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: goodwill or reputation; a misrepresentation; and 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: the business has a reputation; 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 .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)
Prescription: Lack of knowledge regarding legal conclusions
The Constitutional Court in the matter of Mtokonya v Minister of Police [2017] ZACC 33 dealt with the issue of extinctive prescription, in particular regarding whether section 12(3) of the Act requires a creditor to have knowledge of a debtor’s wrongful and actionable conduct, which gave rise to the debt, before prescription may start running against the creditor. Although the Supreme Court of Appeal has pronounced on this issue in a number of cases, the CC has never had the opportunity of pronouncing upon it until now. This case gave the CC an opportunity to pronounce, once and for all, on this issue to settle the law. In this case, the Applicant was arrested and detained by members of the Respondent on 27 September 2010. At the beginning of July 2013, the Applicant consulted an attorney, who after investigating the facts of his arrest and detention, informed him that he was unlawfully arrested and detained and as such had a civil claim for damages against the Respondent. The necessary notice was given to the Respondent in July 2013 and summons was served in April 2014. The Respondent contended that the Applicant’s claim had become prescribed, which the Applicant disputed on the basis that he did not know that he had any claim against the Respondent before consulting his attorney in July 2013 and as such the prescription of his claim could only start to run from July 2013, as this was the first time he obtained “knowledge” of the legal consequences of the actions of the Respondent. The question asked, upon which the Court had to make a ruling, was whether knowledge of a legal remedy is required for prescription to run? The starting point in considering this question, is to point out that the question calls for an analysis of section 12(3) of the Act. This section, in summary, provides that: As the general rule, prescription can only commence to run as soon as the debt is due, subject to three exceptions, namely: Prescription does not commence to run against a creditor if the debtor wilfully prevents him from coming to know of the existence of the debt; The debt is not deemed to be due until the creditor has knowledge of two things, namely knowledge of the identity of the debtor and knowledge of the facts from which the debt arose; and The creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care. The said section of the Act, clearly does not make provision for, nor does it require, the creditor to have knowledge of any right to sue the debtor. The Act also does not require him to have knowledge of legal conclusions that may be drawn from “the facts from which the debt arises”. The facts from which the debt arises are the facts which a creditor would need to prove in order to establish the liability of the debtor. The question arises, whether knowing that the conduct of the debtor is wrongful and actionable is knowledge of a fact? The section does not provide for, nor requires, knowledge of legal opinions or conclusions, or the availability in law of a remedy. A distinction between the question of fact and the question of law needs to be made, which in itself is not always easy to make. The Court considered this and relayed that a conclusion of law results when legal effects are assigned to events and that a question of fact usually calls for proof where a question of law usually calls for argument. The Court found that knowledge of a debtor’s wrongful and actionable conduct is knowledge of a legal conclusion and not knowledge of fact, and as such falls outside the scope of the Act. The facts from which a debt arises are the facts of the incident or transaction, which, if proved, would mean that in law the debtor is liable to the creditor. This case has now become settled law in that section 12(3) of the Act requires knowledge only of the material facts from which the debt arises for the prescriptive period to begin running – it does not require knowledge of the relevant legal conclusions (i.e. that the facts constitute negligence) or of the existence of an expert opinion which supports such conclusions. The interpretation and application of this Act remains technical in nature, and it is advised to obtain legal advice in the event of doubt. Reference List: Prescription Act 68 of 1969 Links v Department of Health, Northern [Cape} Province 2016 (4) SA 414 (CC) Mtokonya v Minister of Police [2017] ZACC 33 Loni v Member of the Executive Council, Department of Health Eastern Cape, Bhisho [2018] ZACC 2 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)