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[2018] ZASCA 175
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Pexmart CC and Others v H. Mocke Construction (Pty) Ltd and Another (159/2018) [2018] ZASCA 175; [2019] 1 All SA 335 (SCA); 2019 (3) SA 117 (SCA); 2018 BIP 345 (SCA); [2018] 2 CPLR 440 (SCA) (3 December 2018)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 159/2018
In
the matter between:
PEXMART
CC FIRST
APPELLANT
PEXMART
LINED PIPE SYSTEMS (PTY) LTD SECOND
APPELLANT
MARIUS
JOHANNES
HENN THIRD
APPELLANT
and
H.
MOCKE CONSTRUCTION (PTY)
LTD FIRST
RESPONDENT
HEIN
MOCKE SECOND
RESPONDENT
Neutral
Citation:
Pexmart
CC v H. Mocke Construction (Pty) Ltd
(159/2018)
[2018] ZASCA 175
(3 December 2018)
Coram:
Navsa
ADP, Lewis, Mocumie, Molemela and Makgoka JJA
Heard:
20
November 2018
Delivered:
3
December 2018
Summary:
Unlawful
competition – unlawful use of confidential information and
trade secrets of a competitor – principles restated
–
failure to call material witness – adverse inference drawn from
failure to testify.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Louw J sitting as court of
first instance):
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
Navsa
ADP (Lewis, Mocumie, Molemela and Makgoka JJA concurring):
[1]
Essentially, this appeal, with the leave of the Gauteng Division of
the High Court, Pretoria, is about whether Pexmart CC, Pexmart
Lined
Pipe Systems (Pty) Ltd and Mr Marius Johannes Henn, the first to
third appellants respectively, have unlawfully made use
of
confidential information and trade secrets of Mr Hein Mocke and H.
Mocke Construction (Pty) Ltd (Mocke Construction), the second
and
first respondents respectively, in relation to a pipelining process.
The details of the events leading up to the litigation
in the court a
quo and the issues that arise for adjudication, are set out
hereafter. I shall, where it is convenient, refer to
the parties
collectively as the appellants and the respondents.
[2]
Mocke Construction is a pipeline construction company that
specialises in lining steel pipes used in the mining industry with
a
plastic high density polyethylene liner by welding factory
manufactured plastic liner pipes together into lengths beyond one
kilometre and then lining a one kilometre steel pipe internally with
the plastic liner pipe. The plastic lining adds longevity
to the
steel pipes by protecting the steel from eroding due to sand and
slurry mineral deposits. The plastic lining extends the
lifespan of a
steel pipe by almost 30 years
.
A
specific plastic-lining process is central to this case. More about
that later.
[3]
Before the material events that gave rise to the present litigation,
both Mr Mocke and Mr Henn had developed experience in the
plastic
lining of steel pipes. They both studied at the same technical high
school and have known each other since their mid-teens.
During 1999,
they were re-acquainted within an employment environment and, at one
stage, built and adapted an extrusion machine,
which extruded
polypropylene.
[4]
Mr Mocke has a BSc degree in Engineering from the University of
Potchefstroom and a chemical engineering degree from the Vaal
Triangle Technicon based in Vanderbijlpark. In 2009, after conducting
business through his own plastic pipe construction company
and
thereafter being employed by two other companies that were involved
in the plastic lining of steel pipes, Mr Mocke registered
Mocke
Construction. He did this in order to solicit the business of a gold
mining company in relation to a pipelining project.
According to Mr
Mocke he had always harboured the ambition to revolutionise the
pipe-lining industry by rehabilitating old pipes
through placing a
plastic liner inside the steel pipe that would make it last for
another 30 years.
[5]
With the twin goals set out in the preceding paragraph, Mr Mocke
began discussions with Mr Don Gish, an American, who owned
Polymeric
Pipe Technology Corporation (Polymeric). That entity is the owner of
what is described as the Polymeric/Sureline Process
(the Process) for
plastic-lining steel pipes. The process uses a specialised deformer
machine invented by Mr Gish. The latter sold
Mr Mocke the ‘exclusive
and irrevocable licence [to the Polymeric/Sureline Process]’.
In turn, Mr Mocke, with Mr Gish’s
consent, permitted Mocke
Construction use of the intellectual property rights that flowed from
the licence.
[6]
A letter from Polymeric dated 1 May 2010 set out the terms of the
‘exclusive licence’:
‘
By this document of
confirmation, Mr. Hein Mocke is extended an unconditional license to
the Polymeric Process within the continent
of Africa, without
exclusion.
This irrevocable
exclusive
license
will be for the benefit of Mr. Hein Mocke and Mr. Hein Mocke only.
This license of agreement extended
from Polymeric Pipe Technology Corporation, referred to as PPTC,
offers the permission to use
the trademark “Polymeric or
SURELINE®” in all terms of business but not to obligate
PPTC of America without PPTC
of America permission.
PPTC of America will support Mr. Hein
Mocke in all efforts and business pursuits which includes current and
any new technical developments,
design, however excludes construction
of Polymeric equipment which includes Polymeric’s Sureline
liner deformers.
Mr. Hein Mocke is entitled to share
the good will and reputation of the Polymeric Lining Systems
generated by PPTC of America.
Beside the construction of the
Polymeric deforming equipment to be purchased from PPTC of America,
PPTC will be entitled to $0.38
/ linear foot of liner royalty
installed by Mr. Hein Mocke and his entity.
’
(Emphasis
in original.)
[7]
As can be seen, the terms of the licence do not allow for the
construction by Mr Mocke of the machine underlying the Process.
Polymeric retained the sole right to construct the machine, which Mr
Mocke purchased and imported from the United States of America.
Mr
Mocke purchased the machine and, at his own cost, transported Mr Gish
and a Polymeric team to South Africa for two months of
on-site
training. Mr Mocke paid a total of R17 million for the deformer
machine, an accompanying winch, other equipment and ‘the
intellectual property of Polymeric and the knowledge and experience
of Gish’.
[8]
For a better understanding of how the Polymeric machine operates and
the problems initially experienced by Mr Mocke and Mr Henn,
and for a
proper appreciation of the issues raised in this appeal, it is
necessary to have regard to what, at the time of the acquisition
by
Mocke Construction of the deformer machine and the licence from
Polymeric, were known and accessible methods employed to line
a steel
pipe with a plastic liner.
[9]
The first is a patented method called swagelining. This is where a
plastic liner is pulled through a reducing ring or rollers
and then
pulled into the steel pipe by keeping the liner under tension
(stretching the liner) while lining the steel pipe. It takes
approximately two weeks for the liner to shrink back in the pipe and
interference fit
[1]
to the
inside of the pipe.
[10]
The second, which is foundational to the Process, is the deforming
method, using a deforming machine. A deforming machine has
a guide
wheel or wheels which exert a downward pressure on a perfectly
rounded plastic pipe that causes it to deform so as to fit
into the
steel pipe which it is intended to line. As stated earlier, the
deformed plastic pipe is then pulled through the steel
pipe by a
winch. Once it has been pulled through the steel pipe, air pressure
is forced into the deformed plastic liner to enable
it to revert to
its original form. It then fits snugly into the steel pipe.
Generally, the deforming process occurs as the pl
astic
pipe is being pulled into the steel pipe. The photograph set out
hereafter shows a cross-section of a plastic pipe in its
deformed
state.
[See
PDF for image]
[11]
The photograph that appears below shows how the beginning of the
indentation to
form the C-shape looks
on a slightly longer piece of pipe.
[See
PDF for image]
[12]
During February 2011, before the Process was refined, as will be
described later, Mr Henn was offered and accepted employment
with
Mocke Construction. He became involved with the gold mining project
referred to above, which had prompted Mr Mocke to search
for and find
an effective pipe-lining method. By that time Mr Henn and Mr Mocke
had been friends for a number of years. Mr Mocke
described Mr Henn as
a ‘professional confidant’ and as his ‘right-hand
man’. I shall, in due course, describe
Mr Gish’s
decades-long pioneering efforts in developing a deforming process as
well as his contribution in relation to the
refinement of the
Process.
[13]
When the machine purchased from Polymeric arrived in South Africa
during January 2011, it did not work optimally. This was
due to poor
South African welding techniques, which led to uneven sharp edges
within the steel pipes to be lined with plastic.
As stated earlier,
the technique generally employed in deforming plastic pipes in order
to line steel pipes was that the plastic
pipe was deformed as it was
being pulled through the steel pipe. This was how the Polymeric
machine was employed prior to it being
brought to South Africa and
initially, when Mr Gish and the Polymeric team as well as Mr Mocke
and Mr Henn put it to use. As the
plastic pipe was being deformed and
pulled through the steel pipe, a tape was applied to keep it in the
C-shape. The tape holding
the plastic liner in the C-shape would
break prematurely due to the uneven sharp edges referred to above.
The plastic liner would
lose its folded C-shape and it would get
stuck in the steel pipe.
[14]
The Polymeric team, including Mr Gish, together with Mr Mocke and Mr
Henn, worked to resolve the problem. The problem was resolved
by
deforming the plastic pipe completely outside of the steel pipe and
then taping it before pulling it through the steel pipe
at speed and
then expanding it with air once it was inside the pipe. At this stage
it is necessary to have regard to the assertions
in the founding
affidavit in the application by Mr Mocke, in which relief was sought
against the appellants and about which more
will be said later. Mr
Mocke said the following:
‘
The Polymeric team, inclusive
of Gish plus two members of his staff, myself and the Third
Respondent worked together to resolve
the problems and ultimately I
created a new technique to deform the plastic liner outside of the
steel pipe on rollers and then
to pull it in with speed. This was a
completely new method and had never been done before in the world; in
that Polymeric’s
process is to deform the plastic liner while
it gets pulled into the steel pipe whereas the First Applicant
deforms the plastic
liner completely outside of the steel pipe, rests
the deformed liner on rollers and then pulls the plastic liner into
the steel
pipe and then expands it with air once the entire liner is
inside the steel pipe.
This
was an instant success and resulted in the First Applicant having
created and successfully proven the fastest pipe lining process
on
the African continent, if not in the world with a modified unique new
method of lining, with major cost savings for the benefit
of the
project duration.’
[15]
During October 2013, Mr Henn’s services with Mocke Construction
were terminated. The reasons for the termination are
contested, but
is an aspect that need detain us no further. Mr Henn, almost
immediately thereafter, took up employment with Pexmart
CC. Mr Mocke
and Mocke Construction contended that the appellants then became
their competitors in the pipe-lining industry through
the alleged
unlawful actions of Mr Henn.
[16]
During October 2013, Mr Mocke warned the appellants that legal action
might ensue in the event of their use of the Process.
During the
second half of 2014, Mr Mocke became aware that the gold-mining
company referred to earlier was in advanced negotiations
with Pexmart
CC for the completion of the plastic pipe-lining project, in respect
of which the existing contractor had defaulted.
According to Mr Mocke
the tender by Pexmart CC was based on the use of the Process. The
gold-mining company had opted to use Pexmart
CC because its tender
was cheaper.
[17]
Written exchanges between Pexmart CC’s and Mr Mocke’s
respective attorneys took place. The following is a material
part of
Pexmart CC’s attorneys’ response to the threatened legal
action:
‘
We refer to your letter dated
14 July 2014 addressed to our client concerning the alleged breach of
an exclusive licence for deforming
of a pipeline, as well as the
machinery used in the said process.
Our client denies that your client has
any rights in the machinery or method used for deforming pipelines
nor that our client is
or ever has been a licensee of your client. In
fact, it is your client that is engaged in unlawful competition with
our client
by making spurious allegations in respect of intellectual
property rights and our client’s business, which allegations
are
intended to harm our client’s business and to compete
unfairly and unlawfully with our client.
It is in any event our instructions
that the
machinery used by our client in deforming pipelines is
not in any manner related to the machinery used by H Mocke
Construction (Pty)
Ltd for pipeline deformation
.
. . .
It is further to be appreciated that
pipelines can be deformed by applying various techniques and
machinery, which machinery and
techniques our client has developed
independently from H. Mocke Construction (Pty) Ltd.’ (My
emphasis.)
It
is common cause that the Polymeric machine was not patented.
[18]
The respondents communicated with the gold-mining company referred to
above, informing it that they intended asserting their
proprietary
rights but were met by a written response that the mining company
reserved its right to call for competitive tenders
in accordance with
good business practice. All the indications were that the gold-mining
company was seriously considering awarding
the contract to Pexmart
CC.
[19]
Mr Mocke and Mocke Construction were adamant that it was clear that
the appellants had reverse-engineered the Polymeric deforming
machine
and intended to market their services competitively, utilising Mr
Mocke’s trade secrets, intellectual property and
licensed
technology. The appellants refused to accede to the respondents’
demand to cease using the deforming machine, intellectual
property
and licensed technology, which the latter insisted they were
employing unlawfully. This led to an application by Mr Mocke
and
Mocke Construction in the court below for an order, inter alia, in
the following terms:
‘
1. THAT the First, Second and
Third Respondents are hereby immediately restrained and interdicted
from:
1.1
imitating, copying, simulating
and using;
1.2
reverse engineering,
reproducing, constructing and using;
1.3
marketing, selling, tendering
and using
directly and indirectly through an
agent, third party or otherwise in any manner the Sureline and/or
Polymeric deforming process
of the Applicant, its machine(s),
intellectual property, techniques, on-site training, technology and
the know-how associated therewith
under sole license to the
Applicant.
2. THAT the First, Second and Third
Respondents are hereby immediately restrained and interdicted from
constructing and utilizing
the Sureline and/or Polymeric deforming
process of the Applicant or it’s machine(s), intellectual
property, techniques, on-site
training, technology and the know-how
associated therewith.’
[20]
In asserting that the appellants were unlawfully making use of their
confidential information and trade secrets, the respondents
asserted
that the following proprietary knowledge was exclusive to them:
(a) the method and
know-how used to fold the plastic liner outside the steel pipe is a
revolutionary new method that had never been
employed on African
soil;
(b) during the folding of
the plastic liner, a certain skill is required to detect the
behaviour of the liner and what procedure
to follow should the folded
liner get stuck, this skill and knowledge was only possible to obtain
through the training with Mr
Gish on site;
(c) the specialised tape
used to ensure that the liner does not lose its folding state, has
very unique manufacturing technology
and qualities and is tailor-made
for the application and use in the deforming process. This knowledge
is crucial to the method
and could only be obtained by the transfer
of this knowledge from Mr Gish;
(d) the correct use of
the tape is an exact science, because the plastic liner wall
thickness in correlation to its diameter, determines
the spacing,
angle of application, speed and width of the tape. If this is done
incorrectly the tape will snap; this knowledge
was only obtainable
through Mr Gish;
(e) the knowledge to know
what maximum liner wall thickness will be suitable to use for a
specific diameter pipe and relative to
the length of pull is a
calculation that only Polymeric and Mr Gish have passed on to Mr
Mocke. For example, in towing a 30 (thirty)
ton plastic liner of 500
(five hundred) metres through a steel pipe with the winch requires
the towing head that connects the cable
to the liner be prepared in a
certain method with specific plate dimensions. This knowledge was
transferred by Mr Gish;
(f) to fold the liner two
wheels push in tandem down on the liner, the dimensions of the curve
of the wheels is proprietary information
and of extreme importance as
the stresses incurred on the liner may exert beyond the maximum
allowable strain, causing the liner
to crack or splinter. This
knowledge was transferred during the on-site training by Mr Gish. If
the pressures are over-exerted
with the incorrect radii, the liner
will experience excessive strain and the liner will be damaged beyond
repair.
(g) to enable the pulling
of a plastic liner a cable needs to be pulled through the 500 (five
hundred) metre steel pipe. The way
to ‘shoot a pig’ is
common knowledge, but the unique design of the front cone piece is
proprietary knowledge and custom
made for the Process. This design
was presented to the respondents during their on-site training by Mr
Gish;
(h) if the liner gets
stuck during the insertion process into the steel pipe, Mocke
Construction designed a cut-out device from
a drawing received from
Mr Gish, this proprietary knowledge is unique and crucial for the
rehabilitation of old pipes.
[21]
The respondents stated that the proprietary knowledge referred to
above had been developed and taught ‘in literally thousands
of
man hours and at a cost of millions’. Mr Mocke was emphatic
that the Polymeric deformer machine could only be operated
successfully using that confidential information. The respondents
alleged that Mr Henn, who was Mocke Construction’s operations
manager at the time that the expertise referred to above was
developed and transferred, abused his position of trust by utilising
their confidential information and trade secrets.
[22]
The appellants opposed the application. In their answering affidavit,
in dealing with Mr Mocke’s claims set out in para
20 above, the
appellants commenced with a generalised denial of them all.
Significantly, however, they then chose to confront certain
specific
issues but refrained from challenging other material aspects. They
asserted that neither Mr Mocke nor Mocke Construction
‘owns any
alleged specialised exclusive technology and know-how to deform high
density polyethylene (HDPE) pipe for insertion
and lining of a steel
pipe’. They stated that many companies specialise in the
deforming of plastic pipes for the lining
of steel pipe lines and
that various methods for deforming plastic pipes were publicly
available on the internet. The following
parts of the appellants’
answering affidavit are relevant:
‘
It is further stated that the
deformation of a deformable pipe can be achieved by any suitable
means. In addition, the means for
temporarily keeping the pipe in
this deformed status wherein the diameter is reduced, can also be
achieved in any conceivable and
convenient manner.
The Respondents recently developed
their own method for deforming a pipe so as to reduce the diameter
thereof.
The method entails the closing off of
the ends portions of the pipe and thereafter extracting the air
within so as to cause the
pipe to collapse.
After insertion of the collapsed pipe
into a steel pipe, the sealed ends are opened up causing an influx of
air and subsequent expansion
of the deformed pipe into its original
shape and size. By using this method no tape is necessary for keeping
the pipe in the deformed
status.
From the abovementioned it is quite
clear that in stark contradistinction to the Appellants’
allegations, plastic pipe deformation
and lining is not a highly
specialised technology, nor is the current method used by the First
and Second Respondents in any way
similar to the method used by the
First Applicant.’
[23]
In opposing the relief sought by the respondents, Mr Henn stated that
he had personally been involved in ‘the optimisation’
of
the process. He alleged that it was
his
idea to deform the full length of the plastic pipe outside of the
steel pipe, before it was inserted. According to Mr Henn he had
received training from his previous employer, Quadrant Chemplast
(Pty) Ltd (Chemplast), on the procedure to be followed when a
plastic
liner got stuck within a steel pipe during the lining process and
that Mr Gish’s contribution in that regard was
negligible.
[24]
There was no specific denial that the Process, as refined with the
participation of the Polymeric team and with directions
from Mr Gish,
was a revolutionary new method that had never before been used on the
African continent. They chose not to engage
with the specific
assertion that in the deforming process certain skills were required
to deal with the unpredictable behaviour
of the plastic. Likewise
they did not engage with the statement that a special skill was
required to deal with the situation when
the deformed plastic pipe
got stuck during the lining process.
[25]
In relation to aspect (c) raised by Mr Mocke, in para 20 above,
namely that the specialised tape used to keep the deformed
plastic
pipe in the C-shape, has very unique technical abilities and was
tailor-made for the Process, Mr Henn stated that the ‘special
tape’ is widely available in South Africa under various brand
names. It is necessary to bear in mind that Mr Mocke stated
that the
requisite characteristics of the tape were determined by Mr Gish and
transferred to him and Mocke Construction.
[26]
Aspect (d) was that the correct use of the tape was an exact science,
because the plastic liner wall thickness in relation
to its diameter,
determines the spacing, angle of application, speed and width of the
tape. To this the appellants responded minimally,
by stating that
pipe deformation is not an exact science.
[27]
In response to the assertion by the respondents in respect of item
(e), that the required technical knowledge, relative to
the maximum
liner wall thickness
vis-à-vis
the diameter of a steel pipe and the length of pull, was imparted to
Mocke Construction by Mr Gish, the appellants were vague and
stated
that Mr Henn
had
re-invented
the method of connecting the pulling-head to the deformed liner and
that Mr Gish’s contribution in that regard was negligible.
In
respect of the remaining aspects, which dealt with technical
know-how, the appellants’ response was limited. In effect,
there was no real engagement on those aspects.
[28]
Mr Henn was emphatic that there was nothing special or unique about
the Polymeric deforming machine and the processes used
by the
respondents in the deformation process. He insisted that no special
skills were required. That notwithstanding, the following
part of his
answering affidavit is instructive:
‘
The Respondents recently
developed
their own method
for deforming a pipe so as to reduce the diameter thereof.
The method entails the closing off of
the ends portions of the pipe and thereafter extracting the air
within so as to cause the
pipe to collapse.
After insertion of the collapsed pipe
into a steel pipe, the sealed ends are opened up causing an influx of
air and subsequent expansion
of the deformed pipe into its original
shape and size. By using this method no tape is necessary for keeping
the pipe in the deformed
status.
From the abovementioned it is quite
clear that in stark contradistinction to the Appellants’
allegations, plastic pipe deformation
and lining is not a highly
specialised technology, nor is the current method used by the First
and Second Respondents in any way
similar to the method used by the
First Applicant.’ (My emphasis.)
[29]
In their replying affidavit, the respondents provided photographic
evidence of a deformer machine at Pexmart CC’s premises.
It was
a deforming machine, not identical, but similar to the Polymeric
deforming machine. It differed in the number of discs exerting
downward pressure to deform the pipe. Polymeric’s machine has
two discs and the appellants’ machine only one. The Polymeric
machine has a pair of rotating rings which have taper heads while the
appellants’ machine contains only one taper head. The
appellants’ machine, unlike the Polymeric machine, has a taper
head angle head adjustment feature.
[30]
In a supplementary affidavit, Mr Mocke presented a printout from the
Pexmart CC website which reads as follows:
‘
. . . Pexmart lined pipe
systems uses a winch to pull the liner through the folding machine
and into the steel pipe itself. After
the liner is installed, HDPE
sealing stubs are butt-welded to the ends of the liner and then
covered with blowing flanges. Compressed
air is then inserted into
the HDPE liner and with the elastic nature of the NDPE material
causes the liner to expend tight against
the steel pipe internal
wall. Long pipeline lengths 100mtr-1000mtr can be achieved depending
on the pipeline route and contours
of the area.’
[31]
In his response to the supplementary affidavit, Mr Henn said the
following:
‘
8.1 The website on which the
First and Second Respondents advertise has recently been upgraded,
and the printout annexed as Annexure
SA 1 is a printout from the
upgraded website.
8.2 After the filing of the previous
affidavits in this application the Respondents took legal advice that
the Applicant, in the
absence of having filed a patent to protect the
way in which it deforms pipes, has no exclusive rights to the manner
in which it
deforms pipes. The Respondents were furthermore advised
that there is nothing unique in the way that pipes are folded, and
that
therefore the Applicant can in any event not register a patent
in this respect.
8.3 Accordingly the First and Second
Respondents now deform pipes using the vacuum method, and also using
a folding method, which
method of deforming pipes is not the same as
the method used by the Applicant. The Applicant makes use of the
Sureline technology,
and the Respondents do not use the Sureline
technology. In particular the First and Second Respondents do not
tape the deformed
pipes in the same way that the Applicant does.
8.4 The Applicant and the deponent
[are] constantly seeking to gain insight into the confidential
information of the First and Second
Respondents which information
it is not entitled to. This information is inter alia used to compile
tenders, on which tenders
the Applicant is a competitor. Argument in
this regard will be advanced at the hearing of the matter.’
I
pause to observe that 8.3 does not follow logically upon 8.2.
Contextually, 8.3 appears to suggest that the new method was resorted
to in order to nullify the respondents’ challenge.
[32]
On 7 March 2016 by agreement, the opposed application was referred
for the hearing of oral evidence by Basson J, on the following
four
issues:
‘
1.1 Whether the two deforming
processes adopted by the Respondents are dissimilar to the Sureline
and/or Polymeric deforming process
utilized by and under license to
the Applicants or are identical thereto;
1.2 Whether the Sureline and/or
Polymeric deforming process of the Applicant, its machine(s),
intellectual property, techniques,
on-site training, technology and
the know-how associated therewith is protected by the license awarded
to the Applicants;
1.3 Whether protectable confidential
information exists in respect to the Sureline and/or Polymeric
deforming process of the Applicant,
its machine(s), intellectual
property, techniques, on-site training, technology and the know-how
associated therewith;
1.4 Whether the Respondents are
utilizing such protectable confidential information.’
[33]
Evidence was adduced before Louw J. Mr Mocke testified. His evidence
in relation to the deforming process and the specificity
of the
Process was largely in line with what was contained in his founding
affidavit. A video recording was presented to the court
which
visually demonstrated the Process. The video is impressive and is
indicative of the speed with which a steel pipe can be
lined with a
plastic pipe by employing the Process. In his evidence-in-chief, Mr
Mocke was asked which part of the activities shown
in the video
recording he claimed proprietary rights to. In this regard, he was
referred to the claims made in the founding affidavit,
set out in
para 20 above, which he confirmed.
[34]
To assist him in giving his testimony, counsel representing the
respondents, presented Mr Mocke with a cross-section cut-off
of a
length of deformed plastic liner which had tape around it. Mr Mocke’s
evidence in relation to the question posed in
the preceding paragraph
commenced with an explanation of the characteristics of polyethylene.
He explained that it was a material
that has a density of less than
one and that it floated in water. He also described it as having a
growing abrasive resistant nature.
It was a thermo plastic, which
meant that it gets soft when heat is applied. It does not corrode.
[35]
Mr Mocke testified that when the pipe was deformed into a C-shape,
the two lobes (hemispheres) had to be equal and that if
the plastic
pipe is not properly centred whilst it was being deformed, it could
twist because of torque
[2]
due
to the fabrication of the liner by the supplier. The liner also has
the ability to roll upside down while the deformer is folding
it.
When this occurred, the tape holding the plastic pipe in the C-shape
was not equal and the tape was cut and the plastic liner
got stuck
within the steel pipe. The impact of differing lobes has a twisting,
roll effect. Temperature changes due to sunlight
on a part of the
deforming machine or on parts of the plastic pipe and the thickness
of the liner all have an effect. When one
is dealing with a two
kilometre length of pipe, these impacts can cause the plastic liner
to snap, causing failure in the lining
process.
[36]
Mr Mocke also testified that the winch that was used by Mocke
Construction to pull the liner through the steel pipe is the
largest
horizontal winch in South Africa. According to him it was critical
that, whilst pulling the plastic pipe to start the deforming
process,
the molecular chain of the polyethylene is not damaged. If that
occurs due to extreme tension, the pipe will crack. He
explained how,
when the Polymeric deformer machine was first utilised by him and the
Polymeric team, the tape was sheared off because
of sharp edges
within the steel pipes.
[37]
With reference to photographs of the Polymeric machine forming part
of the record, Mr Mocke testified how the two circular
discs which
cause the deformation of the plastic pipe as they rotate, have to be
adjusted by rollers on the machine to ensure perfect
lobes to the
C-shape. What is required, according to Mr Mocke, is constant
vigilant supervision to prevent twisting or turning
resulting in the
lobes becoming uneven. The discs also have to be raised or lowered to
prevent uneven lobes. A vigilant supervisor
would, during the
deforming process, have to perform a tweak to ensure that the C-shape
does not distort. The behaviour of the
plastic pipe in the deforming
process, according to Mr Mocke, is unpredictable.
[38]
In his evidence-in-chief, Mr Mocke denied that the tape used to
retain the C-shape, was readily available off the shelf from
suppliers. He was adamant that it was specially designed in the
United States of America for the Process and was subsequently
designed in South Africa under the supervision of Mr Gish. Other
tapes have a polypropylene base. They also have a specific hot-melt
glue which contains a synthetic rubber. The tape used in the Process
does not have polypropylene. It has a synthetic (polyester)
base and
works with an acrylic glue. The tape is designed, ultimately to be
destroyed. This happens when the compressed air is
entered into the
plastic pipe after insertion into the steel pipe and then, due to the
inserted air pressure the tape snaps and
the plastic pipe reverts to
its original shape. The thicker the plastic pipe, the greater should
be the tensile strength of the
tape. There is also the question of
how many wraps of tape are required per linear ten metres of plastic
pipe. The spacing of the
tape, its thickness and the angles at which
it is applied are all significant factors.
[39]
The tape used by Mocke Construction was manufactured in Malaysia in a
master batch roll. It was then sliced to provide the
required width.
Mr Mocke had an exclusivity supply arrangement with the supplier of
the tape. A letter from the supplier indicates
that the tape is
manufactured and supplied to meet Mocke Construction’s
specifications and that the tape is a special grade
filament tape
that is not readily available in South Africa. The letter states that
the supplier had not supplied any other company
with the product and
that Mr Mocke enjoyed exclusivity.
[40]
The winch used to pull the plastic pipe through the steel pipe, does
so at great speed. The speed at which it is pulled is
a factor to be
taken into account as against the thickness of the liner and its
diameter.
[41]
When the welding quality of the steel pipes caused a problem at the
time that the Polymeric team and Mr Gish first used the
machine in
South Africa, it required the collective efforts of Mr Henn, Mr
Mocke, Mr Gish and the Polymeric team to come up with
a solution. It
was then that the idea arose to deform the plastic pipes completely
outside of the steel pipe rather than deforming
it as it entered the
steel pipe and then to lay it out on rollers and pull it through the
steel pipe at enormous speed, so that
the protruding edges within the
steel pipe narrowly shaved the plastic pipe as it entered without
damaging it.
[42]
Mr Mocke testified on whether there was a distinction between the
machine built by Mr Henn and Pexmart CC and the Polymeric
deforming
machine. In this regard, it is necessary to recall that the
appellants denied having made a mechanical deforming machine,
but
stated that they had developed their own method of lining a steel
pipe, namely, of closing off the ends of a plastic pipe and
thereafter extracting the air, resulting in the plastic pipe
collapsing. After insertion into the steel pipe, the ends were
opened,
causing an influx of air. When Mr Mocke visited the
appellants’ premises, all that he was shown was a vacuum pump
on the
back of a bakkie without an electrical plug. In his view, one
pump on its own would not be able to generate sufficient suction
pressure in order to collapse a plastic pipe. It was also likely that
if that kind of pressure were to be exerted, it would have
a
destructive effect on the plastic pipe.
[43]
Mr Mocke testified that if the trade secrets he had acquired from Mr
Gish and further developed with the Polymeric team, were
used by a
competitor, he would be at a disadvantage. A competitor would thus be
using the expertise developed over a long period
and would be saved a
great deal of expense and time. The royalty he was required to pay
would also not be an expense for a competitor
and it would unfairly
destroy his competitive advantage.
[44]
Under cross-examination, Mr Mocke accepted that the Polymeric machine
was not patented nor was the Process. He also accepted
that there was
no design registration for the machine in South Africa. Mr Mocke did
not have any drawings, technical plans or technical
specifications
for the Polymeric machine. He was adamant that Mr Henn had gained
confidential knowledge and experience with Mocke
Construction and had
transferred that knowledge and experience to Pexmart CC, to his
detriment and the detriment of Mocke Construction.
[45]
Mr Mocke accepted that the video recording demonstrated to potential
clients how the machine was employed and the Process was
utilised. He
was adamant, however, that the video recording did not sufficiently
convey what is set out in paras 33 to 41 above.
[46]
The problems presented by the welding quality of the steel pipes,
according to Mr Mocke, enabled an adaptation of the methods
and
knowledge imparted by Mr Gish and the Polymeric team. Any further
problems encountered in using the Process were resolved by
Mr Gish
when he was contacted about them. Mr Gish, so Mr Mocke testified, had
taught the Polymeric team how to handle the behaviour
of the plastic
liners and taught how to rectify matters when problems arose. Mr Gish
had advised on tolerances and the use of additives.
Suppliers of
pipes were also advised in this regard by Mr Gish. He did not,
however, impart the full breadth and knowledge of experience
to
suppliers. The knowledge and secrets acquired were transferred to
Mocke Construction’s operators and staff, including
Mr Henn.
[47]
According to Mr Mocke, after directions from the Deputy Judge
President, a visit to Pexmart CC’s premises was arranged
for
the purpose of inspecting the vacuum machine which Mr Henn allegedly
had developed for a new pipe-lining process, as set out
in para 23
above. This allegedly involved applying negative pressure –
extracting the air within a plastic pipe, causing
it to collapse so
as to be able to insert it within a steel pipe – a vacuuming
process. Mr Mocke testified that when he arrived
at the premises, he
was not shown such a machine, but rather saw a deforming machine.
[48]
Mr Mocke said that the litigation he had embarked on was to protect
not ‘what he did’ in relation to the plastic
lining
process, but it is ‘how’ he did it that he sought to
protect. Mr Mocke readily accepted that the Polymeric machine
could
easily be copied and built by someone else at a cost far less than
what he paid for it. Mr Mocke testified that he had not
seen the
appellants’ deforming machine nor did he know which kind of
tape they used. Before us, this aspect of Mr Mocke’s
evidence
was heavily relied on by counsel on behalf of the appellants. I shall
deal with their submissions in relation thereto
in due course. Mr
Mocke could produce no confidentiality or restraint of trade
agreements involving any of his present or past
employees, including
Mr Henn.
[49]
Mr Patrick Broli, a chemical engineer and former Managing Director of
Chemplast, testified briefly in support of the respondents’
case. He confirmed the contents of an affidavit he had made earlier.
He did not support the assertions in the answering affidavit
of Mr
Henn, namely, that he had been trained by Chemplast in how to deal
with plastic lining pipes that had become stuck in the
steel pipes in
situations similar to those when the Process was employed. Mr Broli’s
affidavit refers to training in a very
specific Teflon method
unrelated to the Process.
[50]
Mr Gish, who is a chemical engineer and biochemical scientist, was
the third and last witness to testify. In essence, he confirmed
the
gist of Mr Mocke’s testimony in relation to the acquisition of
the licence to employ the Polymeric machine and utilise
the Process,
as well as in relation to the on-site training. Mr Gish insisted that
he was the inventor of the Process. The Process
was developed and
refined for over a decade and involved trial-and-error. He commenced
working on the development of the Process
in 1983. Prior to that, he
had built up experience of six years in relation to pipe-line
rehabilitation. Mr Gish identified polyethylene
as material that was
chemically resistant and had hard as well as malleable properties.
Deforming the pipe manually did not work
and he concluded that he had
to build a deforming machine. It took him months to build the machine
and thereafter to refine the
manner in which it operated.
[51]
He had experimented with a variety of tapes to keep the plastic pipe
in a C-shape in order to see which would work best. He
was initially
limited to low-strength tapes vulnerable to heat. In the end he
required a tape that was durable. Together with a
collaborator, Mr
Gish took years to develop a tape that was ideal. He said that the
tape used in the Process was the most expensive
tape on the market.
It had to have a specific tensile strength and had to have good scuff
resistance. The following is a material
part of his evidence:
‘
There have been many people
that have copied what they thought our machine is like and there have
been some that have reproduced
what our machine was like. All of the
people went bankrupt because they did not have the technology, the
intellectual property
to control the liner going through the machine.
They all went bankrupt.’
Mr
Gish testified that the Chinese had copied his machine but had
received no instruction on how to fold the plastic liner and they
ultimately abandoned the project.
[52]
According to Mr Gish, the Polymeric machine and the Process is
employed in 26 countries in the world. He had no problem with
Mr
Mocke passing on to Mocke Construction the use of the technology he
had sold him. He confirmed that Mocke Construction pays
him a royalty
of $0.38 per linear foot of pipe lining.
[53]
Mr Gish testified about how he had sold the licence to the machine as
well as the Process to Mr Mocke. The licensing ‘agreement’,
referred to earlier, had not been drawn by an attorney or a lawyer.
He drafted it in a hotel room because he trusted Mr Mocke and
he
thought that a one-page document would suffice.
[54]
In respect of patents filed in 1992 and at other times, Mr Gish
insisted that none approximated his machine and the Process.
He kept
the secrets of how the Process was to be conducted ‘discrete’
and only shared them with those with whom he
had chosen to work.
[55]
For completeness, it is necessary to record that a patent in relation
to a deforming machine using thermal technology which
was put to Mr
Mocke in cross-examination was registered, after Mr Gish had
developed his machine and the Process. Mr Gish was adamant
that his
machine and Process operated in a unique manner and in accordance
with instructions imparted by him.
[56]
It was uncontested that subsequent to the licence being granted to Mr
Mocke, Pexmart CC had approached Mr Gish for a licence
to use the
machine and the Process and had been rebuffed. Mr Gish was not
subjected to any cross-examination.
[57]
Although Mr Henn had filed an expert notice in which he set out his
intended testimony in relation to the distinction between
the
appellants’ deforming machine and the Polymeric machine, he
chose not to testify. The appellants produced no evidence
in support
of their case.
[58]
The court below dealt with the four issues set out in para 32 above.
In respect of the first, namely, whether the two deforming
processes
adopted by the respondents were dissimilar to the Sureline/Polymeric
deforming process. Louw J stated the following:
‘
It was not denied by the
respondents that the photograph depicted a deformer machine. It was,
however, contended by the respondents
that their machine was not an
exact copy of the applicants’ machine. Mr Puckrin, who appeared
for the applicants, accepted
that the respondents’ deformer
machine was not identical to the Sureline machine used by the
applicants. It was also conceded
by the second applicant during
cross-examination that the respondents’ machine is not an exact
copy of the applicants’
machine. It was, however, submitted
that, on the probabilities, the respondents’ machine must be
performing an identical
process to the Sureline process.
I agree with the submission. The
deforming machine of the respondents must achieve the folding of the
liner pipe in the same way
that the liner pipe is folded by the
applicants’ machine. Although the applicants’ machine has
two wheels which forcefully
press down onto the liner pipe, causing
it to be folded into a C shape, as opposed to the respondents’
machine which has
only one wheel, and the respondents’ machine
has different dimensions, the process performed by the respondents’
machine
is identical, not dissimilar, to the process performed by the
applicants’ machine, which process includes the use of tape
to
keep the liner pipe in the folded position. The second respondent
conceded in cross-examination that he did not know what tape
the
respondents were using, but the process of taping the liner pipe must
obviously be the same as the process used by the applicants.
The
first issue is therefore decided in favour of the applicants.’
[59]
On the second and third issues (recorded in para 32), which it
regarded as inextricably linked, the court below had regard
to what
was claimed by Mr Mocke in his founding affidavit, reproduced in para
20 above. He also referred to the video described
earlier in this
judgment. Furthermore, he considered Mr Mocke’s evidence, set
out above, namely, the difficulty of ensuring
that the lobes of the
C-shape were equal and manoeuvring it to prevent the effects of
torque and the unpredictability of the behaviour
of the plastic pipe
as it was being deformed and the directions he received in this
regard from Mr Gish. The court below thought
it was part of the trade
secrets developed during the refinement of the Process that one was
required to understand the angles
at which the tape had to be applied
to keep the pipe in the C-shape and that the tape had the required
tensile strength.
[60]
Louw J considered it significant that it was never put to Mr Mocke in
cross-examination that it was Mr Henn’s idea to
deform the full
length of plastic pipe outside the steel pipe. The court below took
into account that Mr Henn, as an employee of
Mocke Construction, had
intimate knowledge of the Polymeric machine and its method of
operation. Against this, it weighed Pexmart’s
submissions that
it was entitled to reverse-engineer the deforming machine. Louw J
accepted that there were no restraint of trade
or confidentiality
agreements between Mocke Construction and Mr Henn. He had regard to
the decision in
Van
der Merwe & another v Els & another
2008 BIP 404 (C) at 409H-411A/B, that there was no general right
under the common law to be protected against reverse-engineering.
In
similar vein, with reference to
s 15(3A)
of the
Copyright Act 98 of
1978
,
[3]
this court, in
Premier
Hangers CC v Polyoak (Pty) Ltd
[1996] ZASCA 119
;
1997 (1) SA 416
(A), held that the scope for arguing that
reverse-engineering of technological objects generally constituted
unlawful competition
was reduced. On the third issue Louw J went on
to hold as follows:
‘
I find that protectable
confidential information exists in respect of the Sureline deforming
process used by the applicants. The
third issue is accordingly
decided in favour of the applicants.’
In
relation to whether the Sureline and/or Polymeric deforming process
of the respondents, their machine(s), intellectual property,
techniques, on-site training, technology and know-how associated
therewith were protected by the licence awarded to the applicants,
Louw J examined the terms of the licence agreement with reference to
Prok
Africa (Pty) Ltd & another v NTH (Pty) Ltd & others
1980 (3) SA 687
(W) at 696F-697A, which held that an action based on
unlawful competition was not limited to owners of confidential
information.
Fairness and honesty, so it was held, enter into the
equation. The court below decided the second issue in favour of the
respondents.
[61]
In respect of the fourth issue, whether the appellants were using the
respondents’ protectable confidential information,
the court
below reasoned and concluded as follows:
‘
In their answering affidavit to
the applicants’ founding affidavit, the respondents stated that
the first and second respondents
deform pipes using a vacuum method.
However, in their answering affidavit to the applicants’
supplementary affidavit, filed
a year later, they say that they had,
pursuant to legal advice, commenced using a pipe folding method which
“
is not the same as
the method used by the applicant”
and that the respondents “
do
not use the Sureline technology”
.
They do, however, not give any explanation of the technology which
they use, neither did the third respondent testify about the
process
used by the respondents.
As previously mentioned, a deformer
machine was photographed on the respondents’ premises. I have
found, in respect of the
first issue, that the respondents’
machine must, on the probabilities, be performing an identical
process to the Sureline
process. It follows that the process which
the respondents say they use, is the process which forms part of the
applicants’
confidential information. The fourth issue is
therefore also determined in favour of the applicants.
The above four issues were the only
issues which I was required to determine in terms of the court order
of 7 March 2016. The order
which I accordingly make, is that the four
issues that were referred to the hearing of oral evidence, are
determined in favour
of the applicants.’
It
is against that order and the conclusions on which it was based that
the present appeal is directed.
[62]
Before dealing with whether the conclusions by the court below were
justified, it is necessary to pause and consider the principles
on
which liability for unlawful competition rests. In
Schultz v Butt
1986 (3) SA 667
(A) at 678F-H the following was stated:
‘
As a general rule, every person
is entitled freely to carry on his trade or business in competition
with his rivals. But the competition
must remain within lawful
bounds. If it is carried on unlawfully, in the sense that it involves
a wrongful interference with another’s
rights as a trader, that
constitutes an
injuria
for which the Aquilian action lies if it has directly resulted in
loss.’
In
Dun and Bradstreet
(Pty) Ltd v SA Merchants Combined Credit Bureau (Cape) Pty Ltd
1968 (1) SA 209
(C), the following was stated at 219C-D:
‘
Though
trade warfare may be waged ruthlessly to the bitter end, there are
certain rules of combat which must be observed. “The
trader has
not a free lance. Fight he may, but as a soldier, not as a
guerrilla.”’
[63]
There is no closed list of acts that constitute unlawful competition.
The following are well-known:
(a) trading in
contravention of a statutory prohibition;
(b) fraudulent
misrepresentations made by a rival trader as to that trader’s
own business or goods;
(c) the publication by a
rival of injurious falsehoods concerning the competitor’s
business;
(d) the passing-off by a
rival trader of that trader’s goods or business as being that
of a competitor;
(e) the employment of
physical assaults and intimidation designed to prevent a competitor
from pursuing her or his trade;
(f) the unfair use of a
competitor’s fruits and labour;
(g) the misuse of
confidential information in order to advance one’s own business
interests and activities at the expense
of a competitor’s;
(h) the inducement or
procurement of a breach of contract: an action for damages (and, in
appropriate cases, for an interdict) will
lie against any person who
intentionally and without justification induced or procured another
to breach a contract made with any
other person; and
(i) interference with
character merchandising rights.
[4]
We
are, of course, in the present case, dealing, principally with the
misuse of confidential information and trade secrets, incorporating,
if regard is had to the claims set out in para 20 and the fourth
issue for adjudication in the court below, the unfair use of a
competitor’s fruits and labour.
[64]
In J Neethling
Van Heerden-Neethling Unlawful Competition
(2008)
2 ed at 213-216, the author, under the title ‘Acquisition and
use of competitor’s trade secrets or confidential
information’
and the sub-title ‘Right to trade secret’, with reference
to case law, states the following:
‘
A trade secret may be described
as trade, business or industrial information belonging to a person
(usually an entrepreneur) which
has a particular economic value and
which is not generally available to and therefore known by others. It
is evident that an entrepreneur’s
trade secret represents a
valuable economic interest for him (as proprietor) which is worthy of
legal protection. There is currently
much support for the view that a
trade secret, as an incorporeal product of the human mind embodied in
a tangible agent, constitutes
immaterial
property
which serves as
the
object of an independent
immaterial property right
.
In, for example,
Harchris
Heat Treatment (Pty) Ltd v Iscor
[1983
(1) SA 548
(T), at 555], the court unequivocally described the
confidential information
in
casu
as “
intellectual
property
belonging to the
plaintiff”. Accordingly, “the owner of a trade secret
[has] the
right to exploit
it”. The independent immaterial value of the right to the trade
secret is particularly evident from the fact that this right
is
freely transferable; moreover, its independent value is emphasised by
its applicability outside the competitive context.
Before information can qualify as a
trade secret – and therefore as an independent legal object –
it must comply with
three
requirements
apparent from
case law. First of all, and this is really self-evident, the
information must not only relate to, but also be capable
of
application in,
trade or
industry
. Secondly, the
information must be
secret
or confidential
. The
information must accordingly – objectively determined –
only be available, and thus known, to a restricted number
of people
or to a closed circle; or, as it is usually expressed by the courts,
the information “must be something which is
not public property
or public knowledge”. Thirdly, the information must, likewise
objectively viewed, be of
economic
(business) value
to the
plaintiff.’ (Footnotes omitted.) (Emphasis in original.)
[65]
The protection of confidential information is not always absolute nor
is the protection always permanently available.
[5]
In
Faccenda
Chicken Ltd v Fowler & others; Fowler & Faccenda Chickens Ltd
[1985] 1 All ER 724
(Ch) at 732, the following is stated:
‘
Third, however, there are to my
mind, specific trade secrets so confidential that, even though they
may necessarily have been learned
by heart and even though the
servant may have left the service, they cannot lawfully be used for
anyone’s benefit but the
master’s.’
[66]
In
Schultz
,
this court did not uphold a finding based on the misuse of
confidential information. It was dealing with the use of a hull of
a
ship to form a mould with which to make boats in competition with a
rival boat builder. It found that a case of unlawful competition
had
been made out on another basis. After setting out the broad equitable
approach adopted by our courts in unfair competition
cases,
[6]
this court, in dealing with the facts of that case, said the
following at 683G-I and 684A-B:
‘
One’s initial response to
Schultz’ conduct in the present case is no different. There can
be no doubt that the community
would condemn as unfair and unjust
Schultz’ conduct in using one of Butt’s hulls (which were
evolved over a long period,
with considerable expenditure of time,
labour and money) to form a mould with which to make boats in
competition with Butt. He
went further. Having trespassed on Butt’s
field, he added impudence to dishonesty by obtaining a design
registration in his
own name for the Butt-Cat hull, with the object
no doubt of forbidding the field to other competitors.
. . .
In my opinion, therefore, Mullins J
was right in his conclusion that Schultz’ conduct amounted to
unfair competition, against
which Butt was entitled to be protected.’
[67]
In
Schultz
, this court, at 678J-679B, had regard to the role
that fairness and honesty played in determining whether competition
was lawful.
In this regard, it referred to what was said in
Dun
and Bradstreet
at 218H-219A by Corbett J:
‘
Fairness and honesty are
themselves somewhat vague and elastic terms but, while they may not
provide a scientific or indeed infallible
guide in all cases to the
limits of lawful competition, they are relevant criteria which have
been used in the past and which,
in my view, may be used in the
future in the development of the law relating to competition in
trade.’
At
679E of
Schultz
, this court said the following:
‘
While fairness and honesty are
relevant criteria in deciding whether competition is unfair, they are
not the only criteria. As pointed
out in the
Lorimar
Productions
case
ubi
cit
, questions of public
policy may be important in a particular case, eg the importance of a
free market and of competition in our
economic system.’
[68]
I can find no fault with the reasoning and conclusion of the court
below in relation to whether the processes adopted by the
appellants
are dissimilar to those employed by the respondents. The photographs
presented at trial confirm the similarity between
the Polymeric
machine and the appellants’ machine. The differences described
above are not material. The appellants’
vacillating statements
in relation to whether they were employing a deforming machine or
whether they had developed an entirely
different process by way of
suction, could rightly be held against them. Furthermore, they failed
to produce their vaunted new
process. Instead, what was on display,
was a single compression machine that Mr Mocke was adamant could not
remotely perform the
task. He was adamant that the degree of pressure
required to collapse the plastic pipe, as suggested by the
appellants, was likely
to cause structural damage. This evidence was
not contradicted.
[69]
Mr Henn’s failure to testify is another factor that counts
against the appellants, not only on the first aspect, but
also in
respect of the remaining issues presented for adjudication. There is
no merit to the suggestion by counsel on behalf of
the appellants
that Mr Henn was available and could have been called to testify and
be cross-examined by the respondents and that
therefore an adverse
inference could not be drawn against the appellants. It is true that
this court in
Munster
Estates (Pty) Ltd v Killarney Hills (Pty) Ltd
1979
(1) SA 621
(A) at 624B-F, enunciated that its earlier decision in
Elgin
Fireclays Ltd v Webb
1947 (4) SA 744
(A), did not lay down a general and inflexible rule
to be applied without more in every case, that an adverse inference
is to be
drawn where a party fails to call as a witness one who is
available and able to elucidate the facts. Whether such an inference
is to be drawn will depend on the facts peculiar to the case in which
the question arises. In
Munster
this
court had regard to the circumstances which justified the adverse
inference. During the course of the plaintiff’s case
it was
indicated that the witness would be called. This court held that to
say that the witness was ‘equally’ available,
was to
ignore the realities, particularly if the association was taken into
account. The witness not called was also clearly able
to elucidate
the facts. He was the most knowledgeable of the plaintiff’s
representatives on a material aspect. This court
also took into
account that, during the course of the plaintiff’s case,
contradictory evidence had been led which could have
been clarified
had the witness been called. It held that the probable reason for not
calling him as a witness was that it was feared
that his evidence
would expose facts unfavourable to the plaintiff’s case.
[70]
In the present case, Mr Henn was at the centre of the dispute. The
affidavits he filed were emphatic in their denial of material
aspects
of the respondents’ case. It was asserted that he had developed
a machine different from the Polymeric machine. He
insisted that it
was his idea to develop the revolutionary new technique. In addition,
it was suggested by Mr Henn that the techniques
he employed in the
service of the appellants were acquired from and taught to him by
Chemplast. These assertions were contradicted
by his erstwhile
employer. Mr Henn had been emphatic that there was nothing special in
the directions and techniques imparted by
Mr Gish. He disputed the
special nature of the tape that was applied to the pipe. The evidence
to the contrary by Mr Mocke and
Mr Gish called for rebuttal, which
was not forthcoming. The material assertions by him in the answering
affidavit filed on his
behalf ought to have been testified to during
the trial. In this case the failure to testify could rightly be held
against the
appellants.
[71]
The concession by Mr Mocke, referred to earlier in this judgment, on
which counsel on behalf of the appellants relied, namely,
that he had
not seen the processes they employed and consequently did not have
knowledge of them, must be seen in proper perspective.
The
respondents were consistent in asserting, and referring to evidence
in this regard, that the appellants could only have been
competing
with them by using their confidential information and trade secrets
and by employing the Process. That evidence, in conjunction
with what
is set out in the preceding paragraphs leads to the compelling
conclusion that the finding by the court below, that the
appellants
are using a similar process to that employed by the respondents, is
wholly justified.
[72]
In determining whether there was protectable confidential information
in respect of the Process, its machine, intellectual
property,
techniques and on-site training, technology and the know-how
associated therewith, the court below was correct in having
regard to
the claims made by Mr Mocke, set out in para 20 above and to the
evidence related thereto, described in detail above
in paras 33-41.
[73]
It is clear, as submitted by counsel on behalf of the respondents,
that the protectable information was not only that which
was
developed over decades by Mr Gish through trial-and-error, but also
included the refinement of the Process after the Polymeric
machine
arrived in South Africa as explained above. The difficulties of
manoeuvring the plastic pipe when problems were presented,
the method
of dealing with the pipe when it became stuck, the quality of the
tape and the required tensile strength, the angles
at which the tape
had to be applied, the dimensions of the plastic pipe in relation to
specific parts of the process were all asserted
to be part of the
trade secrets and confidential information. None of this was
controverted by any
viva
voce
evidence.
[74]
That the appellants had unsuccessfully sought to obtain a licence
from Polymeric is yet another factor militating against their
case,
that deforming processes were well-known within the industry and that
there was nothing special about the Polymeric machine
and/or the
Process. Mr Henn was best suited to testify on this aspect.
[75]
Mr Mocke and Mr Gish’s evidence on the confidential information
and trade secrets developed over years and many hours
of practical
application referred to in extensive detail above were, essentially,
uncontroverted. There were no manuals or design
drawings. The details
of the Process referred to above were not within the public domain
and were known only to those with whom
Mr Gish and Mr Mocke chose to
work, including their employees. It is clear that the information had
economic value to Mr Gish and
his licensees.
[76]
I agree with the submissions by counsel on behalf of the respondents
that this is not a case about reverse engineering. The
principles in
that regard were correctly set out by the court below as described
above. This case was about whether unlawful use
was made by the
appellants of the respondents’ confidential information and
trade secrets.
[77]
The details of the licencing agreement are sparse. However, it should
be understood that it was concluded on a handshake and
on the basis
of a relationship of trust. It clearly did not enjoy the attention of
lawyers but must be understood contextually
to have contemplated
confidentiality. It certainly embraced in broad terms the use of the
Polymeric machine and the Process. The
lack of restraint and written
confidentiality agreements involving employees, including Mr Henn,
does not detract from the respondents’
enforceable rights.
[78]
The court below had regard to the licence agreement and rightly held
that the respondents as licensees had enforceable rights
extended to
them by the licence agreement and Mr Gish’s assent. For all the
reasons set out above, its conclusions on all
four issues cannot be
faulted. Applying the principles that emerge from the cases set out
in paras 64, 65 and 67, the ultimate
conclusion by the court below
cannot be faulted.
[79]
The following order is made:
The
appeal is dismissed with costs, including the costs of two counsel.
__________________
M
S Navsa
Acting
Deputy President
Appearances:
For
the Appellant:
B Bester SC
Instructed by:
Hahn and Hahn Inc.,
Pretoria
McIntyre van der Post,
Bloemfontein
For
the Respondent
C E Puckrin SC (with him H Worthington)
Instructed by:
Werksmans Attorneys,
Sandton
Symington & de Kok,
Bloemfontein
[1]
Collocott T C and Dobson A B
Chambers
Dictionary of Science and Technology
(1974)
Revised Edition defines ‘interference fit’ as:
‘
A negative fit, necessitating
force sufficient to cause expansion in one mating part, or
contraction in the other mating part,
during assembly.’
[2]
Torque is defined in the
Chambers
Dictionary of Science and Technology
(1974) at 1193, as:
‘
The
turning moment exerted by a tangential force acting at a distance
from the axis of rotation.’
[3]
Section 15(3A)
(a)
provides:
‘
The copyright in an artistic
work of which three-dimensional reproductions were made available,
whether inside or outside the
Republic, to the public by or with the
consent of the copyright owner (hereinafter referred to as the
authorised reproductions),
shall not be infringed if any person
without the consent of the owner makes or makes available to the
public three-dimensional
reproductions or adaptations of the
authorized reproduction, provided –
(i)
. . .
(ii)
the authorized reproductions
primarily have a utilitarian purpose and are made by an industrial
process.’
[4]
See L T C Harms
Amler’s
Precedents of Pleadings
(2015)
8 ed at 373 and the cases there cited.
[5]
See
Meter
Systems Holdings Ltd v Venter & another
1993 (1) SA 409
(W) at 430E-H.
[6]
Schultz v Butt
1986 (3) SA 667
(A) at 683C-D.