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[2018] ZASCA 67
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Morris Material Handling Limited v Morris Material Handling SA (Pty) Ltd (829/2017) [2018] ZASCA 67; 2018 BIP 278 (SCA) (25 May 2018)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case no: 829/2017
In the matter between:
MORRIS MATERIAL
HANDLING
LIMITED
APPELLANT
and
MORRIS MATERIAL HANDLING
SA (PTY)
LTD
FIRST RESPONDENT
Neutral citation:
Morris Material Handling Ltd v
Morris Material Handling (Pty) Ltd
(829/2017)
[2018] ZASCA 67
(25 May 2018)
Coram:
MAYA P, MAJIEDT, WALLIS, DAMBUZA AND
VAN DER MERWE JJA
Heard
:
9 MAY 2018
Delivered
:
25 MAY 2018
Summary:
Trade mark – expungement from the
register for non-use – s 27(1)
(b)
of
Trade Marks Act 194 of 1993
–
whether mark used by proprietor thereof.
ORDER
On appeal from:
Gauteng Division of the High Court,
Pretoria (Tuchten J, sitting as court of first instance):
The appeal is
dismissed with costs, such costs to include those consequent upon the
employment of two counsel.
JUDGMENT
Wallis JA (Maya P,
Majiedt, Dambuza and Van der Merwe JJA concurring)
[1]
The only issue in this appeal is whether
the appellant’s registered trade mark MORRIS registered in
classes 7 and 11 under
registration number 1935/00289/2-3 should be
expunged from the register for non-use in terms of s 27(1)
(b)
of the Trade Marks Act 194 of 1993 (the
Act). The mark was originally registered in the name of a United
States corporation, MHE
Technologies Inc (MHE), but in 2001 it was
assigned to a British company, GW 103 Ltd (GW), as part of a broader
transaction in
which MHE sold identified parts of its international
business to GW. GW subsequently changed its name to Morris Material
Handling
Limited. In order to avoid confusion between two entities
with similar names I will refer to it as the appellant.
[2]
The respondent, Morris Material Handling SA
(Pty) Ltd, is a South African company that manufactures cranes and
claims a reputation
in this country for cranes bearing the mark
MORRIS. Its endeavour in 2014 to register MORRIS as a trade mark was
blocked by the
existence of the appellant’s existing mark. It
accordingly brought the present proceedings with a view to having the
appellant’s
mark expunged from the register, thus clearing the
path for the registration of its own mark. It obtained an order for
the rectification
of the register from Tuchten J, sitting in the
Gauteng Division of the High Court, Pretoria. The appeal is with his
leave.
[3]
A trade mark falls to be removed from the
register for non-use in terms of s 27(1)
(b)
of the Act when:
‘
up
to the date three months before the date of the application, a
continuous period of five years or longer has elapsed from the
date
of issue of the certificate of registration during which the trade
mark was registered and during which there was no
bona
fide
use
thereof in relation to those goods or services by any proprietor
thereof or any person permitted to use the trade mark as contemplated
in
section 38
during
the period concerned.’
An
application under this section potentially raises the following five
questions,
[1]
namely:
(a)
Were
the marks used during this period?
(b)
Were
they used by the proprietor?
(c)
Was
any other use permitted use?
(d)
Was
the permitted use controlled?
(e)
Was
the use
bona fide
?
The argument
addressed to us on behalf of the respondent was that until a late
change of counsel the case was brought and conducted
in the high
court as a case of permitted use. However, Mr Michau for the
appellant, expressly eschewed any reliance on permitted
use and it is
therefore unnecessary for us to address it.
[4]
The heads of argument foreshadowed a debate
whether there had been any use of the mark in South Africa during the
relevant period
and if so whether that was
bona
fide.
The issue was purely factual as
the parties were at one that the enquiry in terms of s 27(1)
(b)
was summarised in the following terms
in
Westminster Tobacco
:
[2]
‘…
bona
fide
use is
use of the trade mark in relation to goods of the type in respect of
which the mark is registered. The use must be use as
a trade mark,
for the commercial purposes that trade mark registration exists to
protect. It must be use in the course of trade
and for the purpose of
establishing, creating or promoting trade in the goods to which the
mark is attached. The use does not have
to be extensive, but it must
be genuine. Genuineness is to be contrasted with use that is
merely token, but the line is a
fine one, because the use may be
minimal. It may in part be prompted by the fear of removal from
the register and be directed
at protecting the proprietor’s
trade generally or preventing the mark from falling into the hands of
a competitor. Provided,
however, the use is
bona
fide
and
genuine and principally directed at promoting trade in goods bearing
the mark, these further purposes however important, are
irrelevant.
What is impermissible is:
“
. . .
user for an ulterior purpose, unassociated with a genuine intention
of pursuing the object for which the Act allows
the registration of a
trade mark and protects its use . . .”.
Whether
use of the mark was
bona
fide
is a
question to be determined on the facts of the particular case.’
[5]
The founding affidavit claimed that
the respondent was the only entity in South Africa making use of the
MORRIS mark in respect
of cranes and related goods and services and
claimed that the appellant had made no use of the trade mark during
the five years
and three months prior to 31 July 2014.
Initially this was understood to convey that there had been no other
use of the
mark at all during this period, but it transpired that
this was not correct as the following paragraphs demonstrate.
[6]
Documents attached to the answering
affidavit showed that in 2013 an entity called Konecranes (Pty) Ltd
(Konecranes SA) had established
a parts distribution centre in
Johannesburg for the supply of parts for a variety of cranes
including cranes bearing the MORRIS
mark and said to emanate from the
respondent. An email dated 27 February 2014 addressed to a client on
behalf of Konecranes SA
said that they were expecting a consignment
of spare parts for ‘Morris P360 Series, P410, P420, P430 and
P450 Series’
cranes and a later email dated 8 April 2014
reflected that these had arrived. In addition fliers were distributed
to clients
in early 2014 showing the brands of cranes for which parts
would be available from the Parts Centre. In the centre of the flier
and its most prominent item was the mark ‘
MORRIS
®
’.
At the same time media releases published in various outlets
contained the same depiction of the mark or referred to the
respondent’s name, without its corporate identifiers, as a
brand.
[7]
In the face of this evidence counsel for
the respondent accepted that there had been sufficient use of the
mark for the purpose
of establishing
bona
fide
use in accordance with section
27(2)
(b)
.
The dispute therefore came down to the question whether this was use
by the proprietor of the mark. To that question the appellant
answered ‘Yes’ and the respondent ‘No’.
[8]
Nothing was said in the founding affidavit
in this regard, which is not surprising given that the deponent
adopted the stance that
there had been no use of the mark at all in
South Africa. It was dealt with in the answering affidavit deposed to
by Mr Patrick
Campbell, who had been employed by the appellant since
2002 and in 2006 had become its General Manager for Services and
Parts.
[9]
Mr Campbell explained that in March 2001
MHE sold its business operations in the United States, United
Kingdom, Saudi Arabia, Thailand
and Singapore to GW. At the same time
it assigned the trade mark MORRIS registered in Australia, France and
South Africa, to GW.
He attached a schedule to his affidavit showing
that apart from these the trade mark MORRIS has been registered in
China, the European
Community and Mexico, while MORRIS CRANE SYSTEMS
has been registered or is pending in a number of countries.
[10]
Mr Campbell said that in 2006 Konecranes
Plc acquired the appellant. This does not appear to be a separate
United Kingdom company,
but an English transliteration of the name of
the Finnish company Konecranes Oyj,
[3]
which is the holding company of an international business described
in some of the press releases as a global crane giant. There
is a
separate UK company called Konecranes UK Ltd. This operates from the
same registered office as the appellant as does an entity
or business
division – whether it is a separate juristic person is unclear
– called Konecranes (UK Parts Centre). A
later affidavit by Mr
Knut Stewen, who described himself as a director of both the
appellant and Konecranes SA, reveals that the
international business
operates in regions, as in addition to his other two roles, Mr Stewen
said that he was the Vice-President,
Head of Region Africa.
[11]
No attempt was made to place before the
court information showing the relationship between these various
aspects of the overall
group or to explain how they now conduct
business. There was a considerable measure of ambiguity about this.
An invoice was attached
to Mr Campbell’s affidavit showing the
importation of a range of parts the price being over £43 000
of which five
items totalling some £560 were said to be spares
for the appellant’s MORRIS cranes. The other 74 items
presumably related
to other types of cranes but which ones was not
said. The invoice did not identify who was supplying the parts beyond
saying that
payment was to be made to a UK subsidiary of a Finnish
bank and the remittance was to be sent to Konecranes UK Ltd. Printed
at
the top of each page of the invoice, one above the other, were
‘KONECRANES’ with some indecipherable lettering below;
‘
MORRIS
’
and below that in smaller block capitals ‘Material Handling’;
and lastly ‘KONECRANES (UK Parts Centre).
[12]
The emails, fliers and press releases
relied on by the appellant to prove use of the mark were equally
ambiguous in identifying
the entity that was making use of the mark.
The first, dated 24 June 2013, said that Konecranes Southern Africa
had established
a parts distribution centre to supply Konecranes
parts and parts for ‘the “Alpha Brands” owned by
Konecranes,
Morris Material Handling, Stahl, SWF and Verlinde among
them’ as well as competitor parts ‘such as Abus and
Demag’.
The words ‘among them’ indicated that the
Alpha Brands included Morris Material Handling, Stahl, SWF and
Verlinde.
That was reinforced by the reference to competitor brands.
Although it was said that Konecranes SA had established the parts
centre,
it also said that this was supported by the Konecranes
Central Distribution Centre based in Finland.
[13]
The later emails did not clarify this. They
all came from Konecranes SA as did the fliers. These referred to the
international operation,
saying that ‘more than 100 Crane and
Hoist brands’ were owned by Konecranes. Both “MORRIS’
and ‘MORRIS
MATERIAL
HANDLING
’
appear on the flier
as brands owned by Konecranes. The press releases also concentrated
on the international giant, Konecranes,
which in context could only
be a reference to the international company, not the appellant, which
was categorised simply as a brand
owned by the international company.
[14]
All in all the picture as it emerged from
the documents was murky. It was wholly unclear who was making use of
the MORRIS mark in
South Africa. Bearing in mind that this mark was
referred to in all the documents, together with a number of other
‘brands’,
collectively as Konecrane brands, it is
difficult to see how any of this material can be said to have
involved use of the particular
mark MORRIS by the appellant. After
all the balance of the material in the fliers and press releases did
not relate to that mark
or the appellant. It is therefore impossible
to say that any of this constituted use of the mark by the appellant.
The picture
that the documents paint is of a number of brands and
marks falling within the overall Konecranes stable being advertised
collectively
by or on behalf of one or more of the Konecranes
entities, rather than a specific use of the MORRIS mark by the
appellant for its
own business purposes.
[15]
So, what did the appellant say in this
regard? The answer is, very little. Mr Campbell said only that the
appellant had used its
mark in South Africa during the relevant
period. He gave no further details in regard to the use of the mark
beyond saying that:
‘
The
Respondent’s MORRIS branded products have been and are
available for purchase in South Africa and have been so available
and
sold during the relevant period. Through an internal arrangement,
Konecranes
[4]
is authorised to distribute the Respondent’s MORRIS branded
products in Africa, including in South Africa.’
No details were given
of any sales of MORRIS branded products in South Africa during the
relevant period. A few paragraphs later
Mr Campbell said, with
reference to the emails, fliers and press releases, that Konecranes
SA was authorised to distribute MORRIS
branded products in Africa
including South Africa. This highlighted the problem of determining
who was distributing what for whom.
[16]
The response to these allegations by Mr
Chiappa, the managing director of the respondent, whose knowledge of
the crane market in
South Africa was not challenged, was a blunt
denial of the existence of any internal arrangement between the
respondent and Konecranes.
Mr Chiappa then highlighted the
inconsistencies in the appellant’s papers that have already
been mentioned. In regard to
the documents relied upon by the
appellant in Mr Campbell’s affidavit, he said repeatedly that
they did not show use of the
MORRIS mark by the registered proprietor
thereof. The challenge could not have been laid down more clearly.
The respondent was
putting the appellant to the proof of its
allegations in regard to the existence of the ‘internal
arrangement’ and
that the use of the mark as evidenced in the
documents was use by the registered proprietor of the mark.
[17]
The appellant did not rise to this
challenge. It delivered the further affidavit by Mr Stewen referred
to in para 10 with a view
to supplementing the evidence of Mr
Campbell. But the supplementary material took the matter no further.
Mr Stewens said that he
confirmed:
‘…
the
arrangement in place between the Respondent and Konecranes in terms
whereof Konecranes is authorised to distribute the Respondent’s
MORRIS branded products in South Africa.’
The problem was that
this did not disclose in what way this involved the appellant making
use of its mark. It did not say, much
less provide proof, that the
appellant was still trading, as opposed to being a dormant company
within the larger Konecranes group,
kept alive because it was the
proprietor of various trade marks. This was an extraordinary omission
bearing in mind that Mr Stewen
was a director of the appellant and
Konecranes SA, as well as being a very senior figure in the broader
African region of the Konecranes
group.
[18]
Ms Celeste Viljoen, who was the author of
the emails and the person responsible for the fliers and press
releases, filed an affidavit
at this stage of the proceedings. She
was the manager of the Spare Parts Distribution Centre. She simply
confirmed that Konecranes
SA supplied parts bearing the appellant’s
MORRIS trade mark.
[19]
The question is whether that evidence was
sufficient to discharge the onus resting on the appellant to show
that it was the appellant
that had made use of the mark in the
various ways described above. The evidence suffered from all the
deficiencies mentioned in
the judgments of this Court in
The
Gap
[5]
and
New Balance
.
[6]
In the former case, which bore some resemblance to this one, Harms JA
said in relation to the evidence produced that the:
‘
evidence
in this regard is not only vague to such an extent that it smacks of
evasiveness, but it is also contradictory. The problem
lies in the
loose structure of the group,
which
consists of companies and partnerships with an overlap of
shareholders and directors. The group, it appears, tends to ignore
corporate identities and moved enterprises between companies. For
instance, at times, the fourth appellant itself conducted business
and, at other times, a business under its name appeared to be an
operating division of the second appellant. In line with
this
approach, Dr Vahed said that when the group obtained control of the
proprietor it (the group) 'acquired' the 'Gap' trade marks.
These
were dealt with as group property, any member using them whenever it
suited it. If then, in a 200 page affidavit, Dr Vahed
dealt with the
issue of licensing in a single phrase, saying that the use by
the members of the group since 1983 was 'with
the licence' of
the proprietor, one has to conclude that this was no more than a mere
allegation and did not amount to factual
evidence. Affidavits in
application proceedings must do more than make bald allegations; they
must, in addition, provide the facts
that support the allegations.
If the licence had been in terms of a written agreement, one
would have expected some particularity
and perhaps even the
production of a copy; if oral, one would have expected some
indication of between whom, when and where; if
tacit, an allegation
to that effect with the facts that gave rise to the tacit agreement
would not have been out of place. In
any event, the grant
of a licence to the group is not only improbable but also
incompatible with the perception that existed within
the group that
the trade marks belonged to the group.’
[20]
In
New Balance
the Court was concerned with evidence
(or the lack of it) dealing with actual use of the mark at the
relevant time. No invoices
or any other proof of sales were adduced
in support of the appellant’s case. Nugent JA said in regard to
the complete absence
of documentary evidence of sales during the
relevant period:
[7]
‘
But
in any event it is not necessary to find that the ambiguity, and
absence of supporting evidence, was deliberate. The fact
remains
that there is no clear evidence that the alleged use occurred during
the relevant period, and the surrounding circumstances
revealed in
the affidavits provide no sufficient basis for inferring that they
must have occurred then. Whatever corroborating
evidence might or
might not be required in proceedings of this kind, what is
called for, at the least, is clear and unambiguous
factual evidence
that brings the matter within the terms of the section. I agree with
the court below that the evidence was insufficient
for that purpose.
In
the absence of clear and unambiguous proof of relevant use during the
relevant period, the trademarks of New Balance Inc are
liable to be
removed from the register …’
[21]
I would caution that in neither of these
cases was the court suggesting that the onus resting on the
proprietor of the trade mark
was anything more than a requirement to
establish
bona fide
use
by the proprietor of the mark on a balance of probabilities. But, if
clear and unambiguous proof of facts, such as sales contracts,
invoices, trading accounts and financial records, should be available
to demonstrate that the proprietor used the mark, the failure
to
produce such proof will count heavily against the party bearing the
onus. Here, apart from the single ambiguous invoice referred
to in
para 11, not a single document was produced that unequivocally
demonstrated that the mark was being used by the appellant,
even in
the extended sense that indirect ‘back door’ trading was
recognised as use in
Wistyn
.
[8]
[22]
In the present case there is no evidence at
all that the appellant continues to produce cranes or trade in them
or is commercially
active. If it is we do not know whether it is
still producing cranes under the MORRIS brand or has merged its
operations with its
parent, Konecranes Plc. We do not know whether
Konecranes Plc is now using the MORRIS mark and, if so, on what
basis. Certainly
it, or its South African subsidiary or associate,
seems to be using a wide variety of marks that Konecranes Plc claims
are collectively
owned by it and constitute its brands.
[23]
The other feature of importance in my view
is the complete failure to respond to the challenge raised by the
respondent to the existence
of the ‘internal arrangement’
under which Konecranes (either Plc or SA) was said to be distributing
MORRIS branded
products in South Africa. We are dealing with an
international group of companies that is a global giant in its field
of operations.
When GW took over the business of MHE great care was
taken to assign particular trade marks including the one in dispute.
That
trade mark has been in existence on the South African register
since its registration in 1936. I find it difficult to believe that
if there were an arrangement under which either the international or
the South African company was acting as distributor for MORRIS
branded products in this country there would be no record of it. In
enterprises of that size records are kept of such matters in
formal
agreements, minutes of board and executive meetings and in
correspondence. Yet none of these have been produced. In their
absence the position in my view is that the appellant failed to
discharge the onus resting upon it of showing on a balance of
probabilities
bona fide
use
by it, as the proprietor of the mark, during the relevant period.
[24]
The appeal is dismissed with costs, such
costs to include those consequent upon the employment of two counsel.
________________________
M J D WALLIS
JUDGE OF APPEAL
Appearances
For
appellant:
R Michau SC (with him L Harilal)
Instructed by:
Adams and Adams Inc, Pretoria
Honey Attorneys, Bloemfontein
For respondent:
L Bowman SC (with him I Joubert)
Instructed
by:
Spoor and Fisher, Pretoria
Phatshoane Henney Attorneys, Bloemfontein.
[1]
A M Moolla Group Ltd and Others v Gap Inc and
Others
2005 (6) SA 568
(SCA) (
The
Gap
) para 28.
[2]
Westminster Tobacco (Cape Town and London)
(Pty) Ltd v Philip Morris Products SA
[2017]
ZASCA 10
;
[2017] 2 All SA 389
(SCA) para 7.
[3]
Plc is an acronym for public limited company and
Oyj is the Finnish equivalent.
[4]
Earlier in this affidavit Mr Campbell said that
references to ‘Konecranes’ should be understood as
references to Konecranes
Plc, the parent company.
[5]
The Gap
para 31.
[6]
New Balance Athletic Shoe Inc v Dajee and
Others
[2012] ZASCA 3
; 2012 BIP 102
(SCA).
[7]
New Balance
paras
22 and 23.
[8]
Wistyn Enterprises (Pty) Ltd v Levi Strauss &
Co and Another
1986 (4) SA 796
(T).