Silent Pond Investments CC v Woolworths (Pty) Ltd and Another

• Jurisdiction: South Africa
• Judge: Morley aJ
• Judgment Date: 25 June 2007
• Citation: 2011 (6) SA 343 (D)
• Docket Number: 3487/2007
• Hearing Date: 11 June 2007
• Counsel: A Stokes SC for the applicant. E Fagan for the first respondent. LCA Winchester SC for the second respondent.
• Court: Durban and Coast Local Division

Morley AJ:

Introduction

[1] The applicant, Silent Pond Investments CC, has launched an J application against the first respondent, Woolworths (Pty) Ltd, and the

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second respondent, Engen Petroleum Ltd, in which it seeks the following A relief:

'(a)

That the First Respondent be and is hereby interdicted from facilitating or itself opening or operating a store selling foodstuffs from the shopping centre situated at 14 Flanders Drive, Mount Edgecombe, as further identified in annexure AW4 hereto, for as B long as the agreement between the parties, annexed to the founding affidavit and marked AW1 is in existence;

(b)

The First Respondent is directed to pay the costs of this application, unless it is opposed by the Second Respondent, in which event the first and Second Respondents are to pay the costs of this application jointly and severally.'

[2] I mention that the second respondent has remained on the sidelines, C save for darting onto the field of play in certain of the interlocutory applications, to which reference will be made.

[3] The application came before me as an opposed application. Mr A Stokes SC appeared for the applicant, and Mr E Fagan appeared for the D first respondent. I am grateful to counsel for their skeleton heads and for their respective oral arguments before me.

Background facts

[4] The following appear to me to be the essential facts. Most of these E are not in dispute. In terms of an agreement concluded on 7 March 2003 between the applicant and the second respondent, the applicant was given the right to operate an Engen Petroleum station situated on the premises located at 37/38 Flanders Drive, Mount Edgecombe. In terms of that agreement, the applicant was obliged also to operate a convenience store from the same premises, known as a 'Quick Shop'. F The applicant operated an Engen Petroleum garage, together with the Quick Shop, at the above premises from 2003 until 2005.

[5] During 2005, and with effect from 2 November 2005, the parties entered into a tripartite agreement (the annexure AW1 referred to in the draft order prayed), in terms of which the applicant was licensed to use G the Woolworths name and to sell Woolworths foodstuffs from within the Quick Shop premises. I mention that the written agreement appears to have been signed by the respondents during 2007, although the agreement bears the year 2006 above their signatures, and by the applicant on 15 February 2007, but nothing turns on this.

[6] Clause 2 of the tripartite agreement incorporates what is termed an H introduction to the agreement. It sets out the purpose of the agreement. It reads as follows:

'2.1

Woolworths is a leading retailer of, inter alia, foodstuffs of high quality through a chain of retail stores throughout the Republic of South Africa which trade under the name. I

2.2

In conducting the Woolworths business, Woolworths has acquired and developed, over a period of many years, the know-how.

[I mention that the Tripartite Agreement defines know-how as meaning the know-how, expertise and experience as is possessed by Woolworths in relation to the conduct of the Woolworths business .] J

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2.3

A Woolworths has also expended considerable efforts and funds in relation to the promotion of the name and the trade marks and at present sells an extensive range of merchandise bearing the name and/or the trade marks in the conduct of the Woolworths business.

2.4

Woolworths has, moreover, established a wide-spread reputation for providing to the public high quality foodstuffs at reasonable B prices in an attractive and pleasant shopping environment.

2.5

By reason of the abovementioned factors, considerable goodwill vests in the name, the trade marks and the know-how, and the reputation of Woolworths extends throughout South Africa.

2.6

Engen is an integrated oil company which, through a network of Engen Service Stations, holds the position of market leader in the C sales and distribution of automotive fuels, petroleum products and forecourt convenience retailing to the public.

2.7

Engen, in terms of the Woolworths agreement [which is defined as the agreement entered into between Engen and Woolworths in terms of which Engen acquired the right to grant the business rights to dealers nominated by Engen . . . ], obtained the right to D licence the business rights [which are defined in the Tripartite Agreement as meaning the rights to be granted by Engen to the dealer as contemplated in clause 5] to dealers nominated by Engen and agreed between Engen and Woolworths from time to time.

2.8

Engen and Woolworths have agreed that Engen may grant the E business rights to the dealer.

2.9

The parties accordingly wish to enter into this agreement to record the terms and conditions under which Engen shall grant the business rights to the dealer and matters related thereto.'

F [7] I mention that the 'name' is defined in the tripartite agreement as meaning 'the name Woolworths and any other name under which the Woolworths selling point may operate in the future as determined from time to time by Woolworths'. Further in terms of the agreement 'the trade marks' are defined as meaning:

'All the trade marks, emblems, logos or designs, whether registered or G not, owned and/or utilised by Woolworths in the conduct of the Woolworths business, including in particular:

1.

the W logo and the name Woolworths; and any trade marks, names, logos or emblems used in association with the products;

2.

any new trade mark, name, logo or emblem which may be developed and/or used in connection with Woolworths' selling H point and/or the products (sic).'

[8] The tripartite agreement defines the 'Woolworths business' as meaning 'the food retailing business conducted by Woolworths through the medium of a chain of retail outlets located throughout the Republic of I South Africa'. The 'Woolworths selling point' means 'the designated area within the Quick Shop, to be established in accordance with the Woolworths/Engen building specification document, in which the products shall be displayed for sale under the name and the trade marks and in accordance with the know-how, which will take the form of the mini-market model'. The agreement defines the 'mini-market model' in J turn as meaning 'a Woolworths Selling Point which takes the form of a

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small ''U-shaped'' or ''L-shaped'' designated area within a Quick Shop'. A Finally, 'products' means 'the products which Woolworths shall supply to the Licensed Dealers as set out in annexure A hereto which list of products may be amended by Woolworths in accordance with clauses 26 and 29 below'. (I refer to these clauses below.) Annexure A consists of a list of a number of 'products', which are in the nature of 'convenience foods'. B

[9] Certain of the terms of the agreement are material to the present dispute, and I refer to these below:

(a)

Clause 5 sets out the grant of business rights to the applicant in the following terms: C

'5.1

Engen hereby grants to the dealer the business rights which shall comprise:

5.1.1

the right to establish the Woolworths Selling Point in the Quick Shop and to sell the Products therefrom;

5.1.2

the right to obtain and utilise the Know-How in D relation to the sale of the Products and the establishment of the Woolworths Selling Point;

5.1.3

the right to utilise the Name and the Trade Marks in connection with the sale of the Products from the Woolworths Selling Point;

5.1.4

subject to the provisions of clause 7, the right to a E non-transferable, non-exclusive licence to use the software (a reference to the software licensed in terms of the Tripartite Agreement), upon the terms and subject to the conditions set out in this Agreement.

5.2

The dealer shall not be entitled to utilise the business rights or any part thereof other than strictly in accordance with this Agreement.' F

(b)

Clause 10 deals with the relationship between the parties and provides that:

'The relationship between the parties shall be that of independent contractors and, accordingly, nothing in this Agreement shall G constitute a partnership in any shape or form between Woolworths and/or Engen and/or the Dealer, nor shall it authorise the Dealer and/or Engen to incur any liability of any nature whatsoever on behalf of Woolworths.'

(c)

The dealer's rights and obligations, namely those of the applicant, H are dealt with in terms of clause 12 of the agreement. The relevant portions of clause 12 are quoted:

'The Dealer shall:

12.1

neither do anything nor refrain from doing anything which might prejudice or detract from the goodwill and reputation attaching to the Name, the Trade Marks and the Know-How, I including, without derogating from the generality of the aforegoing:

12.1.3

utilising its best endeavours to ensure a consistent customer experience of the Woolworths brand;

12.1.5

complying with all provisions and standards set out in the Woolworths Code of Business Principles; J

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12.3

A in the exercise of its rights and in the performance of its functions and duties in terms of this Agreement, strictly observe and comply with the Operating Manual as varied from time to time and all other reasonable directions and instructions furnished by Woolworths from time to time in relation to the Woolworths Selling Point and/or in accordance B with the terms of this Agreement, whether communicated to the Dealer by Woolworths or by Engen;

12.6

not use the Name, the Trade Marks and the Know-How, except on the basis and in the manner set out in the Operating Manual and in accordance with all directions and instructions furnished by Engen and/or Woolworths to it C from time to time;

12.11

to the extent...