety' - soos die gewysdes dit stel) kan
veroorsaak as die verbode handeling self."
KRIEK,
J then applied these principles to the regulations in question
generally, and to regulation 3(1 )(e) in particular. He listed
a
number of relevant considerations at 583A-584H. He noted that the
regulations do not provide expressly that such an agreement
is null
and void so that its fate consequently depends upon what the
legislature intended it to be. He noted that the regulation
is
couched in imperative terms - without the necessary permission or
exemption "no person shall ... make a loan or grant credit
..."
He noted the substantial nature of the penalty (in those days only
RIO 000,00 or five years imprisonment or both) and
pointed out that
the penalty prescribed by regulation 22 applies to all contraventions
of these regulations and that the offence
of contravening regulation
3(1 )(e) does not appear to be one of the most serious of these
contraventions. He also noted as a relevant
factor that such an
agreement is not altogether prohibited but can validly be concluded
provided permission or exemption is granted.
The
learned judge also pointed out that the object of the regulations is
-
"...
to control foreign exchange in the public interest, not to grant a
selective moratorium to a particular class of defaulting
debtors."
(Per
STEYN, CJ in
Nestel
v
National
& Grindlays Bank Ltd
1962
2 SA 390
(A) at 395-396.)
In
this regard I find the following remarks by C J Steyn
Die
Uitleg van Welle
5
th
edition
pi98, where he deals with the guidelines to be applied when deciding
whether or not invalidity was intended by the legislature,

informative:
"(8)
By voorskrifte waarvan dit die oogmerk is om staatsinkomste te
verseker, word 'n nietigheidsbedoeling. selfs waar 'n strafbepaling

bygevoeg is, nie veronderstel nie: 'It is a well-recognised rule of
construction that the mere imposition of a penalty for the
purpose of
protecting the revenue does not invalidate the relative transaction'
(McLaughlin
NO v Turner
1921
AD 537).
"
Returning
to KRIEK, J, in
Brownlee,
he
also pointed out, at 584A, that there may
wel\
be
agreements or transactions which are covered by these regulations
which will be held to be void if their provisions are not complied

with. However, concerning the agreement envisaged in regulation 3(1
)(e), he concluded, after a careful analysis, that the objects
of the
regulations do not require the avoidance of such agreements entered
into without the necessary permission or exemption.
The learned judge
then revisited the
dicta
in
Standard
Bank
v
Estate
van Rhyn
1925
AD 266
at 274 where,
inter
alia,
the
earlier quoted words of
Voet
1.3.16
was
also dealt with.
KRIEK,
J then pointed out, from 584H-585C, that he regarded the case in
question as an instance of such "greater inconveniences
and
impropriety" resulting from holding the agreement in question to
be null and void. He concluded by holding that
"I
am persuaded that in relation to regulation 3(1 )(e) 'the law is
content with a penalty laid down against those who contravene
it'. To
hold otherwise would be 'to grant a selective moratorium to a
particular class of defaulting debtors' which the legislature
could
not have intended to do."
[71]
For present purposes, I find myself in respectful agreement with the
approach adopted by KRIEK, J. From the point of view of
deciding
whether or not invalidity was intended by the legislature, I see no
material difference between the provisions of regulation
3(1 )(e) and
10(1 )(c), as they apply to the facts of the two cases in question.
It is clear that the parties to the 1998 Assignment
Agreement did not
even contemplate the possibility of contravening regulation 10(l)(c).
-See, for example,
A-Team
Drankwinkel BK en 'n Ander
v
Botha
en 'n Ander NNO
1994
1 SA 1
at 11A-E.
Indeed,
it is clear from what was stated earlier in this judgment, that not
even the Treasury or Reserve Bank contemplated at the
time that the
assignment of intellectual property would constitute a contravention
of regulation 10(l)(c). It is also clear that
the parties to the 1997
Incorporation Agreement, in clause 4.3 thereof,
supra,
loosely
contemplated the need to obtain "requisite consents and
approvals" from "relevant National Revenue and other

authorities" and had no intention of contravening
Exchange
Control Regulations. Of course
, the respondents were not parties to
the 1997 Incorporation Agreement. The relationship between
regulations 3
and
10
is also illustrated by the fact that
regulation
10(2)
prescribe that the provisions of
regulation 3(3)
, (4) and (5)
shall apply
mutatis
mutandis
to
the goods referred to in
regulation 10(l)(b)
, as described
supra.
[72]
Indeed, where it appears from all the relevant facts and information,
supra,
that
the Treasury (or Reserve Bank) did not even contemplate, in 1998,
that the assignment of intellectual property would constitute
a
contravention of
regulation 10(1
)(c), I find it difficult to see how
it can now be argued, in hindsight, that the legislature, at the time
of promulgation in 1961,
not only contemplated that such conduct
would constitute contravention, but also intended that the
contravention would be visited
by invalidity!
[73]
It remains to point out that both JAJBHAY, AJ (as he then was) in
Couve,
and
BERTELSMANN, J in the first
Pratt
judgment,
supra,
distanced
themselves from the approach of KRIEK, J in
Brownlee
-
see
Couve,
at
4361 and
Pratt,
at
314h-315g.
With
respect, I prefer the approach of KRIEK, J for the reasons mentioned.
[74]
Finally, I turn to an important judgment which was not considered in
either
Couve
or
the first
Pratt
judgment.
It is the case of
Barclays
National Bank Ltd
v
Thompson
1985
3 SA 778
(AD).
[75]
The case concerns a contravention of
regulation 3
(1
)(c)
which reads:
"Subject
to any exemption which may be granted by the Treasury or a person
authorised by the Treasury, no person shall, without
permission
granted by the Treasury or a person authorised by the Treasury and in
accordance with such conditions as the Treasury
or such authorised
person may impose -
(a) ...
(b) ...
(c)
make any payment to. or in favour, or on behalf of a person
resident outside the Republic, or place any sum to the credit
of
such person."
[76]
The chief issue raised in the appeal was summarised as follows by the
learned judge at 787D-F:
"Take
the case of a plaintiff resident outside the Republic who has a claim
sounding in money against a defendant who is an
incola
of
the Republic. The plaintiff seeks legal redress by instituting action
against the defendant in a South African court in whose
area of
jurisdiction the defendant is domiciled. In such circumstances
does the absence of Treasury permission, within the
meaning of
regulation 3(l)(c)
, for payment by the defendant to the plaintiff of
the amount of the latter's claim, or any portion thereof, entail any
disability
on the part of the plaintiff either
(1)
in
suing the defendant or (2) in obtaining the court's judgment in the
plaintiffs favour?"
In
the previous decade, these two questions had arisen in a number of
actions for money claims heard in provincial divisions in
the country
and the resultant decisions had not all been harmonious.
In
the
Thompson
case,
the defendant pleaded that in respect of the plaintiffs claim no
permission had been granted by the Treasury for payment thereof
by
the defendant to the plaintiff. Accordingly, so it was averred, the
plaintiffs action was barred.
About
this defence, the learned judge of appeal said the following at
795F-J:
"In
my view one cannot conceive that the legislature intended to subject
litigants of the class with which we are concerned
to such a sweeping
disability unless such a conclusion is to be gathered clearly from
the explicit language of
regulation 3(l)(c)
or the conclusion is
inevitable as a matter of necessary and distinct implication. In my
view the language of
regulation 3(l)(
c) is not susceptible of the
meaning which counsel for the defendant would assign to it.
Regulation 3(l)(c)
makes no reference whatever to legal proceedings.
Had the object behind
regulation 3(1
)(c) been to make legal
proceedings an instrument for the enforcement of
regulation 3(l)(c)
by requiring Treasury exemption or permission as a prerequisite to an
action for the payment of money by a plaintiff living outside
the
Republic, it would have been a simple matter so to frame it.
Regulation 3(1
)(c) is not so framed. Nor, in my view, can it be said
that the construction for which the defendant contends is to be
derived
as a matter of necessary implication. Bearing in mind the
purpose of the regulation there is, I consider, nothing in the
language
of
regulation 3(1
)(c) which even remotely carries such an
implication.
Embodied
in the regulations is a criminal sanction which is designed to
enforce compliance therewith. The penalty prescribed for

non-compliance is a stiff one. In my view the legislature was here
content with the said criminal sanction as being sufficient
to ensure
compliance with
regulation 3(l)(c)
."
(Emphasis added.)
I
add that in those days the fine prescribed by
regulation 22
was RIO
000,00. It is now R250 000,00,
supra.
The
learned judge of appeal comes to the following conclusion at 796B-C:
"I
am consequently of the opinion that it is open to the Court,
unfettered as it is by any decision of its own, to conclude,
as I do,
that the obtaining of Treasury exemption or permission in terms of
regulation 3(l)(c)
is neither a prerequisite to the institution of an
action by the plaintiff in a case such as the present, nor does its
absence
constitute a valid defence to the plaintiffs claim."
At
797F-H, the learned judge of appeal quotes with approval from what he
describes as a "comprehensive and lucid article"
by
A
C Beck
in
1982(99) SALJ at 125-135:
"To
conclude: the Courts would do better to avoid concerning themselves
with the effects of Treasury permission being granted
or withheld. It
is not really within the province of the Courts to try to weave
around the requirement, and in their attempts to
do so a great deal
of unnecessary hardship has been caused to plaintiffs at the expense
of defaulting debtors, which was certainly
not intended by the
legislature, whose purpose is achieved whenever the permission is
given, if at all.
Treasury
permission has no bearing on the jurisdiction of a Court and, in
fact, does not even constitute a defence to the action
- it is merely
a limitation on payment, which can be removed by the Treasury at any
time, and there is no reason why the plaintiff
should have to wait
for this before obtaining j udgment."
[77]
I have already drawn a comparison,
supra,
between
regulation 3
and
regulation 10.
I see no reason whatsoever to
conclude that a court, faced with a
section 3
contravention, will
adopt a different approach to that of a court faced with a
regulation
10
contravention.
Given
the approach adopted by the learned judge of appeal, I cannot see how
that court, had it been faced with the present dispute,
would have
held that the 1998 Assignment Agreement was null and void
ab
initio
for lack of Treasury
approval. In my view,
Thompson
teaches us that a decision in favour
of validity would be the correct one.
Conclusion
[78]
The decision as to whether or not the legislature intended the
contravention of a statutory prohibition to lead to invalidity

(voidness) of the contravening act, is often difficult to decide.
This much appears from the authorities quoted earlier in this

judgment.
[79]
L C Steyn,
Die Uitleg van Wette,
5
th
edition from pi92 discusses this subject under a separate heading
"Nietigheid van Handeling in Stryd met Wetsbepaling verrig".
He
introduces the subject as follows:
"By
bepalings wat die een of ander handeling verbied of wat die wyse
voorskryf waarop die een of ander handeling verrig moet
word, is dit
dikwels nodig om vas te stel of dit die bedoeling van die wetgewer is
dat
'n
handeling as nietig aangemerk moet word indien dit verrig is in stryd
met die verbod, of op 'n ander wyse as die wat voorgeskryf
is.
Verklaar die wetgewer self uitdruklik dat so 'n handeling van nul en
gener waarde is, val daar natuurlik nie verder oor die
vraag te
redeneer nie, maar nou gebeur dit alte dikwels dat so 'n uitdruklike
verklaring nie by 'n wetsvoorskrif bygevoeg word
nie. Wat is nou die
posisie waar dit ontbreek?"
As
I indicated, such a clear provision is also absent in the present
instance.
[80]
The correct approach seems to be that a court, faced with this
question, must look at the merits, particular circumstances
and
background of each case. The well-known guidelines, which have
crystallised from decided judgments and textbooks, ought to
be
considered and applied, or left aside, depending on what appears to
be the just approach for the particular case.
[81]
I can put it no better than the learned author,
L
C Steyn, op cit
at
195-196:
"Net
soos ons skrywers, aanvaar ons howe nietigheid as algemene reel,
onderworpe aan uitsonderings. In
Standard
Bank v Estate Van Rhyn
1925
AD 274
wys Appelregter SOLOMON na die algemene reel, en vervolg dan:
That
as a general proposition may be accepted, but it is not a hard and
fast ruleuniversally applied. After all, what we have to
get at is
the intention of the legislature, and, if we are satisfied in any
case that the legislature did not intend to render
the Act invalid,
we should not be justified in holding that it was.'
Ter
stawing hiervan verwys hy dan na
Voet
1.3.16,
(quoted
earlier in this judgment) en na sy bewering dat nietigheid soms
groter ongerief en meer onwenslike gevolge sou veroorsaak
as die
verbode handeling self.
Hierdie
oorwegings deur
Voet
genoem,
word in
Leibbrandt
v SA Railways
1941
AD 12
as 'n uitsonderingsgrond bevestig, met byvoeging van die
volgende algemene verwysing uit die uitspraak van Lord PENZANCE in
Howard
v
Boddington
2
PD
203:
As
far as any rule is concerned, you cannot safely go further than that
in each case you must look at the subject-matter; consider
the
importance of the provision that has been disregarded and the
relation of that provision to the general object intended to
be
secured by the Act; and upon a review of the case in that aspect,
decide whether the matter is what is called imperative or
only
directory.'
Beide
in hierdie vonnis en in
Sutter
v Scheepers
1932
AD 173
word beklemtoon dat geen algemene en altyd geldige reel gestel
kan word nie. Die vraag moet elke keer opnuut beslis word met
inagneming
van alle relevante oorwegings wat op die betrokke
wetsvoorskrif en die nietigheid van 'n handeling in stryd daarmee
verrig, betrekking
het.
'n
Volledige opsomming van hierdie oorwegings is nerens te vind nie en
kan moeilik verstrek word. In die algemeen sou wel alle
interpretasiereels en alle vermoedens en ander aanwysings wat van
diens is by die uitleg van wette ook hier ter sake wees. As
geldigheid
of nietigheid sou lei tot 'n resultaat wat volgens
bedoelde reels, vermoedens en aanwysings. nie deur die wetgewer beoog
kon gewees
het nie. sou ons geldigheid of nietigheid, na gelang van
die geval, moes verwerp."
The
learned author then goes on, from pp 196-202, to offer no less than
thirteen guidelines and rules of interpretation which may
possibly be
applied.
[82]
Against this background, and for all the reasons mentioned, I have
come to the conclusion that the applicant has failed to
make out a
case for a finding that the 1998 Assignment Agreement is null and
void,
ab
initio.
I
find that it is not. In the result, the application cannot succeed.
Prescription
[83]
I undertook, earlier in this judgment, to revert to the question of
prescription, raised as a defence by the first and second

respondents.
[84]
In argument before me, Mr Dunn, quite properly, conceded that,
absent a finding of nullity, the claim must be deemed to
have become
prescribed.
The
main thrust of his argument, if I understood it correctly, was that,
where the agreement was a nullity, there was no "debt"
as
intended by
section 11(d)
of the
Prescription Act, Act
no 68 of 1969
that could have become prescribed.
[85]
Mr Ellis, on the other hand, argued that the plaintiffs claim (to get
its intellectual property back) was of a vindicatory
nature and, as
such, ought to be regarded as a "debt" as intended by the
Prescription Act. He
referred, in this regard, to
Barnett
& Others v Minister of Land Affairs & Others
2007
6 SA 313
(SCA) at 320H-321B and the authorities there quoted.
[86]
In my view, there is much to be said for the submission made by Mr
Ellis, so that there is room for a finding that the claim
has become
prescribed in any event. However, given the concession made by Mr
Dunn, and my finding that the 1998 Assignment Agreement
is not null
and void, I need not go further than to find, as I do, that the
applicant's claim has become prescribed.
The
order
[87]
I make the following order:
1.
The application is dismissed.
2.
The applicant is ordered to pay the costs of the first and second
respondents, which will include the costs of senior counsel.
W
R C PRINSLOO
JUDGE
OF THE NORTH GAUTENG HIGH COURT
HEARD
ON: 16 NOVEMBER 2009
FOR
THE APPLICANT: MR E W DUNN SC ASSISTED BY MS I JOUBERT
INSTRUCTED
BY: ADAMS & ADAMS, PTA
FOR
THE
1
st
AND
2
nd
RESPONDENTS: MR P ELLIS SC
INSTRUCTED
BY: MARK W NIXON
FOR
THE 3
rd
RESPONDENT: NO APPEARANCE