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[2014] ZAGPPHC 89
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Attachment Corporation v Minister of Water and Environmental Affairs (43363/11) [2014] ZAGPPHC 89 (20 February 2014)
IN
THE GAUTENG DIVISION OF THE HIGH COURT, PRETORIA
REPUBLIC
OF SOUTH AFRICA
CASE
NO: 43363/11
DATE:
20 FEBRUARY 2014
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
In
the matter between:
ATTACHMENT
CORPORATION
…………………………………………………
..
Plaintiff
And
MINISTER
OF WATER AND ENVIRONMENTAL AFFAIRS
…………
.……
Defendant
JUDGMENT
Tuchten
J
:
1
The
plaintiff sues the defendant for payment of license fees which it
says are due under a written agreement ("the license
agreement")
concluded between the parties in June 2005. The plaintiff gave the
defendant ("the DWA") the right to
copy, instal on DWA
computers and use a suite of software owned by the plaintiff called
EXTRA MainFrame Server Edition 8.1.
2
This
software enables a number of users, typically geographically
dispersed, to access data typically stored by a large concern
on its
mainframe computer at
some
central
location. In broad terms, the license agreement requires the DWA to
select the number of its devices upon which it decides
the software
should be installed. The DWA must then pay a fee to the plaintiff for
each device
[1]
upon
which the software has been installed.
3
In
addition, the plaintiff claims damages for breach of the terms of the
written agreement between the parties in relation to the
maintenance
of the software, it is common cause on the pleadings that there was
such an agreement (which I shall call the "maintenance
agreement") and that the terms of the maintenance agreement are
to be found in the plaintiffs technical support guide, a copy
of
which was attached to the particulars of claim.
[2]
4
There
is a mainframe computer ("the mainframe") housed in the
premises of SITA
[3]
The
mainframe carries data for all governmegt departments. The DWA's data
is thus accessible by the DWA and users authorised by
the DWA for
this purpose. The DWA used the plaintiffs software to access its data
on the mainframe.
5
Components
of the plaintiff's software were installed
[4]
on
the mainframe and on individual devices used by DWA employees. Once
the component of the plaintiffs software which has been installed
on
the individual device had been activated, the human user of the
device became able, if certain action were taken by the DWA,
to
access the defendant's data on the mainframe. To enable a user to do
so, the DWA had to assign a unique number on its server
[5]
to
its authorised user. Although, as the system was operated, ail users
whom the DWA authorised were issued with unique usernames
and
passwords, the DWA did not tie a user to a specific device.
6
The
software has a number of functionalities but was only intended by the
DWA
to
be used to enable those of its employees, who were required to do so
to access certain data stored on the mainframe. Those data
were
stored in electronic files referred to in the evidence as Persa! and
Logis respectively. Persal contains human resources data
and enables
government employees to be identified, certain of their employment
information to be accessed and their salaries to
be paid from time to
time. Logis relates to the purchase of goods and services by the DWA,
the warehouses in which such items are
kept and for payment for what
was purchased. The evidence shows that save perhaps for a few highly
placed managerial personnel,
employees would work on Persal or on
Logis but not on both.
7
The
mainframe component of the software was installed by the plaintiff's
technicians. But the component to be used by the individual
human
users ("the user component") within the DWA was provided to
the DWA through a suite of programs ("the installation
software") which enabled the DWA to load and install the
software onto the devices within the department, described in
technical
terms as its environment. DWA technicians loaded the user
software on each individual device.
8
Once
the user component was installed on a device, the software became
functional. But the DWA sought to restr'^t access to its
Persal and
Logis data through the requirement of the software that it be
configured for such access. In the first place, an officer
whose work
required access to Persal or Logis had to make a written application,
supported by her supervisor. If the application
were approved, when
manual installation was the way the software was loaded, a technician
would instal and configure the software
using an electronic tool
provided with the user component called an installation wizard. Once
the configuration process had been
completed, the software was
activated, in the sense that I use that term in paragraph 5 above.
9
The
installation process required the inputting in a box on the screen
generated by the installation wizard of an access code, which
was
supplied to the DWA technicians but not to its users generally.
Certain other rather esoteric information had to be inputted
through
the wizard during the installation process.
10
One
of the screens generated by the wizard related to what was called
Centralised Management. Centralised management was achieved
through a
centralised management server ("the CMS"), a computer
device connected between the individual device and the
mainframe. As
explained in the wizard itself, the CMS enabled the appropriate
administrator
to
manage, update and distribute certain data to all devices connected
to the CMS. A farther box on the same screen invited the
human user
of the wizard \o "Require product activation on first use".
The human user of the wizard could select product
activation on first
use by placing an electronic tick in the box provided for this
purpose. If this box were not ticked, then product
activation was not
achieved.
[6]
11
In
June 2005, underthe license agreement, the DWA boughtfrom the
plaintiff the rights to make 300 copies of the plaintiff’s
software, to install the software on devices within the DWA's
environment and to use the functionalities provided by the software.
The price paid by the DWA was R455 per copy. This was the unit price
negotiated between the plaintiff and SITA as agent for government
departments including the DWA and is significantly lower than the
price that the plaintiff would have charged a customer who bought
the
rights in respect of a single copy of the software.
12
In
addition to conferring these rights on the DWA, the plaintiff
undertook to maintain the software until the end of April 2006.
This
was achieved under a written agreement ("the maintenance
agreement"). The terms of the maintenance agreement appear
from
a section in the plaintiffs technical support guide version 6.14
called Attachmate Maintenance Program. It was common cause
on the
pleadings that this section of the technical support guide governed
the maintenance and support which the plaintiff provided
in respect
of the software. The maintenance agreement provides for its annual
renewal at the election of the customer.
13
The
plaintiffs policy is and has at all relevant times been that a
customer is free to decline to buy any maintenance contracts
at all
but that if the customer does want the plaintiffs maintenance
services, the customer must pay a maintenance fee for every
copy of
the software which the customer was entitled to make. The DWA elected
to receive maintenance after April 2006 and paid
maintenance fees of
R204 per copy for 300 copies. The plaintiffs pricing is based on the
US dollar, which consistently appreciated
against the rand, thereby
causing the annual maintenance fee to increase progressively.
14
The
license agreement provides for the plaintiff to issue what is called
a licensed units certificate. Only after the issue of a
licensed
units certificate was the DWA entitled to install and use the
software. And then only on devices to the number of licensed
units
reflected in the certificate. The plaintiff issued such a
certificate, in respect of the 300 copies of the software which
the
DWA was entitled to make.
15
I
t
seems likely on the evidence that from the outset of the relationship
the DWA did not^pay much regard to its obligation to make
no mor^
than 300 copies’of the plaintiff's software. In the course of
maintaining the software, the plaintiff discovered
that the DWA had
made and installed a total of 660 copies of the plaintiffs software
on devices within its environment. The parties
entered into
negotiations to regularise the position. In 2006, the plaintiff
agreed to sell the DWA the right, at the same prices
of R455 per copy
and R204 maintenance fee, to make, instal and use an additional 360
copies of the plaintiffs software.
16
The
DWA however continued, it seems entirely promiscuously, to make,
install and use additional copies of the plaintiffs software
on
devices within its environment in excess of the increased number of
660 copies which it was licensed to make. It is unnecessary
to
analyse the reasons why it did so. The primary questions as framed by
the pleaded license fee claim are, firstly, how many copies
in excess
of 660 were made by the DWA; secondly, whether the written agreement
between the parties rendered the DWA liable to pay
the plaintiff for
the copies made by the DWA in excess of 660; and, thirdly and subject
to a determination on liability, what amount
per copy the DWA is
liable to pay. In addition, the plaintiff claims that the maintenance
agreement obliged the DWA (which, as
I have said, elected to receive
maintenance from the plaintiff in respect of its authorised copies)
to buy maintenance contracts
in respect of the additional,
ur^uthorised copies in excess of 660.
17
The
South African law in relation to the interpretation of documents is
clear. The starting point is the language. But the document
must be
construed in the light of its context, the apparent purpose to which
it is directed and the material known to those responsible
for its
production. These latter considerations are not secondary matters
introduced to resolve linguistic uncertainty but are
fundamental to
the process of interpretation from the outset.
[7]
18
I
turn to an analysis of the provisions of the license agreement. The
references which follow are to clauses in the license agreement,
19
The
starting point is that the license granted by the plaintiff permits
the purchaser to use a copy of the software on a single
device only.
The purchaser may only begin to use any software so installed by it
once the plaintiff has issued the purchaser with
a licensed unit
certificate. This certificate licenses a specific number of licensed
units.
[8]
20
The
license agreement allows only one situation under which the purchaser
of the software may load onto devices copies of the software
in
excess of the number of units specified in the licensed unit
certificate. This is provided for in clause 2(f) which reads:
This
section applies to the [user component of the software].
If
you select the Central Management and Require Installation options,
then [the plaintiff] grants you the right to install images
or copies
of the [user component] on unlimited number of devices within your
company/organisation ("the Unpaid Copies"),
provided
you
have a process in place that prevents Devices or users from running
or using the Unpaid Copies. You must purchase an additional
unit of
the SOFTWARE for every copy of [the user component of the software]
that you want to run or use on a Device. No Device
(or user) may run
or use any Unpaid Copies.
21
The
purpose of the conditional permission in clause 2(f) to make copies
of the software for which the customer did not have to pay
was
explained in the evidence. The plaintiffs pricing policy was to
charge for each copy of the software the customer elected to
make.
But the plaintiff recognised that within a customer's organisation
there might not be certainty as to the number of devices
on which the
customer might need to run the software, it might suit the customer
to install the software on a greater number of
devices than reflected
by the number of licensed units recorded in the licensed unit
certificate. This would cater for the possibility
that the customer
might need to increase the number of licensed units at its disposal.
22
But
until the number of licensed units was increased, the license
agreement restricted the customer from making copies of the
plaintiff's
software in excess of the number permitted under the
licensed unit certificate. Only in the situation contemplated in
clause 2(f)
is a customer entitled to make copies of the plaintiff's
software in excess of that number.
23
The
meaning of "Central Management and Require Installation options"
within clause 2(f) was explained in the evidence.
These options are
available during the process of configuring the software for use by
the user of a device after the software has
been installed on the
device. As I have explained, this process of configuration was
performed by a DWA technician through the
use of the electronic tool
called the installation wizard.
24
The
evidence given on behalf of the DWA, which was uncontradicted and
which I accept, was that there were two ways in which the
software
could be installed on a DWA device. The first way was that the
technician manually accessed the installation package of
the software
to be found on the DWA's server and used it to install the user
component on a single device at a time. To perform
the installation,
the technician used the installation wizard. At the point the wizard
called for elections in relation to the
Central Management and
Require Installation options, the technician would routinely select
the Central Management option. But,
routinely, the technician would
NOT select the Require Installation option.
25
The
second way the software was installed was like this: in the course of
replacing aged devices within its environment, the DWA
bought a
number of devices branded as Mecer, from Mustek, the supplier of
Mecer devices to the DWA. The DWA technicians prepared
a sample hard
drive within a Mecer device of the model the DWA had ordered. On this
sample hard drive the DWA technicians installed
the software which
the DWA required to be delivered on each Mecer device of the same
model which it had ordered from Mustek. The
software installed on
that sample hard drive included the user component of the software.
Mustek then cloned the sample hard drive
[9]
and
installed the hard drives so cloned in all the Mecer devices of the
same model as the sample provided by the DWA.
26
The
evidence on behalf of the DWA was that it was unable to determine how
rrjany of these Mecer devices it ordered or received^
Apparently the
records of the DWA did not reflect these data and the request to
Mustek itself by the DWA was made too late for
Mustek to gather the
information, if indeed Mustek were able to do so.
27
Because
the software was preloaded onto these Mecer devices, these devices
were delivered to the DWA with the plaintiffs software
already
installed. That meant that it was unnecessary for a DWA technician to
install
it
by accessing the installation software on the DWA's server. But it
still had to be configured. This was done, according to the
DWA
evidence, by using that part of the installation wizard that provided
for configuration. In such a case, too, the Central Management
option
was selected but the Require Installation option was not.
28
Clause
11 of the agreement reads:
AUDIT:
At [the plaintiff's] request and upon ten (10) days prior written
notice, a representative [of the plaintiff] or an independent
auditor
selected by [the plaintiff] may inspect and audit your computers and
records for compliance with this License Agreement
and Licensed
Unit(s) Certificate, during your normal business hours and no more
than twice a year. You shall fully cooperate with
such audit and
provide any necessary assistance and access to all records and
computers. If an audit reveals that you possess or
at any time
possessed unlicensed copies of the SOFTWARE, you will promptly pay
[the plaintiff] t
he
applicable license fee for such unlicensed copies,
(my emphasis)
29
The
plaintiff received information which indicated that the DWA had
installed copies of the software in excess of the permitted
number,
ie 660. Its South African representatives tried, as they had done
before, to resolve the problem through negotiation. In
this the
plaintiff was unsuccessful. It is unnecessary to analyse why these
negotiations failed. I however find that the negotiations
did not
fail from any lack of patience or failure to supply relevant
information on the part of the plaintiff.
30
The
plaintiff resorted to clause 11. It called for an audit. The audit
was performed by a firm called KPMG. The audit by KPMG established
that as at 7 December 2009, the DWA possessed 1 564 unlicensed copies
of the software. It was common cause at the trial that this
conclusion was correct and that at the time KPMG did its audit, the
DWA possessed (within the meaning of cause 11) that number
of
unlicensed copies. But the plaintiff contended for a higher number.
31
A
factual dispute at the trial was therefore whether the figure of 1
564 was definitive of the number of unlicensed copie^orwhetherthe
DWA
had been in possession of more than this number and had deleted some
copies before the audit by KPMG was undertaken.
32
The
case for the plaintiff, which bears the onus on this issue, centres
upon two statements made by a Mr Botha, who was not called
as a
witness. Botha was a consultant to but not an employee of the DWA and
headed a team of technicians to whom the task had been
given to
administer the installation and operation of the plaintiff's software
on devices within the DWA environment. There was
a close relationship
between Botha and his team and the DWA. Botha and his team had office
space allocated to them within the DWA
head office.
33
There
were at the relevant time 5 204 devices within the DWA environment.
The KPMG investigation revealed only 2 224 devices in
all on which
the software had been installed. There is no evidence of any deletion
of the software from DWA devices before KPMG
did its audit. The
plaintiff asks me to draw the inference that a substantial number of
copies (more than 2 000) had been deleted
rom the devices upon which
they had been installed by the process of uninstalling the
plaintiff's software.
34
Inferential
reasoning in a civil case must be undertaken in accordance with the
principles articulated in v Blom
1939
AD 188
, with appropriate adjustments for the difference in the onus
of proof in civil and criminal cases.. This was recognised in MacLeod
v Rens
1997
3 SA 1039
E at 10481-1049C where the court held that the inference
sought to be drawn had to be consistent with all the proved facts. If
it were not, the inference could not be drawn. The proved facts
should be such as to render the inference sought to be drawn more
probable than any other reasonable inference. If they allowed for
another more or equally probable inference, the inference sought
to
be drawn could not prevail.
35
Arising
from the plaintiff's assertion that the DWA appeared to have made
unauthorised copies of the software, Botha was interviewed
by KPMG in
relation to the audit that KPMG had been mandated to undertake. At a
later stage the DWA conducted its own investigation
through auditors
PwC and Botha was interviewed by PwC as well.
36
Both
auditors produced reports. In addition KPMG kept minutes of its
meeting with, inter alios, Botha. The evidence establishes
that at a
meeting on 16 November 2009, Botha told KPMG:
90%
of desktops in the environment are imaged with Attachmate software
but the user cannot use the application without the license
key.
37
The
evidence of what Botha told PwC emerges from PwC's report which was
sent to the DWA under cover of a letter dated 13 June 2011.
The
report was the subject of a notice by the plaintiff under rule
35(10). This subrule reads:
Any
party may give to any other party who has made discovery of a
document or tape recording notice to produce at the hearing the
original of such document or tape recording, not being a privileged
document ortape recording, in such party's possession. Such
notice
shall be given not less than five days before the hearing but may, if
the court so allows, be given during the course of
the hearing. If
any such notice is so given, the party giving the same may require
the party to whom notice is given to produce
the said document ortape
recording in court and shall be entitled, without calling any
witness, to hand in the said document, which
shall be receivable in
evidence to the same extent as if it had been produced in evidence by
the party to whom notice is given.
38
The
PwC report is thus receivable in evidence as if it had been produced
by the DWA. The case was argued on both sides, however,
as if this
established that Botha in fact told PwC precisely what appears in the
report and I shall assume in favour of the plaintiff
that he did so.
On that footing, Botha told PwC:
All
computers used by DWA employees had the [plaintiffs] software
installed.
39
Counsel
for the plaintiff submitted that these statements by Botha, while
admittedly hearsay, were receivable for the truth of their
contents.
Counsel relied upon the proposition that a statement by a third
person is admissible against a litigant if the litigant
expressly or
by implication authorised that third person to speak on her behalf
and then made a statement adverse to the litigant.
I was referred
generally to LAWSA
vol
9 (2nd ed) para 736 and Makhathini v Road Accident Fund
2002
1 SA 511
SCA paras 15-22.
40
The
position in relation to hearsay in a civil case is regulated by s 3
of the Civil Proceedings Evidence Act, 25 of 1965. I need
not quote
these provisions because their effect was authoritatively summarised
in Makhathini
para
22:
Hearsay
evidence is not, as a general rule, admissible. A long recognised
exception to the rule occurs where the contested hearsay
statement
amounts to an admission made by a party to the litigation and, by
extension, by someone
who
has an identity of interest with such a party….. Before
the
advent of the Act statements made by strangers to a suit which were
construed as admissions were not admissible unless they
fell within
the exceptions referred to in para [19].
[10]
Now such statements are examined to see whether they fall within the
statutory definition of hearsay evidence. If they do they
are then
measured against the requirements set ’out in s
(3)(1)(c)(i)-(vii) and are admitted if they pass muster.
41
The
factors enumerated in s 3(1 )(c) include the probative value of the
evidence and the reason why the evidence was not given by
the person
upon whose credibility the probative value of the evidence depends.
The factors specifically listed in s 3(1 )(c) are
not a closed list.
Under s 3(1)(c)(vii) the court must take into account any other
factor which in the opinion of the court should
be taken into
account.
42
Although
there was no evidence as to the availability of Botha, the case was
argued by both sets of counsel on the basis that Botha
was indeed
available and should have been called by the other side. I can see no
reason why the plaintiff, which sought to rely
on Botha's evidence,
should not have called him. It was suggested that because of his
relationship with the DWA, he was the "defendant's
witness".
I do not agree. He was not an employee but a consultant. I find
nothing in the evidence to support the submission
of counsel for the
plaintiff that Botha was authorised to speak for the DWA, whether
expressly or impliedly. Plainly he was interviewed
not as the
representative of the DWA but as someone who might be expected to
give relevant information to the interviewers.
43
Botha's
statements taken in context amount to no more than impressions and,
moreover, are contradictory. There is no explanation
why he told KPMG
in 2009 that 90% of the devices had been loaded with the plaintiffs
software but told PwC in 2011 that all
computers
used by DWA employees had the plaintiffs software installed. I think
that Botha's statements are inherently unreliable.
44
This
unreliability is aggravated when the other evidence on the point is
considered under the rubric of any other factor.
45
The
reference by Botha to imaging in his statement to KPMG must be a
reference to the imaging process undertaken by Mustek in relation
to
the cloned hard drives loaded by them on the Mecer devices supplied
by Mustek to the DWA. No witness from Mustek was called
and none of
Mustek's documents were tendered in evidence. Mr Hornsby and Mr de
Beer testified for the DWA on this issue.
46
Before
I deal with their evidence i must point out that the DWA was unable
to produce any records of its own which showed, or even
tended to
show how many copies of the plaintiff's software had been installed
on DWA devices or even how many relevantly imaged
Mecer devices had
been received from Mustek. Mr Kingma, a member of the plaintiffs
sales team, who tried to negotiate a resolution
to the claims
presently before me, said after being pressed to do so by the court,
that he found the DWA to be in disarray in relation
to the present
dispute. I think that the evidence as a whole demonstrates that this
assessment is accurate and explains the DWA's
inability to provide
this information. There was no conspiracy to suppress information in
this regard.
47
Homsby
was a member of Botha's team of consultant technicians. He physically
performed manual installations of the plaintiff's software.
He was
not asked to perform any uninstallations of the plaintiff's software
before December 2009. But at a later date a decision
was made to
configure access to the mainframe through a new gateway management
server for those persons in the DWA who were actually
required to do
so. Homsby himself did so for every device at the DWA head office and
kept a record of who needed such access and
who did not. He was then
instructed to remove the plaintiffs software from the devices of
those persons who did not need to connect
to the mainframe, which he
did centrally by running a script, ie an instruction to all affected
devices to uninstall. This was
clearly an arduous task which, Homsby
said, took him about a month to complete.
48
Hornsby
did know of any management decision within the DWA before December
2009 to uninstall the plaintiff's software. He was unable
to estimate
a percentage of DWA devices onto which the plaintiff's software had
been loaded but differed from the views expressed
by Botha in the
statements I have quoted. He thought that the true figure was not
even remotely close to 90%.
49
According
to Hornsby, until 2011 users could install and uninstall programs
from DWA devices without restriction. After that the
privilege was
restricted to designated administrators. So it was technically
possible for any user to uninstall the plaintiff's
software before
KPMG undertook their audit. But I think that the probabilities are
against any uninstallation by a significant
number of DWA employees.
Those who needed the software to do their work would not have been
able to do their work after an uninstallation
and would have had to
ask for technical help to re-install it. This is because such a user
would not be in possession of the license
key or the technical skills
to configure the software. Those who did not use the software had no
interest in uninstalling it and
would be unlikely to know what impact
an uninstallation would have on the capacity of their devices to do
the tasks they were required
to perform.
50
This
leaves the speculative possibility, suggested by counsel for the
plaintiff, that a coterie of officials within the DWA undertook
a
clandestine uninstallation campaign to defeat the plaintiffs claim by
removing electronic evidence. With respect to the great
industry
applied by counsel to their brief, I do not think that this argument
has any foundation in the evidence. The proposition
conflicts with
the evidence that the DWA was in disarray. If the hypothetical
coterie had decided to defeat the plaintiffs claim,
one wonders why
they left behind the 1 564 unauthorised copies which the KPMG audit
revealed. One wonders too how the coterie identified
those DWA
employees who actually needed the plaintiff's software and how, when
and why they would have undertaken this arduous,
personally
unrewarding and career threatening action without reference to the
technicians such as Hornsby who would actually have
the skills, if
not the motivation, to do something like that.
51
The
likelihood is that the unauthorised copies were made negligently and
without a proper appreciation of the plaintiff's rights
and the DWA's
obligations. There is no suggestion in the evidence that any specific
official, let alone any coterie of officials,
stood to get into
trouble as a result of the unlawful copying. No motive for a secret
uninstallation campaign has been suggested,
let alone established, on
the evidence. I accordingly find that there was no wholesale
uninstallation campaign, it then follows
that the conclusion derived
from th£ KPMG report, that at December 2009 1 564 unlicensed
copies were in existence, is a fair
reflection of the "number of
unauthorised copies which in fact had been made and thus of the
number of unlicensed copies of
the software which the DWA possessed.
On that ground alone, the estimates expressed in Botha's statements
are thoroughly unreliable.
52
Homsby
was similarly unable to estimate on how many Mecer devices the image
had been cloned. Evidence in this regard was also given
by De Beer,
who was at first a contractor to the DWA but in 2006 was appointed IT
infrastructure manager within the DWA. De Beer
made quite
considerable efforts to establish the number of devices upon which
the image I have described had been cloned. He could
not find any
useful records in the DWA and approached Mustek. His evidence was
that because of the age of the transactions, Mustek
were unable to
find any useful records by the time of the trial.
53
De
Beer was adamant that the most devices the DWA ever bought from
Mustek at one time would have been in the order of 100. The
departmental budget would not allow for larger orders. He would have
been very surprised to hear that any order exceeded 125 devices.
This
is important because an image is devised for a specific model only.
It is notorious that rapid model changes in that industry
are the
rule, rather than the exception, as technological advances and
savings in component costs are achieved. De Beer's view,
which I find
plausible, is that the likelihood was that the Mecer model within
which the imaged hard drive had been developed would
have been
superceded by new models quite quickly. As the image had been
developed for one Mecer model only, De Beer reasoned, it
was unlikely
that the cloned hard drives had been supplied in great numbers. I
find therefore, that the inference sought to be
drawn by the
plaintiff is inconsistent with the proven facts and is not the only
reasonable inference.
54
On
these grounds, I exercise my discretion against the admission of
Botha's statements for the truth of their contents. The plaintiff
has
accordingly failed to prove that the DWA ever possessed more than 1
564 unlicensed copies of the software.
55
As
to credibility, counsel did not advance any arguments in relation to
credibility or suggest that any of the witnesses who testified
before
me were otherwise than trying to tell the truth as they saw it. The
weight to be accorded to any specific evidence is of
course something
else. My own impression is that all the witnesses who testified in
the trial were trying to tell the truth and
were generally reliable.
I have only one reservation, and that of a minor order. I think that
the evidence of Mr Gates, the plaintiffs
director of
license,compliance, might have been coloured by his zeal to promote
the plaintiffs interests and enable the plaintiff
to exact from the
defendant the very maximum the law might be persuaded to allow.
56
It
follows that the question of the DWA’s liability must be
assessed on the basts that the plaintiff has proved on a balance
of
probabilities that the DWA possessed 1 564 unlicensed copies of the
plaintiffs software.
57
It
was conceded by counsel for the DWA that the DWA could only escape
liability in principle under clause 11 if it could bring itself
within clause 2(f) of the license agreement.
58
It
was accepted by the DWA, indeed it was the evidence of Homsby, the
DWA technical witness, that the Require Activation option
had never
been selected during the configuration process.
59
Counsel
for the plaintiff submitted that that was the end of the clause 2(f)
enquiry: that unless the two conditions, Central Management
and
Require Activation, were selected, the DWA could not claim the
protection of clause 2(f).
60
The
argument for the DWA, shortly stated, is that when clause 2(f) is
read in its context and its purpose , preventing abuse of
the
software, is born in mind, then "... select Central Management
and
Require
Activation installation options ..." should be read as "...
select Central Management or
Require
Activation installation options ...".
61
I
am simply unable to read the clause in the way proposed by counsel
for the DWA. It was not suggested either in the evidence or
in
argument that any one of the two options by themselves would confer
protection against abuse of the same order as the selection
of both
options would do. The language is clear. I find that the DWA cannot
bring itself within clause 2(f) because the Require
Activation option
was not selected.
62
In
the result, on the DWA's own version, it did not bring itself within
the conditional protection provided by clause 2(f). The
DWA therefore
breached the agreement by installing, on devices within its
environment, copies of the software in excess of 660,
made up as to
the 300 initially licensed plus the additional 360 which it bought
when its unlawful copying was detected in 2006.
63
This
conclusion makes it unnecessary for me to consider whether the
proviso, that the QWA should have a "process in place that
prevents, Devices or users’from running or using the Unpaid
Copies", has been met. It follows that the DWA is liable,
in the
language of clause 11 of the license agreement, "promptly [to]
pay [the plaintiff] the applicable license fee for such
unlicensed
copies". What is the applicable license fee? I shall deal later
with this question.
64
I
proceed to the claim for damages for breach of the maintenance
agreement. I shall set out the claim as pleaded by the plaintiff:
32
The
[DWA] was obliged in terms of the [maintenance agreement] to purchase
from the plaintiff maintenance for all copies of the ...
software it
was licensed to use in terms of the [license agreement],
33
The
[DWA] breached the terms of the [maintenance agreement] in that as at
March/April 2006, as appears from the PwC Review, the
[DWA] was in
possession of 4 544
[11]
copies
of the ... software in respect of which the [DWA] did not purchase
maintenance and technical support but in respect of which
the [DWA]
was able to avail itself of the maintenance and technical support
provided by the plaintiff in respect of the licensed
copies of the
...software.
34
At
the time the [DWA] purchased the maintenance and technical support
and accepted the terms of the [maintenance agreement] the
[DWA] was
aware that the [DWA] would have to pay for maintenance* and support
for all copies of the ... software, were the unlicensed
programs
licensed.
35
The
plaintiff suffered damages directly as a result of the [DWA]’s
breach of the terms of the [maintenance agreement]
in that the [DWA] appropriated maintenance and support provided in
terms of the 660 licensed copies of the 660 licensed copies
of the
[software] in order to maintain and support the 4 544 unlicensed
copies of the ... software,
[my emphasis]
65
The
evidence does not support the allegation that the unlicensed copies
were all maintained. The evidence on behalf of the DWA was
that there
were never more than 660 active users of the software and that the
unlicensed copies, while installed, were never used
unless configured
by one of the DWA technicians. On that basis, none of the unlicensed
copies would ever have required maintenance
unless so configured and
then used. The evidence of Homsby was that once a user had been
authorised on written application to access
Persal or Logis on the
mainframe, he or one of his technician colleagues loaded (if
necessary) and configured the software, starting
by inputting the
license key, which was unknown to the lay user. In addition, the lay
user who had not been authorised to access
the mainframe for this
purpose had no reason to try to run the software except, perhaps out
of curiosity, and would certainly not
have asked for or received
maintenance for software she was not required by her job description
to use.
66
But
the trial was not run on the basis that the damages alleged in
paragraph 35 of the particulars of claim were not proved. The
case
for the plaintiff was that once the DWA had elected to receive
maintenance for the licensed copies of the software and had
further
elected to load the unauthorised copies, the position was as if the
DWA had bought the unauthorised copies in the regular,
normal course.
In such a case, ie where a client had elected to receive maintenance,
the plaintiffs policy was only to agree to
supply such maintenance
for all
the
licensed copies, By failing to license its additional copies and have
the additional copies added to the maintenance agreement,
the
plaintiff argued, the defendant had breached the maintenance
agreement and the plaintiff was entitled to damages as a surrogate
for performance, which in this case amounted to the maintenance fees
themselves for the additional copies because there were no
saved
costs to be deducted.
67
Counsel
for the plaintiff relied on the provision in the maintenance
agreement to be found under the heading "Howto purchase
or Renew
Maintenance":
Typically,
a maintenance plan is purchased at the time of your initial...
software purchase and is renewed annually on your purchase
anniversary. You can add to your maintenance plans as you acquire
newAttachmate products.
Each
Attachmate product must be covered by its own maintenance plan.
Maintenance for a specified product must be purchased for all
licensed copies of the plan.
68
Counsel
for the DWA, however, submitted that there is no provision in the
maintenance agreement that renders the DWA liable to pay
a
maintenance fee for an unlicensed
copy
of the software.
69
I
confess that during argument on the point I found the argument
advanced by counsel for the plaintiff beguiling. However, on
reflection,
I
believe
that the submission of counsel for the defendant is correct. The
license and maintenance agreements are separate and distinct
agreements. They are related and each forms part of the context for
the interpretation of the other. But each has its own separate
provisions. There is no express term in the maintenance agreement
which obliges the DWA to take out a maintenance contract in respect
of an unlicensed copy of the software. When the plaintiff's
maintenance claim cause of action arose, the unlicensed copies were
just that: unlicensed copies. Even though I have found for the
plaintiff that it is entitled in principle to be remunerated in
respect of the unlicensed copied under clause 11 of the license
agreement, the unlicensed copies remain unlicensed copies. If they
still existed, the DWA would not be entitled to use them because it
does not have a licensed units certificate in respect of the
unlicensed copies.
70
The
maintenance agreement expressly requires maintenance agreements to
cover all licensed copies. The plaintiff has not pleaded
a tacit term
that obliges the DWA to purchase a maintenance plan for an unlicensed
copy. I think that counsel for the DWA are correct
that such a tacit
term should not be read into the maintenance agreement because the
DWA is not entitled to use an unlicensed copy
and therefore cannot
require maintenance for an unlicensed copy. But it is not necessary
for me finally to come to a conclusion
on this point because it was
never before me.
71
I
therefore find that the plaintiff has not established its claim for
damages under the maintenance agreement.
72
The
next question I must consider is the quantum of the claim under, the
license agreement. The question is whether an "applicable
license
fee"
can be determined on the evidence. Counsel for the plaintiff argued
that there were two possible candidates for applicable
license fee:
on the one hand, the deeply discounted fee that the plaintiff agreed
with SITA to charge government departments such
as the DWA and, on
the other, the plaintiffs very much higher single unit list price.
Counsel for the DWA submitted that the expression
"applicable
license fee" was too vague to be given a quantifiable meaning
but that if it could, the SITA price was the
applicable license fee.
73
According
to the Shorter Oxford Dictionary, the word applicable means able to
be applied (to a purpose etc), having reference, relevant,
suitable,
appropriate.
74
Logically,
the starting point on this topic should be whether the phrase
applicable license fee is too vague. In Namibian Minerals
Corporation
Ltd v Benguela Concessions Ltd
[1996] ZASCA 140
;
1997
2 SA 548
AD 561G, the court held that in considering whether an
agreement is fatally vague, it must have regard to a number of
factual and
policy considerations. These include the parties' initial
desire to have entered into a binding legal relationship, that
language
is inherently flexible and should be
approached
sensibly and fairly, that contracts are not concluded on the
supposition that there will be litigation and that the coyrt
should
strive to uphold and not to destroy bargains. See also De Beer v
Keyser
2002 1 SA 827
SCA 834 para 12. In my respectful view these
remarks are equally applicable when the enforceability of a provision
within an otherwise
binding agreement is under consideration.
75
In
Levenstein v Levenstein
1955
3 SA 615
SR 619, the court classified the void for vagueness cases
into four categories. It seems to me that the present case falls
within
the fourth category, ie that where the unspecified details of
the contract are questions of fact capable of determination by
evidence.
76
In
Fluxman v Brittain
1941
AD 273
, Tindall JA found that a condition under which the plaintiff
would be entitled to draw "moderate" amounts from a
business
was not void for vagueness and that, while it might not be
easy to determine what a moderate amount was at a particular time,
such
a determination was possible on evidence of the relevant facts.
To my mind "applicable" is of the same order as "moderate"
in Fluxman v Brittain
and
that evidence is admissible to determine what is relevant, suitable
and appropriate in the circumstances of the case.
77
I
think that one of the purposes of clause 11 was to provide the
plaintiff with a procedure to obtain evidence to determine whether
unlicensed copies of its software had been made by the customer and,
if so, how many. This evidence would in most cases come from
the
customer’s own records. Absent a measure such as clause 11 in
the license agreement, the plaintiff could potentially
anticipate a
struggle to get the evidence which would ground a claim of unlawful
copying. An audit which revealed that the customer
possessed unlawful
copies triggers an obligation on the part of the customer to pay the
appropriate license fee. The plaintiff
need in such a case therefore
not prove damages. So a further purpose of clause 11 was to make it
easier for the plaintiff to recover
remuneration in respect of
unlicensed copies.
78
The
general purpose of the applicable license fee provision, in my view,
was to provide a flexible measure to determine a remuneration
which
would take into account all relevant circumstances in any specific
case, including previous dealings between the parties,
so as to put
the plaintiff in the financial position in which it would have been,
as far as license fees are concerned, had the
plaintiff agreed to
supply additional licensed units to the customer before further
copies of the software were made.
79
Counsel
for the plaintiff submitted that the purpose of the clause 11
machinery was to discourage unlawful product. In the same
context,
counsel submitted that to find the Applicable license fee was a
discounted one would offend public policy because it encouraged
unlawful conduct. I do not agree with either of these propositions.
The written part of the license agreement did not make any
provision
for the price a purchaser would pay for her license(s). Clause 11 is
a provision within the plaintiff's standard terms
on which it offers
to sell licenses to customers. Clause 11 must be interpreted so that
it fits the case, as effectively as may
be possible, of the whole
spectrum of potential purchasers: from the single unit purchaser
right down to the massive volume corporate
purchaser (such as SITA in
its representative capacity). It would make no commercial sense to
punish (or, to use counsels' careful
language, deter) the high volume
corporate purchaser who overstepped her licensed unit certificate by
one unit more severely than
a single unit purchaserwho exceeded his
lawful entitlement by many thousands of units.
80
Counsel
were agreed that there is nothing in the license agreement itself
that sheds light on the meaning of applicable license
fee. The
evidence of Mr Gates is that the plaintiff maintains two price lists:
a normal price list and a compliance price list.
The single unit
undiscounted price is the price which the plaintiff, on the strength
of Mr. Gates' evidence and the context, urges
me to find to be the
applicable license fee. There js nothing in the evidence to indicate
that the single unit undiscounted price
is the applicable license fee
except Mr Gates' testimony, which I accept, that it was the policy of
the plaintiff not to settle
for any lesser amount once the clause 11
audit procedure was under way.
81
There
is no evidence that it was brought to the attention of the DWA or
even to SITA that the price at which the software was offered
to
South African government departments or any other customer was a
discounted price or that the DWA or SITA were ever made aware
that
there was such a thing as a compliance price list.
82
I
find no justification for the suggestion made by counsel for the
plaintiff that the determination of the applicable license fee
was to
be made unilaterally by the plaintiff.
[12]
To
my mind, the purpose of this phrase is to take the determination of
the applicable license fee outside the realm either or negotiation
or
of determination by either one of the parties.
83
The
SITA price, on the other hand, was not only the price at which the
parties had contracted from inception, but also the price
at which
the plaintiff had
agreêd
to
contract when the DWA's earlier unauthorised copying had been
exposed. The SITA price was, to test it against the dictionary
definition of the word applicable, relevant and had been regarded by
the parties as suitable and appropriate for their dealings.
Had the
DWA recognised its unlawful copying which gave rise to this action
before the audit had been undertaken, the probability
is that the
plaintiff would have sold the additional units to the DWA at the SITA
price. 1 recognise the difference between the
earlier situation and
that which arose as a result of the invocation by the plaintiff of
clause 11 but I do not think that this
difference is weighty enough,
in the light of all the other considerations I have discussed, to
carry the day.
84
In
the result, I find that the plaintiff has established a right to be
paid for 1 564 unauthorised copies at the SITA price. Counsel
agreed
the arithmetic which would follow this conclusion. Their agreement
will be reflected in the order which I shall in due course
make.
85
These
conclusions make it unnecessary for me to consider the plaintiff’s
alternative claim for damages for breach of copyright
(which was not
argued) and a defence of prescription in relation to the difference
between the number of 1 564 copies and an increased
number, which the
particulars of claim were amended to include.
86
There
remains the question of mora
(post-judgment)
interest. The plaintiff originally claimed mora
interest
at 12%, the rate alleged to be applicable under the law of the State
of Washington, USA whose law, it was pleaded, governed
the
contract.
[13]
However,
the parties agreed that the rate made applicable by the Prescribed
Rate of Interest Act,
55
of
1975 would apply in respect of any judgment in favour of the
plaintiff. The dispute between the parties is the date from which
this mora
interest
should begin to run.
87
In
my view the debt the DWA owes the plaintiff arose at the latest on
the date the results of the KPMG audit were communicated to
the DWA,
ie 14 December 2009. This is the date from which the plaintiff claims
mora
interest.
The debt was liquidated, ie it did not require quantification by
agreement between the parties or by order of court. Clause
11
provides that this debt be paid promptly by the DWA, ie on the date
it fell due. The plaintiff is entitled to interest as claimed.
88
I
make the following order:
1
In
relation to the claim for the applicable’ license fees, the
defendant is ordered to pay the plaintiff:
1.1
the
sum of R1 168 495;
1.2
interest
on the sum of R1 168 495 at 15,5% per annum from 14 December 2009 to
date of payment.
2
The
claim for maintenance fees is dismissed.
3
The
defendant must pay the plaintiffs costs which are to include the fees
of both senior and junior counsel.
NB
Tuchten
Judge
of the High Court
19
February
2014
[1]
The
term desktop was used in the evidence to include desktop, laptop and
tablet computers; indeed all devices upon which the plaintiffs
software couid be installed and used.
[2]
There
is a third claim, alternative to the license claim, for copyright
infringement. In light of my findings, I need not consider
this
alternative claim.
[3]
State
Information Technology Agency. SITA acted as software procurement
agent to all government departments. All such departments
have
access privileges to the mainframe.
[4]
The
term install means to place a thing on an apparatus or system so
that the thing is in position for service.
[5]
A
server is a system (software and suitable computer hardware) that
responds to requests across a computer network to provide,
or help
to provide, a network service.
(
http://en.wikipedia.org/wiki/Server_(computing
))
[6]
This
information is relevant to a defence raised by the defendant.
[7]
Dexgroup
(Pty Ltd v Trustco Group International (Pty) Ltd and Others
2013
6 SA 520
SCA para 16. See also
KPMG
Chartered Accountants (SA) Securefin and Another2009
4 SA 399
SC/A
paras 39 and 40 ;
Natal
Joint Municipal Pension Fund
v/
Endumeni
Municipality
2012
4 SA 593
SCA paras 18 and 19.
[8]
Clauses
1 (f), 2(a) and 2(b).
[9]
ie
copied the software on the sample hard drive onto other hard drives
so that the sample hard drive and the copies carried identical
software.
[10]
Of
the judgment in
Makhathini
from
which I am quoting. It is unnecessary for present purposes to
consider these exceptions.
[11]
I
have found that the plaintiff has only proved 1 564 unlicensed
copies. This does not affect the merits of the maintenance claim;
only the quantum.
[12]
Counsel made it clear that the
suggestion was that the plaintiff had to make the kind of
determination characterised by the notion
of the arbitrium boni
viri,
the judgment of a
fair-minded person.
[13]
No
evidence of the law applicable in the State of Washington was
adduced and I was expressly asked to decide the case on South
Africa
legal principles.