IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case Number: 23149/2023
In the matter between:
TRUE NORTH HOLDINGS (PTY) LIMITED First Applicant
CASH CONVERTERS SOUTHERN AFRICA Second Applicant
(PTY) LIMITED
TRUE NORTH FRANCHISING (PTY) LIMITED Third Applicant
and
SKY GECKO SOFTWARE LAB (PTY) LIMITED First Respondent
GLYNN-ROBERT HENDRICKS Second Respondent
JUDGMENT
JANISCH AJ:
INTRODUCTION
1. The Applicants seek final interdicts against the Respondents based on
contractual rights of restraint of trade and for the protection of confidential
information.
2. The Applicants are a group of companies with interests in the Cash Converters
franchise busi ness. The business encompasses the buying and selling of
second-hand goods and new wholesale goods, and the provision of short -term
credit (in the form of both unsecured short-term loans and pawn loans).
3. The First Applicant is the holding company of the Second and Third Applicants.
4. The Second Applicant holds the exclusive “ master franchise” in relation to the
use and operation of the Cash Converters business, brand and intellectual
property in the territories of South Africa, Namibia, Lesotho and Eswatini. The
master franchisor is a n Australian company. The Second Applicant concludes
agreements with individual franchisees to operate Cash Converters stores
across the region. For this it receives a royalty based on retail turnover and
pawn fees generated.
5. The Third Applicant plays an operational support role to each franchisee by
licensing a bouquet of software applications to franchisees. These include a list
of computer programs with unique names such as “CC -CORE”, “CC-POS” and
“SMART”. These software appli cations facilitate the efficient conduct of the
franchise businesses in various respects. The Third Applicant charges each
franchisee a monthly software licence fee for the use of the bouquet of software
applications.
6. The Second and Third Applicants enjoy independent contractual relationships
with the franchisees. Each is directly remunerated for the particular benefits
provided by it : the Second Applicant receives the royalty or franchise fee for
inter alia branding, know -how, product development and marketing services,
while the Third Applicant receives the software licence fee for the computer
applications. In other words, the Second Applicant does not acquire the rights
to the computer software applicatio ns directly from the Third Respondent for
on-supply these to franchisees. The Third Applicant licenses these rights
directly to the franchisee.1
7. The Second Respondent (“ Hendricks”) is a self -taught computer software
engineer. He is a director and shareholder of the First Respondent, which is the
vehicle through which he provides services to third parties. Hendricks is
described in the Applicants’ papers as the Second Respondent’s alter ego. He
does not take issue with this.
8. Prior to dealing with the Appli cants, Hendricks had been involved for ten years
in a joint venture with the Applicants’ main competitor, Cash Crusaders, to
develop a point of sale and enterprise franchise management system. It is
unclear whether that was done in his personal capacity or through the First
Respondent, although nothing turns on that. Hendricks thereby gained
considerable exposure to the second -hand retail business in South Africa. His
relationship with Crusaders had ended by the time he commenced engaging
with the Applicants.
APPROACH TO THE EVIDENCE AND FACTUAL DISPUTES
9. The factual versions put up by the parties on various issues are not
harmonious.
10. Although the notice of motion foreshadowed certain claims for interim relief, by
the time the matter came before me the Applicants sought only final relief in the
form of (i) an interdict restraining the Respondents from being involved with
competitors of the Applicants for a particular time and (ii) an interdict restraining
the Respondents from disclosing certain confidential i nformation. Other parts of
1 It is recorded in cause 2.1.27 of the standard -form franchise agreement between the Second
Applicant and the franchisee that the Second Respondent provides “ Marketing and Operation
Manuals” in relation to the operation and management of the business. This includes manuals for “ the
use of the required software, as set out in the Marketing and Operation Manuals, in respect of which
the Franchisee is required to obtain a Licence ” (clause 2.1.27.15). The list of copyright items and
intellectual property of which the franchisee acquires the use under the franchise agreement with the
Second Applicant does not include computer software.
the final relief envisaged in the notice of motion (including an order to return or
delete confidential information in the Respondents’ possession, and interdicts
against the infringement of copyright in the listed computer progr ams) were not
persisted with.
11. In deciding to move for final relief on motion, the Applicants readily accepted
that they would be bound by the approach towards the resolution of factual
disputes on affidavit as set out in Plascon-Evans Paints Ltd v Van Rie beeck
Paints (Pty) Ltd 1984 (3) SA 623 (A) . This is that an applicant can only obtain
final relief on motion where the facts stated by the respondent, read together
with the facts stated by the applicant and admitted by the respondent, justify
such an order . An exception to this rule is that the Court will not be bound by
the respondent’s version where it can safely be rejected on the papers alone.
The threshold in this regard is difficult to cross. As stated in Media 24 Books
(Pty) Limited v Oxford University Press Southern Africa (Pty) Limited 2017
(2) SA 1 (SCA) in para [36]:
“[In an application for final relief] the case could not be determined simply
on a weighing of the probabilities as they emerged from the affidavits. The
facts deposed to by [the respondent’s] witnesses had to be accepted,
unless they constituted bald or uncreditworthy denials or were palpably
implausible, far -fetched or so clearly untenable that they could safely be
rejected on the papers. A finding to that effect occurs infrequently because
courts are always alive to the potential for evidence and cross -examination
to alter its view of the facts and the plausibility of evidence.”
12. The Applicants’ decision to ask for fin al relief on the papers must be viewed in
the context of the history of this litigation.
13. The application was issued in December 2023, and on 31 January 2024 was
postponed for hearing on a semi -urgent basis on 17 May 2024. The day before
that hearing, the Applicants filed an application for the referral of an issue
(namely whether the Applicants enjoy a protectable interest in relation to certain
computer programs) to oral evidence. The stated basis for this was that, during
final preparation for the hearin g, counsel had advised that “ the nature of the
disputes which are the subject of this interlocutory application are such that
they cannot properly be decided on affidavit”.
14. The application for referral to oral evidence was dismissed by Katz AJ for
reasons set out in a judgment dated 29 May 2024. In essence, his reasoning
was that the hearing of oral evidence would result in the dispute only being
finalised in 2025, when the Applicants had said that for any such relief to be
effective it would have to be gra nted well before late 2024. 2 Katz AJ concluded
that oral evidence would not result in the effective and speedy resolution of the
application. He also had regard to the fact that the referral application was only
launched “ at the last possible moment ”, thr ee months after the answering
affidavit that raised the dispute had been delivered.
15. The Appellants decided not to appeal the dismissal of their application for oral
evidence. Instead, they pressed ahead with a claim for final relief on the
papers, assuming the burden imposed by the Plascon-Evans approach. They
contended before me that the referral to oral evidence had been brought out of
an abundance of caution, and that despite its dismissal, a proper case for the
relief sought could be extracted from the affidavits.
16. Against that background, I turn to deal with the relevant facts.
THE FACTS
17. The relationship between the Applicants and the Respondents commenced in
2018.
18. Prior to this, the Cash Converters entities had developed computer software
systems which were used by franchisees in the operation of their business.
Although the founding affidavit is not a model of clarity in this regard, it is
2 This is a reference to an averment made in support of a claim for urgency. It was stated that if the
matter were to be brought in the ordinary course the first date on the opposed motion roll would be in
late 2024, “which will largely render the relief academic if the application is only heard then”.
apparent that the Third Applicant employed in -house software developers and
was the repository of the se systems within the group. The group’s Chief
Information Officer, Mr Bilbrough, was a director of the Third Applicant.
19. By 2017, it was recognised that the existing systems (including one called
“Cash Track” co-developed with the master franchise licence holder) were not
fit for purpose. A new information technology strategy referred to as “ Project
2000” was adopted, which would involve the building of a new “ core” software
system. The strategic planning for this was done by Bilbrough and his team of
software engineers. The Third Applicant however lacked sufficient in -house
skills to commence the project.
20. It was at this point that the First Respondent entered the picture. Hendricks was
in discussion with the group CEO, Mr Mukheibir, in July 2018 in relatio n to the
potential provision of a client relationship management solution. In the course
of this he learned of the difficulties with the “ Cash Track ” system. Bilbrough
later contacted Hendricks to ask if the First Respondent could examine Cash
Track and report on why it was not working. This was agreed.
21. Although Hendricks’ version of these early events focuses on Cash Track, it is
apparent that he was asked at that stage to make a preliminary assessment of
the Applicants’ core software systems more generall y, and to propose steps to
develop a new core system. This is consistent with the adoption of “ Project
2000”. It is also consistent with an “ executive summary” prepared by the Third
Applicant which formed part of the contractual matrix that followed. It records
that Hendricks “agreed to review our systems and was flown up … to attend a
workshop aimed at reviewing the existing application architectures;
understanding their weaknesses; a proposing a new architecture based on the
Core concept envisioned for Cash Converters”.
22. On 29 August 2018, prior to commencing the agreed review, the Respondents
signed a “ Confidentiality Agreement ” with the Applicants. The terms of the
agreement were provided by the Applicant and do not appear to have been the
subject of negotiation. It contained both restraint of trade and confidentiality
protection clauses. 3 The restraint applies “ during the sub sistence of this
Agreement and for three years thereafter ”. It is also recorded that the
obligations of confidence “ shall survive the expiration or termination of this
Agreement”.
23. The confidentiality agreement records that “ the Company ”4 appoints “ the
Consultant”5 to “perform certain services in Connection with Design, architect
and develop (sic) core software systems for the company ”. Those “certain
services” are not specified. However, despite the fact that the contract is
reduced to writing, extraneou s evidence “ of an identificatory nature ” is
admissible to enable one to identify the persons or things which a contract
mentions, so as to apply the contract to the facts (see e.g. Delmas Milling Co
Limited v Du Plessis 1955 (3) SA 447 (A) at 454F; Headermans (Vryburg)
(Pty) Ltd v Ping Bai 1997 (3) SA 1004 (SCA) at 1009H). On that basis, I
accept the evidence of Hendricks (which is consistent with the objective facts)
that the “ certain services ” for which the Respondents had been appointed
under the confidentiality agreement were “ to examine and report on Cash
Track, and what could be done to develop a new core system .” In other words,
they were not appointed at that stage to perform actual design, architecture and
development work on a new system.
24. Hendricks (on behalf of the First Respondent) was duly given access to the
existing computer systems. He performed his review. On 2 September 2018 he
produced a report in the name of the First Respondent entitled “ Results of
exploratory workshop and analysis of existing systems with the aim of
developing a core from existing systems to become the central interface and
database to all products of Cash Converters ”. The report listed a range of
“architectural / system issues ” that had been identified. It made a “ proposal to
3 Hendricks says that he did not notice the restraint clause when he signed this document. However,
he does not make anything of this for purposes of the present case.
4 In the heading to the agreement, the three Applicants are listed, with the term “ Company” following
the last of them (the Third Applicant). In the context of the agreement, it seems clear that “ Company”
was meant to refer to all three of the Applicants, a nd not only the Third Applicant. Otherwise there
seems no reason for the other two to have been named parties.
5 The heading to the agreement likewise lists both the First and Second Respondents as parties
subject to the defining term “Consultant”.
build core and resolve the above and other issues permanently ”, which
included a list of tasks and deliverables. The First Respondent proposed to
charge a monthly retainer of R130 000, noting that it would take approximately
6 months to complete the project.
25. Hendricks states that the delivery of the report “ concluded [the First
Respondent’s engagement, which was the subject of the confidentiality
agreement”. The First Respondent was duly paid for its work.
26. The Applicants in their founding papers also reflect the review and evaluation of
the existing software system (referred to by them as “CCPOS-V1”) as a distinct
phase concluding with the delivery of the report.
27. The Respondents’ proposals for the development of a new core system we re
accepted and a new agreement (the “software agreement”) was concluded.
28. The parties to the software agreement were the Respondents and the Third
Applicant (the group company that owned and licensed the software systems to
franchisees). The First and Second Applicants were not parties.
29. The Respondents signed the agreement on 28 September 2018. There is no
evidence as to when the Third Applicant signed it, but both parties proceeded
before me on the basis that it is a written agreement.
30. In terms of the software agreement, the Respondents ( referred to therein as
“the Performers ”) were appointed “ to develop the software programme in
accordance with the deliverables ”. The “ software programme” was d efined as
“the system that the Performers shall develop for [the Third Applicant] in
accordance with this agreement and as reflected in the deliverables”. The
“deliverables” were computer programs reflected in Annexure A, being a
detailed “Scope Statement” drawn up by the Third Applicant.
31. The software agreement had a built-in time limit. It commenced on 1 October
2018 and would continue “ until the term of period ”, which was defined as the
period ending on 31 March 2019 “ or such extended period as agreed t o
between the parties as reflected at clause 3.2 ”. Clause 3.2 provided that the
parties “may agree to extend the time period to a later date, in which event an
addendum shall be prepared and signed by the parties”.
32. The software agreement contained its own restraint of trade and confidentiality
protection clauses. The restraint is addressed in clause 10. Its core provision
(clause 10.1) is one restricting the Respondents from undertaking various types
of involvement with entities operating in similar busine sses to the Third
Applicant “ within a period equivalent to the months contained in the term of
period (the restricted period) to a maximum period of 3 (three) years after the
termination of this agreement ”. The Respondents acknowledged a protectable
interest for the Third Applicant in “ the software programme ” (clause 10.4).
Clause 10.6, which is dealt with further below, purports to extend the restraint
period, in the event of litigation, to the restricted period from the date of a final
un-appealed judgment.
33. The Respondents commenced the core work contracted for. Monthly R130 000
payments were made as agreed. The core work was however not completed by
31 March 2019. Hendricks states that he then had a telephonic discussion with
Bilbrough (which all the parties accept occurred on 2 April 2019). He says that
they “agreed that the date for delivery of the core work was extended ”. He also
says that he and Bilbrough did not orally agree to extend the software
agreement; that Bilborough acknowledged that it had run its term ; and that the
parties needed to conclude a new written agreement.
34. Bilbrough’s version of this call is that it was agreed that “ the respondents
continue rendering services to the third applicant on the terms set out in the
software agreement to ensure the completion of the project while plans were
made to arrange a workshop in May 2019 for a discussion regarding the design
and development of a new CCPOS -V2 which the third applicant wanted the
respondents to deliver”.
35. It therefore seems clear that there was oral consensus that the contractual
“term of period” would be extended so as to allow for the later completion of the
agreed scope of work (or “the project” in Bilbrough’s language). While Bilbrough
says that there was talk about a further project which the Third Applicant
“wanted the respondents to deliver ”, there is no suggestion of agreement on
this at that stage . The envisaged CCPOS -V2 was n ot part of the deliverables
under the written software agreement.
36. The Applicants however go on to aver that the “ result” of the oral agreement on
2 April 2019 was that the software agreement “ was orally renewed … on
substantially the same terms as before with (i) the duration of the restraint
directly linked to the duration of the contractual relationship between the
parties, [and] (ii) the renewed software agreement not having a fixed term but
terminable on reasonable notice by either party.”
37. These are not averme nts of actual oral terms concluded on the call, but
inferences or legal conclusions which the Applicants wish to draw from the
express oral agreement as attested to by Bilbrough. I will return to this later.
Unsurprisingly, the Respondents deny these allegations.
38. Continuing with the chronology, Hendricks states that in June 2019 he
completed and delivered the core work for which the First Respondent had
quoted (i.e. the agreed deliverables in the software agreement) . This is not
denied.
39. Following that milestone, Hendricks says that the Applicants still required the
First Respondent to continue to provide services to them, and particularly to
assist with the CCPOS -V2 program. He says that Bilbrough spoke to him,
probably in June 2019, and conveyed “ that Converters wanted [the First
Respondent] to stay on and provide services on a retainer basis, and that
Converters would provide a new written agreement to cover this. ” This is
consistent with Bilbrough’s version of the 2 April 2019 call, in which he says
that at that stage plans were being made for a discussion about the design and
development of a new CCPOS-V2.
40. It is common cause that no new written agreement covering any new
deliverables was concluded. Hendricks says that both parties acknowledged
that this was a necessary step, but “back-ranked” it because they were focusing
on the “ real work ”. He says however that Bilbrough regularly mentioned the
need for a new contract.
41. Hendricks goes on to state that i n May 2022 the Third Applicant wanted to
change how it paid the First Respondent from a monthly retainer to an hourly
rate.6 This was a new trigger to both him and Bilbrough for the conclusion of a
new written contract. On 3 May 2022, Bilbrough provided a draft written
proposal for Hendricks to conside r. That draft contained a restraint of trade
clause. On 18 May 2022, Hendricks in an email told Bilbrough that he was
concerned about signing a contract with a restraint of trade.
42. There is a dispute about what happened next. Hendricks contends that he was
furnished with a nother copy of the proposed new contract (which is based on
the software agreement) with the restraint clause having been struck out by the
Applicants. He attaches what he says is that draft to his answering affidavit .
The Applicants deny that they struck out the restraint clause. I do not need to
resolve this dispute, because the Applicants do not deny that Hendricks had
mentioned his difficulties with the restraint , and it is therefore clear at least that
the restraint issue in respect of the proposed new contract was controversial.
43. The proposed new written agreement was never concluded. Hendricks lays the
blame for this at the Applicants’ door, although he also does not seem to have
pressed the matter further. The Applicants do not explain why they did not drive
the matter to a conclusion. It also does not appear that the proposed new
hourly-based payment method was implemented : the First Respondent
continued to receive a fixed monthly payment (albeit at an increased amount
per month).
6 The Applicants say that it was the Respondents that wanted more money, which gave rise to these
discussions. Nothing turns on this.
44. On the Applicants’ evidence, May 2022 was the date on which a new and final
phase of work (“ Phase 5 ”) commenced. Phase 5 followed the completion of
“Phase 3 ”, which entailed the development of the new CCPOS -V2 system.
Under Phase 5, t he Respondents were given specific tasks such as adding a
“Domestic Reverse Charges ” function to CCPOS -V2, and developing a
royalties calculation function and a “Daily Settlement Engine”.
45. The Applicants also refer to a separate “ Phase 4” commencing in March 2020.
This involved an unsecured lending product that was being developed for the
Second Applicant known as SMART. The Respondents’ role was to ensure that
the design and architecture of the new product “ would fit within the overall
architecture of the third applicant’s existing systems”. This is not disputed.
46. In October 2023, the relationship between the Applicants and the Respondents
broke down. The catalyst was the Applicants learning that Hendricks had
recently assisted a group of Cash Crusaders franchisees to back up data
ahead of an anticipated contractual dispute with their franchisor. These
franchisees had then broken away from Cash Crusaders and banded together
as part of a new competitor business called “Cash Xchange.”
47. Hendricks also revealed to the Applicants that he was in the process of
developing a point-of-sale software system for a new company, Phoenix Pos
(Pty) Limited, which would be licensed to third parties. His evidence (contested
by the Applicants) is that the system is suitable for what he describes as a
“single ‘mom -and-pop’ shop operating without a centralised server or
centralised management, which does not offer short term unsecured lending ”.
He offered the Applicants access to the system “ to show that it does not
infringe any right of Converters ,” albeit subject to various “ rules of
engagement.” Nothing came of this. But i n an email to the Applicants,
Hendricks a cknowledged that Cash Xchange was one of the clients to which
Phoenix Pos was providing the new point-of-sale system.
48. In the face of these disclosures, and following various meeti ngs and
correspondence, the Applicants terminated the relationship. They followed this
by demanding undertakings from the Respondents to comply with the terms of
the confidentiality agreement, and not to render services to Cash Xchange or
any other competitor for a period of three years from 17 October 2023.
49. The Respondents refused to give these undertakings.
50. This led to the launch of the present proceedings , to enforce the rights which
the Applicants allege arise from the confidentiality and software agreements.
THE APPLICANTS’ CAUSE OF ACTION
51. In motion proceedings, the affidavits serve the purpose both of pleadings and
evidence. The parties thereby set out the nature of the dispute. It is for the
parties to identify the dispute and for the court to determ ine that dispute, and
that dispute alone (Fischer v Ramahlele 2014 (4) SA 614 (SCA) in para [13]).
52. It is therefore necessary to identify the pleaded cause of action in respect of
which the Applicants seek relief.
53. The final relief which the Applicants seek in these proceedings has changed
over time. They no longer pursue interim relief . They have also abandoned
copyright relief in respect of the computer programs alleged to belong to the
Third Applicant. As regards the final order, i n oral argument a revised draft
order was presented to me which pared down some of the prayers for
interdictory relief. Instead of asking for the Respondents to be restrained for two
years from the date of the Court’s order (as per the no tice of motion), they now
seek the restraint to be enforced for three years from 23 October 2023,
alternatively for six months from the date of the order.
54. The Applicants’ causes of action lie in contract, and particularly in the
enforcement of contractual rights that are alleged to exist based on the terms of
the confidentiality agreement and the software agreement. The Applicants do
not plead an independent case based on common law rights.
55. It is for the Applicants to establish both the existence of a cont ract and the
terms thereof. A claim of this nature can be based on a written, oral or tacit
agreement.
56. The Applicants’ case as pleaded in the founding affidavit is that they have a
clear right “ to require and enforce compliance by the respondents with the ir
restraint and confidentiality obligations arising from the confidentiality
agreement and the software agreement. The operative clauses are clauses 6.1
read with clause 6.3 as well as clause 5.1 to clause 5.5 and clause 11 of the
confidentiality agreemen t. The relevant clause of the software agreement is
clause 10.”
57. The Applicants’ reliance on the software agreement as a source of contractual
rights must be viewed against the common cause fact that the written
agreement lapsed on its own terms on 31 March 2019. The Applicants claim
however that on 2 April 2019 there was an oral “ renewal” of the agreement on
materially the same terms, save for the averred resultant changes as set out in
paragraph 36 above. Hence the Applicants do not rely on the software
agreement per se , but on an alleged oral agreement incorporating relevant
provisions of the software agreement, but with amendments as pleaded.
58. The Applicants also confirmed in oral argument that they made no case for a
tacit agreement. They stand and fall, as far as the software agreement is
concerned, by their pleaded oral agreement of “renewal”.
59. I turn to consider whether the Applicants have es tablished the contractual
framework on which their cause of action is based. If not, the clear right on
which they base their claim for interdictory relief cannot be established.
THE CONFIDENTIALITY AGREEMENT
60. There is no dispute about the conclusion of the confidentiality agreement or its
written terms. For reasons set out above, I consider that all three Applicants are
substantive parties to it and are therefore in principle entitled to enforce it.
61. The parties entered into the confidentiality agreement because it was
necessary for the Respondents to be given access to the Applicants’ existing
computer systems to enable them to perform their review and to make
recommendations to develop a new and impr oved core system. The Applicants
sought protection for that information through inter alia the restraint in clause
6.1.
62. I concluded above that the “ certain services” for which the Respondents were
engaged under the confidentiality agreement constituted onl y the envisaged
review and making of recommendations. Those services were completed at the
latest by the end of September 2019.
63. In my view, the duration of the confidentiality agreement is limited to the period
of the engagement for which it was concluded . That is the period of its
“subsistence” (as envisaged in clause 6.1); and its “expiration” (as envisaged in
clause 5.5) occurred once the services were complete.
64. It is true that the preamble to the confidentiality agreement states that the
Respondents ha ve agreed to perform the identified services and “ such other
services as the Company may from time to time require on the conditions set
out in this Agreement ”. But the actual terms in the body of the agreement are
limited to the identified services, and there was no evidence that the
Respondents were ever requested to provide other services on the terms set
out in the confidentiality agreement. When further substantive services were
identified, a bespoke new software agreement was concluded with the Third
Applicant only, carrying its own confidentiality and restraint provisions.
65. The fact that the subsistence of the confidentiality agreement expired at the end
of September 2019 does not of course mean that it lost contractual relev ance
entirely on that date. On the contrary:
65.1. the obligation of confidence [as set out in clauses 5.1 to 5.4] “ shall
survive the expiration or termination of this Agreement ” (clause 5.5);
and
65.2. the Respondents undertook “during the subsistence of this Agreement
and for three years thereafter ” not to accept instructions from Cash
Crusaders or any other competitor in the Applicants’ industry “ either
directly or indirectly nor do any other act which might give rise to a
conflict of interest” (clause 6.1).
66. At best for the Applicants, the period of restraint under the confidentiality
agreement thus began to run on 1 October 2019 and expired on 30 September
2022.
67. There is no equivalent contractual time -limit on the protection of confidentiality.
However, in my view it follows from the limited scope of the services to which
the agreement relates that the confidential information which it is designed to
protect is that which c ame into the Respondents’ possession for purposes of
enabling them to perform the agreed services.
68. Hence while the confidentiality agreement “lives on” for purposes of protecting
confidential information, th e scope of th at protected information is limited to
what was provided during the subsistence of the agreement.
69. The Applicants made out no case that any of the information to which the
Respondents were exposed for purposes of performing the initial review ( i.e.
the old computer systems) is by itself still requiring of protection. Indeed, it is
the essence of the App licants’ case that the old core systems were not fit for
purpose, which is precisely why the Respondents were required to rebuild
them. It is the current suite of software products, which are the result of five
years of development work, and the informatio n provided that culminated in
their development, that are now held out as being protectable. The Applicants
state in the founding affidavit that “ [t]he extensive, intricate, and highly complex
operation of the software application and technological platfor m forms the
essence of, and encapsulates the protectable interest of the applicants… ” This
is a reference to the current systems, not those which were in place in 2018
and which have now been superseded.
THE CONCLUSION OF THE SOFTWARE AGREEMENT AND THE
QUESTION OF NOVATION
70. Following the delivery of the review and recommendations envisaged in the
confidentiality agreement, a decision was taken to engage the Respondents to
perform substantive work on the computer systems. The result was the
bespoke software agreement concluded with the Third Applicant.
71. The fact that only the Third Applicant was a party is consistent with the group
commercial structure which housed the broader franchise rights in the Second
Applicant and the information technology and computer systems in the Third
Applicant, with each yielding different income streams. It was clearly not
regarded as necessary for the other Applicants to be parties.
72. I concluded above that the primary operation of the confidentiality agreement
expired once the envisaged services were complete, with only the restraint and
confidentiality provisions “ living on ” subject to the restrictions identified. Th e
expiration of the confidentiality agreement was the primary case put up by the
Respondents as to why that agreement did not continue to operate during the
period of the software agreement.
73. The Respondents argue in the alternative that if the conclusion of the initial
services did not cause the confidentiality agreement to lapse, the subsequent
software agreement novated it. Novation is a form of cancellation of a contract
by agreement: “[w]hen parties novate they intend to replace a valid contract by
another valid contract” (Swadif (Pty) Limited v Dyke NO 1978 (1) SA 928 (A)
at 940G). The Applicants den y this and point to authority on the difficulty of
establishing novation, given that a party typically waives rights under a novated
agreement, and waiver is not easily inferred.
74. Given my view on the Respondent’s primary case, the question of novation
does not arise. There was no extant confidentiality agreement to cancel when
the software agreement was concluded. The two agreements enjoy
independent operation , pertaining to different periods and different scopes of
work.
THE TERMS OF THE SOFTWARE AGREEMENT
75. There is no dispute as to the conclusion of the software agreement or its written
terms.
76. As was accepted in oral argument, the software agreement is a contract for the
performance of work ( locatio conductio operis ) as opposed to a contract of
personal service ( locatio conductio operarum ) (see Smit v Workman’s
Compensation Commissioner 1979 (1) SA 52 (A) at 61). The Respondents
were engaged to develop the software pro grams and to produce the specified
deliverables – in other words, to provide a particular agreed result – rather than
to place their productive capacity at the general disposal of the Third Applicant.
77. So viewed, it is perhaps counter -intuitive for the con tract to have a specific
period of operation (“ term of period ”), as would be more common for personal
services or open-ended relationships such as franchise agreements. But in my
view the inclusion of a termination date that may not coincide with the
completion of the work does not convert the software agreement into a contract
of service. It has the effect of limiting the total amount payable by the Third
Applicant and reflects the agreed estimated date of completion of the work. At
the same time, it recog nises that the work may not be complete at the end of
the term, and so provides for the extension of the period by way of a written
addendum.
78. As it happened, the agreed work was not finished by the termination date. It is
also common cause that the softwa re agreement’s term was not extended in
writing. Instead, the parties agreed orally, on 2 April 2019, to extend the date
for delivery of the core work.
79. The legal effect of what the parties agreed on 2 April 2019 is a matter of
dispute. The Respondents say that because the software agreement imposes
its own formalities for the extension of the period, which were not complied
with, the agreement was not extended as a matter of law.
80. Against this, the Applicants relied on the decision in Golden Fried Chicken
(Pty) Limited v Sirad Fast Foods CC [2002] 2 All SA 551 (SCA). That case
involved a franchise agreement whose term had expired. The agreement set
out a formal process which had to be followed to renew it after its initial period,
which process was not foll owed. Both parties initially continued to operate as if
the agreement had continued in force. However, after an apparent change of
heart, the franchisor contended that there was no agreement at all because of
the failure to follow the contractual formalities.
81. Harms JA dismissed this argument, finding that when the old contract expired,
there was nothing to stop the parties from concluding a new contract, “ tacit or
otherwise”. He held (in para [7]) that “ [t]he conditions for extending the initial
agreement cannot govern the conclusion of a new and independent
agreement”. On those facts, he held that there had been a tacit relocation of the
franchise agreement.
82. I accept (as the parties do) that the software agreement terminated on 31
March 2019. It took with it the clause prohibiting the extension of the period
save in writing. I see no reason why (applying the principle in Golden Fried
Chicken) the parties could not have entered thereafter into an independent
(oral) agreement f or the delivery of the same work, albeit with a later targeted
date for delivery, and on the same payment and associated contract terms. The
Respondents’ argument that no new oral contract could be concluded at all
carries an air of unreality, as it was co mmon cause that they agreed to extend
the delivery date and continued to make and receive payments. I very much
doubt that if the parties had been asked on what basis they were then dealing
with each other, they would have disclaimed any reliance on a contract.
83. Be that as it may, the above dispute is not determinative. This is because both
parties aver that all that was actually agreed upon on 2 April 2019 was the
extension of the date for the delivery of the core work (as Hendricks put it) or
the continuat ion of services under the software agreement “ to ensure the
completion of the project” (as Bilbrough put it).
84. In other words, on both parties’ versions the discussion on 2 April 2019 was
limited to giving the Respondents more time to provide the core deliverables
envisaged in Annexure A to the software agreement. It did not relate to any
other work to be performed , since none had yet been agreed – indeed,
Bilbrough says that any further engagement would be the subject of a proposed
workshop to be held at a later time.
85. Thus even if the 2 April 2019 oral agreement established binding contractual
rights and obligation s as the Applicants contend, the ambit of those rights was
limited to the completion of the work (the core deliverables) that had been
agreed upon originally.
86. The Applicants however seek in argument to stretch the oral agreement
considerably further. They allege that the effect of the agreement was to
“renew” the software agreement indefinitely, subject to termination on
reasonable notice by either party, and with the duration of the restraint linked to
the duration of the contractual relationship between the parties.
87. I have already pointed out that these consequences are not alleged to have
been express oral terms, but the “ result” (whether by necessary inference or by
operation of law is not stated ) of what was expressly agreed, namely the
continuation of services “to ensure completion of the project”.
88. In contending that the agreement was “ renewed” on the basis pleaded, the
Applicants are really saying that the parties changed the nature of the
agreement to an open -ended contract of services, not tethered t o the agreed
deliverables but incorporating whatever other projects the Third Applicant may
require from time to time.
89. This argument is irreconcilable with the evidence as to what was actually
agreed. The Respondents were merely given more time (and fundin g) to
complete the identified work. No further work or services were agreed upon, let
alone the commencement of a new open -ended contractual relationship that
would survive after the delivery of the core system.
90. On that basis, the software agreement terminated in June 20 19 when the core
work was delivered.
A FURTHER NEW AGREEMENT?
91. On Hendricks’ evidence, once the core work was delivered in June 2019, the
Third Applicant wanted the Respondents to continue to provide services. This is
consistent with Bilbrough’s evidence about the 2 April 2019 discussion. It
appears that the parties still had in mind further specific items of work, rather
than a general agreement of services. What is important is that Hendricks
states that both he and Bilbrough acknowledged that a new written agreement
would be needed for this. It is common cause that no such written agreement
was concluded.
92. The Applicants’ argument before me was not that a new oral or tacit agreement
was concluded in June 2019 , after the original work ended . The Applicants
contented themselves with averring that what was agreed on 2 April 2019
created a contract governing everything that followed until October 2023.
93. Since the 2 April 2019 agreement does no more than extend the terms of the
software agreement to June 2019, it follows that the Applicants lack a factual
basis, even on their own version, for the existence of an oral agreement
governing the period from June 2019 to October 2023. It might notionally be
argued that the continuation of services in that period demonstrates a tacit
agreement of work or services, but as I have set out above, the Applicants
disavowed any reliance on a tacit contract, not having pleaded it.
94. It follows that there is also no basis to find that the restraint or confidentiality
terms of the expired software agreement continued to bind the parties in th e
period after June 2019.
95. Moreover, on the Plascon-Evans approach I must accept that from June 2 019
both parties accepted that a new written contract had to be concluded to
regulate the new work (deliverables) which the Respondents were tasked to do.
The inference is that the detailed terms of the agreement would be open to
negotiation. I do not thin k that it can be taken for granted that just because the
parties had agreed a restraint of trade in earlier contracts, the same would
necessarily follow in a new contract , or that any restraint terms would be the
same. The parties may have found themselves in very different positions of
negotiating power in imposing or resisting such a provision. As it turned out,
when eventually a draft proposal for an agreement was furnished by the Third
Applicant, the Respondents resisted the inclusion of a restraint. Th e agreement
was never finalised.
96. In the circumstances, I cannot find that the Applicants have established the
existence of an oral restraint of trade term governing the work performed by the
Respondents in the period from June 2019 to October 2023.
97. The fact that it may have been desirable, prudent or commercially sensible for
the Third Applicant to have such a term is of no relevance. A party that seeks
restraint protection, thereby eroding the counterparty’s freedom of contract and
ability to conduct a tr ade, should ensure that it has a proper written agreement
in place. It should not leave such matters to chance or to the vagaries of
establishing oral or tacit terms once a relationship sours.
THE IMPACT OF THE CONTRACTUAL POSITION ON THE RELIEF
SOUGHT
98. I turn now to deal with the impact of my findings on the relief sought.
99. As already stated, the three Applicants were all parties to the confidentiality
agreement. In principle they obtained rights of restraint and to protect certain
confidential information.
100. The confidentiality agreement however lapsed at the end of September 2018.
The three -year period in which the restraint under that agreement could be
enforced has long since expired.
101. Moreover, I have already held that the Applicants have faile d to make a case
for the enforcement of the confidentiality provisions in that agreement in relation
to any information that was originally disclosed to the Respondents in August
2018.
102. Accordingly, there is no basis now to enforce either the restraint or the
confidentiality provisions of the confidentiality agreement.
103. As regards the software agreement, the Applicants in paragraph 187 of the
founding affidavit – the pleading of their case for a clear right – limit the
“relevant” clause of that agreement on which they rely for purposes of relief to
clause 10 (i.e. the restraint provision). They do not invoke the confidentiality
provisions in clause 6 thereof as a separate part of their cause of action.
104. The restraint of trade provision to which the Third Applicant was a party under
clause 10.1 of the software agreement prohibits the Respondents from entering
into prohibited arrangements with competitors for a period “ equivalent to the
months contained in the term of period … up to a maximum period of 3 (three)
years after the termination of this agreement.”
105. Even assuming (following Golden Fried Chicken) that the term of the software
agreement was legitimately extended on 2 April 2019, the maximum period f or
which the Respondents could be restrained would be 9 months from June 2019
(this being the period from October 2018 to June 2019). That period has also
long since expired.
106. The Applicants however referred me to clause 10.6 of the software agreement
which provides as follows:
“In the event that the Performers are involved in any litigation in respect of
this clause, and in the event that this clause 10 is upheld, then the
Performers agree to be restrained for the restricted period from the date of
such un-appealed final judgment of the highest court, which includes but is
not limited to any interim order obtained against the performers.”
107. I have some doubts as to whether such this provision is necessarily
enforceable, given how it materially extends the effective period of the restraint.
Just as a court has the power not to enforce a restraint for an excessive period,
or for a period that does not bear a proper relationship to the interests to be
protected (see e.g. Sunshine Records (Pty) Ltd v Fröhling 1990 (4) SA 782
(A) at 794G -H, Technor (Pty) Ltd v Rishworth 1995 (4) SA 1034 (T) at
1038C-D), such a provision may conceivably not be enforced where it is not
apparent that imposing the restrai nt at a time which may be many years after
the end of the relationship will still be reasonably necessary to protect the
interests for which the restraint was included.
108. On the facts of this case, it is however not necessary for me to decide this
issue. Clause 10.6 presupposes the upholding of the restraint per se under
clause 10. For that to happen, it must be established that the Third Applicant
has a protectable interest that warrants enforcing the restraint.
109. I reiterate that the contractual restraint wh ich is under consideration is located
in the written (or extended oral) software agreement. Since that agreement
expired no later than June 2019, any protectable interest which warrants the
enforcement of the restraint must be found in the work done or ser vices
rendered under that agreement.
110. In this regard, clause 10.4 of the software agreement contains a specific
acknowledgement that the Third Applicant has a protectable interest “ in respect
of the software programme” – which is a reference to the core sy stem that was
the deliverable under that agreement.
111. The Applicants have brought their case on the basis that the current software
system is protectable. Presumably because of their reliance on a “ renewed”
software agreement that applies up until October 2023, they have not
attempted to make an independent case for restraining the Respondents to
protect the original core work that was completed more than four years ago. It
follows that I cannot make an ass essment as to whether it would serve a
legitimate purpose to restrain the Respondents at this stage in relation to what
may be old or superseded work.
112. Moreover, the Applicants elected to move for final relief on the papers, in the
knowledge that the Resp ondents had denied the existence of a protectable
interest in the computer software per se . It was averred in the answering
papers that the work done was not unique, and entailed the application of
standard systems used by many businesses. It was because o f this evidence
that the Applicants applied unsuccessfully to have the issue of a protectable
interest referred to oral evidence on the basis that the dispute could not
properly be decided on affidavit.
113. In moving the application before me, the Applicants sought to overcome this
difficulty by pointing to a letter from the Respondents’ attorneys, sent before the
litigation commenced, that denied that the software programs were confidential
“except for SMART ”. The Applicants argued that this was an admission as to
the protectable nature of SMART, which by itself would justify the enforcement
of the restraint.
114. Whether or not the Applicants are correct in this averment, it is common cause
that SMART was conceptualised in 2020 and that development commenced in
2021. Therefore it is not part of the “ software programme ” envisaged in the
software agreement, and cannot possibly constitute information that enjoys
protectability under the software agreement that terminated in 2019.
115. As far as the Applicants’ case for pro tectability extends beyond SMART and
incorporates parts of the core software developed up to June 2019, I do not
believe that I can summarily reject the Respondents’ averments as to the
standard nature of those systems on the papers alone, by applying the high
threshold for exceptions to the Plascon-Evans rule as set out in Media 24
Books (supra).
116. In summary, even if I were inclined in principle to rule that a restraint sourced in
an agreement that expired in 2019 should run from the date of judgment in
October 2024, on the present facts I could not do so in the absence of the
Applicants having established a relevant protectable interest over material
developed up to 2019.
117. Finally, I have found that the Applicants have not established any restraint of
trade agreement binding the Respondents in relation to the period after the
termination of the software agreement in June 2019. No restraint relief can
therefore be granted in respect of that period.
CONCLUSION ON THE MERITS
118. The first requirement for a final interdict is the establishment of a clear right to
the relief sought.
119. For the reasons given above, I am of the view that the Applicants have not
established an entitlement to enforce the contractual restraints and
confidentiality provisions on which they have pleaded reliance . No clear right
has been shown to exist.
120. It is therefore unnecessary to deal with the other requirements for a final
interdict, namely the infringement of the right and the absence of an alternative
remedy.
COSTS
121. The matter is plainly of considerable importance to both set of parties, and
raises factual and legal issues of some complexity.
122. Both parties regarded it as a reasonable precaution to engage the services of
two counsel, and both agreed that it would be appropriate for any costs order to
include the costs of two counsel on Scale C.
123. I do not consider that this is a matter where the conduct of the unsuccessful
parties warrants a special or punitive costs order.
ORDER
124. In the circumstances, I make the following order:
124.1. The application is dismissed.
124.2. The Applicants shall pay the costs of the Respondents jointly and
severally, the one paying the other(s) to be absolved, including the
costs of two counsel taxed on Scale C.
-----------------------------
M W JANISCH
Acting Judge of the High Court
Western Cape Division
APPEARANCES:
For the Applicants: L Kuschke SC
C Bester
Instructed by:
Redfern & Findlay Attorneys
For the Respondents: R Patrick SC
(the heads of argument having been
drawn by A Sholto-Douglas SC and
R Patrick SC)
Instructed by:
Cluver Markotter Inc
Date of hearing: 18 October 2024
Date of judgment: 28 October 2024 (electronically)