Judgment No. HB 31/06
Case No HC 2721/04
CONSOLIDATED AFRICAN VENTURES (PVT) LTD
METALLURGICAL SUPPLIES (PVT) LTD
DEPUTY SHERIFF – GWERU
IN THE HIGH COURT OF ZIMBABWE
BULAWAYO 29 MARCH AND 31 MARCH 2006
N Mazibuko, for Applicant
G Manyatera, for 1st Respondent
BERE J: The Applicant seeks the following order: -
“(a) The agreement between Applicant and 1st Respondent on 1st of January 1995 be and is hereby cancelled.
1st Respondent be interdicted from continuing manufacturing products in schedule 1 hereunder listed using Applicant’s Know How and technical information utilising the Know How and Industrial Property Rights furnished to it by Applicant.
1st Respondent should within 5 days of date of delivery of this order return to Applicant all Technical Material in its possession relating to the products and the Know How as shown on Schedule 1 of Annexure A.”
The order has been sought on the basis of the alleged violation of a Licence Agreement allegedly entered by the Applicant and the Respondent. That agreement is marked Annexure “A” on the consolidated index filed of record.
It is the Applicant’s case that in terms of Clause 5 of Annexure ‘A’ The Respondent undertook to pay the Applicant a royalty of 5% of the net sales value of the products manufactured and sold or put into use or transferred by 1stRespondent. The royalty was to be paid as consideration for the right and licence to manufacture and sell products and render services utilising the Technical Know How and Industrial Property Rights owned by the Applicant.
In its notice of opposition to the order sought the Respondent has among other things questioned the validity of the Licence Agreement and alleged it was fraudulently entered into to facilitate externalisation of foreign currency by one Dr W Moore who from the papers filed appears to be the majority shareholder in both the Applicant and the Respondent companies.
The greatest hurdle which counsel for the Applicant had to deal with was to indicate to the Court when precisely the agreement in question was entered into and where it was made as the filed agreement Annexure ‘A’ was not on the face of it conclusive in this regard. The Respondent had raised this issue in paragraph 2 (d) of its notice of opposition.
Counsel for the Applicant was forced to speculate on when and where the agreement could have been made. In his endeavor to deal with this issue he was then forced to literally give evidence from the bar. In his desperation he sought guidance from Applicant’s answering affidavit which itself was of little value as P Macrae (the deponent for Applicant) was himself forced to speculate on how the conflicting dates could have come about. He stated at page 68 of the second paragraph 2(d) of his answering affidavit, as follows;
“…The documents were actually signed in 1995. It appears that Dr Moore wrote 1994 in error – an error which regularly occurs well into the New Year. This has no bearing on the validity of the document” (My emphasis)
It is in my view arguable whether or not these inadequately answered questions would have no bearing on the validity of the agreement in question in the light of the combative position taken by the Respondent in its attitude towards this agreement.
The Respondent has alleged that the whole Licence Agreement was a fraudulent document designed to externalise foreign currency from Zimbabwe as both the Applicant and the Respondent were controlled by the same person, one Dr Moore.
There is no doubt that in terms of the Licencing Agreement payment of royalty was going to be made in foreign currency hence the need to comply with the Exchange Control regulations of this country.
It has been argued by the Respondent that there was no such compliance by the Applicant. The Applicant on the other hand has sought to rely on Annexure “A6” as indicative of full compliance with the Exchange Control Regulations.
The difficulty with Annexure “A6” as it stands, is that it is a hanging or floating documents. It is not conclusive per se. Depending on which date one would want to accept as the date the Licencing Agreement was signed one cannot help but come to the conclusion that Annexure “A6” only came into being on 9 August 2005, well after the Licensing Agreement was already operational. If one accepts that the Licensing Agreement came into being on the date reflected on page 25 of the record, that is 1stMarch 1994, then the authority in question must have been obtained almost (17) seventeen months after the Licensing Agreement had come into operation. If one accepts that the agreement was signed on 1stJanuary 1995 as Applicant seems to be insisting on, again one finds that Annexure “A6” was obtained almost (8) eight months after the agreement had come into operations.
There is yet another hurdle which requires to be explained. Was the Exchange Control Authority, that is Annexure “A6” (if at all it was granted) granted with retrospective effect or with effect from the date it was given, that is 8 August 1995? Was it proper that such authority be granted through Standard Chartered Bank or it had to be granted directly by the regulatory authority, the Reserve Bank of Zimbabwe? All these could not, and have not been adequately explained in the filed papers.
The Respondent makes a bold declaration in its opposing papers that there was no transfer of technology or transfer of the Industrial Property Rights to it by the Applicant and that there has never been a time when the Applicant’s workers have visited the Respondent to either facilitate or monitor its operations. The Respondent makes the point that it has only communicated with the Applicant through its Legal practitioners based in Zimbabwe. Again, this aspect is one which the filed papers fall short.
There is also another serious allegation deriving from Annexure “A5” wherein Applicant specifically stated that: -
“CAV NOT PROPRIETOR OF PATENT/TRADE MARKS.
It is recorded that while the company is using the patent/trade marks set out in Schedule 8, CAV is not the registered proprietor therefore, nor in terms of Patents Act Chapter 26:03 and/or the Trade Marks Act Chapter 26:04.”
It is agreed that within this context CAV stands for the abbreviation or shortened name of the Applicant Company.
It is clear that Applicant clearly disowns the Industrial Property Rights which rights it seems to be enforcing against the Respondent. It is not clear from the papers how this would come about. On the face of it the Applicant may not have the rights that it purports forms the subject matter of these proceedings.
It is true there may be a plausible explanation for this but that explanation is fodder for trial and not for an application of this nature.
The position the Court takes is that there are so many issues in this case which remain unanswered even after well presented arguments by both counsel.
It is clear to me that the Applicant has adopted the wrong procedure. As rightly put by counsel for the Respondent, there are triable issues which by any stretch of imagination cannot be resolved on the papers even if one were to adopt a very robust approach.
The Applicant compounded its position by persisting with this application even in the face of the opposing affidavit which gave a clear hint as to the issues at stake.
I am satisfied this matter must be referred to trial with the Applicant’s founding affidavit standing as the declaration, opposing affidavit as the Respondent’s plea and Answering affidavit as the Applicant’s replication.
Because of what appears to be clear intransigence on the part of the Applicant in persisting with this application, it is only fair in my view that Applicant be ordered to pay costs of this arbortive application. Applicant is thus ordered to pay costs.
Mhuruyengwe and Associates, for Applicant
Makonese and Partners,for Respondent