Boyd and Thorne Property Investments CC t/a Landlords v Landlords Residential Letting and Sales CC and Others (6947/2012) [2013] ZAWCHC 38 (22 February 2013)

THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No:6947/2012

In the matter between:

BOYD AND THORNE PROPERTY

INVESTMENTS CC T/A LANDLORDS ............................................................................Applicant

Versus

LANDLORDS RESIDENTIAL LETTING

& SALES CC ..............................................................................................................1st Respondent

MARK BESTER ..........................................................................................................2ndRespondent

BARRY IVAN BESTER ...............................................................................................3rd Respondent

JUDGMENT delivered this 22nd day of February 2013

NDITA; J

[1] This is an application to restrain the respondents from passing off its letting and rental business as that of the applicant. The alleged passing off is concerned with the use of the brand-name ‘Landlords’ which the applicant registered as a trademark during 2009. The applicant alleges that the passing off is detrimental to its goodwill or business. The nature of the relief sought is an order:

1. interdicting the respondents from using or trading under the name "Landlords’ and or using the logo ‘Landlords, We do rentals’] 2. directing that the respondents remove the brand name “Landlords” from all and any documentation or material, advertising or promoting them; 3. directing the respondents to cease passing themselves off as being in any way affiliated to the applicant. The applicant prayed that should this court be of the view that the respondent has raised further any bona fide dispute of facts

material to the relief sought, that the relief sought, then such relief should still be granted on interim basis, subject to the action to be instituted by the applicant. [2] The applicant conducts a property management business of letting immovable property on behalf of its clients throughout the Republic, but primarily in the Western Cape. The first respondent is a vehicle through which the second and third respondents conduct a trade similar to that of the applicant. In addition, the second respondent is a former franchisee of the applicant, whilst the third respondent is an agent employed by the second respondent, tasked with managing the affairs of the franchise. The second respondent is also the third’s respondent’s son. [3] The applicant is a long established business that has been involved in the letting of immovable property for approximately 15 years. It has been throughout this period and is still trading under the name ‘Landlords’ and in addition thereto, uses the logo Landlords, We do rentals’. In a founding affidavit deposed to by Mr Michael John William Thorne, it is alleged that the Applicant is the only entity in its field of business trading under the name ‘Landlords’ in the Western Cape, but for the respondents. When the business expanded over the years, the applicant registered the name ‘Landlords’ as a trademark in accordance with the Provisions of the Trademark Act 194 of 1993. To this end, the Department of Trade and Industry

issued on 7 July 2009 a certification of registration effective for a period of 10 years. [4] It is not in dispute that on 14 May 2009, the applicant, represented by Messrs Patrick Boyd and Thorne, entered into a franchise

agreement with the second respondent, entitling the latter to use the franchisor’s name and identity in connection with the estate agent business. Clause 17 of the agreement describes the name and identity as: ! the Franchisors name and such other names, such marks, designs, logo, colour schemes and other matter and material as are from time to time and for the time being in use by the Franchisor’s network.’ As earlier pointed out, the third respondent was employed as the first respondent’s agent. It is on this basis that he was permitted to use the ‘Landlords’ trade name, although there really was no formal relationship between him and the applicant. The relations between the parties became acrimonious over time resulting in the termination of the franchise agreement. It is not possible to discern from these papers precisely when, or under what circumstances the franchise agreement between the parties terminated. What is clear though is that by agreement between the parties, the applicant obtained an order from this court per Allie; J, on 14 September 2011 in terms of which the second respondent was: ‘interdicted and restrained from engaging in the business of a rental agent/estate or being in any way directly or indirectly involved or associated with the business of a rental agent/estate agent in the areas of Cape Town, Western Cape known as the Southern Suburbs being the area extending from the CBD (Cape Town City Centre) southwards along easterly aspect of the Peninsula up to and including Simonstown.’ Be that as it may, the crux of the applicant’s case is that the respondents despite the cancellation of the agreement continue

trading as ‘Landlords’, a name recognised as the applicant’s trading name in the industry. [5] The applicant alleges that it has in the past and continues to expend large sums of money every year in developing the brand

‘Landlords’. This includes the development and upgrading of the internet website, weekly placement of newspaper adverts, colour advertisement in the yellow pages, production of leaflets and brochures, holding of property rental seminars, deployment of employees for the purpose of marketing the brand-name and sponsorship of various sporting and social events. According to the applicant, the respondent’s

use of the brand-name bearing the logo ‘LANDLORDS’ creates confusion to their clientele, more specifically with regard to the premises situate in Grand Central, Wynberg. This is so because the applicant manages 20 properties in the building whilst the first respondent also manages several properties in the same building. Stated differently, the applicant alleges that the two separate entities, namely, the applicant and the second respondent manage premises in the same building bearing a similar name. The franchise agreement depicts the applicant’s trade-name as follows: PLEASE CHECK PDF FOR BETTER VIEW “LANDLORDS wwwJattdtords^a.com UWE BO MENTALS55 Boyd & Th0rae Property I«¥estoents cc The first respondent trades as ‘Landlords Residential Letting and Sales CC’, but in a copy of a lease agreement relating to Alistair Neil Jamieson the second respondent’s trade name as depicted ‘Landlords Residential Letting ‘ as shown below. [6] According to the applicant, when the franchise agreement was entered into on 19 October 2010, the first respondent was incorporated to enable the second and third respondents to use it as a vehicle for the franchise business. According to an electronic enquiry from the office of the Companies and Intellectual Property Registration Office (CIPRO) annexed to the papers, the first respondent is indeed registered as such and the second and third respondents are reflected as members. [7] The applicant, in addition, bases its entitlement to the relief sought on the terms of the agreement prohibiting the use of the of words and identity associated with the franchise on termination of the agreement. Clause 25 states as follows: ’25 CONSEQUNCES OF TERMINATION 25.1. Upon termination of this agreement for whatever reason the Franchisee shall ..... 25.1.9. Furthermore, the Franchisee undertakes in favour of the Franchisor that any trademarks or logos which it may adopt and use after termination of this agreement in connection with the rental and sale of real estate, brokerage, or related services will not contain any words in the Franchise Name and identity any [sic] of the Franchisor or its trademarks’. [8] The respondents in the opposing affidavit state that the first and third respondents are not bound by the terms of the franchise

agreement between the applicant and the second respondent as they were not party to it. The second respondent averred that on or about 26 January 2009, he was employed by the applicant as an intern estate agent. He confirmed entering into the subject agreement but stated that due to lack of qualifications he was unable to operate the franchise. In terms of the Estate Agents Act of 1976 as well as Regulations promulgated thereunder, he could not: 1. Open an account in the name of the franchise or his personal name; 2. sign any rental or sale agreement as an estate agent: 3. obtain a Fidelity Fund certificate; 4. claim commission as an estate agent in respect of transactions with which he assisted third parties; 5. act as a principal of an agency. According to his averments, it is for this reason that he solicited the assistance of the third respondent to act as principal for the franchise. For this reason, according to the second respondent, the agreement was void or voidable as the applicant cannot invoke any terms thereof against the second respondent. [9] With regard to the restraint of trade order issued on 14 September 2011, the second respondent alleges that because he was not represented by his current attorney, the issues were not properly placed before court. In his opinion, had they been, the court would not have granted the interdictory relief, which was, in any event, by consent between the parties. But the respondents admit that the first respondent was formed as legal entity to carry out the franchise obligations but that the second respondent resigned as a member of the first applicant. The affidavit contains no details of precisely when he resigned. [10] Although the first respondent has been trading under ‘Landlords Residential Letting and Sales’ since 19 October 2010, the respondents dispute that they were entitled to trade as ‘Landlords’ under the franchise agreement. Put differently, the second respondent’s trading under the name ‘Landlords’ is not related to the franchise agreement in any manner. The respondents further dispute that the name of the applicant carries

any goodwill as there are two more estate agents utilising it. In support thereof they attached copies of an internet search

reflecting a domain named ‘landlords.co.za’. According to the information provided, the company has its registered office in Somerset West and provides ‘On Line Information Resources and Services for Landlord’. A further reason for the non-existence of goodwill and reputation , according to the respondents, is that the appellant is registered as a close corporation under the name and style ‘Boyd & Thorne Property Investments CC’and not ‘Landlords’, and its Fidelity Fund Certificate similarly does not reflect the alleged brand-name. In addition, according to the respondents, even if it can be accepted there is goodwill, the business of the first and third respondents is distinguishable from that of the applicant in that the former also sells immovable property and does not operate in the letting field solely. [11] It must be understood that for the purpose of this judgment, the alleged passing off relates to the respondent’s conduct after the order issued by Allie J, on 14 September 2011. The second respondent readily admits being the applicant’s franchisee,

but denies that he is a member of the first respondent. In other words any liability arising from the franchise agreement cannot be imputed on the first and third respondents. His version is that he resigned from the first respondent. As stated previously, he has not divulged the details of the period during which he tendered his resignation from the second respondent. A company search annexed to the papers reveals that as at 19 October 2010, the second and third respondents were active members of the first respondent. It makes sense to deal with this contention from the outset. The applicant in attempting to establish that the second applicant was involved in the business after the issuing of the order referred to above, attached to the papers an email sent by the third

respondent’s secretary, Zennie Smith, on 14 December 2011 regarding a renewal of the lease at 636 Grand Central. The email was sent to Alistair Jamieson and copied to an email address bearing the name of the second respondent at markbester.sa@qmail.com . It reads as follows: ‘Dear Tenant We notice that your lease renewal has not been signed, as a matter of urgency kindly sign and return the the lease renewal via fax: 021 975-9170 or email no later than the 19th of December 2011’ Kind regards Zennie Smith Receptionist [12] The second respondent admits that the email was indeed addressed to him, but states that he was no longer using the email address as it was used by the company. In short, this amounts to a bare denial of the applicant’s contention that the second respondent was involved in the affairs of the first respondent after 14 September 201. With regard to a bare denial, it was held in Room Hire Co (Pty) Ltd v Jeppe Street Mansions Pty (Ltd) 1949 (3) SA 1155 (T) at 1155 that: ‘(A) bare denial of applicant’s material averments cannot be regarded as sufficient to defeat the applicant’s right to secure relief by motion proceedings in appropriate cases. Enough must be stated by respondent to enable the Court. . . to conduct a preliminary examination of the position and ascertain whether the denials are not fictitious, intended merely to delay the hearing. The respondent’s affidavits must, at least disclose that there are material issues in which there is a bona fide dispute of fact capable of being decided only after viva voce evidence has been led.’ [13] In my view, the lack of details of the second respondent’s resignation from the first respondent, coupled with the vague explanation relating to the use of his email address, renders his defence on this aspect unconvincing or fictitious. I now consider the law relating to passing of. [14] It is settled law that the wrong known as passing off consists in a representation by one person that his/her business (or merchandise, as the case maybe) 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 the one is, or is connected, with that of another. Whether there is a reasonable likelihood of such confusion arising, it is, of course, a question of fact which will have to be determined in the light of the circumstances of each case.(See Capital Estate and General Agencies (Pty) Ltd and Others v Holiday Inns Inc and Others 1977 (2) SA 916 (A). Given that passing off is recognised as one of the forms of unlawful competition, the remarks in Stellenbosch Wine Trust Ltd and Another v Oude Meester Group Ltd 1972 (3) SA (C) at 161G - 162 B are relevant; ‘It must be conceded that these phrases, fairness in competition and honesty in trade, have an old-fashioned ring about them which may cause the cynic in business to smile, but it is right that the Courts should have regard to and emphasise these virtues. Moreover the phrases are somewhat elastic, as difficult to apply in some cases as the concept of the reasonable man is difficult to apply. Nevertheless, if our law is to develop and is to offer the commercial man protection from unlawful interference in his business, the Courts will not disregard the fairness and honesty. A trader who makes fraudulent misrepresentations about his own business to the detriment of his rivals’ business is guilty of unlawful interference. So also a trader who passes off his goods as being those of a competitor, or makes injurious false statements concerning his competitors’ business. In each case the interference is unlawful and actionable; and in each case the conduct is unfair or dishonest. I have no doubt that the trader who filches information from a competitor, information which he knows to be secret and confidential, and which has been developed by competitor’s skill and industry, is acting unfairly and dishonestly if he uses the information for his own profit and to the detriment of his rival. His conduct amounts to deliberate misappropriating of a business asset which was acquired by another’s skill and industry. It is difficult to appreciate how this conduct differs in principle from the conduct of a man who steals goods from the shelves of a rival’s shop. Both types of conduct constitute unlawful interference with the trade of another; both types of conduct are in my view actionable, and fall within the principles of the Lex Aquilia. I have accordingly come to the conclusion that the applicant is in law entitled to the relief claimed.’ [15] The applicant seeks a final interdict. It must therefore establish: 1. a clear right 2. an injury actually committed or reasonably apprehended; and 3. the absence of similar protection by any other remedy. Counsel for the respondents contended that the applicant does not possess a right which entitles it to restrain the respondents from the use of the name ‘Landlords’. This is particularly so because there are at least two estate agents utilising the subject name. Neither has it produced any evidence of an injury actually committed or reasonably apprehended. These issues are dealt with in detail later in this judgment. DISPUTE OF FACTS [16] The relief the applicant seeks is final relief and to the extent that there are any factual disputes such an order can only be granted if the facts as alleged in the applicant’s affidavits, which have been admitted by the respondent, together with facts alleged by the respondent, justify such an order. (See Plascon-Evans v Van Riebeeck Paints [1984] ZASCA 51; 1984 (3) SA 623 (A)). The facts in this case are largely undisputed. They are that the second respondent is a former franchisee of the applicant,

trading under the name of the first respondent, having employed the third respondent as a principal. What could be perceived as a factual dispute is the allegation that the franchise agreement is either void or voidable as a result of the second respondent’s

lack of qualifications to act as a franchisee. In my view, based on the common cause facts, this does not qualify as a genuine dispute facts. First, in an order by Allie J, taken by agreement between the parties, the second respondent without any reservations considered himself bound by the terms of the agreement. I am mindful of the averments by the second respondent to the effect the order referred to was taken by agreement due to ill-advice from the counsel who represented him during that hearing. However, it is noteworthy that on subsequent appeal, that issue has not been raised as a ground of appeal. Second, the respondents unequivocally admit conducting business through the franchise, and to this end, paid the requisite franchise fees. The second respondent at the commencement of the business knew of his limitations, and for this reason engaged the services of the third respondent. He did not cancel the agreement but chose to abide by it for almost a period of 12 months, reaping the benefits therefrom. On the respondents’ own version, the third respondent conducted the business of the franchise pursuant to the agreement entered into by the second respondent. To this end, the second respondents states: ‘First Respondent, Landlord Residential Letting and Sales CC, was incorporated on 19 October 2010. The reason why this was done, is because I had been advised by the Applicant’s representatives, including the deponent to the founding affidavit, to sign the franchise agreement on behalf of a legal entity, to be formed’ He further states that: “Third respondent acted as my principal due to the fact that I was an intern agent and was not lawfully entitled to operate as independent franchisee”. A further puzzling aspect is the assertion by the respondents that the franchise agreement was unlawfully cancelled by the applicant. It seems to me that if the agreement was in their version void, it is a contradiction to aver an unlawful cancellation. That said, I turn to consider the defence that the applicant has not established a clear right to the exclusive use of the name ‘Landlord’. [17] I have already indicated earlier in this judgment that the respondents argue that the applicant holds no exclusive right in the use of the name ‘Landlords’ and has therefore failed to establish a clear right. In addition, the respondents contend that the ordinary person is unlikely to confuse the two businesses because the names ‘Landlords - We do rentals’ and Landlords Residential Letting and Sales” contain legends beyond the word ‘Landlords’. For this reason, so it was argued, the business of the applicant and that of the third respondent are distinguishable as it is not possible to confuse the two names. According to the respondents, registration of the name as a trademark does not give the applicant an exclusive right to the use of the words Landlords’. A further argument advanced on behalf of the applicant that the applicant has not gained any goodwill or reputation under the name and style of landlords for the following reasons: 1. The applicant is registered as a close corporation under the name ‘Boyd StThorne Investments CC 'and no reference is made to ‘Landlords’. 2. The applicant’s Fidelity Fund Certificate is issued under the name and style of “Boyd & Thorne Investments without reference to the name 'Landlords'. [9] It must be stated from the outset that the latter contention is disingenuous because the very franchise agreement between the applicant and second respond plainly reflects that ‘Boyd &Thorne Investments is trading as ‘Landlords’. Clearly, ‘Landlords’ is the name under which the business or operation of the applicant is conducted and presented. In fact the very franchise agreement

under which the first respondent carried its business not only reflects this state of affairs, it also has the name “LANDLORDS" emboldened on it. Furthermore, by entering into the agreement, the respondents acquired a right to trade as “LANDLORDS”. [19] Ordinarily the name ‘Landlords’ is open to everyone to use unless the applicant has obtained either by way of registration, or reputation, a distinctive monopoly in that name. It is not the applicant’s case that it has exclusive use of the word ‘Landlords’ solely on the basis that it has registered a trademark. The applicant’s claim to its exclusive use must be examined in the light of the averments in the papers. Counsel for the applicant pointed out that the applicant’s primary field of business in the immovable property rental industry has developed and considerable time and money has been invested in the name entitles

it to goodwill worthy of protection. The respondent’s denial of applicant’s reputation is bare. The applicant’s

version is strengthened by the fact that the respondents, although denying that the applicant has goodwill and reputation, purchased a franchise from the applicant and paid franchise fees and commission for the use of its name. I am satisfied that on the balance of probabilities the applicant acquired and enjoyed a reputation in trading in ‘Landlords’, Such reputation is in my view sufficient to found a clear right. [20] The next question to consider is whether there is a likelihood that members of the public may be confused that the business of the one, is or is connected, with that of the other. To this end, it must be stated that it is not disputed that both the applicant and the respondents are involved in the same field of industry, in the same geographical area and in some instances in the same premises. The matter does not end there. The respondents whilst the franchise agreement was in existence were trading as ‘Landlords’. Subsequent to the cancellation of the agreement, they conducted business as ‘Landlords’. This is the passing-off that is alleged by the applicant. It can be accepted that the applicant has, for several years been trading under the name “Landlords Residential Letting and Sales". The applicant in the founding affidavit states that: “22 Not only does the Respondents use of the name “Landlords” cause scope for prospective confusion, it has in fact already caused quite substantial confusion in the public mind. Just by way of example, earlier this year a young lady by the name of Alicia entered our offices asking to speak to “Mark or Barry”. After some confusion it was established that she had approached the building manager of one of the buildings which Applicant manages, the shopping centre known as Grand Central situated at 227 Main Road, Wynberg, Western Cape, who had informed her that should she wish to lease premises in the building she should contact Second or Third Respondent as “Landlords”. Her investigations on the internet as to where the Landlord offices were located bought [sic] her to us. While this obviously was not prejudicial in the specific instance to Applicant it is strongly indicative of the confusion that can arise” [21] In response thereto, the respondents aver that statement attributable to Alicia is hearsay evidence and should not be allowed. In Solmike (Pty) Ltd v West Street Trading Co (Pty) Ltd 1981 (4) SA (D & CLD) 707at 715 D-E the court citing Kerly, Law of Trade Marks and Trade names, 10th edition, at page 478 para 17 -38, accepted that evidence of instances of actual confusion or deception is not essential to

success and stated thus: This, with respect, must be so: for such evidence is, from its very nature, extremely difficult to locate and obtain even when deception is in fact occurring. Furthermore, a person aggrieved by the another’s passing off is obliged to act as quickly as possible to vindicate his rights and avoid further damage: he cannot be expected to wait until the occurrence of provable instances of deception before approaching the court for relief.’ [22] It is so that in the present matter no actual instances of confusion were proved in the affidavits but for unconfirmed allegation

referred to above. But I hold that the following cogent factors increase the danger of confusion: The proximity of the parties’ businesses.

The prior franchise relationship between the parties.

The common field of activity of immovable property rental. In my view, having regard to all the circumstances, there is a strong likelihood that the ordinary person may be confused that the business of the respondent, is or is connected, with that of the applicant, The respondents contend that use of the name ‘Landlords Residential Letting and Sales’ is so dissimilar to the applicant’s trade name ‘Landlords - We do Rentals’ and cannot lead to confusion on the part of the public and denies that its trade name was intended to create confusion or pass off the business as that of the applicant because of the legends beyond ‘Landlords’. The question is whether the adoption of the legends distinguish the respondent’s business from the applicant’s. I incline to the view that the prior reasoning I alluded to earlier when I found that there was a danger of confusion is equally applicable in this instance. [23] With regard to irreparable harm, the applicant alleges that there is a reasonable apprehension that this may occur. In support of this contention the applicant in the founding affidavit says that: ’25. Above and beyond the concern that applicant has that the respondents will derive benefit from fro the use of the applicant’s

trading name there is the further problem that the reason for the breakdown in the relationship between the applicant and the second respondent was primarily due to the fact that second respondent showed a lamentable lack of appreciation for the property rental business. Accordingly in the event that the respondents continue to use the name “Landlords” in the incompetent manner that they have done so in the past, this will negatively reflect on the name to the further detriment of Applicant.” The applicant’s apprehension finds support in an email from Leisure Group to the second and third respondents dated 24 February

2011 to the following effect: ‘Dear Mark and Barry From 1st March we will be taking back all our units at Grant Central and Six when a current Landlords lease expires. We have found your managing of our properties to be of substandard and feel that you must have too many properties with too little staff to handle the standard that was promised to us when we signed our properties over to you. We are unhappy with landlords service in the following areas and have been communicating this to you over a year now, with very little progress in rectifying our concerns happening from your side. The respondents have neither denied nor assailed this averment. They merely take note of its contents. In the result the apprehension

expressed by the applicant is uncontested. [25] In argument, Counsel for the respondents fleetingly and by reference to the case of Nino’s Coffee Bar and Restaurant CC v Nino’s Italian Coffee and Sandwhich Bar CC and Another 1998 (3) SA 656 (C) suggested that the applicant has not established that the respondent’s conduct has resulted in any harm to it. In Kenitex Africa (Pty) Ltd v Coverite (Pty) Ltd 1967 (3^ SA 307 (W) at 308 F it was held that: ‘It is not necessary that the applicant for an interdict must establish on a preponderance of probabilities that injury will follow. It suffices if a reasonable apprehension of injury is one which a reasonable man might entertain on being faced with certain facts.’ More specifically to passing-off, the court in Old Apostolic Church of Africa v Non-White Old Apostolic Church of Africa 1975 (2) SA 884 (C) at 689 B~C ‘In the ordinary type of passing-off case, i.e. where the plaintiff is a trader, when once the likelihood of confusion has been proved it follows almost automatically that the is a real possibility of damage being done to the plaintiff. In this regard Kerly, op.cit.at p. 364, says: “Proof of damage is not in every case essential to enable the plaintiff to maintain his action, for if he shows that the defendant is acting so as to pass off goods as those of the plaintiff which are not the plaintiff it will generally be assumed that the plaintiff is thereby prevented from selling as many of the goods as he otherwise would. But if this assumption is negative by the circumstances of the case, proof of actual or probable damage is necessary.’ [12] For all the above reasons and findings in this judgment, I am satisfied that the applicant has discharged the onus of proving that the use of the word ‘Landlords’ by the respondents constitutes a passing off of its business as that of the applicant. What remains to be considered is whether the first and second respondents, who, throughout these proceedings protested that they were not bound by the terms of the franchise agreement. It will be recalled the applicant in the papers reiterated that the first respondent is a vehicle through which the second and third respondents conduct their business. 1 have already held that the second respondent’s assertion that he resigned from his membership in the first respondent is not supported by any facts and is a bare denial and ought to be rejected. To add to that, the franchise agreement

stipulates that: ‘34. JOINT AND SEVERAL LIABITY If the Franchisee is a partnership, the partners and the Franchisees shall at all times be liable jointly and severally for all

obligations of the Franchisee in terms of and arising from this agreement.’ On the respondent’s own version, the first respondent was the franchise’s corporate vehicle whilst the third respondent was the principal acting in the place of the second respondent who did not have the legal capacity to act. The respondents should therefore be held liable jointly and severally. [26] In the result it is ordered that:: 1. The respondents and any juristic person under their control and/or affiliated with them is hereby ordered to immediately desist from using and/trading under the name “Landlords” and or using the logo “Landlords, We do Rentals.” 2. The brandname “Landlords” be removed from all and any documentation, advertising and promotional material of respondents. 3. The respondent immediately cease passing themselves off as being in any way affiliated with the applicant. 4. The respondents pay costs of this application, jointly and severally, and severally. NDITA; J

1. interdicting the respondents from using or trading under the name "Landlords’ and or using the logo ‘Landlords, We do rentals’]

2. directing that the respondents remove the brand name “Landlords” from all and any documentation or material, advertising or promoting them;

3. directing the respondents to cease passing themselves off as being in any way affiliated to the applicant.

The applicant prayed that should this court be of the view that the respondent has raised further any bona fide dispute of facts

material to the relief sought, that the relief sought, then such relief should still be granted on interim basis, subject to the action to be instituted by the applicant.

[2] The applicant conducts a property management business of letting immovable property on behalf of its clients throughout the Republic, but primarily in the Western Cape. The first respondent is a vehicle through which the second and third respondents conduct a trade similar to that of the applicant. In addition, the second respondent is a former franchisee of the applicant, whilst the third respondent is an agent employed by the second respondent, tasked with managing the affairs of the franchise. The second respondent is also the third’s respondent’s son.

[3] The applicant is a long established business that has been involved in the letting of immovable property for approximately 15 years. It has been throughout this period and is still trading under the name ‘Landlords’ and in addition thereto, uses the logo Landlords, We do rentals’. In a founding affidavit deposed to by Mr Michael John William Thorne, it is alleged that the Applicant is the only entity in its field of business trading under the name ‘Landlords’ in the Western Cape, but for the respondents. When the business expanded over the years, the applicant registered the name ‘Landlords’ as a trademark in accordance with the Provisions of the Trademark Act 194 of 1993. To this end, the Department of Trade and Industry

issued on 7 July 2009 a certification of registration effective for a period of 10 years.

[4] It is not in dispute that on 14 May 2009, the applicant, represented by Messrs Patrick Boyd and Thorne, entered into a franchise

agreement with the second respondent, entitling the latter to use the franchisor’s name and identity in connection with the estate agent business. Clause 17 of the agreement describes the name and identity as:

! the Franchisors name and such other names, such marks, designs, logo, colour schemes and other matter and material as are from time to time and for the time being in use by the Franchisor’s network.’

As earlier pointed out, the third respondent was employed as the first respondent’s agent. It is on this basis that he was permitted to use the ‘Landlords’ trade name, although there really was no formal relationship between him and the applicant. The relations between the parties became acrimonious over time resulting in the termination of the franchise agreement. It is not possible to discern from these papers precisely when, or under what

circumstances the franchise agreement between the parties terminated. What is clear though is that by agreement between the parties, the applicant obtained an order from this court per Allie; J, on 14 September 2011 in terms of which the second respondent was:

‘interdicted and restrained from engaging in the business of a rental agent/estate or being in any way directly or indirectly involved or associated with the business of a rental agent/estate agent in the areas of Cape Town, Western Cape known as the Southern Suburbs being the area extending from the CBD (Cape Town City Centre) southwards along easterly aspect of the Peninsula up to and including Simonstown.’

Be that as it may, the crux of the applicant’s case is that the respondents despite the cancellation of the agreement continue

trading as ‘Landlords’, a name recognised as the applicant’s trading name in the industry.

[5] The applicant alleges that it has in the past and continues to expend large sums of money every year in developing the brand

‘Landlords’. This includes the development and upgrading of the internet website, weekly placement of newspaper adverts, colour advertisement in the yellow pages, production of leaflets and brochures, holding of property rental seminars, deployment of employees for the purpose of marketing the brand-name and sponsorship of various sporting and social events. According to the applicant, the respondent’s

use of the brand-name bearing the logo ‘LANDLORDS’ creates confusion to their clientele, more specifically with regard to the premises situate in Grand Central, Wynberg. This is so because the applicant manages 20 properties in the building whilst the first respondent also manages several properties in the same building. Stated differently, the applicant alleges that the two separate entities, namely, the applicant and the second respondent manage premises in the same building bearing a similar name. The franchise agreement depicts the applicant’s trade-name as follows:

PLEASE CHECK PDF FOR BETTER VIEW

“LANDLORDS

wwwJattdtords^a.com

UWE BO MENTALS55

Boyd & Th0rae Property I«¥estoents cc

The first respondent trades as ‘Landlords Residential Letting and Sales CC’, but in a copy of a lease agreement relating to Alistair Neil Jamieson the second respondent’s trade name as depicted ‘Landlords Residential Letting ‘ as shown below.

[6] According to the applicant, when the franchise agreement was entered into on 19 October 2010, the first respondent was incorporated to enable the second and third respondents to use it as a vehicle for the franchise business. According to an electronic enquiry from the office of the Companies and Intellectual Property Registration Office (CIPRO) annexed to the papers, the

first respondent is indeed registered as such and the second and third respondents are reflected as members.

[7] The applicant, in addition, bases its entitlement to the relief sought on the terms of the agreement prohibiting the use of the of words and identity associated with the franchise on termination of the agreement. Clause 25 states as follows:

’25 CONSEQUNCES OF TERMINATION

25.1. Upon termination of this agreement for whatever reason the Franchisee shall

.....

25.1.9. Furthermore, the Franchisee undertakes in favour of the Franchisor that any trademarks or logos which it may adopt and use after termination of this agreement in connection with the rental and sale of real estate, brokerage, or related services will not contain any words in the Franchise Name and identity any [sic] of the Franchisor or its trademarks’.

[8] The respondents in the opposing affidavit state that the first and third respondents are not bound by the terms of the franchise

agreement between the applicant and the second respondent as they were not party to it. The second respondent averred that on or about 26 January 2009, he was employed by the applicant as an intern estate agent. He confirmed entering into the subject agreement but stated that due to lack of qualifications he was unable to operate the franchise. In terms of the Estate Agents Act of 1976 as well as Regulations promulgated thereunder, he could not:

1. Open an account in the name of the franchise or his personal name;

2. sign any rental or sale agreement as an estate agent:

3. obtain a Fidelity Fund certificate;

4. claim commission as an estate agent in respect of transactions with which he assisted third parties;

5. act as a principal of an agency.

According to his averments, it is for this reason that he solicited the assistance of the third respondent to act as principal for the franchise. For this reason, according to the second respondent, the agreement was void or voidable as the applicant cannot invoke any terms thereof against the second respondent.

[9] With regard to the restraint of trade order issued on 14 September 2011, the second respondent alleges that because he was not represented by his current attorney, the issues were not properly placed before court. In his opinion, had they been, the court would not have granted the interdictory relief, which was, in any event, by consent between the parties. But the respondents admit that the first respondent was formed as legal entity to carry out the franchise obligations but that the second respondent resigned as a member of the first applicant. The affidavit contains no details of precisely when he resigned.

[10] Although the first respondent has been trading under ‘Landlords Residential Letting and Sales’ since 19 October 2010, the respondents dispute that they were entitled to trade as ‘Landlords’ under the franchise agreement. Put differently, the second respondent’s trading under the name ‘Landlords’ is not related to the franchise agreement in any manner. The respondents further dispute that the name of the applicant carries

any goodwill as there are two more estate agents utilising it. In support thereof they attached copies of an internet search

reflecting a domain named ‘landlords.co.za’. According to the information provided, the company has its registered office in Somerset West and provides ‘On Line Information Resources and Services for Landlord’. A further reason for the non-existence of goodwill and reputation , according to the respondents, is that the appellant is registered as a close corporation under the name and style ‘Boyd & Thorne Property Investments CC’and not ‘Landlords’, and its Fidelity Fund Certificate similarly does not reflect the alleged brand-name. In addition, according to the respondents, even if it can be accepted there is goodwill, the business of the first and third respondents is distinguishable from that of the applicant in that the former also sells immovable property and does not operate in the letting field solely.

[11] It must be understood that for the purpose of this judgment, the alleged passing off relates to the respondent’s conduct after the order issued by Allie J, on 14 September 2011. The second respondent readily admits being the applicant’s franchisee,

but denies that he is a member of the first respondent. In other words any liability arising from the franchise agreement cannot be imputed on the first and third respondents. His version is that he resigned from the first respondent. As stated previously, he has not divulged the details of the period during which he tendered his resignation from the second respondent. A company search annexed to the papers reveals that as at 19

October 2010, the second and third respondents were active members of the first respondent.

It makes sense to deal with this contention from the outset. The applicant in attempting to establish that the second applicant was involved in the business after the issuing of the order referred to above, attached to the papers an email sent by the third

respondent’s secretary, Zennie Smith, on 14 December 2011 regarding a renewal of the lease at 636 Grand Central. The email was sent to Alistair Jamieson and copied to an email address bearing the name of the second respondent at markbester.sa@qmail.com . It reads as follows:

‘Dear Tenant

We notice that your lease renewal has not been signed, as a matter of urgency kindly sign and return the the lease renewal via fax: 021 975-9170 or email no later than the 19th of December 2011’

Kind regards Zennie Smith Receptionist

[12] The second respondent admits that the email was indeed addressed to him, but states that he was no longer using the email address as it was used by the company. In short, this amounts to a bare denial of the applicant’s contention that the second respondent was involved in the affairs of the first respondent after 14 September 201. With regard to a bare denial, it was held in Room Hire Co (Pty) Ltd v Jeppe Street Mansions Pty (Ltd) 1949 (3) SA 1155 (T) at 1155 that:

‘(A) bare denial of applicant’s material averments cannot be regarded as sufficient to defeat the applicant’s right to secure relief by motion proceedings in appropriate cases. Enough must be stated by respondent to enable the Court. . . to conduct a preliminary examination of the position and ascertain whether the denials are not fictitious, intended merely to delay the hearing. The respondent’s affidavits must, at least disclose that there are material issues in which there is a bona fide dispute of fact capable of being decided only after viva voce evidence has been led.’

[13] In my view, the lack of details of the second respondent’s resignation from the first respondent, coupled with the vague explanation relating to the use of his email address, renders his defence on this aspect unconvincing or fictitious. I now consider the law relating to passing of.

[14] It is settled law that the wrong known as passing off consists in a representation by one person that his/her business (or merchandise, as the case maybe) 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 the one is, or is connected, with that of another. Whether there is a reasonable likelihood of such confusion arising, it is, of course, a question of fact which will have to be determined in the light of the circumstances of each case.(See Capital Estate and General Agencies (Pty) Ltd and Others v Holiday Inns Inc and Others 1977 (2) SA 916 (A). Given that passing off is recognised as one of the forms of unlawful competition, the remarks in Stellenbosch Wine Trust Ltd and Another v Oude Meester Group Ltd 1972 (3) SA (C) at 161G - 162 B are relevant;

‘It must be conceded that these phrases, fairness in competition and honesty in trade, have an old-fashioned ring about them which may cause the cynic in business to smile, but it is right that the Courts should have regard to and emphasise these virtues. Moreover the phrases are somewhat elastic, as difficult to apply in some cases as the concept of the reasonable man is difficult to apply. Nevertheless, if our law is to develop and is to offer the commercial man protection from unlawful interference in his business, the Courts will not disregard the fairness and honesty. A trader who makes fraudulent misrepresentations about his own business to the detriment of his rivals’ business is guilty of unlawful interference. So also a trader who passes off his goods as being those of a competitor, or makes injurious false statements concerning his competitors’ business. In each case the interference is unlawful and actionable; and in each case the conduct is unfair or dishonest. I have no doubt that the trader who filches information from a competitor, information which he knows to be secret and confidential, and which has been developed by competitor’s skill and industry, is acting unfairly and dishonestly if he uses the information for his own profit and to the detriment of his rival. His conduct amounts to deliberate misappropriating of a business asset which was acquired by another’s skill and industry. It is difficult to appreciate how this conduct differs in principle from the conduct of a man who steals goods from the shelves of a rival’s shop. Both types of conduct constitute unlawful interference with the trade of another; both types of conduct are in my view actionable, and fall within the principles of the Lex Aquilia. I have accordingly come to the conclusion that the applicant is in law entitled to the relief claimed.’

[15] The applicant seeks a final interdict. It must therefore establish:

1. a clear right

2. an injury actually committed or reasonably apprehended; and

3. the absence of similar protection by any other remedy.

Counsel for the respondents contended that the applicant does not possess a right which entitles it to restrain the respondents from the use of the name ‘Landlords’. This is particularly so because there are at least two estate agents utilising the subject name. Neither has it produced any evidence of an injury actually committed or reasonably apprehended. These issues are dealt with in detail later in this judgment.

DISPUTE OF FACTS

[16] The relief the applicant seeks is final relief and to the extent that there are any factual disputes such an order can only be granted if the facts as alleged in the applicant’s affidavits, which have been admitted by the respondent, together with facts alleged by the respondent, justify such an order. (See Plascon-Evans v Van Riebeeck Paints [1984] ZASCA 51; 1984 (3) SA 623 (A)). The facts in this case are largely undisputed. They are that the second respondent is a former franchisee of the applicant,

trading under the name of the first respondent, having employed the third respondent as a principal. What could be perceived as a factual dispute is the allegation that the franchise agreement is either void or voidable as a result of the second respondent’s

lack of qualifications to act as a franchisee. In my view, based on the common cause facts, this does not qualify as a genuine dispute facts. First, in an order by Allie J, taken by agreement between the parties, the second respondent without any reservations considered himself bound by the terms of the agreement. I am mindful of the averments by the second respondent to the effect the order referred to was taken by agreement due to ill-advice from the counsel who represented him during that hearing. However, it is noteworthy that on subsequent appeal, that issue has not been raised as a ground of appeal. Second, the respondents unequivocally admit conducting business through the franchise, and to this end, paid the requisite franchise fees. The second respondent at the commencement of the business knew of his limitations, and for this reason engaged the services of the third respondent. He did not cancel the agreement but chose to abide by it for almost a period of 12 months, reaping the benefits therefrom. On the respondents’ own version, the third respondent conducted the business of the franchise pursuant to the agreement entered into by the second respondent. To this end, the second respondents states:

‘First Respondent, Landlord Residential Letting and Sales CC, was incorporated on 19 October 2010.

The reason why this was done, is because I had been advised by the Applicant’s representatives, including the deponent to the founding affidavit, to sign the franchise agreement on behalf of a legal entity, to be formed’

He further states that:

“Third respondent acted as my principal due to the fact that I was an intern agent and was not lawfully entitled to operate as independent franchisee”.

A further puzzling aspect is the assertion by the respondents that the franchise agreement was unlawfully cancelled by the applicant. It seems to me that if the agreement was in their version void, it is a contradiction to aver an unlawful cancellation. That said, I turn to consider the defence that the applicant has not established a clear right to the exclusive use of the name ‘Landlord’.

[17] I have already indicated earlier in this judgment that the respondents argue that the applicant holds no exclusive right in the use of the name ‘Landlords’ and has therefore failed to establish a clear right. In addition, the respondents contend that the ordinary person is unlikely to confuse the two businesses because the names ‘Landlords - We do rentals’ and Landlords Residential Letting and Sales” contain legends beyond the word ‘Landlords’. For this reason, so it was argued, the business of the applicant and that of the third respondent are distinguishable as it is not possible to confuse the two names. According to the respondents, registration of the name as a trademark does not give the applicant an exclusive right to the use of the words Landlords’. A further argument advanced on behalf of the applicant that the applicant has not gained any goodwill or reputation under the name and style of landlords for the following reasons:

1. The applicant is registered as a close corporation under the name ‘Boyd StThorne Investments CC 'and no reference is made to ‘Landlords’.

2. The applicant’s Fidelity Fund Certificate is issued under the name and style of “Boyd & Thorne Investments without reference to the name 'Landlords'.

[9] It must be stated from the outset that the latter contention is disingenuous because the very franchise agreement between the applicant and second respond plainly reflects that ‘Boyd &Thorne Investments is trading as ‘Landlords’. Clearly, ‘Landlords’ is the name under which the business or operation of the applicant is conducted and presented. In fact the very franchise agreement

under which the first respondent carried its business not only reflects this state of affairs, it also has the name “LANDLORDS" emboldened on it. Furthermore, by entering into the agreement, the respondents acquired a right to trade as “LANDLORDS”.

[19] Ordinarily the name ‘Landlords’ is open to everyone to use unless the applicant has obtained either by way of registration, or reputation, a distinctive monopoly in that name. It is not the applicant’s case that it has exclusive use of the word ‘Landlords’ solely on the basis that it has registered a trademark. The applicant’s claim to its exclusive use must be examined in the light of the averments in the papers. Counsel for the applicant pointed out that the applicant’s primary field of business in the immovable property rental industry has developed and considerable time and money has been invested in the name entitles

it to goodwill worthy of protection. The respondent’s denial of applicant’s reputation is bare. The applicant’s

version is strengthened by the fact that the respondents, although denying that the applicant has goodwill and reputation, purchased a franchise from the applicant and paid franchise fees and commission for the use of its name. I am satisfied that on the balance of probabilities the applicant acquired and enjoyed a reputation in

trading in ‘Landlords’, Such reputation is in my view sufficient to found a clear right.

[20] The next question to consider is whether there is a likelihood that members of the public may be confused that the business of the one, is or is connected, with that of the other. To this end, it must be stated that it is not disputed that both the applicant and the respondents are involved in the same field of industry, in the same geographical area and in some instances in the same premises. The matter does not end there. The respondents whilst the franchise agreement was in existence were trading as ‘Landlords’. Subsequent to the cancellation of the agreement, they conducted business as ‘Landlords’. This is the passing-off that is alleged by the applicant. It can be accepted that the applicant has, for several years been trading under the name “Landlords Residential Letting and Sales". The applicant in the founding affidavit states that:

“22 Not only does the Respondents use of the name “Landlords” cause scope for prospective confusion, it has in fact already caused quite substantial confusion in the public mind. Just by way of example, earlier this year a young lady by the name of Alicia entered our offices asking to speak to “Mark or Barry”. After some confusion it was established that she had approached the building manager of one of the buildings which Applicant manages, the shopping centre known as Grand Central situated at 227 Main Road, Wynberg, Western Cape, who had informed her that should she wish to lease premises in the building she should contact Second or Third Respondent as “Landlords”. Her investigations on the internet as to where the Landlord offices were located bought [sic] her to us. While this obviously was not

prejudicial in the specific instance to Applicant it is strongly indicative of the confusion that can arise”

[21] In response thereto, the respondents aver that statement attributable to Alicia is hearsay evidence and should not be allowed.

In Solmike (Pty) Ltd v West Street Trading Co (Pty) Ltd 1981 (4) SA (D &

CLD) 707at 715 D-E the court citing Kerly, Law of Trade Marks and Trade names, 10th edition, at page 478 para 17 -38, accepted that evidence of instances of actual confusion or deception is not essential to

success and stated thus:

This, with respect, must be so: for such evidence is, from its very nature, extremely difficult to locate and obtain even when deception is in fact occurring. Furthermore, a person aggrieved by the another’s passing off is obliged to act as quickly as possible to vindicate his rights and avoid further damage: he cannot be expected to wait until the occurrence of provable instances of deception before approaching the court for relief.’

[22] It is so that in the present matter no actual instances of confusion were proved in the affidavits but for unconfirmed allegation

referred to above. But I hold that the following cogent factors increase the danger of confusion:

The proximity of the parties’ businesses.

The prior franchise relationship between the parties.

The common field of activity of immovable property rental.

In my view, having regard to all the circumstances, there is a strong likelihood that the ordinary person may be confused that the business of the respondent, is or is connected, with that of the applicant,

The respondents contend that use of the name ‘Landlords Residential Letting and Sales’ is so dissimilar to the applicant’s trade name ‘Landlords - We do Rentals’ and cannot lead to confusion on the part of the public and denies that its trade name was intended to create confusion or pass off the business as that of the applicant because of the legends beyond ‘Landlords’. The question is whether the adoption of the legends distinguish the respondent’s business from the applicant’s. I incline to the view that the prior reasoning I alluded to earlier when I found that there was a danger of confusion is equally applicable in this instance.

[23] With regard to irreparable harm, the applicant alleges that there is a reasonable apprehension that this may occur. In support of this contention the applicant in the founding affidavit says that:

’25. Above and beyond the concern that applicant has that the respondents will derive benefit from fro the use of the applicant’s

trading name there is the further problem that the reason for the breakdown in the relationship between the applicant and the second respondent was primarily due to the fact that second respondent showed a lamentable lack of appreciation for the property rental business. Accordingly in the event that the respondents continue to use the name “Landlords” in the incompetent manner that they have done so in the past, this will negatively reflect on the name to the further detriment of Applicant.”

The applicant’s apprehension finds support in an email from Leisure Group to the second and third respondents dated 24 February

2011 to the following effect:

‘Dear Mark and Barry

From 1st March we will be taking back all our units at Grant Central and Six when a current Landlords lease expires. We have found your managing of our properties to be of substandard and feel that you must have too many properties with too little staff to handle the standard that was promised to us when we signed our properties over to you.

We are unhappy with landlords service in the following areas and have been communicating this to you over a year now, with very little progress in rectifying our concerns happening from your side.

The respondents have neither denied nor assailed this averment. They merely take note of its contents. In the result the apprehension

expressed by the applicant is uncontested.

[25] In argument, Counsel for the respondents fleetingly and by reference to the case of Nino’s Coffee Bar and Restaurant CC v Nino’s Italian Coffee and Sandwhich Bar CC and Another 1998 (3) SA 656 (C) suggested that the applicant has not established that the respondent’s conduct has resulted in any harm to it. In Kenitex Africa (Pty) Ltd v Coverite (Pty) Ltd 1967 (3^ SA 307 (W) at 308 F it was held that:

‘It is not necessary that the applicant for an interdict must establish on a preponderance of probabilities that injury will follow. It suffices if a reasonable apprehension of injury is one which a reasonable man might entertain on being faced with certain facts.’

More specifically to passing-off, the court in Old Apostolic Church of Africa v Non-White Old Apostolic Church of Africa 1975 (2) SA 884 (C) at 689 B~C

‘In the ordinary type of passing-off case, i.e. where the plaintiff is a trader, when once the likelihood of confusion has been proved it follows almost automatically that the is a real possibility of damage being done to the plaintiff. In this regard Kerly, op.cit.at p. 364, says:

“Proof of damage is not in every case essential to enable the plaintiff to maintain his action, for if he shows that the defendant is acting so as to pass off goods as those of the plaintiff which are not the plaintiff it will generally be assumed that the plaintiff is thereby prevented from selling as many of the goods as he otherwise would. But if this assumption is negative by the circumstances of the case, proof of actual or probable damage is necessary.’

[12] For all the above reasons and findings in this judgment, I am satisfied that the applicant has discharged the onus of proving that the use of the word ‘Landlords’ by the respondents constitutes a passing off of its business as that of the applicant. What remains to be considered is whether the first and second respondents, who, throughout these proceedings protested that they were not bound by the terms of the franchise agreement. It will be recalled the

applicant in the papers reiterated that the first respondent is a vehicle through which the second and third respondents conduct their business. 1 have already held that the second respondent’s assertion that he resigned from his membership in the first respondent is not supported by any facts and is a bare denial and ought to be rejected. To add to that, the franchise agreement

stipulates that:

‘34. JOINT AND SEVERAL LIABITY

If the Franchisee is a partnership, the partners and the Franchisees shall at all times be liable jointly and severally for all

obligations of the Franchisee in terms of and arising from this agreement.’

On the respondent’s own version, the first respondent was the franchise’s corporate vehicle whilst the third respondent was the principal acting in the place of the second respondent who did not have the legal capacity to act.

The respondents should therefore be held liable jointly and severally.

[26] In the result it is ordered that::

1. The respondents and any juristic person under their control and/or affiliated with them is hereby ordered to immediately desist from using and/trading under the name “Landlords” and or using the logo “Landlords, We do Rentals.”

2. The brandname “Landlords” be removed from all and any documentation, advertising and promotional material of respondents.

3. The respondent immediately cease passing themselves off as being in any way affiliated with the applicant.

4. The respondents pay costs of this application, jointly and severally, and severally.

NDITA; J