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[2010] ZAWCHC 221
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Macleod v Van Tonder and Others (3911/2010) [2010] ZAWCHC 221 (21 September 2010)
REPORTABLE
IN THE HIGH COURT OF SOUTH
AFRICA
(WESTERN CAPE HIGH COURT,
CAPE TOWN)
Case No.:
3911/2010
In
the matter between:
NEIL
MACLEOD
…...........................................................................................
First
Applicant
and
JOHAN VAN
TONDER
…..............................................................................
First
Respondent
NEIL
MCLEOD SAFARIS (SOUTH AFRICA) CC
…...........................
Second
Respondent
SAFARISWISE
CC
…....................................................................................
Third
Respondent
Judgment
by
…..................................................................
M
J Fitzgerald, AJ
For the Applicants
…........................................................
Adv.
T Smit
Instructed by
…................................................................
Nicciferguson
Attorneys- N du Plessis
…......................................................................................
Level
C, The Adderley,
…
......................................................................................
25
Adderley Street,
…
.......................................................................................
Cape
Town
For the
Respondents
…................................................
Adv.
N Visser
Instructed by
…..................................................
De
Klerk & Van Gend Attorneys- A Human
…
............
Absa
Building,
…
..............................................................................
132
Adderley Street
…
...............................................................................
Cape
Town
Date(s)
of Hearing
Tuesday,
14 September 2010
Judgment delivered on : Tuesday,
21 September 2010
Reportable
IN THE HIGH COURT
OP SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
Case
No. 3911/2010
In ihe matter
between:
NEIL
MacLEOD
…..........................................................................................
Applicant
and
JOHAN VAN TONDER
…...................................................................
First
Respondent
NEIL MacLEOD
SAFARIS (SOUTH AFRICA)
….........................
Second
Respondent
SAFARIWISE CC
…...........................................................................
Third
Respondent
JUDGMENT
FITZGERALD AJ
In this matter
applicant initially sought an order in the following terms:
1. That the second
respondent be placed under a provisional winding up order;
2. That the powers
of the independent liquidator appointed by the Master be extended to
investigate and report on the legitimacy,
origin and source of any
loan accounts held by the first respondent with the second
respondent; and
3. Thai the third
respondent be directed to change its name within 30 days of the
granting of a final order.
At the commencement
of the hearing, and in light of the fact that a full set of
affidavits had been filed and, more significantly,
that the second
respondent has no creditors, it was agreed by the parties that if a
winding up order were to be granted a final
order was warranted.
During the course
of her argument counsel for the applicant, however, indicated that
the applicant no longer sought an order placing
the second
respondent under a winding up order. Applicant also abandoned the
relief relating to the extension of the powers of
the duly appointed
liquidator.
It was thereafter
further agreed between counsel that an order be granted by agreement
pursuant to which applicant would purchase
the 65 per cent member's
interest of the first respondent in the second respondent.
After further
discussion, counsel undertook to prepare a draft order providing for
the mechanism in terms of which applicant would
acquire such 65 per
cent member's interest. The order which I make hereunder records
that agreed mechanism in paragraphs 1 -
9 inclusive..
In the
circumstances, the only live issue which required my determination
related to the change of name of third respondent. In
this regard. I
point out that written notice of the intended application to court
for such change of name was given to the Registrar
of Close
Corporations.
This relief, so
counsel for the applicant contended, was authorised by section
20(2)(b) of the Close Corporation Act No. 69 of
1984 ("the
Act**) which reads as follows:
"2.
Any
interested parry may -
(a)
(b)
within
a period of two years after the registration of the founding
statement apply to a court for an order directing the corporation
to
change its name on the ground of undesirability or that such name is
calculated to cause damage to the applicant, and the
court may on
such application make such order as it deems fit".
It was suggested in
argument by counsel for the respondents that the applicant was not
an interested person as contemplated by
section 20(2) of the Act
insofar as the close corporation under which he carries on business
in Namibia was not a party to this
application and that he was
purportedly the applicant in his personal capacity.
This submission
overlooks the fact that in paragraph 1 of his founding affidavit,
the applicant expressly stated that he held
a 35% member's interest
in the second respondent and, indeed in paragraph 69.1 thereof
confirmed that the alleged breach of the
fiduciary duty by first
respondent necessitated him "having to bring this application
on behalf of the South African CC"..
Moreover, in
paragraph 52 of his founding affidavit with reference to the
trademark application to which I refer hereunder, the
applicant
stated that he was "advised by my attorneys that I cannot apply
to Cipro for the deregistration of nor for an
order that the first
respondent change the name of the third respondent as I ironically
require the first respondent's consent
to bring an application on
behalf of the South African CC, as he is the majority' member".
In
light of the fact, accordingly, that without the consent of the
first respondent, the applicant is unable to commence proceedings
in
terms of section
20
of
the Act in the name of second respondent, and further that applicant
is indeed a
35%
shareholder
of such close corporation it seems to me that it would be unduly
technical and formalistic to non suit him in these
circumstances.
I
accordingly find, qua minority member of the second respondent, that
applicant is indeed an interested party as required by
section
20
(2)
of
the Act.
Counsel for the
applicant submitted that the affidavits established that there was a
close association between the phrase "SafariWise"
and the
second respondent.
Counsel for the
respondents, conversely, denied any such association albeit that in
official documents, including the application
to the Registrar of
Trademarks, the phrase "Safari Wise" was clearly
identified with the second respondent.
More particularly,
counsel for the respondents submitted that in the public eye the
phrase was associated in Namibia with the
applicant whereas, in
South Africa, it was associated with him personally.
I am not persuaded
that the distinction which counsel for the respondents sought to
emphasize is well founded.
It must, in any
event, be remembered that at all material times when first
respondent made use of the phrase "Safari Wise''
he did so qua
member of second respondent and, as appears from annexure RNM16 to
which I refer hereunder, in documentation bearing
its registration
number.
Further in this
regard, it is indeed common cause that the application made to the
Registrar of Trademarks for registration of
"SafariWise"
was made on behalf of, and in the name, of the second respondent.
Although counsel
for the respondents suggested that that trademark application had
lapsed it is relevant that as recently as late
last year applicant's
attorneys of record received correspondence from the Registrar of
Trademarks referring to "the pending
application".
Further, and
according to the applicant, the second respondent has traded as
SafariWise since 2002 and the name SafariWise has
therefore been
associated, and is synonymous, with second respondent for the past
eight years.
Various documents
annexed to the replying affidavit, moreover, also, in my view*,
refute this submission made on respondents'
behalf.
Although they were
annexed for the first time to the replying affidavit there was no
application by respondents to file a fourth
set of affidavits in
response thereto nor was there any application to strike out any of
this matter.
I do not
necessarily subscribe to the view that these documents constitute
new matter. Even if they were, in the circumstances
postulated, they
remain part of the admissible matrix of evidence against which a
decision falls to be made.
Amongst these
documents is a document headed SafariWise which has along its left
border the words "South Africa" in
capitals. It refers to
set departure dates for 2004 and on that basis must have been
prepared in 2004 or prior thereto.
It concludes with
the names Johan and Neil - the Christian names of the applicant and
first respondent respectively - and at the
foot thereof the
following is stated:
"Neil MacLeod
Safaris CC (CK2000/069611/23) T/A SafariWise"
This, it is common
cause, is a reference to the registration number of second
respondent.
Moreover, on 18
June 2002 Safari and Tourism Insurance Brokers, a division of
Glendrand MIB Namibia (Pty) Limited addressed a
letter to
"SafariWise Namibia and South Africa" with regard to
insurance cover.
A further relevant
document is attached to the replying affidavit marked "RMN14".
It is headed "SafariWise Tours
and Safaris in Southern Africa:
About us" and is said to be a copy of SafariWise's homepage. It
reads, inter alia as follows:
"From a humble
beginning in 1992, with a just a pair of binoculars between us, we
have developed a solid reputation for high
quality, intimate tours
and safaris. Many of our clients return as friends to discover more
of the diversity and beauty of Africa
with us.
In no particular
order, SafariWisc is owned and managed by two of Southern Africa's
leading naturalists: Neil McLcod and .lohan
van Tondcr.
Growing up in the
Western Cape, .lohan spent his youth outdoors absorbing the names
and habits of birds, animals and plants. A
short detour took him
into engineering before he returned to his first love - and Neil's
sister ! In 1999 Neil and .lohan joined
forces and launched
SafariWise".
One further
document bears mentioning. This is annexure RNM16 to the replying
affidavit which is a recent advertisement placed
by first respondent
on the internet. It is headed "SafariWise - Worcester. Western
Cape, South Africa'" and includes
a specific reference to the
aforesaid registration number of second respondent.
A perusal of these
documents demonstrates that the objecti ve ("acts do not
establish the distinction between the South African
and Namibian
businesses which counsel for the respondents sought to assert nor,
in particular that the phrase "SafariWise"
is associated
only with first respondent personally and not second respondent.
It follows, in my
view, that the submission in the affidavits made by applicant that
the second respondent has since 2002 traded
as SafariWise and that
it has build up goodwill in respect thereof is, on the
probabilities, well founded.
Does its use by
third respondent, in the circumstances, however, make it undesirable
in terms of the Act?
The
authorities make it clear that it is inappropriate to prescribe what
is meant by the term "undesirability"inscction20(b)of
the
Act. (Sec:
Peregrine
Group
<
Ptv)
Limited
v Peregrine
Holdings
2001 (3) SA 1268
(SCA) at 1274C-G;
Azisa
fPtv) Ltd v Azisa Media CC
and
Another
2002
(2) SA 377
(C) at 396C).
The
Supreme Court of Appeal held in
Peregrine
,
supra at 1274H with regard to the second leg of the section,
"calculated to cause damage", that this leg usually
resolves itself in the same inquiry, namely the likelihood of
confusion or deception.
In my view the
trading name of second respondent namely "SafariWise" is
sufficiently similar to the trading name of
the third respondent,
namely "SafariWise CC" to cause confusion between the
business activities of the second respondent
and that of the third
respondent.
Given the
likelihood of confusion or deception, it seems to me to follow, as a
matter of logic, that the second leg of the section,
namely that the
use of that trading name is undesirable because it is calculated to
cause damage, is also satisfied.
Moreover,
and given the
dicta
of
the Supreme Court of Appeal in
Peregrine,
supra
that it is inappropriate to attempt to circumscribe the
circumstances under which the registration of a company name might
be found to be "undesirable", 1 consider it further
relevant that in causing the third respondent to be incorporated
during December 2008, the first respondent acted in breach of his
fiduciary duties vis-a-vis the second respondent (see
Robinson
v Randfontein Estates Gold Mining Co Ltd
1925
AD 173
at 192,242;
Cohen
N.O.v Sepal
1970
(3) SA 702
(W) at 706).
It is common cause
that prior to the incorporation of the third respondent no
disclosure of his intention to do so was made to
the applicant.
Moreover, the third respondent carries on business in direct
competition with the second respondent.
In my view it is
undesirable for a court to sanction such breach of fiduciary duty
and in consequence to permit the third respondent
to carry on
business under a name which is confusingly similar to that of the
second respondent.
In light hereof,
the fact of the inconvenience to be caused to third respondent by
the need to change its name is of lesser significance.
I accordingly find,
on the probabilities, that applicant has established the
jurisdictional factors necessary for the grant of
an order in terms
of section 20(2)(b) of the Act.
With regard to the
question of the cost of the application, there appears to be no
reason why costs should not follow the result.
It is, moreover,
clear that a principal factor leading to the disintegration of the
business relationship between the applicant
and the first respondent
was the latter's incorporation of a rival close corporation bearing
a confusingly similar name to that
of the second respondent. This
conduct, I have found, constitutes a breach of the fiduciary duty
owed by first respondent to
the second respondent.
I accordingly make
the following order:
1. The applicant is
directed to purchase the 65% member's interest of the first
respondent in the second respondent at fair value
calculated pro
rata the total issued member's interest without any benefit attached
to the membership interest representing a
majority.
2. For the purpose
of the said purchase of the first respondent's member's interest in
the second respondent, the fair value of
the shares shall be
determined with regard to the financial position of the second
respondent as at 14 September 2010 and such
value shall include the
value of the trade name "SafariWise".
3. In determining
the fair value, the validity or otherwise of the first respondent's
loan agreement to the second respondent
shall be considered.
4.
The
parties arc directed to endeavour to agree upon the appointment of a
practising chartered accountant of not less ten years'
standing, who
shall not be the second respondent's accounting officer, nor have
been previously professionally engaged in any
capacity by any of the
parties, to undertake the valuation of the shares in accordance with
the directions herein above and to
determine the purchase
consideration.
In the event of the
parties being unable so to agree within ten days of the date of this
order, the valuation and determination
shall be undertaken by a Cape
Town based practising chartered accountant of not less ten years'
standing to be nominated by the
President of the South African
Institute of Chartered Accountants.
5.
The costs of the said valuation and determination shall be borne
equally by applicant and first respondent respectively; in
the event
of any party paying more than his share of the costs that party
shall be entitled to recover the excess from the other
party
pro
rata.
6. The applicant
and the first respondent are directed to furnish the person
appointed in terms of paragraph 4 with all such information
appropriately vouched and all books of record and accounting
records, as he might reasonably require in order to undertake the
valuation and determination, failing which the person so appointed
is authorised to make application through the chamber book
to a
judge for such further directions and relief as might be
appropriate.
7. The persons
appointed in terms of paragraph 4 shall complete the valuation and
determination and furnish each of the parties
with a reasoned report
thereon in writing within six weeks of his appointment, or such
extended period as the parties may agree
to in writing.
8. The
determination by the person so appointed of the value of the first
respondent's interest in the second respondent shall
be final and
payment of that amount found to be due by applicant to first
respondent shall be made within 15 days of such final
determination.
9. The first
respondent is ordered to deliver a signed CK. 2 resignation form in
respect of the second respondent to the applicant's
attorneys within
10 days of date hereof for registration purposes.
In the event that
the first respondent fails and/or refuses to sign such documentation
within five days notice to him. the Registrar
of this Court shall be
entitled to sign such documentation on his behalf
It is recorded that
notwithstanding such signature, registration of the acquisition bv
applicant of the first respondent's interest
in second respondent
shall only take place once the determination referred to in
paragraph 8 has been made.
10. Third
respondent is directed to change its name from SafariWise CC to a
name not using the phrase SafariWise within 20 days
from the date of
this order.
11.
First
respondent is directed to pay the costs of this application.
M.J.
FITZGERALD AJ
Tuesday,
21 September 2010