Amdocs SA Joint Enterprise (Pty) Ltd v Kwezi Technologies (Pty) Ltd

• Jurisdiction: South Africa
• Judge: GS Myburgh AJ
• Judgment Date: 15 April 2014
• Citation: 2014 (5) SA 532 (GJ)
• Docket Number: 2012/1068
• Hearing Date: 15 April 2014
• Counsel: J Brett SC (with K Tsatsawane) for the applicant. RD Levin SC for the respondent.
• Court: Gauteng Local Division, Johannesburg

GS Myburgh AJ:

[1] This matter concerns an application made in terms of s 165(3) of the Companies Act [1] (the Act) for the setting-aside of a demand made on the applicant by the respondent, as one of its shareholders, in terms of E s 165(2) of the Act.

[2] The facts are for the most part common cause. To the extent that they are not, I am constrained, given the nature of these proceedings, to decide the matter on the basis of the respondent's version — save to the F extent that any part of the evidence put up by it may be so untenable, having regard to the common-cause facts and the inherent probabilities, that it can safely be disregarded. [2]

[3] On that basis the facts can conveniently be summarised as follows:

[3.1]

The applicant, which is referred to in the papers as a 'joint G venture company', was established in 2007. I will deal with the background to its establishment more fully hereunder. For the time being, suffice to say that its shareholders are and have at all material times been as follows:

[3.1.1]

Amdocs Development Ltd (Amdocs) — as to 51% of the issued share capital. H

[3.1.2]

Waymark Infotech (Pty) Ltd — as to 21% of the issued share capital;

[3.1.3]

Eratis Technologies (Pty) Ltd — as to 14% of the issued share capital; and

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[3.1.4]

A Kwezi Technologies (Pty) Ltd (referred to either as 'Kwezi' or 'the respondent', as best fits the context) — as to 14% of the issued share capital.

[3.2]

Prior to the establishment of the applicant, Amdocs, together with certain associated companies, had for a number of years B and, by all accounts, from as early as 1998 supplied and rendered what are referred to in the papers as 'telecommunications related software and services' to Telkom Ltd (Telkom) — the latter being a very large state-owned entity which holds an effective monopoly over fixed-line telecommunication services in the country. Precisely what the software and services comprised C is not evident from the papers; however, it is also not important for present purposes. Suffice to say the products and services appear to have been of a sophisticated and specialised nature and not of the kind which are available 'off the shelf'. It was common cause that products and services were supplied in terms of long-term contracts of the kind which have come to be D known as 'service level agreements'.

[3.3]

At some time prior to, or at least by approximately 2006, Telkom adopted a procurement policy which incorporated certain BEE requirements. The papers do not contain any detail E in this regard, but again nothing turns on the specific requirements of the Telkom procurement policy. It is a matter of common knowledge that Telkom would, as a state-owned entity, have been obliged to have adopted a procurement policy which would have favoured South African service providers with substantial BEE credentials.

[3.4]

F Certain of the said long-term agreements between the Amdocs companies and Telkom expired during or about the first quarter of 2006. That notwithstanding, the Amdocs companies continued to render the services in question to Telkom as if the agreements in question were still in existence. There is some G disagreement on the papers as to the reason for this. According to the respondent the then chief executive officer of Telkom was not prepared to renew the contracts with the Amdocs companies unless they became BEE-compliant. The applicant objected to that portion of the respondent's evidence on the basis that it constituted hearsay — which it clearly was. That having been H said, I believe it can safely be accepted that the Amdocs companies would, in all likelihood, have been placed under some pressure by virtue of the fact that they were in no way BEE- compliant. At the same time it seems probable that Telkom would have found itself in a rather difficult position by virtue of I its long-standing relationship with the Amdocs companies and its consequent reliance on them for the provision of software and services which were very important, and indeed critical to its ability to provide sophisticated and efficient telecommunications services. As I have already indicated, the products and services in question are not of a kind which are freely available 'off the J shelf'. What is more, it is likely, given the history and the kind of

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products involved, that there would have been at least an A amount of customisation. Indeed, it seems inescapable that those considerations would have weighed with Telkom in deciding to allow the Amdocs companies to continue rendering the services in question in circumstances where the contracts, or at least some of them, had expired. B

[3.5]

According to the respondent, 'Amdocs' [3] informed Telkom during the course of 2006 that it intended to incorporate a BEE- compliant entity and that it had identified certain suitable partners for that purpose. That part of the respondent's case also, strictly speaking, comprised hearsay; however, I believe that C it can be accepted, having regard to the events which followed, that discussions along those lines would, in all likelihood, have taken place.

[3.6]

During the latter part of 2006 Telkom approved a proposal for what is described in the papers as a five-year 'Long-term D ongoing support and maintenance plan'. The papers are effectively silent as to what the proposal entailed or who the parties to the agreement would be (leaving aside Telkom). However, having regard to other evidence contained in the affidavits and which I shall refer to hereunder, it seems clear that the plan entailed the provision of software and the rendering of services by various 'Amdocs companies' [4] over a five-year period. E

[3.7]

The acceptance of that proposal was communicated to Amdocs [5] by way of a letter dated 15 December 2006. That letter referred to three separate contracts which were all dealt with under the heading 'Maintenance and Support' and described as follows: F

[3.7.1]

Contract 590C/98: Licence and customisation for the Amdocs billing products. Request for extension of the maintenance and support of the Amdocs billing software.

[3.7.2]

Agreement 185C/03: Request for extension on G provisioning and implementation of CMSS (including the licence and maintenance of the associated software).

[3.7.3]

Agreement 332C/99 for the supply of Clarify licences: Request for extension of maintenance.

[3.8]

In addition, the letter contemplated the ongoing rendition of H

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A certain undescribed services. These were addressed in part B, which was headed 'Services rate card (hourly rate card)'. The rates and prices stipulated in the letter covered the period 2006 – 2010 and, save for rates stipulated in respect of 'expert' and 'non-expert' 'local' (presumably labour) in part B, all of the amounts were expressed in US dollars. This would have been B consistent with the understanding that the vast majority of the products and services were to be supplied by foreign companies.

[3.9]

Paragraph C of Telkom's letter of 15 December 2006 read as follows:

'C. Please note this approval is subject to Amdocs' Service C Classification to be contractually defined as:

•

Software licences may be acquired directly from Amdocs.

•

Starting in the year 2007 and going forward and upon professional readiness to the parties' satisfaction, ongoing Support, Integration and Resources Allocation for Amdocs' software products which are not currently ordered by or D installed at Telkom SA including software products that shall replace software products which are currently ordered by or installed at Telkom shall be contracted directly with a local entity in which equity is held by Amdocs' BEE partners (according to the structure recently confirmed with Telkom).

•

The BEE partners shall provide services for the abovementioned E contract.

•

Implementation of Skills Transfer to Local Resources shall start from the effective (unclear) these agreements.'

[3.10]

The applicant was established during January 2007 against that F background. The establishment itself was achieved by means of the purchase of an existing company which was then known as Samber Trading 135 (Pty) Ltd, the conclusion of a shareholders' agreement (described in the papers as 'the founders' agreement') and by the changing of the name of the company to Amdocs South Africa Joint Enterprise (Pty) Ltd (referred to G in the papers as ASAJE).

[3.11]

The terms of the founders' agreement are of considerable relevance in the context of the issues which fall to be determined and I shall return to them at the appropriate juncture. For the time being, I shall confine myself to drawing attention H to the following features of that agreement:

[3.11.1]

The preamble to the agreement referred to a desire 'to form a company which shall develop, market and otherwise commercialise the Concept as described in exhibit A attached hereto (the Concept), and pursue the business which is based on the Concept'.

[3.11.2]

I Exhibit A described the concept as follows:

'Purpose Statement

The establishment of the company as a South African company, owned jointly by Amdocs and local BEE partners, is a critical activity to better align J Amdocs with the BEE requirements of doing business

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in South Africa. The initial objectives of the company A are envisaged to be:

To market Business Support Systems (BSS) and Operation Support System (OSS) projects for its own account in South Africa and in Africa.

To sell integration services and hardware around BSS and OSS suite of products for its own account. B

Subsequent objectives could include:

1.

To develop Ongoing Support capabilities and to provide these as a fully accredited...