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[2016] ZAGPPHC 665
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Union-Swiss (Pty)Ltd v Bio-Cream Comsmetics CC (56526/2012) [2016] ZAGPPHC 665 (29 July 2016)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)
DATE:
29 JULY 2016
Case
no.
56526/2012
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
UNION-SWISS
(PTY)LTD
APPLICANT
and
BIO-CREAM
COSMETICS CC
RESPONDENT
In
the matter between:
Case no.: 2521/13
UNION-SWISS
(PTY)LTD
APPLICANT
and
BIO-LOTION
COSMETICS CC
RESPONDENT
In
the matter between:
Case no.: 54314/13
UNION-SWISS
(PTY)LTD
APPLICANT
and
BIO-CREAM
COSMETICS CC
RESPONDENT
JUDGEMENT
RABIE
J
1.
The three respondents in the matters mentioned in the head
note above applied for leave to appeal the order handed down by me
on
17 July 2015 in respect of all three applications. The first two
applications were based on passing off and the third application
sought expungement of a trademark registered in the name of the
first respondent. Apart from opposing the aforesaid application
for
leave to appeal the applicant at the same time applied for an order
that, in the event of leave to appeal being granted,
such leave
shall be conditional upon the furnishing by the respondents of
security for the costs of the appeal in the amount of
R500 000,00 ,
which security shall be furnished on or before the date on which the
record of the appeal is filed in the court
of appeal, together with
ancillary relief.
2.
The respondents based their application on a number of grounds
set out in a Notice for Application for Leave to Appeal. In my view,
and mainly as a result of the decision I have arrived at, it is not
necessary or even proper for me to discuss each of these
grounds and
the merits thereof. Some of the main issues I had to decide depend
on a subjective view of the particular facts and
circumstances and
after careful consideration of the submissions made to me I
concluded that there is a reasonable prospect that
another Court
might come to different findings and that the appeal would have a
reasonable prospect of success. In my
view
the issues are
such that leave to appeal should be granted to the full bench of this
division.
3.
Since I have determined that leave to appeal should be granted
to the respondents, it is necessary to consider the application of
the applicant relating to security for costs of the appeal.
4.
Regarding the applicant's application it was submitted that it
is implicit in section 17(5) of the Superior Courts Act, Act 10 of
2013, that a court may elect to require the "softer option"
of furnishing security for costs of the appeal instead of
ordering
the applicant to whom leave to appeal had been granted, to pay the
costs of the appeal as provided for in section 17(5).
I agree with
this submission.
5.
It was noted by the applicant that the respondents who had
both formally been close corporations, have both since been
incorporated
as private companies. Any order made against the
respondent's would thus be against the respondent as private
companies.
6.
The applicant also noted that the respondent, Bio-Cream
Cosmetics Pty Ltd is in the process of being deregistered.
7.
According to the applicant it has monitored the sales of the
respondents' infringing Bio-Lotion product since the commencement of
these proceedings. The sales remained low and in the applicant's
view, the respondent's business was unlikely to remain viable
in
future. The applicant stated that it was concerned that it was going
to the expense of an appeal in circumstances where there
was no
prospect of it recovering the costs of that appeal. It therefore
instructed its attorney's to demand security for costs
in the event
of leave to appeal being granted. The demand was made in a letter
dated 25 September 2015.
8.
In response the attorneys representing the respondents stated
that they would respond once they had obtained their client's
instructions.
In the absence of any substantive response, a reminder
was sent to the respondents' attorneys on 14 October 2015. The
attorneys
again indicated that they were awaiting their client's
instructions. No substantive response to the applicant's demand has
been
received by the applicant.
9.
The applicant consequently instructed its attorneys to
investigate the matter and to prepare the present application. In
order
to obtain further evidence in this regard an investigator was
mandated to determine the financial position of the respondents.
The
investigator's report was attached to the founding affidavit.
10.
The report speaks for itself and I shall only refer to
certain salient features. It appears that the respondents are at
present
in a very precarious financial position. The investigators
were unable to find the respondents' product at the retail outlets
they visited, including Spar and Dischem. Smaller retail outlets
were also visited but the product was not to be found in any
of
these stores.
11.
It was also found that the two premises from which the
respondents previously operated the businesses, have been vacated
and the
telephone lines for the business have been disconnected. It
was reported that the landlord of these premises is also looking for
the respondents and their controlling member/shareholder as they
have failed to pay the rent for the property.
12.
The applicant's own market information also shows a steady
decline in the respondents' sales since 2014. This is depicted by a
graph copied in the founding affidavit. According to the applicant
just under 80% of the respondents' sales in the last quarter
were
made by Shoprite Checkers. It is not clear whether Shoprite Checkers
still purchases the applicants' product but the applicant
submitted
that if it does, the sales are of old stock purchased before the
respondents' ceased to trade.
13.
The
applicant submitted that even if the respondents are continuing to
supply products from new undisclosed premises, the sales
are at such
low levels that it is nowhere near sufficient to sustain a business
such as that of the respondents. Based on its
calculations the
applicant submitted that the revenue generated by the respondents
during August 2015 would not have been more
than R185 000,00.
Subsequent sales were even less.
14.
The
applicant consequently submitted that the only reasonable inference
to draw from the aforesaid investigations is that the respondents,
if they are trading and solvent at all, are in dire financial
straits and very likely to be technically insolvent. The applicant
invited the respondents to put up their financial statements in
answer to this application.
The
applicant consequently submitted that there is no prospect of the
applicant recovering the costs of the appeal if it were
to be
dismissed. The costs recoverable in this appeal was calculated at
between R400 000,00 and R500 000,00.
16.
The applicant also referred to the respondents' delay in
bringing the application for leave to appeal to finality. It was
submitted
that the respondents appear content to delay the
proceedings indefinitely, having achieved the suspension of the
orders through
the filing of the application for leave to appeal.
It was submitted that it seems that the respondents are using the
filing
of the application for leave to appeal as an opportunity to
exhaust existing stock and to allow the respondents time to
continue
to generate revenue unlawfully.
17.
The respondents belatedly filed a short answering affidavit.
It was denied that the respondents lack commercial viability or that
they are in precarious financial straits or are insolvent or on the
verge of insolvency. To show that the respondents' businesses
are
active certain tax invoices, purchase orders and delivery notes were
attached to the affidavit.
18.
The respondents did not attach any financial statements which
would have been an indication of their profitability. The documents
attached give some indication of turnover but most of them relate to
the period prior to August 2015. The value is surprisingly
low. Then
there appears to be a gap of seven months which reflects no sales at
all. Two relatively large sales are reflected for
February and May
2016 but for the rest there appears little of any significance or at
all.
19.
Based on the aforesaid I am not convinced that the
respondents are viable businesses or that they would be able to pay
the costs
of any appeal.
20.
The respondents also stated in the answering affidavit that
they are operating companies which operate from Innovation Hub and
that they have done so since August 2015. It was stated that the
lease expired at the previous address which is presumably the
premises that the applicant's investigator visited. I have serious
difficulty in accepting these statements by the respondents.
All the
delivery notes and the tax invoices attached to the answering
affidavit, even those dated during May 2016, reflect the
address of
the respondents as being at a different address than the one
mentioned in the answering affidavit and in fact the same
one as
visited by the investigators of the applicant. This conundrum for
the respondents could not be resolved during the hearing
of the
application.
21.
Based on the aforesaid I am satisfied that the applicant has
made out a case for the relief claimed in its application. As far as
costs are concerned it was submitted on behalf of the applicant that
costs of this application should follow the event. In my
view the
costs should follow the outcome of the appeal.
22.
In the result the following order is made:
1.
The respondents are granted leave to appeal to the Full Bench of
this division against the whole of the judgement and the
orders of
this court in case numbers 2012/56526, 2013/2521 and 2013/54314.
The
order in paragraph 1 is made conditional upon the furnishing by
the respondents of security for the costs of the appeal
in an
amount to be determined by the Registrar of this Court which
amount shall be determined within 20 days of date of
this order.
In
the event that the Registrar does not determine the form of the
security to be provided by the respondents, and the parties
are
unable to agree as to such form, the parties may approach the
court on the papers already filed, duly supplemented,
for an
order in this regard.
4.
The costs of the application for leave to appeal as well as the
costs of the application for security are to be costs
in the
appeal.
C.P.
RABIE
JUDGE
OF THE HIGH COURT