Interdicting unlawful competition : False representations

Note: Footnotes omitted and emphasis added

“[1] Whilst competition in trade is healthy and to be encouraged, it ‘must be carried on by means that are fair, rather than foul, or – more correctly – by means which are lawful rather than unlawful’. To borrow from Corbett J:

‘Though trade warfare may be waged ruthlessly to the bitter end there are certain rules of combat which must be observed. The trader has not a free-lance. Fight he may, but as a soldier, not as a guerrilla.’

[2] In this matter the respondents contend that the appellants, in misrepresenting the character, attributes and provenance of their goods, have carried on their trade by means which are unlawful rather than lawful. The application, the subject of the appeal, concerns the manufacture and distribution by the appellants, who are related entities, of two alcoholic beverages. But for the differing get-up, the products, which have been produced in the same production process, are in all respects identical. Each was initially presented in the following get-up (the initial get-up), one in the name Royal Douglas and the other King Arthur.

. . . . . .

[4] The first respondent, the Scotch Whisky Association (the SWA), which traces its origins back to 1912, when the first Association to represent and protect Scotch whisky was formed, is the trade association of the industry. The SWA was incorporated in 1960 under the 1948 Companies Act of the United Kingdom. The objects of the SWA are, inter alia, to protect and promote the interests of the Scotch whisky trade generally and to prosecute, defend and enter into legal proceedings in any territory of the world in defence of the interests of the Scotch whisky trade.

[5] Members of the SWA produce 95% of the Scotch whisky sold worldwide. The SWA has a significant interest in the South African whisky market, in that virtually all of the well-known Scotch whisky brands sold in this country are owned by its members. The second respondent, Chivas Brothers Limited, a company incorporated under the laws of Scotland, is the producer and supplier of a number of Scotch whisky brands sold in South Africa. The third respondent, Chivas Holdings (IP) Ltd, is the owner of the intellectual property and goodwill attaching to the second respondent’s Scotch whisky brands. The fourth respondent, Pernod Ricard South Africa (Pty) Ltd, a South African company, is the appointed exclusive distributor of the second respondent’s products in this country.

. . . . . .

“[15] The respondents’ case rests on two legs:

• firstly, misrepresentation by the appellants as to the particular attributes, character, composition and origin of the Royal Douglas and King Arthur products (misrepresentation as to own performance) and
• secondly, trade in such products in contravention of the Liquor Products Act 60 of 1989 (LPA).

[16] In South Africa unlawful competition is recognised as an actionable wrong, distinct from that of passing off, fitting comfortably under the umbrella provided by the Lex Aquilia.

In Schultz v Butt 1986 (3) SA 667 (A) at 678F-H it was stated:

‘As a general rule, every person is entitled freely to carry on his trade or business in competition with his rivals. But the competition must remain within lawful bounds. If it is carried on unlawfully, in the sense that it involves a wrongful interference with another’s rights as a trader that constitutes an injuria for which the Aquilian action lies if it has directly resulted in loss.’
Unlawfulness is determined according to the objective norm of public policy, being ‘the general sense of justice of the community, the boni mores, manifested in public opinion’.

[17] In Long John International Ltd v Stellenbosch Wine Trust (Pty) Ltd 1990 (4) SA 136 (D) at 143G-I, Booysen J had this to say:

‘It follows from what I have said that a person who falsely and culpably represents to the public that his products are products of a particular character, composition or origin known by the public under a descriptive name which has gained a public reputation, without passing them off as the product of the plaintiff, who produces what may be termed the genuine products, and who thereby causes patrimonial loss to the plaintiff, commits the delict of unlawful competition, and is liable in damages to the plaintiff. It follows also that the injured party is entitled to an interdict restraining such conduct where such patrimonial loss has occurred or is likely to be caused.

Perhaps I should add that I take the view that where all the above elements are present save that of fault (or culpability), an interdict would still be justified. (Cf Dunlop (South Africa) Ltd v Metal and Allied Workers Union and Another 1985 (1) SA 177 (D) at 188G-H.)’

[18] The question is, how a substantial number of the public would perceive the product. What falls to be determined is whether the goods are being marketed in a way that is likely to lead a significant section of the public to think that those goods have some attribute or attributes which they do not possess, thereby giving rise to confusion, or the likelihood of confusion, in the minds of the public.

[19] The considerable distinctiveness of whisky and Scotch whisky, in particular, is not in dispute. Nor, could it be. In John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] 2 All ER 106, the English law principle of extended passing-off was applied to Scotch whisky on the basis that it was a distinctive product with an established reputation and goodwill. It is common cause that the product sold by the appellants is not whisky and that it has no connection to Scotland, or any part of the United Kingdom.

That notwithstanding, the initial Royal Douglas get-up is replete with Scottish indicia, including the tartan-patterned background and the use of the name ‘Douglas’ in the brand name, a Scottish clan name that is strongly associated with Scotland and a heavily crested label, thereby indicating a liquor steeped in tradition (in this case, and considering that the liquor is represented to be whisky, the Scotch whisky tradition).

. . . . .

‘[22] In Diageo North America Inc & Anor v Intercontinental Brands (ICB) Limited & Ors [2010] EWCA Civ 920, reference was made to the decision in The Scotch Whisky Association v Glenn Kella Distillers Ltd [1997] ETMR 470, which was an action to restrain the defendant from selling a drink produced in the Isle of Man called ‘white whisky’. The white whisky was made by distilling matured and blended Scotch whisky so as to render it colourless. The issues were whether the product was nevertheless a ‘whisky’ and, if not, whether the use of the term ‘whiskey’ was actionable as passing-off.

The Court of Appeal held at para 48:

‘The case is potentially interesting because it covers a type of spirit which is widely produced. The judge held that the product was not entitled to be described as a whisky even though it was made from whisky and tasted of whisky. On the issue of passing-off, he accepted the admission by one of the defendant’s witnesses in cross-examination that there was an “aura” surrounding the word whisky and that it had established reputation and goodwill as a product which could be eroded by the sale of the defendants’ product under the same name.’

[23] A court need go no further than to take a commonsensical approach to the labels and the visual impressions created by them. The first impression on a customer passing through a liquor store is likely to be that each product is a whisky. Acting on that first impression, the average customer is unlikely to scrutinise the product closely. The interplay of the other influencing factors, such as the labelling, the alcohol strength of at least 43% and the expressions ‘premium quality’ and ‘double distilled’, all of which are closely associated with whisky, are likely to combine to create the impression that each is a whisky.

Notably, despite the base spirit being vodka, there is no use of any Vodka-associated indicia or geographical regions traditionally associated with vodka, such as Russia. There is, in short, nothing to suggest the true nature of the product being sold and everything to suggest that it is what it is not. There is accordingly much to be said for the respondents’ contention that the appellants’ products and their get-up, will lead a significant section of the public to believe that they have attributes that they do not truly possess.

. . . . .

“[26] Indeed, as Harms JA pointed out in PPI Makelaars v PPS Provident Society of South Africa:

‘. . . in the light of Mr Jacobs’s unconvincing explanation for the adoption of the name and logo, there is a reasonable apprehension that the “PPS” mark may also be infringed by future conduct.

Mr Puckrin in this connection referred us Broderick & Bascom Rope Co v Manoff [1930] 41 F (2d) 353 at 354, to which I subscribe:

“The due protection of trade¬marks and similar rights requires that a competitive business, once convicted of unfair competition in a given particular, should thereafter be required to keep a safe distance away from the margin line ¬ even if that requirement involves a handicap as compared with those who have not disqualified themselves”.’

. . . . .

[30] In William Grant, the abandoning by the defendants of certain advertising material did not avail them. An interdict, preventing them from representing their product as whisky, was nonetheless granted. It was there held:

‘The impression which defendants sought to convey, and which they succeeded in conveying, to the whisky-purchasing and whisky-drinking public, made up of the name, the label and the advertising material, is all of one piece, and a willingness and an undertaking to cease using pictures or descriptions of tartan material, tartan pattern or clothing or apparel which is traditionally Scottish does not serve to raise from the mind or memory of the public the impression such advertising material has created thereon-the song, as the popular music number has it, is ended, but the melody lingers on or, as Mr Cilliers has put it, this advertising material ‘casts its shadow backwards’ . . . .’

[31] Having previously sailed so close to the wind, it was incumbent upon the appellants to depart significantly from the initial get-up. The continued use of the expressions:

(i) ‘whisky flavoured’;

(ii) King Arthur, which is evocative of UK origin;

(iii) Royal Douglas, which is evocative of Scottish origin and has no credible link to Mr Haupt;

(iii) ‘double distilled’, which is a term usually associated with whisky and

(iv) the use of an artificial caramel colouring (there appears to be no reason for the liquid to be this colour other than to assist in representing it as a whisky), means that the appellants have evidently failed to create a get-up which is not suggestive of whisky or Scotland.

[32] In Diageo North America Inc para 16, the Court of Appeal quoted the following from the judgment of Arnold J in the court below:

‘It is fair to say that the New Get-Up is considerably less objectionable than the Old Get-Up. It is less reminiscent of vodka, and the description of the product as “schnapps” is more prominent. Counsel for Diageo submitted, however, that in the light of the previous history the change was not enough to avoid confusion. I agree . . . The change in get-up will have been perceived by many, if not most consumers, in exactly the way ICB promoted, namely as a new look for the same old product. I am prepared to accept that the New Get-Up was less likely than the Old Get-Up to deceive consumers in countering it for the first time, but I do not think it went far enough to avoid the likelihood of confusion altogether given the propensity of the brand name to confuse and the absence of a clearly understood description of the product. Furthermore, I do not consider that the New Get-Up will have been effective to un-deceive many consumers who were already deceived. . . . .’

[33] In all the circumstances, the court a quo cannot be faulted for holding that there was, as well, the likelihood of confusion created by the replacement Royal Douglas and King Arthur get-up. As it was put by Schutz JA in Blue Lion Manufacturing (Pty) Ltd v National Brands Limited 2001 (3) SA 884 (SCA) para 14:

‘The fact that a participant in a market chooses to imitate his competitor’s get-up and then seeks to maintain his imitation, suggest that he believes and has had confirmation of his belief that imitation confers on him some advantage that an original get-up would not. . . .’

[34] Turning to the statutory cause of action. It is a form of unlawful competition to trade in contravention of a statutory provision. Section 12 of the LPA headed ‘Prohibition of false or misleading descriptions for liquor products’, underscores the basic policy consideration of lawful competition by encouraging honesty and fairness in trading competition.

. . . .

[51] That notwithstanding, it was argued on behalf of the appellants that the respondents are nonetheless not entitled to interdictory relief. In that regard reliance was placed on Patz v Greene 1907 TS 427, which held (at 433):

‘Where a statute prohibits the doing of a particular act affecting the public, no person has a right of action against another merely because he has done the prohibited act. It is incumbent on the party complaining to allege and prove that the doing of the act prohibited has caused him some special damage – some particular injury beyond that which he may be supposed to sustain in common with the rest of the Queen’s subjects by an infringement of the law. But where the act prohibited is obviously prohibited for the protection of a particular party, then it is not necessary to allege special damage.’

The judgment continues:

‘Now that appears to be not only good law, but also common sense. Everyone has the right, in my opinion, to protect himself by appeal to a court of law against loss caused to him by the doing of an act by another, which is expressly prohibited by law. Where the act is expressly prohibited in the interests of a particular person, the Court will presume that he is damnified, but where the prohibition is in the public interest, then any member of the public who can prove that he has sustained damage is entitled to his remedy.’

[52] In Johannesburg City Council v Knoetze and Sons 1969 (2) SA 148 (W) at 150-55, Trollip J had occasion to consider:

• firstly, whether the court has jurisdiction to grant an interdict to restrain conduct that amounts to a statutory offence; and if the court does have such jurisdiction,
• secondly, who has locus standi to move the court for interdictory relief.

The learned judge referred to the general principle formulated by Kotze AJA in Madrassa Anjuman Islamia v Johannesburg Municipality 1917 AD 718 at 727 that:

‘[i]f it be clear from the language of a Statute that the Legislature, in creating an obligation, has confined the party complaining of its non-performance, or suffering from its breach, to a particular remedy, such party is restricted thereto and has no further legal remedy; otherwise the remedy provided by the Statute will be cumulative.’

[53] Trollip J pointed out that the purpose of an interdict is to restrain future or continuing breaches of a statute, whereas the statutory remedy of prosecuting and punishing an offender relates to past breaches. Different considerations must therefore inevitably apply. For, while the statutory remedies might be adequate to deal with past breaches, the civil remedy of an interdict might be the only effective means of coping with future or continuing breaches.

[54] The learned judge added (at 154B-H):

‘Hence, it is not to be initially inferred that the lawgiver intended to exclude such a remedy. Indeed, the presumption is the other way, the very converse of the initial approach in considering the first problem: the civil remedy of interdict is presumed to be available unless the statute excludes it expressly or by necessary implication. Halsbury, Laws of England . . . states the rule thus:
“Where a statute provides a particular remedy for the infringement of a right thereby created . . . the jurisdiction of the Court to protect the right by injunction is not excluded unless the statute expressly or by necessary implication so provides.”

The same rule was in effect adopted and applied in the Madrassa case . . . At p 725, Solomon JA said:

“To exclude the right of a court to interfere by way of interdict, where special remedies are provided by statute, might in many instances result in depriving an injured person of the only effective remedy that he has, and it would require a strong case to justify the conclusion that such was the intention of the Legislature.”

And at p 730, Kotze AJA said that the enactment of statutory remedies

“does not, in the absence of anything to indicate that such was the intention of the Legislature, deprive the Municipality of any further remedy which the law may give by way of an interdict. The Legislature cannot, unless it has clearly expressed an intention to that effect, be taken to have meant that . . . no interdict . . . can be applied for by the Council”.’

[55] Trollip J proceeded to state (at 154F):

‘It is true that the qualification – unless the statute otherwise provides – is not incorporated in the well-known rule laid down by Solomon J (as he then was) in Patz v Greene & Co 1907 TS 427 at 433. That decision has on that account been criticised in certain decisions . . .

But with respect I think that in Patz v Greene & Co the Court was satisfied that the statute in question had not expressly or by necessary implication excluded the civil remedy of interdict (see at 434-5), and it was therefore primarily concerned with the locus standi of the applicant to apply for the interdict (see the argument at 427).

Consequently, the rule there laid down accepted, I think, that the right of interdict was available, and it was directed towards defining the person or class of persons who had locus standi to claim its enforcement.

Thus, in the Madrassa case, at 726, the same learned Judge who had announced the rule applied it to determine the locus standi of the applicant . . . In my view, therefore, Patz v Greene Ltd does not add to or conflict with the rule quoted above from . . . the Madrassa case.

The case will be referred to again later on the question of the present applicant’s locus standi. Now the ordinance does not exclude, expressly or by necessary implication, the remedy of interdict to enforce observance of s 4(1).

That remedy, as pointed out above, is applicable to future or continuing breaches; the statutory remedy of prosecution and punishment under s 4(2) relates to past breaches; and the two can therefore co-exist without any conflict.

Consequently the reasoning above for excluding the civil remedy for recovering arrear fees and penalties does not apply. Hence, in my view, future or continuing breaches of s 4(1) can be restrained by interdict.’

[56] In the Long John matter (at 150B), Booysen J had occasion to consider the argument that the object of the legislature in enacting the legislation was to protect members of the public against being misled, accordingly, so the argument went, ‘any member of the public who has been misled may approach the Court, but not a rival trader who is . . . not misled’.

The learned judge held:

‘[i]t seems to me that the object of the Legislature was also to protect traders or producers of goods from the actions of other traders who might mislead members of the public to purchase their goods in preference to theirs. I thus reject the submission that the applicant has for this reason no locus standi.’

[57] It follows that the respondents are entitled to the interdictory relief sought. It remains to record that at the hearing of the appeal, counsel for the respondents did not persist in certain of the orders obtained in the court below. That will be reflected in the order that follows. Although, for the most part the order of the court below remains undisturbed, attempting to amend the order may conduce to confusion. It would thus be more convenient to simply set aside and replace the order.

Consequently, for the reasons given, the appeal must fail. As the appellants have failed in respect all of the substantive issues raised on appeal, costs must follow the result.

“Unlawful competition – false misrepresentation as to the character, composition or origin of product – trade in such products in contravention of the Liquor Products Act 60 of 1989.”