Passing off: When your business’s reputation is threatened

Passing off is a delictual remedy that is derived from English law and has been implemented in South African law.

The most authoritative definition of passing off was given in the Capital Estate and General Agencies (Pty) Limited v Holiday Inns Inc. case (“the Holiday Inns case”) as when a person represents his business or merchandise as the business or merchandise of another person.

An example of passing off is depicted in the Holiday Inns case. In this case, the Supreme Court of Appeal confirmed the High Court’s decision interdicting Capital Estate and General Agencies (Pty) Limited from using the words “Holiday Inn” in the course of, or in relation to its business, or to any business with which it is concerned or connected, in such a manner, form or context as is likely to lead members of the public to believe that such business is, or is connected with, the business of Holiday Inns Inc.

Accordingly, the Holiday Inns case tells us that for a representation to be considered as passing off, one must enquire whether there is a reasonable possibility that the relevant section of the public may be confused between the businesses and believe that one business may be connected with the other.

In the English Jif Lemon case, the Court determined certain factors that must be considered to succeed with a passing off claim. These factors are sometimes referred to as the “classical trinity”, namely:

1. goodwill or reputation;
2. a misrepresentation; and
3. damage.

South African Courts prefer the word “reputation” to “goodwill”. In the Herbal Zone v Infitech Technologies (2017) ZASCA 347 (SCA) case, it was held that in order to prove passing off, it must be proved that:

1. the business has a reputation;
2. there is a misrepresentation that is likely to deceive the relevant section of the public into believing that the business, goods or services of one business is that of another’s; and
3. .there is damage, in the sense that the misrepresentation must damage, or be likely to cause damage to, the aggrieved business’s reputation.

“Reputation” for the purposes of passing off in South Africa was defined in the Premier Trading Company (Pty) Ltd & Anor v Sportopia (Pty) Ltd 2000 (3) SA 259 (SCA) case. The Court held that reputation is the opinion of the relevant section of the public regarding your product.

In Caterham Car Sales and Coachworks Ltd v Birkin Cars (Pty) Ltd & Anor 1998 (3) SA 939 (SCA), the Supreme Court of Appeal provided guidance on the difference between goodwill and reputation. The Court held that it is incorrect to equate goodwill with reputation. It was held that goodwill is the “totality of attributes that lure clients”.

The Court further held that, in order to determine passing off, the Courts must ask whether, in a practical and business sense, a sufficient reputation exists amongst a substantial number of persons who are either clients or potential clients of the business. The Court went on to hold that a reputation must exist where the misrepresentation occurs. In other words, there must be a threat to the business’s reputation in the country or area to be sufficient to prove passing off.

If you are of the opinion that another business is passing off, you are entitled to seek a court order against it compelling it to refrain from representing its business or merchandise as your business or merchandise. You will also be entitled to claim for the damage or loss sustained by virtue of the passing off. The Court concerned will consider the factors and guidelines provided in the abovementioned cases, amongst others, in reaching its decision.

Reference List:

• Capital Estate and General Agencies (Pty) Limited v Holiday Inns Inc. 1977 2 SA 916 (A)
• Reckitt & Colman Products Ltd v Borden Inc & Ors [1990] RPC 341 (HL)
• Herbal Zone v Infitech Technologies (2017) ZASCA 347 (SCA)
• Premier Trading Company (Pty) Ltd & Anor v Sportopia (Pty) Ltd 2000 (3) SA 259 (SCA)
• Caterham Car Sales and Coachworks Ltd v Birkin Cars (Pty) Ltd & Anor 1998 (3) SA 939 (SCA)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)