SCA considers inquiry into damages sought in motion proceedings

In Cadac (Pty) Ltd v Weber-Stephen Products Company ((530/09) [2010] ZASCA 105, September 16 2010), the Supreme Court of Appeal has upheld an appeal against the High Court's refusal of an application for an inquiry into damages.

In November 2004 Cadac (Pty) Limited introduced a barbeque kettle grill which led to a claim of trademark infringement and counterfeiting by Weber-Stephen Products Co, the owner of trademarks which relate to the shape and configuration of barbeque kettle grills. 

 

Weber-Stephen obtained seizure warrants in terms of the Counterfeit Goods Act (37/1997), which were executed during the Christmas period in 2004. Kettle grills in the possession of Cadac and its dealers were seized. 

 

In January 2005 Cadac applied to the High Court on an urgent basis to:

Cadac also applied for costs.
 
Cadac’s application was successful and the warrant was set aside by the High Court, which ordered the return of the grills. The prayer relating to the inquiry into damages was postponed by the court sine die. A subsequent appeal by Weber-Stephen against the court’s order was unsuccessful.

 

Three years and two days after the 2005 judgment of the High Court, Cadac made application for directions from the court on the conduct of the inquiry into the damages. Weber-Stephen opposed the application, arguing that an application for such an order was impermissible in motion proceedings and made a counter-application for an order declaring that Cadac’s claim had become prescribed. South Africa’s extinctive prescription period is three years. The High Court held in favour of Weber-Stephen and dismissed Cadac’s application.

 

The Supreme Court of Appeal handed down judgment on September 16 2010, upholding Cadac’s appeal.

 

Section 17(1) of the Counterfeit Goods Act Act provides that any person suffering damage or loss caused by the wrongful seizure, removal or detention of goods alleged to be counterfeit is entitled to claim compensation from the complainant for that damage or loss. In terms of Section 10(1)(c) of the act, a court in any civil or criminal proceedings relating to counterfeit goods may order the complainant to pay damages, in an amount determined by the court, to the person from whom whose goods were seized and to pay that person’s costs.

 

The first issue that the Supreme Court of Appeal had to decide was whether Cadac’s application was competent in light of Weber-Stephen’s argument that it was not permissible to make an illiquid claim on motion proceedings. 

 

The court confirmed that motion proceedings are principally for the resolution of legal issues (as opposed to factual issues) and illiquid claims, by their very nature, involve the resolution of factual issues. Cadac, however, was not seeking to have its illiquid claim decided by way of motion proceedings. There was no objection to a plaintiff applying for a declaratory order that a defendant is liable for damages, but the quantification should stand over for later adjudication at an enquiry. This was especially so in IP cases because of specific legislation, but also in light of a court’s inherent jurisdiction to regulate its own process in the interests of justice, a power which is derived from common law and now also entrenched in the Constitution.

 

The court reasoned that, once the principle of separating the merits and the quantification of a claim is accepted for trial actions, there is no reason why it cannot apply to motion proceedings. Furthermore, Section 10 of the act provides that an order for damages may be granted against a complainant "in any civil or criminal proceedings relating to counterfeit goods". Cadac’s application to set aside the warrant was such a proceeding. 

 

Weber-Stephen further argued that Cadac’s claim relating to damages in the earlier application to set aside the warrant was premature because the claim had not yet accrued at the time that the application was launched. The court held that this was not the case because a declaration of invalidity operates retrospectively. Once the warrant was set aside, it was assumed that it never existed and everything done pursuant to it was consequently unlawful.

 

With regard to prescription, the court held that the original motion proceedings were instituted in 2005 as a step in the enforcement of a claim for payment of a debt, and that the running of prescription was thus interrupted in terms of Section 15(1) of the Prescription Act (68/1969).

 

Weber-Stephen also argued that Cadac’s claim had become prescribed in terms of Section 15(2) of the Prescription Act. In an earlier appeal judgment under the previous Prescription Act, it was held that extinctive prescription limits the time within which proceedings must be instituted, but once instituted, their continuance was governed by the rules of court which set the time periods within which certain procedures must be carried out. It was impossible for a plaintiff to have any direction over the length or duration of the proceedings once they had been instituted. The court followed this reasoning in casu and held that Cadac’s delay in prosecuting its claim had not led to its extinction by prescription.

 

Weber-Stephen’s opposition to the application was thus without merit and Cadac’s appeal was upheld.