Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd and Another

JurisdictionSouth Africa
JudgeSmalberger JA, Harms JA, Marais JA, Schutz JA, Plewman JA
Judgment Date28 May 1998
Citation1998 (3) SA 938 (SCA)
Docket Number393/95
Hearing Date11 May 1998
CounselCE Puckrin (with him JN Cullabine) for the appellant MJD Wallis (with him GR Thatcher) for the respondent
CourtSupreme Court of Appeal

Harms JA:

[1] This is a passing-off case and concerns the exclusive right to manufacture, market and sell reproductions of the Lotus Seven Series III sports car. The appellant (the plaintiff, 'Caterham') claims exclusivity for its product, the Caterham Seven or Super Seven, and alleges that the Birkin Seven, the product of the first respondent (the C first defendant, 'Birkin') is being passed off as that of Caterham's. Both these sports cars are replicas of this particular Lotus model, a car with a classic and distinctive shape and appearance. (I use the term 'replica' to mean a copy or reproduction made by someone other than the original designer.) Even an expert finds it difficult D to distinguish between these three cars from a relatively short distance.

[2] The essence of Caterham's contention on appeal is that the use of the numeral 'Seven' has become distinctive of a sports car having the particular shape and external configuration of the Lotus Seven Series III and that the E use of a Seven in relation to a sports car having this shape and configuration serves to identify the car as emanating from Caterham or its predecessor. Caterham, at the hearing of the appeal, abandoned any claim for damages and limited the relief sought to an interdict restraining the respondents from manufacturing, marketing, selling and exporting from South Africa a sports car having the said shape and configuration which uses upon or F in relation thereto the numeral 'Seven' in either alphabetic or numeric form. There are no registered trade marks, designs or patents that have a bearing on Caterham's rights. It is no longer argued that Birkin was guilty of the general delict of unfair competition as set out in Schultz v Butt 1986 (3) SA 667 (A). More importantly, the G application of the principles concerning passing-off in relation to a get-up shorn of a distinctive name do not form part of Caterham's case on appeal (cf Weber-Stephen Products Co v Alrite Engineering (Pty) Ltd and Others 1992 (2) SA 489 (A); Reckitt & Colman Products Ltd v Borden Inc and Others [1990] RPC 341 (HL) ([1990] 1 All ER 873)). The reasons will become apparent. Initially Caterham's main claims related to H copyright infringement. All the original claims were dismissed by the trial Judge, Howard JP, in the Durban and Coast Local Division. He refused leave to appeal on copyright but granted leave on passing-off.

[3] For the background facts I rely heavily upon the judgment of Howard JP, and what follows is in part a I quotation from it. The Lotus Seven sports car was designed by the late Colin Chapman and developed, manufactured, marketed and sold from about 1957 to 1972 by one or more companies in the Lotus group which Chapman founded. Nothing turns on the structure of the Lotus group and I shall refer to these companies singly and collectively as 'Lotus'. The Lotus Seven was J

Harms JA

designed as a relatively cheap sports car which would appeal to motor racing enthusiasts. Four models were A designed and built consecutively and they were identified as the Series I (1957), Series II (1960), Series III (1968) and Series IV (1970) respectively. There is a suggestion that Chapman did not have a hand in the design of the last model and that it was marketed somewhat against his will, but that is of no consequence. Of B importance to this case is the Series III.

[4] Caterham is a company incorporated and registered in England and it carries on business as a motor dealer and manufacturer of sports cars at Caterham in Surrey. It became a distributor of Lotus cars in 1959 and the sole C distributor of Lotus Seven sports cars in the United Kingdom from about 1965. Lotus ceased manufacturing any car in the Seven series in 1972, by which stage the version then in production was the IV. In terms of a written agreement dated 28 February 1973 the plaintiff purchased from Lotus, inter alia ,

(i)

the exclusive right to manufacture, sell and distribute Lotus Seven Series IV cars (and subsequent D series thereof) in the United Kingdom and certain European countries;

(ii)

the right to manufacture, sell and distribute spare parts for Lotus cars of whatever series and the exclusive right to describe itself as 'Lotus Seven Spares Distributor'; and

(iii)

the right to use the Lotus symbol in connection with the manufacture, sale and distribution of spare E parts but not otherwise.

(My emphasis.)

[5] Pursuant to this agreement Caterham manufactured and sold about 30 Series IV cars. Thereafter it began F manufacturing the earlier Series III, using jigs, tools and drawings which it had received from Lotus, presumably for the purpose of manufacturing spare parts for that model. Lotus acquiesced in the manufacture and sale of the Series III cars and accepted payment of royalties in respect of them as though they had been manufactured G pursuant to the agreement. Since then Caterham has continued to manufacture the Series III, with modifications and improvements from time to time, and to market and sell it as the Caterham Super Seven car. (The evidence is not always consistent and reference is also made to the car as a Caterham Seven.) Subsequently, during the H period 1985 to 1988, Lotus and Caterham entered into a number of agreements in which copyright and, more importantly for purposes of this case, the alleged rights to goodwill and to the unregistered trade marks 'Seven', 'Super Seven' and 'Super 7' were assigned to Caterham. There was an initial assignment during 1985 relating to the UK and Europe, but it was superseded in 1988 by an assignment of all the rights to and in these trade marks I together with the goodwill in the business of manufacturing and selling Lotus Seven cars in all countries in the world excepting North America.

[6] Birkin is a local company which carries on business as a manufacturer of sports cars at Pinetown. Its replica of the Lotus Seven Series III is marketed and sold in South Africa under the name of Birkin Seven or J

Harms JA

Super Seven and is also exported to Japan. Watson (the second respondent/defendant) is the managing director A of Birkin. Howard JP found no reason to disbelieve his evidence as to how he designed and developed the Birkin model. He is a mechanical engineer with considerable experience in building and working on sports cars. From about 1981 when he moved to Durban and started an engineering business he became acquainted with a B syndicate of people who were engaged in building replicas of the Series III. He purchased a chassis from a member and built a replica for himself. He also made parts for other members of the syndicate and by the end of 1982 he had recognised a commercial opportunity. C

[7] Watson knew that Lotus was no longer making the Series III and that Caterham was manufacturing a replica. During January 1983 he proposed to Caterham's managing director, Mr Nearn, that Birkin be licensed to manufacture and distribute Caterham Super Seven cars in South Africa. The terms upon which the plaintiff was D prepared to do business with Birkin were unacceptable to Watson and the proposal was dropped. Watson thereafter approached Status Cars (Pty) Ltd in Pietermaritzburg, the local distributor and service agent for Lotus. This culminated in an agreement of 20 January 1983 in which Status Cars recorded that Lotus had accepted in principle a proposal that Birkin would manufacture a replica of the Lotus Seven Series III under licence to Lotus E but not bearing the Lotus name, that the vehicle would be marketed through Status Cars and that it would be named the 'Classic Super Seven'. Watson went ahead with the venture believing that he had the approval of Lotus.

[8] Birkin produced a prototype for a launch in Pietermaritzburg on 12 October 1983. Present were Chapman's F widow, Mrs Hazel Chapman, Peter Waugh, the manager of Team Lotus International Ltd, Nigel Mansell and Elio de Angelis, the Team Lotus Formula 1 drivers, and Mike Bishop who was the export sales manager for Lotus. Team Lotus International Ltd was involved in Formula 1 motor racing and was not a member of the Lotus G group. Mrs Chapman unveiled the prototype and the launch received wide press publicity. Birkin produced these cars for Status Cars in accordance with their arrangement. Twelve were produced during the period from 15 December 1983 to 14 January 1985. Thereafter a written contract was concluded in terms of which Birkin H granted to Lotus Motors (Pty) Ltd, the successor of Status Cars as local agent of Lotus, the exclusive right to sell worldwide all Classic Super Seven vehicles manufactured by Birkin. The venture was not a success and was terminated in August 1985.

[9] At about the same time Watson reopened negotiations with Nearn for a licence. These foundered, with I Nearn threatening legal action for infringement of copyright, knowing full well that he had no such rights. Birkin did not have the financial resources to continue with the production of complete cars and so reverted to manufacturing replacement and conversion parts for existing cars and to supplying kits comprising chassis, suspension parts and other components which J

Harms JA

enthusiasts could not obtain elsewhere. With an injection of funds Birkin was eventually able to resume the full A time manufacture of complete cars marketed as Birkin Sevens or Super Sevens.

[10] I now turn to consider the issues as they emerged during oral argument. The heads of argument of Caterham B tended to conceal counsel's intentions and may largely be discounted.

[11] Howard JP, after referring to some authorities, English and local, accepted as correct a statement by Webster and Page South African Law of Trade Marks 3rd ed at 420 to the effect that, since the ordinary rules relating to jurisdiction apply to an action for...

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