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[2017] ZASCA 8
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Herbal Zone (Pty) Limited and Others v Infitech Technologies (Pty) Limited and Others (204/2016) [2017] ZASCA 8; [2017] 2 All SA 347 (SCA); 2017 BIP 172 (SCA) (10 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 204/2016
In the
matter between:
HERBAL
ZONE (PTY)
LIMITED FIRST
APPELLANT
HAKIM
HERZALLAH SECOND
APPELLANT
MOLATENG
TRADING &
PROJECTS
CC THIRD
APPELLANT
HS
FOOD INDUSTRIES (PTY)
LIMITED FOURTH
APPELLANT
and
INFITECH
TECHNOLOGIES (PTY)
LIMITED FIRST
RESPONDENT
HERBS
OILS & CO (PTY)
LIMITED SECOND
RESPONDENT
NKATE
HUTCHISON
MOSIANE THIRD
RESPONDENT
NOZIPHO
SHEILA
MOSIANE FOURTH
RESPONDENT
DAVID
JEKECHA FIFTH
RESPONDENT
Neutral
citation:
Herbal Zone v
Infitech Technologies
(204/2016)
[2017]
ZASCA 8
(10 March 2017)
Coram:
Cachalia, Shongwe, Wallis and Mbha JJA and
Schippers AJA
Heard
:
22 February 2017
Delivered
:
10 March 2017
Summary:
Passing off – requirement of
reputation – failure to prove source of goods and that the
reputation vested in the applicant
– claim for interdict
dismissed.
Defamation
– trading corporation – interdict against future
publication of defamatory matter – such not lightly
granted –
dispute of fact on the papers whether statements were justified –
such a genuine dispute – applicant
failing to show a clear
right – interdict refused.
ORDER
On
appeal from:
Western Cape Division,
Cape Town (Bozalek J sitting as court of first instance):
1 The appeal succeeds in part and the order of the high court is
amended to read as follows:
‘
(a) The application is
dismissed with costs.
(b) The counter
application is dismissed with costs.’
2 Each party is to pay
their own costs of the appeal.
JUDGMENT
Wallis
JA (Cachalia, Shongwe and Mbha JJA and Schippers AJA concurring)
[1]
The dried and crushed extract of Tongkat
Ali,
[1]
a root found in Malaysia and other countries in the Far East, is
believed to have aphrodisiacal properties that enhance male sexual
performance. The second appellant, Mr Hakim Herzallah, recognised
that this belief could be exploited for its commercial potential
and
became involved with the production by a Malaysian company, Madar Al
Jawda Sdn Bhd (MAJ), of capsules containing this extract.
He called
the product in this capsule form ‘Phyto Andro’.
[2]
Since 2006, after he moved to South Africa, it has been marketed in
this country under that mark as Phyto Andro for Him. Mr Herzallah
is
the sole shareholder of the first appellant, Herbal Zone (Pty) Ltd,
which imports Phyto Andro into South Africa. Herbal Zone
(Pty) Ltd
was formerly a close corporation, Herbal Zone CC. In 2015 it was
converted into a private company. As nothing turns on
the conversion
I will refer to them both as Herbal Zone. He also said that he was
the majority shareholder in a Malaysian company
called Herbal Zone
International Sdn Bhd (Herbal Zone International) that he refers to
as the manufacturer of Phyto Andro.
He
annexed a letter to his affidavit in support of this statement and an
extract from the Herbal Zone International’s register
of
directors. These showed that he was appointed as a director in 2008
and recorded that in 2009 he was a 51% shareholder in Herbal
Zone
International. There was no documentary evidence that this remained
the position when these proceedings were commenced.
[2]
From 2009 until 2014 the first respondent,
Infitech Technologies (Pty) Ltd (Infitech), was the sole distributor
in South Africa
of Phyto Andro in terms of a distribution agreement
concluded with Herbal Zone. The present dispute arose from events
after the
termination of that sole distributorship. The second
respondent, Herbs Oils and Co (Pty) Ltd (Herbs Oils), had been formed
in advance
of the termination by Mr and Mrs Moisane, the shareholders
of Infitech and the third and fourth respondents. Herbs Oils has
since
2014 distributed a product in South Africa, also under the name
Phyto Andro for Him, in competition with the product imported by
Herbal Zone. This competing product is imported by Infitech, which
says, somewhat cryptically, that it has procured it from an
unidentified manufacturing source in Malaysia. Although neither
Herbal Zone nor Herbs Oils has secured registration of ‘Phyto
Andro’ as a trademark, the packaging that each uses for its own
product includes after the words ‘Phyto Andro’
the
standard symbol ® used to indicate such registration.
[3]
In addressing the competition from Herbs
Oils product, Herbal Zone took out advertisements in a popular
newspaper, the Daily Sun,
at the foot of which appeared, in fairly
small print, the following statement:
‘
HERBAL ZONE CC WILL NOT BE RESPONSIBLE FOR
THE CONTENT IN ANY OTHER PACKAGING!
LEGAL ACTION WILL BE TAKEN AGAINST SUPPLIERS SELLING/PURCHASING
‘COUNTERFEIT PHYTO ANDRO CAPSULES’
Herbal Zone is the Manufacturer and supplier of
Phyto Andro Capsules’.
[4]
In addition, Herbal Zone distributed a
circular to the pharmacies and outlets through which it was
distributing Phyto Andro containing
the following warning:
‘
URGENT NOTICE!!!
To All Clients,
Herbal Zone CC,
manufacturer of Phyto Andro Capsules
would
hereby like to inform ALL CLIENTS that Infitech Technologies is
NO
longer our
Sole Distributor.
Herbal Zone CC will not be responsible for the content in any other
PACKAGING
!
and hereby warns any Company
purchasing Phyto Andro capsules for Him
ILLEGALLY
from
Herbs Oils and Co (
Infitech Technologies) as this is
a counterfeit product.
LEGAL ACTION WILL BE TAKEN AGAINST SUPPLIERS ‘SELLING/PURCHASING’
COUNTERFEIT PHYTO ANDRO CAPSULES for HIM.
*****
The Original Phyto Andro Capsules for Him has Herbal Zone
printed on the Capsules
*****
Please contact Herbal Zone CC directly for Phyto
Andro Capsules orders and we will refer you to ONE of our
distributors in your
area.’
[5]
The circular was on a letterhead saying it
emanated from Herbal Zone International CC. On the left hand side of
the document was
a spiral device logo and below that the word
‘Herbal’. Below that in turn appeared the slogan ‘For
Better Health’.
Under the name Herbal Zone International CC
Herbal Zone’s contact details, including its email address and
website address,
are printed. At the foot of the document were
references to another entity called Herbal Zone International, based
in Twickenham
in the United Kingdom, and to Herbal Zone
International.
[6]
In addition to the advertisements and the
circular, Herbal Zone employed a private investigator, a Mr Ali, to
investigate the source
and origin of the competing product. Mr Ali
appears to have approached his task with a considerable measure of
vigour and enthusiasm
resulting in the Commercial Branch of the South
African Police Services, on 21 May 2015, obtaining a search and
seizure warrant
under the provisions of the Counterfeit Goods Act 37
of 1997 (the
Counterfeit Goods Act) and
executing it at the premises
of Infitech and Herbs Oils. At the end of the search Mr Mosiane and
the fifth respondent, Mr Jekecha,
the financial manager of the
business, were arrested and held overnight at the Germiston Police
Station. Certain stock was removed
and detained by the police for a
period of about two weeks. It was released when it became apparent
that it could not be confiscated
in terms of the
Counterfeit Goods
Act.
[7
]
These actions by the police, and a further
incident in July 2015 involving an alleged threat by the appellants’
representatives
to take legal action against a Ms Tshite of Protea
Family Pharmacy for selling the Phyto Andro products, were the last
straw as
far as Infitech, Herbs Oils and Mr and Mrs Mosiane were
concerned. On 31 July 2015 they launched proceedings in the
Western
Cape Division of the High Court seeking a number of
interdicts against Herbal Zone, Mr Herzallah and two other entities,
which
are now undertaking the distribution in South Africa of the
Herbal Zone Phyto Andro. The proceedings were opposed and the
respondents
counter-applied for an interdict restraining the
applicants from marketing, selling, advertising, promoting or
presenting consumable
herbal capsules using trademarks, labels or
names including the words Phyto Andro or packaging confusingly
similar to that being
used by Herbal Zone and its distributors. They
contended that Infitech and its associates were passing off their
product as that
of Herbal Zone.
[8]
The application came before Bozalek J who
granted certain of the interdicts sought by Infitech and its
co-applicants on the basis
that the statements made about Infitech
and Herbs Oils in the advertisements and circular were defamatory. He
dismissed the counter-application
on the basis that Herbal Zone
failed to discharge the onus of proving that the reputation and
goodwill attaching to Phyto Andro,
as marketed in South Africa,
vested in Herbal Zone, as opposed to Herbal Zone International, which
was not a party to the application.
The appeal is with his leave. In
arguing it the parties treated the passing off claim as the principal
issue and the defamation
claim as secondary. Accordingly I will
address them in that order in the judgment, albeit that they arose in
the converse order
in the course of the litigation in the high court.
Passing
off
[9]
There is no dispute
over the relevant legal principles. Passing off occurs when A
represents, whether or not deliberately or intentionally,
that its
business, goods or services are those of B, or are associated
therewith. It is established when there is a reasonable
likelihood
that members of the public in the marketplace looking for that type
of business, goods or services may be confused into
believing that
the business, goods or services of A are those of B or are associated
with those of B.
[3]
The misrepresentation on which it depends involves deception of the
public in regard to trade source or business connection and
enables
the offender to trade upon and benefit from the reputation of its
competitor. Misrepresentations of this kind can be committed
only in
relation to a business that has established a reputation for itself
or the goods and services it supplies in the market
and thereby
infringe upon the reputational element of the goodwill of that
business. Accordingly proof of passing off requires
proof of
reputation, misrepresentation and damage.
[4]
The latter two tend to go hand in hand, in that, if there is a
likelihood of confusion or deception, there is usually a likelihood
of damage flowing from that.
[5]
[10]
If Herbal Zone had the requisite reputation
in South Africa then the other requirements of passing off were
satisfied. The packaging
of Herbs Oils’ product uses the same
name, Phyto Andro, to describe the product and the packaging is very
similar. The name
Phyto Andro is not descriptive of the product, but
is an invented mark attached to it in order to distinguish it from
other products
of a similar type. By calling their product Phyto
Andro there is plainly a representation to the public that when they
buy Herbs
Oils’ product it is the product that enjoys a
reputation in South Africa under that name. And, if customers buy
Herbs Oils’
product in the belief that it is the product they
have previously bought or known under the Herbal Zone mark, there
will be damage.
The crucial question was therefore whether Herbal
Zone enjoyed the reputation attaching to Phyto Andro in South Africa.
[11]
Given the centrality of this issue to the
outcome of the claim for an interdict based on passing off, one would
have expected the
parties to address it fully and ask the court to
resolve it. But they did not do so, preferring to keep their powder
dry for a
future battle over the registration of Phyto Andro as a
trademark. Herbs Oils, while claiming that the reputation had
attached
to its predecessor Infitech and had been transferred to it,
said that it was unnecessary to determine who the true proprietor of
the Phyto Andro mark was. Herbal Zone responded by saying that it had
set out its case for proprietorship and it was undeniable.
It added
that this would have a bearing on future proceedings before the
Registrar of Trademarks, but said that in the meantime
it was
entitled to enforce its common law rights. So we were faced with the
curious situation that, in a case where reputation
is central, the
one party has refrained from setting out in full its case on the
point and both parties appear to adopt the stance
that these issues
will be thrashed out more fully when the Registrar of Trademarks
deals with various pending applications for
registration of a number
of marks. In the circumstances this judgment cannot be taken to be a
final determination of that issue,
binding on a court in any
subsequent proceedings. All that it deals with is whether the
evidence tendered in this case established
that the reputation
attaching to the Phyto Andro mark vested in Herbal Zone.
[12]
Three possibilities were mooted in
argument. They were that the reputation attaching to Phyto Andro in
South Africa had been established
by Infitech and now vested in Herbs
Oils; that it had been established by and vested in Herbal Zone; and
that it had been established
through the efforts of Herbal Zone and
its sub-distributors on behalf of Herbal Zone International and
vested in the latter. In
considering these three possibilities, and
indeed the case as a whole, it must be borne in mind that neither
party asked for the
matter to be referred for the hearing of oral
evidence. In the circumstances the evidence had to be approached in
the light of
the
Plascon-Evans
rule
so that the onus of proof resting on any party on an issue would only
be discharged on the requisite balance of probabilities
if the
undisputed evidence, together with that of the other party, sufficed
to discharge that onus.
[6]
[13]
Herbs Oils’ claim that the reputation
in the Phyto Andro mark vested in it can be disposed of fairly
simply. Infitech’s
role in regard to the product sold under
that mark was that of a distributor. It acquired that role in terms
of a distribution
agreement that said that Herbal Zone was the owner
of all rights, title, trademarks and logos in respect of the product.
It was
entitled to advertise the product and hold itself out as the
sole distributor, but in doing so it was obliged to use the trade
mark Phyto Andro, which, as between it and Herbal Zone, was the
property of Herbal Zone. Furthermore it undertook to protect Herbal
Zone’s interests in South Africa and not to ‘pledge,
cede, assign, make over or in any way encumber’ its
intellectual
property rights. Whether the rights vested in Herbal
Zone is neither here nor there. Once Infitech signed an agreement on
those
terms its conduct under the distribution agreement falls to be
measured against a contract under which it disavowed any ability
to
acquire an interest in the trademark. In the face of that disavowal
it is difficult to see on what possible basis Infitech could
nonetheless acquire the very rights it agreed did not belong to it,
much less to do so by its conduct in performing its obligations
in
terms of the distribution agreement.
[14]
The evidence relied on in support of
Infitech’s claim to be the proprietor of the Phyto Andro mark
was the expenditure of
‘considerable time, money and effort’
in establishing a market for Phyto Andro products in South Africa.
It said
that these efforts commenced in 2008 or 2009 prior to the
conclusion of the distribution agreement, although Mr Herzallah said
that the relationship only commenced early in 2010. Whichever date is
correct there was already a market for the product in South
Africa at
that stage, as it had been on sale in this country through another
distributor from 2006. Reliance was placed on some
radio
advertisements, but those did nothing to convey that the product
emanated from Infitech and that proprietorship of the mark
vested in
it. After the distribution agreement was concluded the product’s
external packaging initially said that it was
manufactured by Herbal
Zone International ‘for’ Infitech, but this was later
changed, at Infitech’s instance,
to say that the product was
‘exclusively distributed’ by Infitech. None of this, in
my view, came anywhere near establishing
that proprietorship in the
mark vested in Infitech and hence in Herbs Oils.
[15]
Turning to Herbal Zone’s claim that
proprietorship in the mark and the reputation attaching to it vested
in it, the difficulty
it faced lay in the confusion on the papers
between it and Herbal Zone International and their respective roles
in the manufacture
of Phyto Andro and its marketing in South Africa.
It was as a result of this confusion that Bozalek J held that Herbal
Zone failed
to show that the reputation in the mark vested in it and
not Herbal Zone International and non-suited it on that ground. In my
view he was correct to do so.
[16]
Mr Herzallah said that he became involved
in Malaysia in the production of capsules containing an extract of
dried Tongkat Ali and
had hit upon the name Phyto Andro under which
to market the product. He arranged for it to be manufactured by MAJ
and sold Phyto
Andro in various markets in the Far East and other
countries. After he moved to South Africa in 2005, he set up an
entity called
Etumax Trading CC (Etumax) to market Phyto Andro
capsules in this country. In 2007 he decided to create Herbal Zone to
take over
the business of Etumax and at the same time Herbal Zone
International was established in Malaysia to ‘[take] over the
manufacture
and export’ of Phyto Andro capsules. Once Herbal
Zone was created it became the sole importer of Phyto Andro capsules
into
South Africa and its sole distributor in this country. In
support of that allegation he referred to an undated letter,
apparently
prepared in June 2015, signed by the Chief Operating
Officer of Herbal Zone International saying that Herbal Zone
International
was the manufacturer of Phyto Andro Capsules for Him
worldwide and that Herbal Zone was the only authorised importer into
South
Africa.
[17]
When the disputes in this case arose, that
letter was attached to a letter from Herbal Zone’s attorney
addressed to the attorney
for Infitech in which he described the
situation in the following terms:
‘…
the fact remains that
Herbal Zone itself, whether the proprietary limited company operation
in South Africa or the international
company operating out of
Malaysia, is the original importer, distributor, and
manufacturer of phyto andro products.’
Elsewhere
the attorney said that Herbal Zone was importing Phyto Andro under
licence from its sole distributor, Herbal Zone International,
but,
contradictorily, then said that Herbal Zone was the manufacturer of
Phyto Andro products and capsules worldwide operating
under the name
and style of Herbal Zone International. Throughout the letter there
was a failure to distinguish between Herbal
Zone, the South African
entity, and Herbal Zone International, the Malaysian entity. This
failure to distinguish between the two
corporate entities and
uncertainty about the true role of Herbal Zone characterised much of
the evidence by Mr Herzallah. Some
examples pertinently illustrate
this failing.
[18]
Mr Herzallah’s explanation of the
role of Etumax could not be reconciled with the printouts from the
accounting records of
Etumax that he annexed to his answering
affidavit, which also served as the founding affidavit in Herbal
Zone’s counter-application.
He described Etumax as a local
distributor of Phyto Andro. However, the records tell another story.
They are headed with MAJ’s
name above the words ‘South
African Office Expenses’. The items reflected include salary
for a Mr Shadi and rental
of premises. They also reflect regular
payments, apparently by MAJ in subvention of these costs. The picture
is of a branch office
acting on behalf of MAJ. If Mr Shadi is the
same person who became a director of Herbal Zone International before
Mr Harzallah
and who is now the chief operating officer of that
company, the accounts show that part of his salary in dollars was
being allocated
to Etumax. Most importantly of all it shows that the
mark Phyto Andro was being used on the product at that time. That can
only
have been because it was being used at source in Malaysia.
[19]
The pamphlet that gave rise to the
defamation claim had the name Herbal Zone International CC at the
head and referred to Herbal
Zone International and an English entity
at the foot. There are a number of letters in the papers on the same
letterhead as the
pamphlet and a few that refer additionally to
‘Herbal Zone International’ in Dubai and to Herbal Zone
International
Ltd a New Zealand company. An application addressed to
the Medicines Control Council described the applicant as Herbal Zone
International
CC. It was said that this was an oversight and that
these references were intended to be references to Herbal Zone, but
the use
of that letterhead and description extended from at least
2012 through to the commencement of these proceedings. Over such a
protracted
period it could not have been inadvertent and no other
explanation was proffered.
[20]
The confusion manifests itself elsewhere.
In internal emails Mr Herzallah inserted his name above the words
‘Herbal Zone International,
Cape Town – South Africa’.
The website of the business referred simply to ‘Herbal Zone’
without identifying
either the Malaysian or the South African entity.
The website addresses were equally unspecific referring either to
‘herbalzone.com’
or ‘herbalzone.net’ or
‘phytoandro.com’. This was all consistent with the
business of Herbal Zone being
conducted in a manner that blurred the
distinction between the local and the Malaysian entity. Infitech
contended that the confusion
was deliberate.
[21]
Mr Herzallah said Herbal Zone International
was formed to take over the manufacture of Phyto Andro capsules.
However, it appeared
that Herbal Zone International did not itself
have a manufacturing facility but contracted with others to
manufacture on its behalf.
The registration certificate issued by the
Drug Control Authority (Ministry of Health, Malaysia) for the
manufacture of Phyto Andro
for Him capsules was issued to Herbal Zone
International but the actual manufacture was being undertaken by an
entity called Polens
(M) Sdn Bhd.
[7]
The certificate authorised the holder to endorse the packaging in
which the product was sold with a stamp in a roundel containing
the
letters GMP, which stands for ‘good manufacturing practice’
and is a requirement for the manufacture of this type
of product in
Malaysia.
[22]
The Islamic Food Research Centre, Hong
Kong, Malaysia, issued a similar certificate, stating that the
product was Halaal and complied
with Shariah law, so that it was
lawful for consumption by Muslims. This too was issued to Herbal Zone
International, but in respect
of the manufacturing facility of Polens
(M) Sdn Bhd. It authorised the holder to endorse the packaging of the
product with a roundel
reflecting that the Islamic Food Research
Centre had certified it as Halaal.
[23]
The packaging of Phyto Andro for Him
identified Herbal Zone International as the manufacturer of the
product. Both the GMP and Halaal
certification obtained by Herbal
Zone International appeared on the exterior of the box and on each
foil package containing a capsule.
There was no indication on the
external package that it had any direct South African connection,
much less a connection with Herbal
Zone. The product information on
the side of the box said that it was a product used
‘internationally’. The only connection
with Herbal Zone
was that its name, fax number, email address and the words ‘Cape
Town South Africa’ were printed on
the foil sachet in which the
capsule was sold. But that was packed in a box that identified Herbal
Zone International as the manufacturer.
Inasmuch as the purpose of a
trademark is to serve as a badge of origin
[8]
virtually all the information available to a person purchasing the
product, whether for resale or use, pointed to the origin being
Herbal Zone International.
[24]
I appreciate that a trademark’s
function as a badge of origin does not require that the mark should
identify the corporate
entity that is the proprietor of the mark or,
in the case of an unregistered mark, the entity in which the
reputation attaching
to that mark is vested. Nonetheless, when the
public material associated with the product and the mark points to a
particular entity
as the manufacturer of the product, the ordinary
inference by consumers will be that this is in fact the origin or
source of the
product. Where large corporate groups consolidate all
their intellectual property rights in a single subsidiary that is
done by
way of formal agreements such as assignments of rights –
a situation that is not present here.
[25]
In an endeavour to circumvent these
difficulties counsel drew our attention to a passage in Mr
Herzallah’s affidavit where
he said:
‘
From as early as this all
Phyto Andro capsules were sold in packaging which bore the name
“Phyto Andro” affixed to it
boldly the logo of Herbal
Zone to identify the association between Phyto Andro and Herbal
Zone.’
In
the light of an earlier statement in the affidavit that when
referring to Herbal Zone he was referring to the South African close
corporation, we were asked to infer from this that Herbal Zone had
devised and caused to be affixed to the packaging the spiral
shaped
device logo appearing there above the words ‘Herbal Zone’
and that this created the association between Herbal
Zone and Phyto
Andro.
[26]
I am unable to draw that conclusion. An
immediate difficulty is that documents emanating from Herbal Zone
International also bear
the spiral logo with the words ‘Herbal
Zone’ beneath it. If this were a logo devised in South Africa
for South African
packaging, why would it appear on the letterhead of
the Malaysian company? What is more, the home page of Herbal
Zone International’s
website shows the spiral logo above the
words ‘Herbal Zone’ and says that:
‘
Phyto Andro is Malaysia’s
leading natural health company. Established at 2003 and manufactured
or Founder by Herbal Zone International
Sdn Bhd …’
[9]
The
website reveals that the spiral logo above the words ‘Herbal
Zone’ is affixed to a variety of products not only
Phyto Andro
capsules. A visitor to the phytoandro.com website finds the same
logo. Disturbingly it contains a circular letter dated
1 February
2016 addressed to its customers announcing that Herbal Zone
International CC, giving the Cape Town address of Herbal
Zone, ‘is
no longer our distributor in South Africa’ and claims that
Herbal Zone International Sdn Bhd is ‘a
Malaysian company and
brand established in 2004’. One encounters this letter because
there is both a prominent reference
in the heading of the home page
to a South African circular and a depiction of the South Africa flag
on which in prominent letters
appears ‘WARNING!!’. The
signatory to that letter is Mr Shadi, the same person who signed the
letter of June 2015 referred
to in para 16. He was already a director
of Herbal Zone International in August 2008 when Mr Herzallah became
a director.
[27]
All in all, in the absence of an express
claim by Mr Herzallah to have designed the spiral logo and its
depiction together with
the words ‘Herbal Zone’, and some
explanation of how this came about, it is impossible to accept that
it is a device
that attaches to Herbal Zone as opposed to Herbal Zone
International. When the lack of clarity in regard to the provenance
of the
spiral logo is taken together with all the other curious
features to be found in the documents and the affidavits and the
regular
description of Herbal Zone as an importer or distributor, I
am unable to conclude that Herbal Zone has discharged the onus of
showing
that the reputation in the unregistered mark ‘Phyto
Andro’ vests in it in this country.
[28]
There are circumstances in which an
importer and distributor of goods can acquire a reputation in them.
Webster and Page
[10]
deals with this possibility in the following passage:
‘
An
agent or distributor who merely sells, or imports and sells, goods
manufactured by another without adding anything to the mark
or get-up
under which they are produced, does not thereby acquire any goodwill
in the name or get-up; for those symbols thereby
acquire a reputation
as indicating that the goods emanate from the particular
manufacturing provenance and not that they were imported
and/or
distributed by that particular agent.
On
the other hand, it is possible for a distributor so to market the
goods which he distributes that the name or get-up under which
they
are sold acquires a reputation as indicating that they emanate from
him: in which case the goodwill adhering to that name
or get-up will
vest in him … The enquiry as to which trade source the symbol
has come to indicate in the territory in question
is in every case
one of fact.’ (Footnotes omitted.)
[29]
In support of its contention that it had
acquired a reputation in South Africa for Phyto Andro Herbal Zone
relied on the second
part of this passage and its application in this
court in
Etraction
.
[11]
Herbal Zone’s failure to establish on a balance of
probabilities that it had added anything to the mark or get-up under
which the capsules were produced to identify itself as the source of
the goods and disturb the indications that the manufacturing
provenance lay with Herbal Zone International meant that this
submission could not succeed. Its evidence did not establish that
the
reputation attaching to the product was associated with it and not
Herbal Zone International.
[30]
For those reasons the appeal against the
dismissal of Herbal Zone’s claim based on passing off must
fail.
Defamation
[31]
The order granted by Bozalek J in respect
of the alleged defamation read as follows:
‘
1 That the First to Fourth
Respondents are interdicted and restrained from:
1.1
Stating to the
Applicants’ customers and/or the public in general (whether it
be orally, in writing, in public publications
or in any other way)
that the Applicants’ PHYTO ANDRO Capsules For Him product are
counterfeit;
1.2
Stating to the
Applicants’ customers and/or the public in general that the
Applicants’ PHYTO ANDRO Capsules For Him
product are harmful to
ones’ health, or that patients have become sick as a result of
using the Applicants’ PHYTO ANDRO
Capsules For Him product, or
statements to similar effect;
1.3
Stating to the
Applicants’ customers and/or the public in general that it is
illegal or unlawful to sell and/or distribute
the Applicants’
PHYTO ANDRO Capsules For Him product and threatening legal action
against such customers and/or the public
in general for selling
and/or distributing the Applicants’ said product.’
The
inclusion of para 1.2 in this order was plainly erroneous. It was
based on a disputed affidavit by Ms Tshite about the alleged
incident
in July 2015 referred to in para 7, and counsel rightly made no
attempt to defend it. The argument was therefore restricted
to paras
1.1 and 1.3. These were clearly framed with the above-quoted
advertisements in the Daily Sun and the circular to clients
in mind.
[32]
The argument surrounding defamation was
that in the advertisements and the circular Infitech and Herbs Oils
had been accused of
selling counterfeit products and that this
conduct on their part was illegal. That, with its overtones of
possible criminality,
was said to be defamatory of them and therefore
to warrant the grant of an interdict to prevent a repetition of such
conduct. Ms
Joubert, who appeared for the respondents, submitted that
the onus then passed to Herbal Zone to establish a defence to such
defamatory
statements and that it had failed to do so. As a demand
that such statements would not be repeated in the future had been
answered
with an emphatic negative, she submitted that the necessary
elements for the grant of an interdict had been satisfied.
[33]
Mr Marriott for Herbal Zone, submitted that
the statements were true and that it was in the public interest that
they be published.
He submitted that there was no doubt as a matter
of fact that Infitech and Herbs Oils were not marketing the product
that had been
imported into and sold in South Africa since 2006, as
that product was the Herbal Zone Phyto Andro. In view of the
respondents’
unwillingness to disclose the source in Malaysia
from which they were obtaining their rival product it could not be
the same as
that being imported by Herbal Zone. Accordingly the
product being marketed by Herbal Oils under the name Phyto Andro was
not the
original but at best a generic imitation. It was entirely
inappropriate to describe it as Phyto Andro because that was the name
attaching to the Herbal Zone product. In its ordinary sense this
meant that the Herbal Oils product was counterfeit. It was in
the
public interest that this fact be disseminated to the retail outlets
marketing Phyto Andro to the public and to the members
of the public
who made use of the product and believed in its beneficial
properties.
[34]
While accepting that in common parlance
marketing a generic product under the name by which the original was
known would justify
labelling the generic as counterfeit, Ms Joubert
pointed out that Herbs Oils claimed that the reputation in Phyto
Andro vested
in it and contended that this issue could not be
determined on the papers as they stood before us. If the reputation
in the unregistered
mark Phyto Andro vested originally in Infitech as
a result of its marketing efforts under the sole distributorship
agreement and
had been transferred by Infitech to Herbs Oils, then it
was the latter’s product that was the genuine product albeit
that
it came from a source other than Herbal Zone’s Phyto
Andro. This was so, she submitted, even if the composition of the
product
was different from that of Herbal Zone’s product. She
pointed out that if the reputation in a product vested in a party the
fact that it altered the composition of the product did not mean that
the altered product ceased to be genuine or could properly
be
labelled as counterfeit.
[35]
Flowing from this, Ms Joubert submitted
that, in order to avoid an interdict, the onus rested on Herbal Zone,
as it would in a conventional
action for defamation, to establish a
defence of justification and this required it to prove that the
reputation in Phyto Andro
vested in it. Only then could it claim that
Herbs Oils’ product was counterfeit. For the reasons advanced
in relation to
the passing off action, it had failed to prove this on
a balance of probabilities so that the interdict should be sustained.
[36]
The short answer to these submissions is
that they were inconsistent with established authority on the proper
approach to an application
for an interdict to prevent the
publication of defamatory matter. Such an interdict is directed at
preventing the party interdicted
from making statements in the
future. If granted it impinges upon that party’s
constitutionally protected right to freedom
of speech. For that
reason such an interdict is only infrequently granted, the party
claiming that they will be injured by such
speech ordinarily being
left to their remedy of a claim for damages in due course. Nugent JA
said in this court:
[12]
‘
Where it
is alleged, for example, that a publication is defamatory, but it has
yet to be established that the defamation is unlawful,
an award
of damages is usually capable of vindicating the right to reputation
if it is later found to have been infringed, and
an anticipatory ban
on publication will seldom be necessary for that purpose.’
A
corporate entity such as Herbs Oils is entitled to claim damages
based on defamation. This includes both pecuniary damages for
actual
financial loss and general damages for harm to its commercial
reputation.
[13]
No attempt was made to show that Herbs Oils had suffered loss as a
result of the publication of the advertisements and circular,
much
less that it would suffer irreparable harm in the future by further
publications of such material. Nor did it allege that
damages would
not be an adequate remedy for any such publication. Indeed the third
respondent’s founding affidavit entirely
lacked allegations in
regard to those two elements of a claim for an interdict.
[37]
The contentions in regard to the onus of
proof were also contrary to established authority, to which for some
reason we were not
referred. This court dealt with the proper
approach of a court to an application for an interdict to restrain
the publication of
defamatory matter in
Hix
Networking.
[14]
There it approved, with some clarification, the following passage
from the judgment of Greenberg J in
Heilbron
v Blignault
:
[15]
‘
If an injury which would
give rise to a claim in law is apprehended, then I think it is clear
law that the person against whom the
injury is about to be committed
is not compelled to wait for the damage and sue afterwards for
compensation, but can move the Court
to prevent any damage being done
to him. As he approaches the Court on motion, his facts must be
clear, and if there is a
dispute as to whether what is about to
be done is actionable, it cannot be decided on motion. The result is
that if the injury
which is sought to be restrained is said to be a
defamation, then he is not entitled to the intervention of the Court
by way of
interdict, unless it is clear that the defendant has no
defence. Thus if the defendant sets up that he can prove truth and
public
benefit, the Court is not entitled to disregard his statement
on oath to that effect, because, if his statement were true, it would
be a defence, and the basis of the claim for an interdict is that an
actionable wrong, ie conduct for which there is no defence
in law, is
about to be committed.’
[38]
The clarification was to point out that
Greenberg J did not hold that the mere
ipse
dixit
of a respondent would suffice to
prevent a court from granting an interdict. What is required is that
a sustainable foundation be
laid by way of evidence that a defence
such as truth and public interest or fair comment is available to be
pursued by the respondent.
It is not sufficient simply to state that
at a trial the respondent will prove that the statements were true
and made in the public
interest, or some other defence to a claim for
defamation, without providing a factual basis therefor.
[16]
[39]
In this case Herbal Zone produced evidence
that it had over a lengthy period, first introduced and then caused
to be distributed
in South Africa, the product Phyto Andro for Him.
This entitled it to describe its own product as the genuine or
original product
and to decry the product of others who were
marketing competing products of a different manufacture and source as
‘counterfeit’,
that is, not the genuine article. Even if
the reputation in Phyto Andro did not vest in it, the fact that it
was importing it into
this country and distributing it here entitled
it to level the charge of ‘counterfeit’ against Herbs
Oils products.
There is no need for us to determine whether that
defence will succeed at trial. But it is a colourable defence and a
factual basis
has been laid for it that cannot be rejected out of
hand.
[40]
On the authority of
Hix
Networking
therefore, the application
for an interdict should not have been granted and the appeal against
it must be upheld. I add only two
comments about that judgment to
reinforce that conclusion. The first is that the court said that the
long-standing legal position
as stated by Greenberg J did not require
reconsideration in the light of the guarantee of freedom of
expression in the Constitution.
[17]
Bearing in mind the subsequent comments by Langa DCJ in
Islamic
Unity Convention
,
[18]
this should not be misconstrued. Now that it enjoys constitutional
protection, freedom of speech carries greater weight than it
had in
the past. Accordingly when Plewman JA said that in considering an
application for an interdict ‘
the
proper recognition of the importance of free speech is a factor which
must be given full value in all cases’, that must
now be
understood as referring to the full constitutional importance of
freedom of speech and expression. The other comment is
that
Hix
Networking
was concerned with an interim interdict where it suffices to
establish a prima facie right. As this was an application for a final
interdict, Herbs Oils had to show a clear right and its infringement
on a balance of probabilities. It failed to do so and was
accordingly
not entitled to the order it obtained from the high court.
Costs
[41]
While Herbal Zone and Mr Herzallah have
enjoyed some success in this appeal in having the interdict granted
against them set aside,
the main thrust of their argument related to
the attempt to secure relief against passing off. In the
circumstances I think the
proper order in regard to the costs of the
appeal is that all parties should pay their own costs.
Order
[42]
In the result the following order is made:
1 The appeal succeeds in part and the order of the high
court is amended to read as follows:
‘
(a)
The application is dismissed with costs.
(b)
The counter application is dismissed with costs.’
2 Each party is to pay their own costs of the appeal.
M J D WALLIS
JUDGE
OF APPEAL
Appearances
For
appellants:
G D Marriott
Instructed
by:
Von Seidels Attorneys, Century City, Cape Town.
Honey
Attorneys, Bloemfontein.
For
respondents:
I Joubert
Instructed
by:
Spamer Triebel Incorporated, Bellville.
Symington
& De Kok, Bloemfontein.
[1]
Sometimes spelled ‘Tongat Ali’ in the
papers.
[2]
There appear to be several products
using the Phyto Andro mark, but the one with which this case is
concerned is the male potency
version referred to as Phyto Andro
Capsules for Him
♂
.
[3]
Capital Estate and General Agencies (Pty) Ltd
& others v Holiday Inns Inc. & others
1977
(2) SA 916
(A) at 929B-D.
[4]
Caterham Car Sales & Coachworks Ltd v
Birkin Cars (Pty) Ltd & another
[1998] ZASCA 44
;
1998 (3) SA 938
(SCA) paras 13, 15 and 16.
[5]
The summary is taken from the judgment in
Pioneer
Foods (Pty) Ltd v Bothaville Milling (Pty) Ltd
[2014]
ZASCA 6
;
[2014] 2 All SA 282
(SCA) para 7.
[6]
Lendalease Finance (Pty) Ltd v Corporacion De
Mercadeo Agricola and others
1976 (4)
SA 464
(A) at 489 B-C;
The
Shipping
Corporation of India v Evdomon Corporation and another
[1993] ZASCA 167
;
1994
(1) SA 550
(A).
[7]
That certificate appears to have expired on 27
August 2014 but, in response to a rule 35 (12) notice, a
further certificate
was produced for the product to be manufactured
by Greens United Sdn Bhd valid from 1 January 2015. That certificate
in turn
expired on 31 December 2015.
[8]
Verimark (Pty) Ltd v BMW AG BMW AG v Verimark
(Pty) Ltd
2007 (6) SA 263
(SCA) para
5.
[9]
A more recent website amends this language to
make it clearer that Herbal Zone International was the founder of
Phyto Andro.
[10]
GC Webster and NS Page
South
African Law of Trade Marks
3ed
(Service Issue 19, 2015) p
ara 15.18.1.
[11]
Etraction (Pty) Ltd v Tyrecor (Pty) Ltd
[2015] ZASCA 78
; 2015 BIP 2453 (SCA); 2015 JDR
0994 (SCA) paras 17-19.
[12]
Midi Television t/a E-TV v Director of Public
Prosecutions (Western Cape)
[2007] ZASCA 56
;
2007 (5)
SA 540
(SCA) para 20.
[13]
Caxton Ltd and Others v Reeva Forman (Pty) Ltd
and Another
1990 (3) SA 547 (A).
[14]
Hix Networking Technologies v System
Publishers (Pty) Ltd & another
1997 (1) SA 391 (A).
[15]
Heilbron v Blignault
1931
WLD 167
at 169.
[16]
Buthelezi v Poorter and Others
1974
(4) SA 831 (W).
[17]
Section 16 of the
Constitution.
[18]
Islamic Unity Convention v Independent
Broadcasting Authority and Others
[2002] ZACC 3
;
2002
(4) SA 294
(CC) paras 26 to 28. See also
Print
Media South Africa and Another v Minister of Home Affairs and
Another
[2012] ZACC 22
;
2012 (6) SA
443
(CC) paras 44 and 45.