Tuesday, 21 July 2015

Fairhaven Country Estate v Shaun Harris - High Court saves the day when .za ADR Regulations can't

Fairhaven Country Estate- source
On 8 July 2015 the Western Cape High Court handed down its decision in the Fairhaven Country Estate v  Shaun Harris matter. Carmel Rickard has given an extensive account of  the decision on the Trading Places blog (here), so this post will only comment on one aspect of the matter, that of choice of forum.

Facts and decision - summary
For those who haven't read the case or Carmel's post, the facts were as follows: The domain names in issue were fairhavenestate.co.za (active domain), fairhaven.co.za (redirect domain), fairhavencountryestate.co.za (active domain), fairhaven-country-estate.co.za (inactivedomain ) and fairhaven-estate.co.za (inactive domain). They all relate to the Fairhaven Country Estate (left) in Somerset West in the Western Cape province of South Africa. The first two domains were registered by Shaun Harris in July 2011 prior to the incorporation of  Fairhaven Country Estate (FCE) (Pty) Ltd, so that Harris could secure a mandate to sell property in the estate from Nedbank which was the owner of the estate at that time. He registered the other domains later in November 2011 (fairhavencountryestate) and June 2014 (the inactive domains). After ownership of the estate passed to FCE (Pty) Ltd it used the active domains in relation to the estate. Harris had a mandate to sell properties at the estate on behalf of FCE (Pty) Ltd from September 2012 until May 2014.

In January 2015 FCE (Pty) Ltd received an email informing it that it had to cease its use of the www.fairhavenestate.co.za domain  within 24 hours and then 'transfer' the domain to Harris (decision, para 13). As Harris was already the registered owner of the claimed domain, what he really sought was transfer of the use of the domain to himself and whoever else he authorised to use it. FCE (Pty) Ltd said that it did not know that Harris had registered the domains in his name and that it had always proceeded on the basis that it owned the domains (decision, paras 17, 21). It argued that even if Harris was the registrant of the domains, it was in fact the owner of the domains (decision, paras 19 - 20, 22). Harris wanted the use of the domain so that he could execute resale mandates of Fairhaven properties, from which he anticipated that he would earn R23 million. FCE (Pty) Ltd did not wish to transfer use of the domain as it would be detrimental to its business communication (because its email addresses included the domain (@fairhavenestate.co.za)  and affect its marketing campaign which centred around the domain. It had already spent in excess of R1, 75 million on advertising incorporating the domain. It averred that it had so far spent at least R70 million on the estate. It applied to the High Court for an prohibitory interdict against Harris to prevent him from redirecting or transferring the domains to third parties and from registering or trying to register domains containing the name 'Fairhaven' in future. It also asked that Harris be ordered to transfer the domains to it.

FCE (Pty) Ltd had not registered Fairhaven Country Estate (or any related permutations) as a trademark so it based its claim on common law grounds. It argued that the active domain constitutes 'part and parcel of  its get up and promotional material which it had developed' over a period of three years 'at great expense' (decision, para 24). It argued that Harris' taking over of the use of the domain would amount to passing-off. The High Court was persuaded by its arguments and granted the requested prohibitory interdict and ordered the transfer of the domains from Harris to FCE (Pty) Ltd. (See Carmel's post for a full discussion of the arguments and decision).

Choice of forum
When compared to court processes, the Electronic Communications and Transactions Act (25/2002): Alternative dispute resolution regulations provide a relatively quicker, simpler and cheaper option for the resolution of domain name disputes. The South African Institute of Intellectual Property Law (SAIIPL) is accredited under these regulations and has built up a substantial body of decisions (available here). Under the regulations the transfer of  domain name can be secured by proving that the registration of the domain was abusive. The regulations provide that a registration is abusive if:
(a) it was registered or otherwise acquired in a manner which, at the time when the registration or acquisition took place, took unfair advantage of or was unfairly detrimental to the complainant's rights; or
(b) has been used in a manner that takes unfair advantage of, or is unfairly detrimental to the complainant's rights.
Harris' actions do not fit neatly into either category for the following reasons.
His registration of the first three domains in 2011 did not take unfair advantage of FCE (Pty) Ltd (or its predecessor)'s rights. Indeed, in a way, it was to further its business of selling real estate. As stated above, FCE (Pty) Ltd operated/used the active domains. The last two registrations which were obtained after the termination of Harris' mandate may be impugned as being intended primarily to unfairly disrupt FCE (Pty) Ltd's business and thus fall into the category contemplated by para (a) above. However, these domains were (and continue to be) inactive. Had the use of the active domains been transferred to Harris, as he demanded, his use of the domains would arguably be unfairly detrimental to FCE (Pty) Ltd because people wishing to buy properties on the estate would be directed to a rival estate agent operating a domain name that included FCE (Pty) Ltd's name. At the High Court, FCE (Pty) Ltd successfully argued that such (mis)direction would amount to passing off. Since Harris had not yet taken over the use of the domains, he was not yet engaged in use that would amount to passing-off and FCE (Pty) Ltd could then not rely on para (b) above.

Based on the situation in which it found itself - 24 hours' notice to hand over use of the active domain to Harris - FCE (Pty) Ltd had no recourse under the regulations. Therefore it had to approach the High Court to prevent Harris from wresting use of the domains from it. When the regulations were passed, I wondered who on earth would still approach the High Court in relation to a domain name dispute. This case demonstrates the classic circumstances in which one may still want to rely on a court application. 

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