IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

In the matter between: 

And

and in the counter-application between:

JUDGMENT DELIVERED ON 1 NOVEMBER 2010

YEKISO, J
[1] This matter concerns an application, on the one hand, and a counter-application, on the other hand, for interdictory relief based on the common law delict of passing off. These applications will be referred to as the main application and the counter application as and when a need will arise to specifically refer to each such application.

[2] Two applicants have been cited in the main application whilst only one applicant has been cited in the counter-application.

[2.1.] The first applicant in the main application is Centrecore CC ("Centrecore"), bearing registration no 1986/017212/23, a close corporation duly incorporated in terms of the Close Corporation Act, 69 of 1984 ("the Close Corporation Act") having its registered address at 20 Station Road, Maitland

[2.2.] The second applicant is Timbercore CC ("Timbercore"), bearing registration  no  1989/020923/23,  similarly a close corporation  duly incorporated in terms of the Close Corporation Act, having its registered address at 33 Station Road, Maitland.

[3]
[3.1.] By way of a notice of motion issued out of this Court, the applicants in the main application seek an interdictory relief against Timbacore CC ("Timbacore") and a Nathaniel Roberts ("Roberts"), cited as the first and the second respondents, respectively, interdicting and restraining the first and the second respondent from passing off their business and the goods sold in their business as being those of the applicants or, as being associated with those of the first and the second applicant, by the use of the trade marks Centrecore and Timbacore, or any other mark that is deceptively or confusingly similar to the trade marks Centrecore and Timbacore, in relation to their business and goods sold in their business.

[3.3.] Uniform SA Ltd and the Registrar of Close Corporations have been cited as the third and the fourth respondents, respectively, in their capacities as the controller of co.za domain names and the controller of the register of Close Corporations. No relief is sought against Uniform SA Ltd and the Registrar of Close Corporations in the event both these entities not opposing the granting of the relief sought.

[5] A further relief sought, both in the main application and the counter-application, is an order directing Timbacore and Roberts, the first and the second respondents in the main application and, in the instance of the counter-application, an order directing Centrecore and Timbercore, the first and the second respondents in the counter-application, to do all that is necessary to change the names of the respective close corporations to a name, in each case, that is not confusingly or deceptively similar to the trade name and trade mark complained of. Before setting out the legal position relating to the law of unlawful competition, in particular, that of passing-off, it is appropriate at this stage to determine if the relief contemplated in this paragraph, namely, an order directing the respondents in the instance of both the application and a counter-application to change the names of the close corporations concerned, is competent. In the paragraphs which follow, the parties shall be referred to as cited in the main application.

ORDER TO CHANGE NAME

[7] Section 20(1) and (2) of the Close Corporation Act, in broad terms, provides that if, within one year after incorporation of a close corporation it appears to the Registrar that a name as included in the founding statement is undesirable, he or she must order the close corporation concerned to change the offending name. Furthermore, the section provides that any interested person may, similarly within a period of one year after the registration of a founding statement and, on payment of the prescribed fee, apply in writing to the Registrar for an order directing the close corporation concerned to change its name on the ground of undesirability or on the ground that such a name is calculated to cause damage to the person making such an application.

[8] The section further provides that any interested person may also, within a period of two (2) years after registration of a close corporation, on the same grounds as indicated in the preceding paragraph, apply to court for an order directing the close corporation to change its name, and the court may, pursuant to such an application, make such order as it deems fit. However, whatever prohibition there may be in regard to change of name or any right to apply to court for such change of name, does not in any way detract from the common law right to institute an action against a close corporation for passing-off a business, goods or services as that of another.

THE LAW RELATING TO PASSING-OFF

"The wrong known as passing-off consists in a representation by one person that his business (or merchandise, as the case may be) is that of another, or that it is associated with that of another and, in order to determine whether a representation amounts to a passing-off, one enquires whether there is a reasonable likelihood that members of the public may be confused into believing that the business of one is, or is connected with, that of another."

[12] From the navigation of authorities, it emerges that in a passing-off action a plaintiff must prove the following two things: [12.1] That the trade mark, get up, service mark or trade name which he or she claims has been imitated is known in the market and has acquired with the public a reputation associated with the goods, services or business. Reputation has been said to mean that a substantial number of persons (not every one) are aware of the product and its qualities.

[12.2.]   That the defendant's conduct is calculated to deceive the public.

Thus, each one of the applicants, in both the main application and the counter-application, in order to succeed in their respective claims, must prove the existence of reputation at the time of the commission of the conduct complained of and a representation made by the offending party that is likely to cause confusion amongst purchasers or potential purchasers of the product.

[13] The business activities of all the three entities mentioned in the main application and the counter-application, must be assessed on the basis of the evidence made available to me in order to determine if passing-off has been established. I commence this exercise by casting my search light on Centrecore.

CENTRECORE
[14] Nathaniel Roberts, the second respondent in the main application, explains in his answering affidavit and the founding affidavit in the counter-application, the circumstances under which he initially conducted business, for his own account, initially under the name Centrecore North and, ultimately, under the name and style Centrecore Timbers.   According to
Roberts' version, sometime towards the end of 1999 or the beginning of 2000 he made a proposal to one Harvey Downes, who had a member's interest in both the first and the second applicant, to commence his own business under a separate legal entity. With Downes' express permission he had a close corporation registered under the name Centrecore North. Centrecore and Centrecore North initially shared the same premises at Maitland. Whilst Centrecore carried on with the manufacturing and supply of timber products, Centrecore North's business activity was only limited to the installation of the finished timber products. According to Roberts, from the beginning of 2001 until towards the end of 2006, and with full knowledge and consent of Centrecore, he carried on trade under the name and style of Centrecore Timbers. During that time, according to his version, he (Roberts) was responsible for advertising and the promotion of Centrecore brand and trade mark, thus contributing to building up Centrecore's reputation.

[15] Sometime in January 2006 Roberts approached Downes of the first respondent and asked him if he could use the name Timbercore CC in carrying on trade to which request Downes agreed. Up until then, there had been a raging dispute between the first applicant and Roberts regarding the use of the trade name and trade mark Centrecore.   On 11

[16] In paragraph 116 of his answering affidavit and a founding affidavit to the counter-application, Roberts states that Centrecore CC had been aware that the first respondent (Timbacore) had been carrying on trade as Timbacore; that since then Timbacore (first respondent) advertised in many of the same publications as did Centrecore; that they have had frequent dealing with each other, being in the same industry and, despite this, Timbacore has never received either a call or a letter of demand demanding that Timbacore desist from carrying trade under that name. Under these circumstances, it can thus clearly be said that the first applicant acquiesced in the use of the trade name and the trademark of Timbacore. Thus, the first applicant, Centrecore, would be precluded, at this late stage, to start complaining that Timbacore is passing off its goods, services or business as that of Centrecore.

[17] The first applicant complains that Timbacore CC advertised as Centrecore in the 2008/2009 and 2009/2010 White and Yellow Pages telephone directory and right above the Centrecore CC entry. The first respondent's (Timbacore CC) response to this complaint is that since it had since 2000 traded under the name and style of Centrecore North until it changed its name to Timbacore CC, it had to accommodate clients for whom work had been done under the name Centrecore North who may have wished to follow up with the first respondent, as for an example, pursuant to a guarantee in respect of work done but who may not have been aware of the first respondent's name change. Roberts thus explains that the listing was not intended to constitute use as a trade mark and that he will in any event not renew the listing when it comes up for renewal at the end of 2010, since most guarantee period would have run out by then. In my view, this is a plausible explanation. The conduct of the first respondent (Timbacore) cannot, in circumstances outlined above, be construed as constituting passing-off.

[18] Whilst the first applicant admits that an agreement was reached in terms of which Roberts would starts his own business under the name Centrecore North, it is stated on behalf of the first applicant that this was subject to a number of conditions, a breach of which would entitle the first applicant to withdraw the authority to use the name Centrecore. The first respondent denies that the agreement to use the trademark Centrecore was subject to any conditions. The conditions referred to have in any event not been specified, so that there is no basis to reject the first respondent's version that no conditions were attached to the use of the brand or trade mark Centrecore in circumstances stated by Roberts as being improbable.

TIMBERCORE
[19] It is stated in the applicant's founding affidavit to the main application that the applicants and their predecessor-in-title have since
1978 made continuous use of the Centrecore and Timbercore trade marks in relation to goods, such as fences, decks, cabins, garden poles and services relating to such goods in, amongst others, Western Cape and that the marks have become synonymous with the applicants. And then, of course, claims are being made of significant amounts of money having been spent on advertising the Timbercore mark and that income has been generated through use of the Timbercore trade mark. A reference is then made to a March 2007 copy of a Homemakers publication wherein the logo "Centrecore Timbers" appears as suppliers and installers of timber products. For the period 1 July 2006 to 30 June 2007 an amount of R240,000-00 is claimed to have been spent on advertisements and for the period 1 July 2007 to 30 November 2008 an amount of R406,000-00 is claimed to have been spent on advertising. Prior to 2006, an approximate amount of R16,000-00 is claimed to have been spent on advertising and other promotional efforts.

[20] Only composite figures have been furnished in respect of the advertisements of both the Centrecore and Timbercore trade marks with no indication as regards how much was specifically spent in respect of the Timbercore brand. In the advertisement in the Homemakers publication referred to in the previous paragraph there is only a reference to
Centrecore and there is no specific mention of an entity Timbercore. No particulars relating to the turnover made in respect of Timbercore have been supplied; no financial records or statements, duly verified by Timbercore's accounting officer have been supplied; no income tax returns have been supplied in proof of a contention that Timbercore has been trading since 1978; no bank statements have been supplied to indicate income generated and expenditure incurred in the course of trade. No annual financial statements which are required to be made in terms of section 58 of the Close Corporation Act, have been supplied. The only documents annexed to the replying affidavit, in an attempt to show that Timbercore was trading, are annexures COR2.1, being a letter from Spoornet dated 15 April 1991 demanding payment of outstanding municipal rates; annexure COR2.2 being a letter from Intersite dated 10 July 2002 demanding payment of arrear rentals; annexure COR2.3 being a diagram of the leased premises in Maitland and dated 8 December 1989 in which reference is made to "lease of land to Harvey Downes trading as Timbercore". This in no way indicates that the entity concerned was effectively carrying on trade at the time, and particularly at the time the first respondent commenced trading under the name and style of Timbacore on 1 January 2007.

[22] On the basis of the evidence before me, there does not appear to be any evidence to show that, at the time Timbacore commenced trading, Timbercore was indeed carrying on trade.     Accordingly, no credible evidence has been adduced to show that Timbercore, at the time Timbacore commenced trade at the beginning of January 2007, was trading and had thus acquired any reputation worthy of protection.

TIMBACORE
[23] Timbacore is the subject of the application in the counter-application. It seeks an order to interdict and restrain the first applicant (Centrecore CC) and the second applicant (Timbercore CC) from passing off their business and the goods sold in their business as being those of the first respondent (Timbacore). For Timbacore to succeed in the relief sought, it has to prove all those elements referred to in paragraph [12] of this judgment, namely, that it has acquired with the public a reputation associated with its goods, service or business and that its business activity is not calculated to deceive members of the public.

[25] In paragraph 30 of the founding affidavit to the counter-application Roberts states how the marketing material, signage, advertisements and branding was changed from the name Centrecore North to Timbacore and all costs attendant to such change. He estimates that the name change alone cost him approximately R100,000-00; he comments about the registration of the domain name towards the end of 2006 and simultaneously ran a website; copies of advertisements in the publication "Elegance at home - Blaauwberg" wherein the trade mark Timbacore is clearly depicted, is attached; a reference is also made to copies of the first applicant's advertisements annexed to the founding affidavit in the main application wherein the trade mark Timbacore is clearly depicted; the costs of branding for the period 2007 to May 2009 being in the order of R1,256,610-00 and a copy of a statement of account from Home Focus magazine in respect of advertisements for the period up to March 2009 to the tune of R181,262-00 is similarly attached over and above the costs of advertising on Cape Talk which for the year 2008 amounted to R192,000-00. Roberts further states in his affidavit that as a result of marketing and promotional activities of the first respondent in respect of its Timbacore brand, its business has grown substantially and produces a healthy turnover; that a turnover for the year ending 30 June 2007 was R7,684,382-00; for the financial year June 2008, the turnover was in an amount of R8,213,819-00 and for the period ending January 2009 the turnover was in an amount of R5,960,176-00.

[26] Roberts concludes by stating that as a result of the extensive use of the trade mark Timbacore by the first respondent (Timbacore), the trade mark Timbacore has become synonymous with the goods and services of the first respondent in the minds of the purchasing public, and that the first respondent has built up a substantial reputation and goodwill which is associated with its Timbacore trade mark.
[27] The first and the second applicants naturally deny the averments by Roberts which denials, in my view, are bald ad unsubstantiated.

DECEPTION

■

That conduct constitutes deception, in the absence of clear evidence that the trade name Timbercore was used in the course of trade and in circumstances where the first respondent (Timbacore) was given permission to carry on trade under that name.

[34] As I have pointed out in the previous paragraph, it is trite that corporate entities exist independently of their members. Proceedings against members individually, can only be instituted against those members individually, in the case of close corporations, in those circumstances set out in sections 63 and 64 of the Close Corporation Act. In these proceedings, it has not been shown that the second respondent has fallen foul of any of the provisions of sections 63 and 64 of the Close Corporation Act so as to trigger personal liability. It therefore follows that the citation of the second respondent, as an independent party, is not appropriate.

[36]      In the result, the following order is made:

[36.1.] The relief sought in terms of paragraphs 4,5 and 6 of the notice of motion and the notice of counter-application is not competent and, accordingly, no order is made for the relief contemplated in those paragraphs.

[36.2.] The application of Centrecore CC (the first applicant) and Timbercore CC (the second applicant) is dismissed with costs.
[36.3.] As to the counter-application, the relief sought in terms of paragraphs 1, 2, 3 and 7 of the notice of counter-application is hereby granted.

[36.4.] The first and the second applicants in the main application are ordered to pay the first and the second respondents' costs in the main application and the applicant's costs in the counter-application, duly taxed or as agreed, such costs to include costs arising from citation of the second respondent, as a party, in the main application.