Celestial bodies, capital, company names & confusion
2/10/2009

The case of POLARIS CAPITAL
Polaris, the North star, was the unlikely star in a recent dispute between two asset management firms in the South African Courts. The North star is not visible from the Southern hemisphere, yet became the name of a South African asset management company, POLARIS CAPITAL (PTY) LIMITED, in 2003. POLARIS CAPITAL has also been the company and trading name of a Northern hemisphere asset management company, POLARIS CAPITAL MANAGEMENT, INC. of Boston, Massachusetts, since 1993.

The US company was not registered as a foreign company in South Africa and it did not have a registered trade mark in South Africa. It has, however, actively marketed and traded in South Africa for some time. It brought company name objection proceedings against the identically named private company, who trades in the same field of financial services in South Africa, on the basis, inter alia, of likely confusion and its vested right in the name under section 45 of the Companies Act 61 of 1973 (“the Act”).

On 30 September 2009, the Supreme Court of Appeal per Streicher JA handed down judgement in the case of Polaris Capital (Pty) Ltd v The Registrar of Companies and Polaris Capital Management, Inc (Appeal Case 595 of 2008) in favour of the US company.

POLARIS CAPITAL MANAGEMENT, INC. (Polaris Capital US) was incorporated in the USA and is a registered investment advisor with the US Securities and Exchange Commission. Since 1996, Polaris Capital US has marketed itself in South Africa to several commercial banks, investment and merchant banks, life assurance companies, attorneys firms, the South African Reserve Bank, public companies, and government departments. From 1996 until 2000, Polaris Capital US was tasked with managing a segment of the Iscor Pension Fund. In 2003 it concluded an investment advisory agreement with the South African registered company Oasis Asset Management Limited. Since 1995, Polaris Capital US featured extensively in the international press in articles also available to South African readers. Polaris Capital US had substantial shareholdings in various South African companies on the JSE, including Sappi, Sasol and Impala Platinum.

On 3 June 2003, the company African Harvest Growth Asset Managers (Pty) Ltd, conducting trade as investment manager, changed its name to POLARIS CAPITAL (PTY) LTD (Polaris Capital SA). The South African directors of the company claimed to have chosen the name based on suggestions from a South African astrologer, and maintained that the fanciful choice bore no relation to Polaris Capital US. Polaris is of course a celestial body of relevance in astronomy rather than astrology, but the case did not rest on such distinction, or in fact the motivation behind the choice of name.

Polaris Capital US objected to the new South African company name in terms of section 45 of the Act, which provides that any person may object to a name to the Registrar of Companies within one year after registration of the name on one or both of two grounds, namely that the name is undesirable, or that it is calculated to cause damage.

The Registrar upheld the objection on the basis that Polaris Capital US had built up a reputation in South Africa, and that Polaris Capital SA is likely to be confused with it. The name POLARIS CAPITAL (PTY) LTD was found to be undesirable and the company was ordered to change its name.

In terms of section 48 of the Act, Polaris Capital SA then turned to the Cape High Court to have the Registrar’s ruling overturned. Section 48 provides that any person aggrieved by any decision or order of the Registrar under section 45 may, within one month after the date of such order, apply to the High Court for relief, and the Court shall have the power to consider the merits of any such matter, to receive further evidence and to make an order as it deems fit.

The Cape High Court, having heard the matter de novo on affidavits, found in 2008 that the risk of confusion between Polaris Capital SA and Polaris Capital US could not reasonably be discounted, and that the Registrar’s ruling should stand.

Polaris Capital SA appealed against the Cape judgement. The matter was given further and final consideration by the SCA at a hearing on 25 August 2009.

Polaris Capital SA argued that the Cape High Court erred in its interpretation of undesirability. It argued that the test for undesirability can be founded on one or more of three legs, namely (i) on the criteria in the Registrar’s Practice Note 1 of 2008 (which did not have bearing on the case), (ii) on whether the objecting company has a vested right in the name, or (iii) on whether the two company names will lead to confusion. The latter confusion, according to Polaris Capital SA, could only arise where the objecting company enjoys a sufficient reputation amongst a substantial number of persons (i.e. has a vested right first and foremost). According to Polaris Capital SA, Polaris Capital US could not stand on any one of these legs.

In deciding whether the name POLARIS CAPITAL (PTY) LTD is an undesirable name, the Court relied mainly on two authorities, namely an article by JB Cilliers entitled Similar Company Names: A Comparative Analysis and Suggested Approach – Part 2 1999 (62) THRHR 57 and the case of Peregrine Group (Pty) Ltd and others v Peregrine Holdings Ltd and others 2001 (3) SCA 1268.

In deciding whether a name is undesirable, Cilliers states:

“ The merits to be considered by the Courts are whether… the existing company has such vested rights in its name…that the registration of the new company name or the amended name of another company is undesirable..”
The above approach was adopted by the SCA in the Peregrine case.

Counsel for Polaris SA argued that in the circumstances at hand, the ‘vested right’ required by this passage could only refer to a company’s common law rights in the reputation attaching to its name, which are enforced by the action of passing-off (which requires the aggrieved party to prove a reputation, confusion and damage in order to succeed).

The Court then turned to the following passage in the Peregrine case (per Lazarus AJ in the a quo decision):

”In my view it is inappropriate to circumscribe the circumstances under which the registration of a company name might be found to be undesirable. To do so would negate the very flexibility intended by the Legislature by the introduction of the undesirability test in the section and the wide discretion conferred upon the Court to make such order as it deems fit. For purposes of the present matter it suffices to say that, where the names of companies are the same or substantially similar and where there is a likelihood that members of the public will be confused in their dealings with competing parties, these are important factors which the Court will take into account when considering whether or not a name is undesirable.”

Instead of merging the criteria of confusion and vested right into one before finding undesirability (as suggested by Counsel for Polaris Capital SA), the SCA adopted a broad, flexible approach to the enquiry, based on principles of public policy, as suggested by Lazurus AJ in the Peregrine case.

Without expressly ruling on whether Polaris Capital US could sustain an action based on passing-off per se, the Court found that Polaris Capital US “became known to a substantial number of influential people in South Africa” and that it acquired a reputation in South Africa as an international equity manager. By using the name Polaris Capital first, and vesting this earlier reputation in South Africa, the Court found that Polaris Capital US enjoyed a vested right in the name, which entitled it to object in terms of section 45 of the Act.


The Court proceeded to consider Polaris Capital US’ activities in South Africa, and the instances of confusion that the president of Polaris Capital US attested to in his affidavit. Polaris capital US lead evidence of queries it received regarding whether there is a connection between it and Polaris Capital SA. The Court found that such public uncertainty (as opposed to actual confusion in the true sense) is undesirable and is at least one factor that needs to be taken into account in determining undesirability.

The Court further took note of the possibility of future confusion and the interests of the public. The Court considered Polaris Capital US’ intention to resume trading in South Africa in the future and found that, in such an event, there can be no doubt of public confusion.

One of the purposes of Section 45 of the Act is to protect the public against confusion. Public interest remains an important factor in considering whether a name is undesirable.

After applying a broad approach to the evidence before it, the Court found that the name POLARIS CAPITAL (PTY) LIMITED was undesirable. The appeal was dismissed with costs.
Adams & Adams (Cape Town) acted for POLARIS CAPITAL MANAGEMENT, INC..

Suzaan Laing
Partner
sl@adamsadams.co.za

Roux Potgieter
Candidate attorney
roux-p@adamsadams.co.za

Cape Town Office, Adams & Adams
Tel.: 021 418 8560