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[2011] ZASCA 14
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Alliance Property Group (Pty) Ltd v Alliance Group Ltd and Another (252/2010) [2011] ZASCA 14; 2011 BIP 377 (SCA) (14 March 2011)
Links to summary
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No 252/2010
In the matter between:
ALLIANCE PROPERTY GROUP (PTY) LTD
..........................................
APPELLANT
and
ALLIANCE GROUP LIMITED
..................................................
FIRST
RESPONDENT
AUCTION ALLIANCE KWAZULU-NATAL
(PTY) LTD
...........................................................................
SECOND
RESPONDENT
Neutral citation:
Alliance
Property Group v Alliance Group
(252/10)
[2011] ZASCA 14
(14
March 2011)
Coram
: HARMS DP, HEHER, PONNAN, TSHIQI JJA et
PLASKET AJA
Heard
: 25 February 2011
Delivered
: 14 March 2011
Summary
: Practice – Whether appeal having
any practical effect or result – section 21A of the Supreme
Court Act 59 of 1959
– Passing-off – proof of reputation
– proof of misrepresentation.
ORDER
_______________________________________________________________
On appeal from:
KwaZulu-Natal High Court
(Pietermaritzburg) (Sishi J sitting as court of first instance):
(1) The appeal is upheld with costs and the order of the
court below is set aside.
(2) The following order is substituted for the order
issued by the court below.
'(a) The respondents are interdicted, in the provinces
of KwaZulu-Natal and the Eastern Cape, from passing-off their
property services
as those of the applicant or as being associated in
the course of trade with the applicant, by using the name, mark and
trading
style of Alliance Group without clearly distinguishing their
services from those of the applicant.
(b) The respondents are directed to pay, jointly and
severally, the applicant’s costs of the application, including
the costs
of two counsel.'
JUDGMENT
PLASKET AJA (HARMS DP, HEHER, PONNAN, TSHIQI JJA
concurring):
[1] The appellant appeals against the judgment of Sishi
J in the KwaZulu-Natal High Court, Pietermaritzburg in which its
application
to interdict the respondents from passing-off their
property services as those of the appellant was dismissed with costs.
[2] Two principal issues arise. The first is whether the
appeal will have any practical effect and if not whether it should be
dismissed
in terms of s 21A of the Supreme Court Act 59 of 1959. The
second is whether, if the appeal is not to be dismissed in terms of s
21A, Sishi J was correct in dismissing the application on the basis
that the appellant had failed to prove a reputation in the
name and
trading style of Alliance Property Group and that it had failed to
prove a misrepresentation on the part of the respondents
that created
a likelihood of deception or confusion between the appellant’s
name and that of the respondents. Prior to dealing
with these issues,
it is necessary to set out the facts.
The facts
[3] The appellant commenced business under its present
name in 1997. It conducts business in the field of commercial and
industrial
property, including property development and facilitation,
valuations and consultancy, property sales, the letting of property,
property management and public auctions of property. The heartland of
its operations is the province of KwaZulu-Natal, but the
papers show
that it also conducts business in the Eastern Cape, from that
province's border with KwaZulu-Natal to East London.
[4] The first respondent commenced its existence in 1999
as Electronic Auctioneering Ventures Ltd. In the following year it
changed
its name to Auction Alliance Holdings Ltd and then, in 2003,
to Asset Alliance Ltd. A few years later, it embarked on a
rebranding,
restructuring and consolidation of its associated
companies. The result was that, in October 2006, it changed its name
to Alliance
Group Ltd. It conducts the business of property auctions,
business sales, property finance, property inspections and valuations
in KwaZulu-Natal and elsewhere in the country, including the Eastern
Cape.
[5] The second respondent was incorporated in 2000 under
the name Kusasa Commodities 191 (Pty) Ltd. It changed its name to
Auction
Alliance KwaZulu-Natal (Pty) Ltd in 2001. Between 2003 and
2007 it traded as Auction Alliance but, from September 2007, has
traded
as Alliance Group. Its core business is the selling of
immovable property by way of auctions. It operates in KwaZulu-Natal.
[6] As a result of the first respondent's rebranding and
the change of name and trade name of it and second respondent, the
appellant
launched its application to interdict them from passing-off
their services as those of the appellant's. As stated above, Sishi J
dismissed the application. He then granted leave to appeal to this
court.
Will the appeal have
any practical effect
?
[7] After leave to appeal had been granted, the
respondents’ attorneys wrote a letter to the appellant's
attorneys in which
they said that the respondents had undergone an
'internal strategy change' and had 'performed an intensive "brand
audit"
in light of market conditions'. The result was that they
decided to re-focus their core business to that of auctions,
rebranded
their business and resumed trading as Auction Alliance. The
letter then stated:
'Our clients are
prepared to abandon the costs order in their favour relating to the
proceedings in the Court
a
quo
and are
prepared to agree that each party be responsible for their own costs
in connection with the application for leave to appeal
in the event
that your client is prepared to withdraw its appeal to the Supreme
Court of Appeal.'
[8] It will be noted that the letter gave no undertaking
that the respondents would not in future pass-off their business as
that
of the appellant. Instead, it made the assertion that as they
had changed back to their previous names, the appellant’s
appeal
was moot.
[9] The appellant’s attorneys replied to the
letter by saying that ‘your client’s statement that it no
longer
proposes to trade as “Alliance Group” does not
destroy our client’s right to pursue its appeal’. They
noted
that the respondents had not abandoned the judgment in their
favour and had given no undertaking not to trade as the Alliance
Group.
[10] The letter then mentioned that the second
respondent (it would seem) was still trading under the name of the
Alliance Group
in Durban. Finally, the appellant’s attorneys
demanded that, in order to settle the matter, the respondents should
abandon
the judgment in their favour, give an ‘irrevocable
undertaking’ that they would not use the name Alliance Group,
or
apply for the registration of a new company with that name, and
take various other steps specified in the letter. When, some two
weeks later, the appellant’s attorneys had received no
response, they informed the respondents’ attorneys that they
were proceeding with the preparation of the record.
[11] Shortly before the appeal was to be heard, the
appellant brought an application in which it sought leave to lead
further evidence.
That evidence was to the effect that, in addition
to the second respondent carrying on business under the name of
Alliance Group,
two of the first respondent’s subsidiaries in
Johannesburg and Port Elizabeth were also doing so some seven months
after
the letter informing the appellant of the rebranding. The
respondents, in an answering affidavit, ascribed this to an
insignificant
oversight which had been rectified.
[12] Section 21A(1) of the Supreme Court Act 59 of 1959
provides that ’[w]hen at the hearing of any civil appeal to the
Appellate
Division or any Provincial or Local Division of the Supreme
Court the issues are of such a nature that the judgment or order
sought
will have no practical effect or result, the appeal may be
dismissed on this ground alone’.
[13] The purpose of this
section was considered by this court in
Premier,
Provinsie Mpumalanga, en ʼn ander v Groblersdalse Stadsraad
,
1
in which it was held:
‘
Die
artikel is, myns insiens, daarop gerig om die drukkende werklas op
Howe van appèl, insluitende en miskien veral hierdie
Hof, te
verlig. Dit breek weg van die destydse vae begrippe soos “abstrak”,
“akademies” of “hipoteties”,
as maatstawwe
vir die uitoefening van 'n Hof van appèl se bevoegdheid om 'n
appèl nie aan te hoor nie. Dit stel nou
'n direkte en
positiewe toets: sal die uitspraak of bevel 'n praktiese uitwerking
of gevolg hê? Gesien die doel en die duidelike
betekenis van
hierdie formulering, is die vraag of die uitspraak in die geding voor
die Hof 'n praktiese uitwerking of gevolg het
en nie of dit vir 'n
hipotetiese toekomstige geding van belang mag wees nie.’
[14] In
Port
Elizabeth Municipality v Smit
2
this court held that the
discretionary power to dismiss an appeal in terms of s 21A without
consideration of the merits was only
operative where there was an
existing dispute between the parties that, for some or other reason,
had become academic or hypothetical
(and that, in the absence of an
existing dispute, s 21A did not apply because there simply was no
appeal before the court).
[15] On the facts that I have set out above, I am of the
view that it cannot be said that the dispute between the appellant
and
the respondents is academic or hypothetical. The fact that the
respondents have failed to give an undertaking that they will not,
in
future, use the name Alliance Group renders the dispute a live one. I
accordingly find that the appeal is not one that will
have no
practical effect or result and that it must, as a result, be
determined on the merits.
The merits
[16] In
Caterham
Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd &
another
,
3
Harms JA identified the elements of
the wrong of passing-off to be 'the "classical trinity" of
reputation (or goodwill),
misrepresentation and damage'. As a form of
wrongful competition it is unlawful because 'it results, or at any
rate is calculated
to result, in the improper filching of another's
trade and an improper infringement of his goodwill and/or because it
may cause
injury to that other's trade reputation'.
4
[17] The elements of
passing-off were described more fully as follows in
Premier
Trading Co (Pty) Ltd & another v Sporttopia (Pty) Ltd
:
5
‘
Passing-off is a wrong
consisting of a false representation made by one trader (the
defendant) to members of the purchasing public
that the enterprise,
goods or services of a rival trader (the plaintiff) either belong to
him (the defendant) or are connected,
in the course of trade, with
his own enterprise, goods or services. (I shall abbreviate, for the
sake of convenience, “enterprise,
goods or services” to
the single term “the product” since this is a case of
“product confusion” rather
than “business
connection confusion”.) The defendant's representation is a
misrepresentation if it is likely to deceive
or confuse a substantial
number of members of the public as to the source or origin of his
product. Passing-off, to be actionable,
erodes the plaintiff's
goodwill. Goodwill is the product of a cumulation of factors, the
most important of which, in the context
of passing-off, is the
plaintiff's reputation. Reputation is the opinion which the relevant
section of the community holds of the
plaintiff or his product. If
favourable, it would dispose potential customers to patronise the
plaintiff or his product and, if
unfavourable, it would tend to
discourage them from doing so. The plaintiff's reputation may be
associated with the symbol under
which his product is marketed. The
symbol renders the product distinctive of the plaintiff or his
product. A false representation
by the defendant about the symbol
used by the plaintiff may encourage or induce potential customers of
the plaintiff, believing
that they were patronising him, into
patronising the defendant.’
[18] I turn now to the issues to be decided, namely
whether the appellant proved a reputation in its name and trading
style and
whether it proved a misrepresentation on the part of the
respondents.
(a)
Reputation
[19] It is necessary to
point out that, while in the court below the appellant sought to lay
claim to the word 'Alliance' as being
descriptive of its business,
Sishi J held, correctly, that it was a descriptive word that could
not be monopolised by the appellant.
6
The appellant does not attack this
finding and concedes that it does not have a monopoly on the word
'Alliance'. Instead it argues
that it has established a reputation
symbolised by the name and trade style of Alliance Property Group.
[20] In
Brian
Boswell Circus (Pty) Ltd & another v Boswell-Wilkie Circus (Pty)
Ltd
7
Corbett JA stated that there were two
important considerations in respect of the acquisition by a business
of a reputation in a
trade name:
'Firstly, whether the
general public will be confused or deceived into thinking, because of
identity or similarity of names, that
the business of the defendant
is that of the plaintiff, or is connected therewith, must, as a
matter of logic, depend on the extent
to which that name is
associated in the minds of members of the public with the business
carried on by the plaintiff, ie the extent
to which plaintiff has
acquired a reputation in that trade name. Secondly, as the rationale
of the wrong of passing off is the
protection of the plaintiff's
trade and goodwill, a valid cause of action would seem to postulate
the existence of a goodwill,
ie reputation, attaching to that trade
name. Whether reputation, in this sense, is always a
sine
qua non
of a
successful passing off action need not now be decided.'
In addition, the
reputation that is sought to be protected must have been in existence
when the misrepresentation was made.
8
[21] The existence of the appellant's reputation at the
relevant time is a question of fact. The appellant has put up the
following
facts, none of which have been disputed by the respondents
in any meaningful way: the appellant has provided property services
under the style Alliance Property Group since its incorporation in
1997; its business has, since then, encompassed a full range
of
property related services and, since 1997, it has facilitated a
number of property developments having a combined value of over
R800m; since its incorporation, its portfolio of commercial and
industrial properties that it manages has grown to 54 buildings
worth
R948m; it has conducted a number of public auctions of property,
including one in Dubai; it has acted as a consultant and
advisor to a
Dubai-based company that is developing a prestigious golf and leisure
resort in KwaZulu-Natal; brochures reflecting
its profile in 2003 and
2007 reflect a considerable growth in its business; since 1998, its
turnover from property related activities,
primarily in the form of
commissions, has exceeded R91m; and it has advertised its services
widely.
[22] In answer to this, the respondents claim no
knowledge of the appellant's reputation; state that it is not
involved in property
auctions to any 'significant degree'; suggest
the appellant's property portfolio may have declined since the
signing of the founding
affidavit; allege that the appellant trades
in a small part of the country; and claims that the respondent is
much bigger than
it. The appellant's schedule of the properties it
manages shows, however, that its business is only carried on in
KwaZulu-Natal
and the Eastern Cape, and extends no further than the
Eastern Cape.
[23] It is evident from
the period during which the appellant has traded, the nature of its
business and the scope of its operations
that the appellant has
established that it has acquired a reputation in its field in
KwaZulu-Natal and the Eastern Cape. It is
argued on behalf of the
respondents, however, that there is a difference between it acquiring
a reputation and proving a secondary
meaning. This issue was dealt
with by this court in
Brian
Boswell Circus (Pty) Ltd & another v Boswell-Wilkie Circus (Pty)
Ltd
9
in which the court held simply that
‘the latter would seem to include the former’.
[24] The court then
referred with approval to
Policansky
Bros Ltd v L & H Policansky
10
in which this court said the
following concerning a name acquiring a secondary meaning:
'If a person has previously through his advertisements
and through the quality of his goods made his name valuable as a
trade name
so that his name has become distinctive both of his goods
and of himself as the manufacturer of those goods, and if his goods
have
come to be universally known in the market by his name then his
name is said to have obtained a secondary meaning. When this is
the
case another person cannot use that name in connection with a similar
class of goods unless he makes it perfectly clear to
the public that
he is not selling the goods of the original manufacturer . . . .'
[25] On the strength of the above, I conclude that the
appellant has established a reputation in the field of providing
property-related
services in KwaZulu-Natal and the Eastern Cape and
that it has done so in relation to the name and trading style of
Alliance Property
Group which name (to the extent that it may be
descriptive) has acquired a secondary meaning as a result of the
close and distinctive
association between it and the business the
appellant carries on in the minds of the public. In addition, the
evidence also establishes
that the appellant’s reputation was
in existence when the respondents began to trade under the name
Alliance Group Ltd. As
a result, the appellant has established that,
in relation to the first issue, the court below erred in finding that
the appellant
had not proved a reputation in its name and trading
style.
(b)
Misrepresentation
[26] In
Capital
Estate & General Agencies (Pty) Ltd & others v Holiday Inns
Inc & others
,
11
this court held the following in
respect of the proof of the misrepresentation necessary to establish
a passing-off:
‘
The wrong known as passing off
consists in a representation by one person that his business (or
merchandise, as the case may be)
is that of another, or that it is
associated with that of another, and, in order to determine whether a
representation amounts
to a passing-off, one enquires whether there
is a reasonable likelihood that members of the public may be confused
into believing
that the business of the one is, or is connected with,
that of another. Whether there is a reasonable likelihood of such
confusion
arising is, of course, a question of fact which will have
to be determined in the light of the circumstances of each case.’
(Reference omitted.)
[27] The court, in
Miriam Glick Trading
(Pty) Ltd v Clicks Stores (Transvaal) (Pty) Ltd & others
,
12
after referring to the above passage
from the
Holiday
Inns
case,
proceeded to set out how the factual enquiry is to be conducted:
‘
In such an enquiry the trade
names must be considered from the visual, phonetic and ideological
points of view. They must be considered
not side by side, but as a
member of the public would see them, one after the other, with a time
lapse in between and having regard
to the likelihood of imperfect
recollection. In passing-off they must be considered not
in
abstracto
but
in the form and under the circumstances in which they are used. This
involves having regard to all the surrounding circumstances
such as
the nature of the businesses in question and the goods to which they
relate, the types of persons who constitute potential
clients of such
businesses and the conditions under which such businesses are
conducted. The criteria is not that of a very careful
or a very
careless purchaser but an ordinary purchaser of the types comprising
the potential clients’.
[28] Prior to September
2007, the appellant, trading as Alliance Property Group, provided a
comprehensive range of property-related
services. The respondents
traded as Auction Alliance and concentrated on selling property by
way of public auctions. At this stage,
the only common factor in the
names of the appellant and the respondents was the descriptive word
Alliance. To the extent that
this had the potential to cause
confusion, it was a risk that the appellant and the respondents bore,
but the remainder of their
respective names was sufficient to
distinguish them from each other in the minds of the public.
13
[29] In September 2007, however, the respondents dropped
the word Auction from their names, expanded their services in the
property
field to include more than property auctions and called
themselves Alliance Group Ltd. The effect of this was to remove
important
features that distinguished the business of the appellant
from that of the respondents, make the respondents’ businesses
look more like the appellant’s business from a functional point
of view and to make their names look strikingly similar to
that of
the appellant. By doing this, confusion in the minds of the public
was inevitable and it is hardly surprising that instances
of actual
confusion arose.
[30] In these circumstances, I am of the view that the
appellant succeeded in establishing a misrepresentation on the part
of the
respondents that its businesses were the same business as that
of the appellant or was connected with it. That being so, I am of
the
view that the court below erred in this respect too and that,
consequently, the appeal must succeed.
THE ORDER
[31] The following order is issued.
(1) The appeal is upheld with costs and the order of the
court below is set aside.
(2) The following order is substituted for the order
issued by the court below.
'(a) The respondents are interdicted, in the provinces
of KwaZulu-Natal and the Eastern Cape, from passing-off their
property services
as those of the applicant or as being associated in
the course of trade with the applicant, by using the name, mark and
trading
style of Alliance Group without clearly distinguishing their
services from those of the applicant.
(b) The respondents are directed to pay, jointly and
severally, the applicant’s costs of the application, including
the costs
of two counsel.'
_____________________
C. PLASKET
ACTING JUDGE OF APPEAL
APPEARANCES
APPELLANT: G E Morley SC instructed by Cox Yeats,
Durban; Honey Attorneys, Bloemfontein
RESPONDENTS: J-H Roux SC instructed by Cliffe Dekker
Hofmeyr, Cape Town; Symington and De Kock, Bloemfontein
1
1998
(2) SA 1136
(SCA) at 1141D-E. See too
Rand Water Board v Rotek
Industries (Pty) Ltd
2003 (4) SA 58
(SCA) paras 13-14.
2
2002
(4) SA 241
(SCA) para 7.
3
[1998] ZASCA 44
;
1998
(3) SA 938
(SCA) para 13. See too
Nino’s Coffee Bar &
Restaurant CC v Nino’s Italian Coffee & Sandwich Bar CC &
another; Nino’s Italian
Coffee & Sandwich Bar CC v Nino’s
Coffee Bar & Restaurant CC
1998 (3) SA 656
(C) para 30.
4
Brian
Boswell Circus (Pty) Ltd & another v Boswell-Wilkie Circus (Pty)
Ltd
1985 (4) SA 466
(A) at 478I-J.
5
2000
(3) SA 259
(SCA) at 266G-267C. See too
Capital Estate and General
Agencies (Pty) Ltd & others v Holiday Inns Inc & others
1977 (2) SA 916
(A) at 929C-D;
Brian Boswell Circus (Pty) Ltd &
another v Boswell-Wilkie Circus (Pty) Ltd
fn 4 at 478E-H.
6
See
Value
Car Group Ltd & another v Value Car Hire (Pty) Ltd & others
[2005] ZAWCHC 23
;
[2005] 4 All SA
474
(C).
7
Footnote
4 at 479B-D. See
too
Caterham
Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd
fn 3 paras 20-21.
8
Caterham
Car Sales & Coachworks Ltd v Birkin Car Sales (Pty) Ltd
fn 3
para 22.
9
Footnote
4 at 482A-B.
10
1935
AD 89
at 103.
11
Footnote
5 at
929C-E.
See too
Brian
Boswell Circus (Pty) Ltd & another v Boswell-Wilkie Circus (Pty)
Ltd
fn
4 at 478E-J.
12
1979
(2) SA 290
(T) at 295A-D.
13
Sir
Robert McAlpine Ltd v Alfred McAlpine Ltd
[2004] EWHC 630
;
[2004]
RPC 36
711 (HC) paras 49-50;
Initiative
Promotions and Designs CC v Initiative Media South Africa (Pty) Ltd
& others
2005
BIP 516 (D) at 525B-E, quoting with approval Kerly
Law
of Trade Marks and Trade Names
12
ed (1986) p 389.