IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No: 5850/07

In the matter between:

and

JUDGMENT DELIVERED ON 19 NOVEMBER 2009

[1] The name "Incledon" has been used as a trading name in South Africa since 1906. The applicant in this matter seeks a permanent interdict restraining the respondent from passing off its business as that of the applicant, or as being associated with the applicant in the course of trade by using the trade name, mark and trading style "Incledon DPI". By way of notice of motion the applicant sought a hearing as a matter of urgency on 29 May 2007, in which it applied for the following relief:

"1. "An order directing that the matter be dealt with as one of urgency, and that the ordinary rules relating to time periods and service be dispensed with.
“2” An order directing that clauses 5.1 and 5.1.1 of the agreement annexed to the founding affidavit as "GT2", be and is hereby rectified to read as follows:

'5.1 To protect the proprietary interests of both Incledon (Pty) Limited and Newco in acquiring the business, both parties undertake in favour of each other that they, for an indefinite period after the Effective Date and in respect of the Trading Relations, shall not: 
5.1.1 Directly or indirectly, at any place carry on a business the type of which is alike and/or similar and/or in conflict with the business of other Incledon companies.'

3. That the Respondent be interdicted and restrained with immediate effect in the Western Cape, the area from the Western border up to and including Port Elizabeth in the Eastern Cape, the Northern Cape and Namibia ('the territory'), from using the name "Incledon DPI", "Incledon" or "Incledon Cape" or any derivative thereof that is so similar thereto as to be likely to confuse or deceive the public into believing that the business or the products of the Respondent in the territory are those of the Applicant.

5. That the Respondent be directed to notify its customers in the territory, by using its normal communication channels, that it no longer trades under the name and style of "Incledon DPI" or any derivative thereof in the territory.
6. That the Respondent be directed to pay the costs of this application.
7. That further and/or alternative relief be granted to the Applicant."

[3] Incledon Cape (Pty) Ltd (hereinafter referred to as Incledon Cape), a company with limited liability and duly incorporated in terms of the company laws of the Republic of South Africa, has its principal place of business at Beacon Way, Beaconvale, Parow, Western Cape. It carries on the business of the sale and supply of conduit products for the transmission of liquids and gasses in particular pipes, fittings, water meters, flanges, valves and sanitary wear. The products are also utilized in various spheres including civil and mechanical engineering, agricultural produce and plumbing.

[4] The respondent, DPI Plastics (Pty) Ltd, is a duly registered company with its principal place of business at Bridge Road, Bellville, Western Cape.

[5] On 28 February 2001 an agreement was concluded between Incledon (Pty) Ltd and Mr Glen Andrew Turner, who acted in his capacity as a trustee of a company to be formed, in terms of which Incledon (Pty) Ltd sold its separate business division which traded under the name "Incledon Engineering Western Cape" to Turner as a going concern. The definition and interpretation clause of the agreement defines the following concepts as follows:

"Incledon Cape"

[6] It is common cause that at the time of the agreement Incledon (Pty) Ltd traded in the territory using the name "Incledon Engineering Western Cape". After conclusion of the agreement Incledon (Pty) Ltd continued to trade under the trade name "Incledon" in the rest of the Republic. Since 1 March 2001 applicant remained the sole user of the name "Incledon Cape". Prior to this dispute DPI Phumela Trading (Pty) Ltd, a subsidiary of respondent, traded under the name "DPI Phumela" and was a supplier to and a customer and competitor of applicant.

[7] Some time after the conclusion of the agreement Incledon (Pty) Ltd restructured its business as follows:

(a) In 2002 Incledon (Pty) Ltd entered into a joint venture with respondent.
(b) In 2003 Incledon Pty (Ltd) and respondent registered Incledon DPI (Pty) Ltd.
(c) A listed company, Distribution and Warehousing Network Limited ("Dawn Limited") purchased the entire shareholding of DPI Holdings (Pty) Ltd, which in turn is the holding company of respondent.
(d) It was subsequently resolved to transfer all business assets relating to the business of Incledon (Pty) Ltd and Incledon DPI to the respondent.
(e) In the result, respondent is the successor-in-title of Incledon (Pty) Ltd in respect of the obligations of Incledon (Pty) Ltd under the agreement.
(f) After the restructuring of the business respondent changed the trading name of DPI Phumela to Incledon DPI as part of a national strategy.

[8] These proceedings arise out of respondent's change of the trading style from "DPI Phumela" to "Incledon DPI" five years after the conclusion of the sale agreement. The new entity Incledon DPI trades in similar goods as applicant and has offices in all major centers in South Africa, including one in Cape Town.

[9] On or about 17 April 2007 the applicant became aware that respondent styled itself as "Incledon DPI - a division of DPI Plastics (Pty) Ltd" within its territory of operation. In addition the respondent had a stamp on its delivery note advising that it is no longer trading as DPI Phumela, but under the new name of "Incledon DPI". Applicant contends that it has acquired the goodwill of the business which confers upon it the right to the exclusive use of the name "Incledon" within the territory and that the trade name already had a reputation there at the time of the alleged passing off. It is further contended that the business was sold to the purchaser inclusive of the trade name and goodwill previously owned by Incledon Engineering Western Cape. Consequently, the contention went, the purchaser acquired the right to use the trade name in respect of the business as a going concern, and the seller loses the right to use the trade name in respect of the territory to which it applies. According to applicant it took transfer of ownership of the right, title and interest in the trade names of Incledon (Pty) Ltd in the territory, including the name "Incledon Cape".

[10] Applicant submits that respondent is misrepresenting to customers and suppliers that its business is that of the applicant and that such conduct is likely to deceive the public. Applicant claims that respondent is unlawfully appropriating its trade name and goodwill, the latter being an asset built up by it over the five years it operated exclusively in the territory and that respondent has accordingly passed its business off as being that of the applicant or being allied to it to the detriment of applicant. Applicant submits that even an own name or a name owned and used by a company in another territory cannot prevent a successful action of passing off if the normal prerequisites are met.

[12] It is common cause that the agreement of sale does not specifically refer to the goodwill of the business. It is not disputed that at the time of the purchase of the business by applicant, the name "Incledon" already had a sound reputation in the territory. Applicant concedes that it has not become the exclusive owner of the name "Incledon" and that Incledon (Pty) Ltd did not relinquish ownership of the name "Incledon". It is also common cause that applicant used the trade name "Incledon Cape" exclusively within the territory from 1 March 2001 until about 17 April 2007 when DPI Phumela Trading (Pty) Ltd started to trade under the name "Incledon DPI". Although there is a dispute of fact as to whether Incledon (Pty) Ltd continued trading in the territory after the conclusion of the contract, it is common cause that no other trade or retail outlet was operating in the territory under the name "Incledon" until 17 April 2007. The sale agreement made provision for ongoing co-operation between applicant and Incledon (Pty) Ltd in respect of stock supply, trading and the Incledon network.

[13] A final interdict applied for by way of motion or action, finally determines the rights of the respective parties to a dispute or litigation. To succeed in its quest for a final interdict, the applicant has to establish:
1.1 the existence of a clear right;
1.2. an injury actually committed or reasonably apprehended or an actual or threatened invasion of that right; and

[14] In order to establish a clear right for the granting of a final interdict, the applicant must prove that the respondent's use of the name "Incledon" within the territory amounts to a wrongful passing off by the respondent.

[15] Passing-off occurs where a person unlawfully misrepresents to a member of the public that his goods or services are those of another or associated with those of another. The alleged misrepresentation must be of such a nature that it is likely to deceive or confuse the public into believing that such goods or services are those of the plaintiff or are closely connected with it. In order to succeed with an action for passing off a plaintiff must prove an existing goodwill or reputation in the name, that the defendant is likely to confuse or deceive the public, and that the deception has caused or is likely to cause damage to plaintiffs goodwill.

"... (I)t is generally incumbent upon the plaintiff to establish, inter alia: firstly, that, the name, get-up or mark used by him has become distinctive of his goods or services, in the sense that the public associate the name, get-up or mark with the goods or services marketed by him (this is often referred to as the acquisition of reputation) and secondly, that the name, get-up or mark used by the defendant is such or is so used as to cause the public to be confused or deceived ... into thinking that (the defendant's) goods or service emanate from [the plaintiff] .. .such conduct is treated by the law as being wrongful because it results, oris calculated to result, in the improper filching of another's trade and/or an improper infringement of his goodwill and/or causing injury to that other's trade or reputation."

"It is the benefit and advantage of the good name, reputation and connection in a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has the power of attraction sufficient to bring customers home to the source from which it emanates".

"From the foregoing it clearly appears that certain factors are common to these descriptions and that three of them appear to be of considerable importance namely, the locality of the business, the personality of the person who conducts the business, and in a number of cases, the importance attached to a name."

"Die werfkrag van n besigheid is as regsgoed die voorwerp van n immateriele goederereg. Uit 'n regsoogpunt is die begrip doelmatiger as 'goodwill' aangesien dit die klem laat val op die totaliteit van eienskappe wat klante na 'n onderneming lok in teenstelling tot die gesindheid van klante teenoor die onderneming."

"Goodwill is the totality of attributes that lure or entice clients or potential clients to support a particular business ... The components of goodwill are many and diverse... Well recognized are the locality and the personality of the driving force behind the business... business licences... (and) agreements such as restraints of trade... These components are not necessarily all present in the goodwill of any particular business."

"...It is this which constitutes the difference between a business just started, which has no goodwill attached to it, and one which has acquired goodwill. The former trader has to seek out his customers ... The latter has a custom ready-made. He knows what members of the community are purchasers of the articles in which he deals, and are not attached by custom to any other establishment."

"My survey of the authorities brings me to the conclusion that the law recognizes no exception to the prohibition against passing off which can be invoked successfully in the present litigation, no exception which protects a man's use of his own name, when, had it not in truth been his, its exploitation by him would have amounted to a passing off that was actionable ... You may not call your business by any name which is likely to mislead the ordinary run of persons into the belief that it is or has connections with the business of somebody else. Such is the rule. It is subject to no qualification. It operates even where the name in question happens to be your own."

"The importance of the acquisition by plaintiff of a reputation in the trade name is twofold. Firstly, whether the general public will be confused or deceived into thinking, because of identity or similarity of names, that the business of the defendant is that of the plaintiff, or is connected therewith, must, as a matter of logic, depend on the extent to which that name is associated in the minds of members of the public with the business carried on by the plaintiff, i.e. the extent to which plaintiff has acquired a reputation in that trade name. Secondly, as the rationale of the wrong of passing off is the protection of the plaintiff's trade and goodwill, a valid cause of action would seem to postulate the existence of a goodwill, i.e. reputation, attaching to that trade name."

"In such an enquiry the trade names must be considered from the visual, phonetic and ideological points of view. They must be considered not side by side, but as a member of the public would see them, one after the other, with a time lapse in between and having regard to the likelihood of imperfect recollection. In passing-off they must be considered not in abstracto but in the form and under the circumstances in which they are used. This involves having regard to all the surrounding circumstances such as the nature of the businesses in question and the goods to which they relate, the types of persons who constitute potential clients of such businesses and the conditions under which such businesses are conducted. The [criterion] is not that of a very careful or a very careless purchaser but an ordinary purchaser of the types comprising the potential clients."

"... When one is concerned with alleged passing off by imitation of get-up [or whatever the case may be] ... one postulates neither the very careful nor the very careless buyer, but an average purchaser, who has a general idea in his mind's eye of what he means to get but not the exact and accurate representation of it."

[30] It would be anomalous if a trader could sell his business and trade name, continue to compete with his former business under a different name and thereafter baptize his competing business with the same trade name (or derivative thereof). In fact, the baptism is contrary to the spirit of the agreement since it was anticipated that trading relations would continue between Incledon (Pty) Ltd and Incledon Cape which were to be facilitated through the Incledon Network.

[32] The next issue to be determined is whether respondent's use of the name Incledon within the territory is reasonably likely to confuse or deceive the public into believing that its business is that of the plaintiff or is connected thereto. The onus is on the applicant to prove that there is confusion or deception on a balance of probabilities. Applicant avers that its business is hugely successful and had a reputation as a reliable supplier of quality goods to its customers. Applicant has 933 customers on its books. It has acquired many customers based on the goodwill it acquired under the agreement as well as new customers acquired after the agreement. These are loyal and repeat customers who associate the trade name "Incledon" with the business of applicant. According to applicant, respondent and DPI Phumela recognized the reputation and goodwill established by applicant in the name and mark of "Incledon Cape" in the territory hence it did not trade under the name and style of "Incledon" for five years within the territory. The contract provides that the parties would not trade to the detriment of each other. Applicant cited numerous examples of confusion which arose after the renaming of respondent:

(a) Customers contacted applicant's business and asked for the telephone number of its Johannesburg branch.
(b) A supplier contacted the applicant requesting to speak to respondent's employer.
(c) Employees of respondent intimated to members of the public that they were part of Incledon Cape.
(d) The Johannesburg office erroneously contacted applicant's office instead of respondent's business.
(e) A customer telephonically enquired whether applicant was the same as Incledon DPI.
(f) Applicant's business is contacted when in fact the intention was to contact respondent's business.
(g) Applicant received a tax invoice which was meant for respondent, and a client made enquiries related to respondent's tax invoice number.

(j)      Unwillingness of clients to do business with applicant due to its association with respondent.

[33] Applicant submits that the confusion has caused or is likely to cause the public to divert its business away from the applicant which can result in loss of its market share. The renaming of DPI Phumela as "DPI Incledon" may reasonably create the impression that it is connected to Incledon Cape. Applicant alleges that it has no control over the quality of respondent's products or service and may suffer harm if the businesses are confused with each other.
[34] On the other hand respondent avers that the examples of confusion are irrelevant and do not refer to the true customer base consisting of civil contractors, engineers, farmers and municipalities. According to respondent the alleged confusion are merely administrative problems which can be rectified. Respondent therefore denies that any confusion arose as a result of the name change.

[39] Respondent undertook not to trade in conflict with the applicant. By using a similar name it is trading directly in conflict with the applicant. Considering the fact that the trading names were almost identical, that they engage in the same field of activity and that they share a common client base I am satisfied that there is a reasonable likelihood that members of the public may be confused into believing that there is a business relationship or some trade connection between the goods and services of the parties. It is clear that the evidence establishes actual confusion. The applicant has shown that it has a reputation which is worthy of protection and that the respondent has wrongly conducted itself so as to cause confusion.

"... as far as the location of reputation is concerned, it must subsist where the misrepresentation complained of causes actual or potential damage to the drawing power of the plaintiff's business."

[41] The applicant is based in Cape Town. All the examples of actual confusion have taken place in Cape Town. The applicant itself states that its good reputation is associated with the trade name "Incledon Cape" in the territory. I am not persuaded that the applicant has discharged the onus of proving that its reputation extends beyond the geographical area of the Western Cape. I am accordingly satisfied that Incledon Cape has shown to have the necessary proprietary interest, trade reputation and goodwill in the Western Cape in respect of the trading style "Incledon" or "Incledon Cape". I am also satisfied that no reasonable alternative remedy is available to the applicant. In my view, therefore, the applicant has succeeded in satisfying all the requirements of a permanent interdict.

In the result the following order is made:

1.	The respondent is interdicted from operating a business in the Western

3.	Respondent is ordered to pay the costs of the application.

P L GOLIATH