‘Alliance’ can acquire secondary meaning as used in particular trading style

South Africa

In Alliance Property Group (Pty) Ltd v Alliance Group (Ltd) (Case 252/10 [2011] ZASCA 14, March 14 2011), the Supreme Court of Appeal has upheld an appeal from Alliance Property Group (Pty) Ltd, ruling that Alliance Group Ltd was passing its business off as being associated with that of Alliance Property Group.

Alliance Property Group started its operations under that name in 1997. Its business includes property development, property sales, property management and property auctions. Alliance Group Limited started its business in 1999 under the name Electronic Auctioneering Ventures Limited. In 2000 it changed its name to Auction Alliance Holdings Limited and, in 2003, to Asset Alliance Limited. In 2006 it changed its name to Alliance Group Limited. It too operates in the field of property auctions, property finance and sales.

After Alliance Group’s rebranding in 2006, Alliance Property Group instituted proceedings against it, claiming passing off. The application was dismissed and Alliance Property Group lodged an appeal.

After leave to appeal was granted, Alliance Group advised Alliance Property Group that it would again be re-branding its business and would revert once more to trading under the name Auction Alliance. Alliance Property Group requested that Alliance Group provide an irrevocable undertaking that it would not in future ever use the name Alliance Group. Alliance Group failed to respond.

In terms of the Supreme Court Act, if the issues which are before the Supreme Court of Appeal are “of such a nature that the judgment or order sought will have no practical effect or results, the appeal may be dismissed on this ground alone”. Alliance Group argued that the appeal should be dismissed on this ground in light of its decision to resume trading under the name Auction Alliance once again. However, the court ruled that, as Alliance Group had failed to provide an undertaking that it would not in future use the name Alliance Group, the court’s ruling would have a practical effect and this argument was rejected.

In terms of South African law, the wrong of passing off has been held to be a “classical trinity” of reputation (or goodwill), misrepresentation and damage. With respect to the element of reputation, Alliance Group argued that:

  • the word 'alliance' was descriptive';
  • Alliance Property Group did not have a monopoly over it; and
  • therefore, it had not established the requisite reputation.

However, the court found that Alliance Property Group had, through its evidence, shown that it had a reputation in relation to its name, which, to the extent that it may be descriptive, had acquired a secondary meaning in the sense that members of the public would automatically associate the name with the business of Alliance Property Group. The evidence had also established that Alliance Property Group’s reputation was in existence when Alliance Group began to trade under that name and, as a result, the court held that Alliance Property Group had established a reputation in its name and trading style, as required for passing off.

With respect to the misrepresentation element, for passing off to be established, there must be shown to have been a representation by one person that his business is that of another or is associated with that of another. In making this determination, there must be an enquiry as to whether there is a reasonable likelihood that members of the public may be confused into believing that there is a connection between the two businesses.

The court found that, during the period that Alliance Property Group was trading as Auction Alliance, the only common factor in the names of the two parties was the descriptive word 'alliance'. In the court’s view, the remainder of their respective names was sufficient to distinguish them from each other in the minds of the public. This was no longer the case after the change from the name Auction Alliance to Alliance Group. The effect of the change was to:

remove important features to distinguish the business of the appellant from that of the respondents, make the respondents’ businesses look more like the appellant’s business from a functional point of view and to make their names look strikingly similar... By doing this, confusion in the minds of the public was inevitable and it is hardly surprising that instances of actual confusion arose.”

In the circumstances, the court upheld Alliance Property Group’s appeal, finding that Alliance Group’s use of the name Alliance Group amounted to passing off and was unlawful.

It is of interest that the extent of the order was limited only to those areas in South Africa in which Alliance Property Group had been operating, being Kwa-Zulu Natal and the Eastern Cape. Accordingly, Alliance Group was not prevented from trading under the name Alliance Group in other provinces of South Africa. In effect, the court limited the extent of its order to only that geographical area in which Alliance Property Group had established a reputation.

Megan Reimers, Spoor & Fisher, Pretoria

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