Skip Navigation

across the bar

Goodwill of a business-something worth protecting

by Ashley - Posted 20 October 2011

 

Recent court cases have emphasised the importance of protecting the goodwill of a business, particularly when that business is sold as a going concern. 
The term ‘goodwill’ has proved difficult to define and is capable of different meanings, depending on the context.  However, in most instances it means the following:  ‘the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which lures or entices clients or potential clients to support a particular business.’ 
Buying a business is an exciting new chapter in any businessman’s life. It can however, quickly turn into a nightmare if the seller of that business opens up shop around the corner to compete with you. The law creates the necessary mechanism to protect the buyer in this situation and the cases below demonstrate why a Restraint of Trade Agreement is vitally important.
In RICAMA CC v Twynham, a case which came before the Eastern Cape High Court in June 2011, RICAMA CC had purchased the business of a restaurant under the name and style of ‘Bella Vita’ and a bed and breakfast business from Ms. Twynham.
A restraint of trade clause was included in the Agreement of Purchase which prohibited Ms. Twynham from directly or indirectly engaging in a business or activity similar to the business carried on by RICAMA CC, within the City of Grahamstown and Makana Municipal area for a period of three years.
Shortly after Twynham sold her business to RICAMA CC she opened up a sushi bar within a radius of 3 kilometres of “Bella Vita” restaurant.
RICAMA approached the Court in an attempt to enforce the restraint of trade. The court held that the sushi bar opened by Twynham operated as a restaurant and was therefore subject to the restraint of trade clause. The Court found further that Twynham’s conduct amounted to a breach of the restraint and an interdict was granted against Twynham.
In September 2011 another matter came before the Supreme Court of Appeal whereby the Court had to decide whether a restraint of trade was enforceable or not. In Van Der Watt and Another v Jonker and another, Mr. Jonker had established the following businesses:
1.       Agriwen (Pty)Ltd, which specialised in the sale of agricultural products to farmers and the distribution of Engen Petroleum Products in certain areas of the Free State province;
2.       Agri-petroleum which specialised in the sale and distribution of Engen Petroleum products under the Zenex brand within certain areas of the Free State namely, Bothaville, Bultfontein and Virginia; and
3.       Agri-diesel, which specialised in the sale and distribution of Engen Petroleum Products to areas of the Free Stat not serviced by Agri-petroleum.
In 2005 Jonker and Van Der Watt started a new business in Randfontein selling and distributing Sasol Petroleum Products, mostly to industrial clients (the Agri group business distributed Engen petroleum products, mostly to farms).
In terms of a written agreement concluded between Jonker and Van Der Watt it was agreed that Van Der Watt would become the sole shareholder of the company which owned the Randfontein business and Jonker would become the sole shareholder of the Agri Group.  Jonker would pay Van Der Watt R 2 million and the agreement would include a restraint of trade clause.
In terms of the restraint of trade Van Der Watt was restrained for a period of 10 years from being involved in a business entailing the trading, storage, handling, sale, marketing or distribution of fuel, oil and/or related products in the areas serviced by the Agri group i.e. those particular parts of the Free State, for a period of 10 years.
Despite the restraint of trade Van Der Watt solicited customers of the Agri Group and he traded in areas serviced by Agri group under the name of Dynamic Fuel on both the distribution and retail sides. The Court held that the purpose of the restraint was to protect the goodwill of the business and that it was enforceable. The Court held further that Van Der Watt’s conduct constituted a breach of the restraint and the interdict granted against him was upheld.  
 

permalink | comments (0) | back to top

google victory in the you tube copyright lawsuit

by Steve - Posted 26 June 2010

Google have successfully defended the lawsuit brought against them by Viacom and its co-plaintiffs for direct and secondary copyright infringement involving copyright protected material being uploaded to You Tube. The New York district court ruled that Google were entitled to safe harbour protection under the Digital Millenium Copyright Act, and that general knowledge of copyright infringement on its site did not disqualify it from such protection. Viacom have said that they will appeal the decision.

Check out the ruling.  

permalink | comments (0) | back to top

when crime does pay (at least 6 months salary)

by Ashley - Posted 21 May 2010

So what happens if one of your employees is arrested on suspicion of committing a crime and remains in custody for a long period of time? Does this constitute incapacity and can you then fire them?

The Labour Appeal Court was faced with this very question in the recent case of Samancor Tubatse Ferrochrome v Metal and Engineering Industries Bargaining Council (MEIBC) and Others. Mr. Maloma (not Malema) was employed by Samancor as a furnace operator. He was arrested on suspicion of having committed an armed robbery. He remained in custody and was absent from work for approximately 150 days!

10 days after his arrest, Mr. Maloma received a dear john letter from his employer advising him that he had been dismissed on the ground of incapacity, i.e. that he was physically unable to tender his services.

Previously, our law recognized two aspects of incapacity: a) poor performance - where the employee was incompetent at doing the work because of a lack of skill, knowledge, ability or efficiency; and b) ill health or injury. However, the new case law has extended these 2 categories and incapacity can now be permanent or temporary and may take other forms, for instance, imprisonment and military call-up.

The court took into account that Samancor had no idea how long Mr. Maloma's incarceration would last, and that they needed a quick replacement because of the skilled nature of his job. The court decided that the dismissal was substantively fair. Unfortunately Samancor dropped the ball by not giving Mr. Maloma a fair opportunity to present his case and so the dismissal was held to be procedurally unfair. They were ordered to pay him 6 months salary as compensation.

In other words, Mr. Maloma received paid leave from his employer for his stay in jail. Who says crime doesn't pay.   

 

permalink | comments (0) | back to top

google victory in EU adwords case

by Steve - Posted 24 March 2010

The European Court of Justice ruled in favour of Google  yesterday in the Louis Vitton Adwords case, finding that Google's practice of allowing online advertisers to buy keywords which were the same or similar to their competitors' trademarks, did not in itself amount to trademark infringement.  

There must have been the proverbial deep gasp of relief from Google's headquarters as the search giant derives a large portion of its income from its Adwords online advertising service.

The court did rule that online advertisers who use another party's trademarks in keyword-based advertising in order to confuse consumers or to piggyback on their competitors' business success could be held liable for trademark infringement. This clarifies the law as it relates to online advertising and the decision is to be welcomed.

Now Google can concentrate on its fight with Viacom and others in the Youtube case.

permalink | comments (0) | back to top

google adwords decision expected next week

by Steve - Posted 19 March 2010

Online advertisers will be waiting anxiously for the decision of the EU's Court of Justice next week in the Google Adwords case. The court will rule on whether or not a company that buys Google adwords for a rival's trade marks are committing trade mark infringement. Google's adWords system currently lets the highest bidder choose any search term to display its ads.

The case involves luxury brand, Moët Hennessy Louis Vuitton (LVMH), who noticed that adverts for counterfeit product suppliers were being displayed on Google when searching under various LVMH trade marks.

The case will have major repercussions for online advertising that is based on a context-sensitive ad model. It will also provide some much needed clarity on the application of traditional trade mark protection into the online world.

Watch the space.

permalink | comments (0) | back to top

Affirmative action in the spotlight

by Ashley - Posted 15 March 2010

Affirmative Action is still a hotly contested topic in South Africa. In the recent case of Solidarity obo Barnard and Another v South African Police Services the Labour Court had to consider the issue of Affirmative Action and employment equity in the South African Police Service (SAPS).



Mrs. Barnard commenced service with the SAPS in 1989 as a constable. In 1997 she was promoted to the rank of Captain. After many years she was transferred to the National Inspectorate, formerly known as the National Evaluation Service (NES), at the rank of Captain.



During 2005 the SAPS created a new post of Superintendent of the NES. Mrs. Barnard applied for the position twice but was denied the promotion. Mrs. Barnard brought this application based on unfair discrimination and the allegation that she was denied the promotion solely for being white.



During the interview process for the position  Mrs. Barnard obtained the highest scores out of all the candidates and the panel agreed that the appointment of Mrs. Barnard would definitely enhance service delivery. Despite these factors, the Divisional Commissioner decided to leave the post vacant based on the sole reason that Mrs. Barnard was white and her appointment would frustrate the representivity status.



In 2006 the same post was again advertised. Mrs. Barnard applied and was short-listed. She was once again the top candidate for the position and recommended by the panel.



The National Commissioner refused to approve Mrs. Barnard's appointment on the basis that she was white and her appointment would not address representivity. The post was left vacant.



After due deliberation the Court reiterated that where a post cannot be filled by an applicant from an under- represented category because a suitable candidate from that category cannot be found, promotion to that post should not ordinarily and in the absence of a clear and satisfactory explanation be denied to a suitable candidate from another group.



The Court held that the failure to promote Mrs. Barnard was a decision based on her race and was indeed discrimination. The fact that other suitable black candidates were not appointed did not make the non- appointment fair.



In light of SAPS decision not to promote a black candidate, the Court concluded that it was unfair not to appoint Mrs. Barnard, who was a member of a designated group in the Employment Equity Act and the best candidate for the job.



The Court directed the SAPS to promote Captain Barnard to the post of Superintendent with effect from 2006.



permalink | comments (0) | back to top

State needs to cough up within 30days

by Steve - Posted 19 November 2009

The government has said that all current and future judgments against it would be settled within 30 days.  This follows the constitutional court ruling last month that confirmed that moveable assets belonging to the state could be attached in execution of a judgment against it. 

In the past, the only leverage you had to get an unpaid judgment paid by the state was to charge interest. But this wasn't really a major deterent. The 30 day promise is great news for litigants if the government can deliver on it.    

permalink | comments (0) | back to top

Employer's risk for internet abuse - the Grobler v Naspers judgment

by default - Posted 16 June 2005

The Cape Provincial Division's landmark judgment in the case of  Grobler v Naspers 2004(4) SA 220(CPD) poses some serious questions for employers facing growing internal ICT risks in their workplace.

The judgment paves the way for more and more employers to be held vicariously liability for the wrongful actions of their employees. Although the case dealt with sexual harrassment risks, the approach taken by the court will be applicable to ICT risks as well. It may no longer be enough for employers to rely on the fact that the employee was not acting in the furtherance of the employer's business, or that the employee's conduct complained of was intentional or a clear deviation from the employer's instructions. The court followed the approach adopted in other jurisdictions by looking at the risks associated with and created by the running of the employer's business. If risks are introduced which later materialise causing harm, the employer may be liable even though there is no-fault on his/her part.
      

permalink | comments (0) | back to top

New case - trademarks vs domain names

by default - Posted 24 April 2005


Last week the CPD handed down its judgment in the matter of New Media Publishing (Pty) Limited v Eating Out Web Services CC. The facts briefly stated were as follows:

The facts

The Applicant is the publisher of a magazine titled "Eat Out" which is a guide to restaurants in SA. The guide contains comprehensive information on the featured restaurants. The Applicant also has a website at www.eat-out.co.za which has been registered since 24 November 2000. The website is based on the same concept as the offline publication but is not as comprehensive.

The Applicant is also the holder of the registered trade mark "Eat Out Guide" which was duly registered with effect from 3 July 1998.

The Respondent has websites at www.eating-out.co.za and www.eatingout.co.za which provides visitors with free information on restaurants in SA. The websites are similar to the offline material published by the Applicant. These websites have been operating since June 2000.

Relief sought

The Applicant sought an interdict from the court for the following relief:

a)                  restraining the Respondent from infringing its registered trademark; andnull

b)                  restraining the Respondent from passing off its business, products or services as those of the Applicant and from using the name Eating Out or any mark confusingly or deceptively similar in any manner so as to connect it with the applicant's business, products and services.

Trade mark infringement

The court found that the combined effect of the close resemblance of the words "Eating Out and the Applicant's registered trade mark and the similarity between the Applicant's publication and the Respondent's website is such that in the use of its mark by the Respondent there exists the likelihood of deception or confusion. Therefore, the Applicant established an infringement of its registered trade mark by the Respondent.                          

permalink | comments (0) | back to top

Viewing posts 1 - 9 of 9