REPORTABLE (116)

Judgment No. SC 68/04

Civil Appeal No. 149/03

POLARIS ZIMBABWE (PRIVATE) LIMITED v ZAPCHEM DETERGENT MANUFACTURERS CC (trading as STARCHEM)

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, CHEDA JA & ZIYAMBI JA

HARARE, JUNE 1 & DECEMBER 16, 2004

R M Fitches, for the appellant

J C Andersen SC, for the respondent

ZIYAMBI JA: The appellant, to whom I shall refer as “Polaris”, is a distributor and manufacturer of home care products. Its business consists in the re-packing and distribution of certain home care products as well as the manufacture and distribution of others.

The respondent, (“Zapchem”) is a South African company, which conducts business as a manufacturer of detergent powders. The respondent has been producing two types of detergent powder, known as “ENERGY” and “ENERGY MICRO” (“the detergent powders”), under the trademark “ENERGY” since 1993 and exporting the product to Zimbabwe through its local agent since 1995.

It was common cause in the court a quo that the respondent’s agent in Zimbabwe was New Group (Pvt) Ltd (“New Group”) who would purchase, in bulk, the detergent powder as well as the accompanying boxes from the respondent and market them in Zimbabwe. It was also common cause that the appellant and New Group had an agreement in terms of which the appellant would purchase, in bulk, the detergent powders and boxes from New Group, arrange for the packing of the detergent powders into ENERGY boxes and distribute the packaged detergent powders to wholesale and retail outlets in Zimbabwe.

In 1998 a company called Woodoc (Private) Limited - now known as New-wood Holdings (Private) Limited - (“Woodoc”) took over from New Group the agency for the detergent powders in Zimbabwe. Thus Woodoc was the sole importer of the detergent powders from the respondent and the appellant was the sole customer of Woodoc in relation to the detergent powders. The appellant placed orders twice a year with Woodoc and between 1997 and 1999 purchased about eight to ten thousand kilograms of the detergent powders annually.

All went well until September 1999 when the appellant indicated its intention to manufacture the packaging locally, as the cost of importing the packaging from South Africa was proving too high and it was thought that the cost of the detergent powders could be reduced if the packaging was locally manufactured. The respondent says it agreed to the local manufacture of the boxes on condition that a disclaimer was placed on the boxes that the detergent powders were:

“Packed in Zimbabwe under the authority of the licensed owners and distributors of Energy products by Polaris Zimbabwe (Pvt) Limited.”

Thereafter it supplied the detergent powders to the appellant without the packaging material or boxes.

Although the appellant’s contention was that it did not require the consent or permission of the respondent or its agent, Woodoc, in order to manufacture the boxes locally, the learned judge in the court a quo was of the view, correctly in my judgment, that this dispute of fact was not material to the determination of the issues before him since it was common cause that:

“Polaris manufactured the boxes locally and packed the detergent powder for local sale where Zapchem believed that its conditions had been met and Polaris believed that there was no need to be authorized to produce the boxes locally as in any case Zapchem was not the registered owner of the trademark ENERGY in Zimbabwe nor was Woodoc the licensed user of the trademark. What is also not in dispute is that the locally manufactured boxes were a replica of Zapchem’s boxes. The get-up was the same and so was the trademark or trade name.”

It seems that the last order placed by Polaris for the detergent powders and supplied by Woodoc was in September 1999. Once its stocks were finished, it is common cause that Polaris imported a different detergent powder from Austria, packed it in the same boxes which it had used for packing the detergent powders from Zapchem and sold it to the Zimbabwean customer.

The respondent therefore sought an order in the High Court –

(1) restraining Polaris from passing off the Austrian detergent powder as being that of or associated with Zapchem;

(2) restraining Polaris from using the trademark ENERGY in relation to detergent powder other than the detergent powder manufactured by or with the authority of Zapchem;

(3) restraining Polaris from using Zapchem’s ENERGY get-up or any get-up which is confusingly similar to Zapchem’s ENERGY get-up in relation to any detergent powder other than Zapchem’s detergent powder; and

(4) requiring Polaris to deliver up to Zapchem any packaging, advertising or promotional material, business stationery or other documents in the possession of, or under the control of, Polaris bearing the trademark ENERGY or bearing Zapchem’s get-up.

The respondent’s application was upheld in the court a quo.

The appellant appeals on the following grounds:

“1. That the learned Judge in the court (a quo) erred in finding that the respondent had the necessary locus standi to institute the application in the court below;

2. That the learned judge in the court (a quo) erred in finding that the respondent had goodwill in and to the names or trademarks ENERGY and ENERGY MICRO in Zimbabwe;

(3) That the learned judge in the court (a quo) erred in finding that the appellant had no goodwill in and to the names of ENERGY and ENERGY MICRO in Zimbabwe; and

(4) That the learned judge in the court(a quo) erred in finding that the requirements for the granting of an interdict against the appellant had been satisfied in this matter.”

Before dealing with the grounds of appeal, it is convenient to deal with an application made by the appellant to lead further evidence on appeal.

The appellant sought leave to lead evidence on appeal on the basis that:

“… crucial evidence, material to the matter, which was made available to the appellant’s late legal practitioner of record, Mr Brooks, was not produced for examination at the hearing.

These were samples of locally produced boxes which reflect the name of the appellant and not of the respondent as the supplier of the detergent powders.”

The application was opposed in principle by Mr Andersen, who appeared for the respondent, on the ground that the evidence, if led, would not have a material effect on the judgment.

The cases referred to us by Mr Fitches correctly reflect the legal principles applicable in an application of this nature.

Thus, it has been held that such an application will only be granted where special grounds exist and where it is clear that such a course will not unfairly prejudice the other side and will enable the court to do justice between the parties. See Kearns v Walter Enterprises SC-160-90.

An application of this nature is never lightly granted and the evidence sought to be led must not with reasonable diligence have been obtainable for use at the trial. And the applicant must prove that the evidence could not with reasonable diligence have been obtained at the trial. See Farmers Co–op v Borden Syndicate 1961 R & N 28 at 31 B-C.

There should be finality to a trial, so a party can only adduce further evidence in exceptional cases in a civil matter. The court will only call for new documentary evidence if it is satisfied that a major injustice would otherwise be done and that the evidence will settle all argument. See Kearns v Walter Enterprises supra. In that case it was said at p 5 of the judgment:

“In the circumstances, we did not wish to set a precedent for litigants to treat the Supreme Court as a second court of first instance, a court in which they can try out the issue again on fresh facts if the first set of facts proves to be inadequate.”

Even where the appellant was unaware of the evidence sought to be adduced the appeal court is very reluctant to allow new evidence, even if it is decisive and the appellant was unaware of it before. The particular circumstances of the case need to outweigh the general undesirability of allowing evidence on appeal. See Leopard Rock Hotel v Walenn Construction SC-233-93.

“There are two conflicting principles always operating in these matters. One is that everything should be done to ascertain the truth; the other is that there should be some finality in litigation, and, so far as possible, a reasonable limitation of costs. It is to achieve the latter result that it is necessary for the court to impose some limit to the re-opening of decided issues, even at the risk that injustice may result or that there is the possibility of injustice resulting.”

See Braddock v Tillotsons Newspapers Ltd [1949] 2 All ER 306 at 311A.

None of the cases quoted support the appellant’s case.

The evidence sought to be led on appeal was available at the time of the trial and in possession of the appellant’s legal practitioner. Not only has there been no explanation by the appellant as to why the evidence was not produced at the trial, but the appellant has failed to show that the evidence sought to be led on appeal would materially affect the outcome of the appeal. (See the Leopard Rock Hotel case supra). Applying the above principles therefore, the application must fail.

I turn to consider the merits of the appeal.

The contention advanced on behalf of the appellant was that the respondent did not prove in the court a quo that, in respect of the detergent powders, it had acquired a business reputation which is a sine qua non in a passing-off action. The appellant also raised before us the issue of the locus standi of the respondent. It was alleged that the respondent, not being the holder of the goodwill in the detergent powders, had no locus standi to make this application.

A plaintiff in passing-off proceedings must prove that the property in the goodwill, which he seeks to protect, vests in him. See Webster and Page South African Law of Trade Marks 3 ed p 428. Reputation is a component of goodwill. See F W Woolworth & Co (Zimbabwe) (Pvt) Ltd v The W Store & Anor 1998 (2) ZLR 402 (S), where GUBBAY CJ at p 404 D-G set out the general principles applicable in passing-off cases as follows:

“These principles were lucidly identified, with reference to leading authorities, in Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd 1998 (3) SA 938 (SCA) where, at 947E-948B, HARMS JA said:

‘The essence of an action for passing-off is to protect a business against a misrepresentation of a particular kind, namely that the business, goods or services of the representor is that of the plaintiff or is associated therewith (Capital Estate & General Agencies (Pty) Ltd and Ors v Holiday Inns Inc and Ors 1977 (2) SA 916 (A) at 929 C-D). In other words, it protects against deception as to a trade source or to a business connection (Reckitt & Colman SA (Pty) Ltd v SC Johnson & Son SA (Pty) Ltd 1993 (2) SA 307 (A) at 315B). Misrepresentations of this kind can be committed only in relation to a business that has goodwill or a drawing power (Afrikaans: “werfkrag”). Goodwill is the totality of attributes that lure or entice clients or potential clients to support a particular business (cf A Becker & Co (Pty) Ltd v Becker and Ors 1981 (3) SA 406 (A) at 417A). The components of goodwill are many and diverse (O’Kennedy v Smit 1948 (2) SA 63 (C) at 66; Jacobs v Minister of Agriculture 1972 (4) SA 608 (W) at 624A-625F). Well recognised are the locality and the personality of the driving force behind the business (ibid), business licences (Receiver of Revenue, Cape v Cavanagh 1912 AD 459), agreements such as restraints of trade (Botha and Anor v Carapax Shadeports (Pty) Ltd 1992 (1) SA 202 (A) at 211H-I) and reputation. These components are not necessarily all present in the goodwill of any particular business.

The only component of goodwill of a business that can be damaged by means of a passing-off is its reputation and it is for this reason that the first requirement for a successful passing-off action is proof of the relevant reputation (Hoechst Pharmaceuticals (Pty) Ltd v The Beauty Box (Pty) Ltd (in liquidation) and Anor 1987 (2) SA 600 (A) at 613 F-G; Brian Boswell Circus (Pty) Ltd and Anor v Boswell-Wilke Circus (Pty) Ltd 1985 (4) SA 466 (A) at 479D; Williams t/a Jennifer Williams & Associates and Anor v Life-Line Southern Transvaal 1996 (3) SA 408 (A) at 419 A-B, 420B). Misrepresentations concerning other components of goodwill are protected by other causes of action such as claims for injurious falsehoods.’”

In Kinemas Ltd v African Theatres Ltd 1928 WLD 100, it was held that the owner of the goods, or the person who has proprietary rights in the goods, or the assignee of the goods, has the locus standi to sue for passing-off if his or her rights are infringed by the act complained of. See also Frank & Hirsch (Pty) Ltd v Roopanand 1987 (3) SA 165 (D) at 188H-189D and 189 H-I; Roamer Watch Co SA & Anor v African Textile Distributors 1980 (2) SA 254 (W) at 264 D-F; Cambridge Plan AG and Anor v Moore and Ors 1987 (4) SA 821 at 834 H-J. A determination as to the ownership of the goodwill in the detergent powders will therefore settle the question of locus standi.

It was contended on behalf of the appellant in the court a quo that ownership of the goodwill in the detergent powders vests in the appellant by reason of the latter being the exclusive vendor of the detergent powders in Zimbabwe. The learned judge found that Polaris, being not the manufacturer of the goods but merely a trader in them, had not acquired goodwill in respect thereof. At p 10 of the cyclostyled judgment he remarked:

“The only situation in which a trader in the position of Polaris can acquire goodwill in respect of a product which is manufactured by another but sold by itself is postulated in Unlawful Competition (by Van Heerden and Neethling) at p 168 where the learned authors state:

‘The issue in question frequently enjoyed the attention of the courts in regard to parallel importation. A trader who has the sole right to sell and distribute in South Africa a product which is packed by a foreign manufacturer under his own trade name, and who sells and distributes the product completely unaltered without adding anything to the name or get-up, may not sue on the ground of passing-off if a rival trader imports and distributes the same product in the same get-up. Since the trade name and get-up distinguish the manufacturer’s business and products, only the manufacturer, and not the distributing agent, acquires the right to the distinctive mark. On the other hand, where such an agent (bare licencee) is not ‘a mere conduit for the goods of another’ but ‘markets its own product under its own name’, he in principle has locus standi to institute an action for passing off. In this case the bare licencee indeed acquires his own right to the distinctive mark.’”

He then went on to find that the goodwill in the detergent powders which was created in Zimbabwe belonged to the respondent. Still at p 10 of the cyclostyled judgment he said:

“In my view, Polaris, though not an agent but outright purchaser of Zapchem’s product, is in no different position to the agent or bare licencee referred to in the above passage who does not market the product in its own name. It is a ‘mere conduit for the goods of another’. Goodwill cannot exist in the air. It exists in the context of the undertaking which produces the goods to which the force of attraction relates. I am quite satisfied that the goodwill created in Zimbabwe is that of Zapchem as the manufacturer of the detergent power and as successor to Starchem. Polaris did not sell the detergent powder as its own product or make it apparent in any way that the detergent powder was its own. How then could it have been associated with the detergent powder and the goodwill flowing from its sale in Zimbabwe? All that Polaris did was pack Zapchem’s detergent powder into Zapchem’s boxes and sell it. Later it packed the Austrian detergent powder in boxes bearing Zapchem’s trade name and get-up and sold it to the public. In this sense it represented that the Austrian detergent powder (which is Polaris’s own product for the present purposes) is the detergent powder manufactured by or associated with Zapchem. Polaris clearly passed off its product as that of Zapchem or associated with Zapchem and thereby committed the wrong of passing off.”

The approach and the findings of the learned judge are, in my view, unassailable.

Accordingly, the respondent, being the owner of the goodwill, and by inference the reputation, in the property, had the locus standi to bring the application.

The learned judge’s finding set out above has in effect disposed of the first three grounds of appeal. It also disposes, in my view, of the final ground of appeal, namely, that the requirements for an interdict were not met.

The appellant’s contention in this regard was that the court a quo erred in issuing an interdict, as the respondent had not proved business reputation and an infringement of a right to an existing goodwill.

It was common cause in the court a quo that the detergent powders had acquired a reputation in Zimbabwe. The following passage, quoted from p 11 of the cyclostyled judgment, bears this out:

“The issue in this application was, as I have already pointed out, whether the goodwill attached to Zapchem or to Polaris. There was no argument whether or not any goodwill had been created in Zimbabwe. In fact, it was commonly accepted that the detergent powder had acquired a reputation in this country. Having resolved that the goodwill attached to Zapchem, there is no longer any impediment to a finding in favour of Zapchem.”

The learned judge having found that the goodwill in the detergent powders vested in the respondent, it goes without saying that there was an infringement of the respondent’s rights of ownership of the goodwill in the detergent powders by the appellant, which packed and sold its own detergent powder in boxes carrying a get-up identical to the respondent’s. The intention can only have been to deceive the public into thinking that the product contained in the boxes was that manufactured by the respondent under the name and mark “ENERGY”. Accordingly the learned judge cannot be faulted in his conclusion that the appellant had committed the wrong of passing-off. That being so, the interdict was correctly granted.

In the premises the appeal is without merit and it is hereby dismissed with costs.

CHIDYAUSIKU  CJ: I agree.

CHEDA JA: I agree.

Honey & Blanckenberg, appellant's legal practitioners

Gill, Godlonton & Gerrans, respondent's legal practitioners