South African Iron and Steel Industrial Corporation Ltd v Harchris Heat Treatment (Pty) Ltd (455/82) [1987] ZASCA 67 (27 July 1987)

Cas no 455/82 MC

1987-07- 27

SOUTH AFRICAN IRON AND STEEL INDUSTRIAL CORPORATION LIMITED

- and -

HARCHRIS HEAT TREATMENT (PTY) LTD.

JANSEN JA.

Case no 455/82

M C

IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter between

SOUTH AFRICAN IRON AND STEEL

INDUSTRIAL CORPORATION LIMITED Appellant

(Defendant in the Court a quo)

HARCHRIS HEAT TREATMENT

(PROPRIETARY) LIMITED Respondent

(Appellant in the Court a quo)

CORAM: JANSEN, VILJOEN, HOEXTER, BOTHA JJA et

ELOFF AJA.

HEARD: 5 March 1985

DELIVERED: 23 July 1987.

JUDGMENT2 JANSEN, JA:-This is an appeal against an order of the Transvaal Provincial Division (per O'DONOVAN J ) whereby the appellant (Iscor) was, at the instance of the respondent (Harchris), inter alia interdicted from using or otherwise dealing with a furnace (referred to as the " ZD") which it (Iscor) had constructed. The judgment of the Court a quo is fully reported at 1983(1) SA 548 (T).It appears that during the second half of 1979 Iscor found itself, owing to an unprecedented demandarising from projects such as e g Sasol III and Koeberg and the require= ments of the armaments industry, unable to meet its commitments for the delivery of normalized steel plate. It ran the risk of

incurring /

3incurring substantial penalties and had to bear recriminationfrom Sasol for the assurance it had given that it would not benecessary to import normalized plate. The process of normali=zation entails the heating of the steel to approximately 900°C,holding that temperature for some time ("soaking") and thenallowing it to cool in, ideally, still air. Theoretically anyfurnace with an enclosure physically able to take the load andable to supply the necessary heat (preferably, evenly) would do.Iscor itself was mainly using a bogie hearth furnace for norma=

lization of its plate and had experience of occasionally using

its top hat annealing furnaces for this purpose. The demand for normalized plate

exceeded production by about 1 000 tons per month and Iscor expected this position to continue for some months. The obvious

solution / 4 solution of the problem was to sub-contract for the normaliza= tion of the plate which Iscor itself could not do. There were, however, disadvantages in following this course: large loads would have to be transported to the sub-contractors and regular visits by employees of Iscor would be reguired to monitor the process so as to enable Iscor to give the necessary warranties to its customers. An approach was nevertheless made to Vecor. This corporation was quite prepared to put its top hat furnaces at the disposal of Iscor when available, but it was not in a position to give any priority to Iscor's work and this was not acceptable to Iscor. At a meeting on 18 September 1979, however, an agreement was reached with Harchris that it would normalize 300 tons of steel plate for Iscor at R50 per ton.

It was / 5 It was minuted that "kapasiteit by Harchris is voorlopig 500 ton per maand maar kan waarskynlik hoër wees" and that "Yskor voel dat die prys van R50 per ton vir normalisering te hoog is en dat verdere samesprekings moet volg nadat 300 ton behandel is". It was also minuted that the plates to be treated would have a minimum thickness of 30 mm and a maximum length of 9000 and a maximum width of 3000 mm. It was also agreed that Iscor would supply a reject 30 mm plate for experimentation by Harchris. Obviously this was, as far as Iscor was concerned, a trial con= tract.

In terms of the contract Iscor delivered 150 tons of plate to Harchris, which set about normalizing them in its pit furnaces. Harchris, however, encountered serious difficulty:

the / 6 the plates, particularly the thinner ones, tended to become distorted (buckled). J MacDonald, a metallurgist and at the time technical manager of Harchris, believed that this was caused by excess heat rising from the base of the furnace during the cooling stage. In an attempt to obviate this, he experi= mented with a removable ceramic fibre blanket, placing it on the base of the furnace. It does not seem as if this expëriment was very successful. He, however, had high hopes of a top hat furnace Harchris had started building at the beginning of the year and which was reaching completion. He believed that this furnace would allow greater evenness of cooling of the plates and that the use of a removable ceramic blanket on the base could improve this even further.

From / 7 From Iscor's point of view things were not proceeding satisfactorily. Reports by Iscor's quality control section of distortion occurring in a large percentage of the plates were not reassuring. Customers could not be supplied and had to be appeased. During the afternoon of 9 October 1979 Mr Riddell, the Chief Works Manager at Van der Bijl Park, called a meeting of the works management team to discuss the position. It was reported that there appeared to be grave doubts whether Harchris would be able to do the required normalization. Riddell felt that something drastic had to be done to save the situation. The meeting then con= stituted itself a "think tank" ("dinkskrum") and came up with the solution that Iscor should become self-sufficient by con=

structing /

8.

structing an additional furnace, a batch type, either a top hat

or a bogie hearth, as soon as possible. A C Fokker,(a BSc graduate in iron and steel and a qualified metallurgist) the manager of the Hot Mills Séction, who attended the meeting, was then

given a mandate to investigate the possibility of building one

or the other within a month. (Fokker preferred the idea of a bogie hearth furnace, because of the experience by Iscor of using that type of furnace for normalizing. However, the proposal of a top hat cannot be considered incongruous at all. Iscor had occasionally used its top hats, designed for annealing, for normalization.) He was also instructed to assess the likelihood of Harchris being able to meet Iscor's requirements in the immediate future.

Fokker retired to his office and considered the

situation. He decided to approach Dickenson & Sons Limited,

a company which had done considerable work on furnaces for Iscor

in the past. He telephoned mr Neville Dickenson who referred

Fokker / 9 Fokker to A G van der Veen, the technical director. Dickenson said that he would arrange for Van der Veen to call back. Van der Veen telephoned at about 17h00 and Fokker asked him to come over. Fokker also recalled members of his staff who had already left for the day to be present at the meeting with Van der Veen and he instructed J S Allison, Superintendent of the Slab Handling and Treatment Division,to arrange a visit to Harchris the next morning.

At the meeting Van der Veen was apprised of the situation. He dismissed the idea of a bogie hearth furnace out of hand because he was of the opinion that it could not be built within a short time - the top hat was of far simpler con= struction. It is unnecessary at this stage to go into detail regarding what transpired at the meeting, or at Van der Veen's

home /

10.

home that evening or at Harchris the next day. Suffice it to say that Fokker came to the conclusion that Harchris could not solve Iscor's difficulties, and that with the assistance of Van der Veen Fokker was able to present the concept of a large top hat furnace, entailing an expenditure in the vicinity of R160 000, to Riddell on the llth of October, and the green light to proceed was immediately obtained from head office in Pretoria. Fokker was relieved of his ordinary duties and appointed Project Leader. The project was completed in the remarkably short time

of 18 days. Great prominence was given in the media to this feat and Iscor produced a brochure setting out the history and specifications of the furnace (hereinafter called the "ZD" furnace).

On reading the brochure, H B Preston (at the time managing director of Harchris and designer of the top hat

furnace /

11

furnace then under construction) came to the conclusion thatIscor had unlawfully copied his furnace - hence the próceedingsinstituted by Harchris in this case. In evidence on behalf ofIscor, Fokker and Van der Veen deny copying. Van der Veenparticularly maintains that the ZD evolved independently and heexplains how it came about. The Court a quo came to the conclusion that Iscor did copy the Harchris furnace. It speaks of an "inference of copying based on similarities between the two furnaces, oppor= tunity and motive" (553A) and expresses the view that the "differences (between the two furnaces) do nothing individually or cumulatively, to displace the clear inference to be drawn from the basic similarities between the two furnaces, which were

constructed / 12. constructed in quick succession and are unlike any other

known to exist" (553D). In the result the Court also disbelieved Fokker and Van der Veen when they said, in effect, that the Harchris furnace did not figure at all in the design and building of the ZD. The Court's assessment of these two witnesses was however not based on demeanour but inter alia on a finding that certain aspects of their evidence were against the probabilities. The Court's conclusion also amounted, in effect, to an acceptance of the opinion of the Harchris expert witnesses (Preston, Dr C Allen and M van Dorfy) that the ZD was derived from the Harchris, and a rejection of the opinion of F J Koinis, the expert called by Iscor, who held the contrary vie The Court considered Koinis to be not impartial and his opinion

as "entirely inferential and based on the differences

between /

12(a)between the two furnaces .... (which) differences are not inconsistent with the charge of copying, and therefore do not logically support the positive inference which Koinis seeks to draw" (554F). It may, however,fairly be said that the opinion evidence on behalf of Harchris is also êntirely inferential and is based mainly on the similarities between the two furnaces, and that little appears on the record to show undue bias on the part of Koinis.

In regard to the similarities between the furnaces the Court a quo considered the ZD furnace to bear "a striking resemblance to the Harchris furnace" and found the former to incorporate (see p 552H) all the features" of the latter mentioned in the judgment (at p 550 C-F). This passage reads as follows :-

"Certain /

12(b)

"Certain of the salient features of the Harchris furnace should be noted. It is a type of furnace which is commonly referred to as a 'top hat' furnace, and consists of a removable hood or cover and two bases, which can be used alterna= tively, and which are insulated to prevent loss of heat. The dimensions of the hood and each of the bases enable it to serve for the treatment of steel plates in sizes ranging up to three metres in width and nine metres in length. Thé cover is equipped with four high velocity gas burners situated below the roof and firing above the load. There are three exhaust outlets in each of the bases, the function of which is to allow exhaust gases to escape evenly from all parts of the furnace, and ensure the maximum uniformity of temperature throughout the furnace. The cover is lined on the inside with a ceramic fibre blanket, attached with stainless steel studs and clips. Over each burner there is a layer of ceramic hardboard designed to eliminate or reduce erosion of the fibre blanket. The temperature control system operates by means of a programmer which interprets signals recorded on a tape. Locating devices, consisting of two steel centering rods, are located at opposite ends of the top hat. Chromite sand, placed in a channel, is used as a sealant between the top hat and the base."

The /

12(c)

The differences between the two furnaces considered by the

Court a guo appear from the following passage (p 553 'A-C) :-

"The defendant seeks in various ways to displace any inference of copying based on similarities between the two furnaces, opportunity and motive. First of all, emphasis is placed on a number of differences between the two furnaces, of whïch a schedule has been drawn up by Mr Frank J Koinis, an expert witness called by the defendant. Many of these are variations of details. The most important variation relates to the arrangement of burners in the hood and the exhaust flues in the base. The Harchris furnace has four burners in the hood operating in a continuous flow, while the three flues in the base are inter-connected by a single channel running lengthwïse along the base. The ZD furnace on the other hand has six burners inside the hood, arranged in three pairs in staggered opposition to each other, while each of the three flues in the base exhausts separately at the side of the base. This arrangement, it is claimed, permits three zones of temperature control to be main= tained."

It/

12(d)It may also conveniently be mentioned at this stage that the ZD was very much longer than the Harchris (the inside measurement being 14,5m as apposed to 9,58m), and that the difference in the positioning of the burners resulted in guite a different pattern in the heat flow. The details of the seal and locating pins also differed.It is contended on behalf of the appellant that the Court a guo erred not only in its reasoning but also in the assessment of the witnesses,

of the/ 13 of the probabilities of the case and of the opinions of the experts. For a proper evaluation of thesematters it will be expedient to mention, initially, some aspects of the art or science of furnace design and construction and the materials and components available to the constructor, in the light of evidence that is either common cause or uncontested.This is not an arcane field and suitable materials and components are well-known and available in South Africa. Basically a furnace is an enclosure lined with a refractory material. The design and construction of the enclosure is mainly an engineering problem. As a refractory material ceramic fibre has distinct advantages, foremost that it is a lighter material than e g brick. There are a number of firms, such as Dickenson

& Sons /

14

& Sons and Carborundum Universal, that specialize in supplying,and if required, installing the fibre. In order to promotesales these firms are only too keen to assist in every respect.In the course of giving his evidence-in-chief H B Preston saysthe following:-

" a person must be very knowledgable in the

art to make these calculations [i e in designing

a furnace] accurately, not so? You have

got a lot of assistance these days. You can re= ceive assistance from the ceramic fibre suppliers who will give you heat charts showing heat losses through various thicknesses and densities of wool, you can find out similar information from the refractory suppliers who will give you the heat conductivity and losses through various thick= nesses of different types of castable, that would, that helps tremendously in working our calculations and you have a handbook named North American Combustion Handbook which gives you all the for= mulas to work to in designing a heat enclosure. It is a matter of following the formulas if you wish to do it the long way."

Gas /

15 Gas is a most suitable heat source in the case of a large furnace (electricity e g then proving too costlý). There are firms specializing in the supply and installation of appropriate burners. Hotwork Africa (Pty) Ltd supplies H V (high velocity) burners and Passetti,Maxon burners (that function. at lower pressure). These firms are also eager to supply specifications and give advice, and they distribute pamphlets in the proper quarters. Illustrative of this is that Harchris bought the burners for its top hat from Hotwork and they were installed in a configuration recommended by J B Forster, at the time Sales Director of that company. Preston concedes that Forster also did the necessary calculations for the flues and that he may have recommended that they should be placed in the base.

There /

16

There is, however, a conflict on one aspect inthis regard. Forster (a witness for Iscor) says that the ideaof running the flues through the base was adopted by Prestonon his recommendation whereas Preston claims to have alreadydecided upon this before speaking to Forster. But be that as

it may, it is not disputed that Forster's standard recommenda=tion to prospective clients is that the flue(s) should be

located in that position,with the burners firing overhead.

There are also firms specializing in the supply and installation

of instrumentation and control gear.

It would therefore not be surprising that if two

furnaces of the same type (such as a top hat) are newly de-

signed and constructed that they should have common features

without any copying being involved. Unless the similarity

of/

17.of detail is so great that coincidence is excluded or a feature of the one is so novel that a similar feature in the other is hardly to be explained except on the basis of copying, such an inference cannot legitimately be drawn. The mere fact that they both in certain respects differ from all other existing furnaces of that type cannot be conclusive; the availability of new materials and components may lead to independent but similar adap-tation. This is clearly to be gleaned from the evidence given by M van Dorfy ( an expert called by Harchris) under cross-examination. His evidence in effect amounts to a concession that if called upon to design and construct a top hat furnace such as that required by Iscor, bearing in mind the new materials and components available, one would

by/

18.

by a logical progression of steps arrive at a furnace very

similar to the ZD.

It is against this background that the evidenceof Fokker and Van der Veen must be evaluated. They bothsay that at the meeting on the 9th Iscor's problem wasposed without reference to the top hat under constructionat Harchris. This, it is contended, was improbable. How-ever, the explanation given by Fokker that when he callsin an expert to solve a problem he does not volunteer

suggestions until he has heard what the expert proposes to

do, seems eminently reasonable. Furthermore, there appears

to be little reason for Iscor to have considered the Harchris

furnace as a prototype. Preston was not known as a professional designer

and he did not profess to be one; no specifications or details

19.

of the capabilities of that furnace were ever available toIscor; it was as yet unfinished and untried; van der Veengave the impression of being fully capable of doing what wasrequired and exuded confidence. Although not a professionaldesigner of furnaces he in fact had extensive experience in

replacing refractories in existing furnaces with ceramic fibre

and in making all the necessary calculations. He had also

recently collaborated with Forster in the redesign of the VPC furnace at Vecor for

conversion from electric heating to gas firing. According to Preston (at p 669), who had viewed the plans, "the VPC furnace was going to be changed to high velocity".Fokker and Van der Veen say that the latter went home after the meeting and that night did the necessary pre-liminary calculations. van der Veen produced those calcu=

lations /

19(a)lations, as also subseguent alterations and additions which portray the evolution of the ZD from a furnace with one heating cycle for normalization to one with additional cycles suitable for tempering. That these were in fact the calcu= lations that led to the building of the ZD was never contested. In this regard the comments of C Allen (also an expert called by Harchris) are instructive :-

"Now, has, were the calculation of Mr van der Veen which have been in the plaintiff's possession and

which /

20. which have been handed up in the bundle, shown to you? Yes I have seen them. Do they make sense to you? Yes. Good sense? Yes. Do they look like genuine calculations? They do indeed. With,a view to designing the Iscor furnace? Yes I would have to agree to that. They looked very competent indeed. And as far as size and function and purpose is concerned they do relate to one another, the furnace is the child of the calculation? The furnace has to be the child of the calcu-lation yes. In that sense."

Although a few errors and peculiarities (whichdid not appreciably affect the conclusions) were winkledout in cross-examination, it was never suggested that thecalculations could not serve the purpose for which theywere made or that Van der Veen was not competent to makethem. The main thrust of the attack upon him was directed

at/

21.

at showing that he was not truthful in denying that he had

been given any information about the Harchris furnace.

It is contended, and the court a quo so held,that it is improbable that Van der Veen could have visualizeda concept of a furnace for purposes of his calculations inthe short time it took him to drive from Fokker's office tohis own house. Under cross-examination the following exchangebetween Van der Veen and Counsel took place:

"Now you told me that you began your drawings, not your drawings, your calculations immediately

you got home? Correct.

Right. Now tell me when did you conceive of

this furnace? How does one answer a thing

like that, one imagines a furnace as I, if you spoke to me about a bogey hearth, an open hearth furnace I would know exactly what you are talking about you know. No. I know you would know about a bogey hearth.

But now let us look at a top hat. Top hat

I think is the simplest form of furnace that

one/

22.

one can really get.

I see. So tell me when did you form your concep-

tion of how this particular one would look? Well I presume I was thinking about it on the . way home and when I got home. Then it is a case of putting a couple of sketches out on paper and then starting to calculate. In other words you would start off with your plate size."

At a later stage the court intervened:

"COURT: Mr Labe before you start on calculationsagain I would like the witness to clarify onepoint on which you have questioned him. Mrvan der Veen in answer to the question whendid you conceive the furnace you said youwere thinking about it on the way home? — Yes.

Does your evidence amount to this that when you did the calculations you visualised what

the furnace would look like? I already

knew, I visualised it, correct.

And where various things would be positioned? That is correct.

And that visualisation corresponds with whatwas subsequently constructed? Correct.

I see. Yes. Proceed."

It is/

23.

It is true that Van der Veen does not profess to be adesigner of furnaces and that he should perhaps be betterdescribed as a refractory installer, but he had greatexperience in this field, including the redesigning ofrefractories. Given the dimensions of the largest plateto be normalized it does not, with respect, seem at allimprobable that Van der Veen could almost immediately havevisualized the required enclosure and apply the theoreti-cally sound rule that the burners should fire above the loadand the gases be exhausted through the base. He certainlycannot be understood to have claimed to have vizualisedevery nut and bolt.

Some point is made of the fact that in calcula-

ting the heat losses Van der Veen assumed a blanket of

ceramic fibre on the base of the proposed furnace, the

suggestion/

24.

suggestion being that this was derived from MacDonald's

experiments with a fibre blanket. However, Van der Veen

explained that in doing the preliminary calculations he

had to assume some value for the refractory material on

the base and to expedite matters he assumed this to be

the same as for ceramic wool. This seems an adequate

explanation. It was never proposed in fact to place a

wool blanket on the base of the ZD.

The ZD furnace is 2 metres high, which is more

or less the height of the Harchris furnace. Van der Veen was at a loss to explain how he arrived at this measurement. He

tried to relate it to the height of the stack of plates

expected to be heated, but he was in difficulty. It is contended on

behalf of Harchris that the height was derived from the Harchris

furnace/

25.

furnace, but this seems hardly likely. Obviously theheight is related to the height of the load - thus theHarchris furnace was built to accommodate coils of wire.It is difficult to envisage Iscor adopting a particularheight for the ZD simply. because the height of the Hal-chris furnace was of this order. The true explanationwhy Van der Veen could not clarify this dimension seemsmuch rather to flow from his inability to remember the number and theproposed spacing of the plates which would constitute theload, than from an uncritical and slavish adoption of theheight of the Harchris furnace.

Much is made of the fact that on one page of the calculations by Van der Veen, which he relates to a later stage in the evolution of the ZD when, according to him,

6 HV/

26.

6 HV burners were proposed instead of 12 Maxon burners(so as to allow tempering cycles), there appears thefollowing: "13700 x 3000 x 65(85?) by 5 (?)"This is similar to part of a calculation which Van derVeen made during the evening óf the 9th of the weightof the load and then rejected as giving an "impossible"result: he accepted that he must have misunderstoodFokker in this regard. He then proceeded simply on theassumption that production of the furnace would be 1000tons per month. Van der Veen could not really explainwhy these figures appeared on the sheet of calculationswhich he claims to have made subsequent to the 9th. He

thought it might have been written as a reminder to askFokker about this. The contention by Harchris, accepted

by the court a quo, is that these figures indicate that

the/

27.

the calculations on that page were also made on the 9th.

This would mean that high velocity burners were in fact

mooted from the very outset, which is contrary to Van der

Veen's evidence. There is however, at least one aspect

which gives considerable support to Van der Veen's sugges-

tion that the figures were a mere remindêr: they play no

part whatever in the calculations on the page in question.

These calculations proceed on the basis of a load of 16,3

ton (which is that derived from a production rate of 1000

tons per month).

It has been mentioned that prior to the second

meeting on 9 October Fokker instructed J S Allison toarrange a visit to Harchris the next morning, a public holi-

day. The visit took place and Fokker and a number of his

staff (including Allison) spent some hours there. The

court/

28.court a quo found that Allison carried out a "detailed inspection of the top hat furnace" and that "it is diffi-cult to see what purpose Allison, who was not called as a witness, could have had in mind other than the obtaining of information to be used in the design of the furnace" which Iscor considered building (p554 A - D).It may be mentioned that a careful perusal of the evidence of MacDonald and that of Mr Errol Preston, who testified to what transpired that morning, does not seem to justify the designation of Allison's conduct as "a detailed inspection" of the top hat. Members of the party headed by Fokker, did look at the cover standing on trestles and the two bases on which Errol Preston was working and listened to MacDonalds hopes of the new furnace succeeding

to/

29.to normalize plate without distortion but this is a far cry from a "detailed inspection". Moreover, as has been pointed out above, it is difficult to see what Iscor could have hoped to gain by taking the Harchris furnace as a prototype. Allison, it is true, had previously expressed admiration for the furnace to MacDonald, but he was hardly the best qualified member of the party to spy. Moreover, he was to undergo an operation the next day and would play no further role.There appears to be no firm ground for rejecting Fokker's explanation of the reason for the visit to Har-chris and the outcome thereof. Fokker's mandate as a result of the "dinkskrum" the previous afternoon was not only to investigate the building of a furnace but also to

determine/ 30.determine finally the prospects of Harchris meetingIscor's requirements. That he should take along anumber of his colleagues does not per se raise suspi-cion. Fokker had never been to Harchris before and hekept in mind that the distortion of the plates could beowing to an error in handling. He believed that fordistortion-free normalizing plates had to be removedfrom the furnace at the proper time and individuallyplaced on supports for cooling. He immediately noticedthat Harchris had neither the space nor the equipment to

do this. In his view, therefore, the solution of Iscor's

problems did not lie with Harchris. It is true that the

party spent some time at the works, but, clearly, the

individual examination of the plates already treated took

some time.

The/

31.

The similarities between the Harchris furnaceand the ZD, in view of the new materials and components available, do not necessarily point to copying. Even details such as the sand used as a seal and the posi-tioning of the locating pins appear to be insignificant.Forster generally recommended chromite sand and the merelocation of the pins could very well be a coincidence.There is, in my view, no sound reason for totally re-

jecting the evidence of Fokker and Van der Veen to the

effect that the ZD was developed independently and not

derived from the Harchris furnace. The Court a quo should

have found that Harchris had not proved the allegation of

copying. It follows that it is unnecessary to investigate

the difficult and important questions of law that would

otherwise/

32.

otherwise arise, such as e.g. the requirements for an idea to gualify for protection by the actio Legis Aquiliae or otherwise and in particular the nature of the remedy af-forded to the "owner" once the idea becomes public knowl-edge as a result of an unlawful act by another. The following order is made:-

(1) The appeal is allowed with costs(including the costs of two counsel);

(2) The order of the Court a quo is alteredto read as follows:

"(a) the defendant is absolved from

the instance;

(b) the plaintiff is to pay the

defendants costs of suit, such

costs/ 33.

costs to include:

(i) the qualifying fees of F.J. Koinis; (ii) the costs of the pro-

ceedings in the matter by way of notice of motion; (iii) the costs attributable to the employment of two counsel."

E L JANSEN JA

VILJOEN JA )) concur ELOFF AJA )