[6] Birkin is a local company which carries on business as a manufacturer of sports cars at Pinetown. Its replica of
the Lotus Seven Series III is marketed and sold in South Africa under the name of Birkin Seven or
View Parallel Citation
Super Seven and is also exported to Japan. Watson (the second respondent/defendant) is the managing director of
Birkin. Howard JP found no reason to disbelieve his evidence as to how he designed and developed the Birkin
model. He is a mechanical engineer with considerable experience in building and working on sports cars. From about
1981 when he moved to Durban and started an engineering business he became acquainted with a syndicate of
people who were engaged in building replicas of the Series III. He purchased a chassis from a member and built a
replica for himself. He also made parts for other members of the syndicate and by the end of 1982 he had
recognised a commercial opportunity.
[7] Watson knew that Lotus was no longer making the Series III and that Caterham was manufacturing a replica.
During January 1983 he proposed to Caterham's managing director, Mr Nearn, that Birkin be licensed to
manufacture and distribute Caterham Super Seven cars in South Africa. The terms upon which the plaintiff was
prepared to do business with Birkin were unacceptable to Watson and the proposal was dropped. Watson
thereafter approached Status Cars (Pty) Ltd in Pietermaritzburg, the local distributor and service agent for Lotus.
This culminated in an agreement of 20 January 1983 in which Status Cars recorded that Lotus had accepted in
principle a proposal that Birkin would manufacture a replica of the Lotus Seven Series III under licence to Lotus but
not bearing the Lotus name, that the vehicle would be marketed through Status Cars and that it would be named
the Classic Super Seven. Watson went ahead with the venture believing that he had the approval of Lotus.
[8] Birkin produced a prototype for a launch in Pietermaritzburg on 12 October 1983. Present were Chapman's
widow, Mrs Hazel Chapman, Peter Waugh, the manager of Team Lotus International Ltd, Nigel Mansell and Elio de
Page 180 of [1998] 3 All SA 175 (A)
Angelis, the Team Lotus Formula 1 drivers, and Mike Bishop who was the export sales manager for Lotus. Team
Lotus International Ltd was involved in Formula 1 motor racing and was not a member of the Lotus group. Mrs
Chapman unveiled the prototype and the launch received wide press publicity. Birkin produced these cars for Status
Cars in accordance with their arrangement. Twelve were produced during the period from 15 December 1983 to 14
January 1985. Thereafter a written contract was concluded in terms of which Birkin granted to Lotus Motors (Pty)
Ltd, the successor of Status Cars as local agent of Lotus, the exclusive right to sell worldwide all Classic Super
Seven vehicles manufactured by Birkin. The venture was not a success and was terminated in August 1985.
[9] At about the same time Watson reopened negotiations with Nearn for a licence. These foundered, with Nearn
threatening legal action for infringement of copyright, knowing full well that he had no such rights. Birkin did not
have the financial resources to continue with the production of complete cars and so reverted to manufacturing
replacement and conversion parts for existing cars and to supplying kits comprising chassis, suspension parts and
other components which
View Parallel Citation
enthusiasts could not obtain elsewhere. With an injection of funds Birkin was eventually able to resume the fulltime
manufacture of complete cars marketed as Birkin Sevens or Super Sevens.
[10] I now turn to consider the issues as they emerged during oral argument. The heads of argument of Caterham
tended to conceal counsel's intentions and may largely be discounted.
[11] Howard JP, after referring to some authorities, English and local, accepted as correct a statement by Webster
& Page��South African Law of Trade Marks 3ed p 420 to the effect that since the ordinary rules relating to jurisdiction
apply to an action for passingoff, it is essential for the plaintiff to prove that the goodwill he seeks to protect
extends to the area of jurisdiction of the court in which he sues. That, he held, meant that Caterham had to prove
the existence of goodwill "generated by sales" within the area of jurisdiction of the court below. A similar statement
of the law is to be found in Star Industrial Company Limited v Yap Kwee Kor (trading as New Star Industrial Company)
[1976] FSR 256 (PC) 269:
" A passingoff action is a remedy for the invasion of a right of property not in the mark, name or getup improperly used,
but in the business or goodwill likely to be injured by the misrepresentation made by passingoff one person's goods as the
goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent
existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in
several countries a separate goodwill attaches to it in each."
The proposition fits in with the first essential of a passingoff action as formulated by Lord Fraser in Erven Warnink
BV and another v J Townend & Sons (Hull) Ltd and another [1979] AC 731 at 755, namely that the business of the
plaintiff must consist of or include "selling in England a class of goods to which the particular trade name applies".
[12] Caterham's case as formulated in the court below was along these lines: Lotus carried on business in South
Africa; Lotus had a goodwill and reputation in the Lotus Seven Series I to IV; the goodwill and reputation became
that of Caterham during 1988 by virtue of the assignment from Lotus; since 1988 Birkin made a number of
misrepresentations relating to its car's provenance and
Page 181 of [1998] 3 All SA 175 (A)
that amounted to a passingoff. The problem is that, if one applies the law as just stated, Caterham was doomed to