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COMPANIES TRIBUNAL OF SOUTH AFRICA

Case/File Number: CT008FEB2018

In the matter between:

AGILITY HOLDINGS (RF) PROPRIETARY LIMITED                                       APPLICANT

and

NEO COMPUTERS (PTY) LIMITED                                                  FIRST RESPONDENT

THE COMMISSIONER OF COMPANIES                                     SECOND RESPONDENT

in respect of objection to company name

Presiding Member                                          :           Khashane La M. Manamela (Mr.)

 

Date of Decision                                             :           30 April 2018

DECISION (Order and Reasons)

Khashane La M. Manamela

Introduction

[1] The applicant is the proprietor of the trade mark “NEO”, registered on 31 March 2016 in respect of goods and services in class 9. It objects, in terms of this application, to the company name “NEO COMPUTERS” or the inclusion of the word “NEO” in the name. [For reasons that will become clear below,[1] I refer to the first respondent simply as the respondent and the second respondent as the CIPC] The applicant says that the respondent’s name does not satisfy the requirements of sections 11(2)(b) and 11(2)(c)(i)[2] of the Companies Act 71 of 2008 (the Companies Act), as the name is confusingly  similar to the applicant’s trademark “NEO” and falsely implies or suggests, or is such as would reasonably mislead a person to incorrectly believe that, the respondent is part of or associated with the applicant.[3] This Tribunal is requested to direct the respondent to change its name, as contemplated by the provisions of section 160(3)(b)(ii) of the Companies Act,[4]  plus costs.

[2] The applicant further requests this Tribunal, in the event of non-compliance with the aforementioned administrative order by the respondent within 60 days of the order being granted, to direct that the Registrar of Companies change the respondent’s name and replace it with the respondent’s registration number.

[3] The application is unopposed. According to the return of service, the papers were served on the respondent’s registered office address in Centurion, Pretoria by the sheriff on 09 February 2018. It appears from other papers in the file that, subsequent to the service, the respondent instructed a firm of attorneys, which firm interacted with the applicant’s attorneys and undertook to deliver an answer on behalf of the respondent, but in vain. Ultimately, the period for serving and filing an answer to the application  has since elapsed.[5]

[4] As stated above, the applicant also seeks an order involving the Commissioner of the Companies and Intellectual Property Commission (the CIPC), although inadvertently cited as the “Commissioner of Companies” or referred to elsewhere as the “Registrar of Companies”. However, it does not appear that the CIPC was actually cited as a party in the original papers, including in the Form CTR142 of the application. The CIPC   appears to have belatedly found its way into the matter in the request for default order. As a  matter of fact, apart from the request for default order, the only other documents reflecting as the second respondent, the CIPC or, as I have mentioned above, “Commissioner of Companies”, are the index and filing notice of the papers. Further, no reference to the CIPC or the “Commissioner of Companies” is made under the heading or paragraph dealing with the parties in both the affidavit in support of the request for  default order and founding affidavit.[6] I also could not find proof of service of the application on the CIPC. This would definitely have a bearing on the alternative relief sought by the applicant (as stated above), but I will revert to this later, below.

[5] But, as indicated above, there is proof of service of the application on the respondent. And, therefore, in the absence of opposition, particularly from the respondent, the applicant’s request for default order will be considered as I find the application to have been adequately served on the respondent.[7]

Applicant’s case

[6] The applicant states that it has since 2009 been making widespread and extensive use of its “NEO” trade mark in relation to computer software and related material for purposes of providing healthcare and risk management solutions. The NEO software is applied both directly and indirectly through its fully-owned subsidiary called Knowledge Objects Solutions (Pty) Ltd. The products are available throughout South Africa and have been used by several well-established financial institutions. The applicant further submits that the trade mark, through constant marketing and promotion, has acquired substantial reputation and goodwill, and, therefore, apart from the statutory rights the applicant has  in respect of the trade mark, the applicant also has common law rights.

[7] As stated above, the applicant registered the trade mark in respect of goods and services in class 9. The application for registration of the trade mark “NEO” was  accepted on 24 August 2015.[8] The trade mark covers the following goods and services: “Data processing apparatus and equipment, computer software including computer programs and programming material included in this class; computer software supplied from the internet; software solution for the healthcare insurance market that manages all events related to administration, medical shortfall and risks”.[9]  [italics supplied]

[8] According to the applicant the respondent’s existence came to the attention of its attorneys in September 2017. From the certificate issued by the CIPC on 11 September 2017, it is indicated that the respondent was registered on 08 February 2017.[10] But the applicant or its firm of attorneys does not bother explaining how the existence of the respondent came to its attention or that of its attorneys, seven months after the respondent was registered. This issue is invariably decisive or significantly influential to the outcome of applications of this nature, especially when considering the provisions of section 160(2)(b)[11] of the Companies Act. However, I will let nothing turn on this for current purposes, significantly due to the fact that the papers were adequately served on the respondent and the respondent also engaged attorneys. I also do not consider the lapse of time between the respondent’s date of registration and the first activity by the applicant’s attorneys in objecting to the respondent’s name, to have been inordinate.

[9] With regard to the respondent’s name, it is submitted that the only dominant and memorable portion thereof is the word “NEO”, which is identical to the applicant’s trade mark. It is further submitted that the remaining portion of the respondent’s name “COMPUTERS” is merely descriptive and not sufficiently distinctive to avoid confusion. Also, that, as the respondent’s area of business is unspecified, the respondent may also be conducting business in areas of the applicant’s trademark stated above,[12] which would cause even more confusion amongst members of the public.

[10] To its credit, the applicant first attempted to informally request the respondent to voluntarily change its name or to cease and desist in using a name including the word “NEO”, but in vain.

Submissions and applicable legal principles (an analysis)

[11] As stated above, the applicant submits that the objection is based on the  provisions of sections 11(2)(b) and 11(2)(c)(i) of the Companies Act.

[12] Section 11(2) of the Companies Act reads in the material part:

“(2) The name of a company must-

(a)  not be the same as -

(i) the name of another company…

…

(b)  not be confusingly similar to a name…contemplated in paragraph (a) unless -

(i) in the case of names referred to in paragraph (a)(i), each company bearing any such similar name is a member of the same group of companies;

…

(c)  not falsely imply or suggest, or be such as would reasonably mislead a person to believe incorrectly, that the company –

(i) is part of, or associated with, any other person or entity…”

[underlining supplied]

[13] In sum, the applicant submits that the respondent’s name does not satisfy the requirements of section 11(2) of the Companies Act in respect of its trade mark.

[14] Section 11(2)(b) proscribes confusing similarity between, among others, a company name and, for example as in this case, a registered trade mark. On the other hand, the provisions of section 11(2)(c) are the same as the common-law delict of passing-off, which is a species of the broader delict of unlawful competition.[13] The Supreme Court of Appeal in the decision of Alliance Property Group v Alliance Group,[14] restated the elements of passing-off as follows:

“Passing-off is a wrong consisting of a false representation made by one trader (the defendant) to members of the purchasing public that the enterprise, goods or services of a rival trader (the plaintiff) either belong to him (the defendant) or are connected, in the course of trade, with his own enterprise, goods or services…. The defendant's representation is a misrepresentation if it is likely to deceive or confuse a substantial number of members of the public as to the source or origin of his product [being enterprise, goods or services]. Passing-off, to be actionable, erodes the plaintiff's goodwill. Goodwill is the product of a cumulation of  factors, the most important of which, in the context of passing-off, is the plaintiff's reputation. Reputation is the opinion which the relevant section of the community holds of the plaintiff or his product. If favourable, it would dispose potential customers to patronise the plaintiff or his product and, if unfavourable,  it would tend to discourage them from doing so. The plaintiff's reputation may be associated with the symbol under which his product is marketed. The symbol renders the product distinctive of the plaintiff or his product. A false representation by the defendant about the symbol used by the plaintiff may encourage or induce potential customers of the plaintiff, believing that they were patronising him, into patronising the defendant.”

[underlining supplied]

[15] For one to succeed in establishing passing off, one ought to show that there was misrepresentation; reputation or goodwill; that the infringing party’s trade name was calculated or likely to deceive or confuse the ordinary customer and thus to deceive or cause confusion, and a common field of activity (although not essential).[15]

[16] However, in terms of section 11(2)(c)(i) of the Companies Act, an applicant has  to establish that the impugned company name, either falsely implies or suggests, or it is such as would reasonably mislead a person to incorrectly believe that, the other party is part of or associated with the applicant.

[17] Without much ado, I find that the respondent’s name is confusingly similar to the applicant’s trademark, due to the inclusion of the word “NEO”. I agree with the applicant that the word “NEO” constitutes the dominant feature of the respondent’s name and is tantamount to complete incorporation of the applicant’s trade mark into the respondent’s name. And this was done without the applicant’s consent. Having arrived at this finding, I consider it unnecessary to determine whether the applicant’s name contravened section 11(2)(c)(i) of the Companies Act.

[18] However, I have noted from the papers that the registration of the applicant’s trademark has an endorsement which states “Applicant admits that registration of this trade mark shall not debar other persons from the bona fide descriptive use in the ordinary course of trade of the word ‘NEO’”.[16] [italics supplied] Therefore, the applicant’s rights with regard to the trade mark and word “NEO” are not unlimited. But, in the absence of something from the respondent suggesting that the respondent’s use of the word “NEO” falls within the realm of the endorsement, I am inclined to maintain the outcome expressed above, in respect of the respondent’s name. But, I find it remarkable that the applicant’s attorneys have made no submissions at all with regard to the endorsement. This Tribunal can benefit from applications which always strive for  ultimate disclosure of  facts,  for and  against the  remedy sought  by litigants, and the  ad infinitum sustenance of uberrima fides. Be that as it may, as I already mentioned, nothing will turn on this, for current purposes.

Conclusion

[19] The above being my finding, I will direct the respondent to choose a new name which does not include the word “NEO” and which is compliant with the criteria for company names set in section 11(2) of the Companies Act. And in order to facilitate compliance with the order and ensure that the transgression does not inordinately endure, I will direct that the respondent be exempted from paying the fees prescribed for amendment of its name occasioned by this order. I make the latter part of the order as it does not appear that the respondent, which appears to be a relatively new or even start-up company, have been deliberate in its transgression of the impugned provisions of the Companies Act.

[20] This brings me to the alternative relief sought by the applicant. The applicant also applied that the Registrar of Companies - which I presume is reference to the Commissioner of the CIPC - be directed to change the name of the respondent to the registration number, in the event of the respondent’s non-compliance with the order that  it change its name, within 60 days from date of the order. This prayer or relief is conspicuous by its absence from the original notice of motion or Form CTR142 dated 06 February 2018, although it does appear in the founding affidavit and the request for default order. Apart from my lamentation expressed above that the CIPC was not served with this application and, therefore, did not get notice of same and the relief sought in terms thereof, [17] I find the relief incompetent for another reason. In my view this Tribunal lacks jurisdiction to make an order in the manner sought by the applicant.[18]

[21] The applicant also requested that an order granting costs of the application against the respondent be made. I agree that an adverse costs order is warranted under the circumstances and I will grant same on a party and party scale of the High Court of South Africa. However, such costs are to exclude those relating to the investigations conducted by the applicant, which I found to have been unnecessary. There is nothing in the papers suggesting that the respondent was ever untraceable at its registered office address.

Order

[22] Therefore, the following order is made:

a)    the first respondent’s registered company name “NEO COMPUTERS” does not satisfy the requirements of the Companies Act 71 of 2008;

b)    the first respondent is directed to choose a new name and file a notice of amendment to its Memorandum of Incorporation;

c)    the first respondent is directed to complete the activities ordered in b) hereof within three (03) months of service of this order upon the first respondent in terms of regulation 153(3) of the Companies Regulations, 2011, and

d)    the first respondent is liable for costs of the application on a party and  party scale of the High Court of South Africa, but such costs to exclude those relating to the investigations conducted by the applicant.

________________________

Khashane La M. Manamela

Member, Companies Tribunal

30 April 2018

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