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[2019] ZAGPPHC 1102
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Herps N.O. and Others v Ward and Others (10711/19) [2019] ZAGPPHC 1102 (7 March 2019)
COMMISSIONER
OF PATENTS
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Case
Number: 10 711/ 19
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
DATE:
7/3/19
In
the matter between:
FRANCOIS
JEREMIAS HERPS, N.O
1
ST
APPLICANT
(In
his capacity of the FCFC Herps Trust)
(IT3560/02(T))
ANDRIES
PETRUS PRETORIUS, N.O
2
ND
APPLICANT
(In
his capacity of the FCFC Herps Trust)
(IT3560/02(T))
CHARMAINE
HERPS , N.O
3
RD
APPLICANT
(
In his capacity of the FCFC Herps Trust)
(IT35
60 / 0 2( T) )
AILEEN
MARIE GUEST
4
TH
APPLICANT
CYNTHIA-ANN
BENZINGER
5
TH
APPLICANT
CLARISS
VYNESSA GEOGIA LANDMAN
6
TH
APPLICANT
PETER
ERICH BENZINGER
7
TH
APPLICANT
ROBERT
PAUL HOARE
8
TH
APPLICANT
And
JENNIFER
ANN WARD
1
ST
RESPONDENT
KENNETH
GRAVES CRAM
2
ND
RESPONDENT
CHRISTIE-
MARI DU PLESSIS
3
RD
RESPONDENT
JOHN
LOUIS
DAVIS
4
TH
RESPONDENT
NEIGHBIZ
HOLDINGS (PTY) LTD
5
TH
RESPONDENT
NEIGHBIZ
SA (PTY) LTD
6
TH
RESPONDENT
JUDGMENT
Fabricius
J,
[1]
In this urgent application which was originally set down for 20
February 2019, but
was heard on 27 February 20 19, the Applicants
sought the following relief:
"2.
That the Applicants, in terms of s. 165 (5) of the
Companies
Act
71 of
2008
("the
Companies
Act
”
>)
,
be granted leave to bring these proceedings in the name and
on behalf of Neighbiz Holdings (Pty ) Ltd…(the Company")
and condoning the non-compliance with
s. 165
(2), insofar as it is
necessary, in order to protect the rights of the Company:
3.
The First to Fourth Respondents are interdicted
from launching the
application known as NEIGHBIZ ("the NEIGHBIZ App") or
causing the launch of the NEIGHBIZ App by any
juristic person and /
or third party, pending an action to be instituted by the Company
within 30 days of the date of this order;
4.
The First to Fourth Respondents are interdicted
from infringing the
copy-righted works relating to the NEIGHBIZ Application ("the
NEIGHBIZ copy- righted works") of the
Company identified in the
Founding Affidavit or by causing them to be infringed by any juristic
person and/ or third party, pending
the aforesaid action;
5.
The NEIGHBIZ copy righted works are to be
kept in escrow at the
offices of an independent Attorney pending the outcome of their
action;
6.
In the event of the parties being unable to
agree on the identity of
the independent Attorney, either party is entitled to approach a
Legal Practice Council to appoint such
an Attorney;
7.
The First to Fifth Respondents are ordered
in terms of
s. 165
(9) (e)
to permit the Applicants to inspect the books of the Fifth Respondent
to obtain full details of the NEIGHBIZ Application
and any financial
transactions relating thereto."
Costs
were also asked for.
[2]
The First Respondent filed a conditional counter-application in which
she sought a
declaratory order to the effect that she was the owner
of the relevant copy right that is the subject matter ( at least
partially)
of these proceedings. The existence of the copy right is
common cause and in fact, the only issue is to determine
prima
facie
who the proprietor is.
[3]
It was clear to me from reading the some 500 pages that the parties
created for the
purposes of this urgent application that a material
dispute of fact had arisen in the context of the actual issue between
the parties,
and that I could not decide this merely on the
affidavits.
[4]
During Roll Call on 26 February 2019 ,1 mentioned, as I was entitled
to, that I was
of the view that numerous material conflicts of fact
existed. The matter was then heard on 27 February 2019, and the First
Respondent
withdrew the counter-application and tendered any costs
pertaining thereto.
[5]
I do not intend to analyse 500 pages of allegations,
counter-allegations and all relevant
background facts in the light of
the fact that the Applicants are merely seeking a temporary interdict
at this stage which would
make it undesirable, if it is granted, that
I make findings of fact by which the trial Court could possibly be
bound by. Any views
that I express are therefore merely for the
purposes of the relief sought at present.
Brief
background:
[6]
Applicants form a minority shareholding of some 22% in the
Fifth Respondent.
The first four Respondents have a majority
shareholding of some 71% in the Fifth Respondent, and with the First
Respondent having
a 61% shareholding in the Fifth Respondent. The
Fifth Respondent is a company in which the Applicants have invested
for the exploitation
of the NEIGHBIZ Application. The
Shareholder-Applicants contend that the Fifth Respondent
("Holdings"), is a proprietor
of the copy-right that vests
in the NEIGHBIZ Application. The subsistence of the copy-right is
common cause in these proceedings
and, as I have said, the only issue
is to determine
prima
facie
who the proprietor
is. It is in this context that numerous material conflicts of fact
exist.
[7]
The NEIGHBIZ Application has been at least seven years in the making.
First Respondent
had incorporated Holdings for the purposes of
commercializing this application. She sold shareholdings in Holdings
for the purpose
of financing the development. Various minority
shareholders purchased shares in the hope that they would receive a
good return.
[8]
It is clear that since early 20 18, discussions had occurred why this
app. Had not
yet been launched, and it also seems that there were
discussions on a number of occasions concerning the present issue
before me.
Shareholder-Applicants were advised by the First
Respondent that the launch was eminent. It must have come as a bolt
from the blue
that on 28 January 2019, and without any warning or
notice, Respondents' shareholders brought an application in this
Court, seeking
the winding-up of Holdings on the basis that it was
just and equitable to do so. Prior to them doing so, First
Respondent, apparently
on the advice of her Attorney and Accountant,
withdrew approximately R2 million from the bank account of Holdings
and subsequently
launched that application.
[9]
In the context of urgency of the present application before me, it is
interesting
to note that in support of the winding-up application the
First Respondent made statements to the effect that all of the
intellectual
property vesting in the NEIGHBIZ Application, belong to
her personally, and that she would only have licenced Holdings to
make
use of such intellectual property.
[10]
On 1 February 2019, the Shareholder- Applicants heard from one of the
shareholders in the Sixth
Respondent, that the Respondent
Shareholders were arranging for the NEIGHBIZ Application to be
launched in the name of a different
legal entity and/ or by a third
party. Counsel were consulted, and on
7
February
certain correspondence was addressed to the Respondents' Attorney
which indicated that the copy-right in the NEIGHBIZ Application
did
not vest in the First Respondent but rather Holdings, and that it had
been brought to their attention that this application
would be
launched by the end of February, in another entity or third party.
[11]
An undertaking from the Respondents was sought failing which urgent
proceedings would be launched
to protect the rights of Holdings. In
response to this letter, the Respondents' Attorneys indicated that
First Respondent was the
owner of all intellectual property vesting
in the NEIGHBIZ Application, and all undertakings were refused. No
response was given
in regard to the launch date of the application.
[12]
On 12 February 20 19, one of the shareholders advised that the
NEIGHBIZ Application would be
launched on 22 February 2019. Again,
the Respondents' Attorneys were requested to provide certain
information and undertakings.
In response to this letter, the
Respondents' Attorneys failed to disclose the launch date for the
NEIGHBIZ Application, stating
that the First Respondent was entirely
within her rights to launch the application in her personal capacity,
or in any legal entity
she should choose, and whether on 22 February
2019, or any other date. Urgent proceedings were then launched and
set down on the
Urgent Roll for 20 February 20 19. When the
Respondent-shareholders filed their Answering Affidavit, it was
indicated for the first
time that the launch date for the NEIGHBIZ
Application would not be 22 February 2019, but that "no date has
been launched".
Again, the Respondents' Attorneys were contacted
in an attempt to avoid setting down the urgent application
unnecessarily and a
date for the launch was again requested. In
response to this correspondence, the Respondents' Attorneys now
indicated that the
intended launch would be 28 February 2019. During
the hearing, the First Respondent' s Attorneys undertook not to
launch the said
app. until my judgment had been delivered.
[13]
In the light of this brief history, and
also
the
consideration
of
what
is
actually
the issue
between
the
parties,
and
certain
correspondence relating thereto
,
I
hold that this application is urgent.
Section
165
of the
Companies Act:
[14
]
This section deals with derivative actions such as the present one.
The said section provides for
a statutory derivative action to
enforce the rights of the Company on its behalf, because although it
is the proper Plaintiff,
the "wrongdoers" are in control of
the Company, and will not enforce its rights against themselves. In
Mbethe
v United Manganese
of Kalahari (Pty) Ltd
2017
(6)
SA
409
SCA,
it was held that the Court
exercised an overriding discretion whether or not to grant leave to
institute derivative action. The
imposition of an onus on an
Applicant, together with the exercise of a discretion by the Court,
had as its objective, not only
the need to protect the rights of
members of the Company, but also the need to protect the
administration of the business of the
Company. With regard to
personal derivative actions in terms of
s. 165
(5), the Court may
grant leave only if it is satisfied that the Applicant for relief is
acting in good faith, that the proposed
proceedings involve the trial
of a serious question of material consequences to the Company, and
that it is in the best interest
of the Company that the particular
Applicant be granted the necessary leave to commence the proposed
proceedings. The provisions
of s.165 (5) (b) of the
Act
requires an enquiry into the good faith of the Applicant. It
is also clear that the Court retains an overriding general discretion
to grant or refuse an application for leave.
[15]
Looking at the application holistically, I find that such good
faith has been shown to exist. I also need to consider in the present
context, the requirements of s. 165 (6) relating to no notice being
required under exceptional circumstances. Again, without attempting
to analyse every relevant fact, or suggested relevant fact, I have
considered all the arguments and I hold that exceptional
circumstances
do indeed exist, having regard also to the requirements
referred to in s. 16 5 (6 ) (a) (i), (ii) , and (b) and (c). In this
context
therefore, I exercise my overall discretion in favour of the
Applicants.
[16]
The real issue is whether or not the First Respondent acted in the
course of employment with
Holdings under a contract of service as
envisaged by the provisions of s. 21 (1) (d) of the
Copyright
Act of
1978
.
In my view, this is
a topic that the trial Court will address as it is the most
appropriate forum having regard to the disputes
of fact that relate
thereto. There are a number of documents that indicate that on the
probabilities, and at this stage I put no
higher than that, it may
well be found by a trial Court that the First Respondent either
attempted to mislead the Applicants and/
or to bring them under the
wrong impression with the view to ultimately obtain all relevant
benefits for herself only. I will refer
to a number of these
instances. A "NEIGHBIZ business plan" was prepared by First
Respondent in March 2018. It indicates
that the Sixth Respondent
"holds the National Distribution Rights of all NEIGHBIZ licences
and trademarks, brand names and
other confidential information
pertaining to NEIGHBIZ on the on-line portal, has manifested in
application's website". And
"such rights have been acquired
by NEIGHBIZ SA under an agreement with NEIGHBIZ Holdings (Pty) Ltd
for the finalisation of
the distribution of all franchise licensees
within the Republic of South Africa. Nothing in the entire document
indicates that
any intellectual property rights belong to the First
Respondent. The Answering Affidavit contains no explanation as to why
she
stated what she did.
[17]
She also wrote a letter dated 22 March 2017 to "NEIGHBIZ
shareholders". She does not claim any intellectual property
rights
in the NEIGHBIZ Application or indicate that the patent will
be filed in her name. Moreover, she repeatedly uses the word "we"
in the context of what rights exist and what needs to be done in that
respect in the context of her marketing the NEIGHBIZ Application
in
the USA. For instance: "If we succeed and the patents are
granted, it could be worth millions - if we fail, we gave it
our best
try". Also, under the heading "DILUTION OR FURTHER
INVESTMENT", she says: "We need to complete the
applications and API". She also states that she intends to
pursue the US market and says: "There is no doubt that this
is
our first prize". Keeping in mind that this letter is addressed
to NEIGHBIZ shareholders, it is significant that she also
stated that
"we could defend in Court any breach of copy right". No
explanation is given by the First Respondent in this
regard. There
are other similar instances, one of them also being a revised
Memorandum of Understanding, dated 25 January 2017.
This indicates
that "The design and code of the application will be bespoke,
and will remain at all times the property of
NEIGHBIZ (Pty) Ltd".
This particular email further makes it clear that all funds invested
would be for the development of
Holdings and that no funds would be
for personal use (except for a salary for First Respondent). As I
have said, there are at least
another half a dozen communications
either in the same vein, or that indicate on the balance of
probabilities that would support
the granting of an interim interdict
at this stage. In this context, I refer particularly to annexures
FA10, FA11, FA12, FA13.1
to FA13. 2, FA13.3, FA13.4 and annexures
RA4, RA7, RA9, RA16 and RA17. It was submitted that these objective
facts indicate that
Holdings is the holder of the copy right vesting
in the NEIGHBIZ Application and not the First Respondent.
[18]
An interim interdict is requested and in my view, the
requirements relating thereto have been fulfilled.
See:
Olympic
Passenger
Services
(Ply) Ltd
v
Ramlagan
1957 (2)
SA
382
(D).
There
are clear indications that the launch date of the NEIGHBIZ
Application has been deliberately withheld. Exceptional circumstances
exist in my view justifying the institution of this application
without prior demand. I have considered the question of irreparable
harm, as well as the balance of convenience. This clearly favours the
granting of an order at this stage, subject to the qualification
that
appears in my order. In my view, there is at present no other
mechanism available to the Applicants to obtain similar relief
than
the prayers sought.
[19]
The Respondents hold a different view and made detailed submissions
in that regard. As I have
said however, the objective facts contained
in the some 500 pages of affidavits and annexures indicate that the
answer contended
for on behalf of the Respondents is not as clear-cut
as was put to me. I, for obvious reasons, do not intend making any
final rulings
in this context, as this is a matter that clearly calls
for a decision by trial Court. I am satisfied that the statutory
requirements
have been met in this case, as have those applying to
the granting of an interim interdict. I also exercise my overall
discretion
in this regard, in favour of the Applicants, and as a
result the following order is made:
Prayers
1 to 7 of the Notice of Motion are granted. This order will not
operate as a bar to any claim the Respondents may have for
damages,
nor will the order operate as a defence to any such claim for
damages.
JUDGE
H.J FABRICIUS
JUDGE
OF THE HIGH COURT GAUTENG DIVISION, PRETORIA