Cambridge Plan AG and Another v Moore and Others

• Jurisdiction: South Africa
• Judge: Page J
• Judgment Date: 02 May 1986
• Citation: 1987 (4) SA 821 (D)
• Hearing Date: 25 April 1986
• Court: Durban and Coast Local Division

Page J:

The facts which give rise to the present application C are, briefly, the following. During the 1970s a Dr Alan Howard, a nutritionist of Cambridge University in England, developed, with the assistance of others, a dietary regimen involving the use of low-calorie foods of a specific dietary D formulation. In 1979, a California corporation called Eileen Feather Studios was granted a licence by Dr Howard to manufacture and sell dietary foods according to his formulation. The owners of Eileen Feather Studios conceived and adopted the name 'The Cambridge Diet' and used it as a trade mark in relation to their products, which were originally sold E by mail order in the United States of America.

In 1980 they formed another California corporation called Cambridge Plan International and transferred all the rights of Eileen Feather Studios in the business together with the goodwill under the trade marks 'Cambridge Diet' and 'Cambridge Plan' to the latter company.

Cambridge Plan International adopted a marketing method which involved using the services of persons called Cambridge F Counsellors to promote and sell the products and render encouragement and advice to the end-users. These counsellors were required to qualify themselves in the application of the prescribed dietary regimen and the use of 'Cambridge Diet' products in its implementation. Those products were sold primarily by them directly to the end-consumers and were not available through other sources. Their remuneration comprised G commission on such sales.

The diet is employed not only to achieve an initial weight loss but also thereafter to maintain the dieter at that reduced weight. It follows that persons who adhere to the diet (which, of course, not everybody does) become regular purchasers of the products.

The trading activities of Cambridge Plan International proved a H great success in the United States of America, and in August 1982 the American company caused the formation of a Swiss company, Cambridge Plan AG, which is the first applicant. Cambridge Plan International transferred to Cambridge Plan AG all its rights, title and interest in and to the trade names 'Cambridge Plan', 'The Cambridge Diet' and related marks and/or names related to the Cambridge Diet together with the goodwill I associated with such names. Included in such transfer was an assignment relating specifically to the rights of Cambridge Plan International in those marks and names in South Africa.

On 4 July 1983, Cambridge Plan AG applied for, and subsequently obtained, registration in South Africa of a trade mark J consisting of the

Page J

A words 'The Cambridge Diet' presented in a particular fashion in conjunction with a device consisting of a crown including a logo comprising the letters 'cpi' in lower case. The words 'The Cambridge Diet' also appear in lower case in the mark, save for the letter 'C' which is in upper case, is larger than the rest B of the letters, and has an elongated tail. The mark is registered in classes 29, 30 and 32. Each registration is subject to a disclaimer in the following terms:

'Registration of this mark shall give no right to the exclusive use of the alphabetic letter "C" and the word "Cambridge" in its geographical connotation, separately and apart from the mark and from each other.'

These three trade mark registrations are numbered 83/4447, C 83/4448 and 83/4449 respectively.

The first applicant commenced to trade actively on 1 May 1984.

The second respondent is a medical practitioner who was associated with Dr Howard in the development and testing of the diet in Cambridge during the late 1970s when he and his wife, D the first respondent, were living in England. After they came to South Africa, the second respondent imported quantities of dietetic products from Cambridge Plan International under the trade mark 'Cambridge Diet' for use in the obesity research work that he was doing at the Natal University. These products generated considerable interest in South Africa and the first respondent decided herself to undertake the importation, E promotion and sale of 'Cambridge Diet' products. To this end she visited California in July 1982 and returned to South Africa with quantities of 'Cambridge Diet' products which she offered for sale in Natal with herself as counsellor. The products sold by the first respondent initially came from Cambridge Plan International. After the first applicant F commenced operations, however, the goods imported consisted to an ever-increasing extent of its products and at present and for a considerable period in the past all such products sold in South Africa have emanated from it.

Second applicant was incorporated in South Africa in August 1983 by persons unconnected with the respondent. In June 1984 the second applicant was appointed by the first applicant as G the exclusive distributor of its products in South Africa, notwithstanding requests by the respondents that they should be so appointed. This appointment carried with it the exclusive right to render, or cause to be rendered, counselling services which form part of the marketing system of the product described earlier in this judgment. The second applicant also H applied to be entered as a registered user of the first applicant's registered trade marks.

Figures supplied by the first respondent in an affidavit in earlier proceedings (the correctness of which is not disputed in this regard) revealed that from February 1982 to September 1984 respondents sold 15 541 cans of the 'Cambridge Diet' I formulation in South Africa to a retail value of R255 142 to a total of 2 396 users. The second applicant's figures, which have been furnished from September 1984 to February 1986 reveal the sale by it over that period in South Africa of 81 441 containers of Cambridge Diet products for a value of R1 760 575 to approximately 16 600 consumers, of whom some 3 000 were in Natal. There may, of course, be some overlapping in these J figures, but I do not consider it to be significant.

Page J

The promotional activities of the second applicant were carried A out primarily through the medium of counsellors appointed by it as Cambridge Counsellors. As at the date of this application there were 272 counsellors operating throughout South Africa of whom approximately 52 were in Natal. I will revert later in this judgment to the manner in which they are appointed and B operate, but it is relevant to mention at this stage that many of them elected at their own expense to publicise the counselling services and Cambridge diet products which they offered for sale through various media. The promotion of the products by counsellors was, however, chiefly by word of mouth at meetings convened for the purpose of counselling potential and confirmed dieters, where the products received the maximum C exposure.

The second applicant has, since the commencement of its trading activities, expended more than R180 000 in promoting the 'Cambridge Diet' formulation and method in South Africa, of which approximately one-quarter has been spent in Natal. Such expenditure included some press advertising and a visit to this D country of a person who had allegedly lost 145 kg on the Cambridge Diet. The Cambridge Diet has also enjoyed considerable publicity in magazine and similar articles and a book has been published by Dr Howard titled The Cambridge Diet.

The system used by the second applicant in distributing 'Cambridge Diet' products in South Africa is to appoint 'Area E distributors' and, through them, 'Cambridge Counsellors'. The relationship between an area distributor and the second applicant is not embodied in any written agreement but it involves the distribution of 'Cambridge Diet' products supplied by the second applicant to the counsellors in that distributor's area. The distributor is also entitled to appoint additional counsellors in the area, subject to the confirmation F of the second applicant. The counsellors are required to make returns of information to the area distributor including the completion of a record card in respect of each customer. Originally the area distributor retained one copy of such records for her own purposes and furnished the other to the second applicant. Latterly, the area distributor no longer G retains a copy of the card.

In order to be appointed a counsellor, a candidate has to have been a user of the Cambridge Diet and to have attended a course on counselling. On appointment, the counsellor enters into a contract with the second applicant, termed a 'counsellor agreement'. The obligations of the counsellor are set forth in that agreement as follows. (The references to CDPL are H references to the second applicant.)

'The counsellor agrees to:

1.

Attend all training seminars as may be required by CDPL.

2.

Sell CDPL products at the appropriate retail price in accordance with the guidelines as detailed on the established current price lists.

3.

Strictly adhere to any and all policies and procedures I established by CDPL. This includes, but is not limited to, the purchasing and selling of any CDPL product, accounting and record keeping, proper counselling and personal conduct, maintaining the high image of CDPL and its products, and the proper collection and remittance of any taxes to the Receiver of Revenue. Any policy and/or procedure may be amended and/or revised at the sole J discretion of CDPL.

Page J

4.

A Act as an independent contractor, not as an agent, or legal representative of CDPL.

5.

Keep records and make payments to any third party with whom the counsellor may enter into an authorised (by CDPL) agreement. CDPL will in no way whatsoever be liable for debts incurred by the counsellor.'

B On appointment the counsellor is furnished with a 'counsellor manual' which stresses, inter alia, the...