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[2010] ZASCA 105
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Cadac (Pty) Ltd v Weber-Stephen Products Company and Others (530/09) [2010] ZASCA 105; [2011] 1 All SA 343 (SCA); 2011 (3) SA 570 (SCA); 2010 BIP 307 (SCA) (16 September 2010)
Links to summary
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 530/09
In
the matter between:
CADAC
(PTY) LTD Appellant
and
WEBER
STEPHEN PRODUCTS COMPANY First Respondent
GALACTEX
OUTDOOR (PTY) LIMITED Second Respondent
THE
MINISTER OF SAFETY & SECURITY Third Respondent
THE
REGISTRAR OF TRADEMARKS Fourth Respondent
Neutral
citation:
Cadac v Weber-Stephen
(530/09)
[2010]
ZASCA
105
(16 September 2010)
Coram:
Harms DP, Nugent, Ponnan and Shongwe JJA
and R Pillay AJA
Heard:
03
September 2010
Delivered:
16
September 2010
Summary:
Civil procedure – inquiry into
damages – sought in motion proceedings –
Counterfeit
Goods Act 37 of 1997
s 10(1)
and
17
(1) –
Prescription Act 68 of
1969
s 15.
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from:
South Gauteng High Court
(Johannesburg) (Brett AJ sitting as court of first instance):
1 The appeal is upheld with costs, including the costs
of two counsel.
2 The order of the court below is set aside and replaced
with an order in these terms:
(a) The interlocutory application is upheld with costs,
including the costs of two counsel.
(b) The counter-application is dismissed with costs,
including the costs of two counsel.
(c) The Registrar of the South Gauteng High Court is
directed to fix a date for an inquiry to be conducted by way of a
High Court
trial for the purposes of:-
(i) the determination of the amount of compensation to
be paid by the Respondents to the Applicant as contemplated in
section 10(1)(c)
of the
Counterfeit Goods Act 37 of 1997
; and
(ii) the payment by the Respondents, jointly and
severally, the one paying the others to be absolved, to the Applicant
of the amount
of compensation found to be due to the Applicant
pursuant to the determination, together with interest on such amount
at the prescribed
rate of interest from the date of such
determination until the date of payment and the costs of the
determination.
(d) The Applicant shall within 20 (twenty) days of the
date of this order serve upon the Respondents and file a declaration
particularizing
the damages allegedly suffered by it as a result of
the seizure of its goods under the search and seizure warrant
issued on
10 December 2004.
(e) The Respondents, if so advised, shall with 10 (ten)
days of the service of the Applicant’s declaration, file a
plea
thereto.
(f) The Uniform Rules of Court relating to discovery,
inspection and all other matters of procedure shall apply to the
determination.
(g) The parties are authorised, on notice to the other
parties and should it be required by one or both of them, to make
application
to the South Gauteng High Court to add to, or vary the
above order so as to facilitate the conducting of the determination
and
generally to make application for further directions in regard
thereto.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
HARMS DP (NUGENT, PONNAN and SHONGWE JJA and R PILLAY
AJA concurring)
INTRODUCTION
[1] The first respondent,
Weber-Stephen Products Co, a US company, is the registered owner of
trademarks that relate to the shape
and configuration of barbeque
kettle grills. Its sole distributor in South Africa is the second
respondent, Galactex Outdoor (Pty)
Ltd. The appellant, Cadac (Pty)
Ltd, also manufactures kettle grills and had a kettle grill on the
local market for some 18 months
when it decided to introduce another
model during November 2004.
1
[2] This gave rise to correspondence between the parties
in which the respondents (to whom I shall simply refer as
Weber-Stephen)
alleged trademark infringement, something Cadac
denied. Weber-Stephen then alleged that Cadac was guilty of
counterfeiting and
threatened to lay a charge under the
Counterfeit
Goods Act 37 of 1997
. In spite of Cadac’s detailed refutation
of the allegations the respondents proceeded to lay a complaint
without notice to
Cadac in terms of
s 3
of the Act by means of an
affidavit and without disclosing the fact that Cadac had asked for
notice and had provided it with a
detailed defence.
[3] An inspector appointed under the Act, acting on the
correctness of the allegations in the affidavit, applied for a
warrant from
a magistrate in chambers authorising him to seize
Cadac’s kettle grills
(s 6(1)).
The warrant was executed during
the Christmas season and kettle grills in the possession of dealers
were also confiscated. Cadac
alleges that it suffered some loss as a
result.
[4] On 13 January 2005 Cadac applied on an urgent basis
for a setting aside of the warrant in the light of the underhand
manner
in which it had been obtained. It also applied for a
declaration that the goods seized were not counterfeit and for an
inquiry
into damages and for costs.
[5] The application was heard by
Schwartzman J on 25 February, and in a fully reasoned judgment of 18
March he came to the conclusion
that the warrant had been obtained
irregularly and he set it aside with costs and ordered the return of
Cadac’s goods.
2
Weber-Stephen sought leave to appeal from the learned judge and from
this court but without success.
[6] Because of this finding the
learned judge thought it unnecessary to express any view about
whether or not the Cadac product
was counterfeit. This he did in
spite of the fact that
‘
the
striking feature about counterfeit cases is that they are legally
very simple: they do not involve serious disputes over the
boundaries
of the trademark owner’s rights. In mimicking the goods and the
trademarks, the conduct of counterfeiters clearly
falls within the
ambit of conduct that a trademark owner is entitled to prevent.’
3
Counterfeiting involves deliberate
and fraudulent infringement of trademarks
4
and ‘counterfeit cases involve an infringer attempting to
reproduce – and substitute for – the goods (not just
the
trademark) of the trademark owner.’
5
That is why the Act is concerned with trademark and copyright
infringements that are criminal in nature. The Act does not permit
a
rights holder to steal a march on an alleged infringer in order to
settle a bona fide dispute about the boundaries of rights.
Those
disputes should be litigated under either the Trade Marks Act or the
Copyright Act.
6
[7] The prayer relating to an inquiry into damages
flowed from the provisions of s 17(1) of the Act, which provides that
any person
suffering damage or loss caused by the wrongful seizure,
removal or detention of goods alleged to be counterfeit is entitled
to
claim compensation from the complainant for that damage or loss.
This must be read with s 10(1)(c) which states, inter alia, that
a
court ‘in any civil or criminal proceedings relating to
counterfeit goods’ may order
‘
that the complainant pays
damages, in an amount determined by the court, to the person from
whom those goods were seized and pays
that person’s costs.’
[8] The court postponed this prayer
sine die
. For
reasons that are not now germane Cadac did not take further formal
steps in relation to the inquiry into damages until three
years and
two days after the judgment of Schwartzman J when it applied by means
of an interlocutory application for directions
for the conduct of the
inquiry, something not regulated by any court rule. The crux of
Weber-Stephen’s answer was a multi-faceted
reliance on
prescription (in some instances somewhat of a misnomer) and a counter
application for an order declaring that Cadac’s
claim had
become prescribed. Not all were persisted in during the appeal.
[9] One of these arguments was based on the fact that
Schwartzman J did not deal with the question whether or not the goods
were
counterfeit. Weber-Stephen argued in the court below that the
provisions of s 10(1)(c) and s 17(1) in those circumstances did not
provide a cause of action for the recovery of damages. The cause of
action, according to the submission, was dependent on a finding
that
the goods were not counterfeit. Brett AJ dismissed the argument and
Weber-Stephen did not attempt to revive it in this court.
It does not
appear from the papers that Weber-Stephen has instituted any
trademark infringement proceedings against Cadac.
INQUIRY INTO DAMAGES: IS IT PERMITTED?
[10] The first issue to decide is
whether the proceedings launched by Cadac for an inquiry into damages
is competent because, as
was argued by Weber-Stephen, it is not at
all permissible to bring an illiquid claim by means of motion
proceedings. This much
was said by Murray AJP in
Room
Hire
.
7
The main reason for the statement is in general terms
unobjectionable. It is that motion proceedings are not geared to deal
with
factual disputes – they are principally for the resolution
of legal issues
8
– and illiquid claims by their very nature involve the
resolution of factual issues. The related reason concerns the lack
of
pleadings.
9
The other objection, namely that motion proceedings give the
applicant a procedural advantage because the respondent is not
entitled
to rely on a bald denial as is possible in trial proceedings
and that it would be unfair to deprive the respondent of this
advantage,
no longer holds water.
10
Litigation is not a game.
[11] The fact of the matter is that
Cadac does not seek to have its illiquid claim decided by means of
motion proceedings and that
these objections have no bearing on the
matter. What it does seek are directions as how to proceed with the
quantification of its
claim for damages to which it is entitled by
virtue of the statute and the findings by Schwartzman J.
11
The irony of the objection is that if it had proceeded by way of
application for an interdict based on trademark infringement,
Weber-Stephen, if successful, would have been entitled to an order
directing an inquiry into damages and directions as to the procedures
to be followed.
12
But since the proceedings by Cadac are not trademark infringement by
a quirk of somewhat ossified procedural law the same procedure
is
said not to be available.
[12] Courts have refused to make
orders for an inquiry into damages because the relief, which is found
in English procedural law,
is not dealt with in our court rules.
13
But, as Nicholas J pointed out in
Harvey
Tiling
,
14
such orders have been granted without objection in patent actions at
a time when there was no available local rule. And, as he
showed,
courts are able to craft an appropriate order for an inquiry into
damages without the need for a rule. One finds regularly
that parties
agree or courts order that issues concerning liability are to be
decided first and quantum thereafter. But the present
rigid system
requires of a plaintiff to particularize its damages when instituting
action, sometimes a costly exercise which may
prove to have been
unnecessary.
[13] I cannot see any objection why,
as a matter of principle and in a particular case, a plaintiff who
wishes to have the issue
of liability decided before embarking on
quantification, may not claim a declaratory order to the effect that
the defendant is
liable, and pray for an order that the
quantification stand over for later adjudication. It works in
intellectual property cases
albeit because of specific legislation
but in the light of a court’s inherent jurisdiction to regulate
its own process in
the interests of justice – a power derived
from common law and now entrenched in the Constitution (s 173) –
I can see
no justification for refusing to extend the practice to
other cases. The plaintiff may run a risk if it decides to follow
this
route because of the court’s discretion in relation to
interest orders. It might find that interest is only to run from the
date when the debtor was able to assess the quantum of the claim.
15
Another risk is that a court may conclude that the issues of
liability and quantum are so interlinked that it is unable to decide
the one without the other.
[14] Once the principle is accepted
for trial actions there is no reason why it cannot apply to
application proceeding. In
Modderklip
,
16
which was brought on notice of motion, this court issued an order for
the determination of the quantum of damages based on the
formulation
used in
Harvey
Tiling
. The order
of the Constitutional Court was in this regard identical.
17
The fact that the order related to ‘constitutional’
damages does not affect the procedural principle.
[15] There is, without derogating from the foregoing, an
additional reason why the procedure is permissible in this case.
Section
10 of the Act provides that an order for damages may be
ordered against a complainant ‘in any civil or criminal
proceedings
relating to counterfeit goods’. Cadac’s
application to set aside the warrant was such a proceeding within the
meaning
of the section, which does not require separate proceedings
for the determination of quantum. In the absence of rules regulating
these quantification proceedings a court has to prescribe an
appropriate procedure.
THE CAUSA OF CADAC’S CLAIM
[16] The issue relating to the nature
of Cadac’s claim arises from Weber-Stephen’s argument
that at the time that the
main application was launched the right to
damages had not yet accrued and that the proceedings for the recovery
of damages (albeit
in the form of an inquiry into damages) were
accordingly premature. This argument was based on the supposition
that the warrant
was not void but voidable and that a cause of action
for wrongful attachment of goods could only arise once the warrant
has been
set aside – until then it remains valid. As was said
by Trollip JA, until a warrant like the one in the instant case is
set
aside ‘it continues to have the effect of justifying the
proposed attachment [citations omitted] and, without more, the
appellant
cannot obtain the interdict it seeks.’
18
[17] The learned judge was concerned
with an application for an interdict to prevent the police from
attaching certain gambling
machines. The police in answer relied on a
warrant issued by a magistrate. The application, the judge said,
could not be regarded
or treated as including a claim to have the
warrant set aside because there was not a timely attack on its
validity (the attack,
it would appear, came in the replying
affidavit). Without such a claim the interdict could not be granted.
This means that the
interdict could have been granted if in the same
proceedings the there was a prayer, which was successful, for the
setting aside
of the warrant.
[18] The cause of action for an
interdict and one for damages are the same. Only the nature of the
relief differs. And although
there are statements in cases that
damages can only be sought after a warrant had been set aside, those
statements must be read
in context. They dealt with the distinction
between malicious attachments and wrongful ones. Because a writ is a
defence against
a claim based on the former the claim cannot succeed
unless the writ is set aside.
19
To anticipate reliance on a writ by the defendant a plaintiff must
include a claim for having it set aside. Not one ever suggested
that
two proceedings, one for setting aside and the next for damages, are
required. The reason is apparent. The declaration of
invalidity
operates retrospectively and not prospectively. This means that once
a warrant is set aside it is assumed that it never
existed and
everything done pursuant thereto was consequently unlawful.
[19] I therefore conclude that the
claim relating to damages in the application to set aside the warrant
was not premature. The
notice of motion was a process whereby
proceedings were instituted as a step in the enforcement of a claim
for payment of a debt.
20
This means that the running of prescription was interrupted in terms
of
s 15(1)
of the
Prescription Act 68 of 1969
.
21
FAILURE TO PROSECUTE THE CLAIM FOR DAMAGES
[20] I have mentioned that Cadac had
failed to further prosecute its damages claim until it launched the
present proceedings on
20 March 2008. Because of this delay
Weber-Stephen relied on
s 15(2)
of the
Prescription Act which
provides inter alia that ‘the running of prescription shall not
be deemed to have been interrupted, if the creditor does
not
successfully prosecute his claim under the process in question to
final judgment.’ The argument was that since Cadac
did not
prosecute its claim to a final judgment the claim became prescribed.
For this proposition reliance was placed on the judgment
in
Chauke.
22
[21] The immediate problem with the
argument is this: when did the claim prescribe? Counsel suggested
within three years from the
judgment of Schwartzman J, but there is
no time limit stated in
s 15(2)
within which the claim must be
prosecuted with success. It could just as well have been three days,
weeks or months. In any event,
Munnik CJ analyzed
s 15(2)
in
Titus
23
and came to the conclusion that
Chauke
was incorrect. I can do no better than to rely on his reasoning. He
pointed out, with reference to
Kuhn
v Kerbel
1957 (3)
SA 525
(A), a case decided under the
Prescription
Act 18 of 1943, that the Act rendered a right unenforceable after the
lapse of a certain time, but did not purport
to deal with the time
within which proceedings had to be concluded. Extinctive
prescription, it held, limits the time within which
proceedings must
be instituted but once instituted its continuance is governed by the
rules of court. The reason is that while
the initiating step (the
issue of process) is within the power of the creditor the subsequent
conduct of the proceedings might
not be.
24
[22] Munnik CJ further held that the
introduction of s 15(2) of the 1969 Act did not affect this
reasoning. He focussed on the word
‘successfully’ and
held that only if a creditor’s claim fails the provision comes
into force. The practical effect
of this is that, should absolution
be granted, the plaintiff cannot be said to have successfully
prosecuted the claim to final
judgment. The same would apply, he
said, if an exception is taken and the plaintiff cannot amend but has
to issue a fresh summons
(an unlikely event). Another example appears
from a later case where a plaintiff withdrew the action in one court
in order to institute
it in another: since the first summons was not
successfully prosecuted it could not interrupt prescription.
25
[23] The learned judge concluded (at
704F-H):
‘
It is not unreasonable to
assume that what the legislator had in mind was the following: It is
necessary that there should be finality
in litigation. The plaintiff
is given a reasonable time within which to institute his action,
thereafter he is in the hands of
the administration of the Courts.
Certain Rules are laid down, time is given in which certain
procedures have to be carried out
in regard to the pleadings and
there is a general provision in every Rule of Court in terms whereof
the Court can always extend
the time and furthermore he has other
factors to contend with . . . which all make it impossible for him to
have any direction
over the length or duration of the proceedings
once he has instituted them.’
[24] This means that the failure to prosecute did not in
the circumstances of this case lead to the extinction of the claim by
prescription.
I do not thereby wish to condone the lackadaisical
manner in which Cadac dealt with the matter but, as Munnik CJ said
(at 705A-B),
the debtor to a certain extent has a say in the running
of prescription by enforcing the rules of court. In this case
Weber-Stephen
could have enrolled the case for dismissal of the
postponed relief.
CONCLUSION
[25] This means that Weber-Stephen’s defences to
the relief sought were without merit. The parties are agreed that the
following
order should issue in that event and it is ordered as
follows:
1 The appeal is upheld with costs, including the costs
of two counsel.
2 The order of the court below is set aside and replaced
with an order in these terms:
(a) The interlocutory application is upheld with costs,
including the costs of two counsel.
(b) The counter-application is dismissed with costs,
including the costs of two counsel.
(c) The Registrar of the South Gauteng High Court is
directed to fix a date for an inquiry to be conducted by way of a
High Court
trial for the purposes of:-
(i) the determination of the amount of compensation to
be paid by the Respondents to the Applicant as contemplated in
section 10(1)(c)
of the
Counterfeit Goods Act 37 of 1997
; and
(ii) the payment by the Respondents, jointly and
severally, the one paying the others to be absolved, to the Applicant
of the amount
of compensation found to be due to the Applicant
pursuant to the determination, together with interest on such amount
at the prescribed
rate of interest from the date of such
determination until the date of payment and the costs of the
determination.
(d) The Applicant shall within 20 (twenty) days of the
date of this order serve upon the Respondents and file a declaration
particularizing
the damages allegedly suffered by it as a result of
the seizure of its goods under the search and seizure warrant
issued on
10 December 2004.
(e) The Respondents, if so advised, shall with 10 (ten)
days of the service of the Applicant’s declaration, file a
plea
thereto.
(f) The Uniform Rules of Court relating to discovery,
inspection and all other matters of procedure shall apply to the
determination.
(g) The parties are authorised, on notice to the other
parties and should it be required by one or both of them, to make
application
to the South Gauteng High Court to add to, or vary the
above order so as to facilitate the conducting of the determination
and
generally to make application for further directions in regard
thereto.
______________________
L T C Harms
Deputy President
APPEARANCES
APPELLANTS: A J Bester SC (with him N J Tee)
Instructed by D M Kisch Inc, C/o Blake Bester
Attorneys, Rosebank
Rossouws, Bloemfontein
RESPONDENTS: G E Morley SC (with him A Annandale)
Instructed by Spoor & Fisher Attorneys, C/o
Routledge Modise Moss Morris, Johannesburg
Matsepes Inc, Bloemfontein
1
The third and fourth respondents were
inappropriately cited for purposes of the appeal.
2
The judgment has been reported:
Cadac
(Pty) Ltd v Weber-Stephen Products Co
2005 Burrell’s IP 439 (W).
3
Jason Bosland, Kimberlee
Weatherall and Paul Jensen ‘Trademark and counterfeit
litigation in Australia’ at
www.law.unimelb.edu.au/ipria/publications/workingpapers.html
.
4
R v Johnstone
[2003] UKHL 28.
5
Ibid.
6
Trademarks that relate to shape and configuration
have their own peculiar problems:
Die
Bergkelder Bpk v Vredendal Koöp Wynmakery
[2006] ZASCA 5
;
2006 (4) SA 275
(SCA) para 8.
7
Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949
(3) SA 1155
(T).
8
National Director of Public Prosecutions v
Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) para 26.
9
Montres Rolex SA v Kleynhans
1985 (1) SA 55
(C) 70B.
10
Williams v Tunsdall
1949 (3) SA 835 (T) 839.
11
The notice of motion was for an order directing
an inquiry into the damages due to Cadac, a direction in relation to
the procedure
to be followed, an order that the respondents pay
those damages, and an order in relation to interest.
12
Trade Marks Act 194 of 1993
s 34(4).
13
">
13
Atlas Organic Fertilisers (Pty) Ltd v Pikkewyn
Ghwano (Pty) Ltd
1978 (4) SA 696
(T);
Montres Rolex SA v Kleynhans loc cit
;
Atlas Organic Fertilisers (Pty) Ltd v
Pikkewyn Ghwano (Pty) Ltd
1978 (4) SA
696
(T);
Haggar Co v SA Tailorcraft
(Pty) Ltd
1985 (4) SA 569
(T) 582A-C.
14
Harvey Tiling Co (Pty) Ltd v Rodomac (Pty) Ltd
1977 (1) SA 316 (T) 328-330.
15
Prescribed Rate of Interest Act, 1975
s 4
read with
s 2A(5).
16
">
16
Modderfontein Squatters, Greater Benoni City
Council v Modderklip Boerdery (Pty) Ltd (Agri SA and Legal Resources
Centre, amici
curiae)
2004 (6) SA 40
(SCA).
17
President of the RSA v Modderklip Boerdery
(Pty) Ltd (Agri SA and others amici curiae)
2005 (5) SA 3
(CC).
18
Cresto Machines (Edms) Bpk v Die Afdeling
Speuroffisier, SA Polisie, Noord-Transvaal
1972 (1) SA 376
(A) 395H.
19
Hart v
Cohen
(1899) 16 SC 363
at 369;
Cohen Lazar & Co
v Gibbs
1922 TPD 142
at 147-148;
Begeman v
Cohen
1927 TPD 674
at 676;
Cole’s
Estate v Oliver
1938 CPD 465
at 468.
20
Cape Town Municipality v Allianz Insurance Co
Ltd
1990 (1) SA 311
(C) 334G-J.
21
‘The running of prescription shall, subject
to the provisions of subsection (2), be interrupted by the service
on the debtor
of any process whereby the creditor claims payment of
the debt.’
22
Chauke v President Insurance Co Ltd
1978 (2) SA 947
(W).
23
Titus v Union & SWA Insurance Co Ltd
1980 (2) SA 701
(TkSC).
24
Sieberhagen v Grunow
1957 (3) SA 485
(C).
25
Van der Merwe v Protea Insurance Co Ltd
1982 (1) SA 770
(E).