Peregrine Group (Pty) Ltd and Others v Peregrine Holdings Ltd and Others

• Jurisdiction: South Africa

Peregrine Group (Pty) Ltd and Others v Peregrine Holdings Ltd and Others
2000 (1) SA 187 (W)

2000 (1) SA p187

Citation	2000 (1) SA 187 (W)
Case No	98/21088
Court	Witwatersrand Local Division
Judge	Lazarus AJ
Heard	November 4, 1998; November 5, 1998; November 6, 1998
Judgment	June 30, 1999
Counsel	P B Hodes SC (with him A R Sholto-Douglas) for the applicants.; M D Kuper SC (with him P Levenberg) for the respondents.

Flynote : Sleutelwoorde H

Company — Formation and constitution — Name — Order that company change registered name because name undesirable or calculated to cause damage to applicant — Companies Act 61 of 1973, s 45(2A) — 'Calculated to cause damage' approximating common-law passing off — By introducing 'undesirable', Legislature creating new and more liberal test — To I circumscribe circumstances under which company name might be found undesirable would be to negate flexibility intended by Legislature and wide discretion conferred upon Court — Mere existence of similar names on register of companies, without more, not necessarily undesirable — Where company name an ordinary English word, inappropriate to J

2000 (1) SA p188

confer monopoly on word unless word acquiring secondary meaning in association A with applicant's business.

Headnote : Kopnota

The seven applicant companies and first to eleventh respondent companies were all registered under names in respect of which the word 'Peregrine' was the first and dominant word. Between 1993 and August 1994 each of the applicant companies was registered. All the applicants conducted business from the same offices, utilised the same staff and B shared a commonality of directors. The applicants maintained that they were perceived of as a 'group of companies', although they did not constitute a 'group of companies' within the meaning of that phrase as defined in para 4(q) of Schedule 4 to the Companies Act 61 of 1973. The applicants described their principal business undertakings as property development, the furnishing of financial C advice and expertise associated in particular with property developments and the provision of structured finance packages. On 18 May 1998 the third applicant changed its name from Peregrine Properties No 4 (Pty) Ltd to Peregrine Project Finance (Pty) Ltd and changed its main object from 'carrying on the business of an investment company' to 'operating as a finance company'.

The respondent companies were a 'group of companies' as defined D in para 4(q) of Schedule 4 to the Companies Act. The first and second respondents were holding companies: the first respondent was listed on the Johannesburg Stock Exchange on 10 June 1998; the second respondent was a wholly owned subsidiary of the first respondent; and the remaining respondents were wholly or partly owned subsidiaries of the second respondent. The principal E business undertakings of the respondents were stated in the first respondent's prospectus to be the provision of specialised financial expertise to the leading financial institutions and corporations in South Africa, including the provision of structured financial packages for the acquisition and development of commercial property. Derivative-based financial structuring and corporate structuring F accounted for 90% of the business of the group as a whole. These businesses were divisions of the third respondent. The group's property finance structuring division was also housed in the third respondent, the extent of its activities in this field being described as limited to advising three privately-owned companies whose shareholders were also shareholders in the first respondent on G property finance structuring involving the use of debentures, preference shares and/or options to maximise tax effectiveness and to accomplish effective interest rates lower than the market rate. This advice was said not to rely in any way on any expertise in or knowledge of the property market.

The applicants sought an order directing the first to eighth respondents to change their names by excluding therefrom the word H 'Peregrine' and restraining them from passing off their businesses as that of or associated in the course of trade with that of the first, second and/or third applicants. (A prayer for similar relief against the ninth to eleventh respondents was dropped because those companies were not currently trading.) The relief was claimed in terms of s 45(2A) of the Companies Act and on the grounds of common-law I passing off. The applicants elected to present their evidence by not, in the main, differentiating between the activities engaged in by each company. Instead, their case was presented as though each individual applicant was entitled to rely upon the collective activities of the group in seeking redress. It appeared that the fourth applicant traded from time to time as a property developer; and that the fifth, sixth and seventh applicants carried on the business of holding investments in immovable property from time to time, usually while such properties were being developed. The first J

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applicant was said to trade in the field of property development and the A furnishing of financial advice and expertise associated with property developments; and the second applicant was said to have put in place, together with the third applicant, a structured financial package in relation to existing buildings without, however, any distinction being made between the roles played by the second and third applicants respectively. The main object of the third applicant had originally been the business of an B investment company. On 18 May 1998, when it changed its name, the third applicant also changed its main object to enable it to operate as a finance company. It was said by the applicants that the third applicant conducted business as the provider of structured finance packages to its various clients and to the applicant companies.

The Registrar of Companies, the twelfth respondent, stated that he did C not, as a matter of principle, 'allow the monopoly of an ordinary generic word'. He had thus permitted the registration of no fewer than 29 entities bearing some designation of the name 'Peregrine', 14 of which had no relationship with any of the applicants or respondents. The first of the applicant companies to use the name appeared to have been the twelfth entity to do so. D

Held, that there were no activities engaged in between the first, fifth, sixth and seventh applicants common to those of any of the respondents. (Paragraph [5] at 195A - C, paraphrased.)

Held, further, that, while the undisputed evidence was that the third respondent's structured property finance division constituted a negligible portion of its business, there was some E overlap between its activities in providing structured finance and that of the third applicant and that there was a certain amount of overlap between the third applicant's structured property finance customer base and the customer base to which the respondents provided derivative-based structured financial services. (Paragraph [5] at 196C - D and F - F/G.)

Held, further, that it could not be found that the second F applicant was or would be engaged in competitive activities with the third respondent or with any other company in the respondent group. This conclusion arose from the applicants' failure clearly to identify and produce evidence of structured property finance transactions engaged in by the second applicant. (Paragraph [5] at 196E - F.) G

Held, further, that s 45(2A) established two grounds upon which a Court could direct a company to change its name, namely (a) that the name was 'undesirable' and (b) that its name was 'calculated to cause damage to the applicant'. Prior to the insertion in the Act of s 45(2A) in 1990, the Registrar of Companies could only order a change of name where the name was 'calculated to cause damage to the objector'. (Paragraph [8] at 197B - C.) H

Held, further, that the words 'calculated to cause damage to the objector' approximated the common law of passing off. To establish an objection based on this ground an applicant would essentially have to establish the same facts as those required in an action for passing off, namely (a) that confusion or deception was likely to ensue and (b) that, if confusion or I deception ensued, it would probably cause him damage. By introducing the word 'undesirable' the Legislature must have intended to create a new and more liberal test in the recognition that it was often difficult for an objector to prove damage. (Paragraph [13] at 198B/C - E/F.)

Held, further, that it would be inappropriate to attempt to circumscribe the circumstances under which the registration of a company name might be J

2000 (1) SA p190

found undesirable. To do so would be to negate the flexibility intended by the A Legislature and the wide discretion conferred upon the Court. (Paragraph [15] at 198I/J - 199A/B.)

Held, further, that, for the purposes of this matter, where the names of companies were the same or substantially similar and where there was a likelihood that members of the public would be confused in their dealings with the competing parties, these would be important factors to be taken into account in deciding whether or not a name was B undesirable. It did not follow, however, that the mere existence of the same or similar names on the register of companies would without more be undesirable. (Paragraph [15] at 199A/B - B/C.)

Held, further, that, despite the fact that the use by the parties of the word 'Peregrine' could hardly be described as generic C or descriptive of the services they offered, the approach adopted by the Registrar and the fact that his policy had been not to permit the word 'Peregrine' to become the subject of a...