The story starts with two school friends. M and H met each other at the same technical High School in Johannesburg. M developed a career for himself in industrial plastic piping for mining and industry. He became interested in the concept of rehabilitating old steel pipes by inserting a plastic pipelining inside such pipes thereby extending their lifespan by some thirty years.
In fact the commercial feasibility of this concept became a reality for M when an opportunity arose with an existing gold mining company for him to fulfil this function on their behalf. At that stage the process was novel in South Africa.
M accordingly looked further afield. He went to the USA and linked up with a certain G who had already established a plastic pipelining process. At M’s behest and expense G came to South Africa and spent quite some time here teaching M a process known as Sureline. This process involved the use of a deformer machine to fold plastic piping into steel piping in a certain way, taping the folded pipe and then inflating same once it had been pulled through the steel pipe, thereby sealing the inside.
Due to certain welding peculiarities of the older pipes the process of inserting plastic pipe was complicated in this country. M and G spent a considerable amount of time, effort and money in refining the Sureline process to the point where it worked effectively in South Africa. A novel idea which arose from all of this work was to have the plastic pipe already laid out prior to its insertion into the steel pipe. Remember that piping of several hundred meters sometimes up to a kilometre or more had to be lined, the procedure needed to be faultless to avoid the plastic pipe tearing, breaking or becoming stuck inside the older pipe.
M spent many millions of rand in getting the process right. During the course of these endeavours he linked up with his old friend H who became not only an employee but a confidant and close associate. Inevitably H was closely involved in perfecting the piping process and utilising same in practical terms. H unavoidably picked up all of the methods and nuances of plastic-lining steel pipes.
Importantly no agreement in restraint of trade was ever entered into between M and H. Also no confidentiality agreement was concluded between them. It is not clear why M did not insist on H signing written agreements of this nature. One would have thought that because of the amount of money and time as well as effort M spent in perfecting and implementing the piping process (to which H was very much a party) he would have insisted on these agreements to protect himself. Perhaps due to their friendship and M’s evident trust in H this simply did not occur.
Unfortunately things went wrong between the two of them. H stopped working for M and immediately started a competing business of his own known as Pexmart. To make matters worse for M he soon discovered that H had tendered for the lucrative piping opportunity mentioned above with the gold mining company. In fact it looked like H was about to be awarded the tender in preference to M as H’s price was cheaper.
M had to move quickly. He brought an application to court to stop H using the pipelining process claiming that this process consisted of M’s confidential information and know-how. M also sought to stop H from copying the machinery M used in the process.
This case was heard in the Pretoria High Court and M won. H then appealed to the Supreme Court in Bloemfontein. He claimed that M did not have any patent on his pipelining equipment. There was no restraint of trade agreement nor even a confidentiality agreement binding him. M’s pipelining process was out there for anyone to copy and use. H said there is nothing unique about M’s pipelining techniques. H had developed his own method in any event. Furthermore, H said that when he worked with M he contributed substantially to M’s pipelining process.
M on the other hand contended that the pipelining process he used was revolutionary and new in South Africa. M’s work with G which cost him a large amount of money led to the perfection of the relevant technique. The details of how M’s pipelining process worked had been acquired over a long period of time with the application of much time, effort and of course cost.
M claimed that H’s alleged pipelining method which H said differed from M’s, could never work effectively. It was a ruse by H to conceal the fact that he was simply utilising M’s method. In summary M contended that H had taken everything he learned from M to set up Pexmart and steal the gold mining company opportunity from M.
The court was now faced with two different versions. It seems the biggest problem for H was the fact that he did not get into the witness box and testify. M on the other hand did. It appears that M gave comprehensive evidence on the background leading up to the perfection of his pipelining process, how it worked and how he had educated H on all of these aspects. To a large extent M’s evidence was uncontested. The inevitable inference arising from the fact that H did not testify is that he had something to hide and M was right all along.
The court then looked at M’s version of events. It found that M had indeed spent a considerable amount of time, effort and money in perfecting his pipelining process. This could not be disputed. H’s conduct in essentially hijacking M’s pipelining process and putting same forward as his own in tendering for competing work was found to be unlawful competition. H had unlawfully used M’s confidential information and trade secrets. It did not matter that M did not have restraint of trade or confidentiality agreements in place. Our law of unlawful competition was available to M in these particular circumstances. He successfully relied on the law of unlawful competition to protect his business against H copying M’s pipelining process.
This case is another example of how our courts have come to the assistance of someone in M’s position. He trusted H with his trade secrets and knowhow without seeing the need for any written protection. When H turned that trust against M to protect him.
Full case citation : PEXMART CC AND OTHERS v H MOCKE CONSTRUCTION (PTY) LTD AND ANOTHER 2019 (3) SA 117 (SCA)
