IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
CASE NO: 4370/2023
In the matter between:
MERCURY FITTINGS (PTY) LTD First Applicant
Formerly Mercury Fittings CC
CHARMAINE OSBORNE-YOUNG Second Applicant
and
DOORMAX (PTY) LTD First Respondent
DOORWARE CC Second Respondent
Before: The Hon. Ms Acting Justice Mahomed
Heard: 07 June 2024
Delivered: 21 June 2024
JUDGMENT
MAHOMED, AJ:
[1] This is an application for final interdictory relief, alternatively interim interdictory relief
against the first respondent, Doormax (Pty) Ltd (“ Doormax”) pending an action to be
instituted against Doormax and the second respondent, Doorware CC (“ Doorware”) by
the first applicant, Mercur y Fittings (Pty) Ltd (“ Mercury”) and second applicant,
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Charmaine Osborne -Young (“ Ms Osborne -Young”) (together referred to as “ the
applicants”).
[2] On 1 March 2024, the applicants brought an urgent application for the relief as set out in
the Notice of Motion:
“1. To the extent necessary, directing that the application be heard as a matter
of urgency in terms of Uniform Rule 6(12) and the applicants’ non -platform
side-compliance with the provisions of uniform rules relating to time
periods, form and service be condoned;
2. Interdicting and restraining Doormax from importing and/or distributing
and/or offering to sell and/or making available to sell and/or supplying
and/or otherwise dealing with, whether directly or indirectly, any product in
the “QS" product range or any product bearing the name and/or branding of
the “QS” product range, without the written consent of Mercury,
alternatively, Ms Osborne-Young;
3. Interdicting and restraining Doormax from canvassing and/or soliciting
customers of Mercury, whether directly or indirectly;
4. In the alternative to paragraphs 2.2 and 2.3 above, directing as follows:
4.1 Pending the final determination of the action referred to in paragraph
4.2 below, Doormax is interdicted and restrained from:
4.1.1 Importing and/or distributing and/or offering to sell and/or
making available to sell and/or supplying and/or otherwise
dealing with, whether directly or indirectly, any product in the
“QS” product range or any product bearing the name and/or
branding of the “QS” pr oduct range, without the written
consent of Mercury, alternatively, Ms Osborne-Young; and
4.1.2 Canvassing and/or soliciting customers of Mercury, whether
directly or indirectly.
4.2 The applicants are to issue out an action against Doormax and
Doorware including for relief consistent with the sought in
paragraphs 4.1.1 and 4.1.2 above within 20 days, failing which the
abovementioned interdictory relief shall lapse.
5. Directing that Doormax pay the costs of this application.
6. In the event that Doorware opposes the application, directing that Doorware
pay the costs of the application jointly and severally with Doormax.”
[3] The matter was postponed for hearing to 7 June 2024 to enable the parties to file their
respective affidavits. As such, I need to not address the issue of urgency.
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[4] During the hearing of the application, the counsel for the applicants withdrew the relief
which the applicants seek at paragraphs 3 and 4.1.2 of the notice of motion insofar as it
pertains to the canvassing and/or soliciting of Mercury’s customers, either directly or
indirectly.
[5] In short, the relief which the applicants seek is that Doormax be interdicted and
restrained, either finally or in the interim , pending an action to be instituted by the
applicants against Doormax and Doorware, from dealing in “QS” products without the
consent of Mercury alternatively Ms Osborne -Young, which consent Doormax does not
have.
MATERIAL BACKGROUNDS FACTS
Common cause facts
[6] Mr Andrew Osborne-Young, the owner of which was then Mercury Fittings CC and now
Mercury, and Mr Martin Humphries (“ Mr Humphries ”), the owner of Doorware , have
had a long history in the door handle business. The deceased passed away on 21 July
2021 (“hereinafter referred to as “the deceased”).
[7] After establishing Mercury, the deceased approached Dorma Door Controls (“Dorma”)
in an attempt to sell it a range of door handles. His point of contact at Dorma was Mr
Humphries, who served as the accountant for Dorma. According to Mr Humphries,
Dorma made a much greater profit se lling Mercury’s products compared to the previous
range stocked by Dorma.
[8] In 2002:
[8.1] Dorma ceased ordering door handles from Mercury and Mr Humphries
employment contract there has also been terminated. This placed The deceased in
a precarious financial position since Dorma was his main client.
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[8.2] At that time, the deceased and Mr Humphries decided to join forces in sourcing a
range of stainless steel and ironmongery goods to be imported and sold in South
Africa. To give effect to this idea, the two of them travelled to China.
[8.3] They originally wanted to brand the imported products as “Quicksilver” but they
discovered that this was always a well -known surf brand so they agreed to the
name “QS”.
[8.4] The “QS” Brand was established and constituted a joint venture (“JV”) between
Mercury and Doo rware alternatively the deceased and Mr Humphries (“the
parties”), in terms of which they would import and distribute their own range of
door handles and products under their own brand which they invented.
[8.5] The parties to the JV concluded an oral agreement in terms of the distribution of
“QS” Products (“the JV agreement”).
[9] The agreed terms of the JV agreement were the following
[9.1] The deceased and Mr Humphries would import and distribute "QS" Products
under the ir “QS” brand via their respective juristic enterpri ses, Mercury and
Doorware, respectively;
[9.2] The parties would do so for their own account, but with a level of cooperation;
[9.3] The parties agreed to split the country (“ the geographic split ”), where Mercury
had the exclusive right to sell "QS" Products to customers within the Northern,
Western and Eastern Cape provinces whereas Doorware had the exclusive right to
sell the "QS" Products everywhere else in South Africa. No one had rights to d eal
in "QS" Products.
[10] Mercury and Doorware carried on business in this manner, as wholesalers of "QS"
Products, successfully for over 22 years. In terms of the geographic split, they distributed
the "QS" Products in their agreed regions.
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The “QS” Brand
[11] The "QS" Products are distinguished from the very many other door handles by the "QS"
Brand, and that Mercury and Doorware had a “ common law” or “unregistered” trademark
that formed part of the goodwill for both businesses.
[12] The "QS" mark is an important feature of what sets the "QS" products apart.
[13] The “QS” brand is susceptible to reputational damage1.
[14] Until the deceased ’s untimely death in July 2021, the JV operated with commercial
success. Mercury traded as the Cape Town branch and Doorware traded as th e
Johannesburg branch for “QS” Products.
[15] Mr Mark Engel, the deponent to Doormax’s answering affidavit, was previously
employed at Mercury for 17 years as a general manager who attended to the day -to-day
operations of Mecury. He was the deceased ’s right -hand man and his wife, Mrs
Samantha Engel was also employed at Mercury as a bookkeeper.
[16] The deceased took them both under his wing and trained them in the importation and
distribution of goods.
[17] During July 2021, the deceased tragically passed away and Ms Osborne-Young and their
son, Alexander, stepped into the breach.
[18] Mr Engel subsequently resigned and took up employment with Doorware in
Johannesburg.
[19] In late 2022/early 2023, Doorware established pre mises in and began trading from Cape
Town. Doorware contravened the geographic split.
1 In the supporting affidavit of Mr Humphries of Doorware he states that “Doorware began investigating the possibility of
opening a branch in Cape Town because we were gravely concerned with the reputational damage that was being done to
the brand, and wanted to ensure that Doorware's livelihood was protected.”
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[20] Mercury instituted interdictory proceedings in the South Gauteng Division, Johannesburg
where it sought the following relief:
[20.1] Part A: Final interdictory relief on an urgent basis, essentially to enforce the
geographic split; and
[20.2] Part B: Mercury sought an account from Doorware of the business it had
conducted in contravention of the agreement and the debatement of that account.
[21] Doorware opposed the application.
[22] The South Gauteng Division, Johannesburg handed down judgment on 22 February 2023
in terms of which she granted the interdictory relief in terms of which Doorware was
interdicted from contravening the geographic split , and referred the issue pertaining to
who the parties to the JV were (Mercury and Door ware, or the deceased and Mr
Humphries) to trial.
[23] The court refused leave to appeal as did the Supreme Court of Appeal (“the SCA”).
[24] Doorware then applied to the President of the SCA for the reconsideration of its
application for leave to appeal and the P resident of the SCA referred Doorware’s
application for reconsideration, together with its application for leave to appeal to oral
argument.
[25] Doorware, in its replying papers in the application for reconsideration to the SCA for the
first time, included an argument relating to the Competition Act, 89 of 1998 in terms of
which Doorware contended that the venture agreement was unlawful and constitutes
cartel conduct.
[26] On 1 May 2023, Doorware sold its Cape Town business to Doormax.
[27] Mr Engel now works for Doormax and deposed to the affidavit on behalf of Doormax.
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[28] Doormax now styles itself as an “importer and distributor of genuine “QS” Products and
distributes “QS” Products in circumstances where Mercury has not consented to the use of
the “QS” brand including, but not limited to, its logo and the goodwill.
[29] On 11 September 2023, the applicants attorneys of record addressed a letter of demand to
be served on Doormax, demanding an undertaking that Doormax would cease and d esist
from distributing “QS” Products on, inter alia, the basis that:
[29.1] The “QS” Brand is an asset of the JV;
[29.2] Both parties to the JV are required to consent to the use of its assets; and
[29.3] Mercury has not consented to Doormax using the “QS” Brand and distributing
“QS” Products.
[30] Doormax’s attorneys of rec ord responded to this letter of demand , whe rein Doormax
stated the following:
[30.1] That Doorware specifically advised Doormax that if Doormax wanted to acquire
“QS” Products, they would have to secure same directly from the supplier and
would have to negotiate terms for their benefit and that Doormax would not be
able to source “QS” Products from Doorware for the foreseeable future (due to the
pending litigation)
[30.2] As far as Doormax is aware, Mercury and/or Doorware do not hold an exclusive
licence agreement with the supplier of the “QS” Products and that, in the
circumstances, there is no merit to Mercury’s allegation that Doormax has no right
to deal with “QS” Products.
[30.3] Doormax refused to provide the undertaking sought.
[31] Doormax currently imports and distributes “QS” Products and, in fact, admits that it
directly imports “QS” Products from China.
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[32] In the supporting affidavit of Mr Pierre Andre Nieuwoudt, the executor of the deceased,
which was handed up by Doormax’s counsel during argument (I understand that the
applicants had procured this affidavit and served a copy of it on Doormax but the
applicant did not file this at court) , it confirmed that , apart from R3 500 000.00, the
residue of the deceased ’s estate (including Mercury) devolved upon Ms Osborne-Young.
Disputed facts
[33] After the deceased passed away, Mr Engel took a leave of absence and went to
Johannesburg. At that stage, Mr Engel had the master key to the deceased’s office. Prior
to his departure, the filing cabinets and draws at Mercury were emptied a nd
documentation pertaining to trademark information and customer details went missing.
[34] With regards to Doormax and Doorware, the applicants contend that Doormax, in
collusion with Doorware began to distribute "QS" products to Mercury’s customers in
Cape Town and the Western Cape in breach of the interim interdict granted by the South
Gauteng Division, Johannesburg and that contempt of court proceedings have been
instituted.
[35] Doormax denies these allegations and in particular, that there is any collusion wha tsoever
between Doorware and Doormax.
[36] According to Doormax:
[36.1] Subsequent to the interdict being granted against Doorware, Doorware took the
decision to sell its business in the Western Cape to Doormax and Doormax is
owned indirectly by its staff through an employment trust.
[36.2] Given the nature of the interdict and the uncertainty and duration of the appeal
proceedings, Doorware found itself in an uncomfortable position, whereby it
placed not only its business operations in jeopardy but also the livelihood of its
employees in the Cape Town branch.
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[36.3] In an attempt to secure the livelihood of its employees, Doorware acted
responsibly with only the interests of its employees at heart, and sold the business
to Doormax.
[36.4] Doormax is a separate juristic entity to Doorware a nd/or their members derive no
benefit either directly or indirectly from Doormax, nor do they exercise any
control over the business of Doormax.
[37] Doormax unequivocally denie d that it, in any shape or form, colludes with Doorware in
the distribution of "QS" products, that Doormax imports its own "QS" products from a
supplier in China called Amsun, and that Doormax is a separate and distinct from
Doorware. Doormax also denies that Doorware supplies it with "QS" products at all.
[38] Doormax contends that the fact that it imports “QS” Products directly from China and
distributes/sells these in the Western Cape in South Africa, is not unlawful.
ISSUES FOR DETERMINATION
[39] The central issue for determination is whether Doormax may deal in “QS” P roducts
without the consent of Mercury and/or Ms Osborne-Young.
[40] However, Doormax raised two points in limine:
[40.1] That the decision of the SCA in the reconsideration application suspends the
interdict against Doorware in terms of section 18(1) of the Superior Courts Act, 10
of 2013 (“ Superior Courts Act ”). Counsel for Doormax submitted that Doormax
would not persist with this point in limine. It is, therefore, not necessary for me to
deal with this issue for the purposes of this judgment; and
[40.2] The JV agreement constituted “cartel conduct” as contemplated in section 4 of the
Competition Act , 89 of 1998 and Doormax, accordingly, wants to refer the JV
agreement to the C ompetition Tribunal, and, accordingly, seeks a stay of this
application.
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Point in limine:
[41] I deal with the second point in limine before addressing the central issue for
determination.
Cartel conduct in terms of section 4 of the Competition Act
[42] Doormax contend ed that the JV agreement involved dividing markets by allocated
territories, customers and specific types of goods and that, as such, a prohibited agreement
to engage in restrictive horizontal practices is presumed to exist between Mercury and
Doorware and that this conduct constitutes cartel conduct as contemplated in section 4 of
the Competition Act.
[43] At the same time, Doormax contends that it is no way affiliated with Doorware, that it is a
separate and distinct entity from Doorware and that there is no collusion between
Doorware and Doormax.
[44] This raises somewhat of a dilemma for Doormax sin ce, if it is not a branch of Doorware
and is not in anyway affiliated with the business of Doorware, then it is not a party to the
JV agreement and there is, therefore, no legal basis upon which Doormax can place any
reliance whatsoever on the JV agreement.
[45] The general rule is that a contract cannot bind a person who is not a party to it 2. Similarly,
a person who is not a party to a contract cannot rely on the terms of that contract.
[46] During oral argument, and i n the context of the referral of the JV agreeme nt to
Competition Tribunal , it was put to Doormax’s counsel that, absent the JV agreement,
whether the relief which the applicants seek against Doormax, i.e. Doormax cannot deal
in “QS” Products without Mercury’s consent, in and of itself, amounts to “cartel
conduct” as contemplated in section 4 of the Competition Act . He conceded that if the JV
2 Lorentz v Melle 1978 (3) SA 1044 (T) at 1058B
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agreement did not exist, then the specific relief sought by the applicants against Doormax
would not amount to cartel conduct.
[47] In light of the above, since Doormax is not affiliated with Doorware in any way, shape or
form, Doormax is not a party to the JV agreement . As such Doormax lacks the necessary
standing to refer the JV agreement to the Competition Tribunal on the basis that it
constitutes cartel conduct as contemplated in section 4 of the Competition Act.
[48] It follows that Doormax cannot rely on the JV agreement at all for its defence of this
application.
[49] Based on the above, I find that this point in limine is without any merit.
[50] In any event, as I understand it, Doorware already referred the JV agreement to the
Competition Commission on the basis that the “ geographical split ” constitutes “cartel
conduct”.
Central issue for determination:
[51] The basis upon which the applicants conten ded that Doormax cannot import and /or
distribute and/or offer to sell and/or make available to sell and/or supply and/or otherwise
deal with, whether directly or indirectly, the “QS” Products without Mecury’s consent is
that:
[51.1] Both Mercury and Ms Osborne-Young (and Doorware and Mr Humphries) rely on
a common law trademark of the “QS” Brand which is inextricably linked to the
goodwill of both Mecury and Doorware and that this is clear from the conduct of
the deceased and Mr Humphries over the last 20 years;
[51.2] By importing and distributing "QS" products without Mercury's or Ms Osborne -
Young’s consent, Doormax is wrongfully infringing on that trademark and
goodwill;
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[51.3] Such conduct on the part of Doormax constitutes unlawful competition.
APPLICABLE LEGAL PRINCIPLES:
Whether the “QS” Brand is a common law trademark that forms part of the goodwill for
Mercury
[52] In support of the applicants’ contention that the “QS” mark is an important feature for
what sets “QS” products a part and that the “QS” mark forms part of the goodwill of
Mercury’s business , reference was made to the case of Turbek Trading CC v A and D
Spitz Ltd & Another 3 with regards to the approach in determining whether a mark forms
part of the goodwill of a business wherein the SCA found as follows:
“In context, the question is whether the mark ‘KG’ formed part of Spitz’s goodwill.
Spitz had to show that it was at the date the common -law proprietor of the ‘KG’
trade mark, and this required proof that Spitz ‘originated, acquired or adopted it
and has used it to the extent that it has gained the reputation as indicating that the
goods in relation to which it is used’ belonged to Spitz (Moorgate Tobacco Co Ltd
v Philip Morris Inc – a trade mark determination by Hon WG Trollip referred to
inter alia by Southwood J in Butterworths Publishers (Pty) Ltd v Jacobsens Group
(Pty) Ltd [2005] 2 All SA 588 (T) para 34). As Colman J explained, extensive use
creates the intangible property rights in an unregistered (common-law) trade mark
(Oils International (Pty) Ltd v Wm Penn Oils Ltd 1965 (3) SA 64 (T) 70G). In
other words, Spitz had to discharge the same onus in relation to reputation that it
would have had under a passing -off claim (Adcock -Ingram Products Ltd v
Beecham SA (Pty) Ltd 1977 (2) SA 434 (W) 436H-437E; Caterham Car Sales &
Coachworks Ltd v Birkin Cars (Pty) Ltd [1998] ZASCA 44; 1998 (3) SA 938 (SCA)
para 16 and 21 – 22).” (Emphasis added)
[53] In McDonald's Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd and Another;
McDonald's Corporation v Dax Prop CC and Another; McDonald's Corporation v
Joburgers Drive-Inn Restaurant (Pty) Ltd and Another4, the SCA held that:
“I consider therefore that a mark is well-known in the Republic if it is well-known
to persons interested in the goods or services to which the mark
relates”(Emphasis added)
[54] This “well-known” requirement could exclude protection in situations where there is no
reputation.
3 [2010] 2 All SA 284 (SCA) at para [17]
4 1997 (1) SA 1 (A) at 20E
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[55] It is common cause the the “QS” Brand has such a “mark” and that this “mark”
distinguishes the “QS” Brand from all other brands of doorhandles.
[56] The applicants’ contend ed that the holder of the “ mark” pertaining to the "QS" Brand is
part of the business of Mercury and Doorware and that had always been the intention and
that this was borne out by the conduct of The deceased and Mr Humphries for the last 22
years. This is undisputed by Mr Humphries.
[57] Doormax argued that the applicants only raised the issue of a common law trademark,
ownership of and goodwill in the "QS" brand for the first time in their heads of argument.
[58] This is not strictly correct. Reference s to trademarks and goodwill appear in the
applicants founding affidavits (as appears from the facts as set out above).
[59] Doormax, on the other hand, raised, for the first time in its heads of argument, the
following:
[59.1] That the applicants averments that the JV had become the owner of the “QS”
Brand because both Mercury and Doorware adopted the mark and used it, and that
it does not matter who the parties to the JV agreement wer e, and that the court
need not determine the dispute regarding the agreement , is a rear guard attempt to
avoid the insurmountable disputes of fact regarding the JV agreement and falls to
be rejected for the following reasons:
[59.1.1] That the necessary substratum for this belated contention does not
appear from the affidavits filed on behalf of the applicants;
[59.1.2] It is unfair to Doormax to raise these issues for the first time in
heads of argument and Doormax has not been given an opportunity
to deal with the argument; and
[59.1.3] That had the applicants raised this in their founding papers, that
Doormax would have pointed out that:
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59.1.3.1 The deceased and Mr Humphries were the originators of the
mark and they utilised their juristic entities to give effect to
the JV agreement between them;
59.1.3.2 It stands to reason that, in dealing with the “QS” Brand,
Mercury and Doorware did so under a license and that the
license may be inferred by the conduct of the deceased and
Mr Humphries.
[60] Counsel for Doormax did not persist with the first two complai nts but rather presented its
argument on the license agreement aspect.
[61] In this regard, the counsel for Doormax referred the court to Webster and Page South
African Law of Trademarks5 wherein it states the following:
“In its simplest form a license is no more than an authorisation given by one person to
another to invade a monopoly right. A license may be written, oral or inferred by
conduct. A license may be non -platform side -exclusive, exclusive or sole. A non -
exclusive or ordinary license gives the right to use the intellectual property licensed but
does not restrict the rights of the licenser in any way.”
[62] After hearing the application, I invited the parties to submit a supplemen tary note on this
aspect of their respective arguments.
[63] In the supplementary note filed by Doorman , the argument in this regard is clarified as
follows:
[63.1] Based on what is stated in the excerpts from Webster and Page, that it would be
“totally contrary” to the license agreement for the licensee (in this case Mercury
and Doorware) to apply the trademark himself with a view to perhaps later
preventing or attacking the registration of the same mark in the name of the
licensor (in this case the deceased and Mr Humphries). In other words, it would
5 Webster CE and Joubert I: “Webster and Page South African law of trademarks”, 4th Division, Service Issue 26,
November 2023 at 11-3 para 11.1 pp. 306 – 309
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be an anathema to the terms of a license agreement to allow the licensee to
appropriate the licensed mark, whether registered or unregistered.
[63.2] On the facts, the deceased and Mr Humphries took the necessary steps to preserve
the distinctiveness of the unregistered “QS” Brand mark and, accordingly, the use
of the licensee (Mercury and Doorware) inures to the benefit of the deceased and
Mr Humphries in their capacity as proprietors of the mark.
[64] In the supplementary note filed by the applicants, they submit as follows:
[64.1] The stated purpose of the argument by Doormax is to distinguish the matter from
Turbek Trading (supra) but that the existence of a tacit license does not have this
effect.
[64.2] In terms of Turbek (supra) , in order to have a proprietory interest in the “QS”
mark, Mercury needs to have “adopted it and…used it to the extent that it has
gained the reputation as indicating that the goods in relation to which is used,
belonged to it”.
[64.3] It is common cause that both Mercury and Doorware did so and that they have
both been trading under the “QS” Brand, using the “QS” mark to the exclusion of
the world for 20 years , thereby benefiting from the value that is inherent in “QS”
and that the “QS” mark froms part of Merc ury’s (and Doorware’s) goodwill and
Mercury is entitled to protect it.
[64.4] The tacit license is therefore irrelevant to this matter.
[64.5] Even if Mercury and Doorware were exploiting the “QS” mark under a tacit
license agreement granted to them by the deceased and Mr Humphries, Mercury
and Doorware, by trading separately using the “QS” mark for 20 years, developed
their own rights to the “QS” mark (including goodwill), which rights are harmed
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or may be harmed by Doormax’s exploitation of the mark without the consen t of
both Mercury and Doorware.
The conduct of parties in relation to the “QS” Brand
[65] In order to determine whether Doormax required the consent of Mercury (and Doorware)
to import and/or distribute and/or trade in and/or sell “QS” Products, regard needs to be
had to the conduct of the parties over the last 22 years in relation to the “QS” Brand.
[66] In the case of Comwezi Security Services (Pty) Ltd v Cape Empowerment Trust Ltd 6 the
SCA addressed the issue of the conduct of parties in implementing a co ntract and held as
follows:
“[15] It was suggested that for us to place reliance on this conduct is impermissible
in the light of the exposition of the law in Natal Joint Municipal Pension Fund
v Endumeni Municipality . However, that is incorrect. In the past, where
there was perceived ambiguity in a contract, the courts held that the
subsequent conduct of the parties in implementing their agreement was a
factor that could be taken into account in preferring one interpretation to
another. Now that regard is had to all relevant context, irrespective of
whether there is a perceived ambiguity, there is no reason not to look at the
conduct of the parties in implementing the agreement. Where it is clear that
they have both taken the same approach to its implem entation, and hence the
meaning of the provision in dispute, their conduct provides clear evidence of
how reasonable business people situated as they were and knowing what they
knew, would construe the disputed provision. It is therefore relevant to an
objective determination of the meaning of the words they have used and the
selection of the appropriate meaning from among those postulated by the
parties…” (Emphasis added)
[67] It is clear from the founding affidavit as well as the supporting affidavit of Mr Humphreys
to Doormax's answering affidavit that over the last 22 years:
[67.1] Mercury and/or Doorware imported and distributed “QS” products;
[67.2] They did so for their own account, but with a level of cooperation;
[67.3] They agreed to split up the areas in w hich they would trade , the so -called
“geographical split ”, where Mercury had the exclusive rights to sell "QS"
6 Unreported judgment: (759/11) [2012] ZASCA 126 (21 September 2012)
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products wholesale to customers in the Northern Cape, Eastern Cape and Wester n
Cape and where Doorware had the exclusive rights to sell “QS” products in
Gauteng and everywhere else in South Africa;
[67.4] Neither company would do anything to undermine the image and market standing
of the “QS” brand;
[67.5] The “QS” brand was capable of reputational damage meaning that it had goodwill.
[68] Mercury and Doorware were the exclusive importers and distributors of the "QS" product
within South Africa.
[69] This is not disputed by Mr Humphries in his supporting affidavit.
[70] The parties therefore acquired their goodwill from the “QS” Brand and, in particular, the
“QS” mark through a common law trademark.
[71] Given the undisputed conduct of the parties in relation to the “QS” Brand, I find myself in
agreement with the applicants that t he tacit license is irrelevant for the court to make a
determination as to whether Doormax required Mercury’s consent or Ms Osborne -
Young’s consent to import and distribute “QS” Products.
[72] For the purposes of this determination, it makes no difference who the owner of the “QS”
Brand is. What matters is that the “QS” Brand and the goodwill that comes along with it,
belongs to someone other than Doormax.
Right to goodwill as premise for unlawful competition
[73] The applicants contend that a distinctive mark is important to the formation of the
goodwill of a business and the capacity of a business to attract custom.
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[74] According to Neethling’s Unlawful Competition 7, insofar as goodwill is capable of
functioning as legal property , and as the object of immaterial property right s, the
recognition of the right to goodwill is, in the final instance, a matter of positive law8.
[75] The question to be addressed in this case is the relationship between goodwill and
distinctive marks.
[76] The pri mary function of all these marks is to distinguish an entrepreneur's own
performance from similar competitive performances9.
[77] It stands to reason that it is hardly of any avail to an entrepreneur if he brings an excellent
product onto the market to the complete satisfaction of consumers, and it does not enable
the consumer to distinguish between his product and other similar products. The simple
truth is that a product can only have a good name if in the first instance it has a name or is
individualised in some other10.
[78] From the foregoing it follows that the distinctive mark is a very important factor in the
formulation of goodwill . Precisely because the trademark or trade name individualises
and consequently distinguishes the product or undertaking , the mark or name therefore
has distinctive value (or power), it contributes towards attracting custom and therefore the
creation of goodwill11. (Emphasis added)
[79] Accordingly, it stands to reason that his distinctive marks are of great value to an
entrepreneur and the only question is whether the distinctive mark can be the object of an
independent subjective right, a right which can exist in addition to the right to goodwill12.
[80] In this regard, Neethling states that:
7 2nd Edition, p. 111
8 IBID at p. 105 para 2.2
9 IBID at p. 110 para 3
10 IBID at p. 111
11 IBID at p. 111
12 IBID at p. 111
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[80.1] First of all, it is necessary to obtain clarit y regarding the object of such a right.
The object is definitely not the word, image, sign, get-up or whatever the
entrepreneur uses to distinguish his performance so that he “owns” the word, etc.
and everyone else is excluded from its use;
[80.2] To cut the knot, the object can really only lie in the distinctive value which the
mark has in connection with the entrepreneur's business, product or service;
[80.3] Since the purpose of all distinctive marks , of whatever nature (technical, fanciful,
descriptive, get-up), is the same, namely the individualisi ng of an undertaking or
product, all of them to a greater or lesser extent (probably) have distinctive value
and therefore in principle qualify as the “object” of a right.
[80.4] Of importance is the fact that in ord er to serve as the legal object of an
autonomous right, distinctive marks must be able to exist ind ependently not only
of the goodwill, but also the other independent components of the undertaking.
[81] The issue to address now is whether , by importing and dist ributing “QS” Products,
Doormax is unlawfully competing with Mercury , given the fact that Mercury has
established that the “QS” Brand is a common law trademark from which the goodwill for
Mercury arose.
[82] In Mullane and Another v Smith and Others 13, the court addressed the issue of unlawful
competition in the context of goodwill and stated the following:
“[15] In order to succeed with its application for final interdictory relief the second
applicant had to demonstrate that there is a wrongful act of competition, or one
which is impending, and which is infringing or threatening to infringe its business
goodwill and that no other suitable remedy is available.
[16] Since final relief is sought the second applicant must show the infringement or
threatened infringement of a clear right to the goodwill of its business . The facts
that the court can take into account are limited to those presented by the
13 [2015] 3 All SA 230 (GJ) at para [15] - [17]
20
respondents, including admissions made to the applicants affidavit unless one of
the exceptions mentioned in Plascon-Evans applies.
[17] The generic description of the right attached to the goodwill of a business is to be
found in Unlawful Competition (2ed) at Chapter 3 paragraph 2.2 where the co -
authors, after explaining “the right to trade without wrongful interference”, rely
on the following passage by Van Dijkhorst J in Atlas Organic Fertilizers (Pty) Ltd
v Pikkewyn Ghwano (Pty) Ltd14:
“It is important to note that the reference by the Court do the plaintiff’s ‘right to
attract custom’ is being the right it has as a trader which is protected from
wrongful interference by a competitor , is the same as the ‘reg op die werfkrag’
which is the right HJO van Heerden seeks to protect in Grondslae van die
Mededingsreg (supra). Sometimes this is referred to as the traders goodwill,
which is defined by Lord Macnaughten in Commissioners of Inland Revenue v
Millar & Co Margarine Ltd 1901 AC 217 at 224 as ‘the attractive force that
brings in custom’.” (Emphasis added)
[83] It is common cause that Doormax is trading in “QS” Products but Doormax denies that it
is doing so unlawfully.
[84] However, given the facts and the law as set out above, it is clear that:
[84.1] Mercury (and Doorware) alternatively the deceased and Mr Humphries own the
“QS” Brand and the “QS” mark and have had the exclusive rights to import and
distribute “QS” Products, as wholesalers, to retail stores for the last 22 years; and
[84.2] Anyone else wishing to import and distribute “QS” Products in South Afr ica,
would be wrongfully intefering with the goodwill of the “QS” mark which is
within the exclusive rights of Mercury and Doorware, alternatively now Ms
Osborne-Young and Mr Humphries.
[85] Doormax has set out no defence (which is not based on the JV agreement) for why it is
unlawfully competing with Mercury in respect of the “QS” Brand. From this, it can be
inferred that, notwithstanding its argument that it imports and distributes “QS” Products
14 1981 (2) SA 173 (T) at 182D-E
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lawfully, this is not correct. Doormax’s conduct resul ts in a wrongful interference with
Mercury’s goodwill and its business and therefore amounts to unlawful competition.
[86] I make mention of the fact that Mr Engel was also employed with Mercury for 17 years
and learnt about the business and the importing and distribution of “QS” Products from
the deceased. He subsequently went to work for Doorware and is now at Doormax. That
he is importing and distributing “QS” Products from China for Doormax and is doing so
in the Western Cape, in a way, adds to the un laeful competion angle. This issue, however,
was not pursued with any vigour by the applicant.
Requirements for a final interdict
[87] The applicants seek final interdict ory relief against Doorm ax, alternatively an interim
interdictory relief against Doormax pending the issuing of an action against Doormax and
Doorware within 20 days of the grant of an order failing which the interdictory relief shall
lapse.
[88] Doormax’s defences that its conduct is lawful are based on the following facts:
[88.1] That since the JV agreement was concluded between the deceased and Mr
Humphries, that it was terminated by the untimely passing of the deceased ;
[88.2] Mercury and Doorware were not parties to the JV agreement;
[88.3] Mercury’s consent is, accordingly, not required.
[89] The only inference which can be drawn from Doormax’s contention above is that had the
JV agreement still been in place, then Mercury’s consent would have been required.
[90] However, since Doormax was not a party to the JV agreement , the continued existence or
termination thereof upon the death of the deceased, is of no moment to Doormax.
22
[91] The applicants have already established that the “QS” Brand is a common law trademar k
which resulted in goodwill to Mercury and Doorware and which goodwill is a protected
right.
[92] Doormax’s importing and distributing of the “QS” products without consent is an
infringement of that protected right.
[93] Doormax contended during argument that there are disputes of fact and that the Plascon-
Evans rule must apply.
[94] The disputes raised by Doo rmax are directly linked to the JV and the JV agreement and
the terms thereof, to which Doormax was not a party. Doormax’s reliance upon the JV
agreement and its terms for the purposes of establishing disputes of fact, is therefore
misplaced. Absent the JV agreement, there are no disputes of fact raised by Doormax.
[95] In light of the fact that there are no disputes of fact , real or otherwise, in this matter, the
applicants will be entitled to final relief provided they satisfy the requirements therefor.
[96] It is trite that the three requirements for a final interdict:
[96.1] A clear right;
[96.2] An injury actually committed is reasonably apprehended; and
[96.3] Absence of satisfactory protection by any other ordinary remedy15.
[97] Once an applicant has established the three requisites for the grant of a final interdict, the
scope, if any, for refusing relief is limited. There is no general discretion to refuse relief .
That is a logical corollary of the court holding that the applicant has suffered injury or has
a reasonable apprehension of injury and that there is no similar protection against the
injury by way of another ordinary remedy16.
15 Sethlogo v Sethlogo 1914 AD 221 at 227
16 Hotz v University of Cape Town 2017 (2) SA 485 (SCA) at para [29]
23
[98] In order to establish a clear right, the applicants have to prove on a balance of
probabilities, facts which, in terms of substantive law, establish the clear right upon which
it relies17.
[99] In NCSPCA v Open Shore18 the SCA reiterated that an interdict is not a remedy for a past
invasion of rights, but is concerned with present or future infringements . According to
the SCA, an interdict is appropriate only when future injury is feared. Where a wrongful
act giving rise to the injury has already occurred, it must be of a continuing nature and
there must be a reasonable apprehension that it will be repeated.
Clear right
[100] As regards the clear right , based on the common cause facts and the legal principles
enunciated above, the applicants have established that:
[100.1] They have a protectable interest in the form of the “QS” Brand and the goodwill
which arises therefrom;
[100.2] This goodwill has been wrongfully interfered with by Doormax; and
[100.3] That such wrongful interference amounts to unlawful competition.
[101] The breach of the applicants rights is sufficient to find a basis for the final interdictory
relief sought.
Harm actually committed
[102] It is undisputed that Doormax is currently using the “QS” brand without the consent of
Mercury or Ms Osborne-Young, even though Doormax’s basis for doing so is that it does
not require their consent.
17 LAWSA Volume 11, 2nd Edition p. 397
18 2008 (5) SA 339 (SCA) at para [20]
24
[103] Doormax has also refused to gi ve an undertaking to cease and desist from doing so and
the basis for such refusal is that Doormax should be entitled to trade as it deems fit and
that the applicants are attempting to enforce a prohibited agreement in an obvious attempt
to quell legitimate competition in the market place.
[104] On a balance of probabilities, the most probable inference to be drawn 19 from Doormax’s
refusal to provide the requested undertaking is that there is, as the applicants contend, a
continuing threat that Doormax will persist with its offending conduct in the absence of
an interdict. This is also clear from Doormax’s answering affidavit.
[105] Doormax’s reliance on the JV agreement for its refusal to cease and desist from importing
and distributing “QS” Products is also misplaced and does not offer a valid defence.
[106] As a result of Doormax’s unlawful conduct, my view is that the applicants have suffered
and will continue to suffer harm and that this needs to be stopped.
Lack of an alternative remedy
[107] According to the applicants, they do not have any other remedies available against
Doormax. Interdictory relief is the only remedy available in order to prevent the
continued unlawful use of the “QS” brand to the detriment of Mercury’s business.
Balance of convenience:
[108] Even though the balance of convenience is not a requirement for a final interdict, both
parties addressed this in their respective heads of argument.
[109] According to the applicants, they lose a corporate opportunity everytime Doormax makes
a sale, whereas Doormax only stands to be precluded from selling a particular range of
door handles.
19 Cooper and Another NNO v Merchant Trade Finance Ltd 2000 (3) SA 1009 (SCA) at para [7] . See also Ocean Accident and
Guarantee Corporation Ltd v Koch 1963 (4) SA 147 (A) at 159B-D.
25
[110] Doormax contends that it will be gravely prejudiced if the relief sought is granted as they
will not be able to trade in “QS” products and given the length of time that it takes to
obtain a trial date in this division, even the alternative relief (the interim interdict) will be
final in effect, whereas if the applicants prevail, they may enjoy a claim for damages
against Doormax for the interim period.
[111] Nowhere in Doormax’s answering affidavit does it state that it only trades in “QS”
Products. In fact, if regard is had to the invoice from Amsun, from whom Doormax
imports its door handles, it refers to various types of door handles apart from the “QS”
Products.
[112] Accordingly, I am satisfied that Doormax will be able to continue to trade by selling other
ranges of door handles and that the prejudice against Doormax is outweighed by the
prejudice to the applicants.
CONCLUSION
[113] In applying the reasoning in Mullane (supra), I find that Mercury has demonstrated that:
[113.1] There is a wrongful act of interference by way of unlawful competition being
perpetrated by Doormax and have therefore established a clear right;
[113.2] Such wrongful act has infringed the business goodwill and the protected right
thereto, acquired by Mercury through the “QS” Brand and that this infringement
continues; and
[113.3] No other suitable remedy is available to the applicants.
[114] As regards the issue of costs, I see no reason why the costs should not follow t he result in
respect of Doormax.
26
[115] As regards costs against Doorware, the applicants argued that the supporting affidavit of
Mr Humphries is essentially an opposing affidavit and that Doorware, for all intents and
purposes, opposed that application. I disagree.
[116] The supporting affidavit was helpful to the court is ascertaining the conduct of Mercury
and Doorware alternatively the deceased and Mr Humphries in relation to the “QS”
Brand, the “QS” Products and the “QS” mark.
[117] In light of all the facts and legal principles set out above pertaining to relief which the
applicants seek, I am satisfied that the requirements for a final interdict have been met and
there is no reason why such a final interdict should not be granted against Doormax.
[118] Accordingly, I make the following order:
[118.1] That Doormax is interdicted and restrained from importing and/or distributing
and/or offering to sell and/or making available to sell and/or supplying and/or
otherwise dealing with, whether directly or indirectly, any product in the “QS”
product range or any product bearing the name and/or branding of the “ QS”
product range, without the written consent of the first, or alternatively, second
applicant.
[118.2] That Doormax will pay the costs of this application on party and party Scale C,
including the cost of two counsel.
[118.3] There is no order as to costs against the second respondent.
_________________________
The Hon. Ms Acting Justice Mahomed
Of the Western Cape High Court
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APPEARANCES:
Applicant’s Counsel: Adv AR Sholto-Douglas SC and Adv C Quinn
Instructed by: Deon Perold & Associates
Respondents’ Counsel: Adv C Cutler
Instructed by: Adams Attorneys