Capital Estate and General Agencies (Pty) Ltd and Others v Holiday Inns Inc and Others

• Jurisdiction: South Africa
• Judge: Holmes JA, Wessels JA, Rabie JA, Corbett JA and Galgut AJA
• Judgment Date: 29 March 1977
• Citation: 1977 (2) SA 916 (A)
• Hearing Date: 07 March 1977
• Court: Appellate Division

Rabie, J.A.:

This is an appeal, brought direct to this Court in terms of sec. 20 (3) of the Supreme Court Act, 59 of 1959, against the judgment of COLMAN, J., sitting in the B Witwatersrand Local Division, in which he granted a final order interdicting each of the four appellants (respondents in the Court a quo) from using the words "Holiday Inn" in the course of, or in relation to its business, or to any business with which it is concerned or connected, in such manner, form or context as is likely to lead members of the public to believe that such business is, or is connected with, the business of the respondents or of any one of them. The Court a C quo also made certain ancillary orders, but it is not necessary to set out the terms thereof.

The first respondent (the first applicant in the Court below) was incorporated in the United States of America in 1952. The second and third respondents (the second and third applicants, respectively, in the D Court below) are South African companies.

There is no dispute in the affidavits as to the nature of the business and the activities of the respondents. The first respondent, its subsidiaries and franchisees operate hotels under the style of Holiday Inns in many countries of the world; E they are said to be "the largest hotel group in the world", and "the second biggest hotel group in South Africa". In January 1970 the Holiday Inn group of companies, headed by the first respondent, was operating 1 668 Holiday Inns in the world, while a further 78 were then under construction. The second and the third respondents are members of the aforesaid F group of companies. They operate hotels, styled Holiday Inns, in South Africa and in certain adjacent countries in terms of franchise agreements concluded with the first respondent. The first Holiday Inn in South Africa was opened in June 1970, and two others were opened later in the same year. The Holiday Inn at Jan Smuts Airport, which is said to be the best known of the Holiday Inns in South Africa, was opened early in 1971. By G April 1975, when the respondents launched the proceedings which resulted in the aforesaid interdict being granted against the appellants, there were 12 Holiday Inns in South Africa, and the expected turnover for the year 1975 was in excess of R12 000 000.

The Holiday Inns have been extensively promoted in South Africa, and large sums are spent on advertising every year. The sum of R437 000 was set aside for advertising purposes during the year ended June 1975.

H The second respondent also controls Holiday Inns in Rhodesia, Botswana, Lesotho and Swaziland. These hotels, six in all, are said to be (and it is not disputed) "well known to thousands of South African residents".

The respondents' main business is the provision of hotel accommodation, but they also undertake certain other activities on their hotel premises, viz. the operation of restaurants, and, in the case of some of the hotels, the operation and/or letting of shops. More will be said about this

Rabie JA

later in the judgment.

During November 1974 it came to the notice of the respondents that a shopping centre called "Holiday Inn Shopping Centre" was being constructed at Bonaero Park, Kempton Park, and that the A first appellant was offering to let shops therein. On one of the signs erected at the site appeared the name "Holiday Inn of Southern Africa Group (Pty.) Ltd". The respondent's, contending that the name "Holiday Inn" was distinctive of their hotels and B that the use thereof in connection with the shopping centre constituted an infringement of their rights, called upon the first appellant to desist from using the name in connection with the shopping centre or any business related to it. The demand was rejected in a letter signed by Mr. Philip Voutsas. He is a director of all four of the appellants and is the leading spirit in all their affairs. Voutsas stated in the letter that the first appellant was authorised to

"use the name 'Holiday Inn' in their agency for conducting C their business";

that the second appellant (whose real name is "Holiday Inn of Southern Africa (Pty.) Ltd." and not "Holiday Inn of Southern Africa Group (Pty.) Ltd.", as shown on the signboard referred to above) and its "associates" were registered "prior to the respondents commencing business in South Africa", and that no rights of the respondents were being infringed. On receiving this reply, the respondents proceeded on notice of motion D against the first and second appellants, claiming an order restraining them from passing off the business of the one or the other or both of them as being that of the respondents by using the words "Holiday Inn" in connection therewith. The first and second appellants filed a joint answering affidavit, deposed to by the aforesaid Voutsas, in which it was said, E inter alia, (a) that the "Holiday Inn Shopping Centre" in Bonaero Park was being erected by Bonaero Park Galleries (Pty.) Ltd., which company had an agreement with the second appellant "entitling it to use the name of 'Holiday Inn"'; (b) that the second appellant had an agreement with a company known as F Trever Investments (Pty.) Ltd. in terms of which this company was entitled to use the name "Holiday Inn" in connection with the development on erf 1086, Bonaero Park Extension 2, of a project which would consist of 44 "duplex chalets with swimming pools and playing fields" and which would probably cost about R1 150 000; and (c) that the second appellant had in the past endeavoured (without success), and that it was still G endeavouring, to "negotiate franchise agreements" with the owners of hotels and motels in various parts of South Africa. The second appellant, it may be said at this point, was incorporated in 1965. As to its name, Voutsas says in one of his affidavits that he first saw the name "Holiday Inn" on a roadhouse in Springs in about 1964 and that it seemed to him to H be a good name for a motel. Some time thereafter, he says, he saw the name "Holiday Inn" in an American magazine, and in 1965, when he was in the United States, he again came upon the name. He approached the first appellant and asked whether it would grant him a franchise for South Africa. His request was not granted. Thereafter, on his return to South Africa, he caused the second appellant to be registered under the name it bears, i.e., Holiday Inn of Southern Africa (Pty.) Ltd. Its main registered objects are

"to establish, control and manage motels and hotels anywhere in the Republic of

Rabie JA

South Africa... "

and

"to negotiate franchise or other agreements with other parties on such terms as the directors in their discretion may from A time to time decide for the use of the company's name and goodwill or for any other purpose for the benefit of the company".

By 1975, when the respondents commenced proceedings against the appellants, the second appellant had not yet conducted any business in connection with hotels or motels.

As a result of the disclosures mentioned in (a), (b) and (c) above, the respondents informed Bonaero Park Galleries (Pty.) B Ltd. and Trever Investments (Pty.) Ltd. that they intended applying for their joinder as respondents in the motion proceedings. The two companies consented to being joined and they became third and fourth respondents, respectively, on the papers. After their joinder the third and fourth respondents filed a joint answering affidavit, deposed to by Voutsas, in which the allegations and submissions appearing in the present C respondents' founding and replying affidavits were dealt with at great length. It appears from the affidavit and one of the annexures thereto, viz., a copy of a draft franchise agreement, that the second appellant - although it has never conducted any hotel or motel business - has appointed a company known as Higba (Pty.) Ltd., which trades under the style "Holiday Inn D Group Buying Association", as the "sole distributor of the franchise name known as 'Holiday Inn of Southern Africa'", and that it has authorised this company to grant to a franchises, for reward, the right to use the name "Holiday Inn of Southern Africa", or to describe his hotel or motel as one "recommended E by Holiday Inn of Southern Africa (Pty.) Ltd." At a later stage of the proceedings in the Court below Voutsas made a further affidavit on behalf of all four of the appellants. It is not necessary to refer to the contents thereof.

I have set out at some length the circumstances in which the appellants' activities relating to the duplex chalet project and the attempted negotiation of franchise agreements came to F be raised in the affidavits because of an argument which was addressed to us by appellants' counsel. The argument is that, when the proceedings commenced, the respondents' only complaint related to the appellants' conduct in connection with the shopping centre, and that it did not at any time thereafter become part of the respondents' case that the appellants' G activities...