South Africa: Taking names in vain is a risky business

The streamlining of the commercial backdrop in South Africa has in recent years proliferated with the establishment of the Companies Tribunal (“the Tribunal”) in terms of the ‘new’ Companies Act No. 71 of 2008. The Tribunal aims at providing an alternative forum to resolve company disputes, including disputes relating to the erroneous registration of company names as contemplated by the Act. Since its inception, the bulk of the applications adjudicated by the Tribunal revolve around company name disputes.

The relative ease and lower costs associated with tribunal proceedings have strengthened the position of brand owners objecting to the registration of company names which incorporate their trade marks. However, this has resulted in an alarming upsurge of the caseload before the Tribunal coupled with decisions which are at times questionable.

If regard is to be had to the jurisdiction conferred upon the tribunal by the Companies Act in adjudicating company name disputes, it then begs the question whether or not a brand owner has a discretion to apply to the High Court to resolve the dispute and obtain relief based on the factual matrix as would be decided before the tribunal.

The judgment handed down in the case of Global Vitality Incorporated v Enzyme Process Africa (21 August 2015, Western Cape High Court) shed some light on the question. Whilst the decision covers a wide range of legal issues relating to passing-off, cancellation of trade mark registrations, a company name objection and an objection to a co.za domain name registration, the judgment particularly echoed that the High Court has jurisdiction to deal with disputes relating to company names.

Global Vitality (the Applicant) is the USA manufacturer, distributor and seller of dietary nutritional supplements under its Enzyme Process brand. The Respondent was appointed in South Africa to distribute Enzyme Process products. The relationship between the parties eventually deteriorated causing the distribution agreement to be terminated as a result of the inappropriate conduct of the respondent in four key instances: (i) it purchased and imported similar dietary nutritional supplements in unbranded packaging from other foreign manufacturers, and labelled and sold those (unbranded) products in South Africa under the trade mark Enzyme Process; (ii) it registered a local company under the name “Enzyme Process Africa (Pty) Ltd”; (iii) it registered the domain name enzymeprocess.co.za in its own name; and (iv) it registered the trade mark Enzyme Process in South Africa in its own name.

Global Vitality instituted legal proceedings, seeking the cancellation of the offending trade mark registrations, the transfer of the offending domain name, an order to change the offending company name and passing-off. In the end, Global Vitality was successful in pursuing each of these claims. 

Over and above the findings by the Court in favour of Global Vitality concerning passing-off, cancellation of the respondent’s trade mark registrations and the transfer of the abusive domain name registration, the Court made vital pronunciations in deciding the offending company name dispute.

One of the legs of relief sought by Global Vitality was an order directing the respondent to change its registered company name to a name that does not incorporate the mark Enzyme Process, or any mark confusingly similar thereto. Global Vitality argued that the Respondent’s company name, “Enzyme Process Africa”, falsely implies or suggests, or would reasonably mislead a person to believe, that the Respondent is still its distributor or associated with Global Vitality in another significant way.

The court turned to the provisions of Sections 11(2)(a)(iii), 11(2)(b) and 11(2)(c) of the Act which prohibits, inter alia, the registration of a company name: that is the same as a registered trade mark owned by a different person, or a mark which is the subject of an application for registration as a trade mark in South Africa; or which falsely implies or suggests or would reasonably mislead a person to believe that the company is part of, or associated with, any other person or entity.

Section 157(1) of the Act, sets out who has locus standi to resort to the remedies contained in Section 156 of the Act, i.e. “and who may therefore apply to Court, the Companies Tribunal, the Panel or the Commission to address complaints or secure rights” and, in terms of Section 157(1)(a), includes a person “directly contemplated” in any provision of the Companies Act.

Section 156 of the Act, particularly provides that a person contemplated in Section 157(1), who seeks to address an alleged contravention of the Act, or to enforce any provision of, or right in terms of the Act, may do so by, inter alia, applying to the Tribunal for adjudication in respect of any matter in terms of the Companies Act, or applying for appropriate relief to the High Court that has jurisdiction over the matter.

The Court identify an internal remedy contained in Section 160(1) of the Act for the resolution of disputes concerning the reservation or registration of a company’s name, which provides that any other person with an interest in the name of a company, may apply to the Tribunal for a determination whether the name satisfies the requirements of the Companies Act.

The Court concurred with Global Vitality’s contention that the existence of the internal remedy in the Act does not bar its application to court for relief in respect of a complaint regarding the respondent’s company name.

The Court’s discourse in support of its view turned on the interpretation of statutes and that the word “may” contained in Sections 157 and 160 of the Act, when given its ordinary meaning, means “expressing possibility”. Conversely, the word “shall” means “expressing an instruction or command”. The Court held that instead of being peremptory as with the word “shall”, the word “may” then logically allows for a discretion.

The Court pointed out that a party dissatisfied with a decision of the Tribunal has recourse to the High Court and Section 160(4) of the Act confers on a court the power to review a tribunal decision. It is deliberated that an interpretation of Section 160(4) limiting the court’s jurisdiction to review power only, would lead to ‘insensible or unbusinesslike results’.

In reaching its decision, the Court identified three vital considerations: (i) That it was the specific intention of the legislature to adopt the use of the word “may”; (ii) A limiting interpretation otherwise would require an Applicant to institute proceedings in two separate forums at the same time, for inextricably linked relief, turning on the same legal principles and the same facts; (iii) This would theoretically result in two different forums (i.e. the Tribunal on the one hand, and the Court on the other) reaching different decisions on the same factual matrix. The Tribunal’s decision would then be subject to review by the High Court in terms of Section 160(4) of the Act, whereas the decision of the court would be subject to the appeal process, with the two legal processes running parallel to each other.

The Court concluded by granting the order sought by Global Vitality directing the Respondent to change its offending company name.

The Global Vitality judgment fundamentally fortifies the jurisdiction of the High Court in company name disputes – which remains the principal forum for the resolution of disputes and the interpretation and enforcement of the Companies Act.

This article was first published in the Business Day.

Date published: 13 September 2018
Author: Jeanine Coetzer

Tags: company names trade marks