Wednesday 16 July 2008

Darren Olivier

SA: gas containers - latest unlawful competition case

South Africa's latest reported unlawful competition case was handed down last month in the High Court as Totalgaz Southern Africa v Solgas (Pty) Ltd and Another; Easigas (Pty) Ltd v Solgas (Pty) Ltd and Another (22007/2006; 2006/23048) [2008] ZAGPHC 170 .

This was an appeal concerning commercial activities around the business of steel pressurised liquid petroleum gas (“LPG”) cylinders bearing certain identification marks. It is an interesting decision because it involves a defence based on custom and illustrates the difference between passing off (by omission) and unlawful competition which tend to be used interchangeably, sometimes in error. It is also a timely decision as South Africa is in its winter months and has recently endured a period of unreliable electricity supply, raising the demand for safely supplied LPG in cylinders.

The appellants (Totagaz & Easigas) contended that they, together with the other major wholesale suppliers of LPG, sell LPG through the “cylinder market” where they supply their products in a manner which allows them to retain ownership of their cylinders. The practice is that when a supplier or distributor receives in exchange for LPG filled cylinders, cylinders belonging to another supplier it returns them to that supplier, receiving in exchange such cylinders as that other supplier may have belonging to him. Then, if a number of empty cylinders exchanged do not match, the recipient of the greater number will pay the current deposit price on the empty cylinders received which exceed those delivered by it.

The appellants as owners of their cylinders contended that they are entitled to prohibit the respondents (Solgas and another) from using their cylinders and to their return. The appellants relied on Section 10(2) of the Practice of the South African Bureau of Standards 019 of 2001 Code which deals with “persons competent to fill containers” requiring permission of the owner of the container/cylinder which had not been given.

The respondent asserted that the trade usage or custom negates any claim that the appellants may have to ownership of the cylinders. In the alternative, the respondents contended that if the appellants retained ownership of their cylinders, the appellants’ claim to ownership may be refuted by reason of the usage, circumstances and manner in which customers come into possession of the cylinders. The respondent also claimed that the appellants and all suppliers have “tacitly and/or impliedly, if not expressly, consented to them ... filling its cylinders when requested to do so by customers in possession thereof and to return such filled cylinder to the customer”.

In upholding the appeal, the court held that the custom or trade practice that the respondent claims to exist has simply not been established by evidence. In particular the practice which the second respondent claims in his affidavit exists, has not been "uniformly observed, is not reasonable, and is definitely not certain". Consequently, the contention that the appellant’s true motive is to prevent lawful competition was simply incorrect. The Court also upheld the express permission requirement under the Code, which had not been granted in this case.

The case contains a useful summary of the law pertaining to custom and unlawful competition in South Africa. (Darren Olivier, Bowman Gilfillan)

Darren Olivier

Darren Olivier

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