Sterling Auto Distributors CC v The Commissioner For The South African Revenue Services and Another
| Judge | Patel, J |
| Judgment Date | 26 September 2003 |
| Citation | 2003 JDR 0825 (T) |
| Docket Number | 19300/03 |
| Hearing Date | 18 July 2003 |
| Court | Transvaal Provincial Division |
Patel J:
This is a case of importation of suspected counterfeit goods. Lord Nicholls of Birkenhead in R v Johnstone UKH [2003] 3 All ER 884 (HL) para. [28] at 887g noted:
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Counterfeit goods and pirated goods are big business. They account for between 5% and 7% of world trade ... Counterfeit goods comprise cheap imitations of authentic articles, as with 'Rolex' watches. Pirated goods comprise illicit copies of the authentic article which are not sold under the trade mark of the authentic article."
Counterfeit goods either in the form of imitation or cloning are considered as part of an international organised crime. The Counterfeit Goods Act 37 of 1997 is a measure to enable owners of intellectual property rights to act against the counterfeiting of their products. It also provides for a systematic enforcement mechanism to attain this objective. [1] The Act brings South Africa into compliance with the provisions of the Agreement on Trade – Related Aspects of Intellectual Properly Rights (TRIPS). It is doubtful whether all imitation goods are protected goods or only those imitations of branded goods. Unbranded imitations may not necessarily be regarded as counterfeit goods. It may be critically important to determine whether the items are branded or unbranded imitations of authentic products since it is a notorious fact that in many Far Eastern countries the manufacturing of unbranded imitations is a lawfully legitimate and viable industry and not necessarily part of globally organised crime. A bona fide
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and an undiscerning importer may be an innocent importer of what may later appear to be suspected counterfeit goods. The intellectual property right owner has the facility to guard against the importation of counterfeit goods into the country. To this extent the government comes to the assistance of intellectual property right owners to seize and detain suspected counterfeit goods entering the country. However, seizure and detention of such goods must be lawful.
In this application, a close corporation, Sterling Auto Distributors is the applicant. It is seeking an order declaring that a consignment of automobile parts detained and seized by the respondents, the Commissioner for the South African Revenue Services (SARS) and the Commissioner for Customs and Excise, is unlawfully detained and seized in terms of the provisions of the Customs and Excise Act 91 of 1964 (C&EA) read with Counterfeit Goods Act 37 of 1997 (CGA). It also seeks an order directing the respondent to release the goods to the applicant.
The background of this application is that on 28 May 2003, a high cube container, marked EMCU 9096150, arrived by ship from Taiwan at Durban harbour. The Bill of Entry for the consignment was accompanied by an invoice. The consignment consists of
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788 cartons containing 3 139 pieces and 15 sets of motor vehicle parts and accessories. The customs value of the consignment is R120 629,00. The container was initially detained by M Ogle, an import assessment officer for Customs and Excise. Presently the container is stored at Green Africa Container Depot. It is the warehouse chosen by the applicant's agent, SA Mercantile Corporation (Pty) Ltd. The container was opened on 4 June, but because of its size and number of items contained in it, it was not possible to unpack it and only certain samples were extracted. These were headlamps and front grills. They were taken by St. John Pitt, a forensic specialist in counterfeit goods, for verification so as to whether they are in fact counterfeit goods [2] or not. On 6 June, Ebrahim Bharath, a customs officer, contacted Pitt to ascertain whether he received any confirmation from Adams & Adams, a firm of attorneys representing both BMW and Mercedes
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Benz and whether the samples were sent for verification. St. Pitt informed Bharath that he did not receive any confirmation.
Subsequently, on 17 June, St. Pitt informed Bharath that the samples were confirmed to be counterfeit. The following day the latter received from Adams & Adams two affidavits, one deposed to by David John Richardson, the brand protection manager of Daimler-Chrysler South Africa, and the other by Christopher Hastings Joy, the business development manager of BMW South Africa (Pty) Limited. Adams & Adams, on behalf of both their clients, informed SARS that their clients would indemnify SARS and its officers against any liability that may be incurred pursuant to the detention, in terms of the C&EA and/or seizure and detention in terms of the CGA and any other action with or delivery of the goods in terms of legislation, including but not limited to the CGA and C&EA, where such detention, seizure or other act were performed at their clients' request. An undertaking was also given by Adams & Adams, on behalf of their clients, to SARS that any expenses that may be incurred by the latter pursuant to the seizure and/or detention of the goods and to pay and arrange for the removal of such goods to a place of storage, and to pay any storage costs, including state warehouse rent as determined by SARS and to arrange for and
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pay for the destruction of goods if so required where such expenses were incurred as a result of the request by them.
On that day Bharath informed Dylan Naiker of the applicant's clearing agent that he received the necessary confirmation and the container needed to be re-examined in order to make an inventory and take samples of all the items contained in it. This re-examination was held at the Green Africa Container Depot on 19 June. Harilall of the applicant's clearing agent was also present. Sharmalan Arumagam, the manager of the depot indicated that it was not possible to unpack the container since its warehouse facilities were not adequate to unpack a high cube container and also because of the fragile nature of the goods as well as the flimsy nature of their packaging. Bharath consulted his quality assuror, Jack Kraft who advised that the applicant's clearing agent should be asked to move the container to the New Pier State Warehouse where it could be unpacked under custom control. The container was not transferred to the state warehouse and an inventory was not taken of the goods in the container. It is presently stored at the Green Africa Container Depot and remains at the depot. On 9 July, Bharath referred the investigation to the Anti-Smuggling Team.
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It is against this background that on 14 July 2003 the applicant .launched an urgent application for an order in the following terms:
that in terms of Rule 6(12) of the Uniform Rules of Court the forms and services as provided for in the Uniform Rules be dispensed with including the provisions of Rule 6(13) of the Uniform Rules of Court;
to the extent necessary that the usual forms of service be dispensed with and that service upon the First and Second Respondents by the Applicant's attorney's messengers be sanctioned as constituting proper service in light of the urgency of this matter;
that it be and is hereby declared that the consignment of motor vehicle parts contained in container number EMCU 9096150 is not being lawfully or properly retained in terms of the provisions of the Customs and Excise Act No.91 of 1964 and/or the Counterfeit Goods Act No.37 of 1997;
that the First and/or Second Respondents be and are hereby directed to release the goods to the applicant forthwith;
that the First and/or Second Respondents pay the costs of this application;
such further or alternative relief as this Honourable Court may deem fit."
On the same day, application papers were served on the respondents. The matter was placed on the roll for hearing at
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14:00 on Friday 18 July 2003, when it was postponed sine die and costs were reserved. Subsequently, on 6 September, the application came before me in the urgent court on the basis that it has some degree of urgency under the tag of being semi-urgent.
The applicant contended that the container is stored at Green Africa Container Depot. It is not a counterfeit goods depot [3] as defined in the CGA. The respondents' seizure and detention, without removal it to a counterfeit goods depot, compels the applicant to pay daily storage charges. Mr Wheeldon, for the applicant argued that in terms of the provisions of the CGA, storage fees for counterfeit goods are for the account of the complainant. Therefore the container should be moved to the counterfeit goods depot. In the absence of such a removal, each day of seizure and detention of the container by the respondents, causes financial loss to the applicant. The storage fees that the applicant has to pay outweighs the value of the goods. Consequently, it diminishes its potential profits. It causes not only financial loss but also erodes its goodwill since it is unable to
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fulfil the orders for motor vehicle parts placed by its customers. It was submitted that no award of damages can ameliorate the diminution of its goodwill when its clients and potential customers gain the impression that it cannot make good on its promises to fulfil their orders.
On behalf of the respondents, Ms Khatri argued that the matter is not urgent because the costs of the storage are for the importer pending the return of the goods by customs officials. She submitted, without citing any authorities, that it is a term implicitly consented to by an importer when goods enter the Republic and this is sanctioned by section 107(1)(a) and (2)(a) of the Customs and Excise Act. There is no merit in this submission. In terms of sub-section (1)(a) all handling of and dealing with goods for the purposes of C&EA must be...
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