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[2013] ZASCA 152
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Mettenheimer and Another v Zonquasdrif Vineyards CC and Others (965/12) [2013] ZASCA 152; 2014 (2) SA 204 (SCA); [2014] 1 All SA 645 (SCA); 2013 BIP 302 (SCA) (19 November 2013)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 965/12
In
the matter between:
ALEXANDER
ANATOLE THEODOR METTENHEIMER
..................................
FIRST
APPELLANT
ZONQUASDRIFT
ESTATES (PTY) LIMITED
...............................................
SECOND
APPELLANT
and
ZONQUASDRIF
VINEYARDS CC
..................................................................
FIRST
RESPONDENT
REGISTRAR OF CLOSE
CORPORATIONS
............................................
SECOND
RESPONDENT
REGISTRAR OF TRADE
MARKS
.................................................................
THIRD
RESPONDENT
Neutral
citation:
Mettenheimer
v Zonquasdrif Vineyards CC
(965/12)
[2013]
ZASCA 152
(19 November 2013)
Coram:
Brand,
Theron, Pillay, Petse JJA
et
Meyer AJA
Heard:
4 November 2013
Delivered:
19 November 2013
Summary:
(a)
Trade
Marks Act 194 of
1993
– appellants’ trade mark registered in respect of
wine – used by the respondent in the course of trade
with
reference to wine grapes – whether goods so similar as to
give rise to the likelihood of deception or confusion
as
contemplated in
s
34(1)
(b)
of the Act.
(b)
Close
Corporations Act 69 of 1984
– whether respondent’s
name calculated to cause damage to the appellants as contemplated
in
s 20(2)
(b)
of the Act.
ORDER
On appeal from:
Western Cape High Court, Cape Town (Davis J sitting as court of
first instance):
The appeal is
dismissed with costs, including the costs of two counsel whenever
employed.
JUDGMENT
BRAND JA
(THERON, PILLAY, PETSE JJA
et
MEYER AJA
concurring):
[1]
This appeal turns on the application of
s
34(1)
(b)
of
the
Trade
Marks Act 194 of
1993
and
s 20(2)
(b)
of
the
Close Corporations Act 69 of 1984
prior to its amendment that
came into operation in 2011. The first appellant, Mr Alexander
Mettenheimer, is the registered
proprietor of the trade mark
Zonquasdrift in class 33 in respect of alcoholic beverages,
except beer. The trade mark therefore
covers wine but not wine
grapes which, incidentally, falls in class 31. Mettenheimer and
his wife are also the shareholders
in the second appellant, a
private company which is the owner of a farm called Zonquasdrift
between Malmesbury and Riebeek
Kasteel in the Western Cape. Until
recently the second appellant was known as Almett Properties
(Pty) Ltd, but on 3 May
2012 – that is about two years
after the commencement of the present litigation – it
formally changed its name
to Zonquasdrift Estates (Pty) Ltd.
[2] The first
respondent is a close corporation with the registered name
Zonquasdrif Vineyards CC. It conducts its farming
business on a
farm situated about one kilometre from the second appellant’s
farm where it grows wine grapes which
it sells under its
registered name. The second and third respondents are the
Registrar of Close Corporations and the Registrar
of Trade Marks,
respectively, who were joined in the proceedings for the sake of
formality and who never became active
participants at any stage.
Hence I propose to refer to the two appellants as ‘the
appellants’ and to the first
respondent as ‘the
respondent’.
[3]
Proceedings started when the appellants brought an application
against the respondent in the Western Cape High Court,
Cape Town.
The relief they sought was twofold. First, that the respondent be
interdicted in terms of
s
34(1)
(b)
of the
Trade
Marks Act from
infringing its trade mark Zonquasdrift by,
inter alia, selling wine grapes under that name. Secondly, for an
order declaring
that the respondent’s registered name is
calculated to cause damage to the appellants and ordering the
respondent,
for that reason, to change its name in terms of
s
20(2)
(b)
of the
Close Corporations Act. The
respondent not only opposed
the relief sought on its merits, but also brought a
counter-application for the removal of
the appellants’
trade mark from the register on the basis that it exclusively
serves to ‘designate the geographical
area of the goods’
as envisaged by
s
10(2)
(b)
of the
Trade
Marks Act.
[4
]
With reference to the counter-application, the respondent made it
clear from the outset that it never had any interest
in selling
goods covered by class 33 and that, absent the appellants’
application for an interdict, it would ordinarily
have no
interest in their registered mark. In essence, the
counter-application thus amounted to no more than an additional
defence to the appellants’ claim. When the matter came
before Davis J in the court a quo he found the appellants’
application wanting on its own merits with regard to both aspects
of the relief claimed. In this light he considered it
unnecessary
to deal with the substance of the respondent’s
counter-application. Hence he refused the appellants’
application with costs and dismissed the respondent’s
counter-application, making no order as to costs in respect
of
the latter. The appeal against these orders is with the leave of
this court. There is no cross-appeal in respect of
the
counter-application. In consequence, that application is no
longer of any relevance, save to the extent that the appellants
seek to replace the court a quo’s order with regard to the
costs of the counter-application with one that the respondent
should pay these costs.
[5] The issues that
arose on appeal will be better understood against the background
facts that follow. I find it convenient
to start with the
geographical layout of the area involved. Zonquasdrift is the
name of a natural crossing over the Berg
River or a ‘drift’
in Dutch, which eventually became a ‘drif’ in
Afrikaans. Historians tell us
that the existence of the crossing
has been well documented under that name since at least 1660 when
the Dutch colonists
first used it to cross the natural hindrance
to their passage into the interior, created by the Berg River. In
more modern
times Zonquasdrift has also become known as the end
of the first stage of the four day Berg River canoe marathon. The
farm
Zonquasdrift was originally granted in the early 1700s.
Rather self-evidently, the crossing is on that original grant.
The farm of the appellants is that subdivision of the original
grant which retained the original name. On the one side of the
Berg River the crossing is now on the appellants’ farm. On
the opposite side of the river the crossing is on the
farm Klein
Zonquasdrift. The farm on which the respondent conducts its
business is on the same side of the river as Klein
Zonquasdrift.
It is about 300 metres from the crossing and, as I have said,
about one kilometre from the appellants’
farm. It is a
subdivision of the farm Bosplaas. Until it was given the name
Zonquasdrif Vineyards in 2008, it was never
known by that name.
[6] The appellants
are not involved in wine-making. They do not have a cellar on
Zonquasdrift farm nor do they employ any
wine-makers. It is a
wine grape producing farm that delivers its grapes in bulk to a
co-operative cellar, Riebeek Cellars.
The vinification process is
conducted exclusively by Riebeek Cellars, which sources its wine
grapes from 32 different farms
in the Swartland area, being the
members of the co-operative. The wine is then sold under the
trade mark Riebeek Cellars.
As a result of this communal system,
it is generally not possible to say, with reference to a
particular wine, where the
grapes originally came from. The
grapes are pooled by Riebeek Cellars and the wine sold under its
label with the designation
that it is a wine of origin Swartland
under the wine of origin scheme, to which I shall presently
return.
[7] An exception to
the general exposition conveyed thus far, pertains to wine made
by Riebeek Cellars from grapes of the
chenin blanc cultivar that
originates from two blocks on the appellants’ farm –
about six hectares in extent
– which had been registered
under the wine of origin scheme as a single vineyard. Pursuant to
an arrangement between
the appellants and Riebeek Cellars, chenin
blanc wine from this single vineyard is kept separate and bottled
under the
special Zonquasdrift label. This wine is then exported
by the appellants for sale in Germany. It also bears the
designation
wine of origin Swartland. Moreover Riebeek Cellars
has in 2009 bottled a chenin blanc wine from the appellants’
single
vineyard as ‘Limited Release Chenin Blanc’
under the Riebeek Cellars trade mark, but with the indication on
the label that it comes ‘from a designated block of vines
in a 47-year old single vineyard on the farm Zonquasdrift in
the
Swartland’. In short, the appellants’ business is
therefore that of a wine grape producer and on a more
limited
scale, that of a wine exporter under its registered trade mark.
What should perhaps be pointed out for the sake
of completeness,
is that the appellants never registered any trade mark for their
wine grapes in class 31.
[8] The respondent
was incorporated on 4 August 2008. Its majority member and the
deponent to its answering affidavit is
Mr Petrus Walters. In the
same way as the appellants, the respondent is also a wine grape
producer. But, unlike the appellants,
it has never sold wines
under any name. Neither has it ever made any wine. It sells its
wine grapes in bulk under its registered
name, Zonquasdrif
Vineyards, to a corporate wine cellar in the Worcester area. By
contrast, the farm Klein Zonquasdrift,
which is directly across
the Berg River from the appellants’ farm, produces table
grapes. Table grapes are not used
to produce wine. Conversely,
wine grapes are not suitable for consumption as a fruit in the
way that table grapes are.
In consequence, wine grapes are not
sold to the general public, but only to wine cellars or wine
co-operatives. As to why
the respondent was given the corporate
and trading name Zonquasdrif Vineyards CC, Walters explained that
he found the original
name of the farm on which the respondent
conducts business, Bosplaas, rather uninspiring. In consequence
he decided to
link its name to the historical nearby crossing,
which is well-known to the public, so as to indicate the
geographical
location of the respondent’s farming business.
[9]
In delineating the issues it is perhaps useful to identify that
which falls outside the ambit of this appeal. The appellants
did
not rely on passing off or any other form of unlawful competition
to justify any of the relief sought in the court
a quo. The case
relied solely on an infringement of their trade mark rights.
Potential confusion resulting from similar
names of farms
situated in close proximity to one another, for instance, is
therefore of no consequence. Equally irrelevant
is the
respondent’s contention that the appellants had failed to
establish a reputation either to its grape production
or its
wine. The fact that the appellants thus far have only sold their
wine in Germany, is not material. What we have
to look at is the
‘notional use’ that the appellants can make of their
trade mark, which would obviously include
the marketing of wine
under that label in South Africa (see eg
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984]
ZASCA 51
;
1984
(3) SA 623
(A) at 641E-I).
[10]
The interdict application, as I have said by way of introduction,
rested squarely on
s
34(1)
(b)
of the
Trade
Marks Act. In
relevant part this section provides:
‘
(1)
The rights acquired by registration of a trade mark shall be
infringed by-
(a)
. . .
(b)
the
unauthorized use of a mark which is identical or similar to the
trade mark registered, in the course of trade in relation
to
goods or services which are so similar to the goods or services
in respect of which the trade mark is registered, that
in such
use there exists the likelihood of deception or confusion.’
[11]
The respondent clearly used its impugned mark in the course of
trade and it is not suggested that it had been authorised
by the
appellants to do so. That limits the enquiry to the issue of
confusing similarity. Unlike
s
34(1)
(a)
,
the provisions of
s
34(1)
(b)
do not require that the offending mark be used in relation to
goods in the class for which the trade mark had been registered.
It contemplates two elements, namely, (a) a mark identical or
similar to the trade mark used in relation (b) to goods which
are
so similar to those for which it had been registered, that it
gives rise to a likelihood of deception or confusion.
As to the
relationship between these two elements, I agree with the
sentiments expressed by Thring J when he said in
New
Media Publishing (Pty) Ltd v Eating Out Web Services CC
[2005]
ZAWCHC 20
;
2005
(5) SA 388
(C) at 394C-F:
‘
There
is, it seems to me, an interdependence between the two legs of
the inquiry: the less the similarity between the respective
goods
or services of the parties, the greater will be the degree of
resemblance required between their respective marks
before it can
be said that there is a likelihood of deception or confusion in
the use of the allegedly offending mark,
and
vice
versa
. Of course, if the respective
goods or services of the parties are so dissimilar to each other
that there is no likelihood
of deception or confusion, the use by
the respondent even of a mark which is identical to the
applicant's registered mark
will not constitute an infringement;
also, if the two marks are sufficiently dissimilar to each other
no amount of similarity
between the respective goods or services
of the parties will suffice to bring about an infringement. . .
.’
(See
also
Canon
Kabushiki Kaisha v Metro-Goldwyn-Mayer Inc
[1999]
RPC 117
(ECJ) para 17.)
[12]
In comparing the two marks I find them virtually identical.
Although the respondent’s mark contains the additional
reference to ‘Vineyards’ I regard the dominant or
striking feature of the mark, in the sense that it will impact
on
the mind and recollection of the notional ordinary purchaser, in
‘Zonquasdrif’ (see eg
Plascon-Evans
Paints Ltd v Van Riebeek Paints (Pty) Ltd
[1984]
ZASCA 51
;
1984
(3) SA 623
(A) at 641D-E). The further difference between the
two, which lies in the absence of the final ‘t’ in
the respondent’s
mark – changing it from Dutch into
Afrikaans – is in my view insignificant. In the unlikely
event that it is
noticed by the notional purchaser, it could be
ascribed to a misspelling of the appellants’ mark. What it
therefore
boils down to in the end is the similarity of the
goods. Can it be said that, having regard to the sameness of the
two
marks, the similarity between the goods in respect of which
the appellants’ mark is registered (wine) and the goods in
which respondent trades (wine grapes) is such that confusion or
deception is the probable result? The deception and confusion
we
are talking about, of course, must relate to the origin of the
respective goods. So, is it likely that the notional
purchaser
may be confused to think that these goods have the same origin?
[13]
Considerations that could assist in determining this likelihood
of confusion have been proposed in decided cases. Prominent
amongst these are the judgments of the Chancery Division in
British
Sugar Plc v James Robertson & Sons Ltd
[1996]
RPC 281
(Ch D) at 296-297 and of this court, albeit in a
context different from
s
34(1)
(b)
in
Danco
Clothing (Pty) Ltd v
Nu-Care
Marketing Sales and Promotions (Pty) Ltd
[1991]
ZASCA 121
;
1991
(4) SA 850
(A) at 860-861. Included amongst the
considerations proposed in these cases are: (a) the uses of the
respective goods;
(b) the users of the respective goods; (c) the
physical nature of the goods; and (d) the respective trade
channels through
which the goods reach the market. It is clear
that the list of proposed considerations was never intended to be
exhaustive.
Yet they serve to stimulate and guide the required
process of reasoning in the enquiry as to the likelihood of
confusion.
[14] On application
of these considerations to wine grapes and wine, first
impressions are that the likelihood of confusion
is slight
indeed. The nature of the two products is entirely different. The
one is a fruit – albeit inedible –
and the other is
an alcoholic beverage. As are their uses, their users and the
trade channels through which they are marketed.
Since wine grapes
are not suitable for consumption as a fruit, they are not sold to
the public and they are therefore not
to be found in any retail
outlets. Wine, on the other hand, is marketed, advertised and
sold directly to the public in
supermarkets, liquor stores and
other retail outlets. The prospects of Zonquasdrift wine and
Zonquasdrif grapes ever being
marketed or sold in close proximity
can therefore safely be excluded as non-existent.
[15] The appellants’
argument as to why, despite these distinct differences between
the two products, they have succeeded
in showing a likelihood of
confusion, went along the following lines. Wine grapes constitute
the raw material from which
wine is made. Hence the two products
are associated with one another. It is known in the industry that
while some farms
sell their wine grapes to wineries, others make
their own wine from grapes produced on the farm or purchased from
other
farms. There is therefore no clear delineation between
farms producing and selling grapes and those selling both wine
and
grapes. Although the appellants do not make their own wine
and only sell their Zonquasdrift wine in Germany, they are
entitled
to sell their wine in South Africa as well. What must
also be postulated as part of the appellants’ notional use
is that they may integrate their grape growing and wine-making
activities on the farm Zonquasdrift. In these circumstances,
so
the appellants’ argument went, the notional member of the
public may very well be confused in thinking that the
appellants’
wine and the respondent’s grapes originate from the same
farm.
[16] In evaluating
the appellants’ argument, it seems to me that it draws no
distinction between the notional purchasers
of grapes, on the one
hand, and the notional purchasers of wine, on the other. But, in
the light of the distinct differences
between the two products
that I have alluded to, I do not believe logical reasoning allows
this conflation. For the very
reason that wine grapes are
suitable for wine-making only, they are exclusively sold to wine
makers and wine co-operatives
for that purpose. The undisputed
evidence by the respondent is that wine cellars and wineries
purchase grapes based on
a number of factors, including the
cultivar and the terroir, the vineyards and the like but not with
reference to the trade
names of wine or the names of farms.
Furthermore, wineries and co-operative cellars make use of
specialists in the wine
industry to buy their wine grapes from
approved suppliers who comply with their own established quality
control standards.
The chances of these buyers confusing the
respondent’s wine grapes as the source of the appellants’
wine can
therefore safely be excluded.
[17] The only enquiry
worthy of pursuit therefore relates to the likelihood of notional
purchasers of Zonquasdrift wine
believing that they originate
from the same farm as the respondent’s grapes. The first
question raised by this enquiry
is whether the notional wine
purchaser would be aware of the respondent’s grapes that
are sold under its trade name.
Since the respondent does not
market its wares in retail outlets or advertise them in the
public domain, I cannot see why
this awareness should be assumed.
My second problem with the appellants’ argument is this: in
order for the notional
purchaser to be confused in thinking that
Zonquasdrift wine comes from the same farm as Zonquasdrif grapes,
he or she must
infer that (a) there is a farm Zonquasdrift; (b)
that farm is owned by the same entity as the trade mark; and (c)
that
the wine is made of grapes grown on that farm. As I see it,
however, there is no reason to assume that the notional purchaser
will make all these inferences just by looking at the appellants’
trade mark on their wine label.
[18] As to (a): it is
well known that many trade marks in the wine industry are not
associated with farms at all. That is
so even where the trade
mark bears resemblance to the name of an existing or non-existing
farm. As to (b): even if the
notional wine purchaser knew of the
farm Zonquasdrift, there is no reason to think that he or she
would have known or infer
that the farm and the trade name belong
to the same proprietor. As to (c): even if the notional purchaser
knows or infers
that there is a farm Zonquasdrift which belongs
to the same entity as the trade mark, he or she would have no
reason to
infer that Zonquasdrift wine is made of grapes grown on
that farm. An interesting exchange on the papers illustrates this
point. In the answering affidavit Walters contended that, since
the appellants’ Zonquasdrift wine is made by Riebeek
Cellars that sources its grapes from 32 farms, it cannot even be
said that the wine sold under the appellants’ trade
mark is
made from grapes grown on its farm. In reply the appellants then
said – and this was confirmed by Mr Izak
Bester who is the
wine-maker at Riebeek Cellars - that Zonquasdrift wine is indeed
made from chenin blanc grapes grown
on the appellants' farm. The
moral of the story is this: although there is no reason to doubt
the correctness of Bester’s
version, he was clearly one of
a very few who could say where the grapes came from. For all the
potential purchaser knows,
the grapes could come from one or more
of 32 farms.
[19]
Even if the appellants were therefore to make their own wine on
the farm Zonquasdrif, they would not be obliged to
source the
grapes for wine-making under their trade mark from that farm
only. In consequence the customer would have no
basis to think
that they did. According to well-established principle, a trade
mark serves as a badge of origin, in the
sense that it identifies
and guarantees the trade origin of the goods to which it applies
(see eg
Verimark
(Pty) Ltd v BMW AG
2007
(6) SA 263
(SCA) paras 4-5). But in the wine industry a trade
mark in respect of wine serves to guarantee the origin of the
wine only.
The badge of origin in respect of the grapes from
which that wine is made is provided by the wine of origin scheme
(WO
scheme).
[20] The WO scheme is
governed by regulations promulgated (under GNR 1434 of 29 June
1990) in terms of
s 14
of the
Liquor Products Act 60 of 1989
. It
emanates from the recognition in the wine industry that the
‘terroir’ or area where the grapes are grown
has a
significant bearing on the wine made from these grapes. Under the
WO scheme geographical areas in which wine are
produced are
divided into nine units. These units are further divided into
increasingly smaller areas called ‘regions’,
‘districts’ and ‘wards’. The farms of the
appellants and the respondent, for instance, fall into
the
Swartland region and the Riebeek Kasteel district. As to the
origin of the grapes from which the wine is made, the
potential
purchaser can therefore rely on the designation of origin on the
label. Since the appellants’ wine is designated
as a wine
of origin Swartland, the purchaser can assume the grapes are
grown in that area. But with regard to the origin
of the grapes
he or she can assume nothing more. For these reasons I find no
substance in the appellants’ contention
that they have
established a likelihood of confusion with regard to the origin
of their wine and the respondent’s
grapes.
[21] In further
support of their case, the appellants sought to rely on the fact
that at some stage Riebeek Cellars sold
its ‘Limited
Release Chenin Blanc’ with an indication on the label that
the grapes came from the single vineyard
on the farm
Zonquasdrift. But as I see it, this reliance is misconceived. The
wine was sold under the trade mark of Riebeek
Cellars. The
reference to Zonquasdrift related to appellants’ farm –
not their trade mark – as the origin
of the grapes which,
as we know, is not covered by their registered mark.
[22] The appellants’
further argument rested on two alleged incidents of actual
confusion. The first arose when Eskom
threatened to cut off the
electricity supply to the appellants’ farm because the
respondent had failed to pay its
account. The second occurred
when the appellants’ farm manager was asked by a third
party whether the appellants
had opened a new business under the
name Zonquasdrift Vineyards CC. But I find the argument based on
these instances equally
unsustainable. The confusion demonstrated
by these incidents, as I see it, probably arose from the
similarity between the
respondent’s name and that of the
appellants’ farm. It therefore had nothing to do with
confusion created by
two similar marks.
[23] This brings me
to the appellants’ application in terms of
s 20(2)
(b)
of the
Close Corporations Act, to
compel the change of the
respondent’s close corporation name on the basis that it is
calculated to cause damage to
the appellants. As it turned out,
this part of the case does not require any lengthy discourse. The
reason for this emanates
from the narrow foundation upon which
the appellants eventually relied as the basis for this relief.
All that the appellants
contended for in the end was that,
because the use of the respondent’s name results in an
infringement of their trade
mark, it is calculated to cause
damage to them. Since I hold the view that the infringement of
the appellants’ mark
had not been established, this
application must follow the same fate.
[24]
What remains is the appeal against the costs order relating to
the respondent’s counter-application. It will
be remembered
that the court a quo dismissed the counter-application with no
order as to costs. The appellants’ objection
against this
order starts out from the premise that, as a rule, the dismissal
of an application results in a costs order
against the
unsuccessful applicant. That is undoubtedly so. But it is not a
rule of the Medes and Persians. In this case
the court a quo
found it unnecessary to deal with the counter-application because
it rightly regarded it as no more than
a second tier defence
against the main application which was dismissed on the basis of
the respondent’s first tier
defence. In the exercise of its
discretion the court a quo then decided that, in these
circumstances, the most appropriate
order would be no order as to
costs. According to a well-established principle, this court will
not interfere with the
decision of a lower court as to costs
unless it is quite clear that some important factor escaped the
attention of the
lower court, or unless the discretion exercised
has not been a judicial discretion (see eg
Molteno
Bros v South African Railways
1936
AD 408
at 417). In this light, I can see no basis upon which
we can interfere with the exercise of the court a quo’s
discretion
with regard to costs.
[25] As to the costs
on appeal, the respondent was at all times represented by two
counsel. Shortly before the hearing of
the appeal, its senior
counsel however became indisposed. That is the reason for the
costs order I propose to make. In
the result:
The appeal is
dismissed with costs, including the costs of two counsel whenever
employed.
F D J BRAND
JUDGE OF APPEAL
APPEARANCES:
For
Appellants: D HARMS
Instructed
by:
ADAMS & ADAMS
CAPE
TOWN
Correspondents:
HONEY ATTORNEYS
BLOEMFONTEIN
For
Respondent: M IOANNOU
(HEADS
OF ARGUMENT PREPARED BY A R SHOLTO-DOUGLAS SC AND M IOANNOU)
Instructed
by:
MacROBERT INC
CAPE
TOWN
Correspondents:
CLAUDE REID
BLOEMFONTEIN