1. Syarikat Faiza Sdn Bhd v 1. Faiz Rice Sdn Bhd (WA-22IP-9-03/2016)

SYARIKAT FAIZA SDN BHD

FAIZA BAWUMI BINTI SAYED AHMAD (NRIC NO. 420309-71-5196) … PLAINTIFFS

FAIZ RICE SDN BHD

FIKRI BIN ABU BAKAR (NRIC NO. 660307-01-5439) … DEFENDANTS (Consolidated with Civil Suit No. WA-22IP-13-03/2016 pursuant to Order of Court dated 29.04.2016 by Judicial Commissioner Datuk Wong Kian Kheong) IN THE HIGH COURT OF MALAYA IN KUALA LUMPUR (COMMERCIAL DIVISION) CIVIL SUIT NO: WA-22IP-13-03/2016

SYARIKAT FAIZA SDN BHD

FAIZA BAWUMI BINTI SAYED AHMAD (NRIC NO. 420309-71-5196) … PLAINTIFFS

FAIZ RICE SDN BHD

FIKRI BIN ABU BAKAR (NRIC NO. 660307-01-5439) … DEFENDANTS 2 JUDGMENT (Court enclosure no. 219 - Assessment of damages)

After a trial of the above two consolidated cases, this Court delivered judgment (Judgment) for the first and second plaintiffs (Plaintiffs) against the first and second defendants (Defendants) - please see the Judgment in [2017] MLJU 1595. According to the Judgment, among others -

the Defendants are liable to the Plaintiffs for the following 4 causes of action (4 Causes of Action) due to the sales of rice products (Infringing Products) of the first defendant company (1st Defendant) -

copyright infringement;

trade mark infringement;

tort of passing off; and

tort of unlawful interference with the first plaintiff company’s (1st Plaintiff) business;

the Defendants shall pay to the Plaintiffs the following damages for the 4 Causes of Action -

compensatory damages; and

non-compensatory damages as follows - 3

statutory damages (Statutory Damages) pursuant to s 37(1)(d) and (8) of the Copyright Act 1967 (CA);

(ii) additional damages under s 37(7) CA (Additional Damages);

(iii) exemplary damages; and

(iv) aggravated damages;

all the above damages shall be assessed by me (Assessment);

the Defendants shall pay to the Plaintiffs interest at the rate of 5% per annum on the damages assessed by the Court (Assessed Damages) from 2.6.2017 until full payment of the Assessed Damages; and

costs of the Assessment (if any) shall be decided after the Assessment. B. Novel issues

This Assessment raised the following two novel questions:

whether expert evidence by an accountant is required under s 45(1) of the Evidence Act 1950 (EA) and O 40A rr 1 to 3 of the Rules of Court 2012 (RC) to prove loss of business profits suffered by the 1st Plaintiff as compensatory damages for the 4 Causes of Action; and 4

whether the Court may consider expert evidence regarding “EBITA” (earnings before interest, tax and amortization) in assessing compensatory damages for the 4 Causes of Action. If “yes”, should the Court use “Average EBITA Margin” or “Actual EBITA Margin”? C. Assessment proceedings

The Plaintiffs have filed affidavits affirmed by the following persons in support of their claim for damages:

Puan Jadwa binti Abu Bakar, the 1st Plaintiff’s Branch Manager for Kuala Lumpur; and

Encik Azhar bin Kasim (Encik Azhar), the Sales and Marketing Manager of the 1st Plaintiff.

The following affidavits had been affirmed on behalf of the Defendants in this Assessment:

the second defendant (2nd Defendant); and

Encik Ong Koon Liang (Encik Ong), a practising accountant.

The parties in this case have agreed for all the deponents in the Assessment (Deponents) to be cross-examined regarding the conflict in their affidavits (Cross-Examination). This judgment is based on the Deponents’ affidavits as well as oral evidence given by the Deponents in the Cross-Examination and re-examination. 5 D. Assessment of compensatory damages D(1). Judicial approach

In assessing compensatory damages, I adopt the following approach:

a plaintiff bears the evidential burden to prove -

the defendant’s infringement of the plaintiff’s Intellectual Property (IP) rights has “caused” loss to the plaintiff - please see the judgment of Richard Malanjum CJ (Sabah & Sarawak) (as he then was) in the Federal Court case of Taiping Poly (M) Sdn

Bhd v Wong Fook Toh & Ors [2011] 3 CLJ 837, at paragraph This is a question of causation of the plaintiff’s loss;

the loss suffered by the plaintiff is not too remote and can be recovered in law. This concerns the issue of remoteness of damage suffered by the plaintiff; and

the amount of damages to be awarded - please see the judgment of Edgar Joseph Jr J (as he then was) in the High Court case of Popular Industries Ltd v Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360, at 367. If a plaintiff fails to discharge the above onus, the plaintiff is not entitled to compensatory damages - please see Schwan-Stabilo Marketing Sdn Bhd & Anor v S & Y Stationery & Ors [2018] 9 CLJ 384, at paragraphs 46 and 47. In such a case, the plaintiff can only claim nominal compensatory damages - please see the judgment of 6 Edgar Joseph Jr FCJ in the Federal Court case of Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777, at 799;

there is no hard and fast rule to assess compensatory damages - Taiping Poly, at paragraph 19;

in accordance with the general principle of restitutio in integrum, compensatory damages should as nearly as possible put an injured plaintiff in the same position as the plaintiff would have been in if the wrong has not been committed by the defendant - Taiping Poly, at paragraphs 8 and 19. The object of compensatory damages is to compensate a plaintiff and not to punish the defendant - General Tire & Rubber Co, at p. 177;

the Court must ensure that a plaintiff is not unjustly enriched (overcompensated) and at the same time the court should prevent the defendant from being financially ruined in an unjust manner - please see Motordata Research Consortium Sdn Bhd v Ahmad Shahril bin Abdullah & Ors [2017] 7 AMR 560, at sub-paragraph 75(2); and

to assess compensatory damages for a breach of IP rights, the Court may apply any one of the following three bases -

a computation of the loss of a plaintiff’s business profits caused by the defendant’s infringement of the plaintiff’s IP rights (Lost Profits Basis) - Taiping Poly, at paragraph 19; 7

where a plaintiff has previously granted licenses to third parties for the use of the plaintiff’s IP rights, the court may assess the plaintiff’s loss of royalty or license fee due to the defendant’s infringement of the plaintiff’s IP rights (Royalty Basis) - please see Lord Wilberforce’s judgment in the House of Lords’ case of General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 2 All ER 173, at 178; or

when it is not possible to apply Lost Profits Basis and Royalty Basis, according to General Tire & Rubber Co, at p. 178-179, the Court may assess compensatory damages based on the following evidence adduced by a plaintiff -

as regards royalty, the practice in the relevant trade or in analogous trades;

(ii) expert opinion;

(iii) profitability of the invention; and

(iv) any factor on which the Court can assess compensatory damages. D(2). Whether 1st Plaintiff’s loss of business profits was “caused” by sales of Infringing Products

Encik Azhar gave the following evidence: 8

the Infringing Products entered the market in November 2015. The 1st Plaintiff however only claimed for compensatory damages for the year of 2016. This was because the effect of loss of business profits suffered by the 1st Plaintiff in November and December 2015 (due to the sales of the Infringing Products) was not reflected in the 1st Plaintiff’s accounts (as there was a lag of 45 to 60 days in the “ordering cycle” of the 1st Plaintiff’s products);

the 1st Plaintiff did not claim compensatory damages for the year 2017 because the sales of the 1st Plaintiff’s products had reverted to their original trend before the introduction of the Infringing Products in the market;

the 1st Plaintiff firstly claimed compensation for loss of business profits regarding sales of its five brands of rice products (5 Brands) as follows -

“Beras Faiza Emas (Super Spesial Tempatan)”;

“Beras Faiza Emas (Beras Putih Import)”;

“Beras Kashmir Faiza Basmathi”;

“Beras Moghul Faiza Basmathi”; and

“Beras Taj Mahal Beras Herba Faiza”;

the 1st Plaintiff also claimed for compensatory damages for its other brands of rice products (Other Brands) because the sales of the 9 Other Brands had been adversely affected by the sales of the Infringing Products; and

the Plaintiffs initially claimed a sum of RM5,096,966.00 as compensatory damages for the 5 Brands and the Other Brands (collectively referred to in this judgment as the “Affected Brands”). The Plaintiffs subsequently reduced their claim of compensation for the Affected Brands to RM3,993,389.00.

According to the Defendants, the Plaintiffs were only entitled to nominal compensatory damages. The Defendants firstly alleged that the loss of sales of the 5 Brands was not caused by the Infringing Products but was due to the following reasons:

the 5 Brands concern rice, a food staple, which is sold in this country by more than 1,000 holders of wholesale licenses (other than the 1st Defendant) (Other Traders). The loss of sales of the 5 Brands could have been due to rice products sold by the Other Traders;

there are differences in quality and taste between the 5 Brands and the Infringing Products. There is also a difference in the quality of service provided by the 1st Plaintiff and the 1st Defendant. Hence, there was no proof that the reduction in the sales of the 5 Brands was caused by the Infringing Products;

the 1st Defendant’s market share in the rice industry is substantially lower than that of the 1st Plaintiff and consequently, the Infringing Products could not have adversely affected the sales of the 5 Brands; 10

before the 1st Defendant entered the market in 2015, there was already a decline in the 1st Plaintiff’s revenue due to the following problems -

the 2nd Defendant has more than 25 years of experience in the rice industry. The 2nd Defendant was the “driving force” behind the 1st Plaintiff and his departure from the latter, had negatively impacted the latter’s financial performance;

after the 2nd Defendant had left the 1st Plaintiff, his successor was Dr. Salwa binti Abu Bakar (a former lecturer) who was not actively involved in the 1st Plaintiff’s management until she joined the 1st Plaintiff in 2014;

approximately 110 employees left the 1st Plaintiff in 2015 and this would have a detrimental effect on the running of the 1st Plaintiff’s business;

the quality of the 5 Brands deteriorated after the 2nd Defendant’s departure from the 1st Plaintiff;

since 2015, the 1st Plaintiff has procured rice from different suppliers. This could have adversely affected the taste of the 5 Brands and could have caused a decline in the sales thereof; and

the 1st Plaintiff had a poor delivery system; 11

major rice wholesalers such as Jasmine Food Corporation Sdn. Bhd., OEL Realty Holdings Sdn. Bhd., YHL Group, Serba Wangi Sdn. Bhd., Dagang Mewah Sdn. Bhd. and Edaran Komachi Sdn. Bhd. have introduced basmathi rice and ponni rice in packagings which are similar to the packagings of the 5 Brands. This could have a negative effect on the sales of the 5 Brands;

the 1st Plaintiff’s loss of profits for the 5 Brands could be attributed to the following reasons -

in December 2015, the Government withdrew subsidy for local rice products;

prices of local rice products are capped by the Government;

there is a general increase in the cost of imported and local rice;

the 1st Plaintiff’s total expenditure has increased;

the American Dollar had strengthened against the Ringgit;

changes in consumer taste; and

downturn in the Malaysian economy;

in 2015, the 1st Plaintiff suffered a 6.59% decline in its sales. After the 1st Defendant’s entry in the market in 2015, the annual revenue of the 1st Plaintiff declined only 4.24% in 2016. Accordingly, the 1st Plaintiff’s revenue in 2016 improved (as compared to its revenue in 2015) and 12 the loss of sales of the 5 Brands could not have been caused by the Infringing Products;

the 1st Defendant had expended a substantial sum of money in the promotion and advertisement of the Infringing Products (1st Defendant’s Promotion Expenditure). Hence, the 1st Defendant is not a “copycat” which rides on the 1st Plaintiff’s goodwill; and

the Infringing Products are different from the 5 Brands. Hence, there is no confusion between the Infringing Products and the 5 Brands.

Regarding the Other Brands, the Defendants rely on the above contentions in the above paragraph 8. Additionally, the Defendants claimed as follows:

the Other Brands were not the subject matter of the Plaintiffs’ suits in this case;

the design and get-up of the Other Brands’ packagings are completely different from the 5 Brands; and

the 1st Plaintiff’s revenue from the Other Brands had already been declining since 2012 and this decline accelerated in 2014 (before the 1st Defendant entered the market).

Firstly, I am of the view that the Defendants cannot aver that there was no confusion between the 5 Brands and the Infringing Products. This is because I have made a finding of fact in the Judgment that there was a likelihood of confusion and/or deception between the 5 Brands and the 13 Infringing Products (Likelihood of Confusion/Deception) - please see paragraphs 101 and 113(3) of the Judgment.

The Plaintiffs have the burden proven that the 1st Plaintiff’s loss of business profits regarding the Affected Brands is “caused” by the sales of the Infringing Products. To decide this causation issue, I adopt the “but for” test which has been applied by Lord Jauncey in a judgment delivered by the Privy Council in Deloitte Haskins & Sells v National Mutual Life Nominees Ltd [1993] AC 774, at p. 788 (an appeal from New Zealand).

In 2016, BERNAS imposed penalties on the 1st Plaintiff amounting to RM5,365,957.24 (Penalties). The Plaintiffs, to their credit, had properly excluded the Penalties in this Assessment because the Penalties could not have been “caused” by the 4 Causes of Action or the Infringing Products.

I find as a fact that Plaintiffs have succeeded to discharge the onus to prove that the 1st Plaintiff’s loss of business profits for the 5 Brands is “caused” by the sales of the Infringing Products. This finding is premised on the following evidence and reasons:

the sales of the 5 Brands had been increasing every year from 2010 (RM166,408,757.00) to 2014 (RM204,585,565.00). Suddenly, the sales of the 5 Brands suffered big declines in 2015 (RM191,086,048.00) and 2016 (RM182,974,225.00). Such a drastic fall in the sales of the 5 Brands coincided with the 1st Defendant’s introduction of the Infringing Products in November 2015. The 1st Plaintiff’s sudden loss of business profits in the sales of the 5 Brands 14 could not have happened “but for” the Infringing Products. In fact, the 1st Plaintiff suffered an actual loss in 2016. As such, the reasons given by the Defendants in the above sub-paragraphs 8(1) to (7) could not have “caused” the 1st Plaintiff’s loss of sales of the 5 Brands; and

the 1st Defendant’s Promotion Expenditure exacerbated the Likelihood of Confusion/Deception to the detriment of the 1st Plaintiff in terms of its sales of the 5 Brands.

I am of the view that the 1st Plaintiff’s loss in the sales of the Other Brands was “caused” by the Infringing Products. This is due to the following evidence and reasons:

the Infringing Products use, among others, “FAIZ” mark, “FAIZ” logo mark and the name of the 1st Defendant. This Court has found as a fact, among others, that the 1st Defendant has passed off its business and the Infringing Products as those of the 1st Plaintiff - please see paragraphs 109-118 of the Judgment; and

it is true that the 1st Plaintiff had suffered falling sales of the Other Brands from 2011 to 2014. However, with the introduction of “FAIZ” mark, “FAIZ” logo mark and the 1st Defendant’s name in November 2015, the 1st Defendant suffered a greater decline in the sales of the Other Brands. Such a sharp drop in the sales of the Other Brands would not have happened “but for” the Infringing Products and the tort of passing off the 1st Defendant’s business as the 1st Plaintiff’s. 15

Premised on the reason stated in the above paragraph 13, I reject the Defendants’ submission in the above sub-paragraphs 8(1) to (7) and 9(1) to (3) regarding the Other Brands. The fact that the Other Brands are not the subject matter of the Plaintiffs’ suits in this case is immaterial because -

the Defendants are liable in this case for, among others, the torts of passing off and unlawful interference with the 1st Plaintiff’s business; and

the 1st Plaintiff did suffer a loss of business profits from the sales of the Other Brands due to the Defendants’ commission of the tort of passing off the 1st Defendant’s business as the 1st Plaintiff’s and the tort of unlawful interference with the 1st Plaintiff’s business. D(3). Whether 1st Plaintiff’s loss of business profits was too remote

The 1st Plaintiff’s loss of business profits for the Affected Brands, in my view, is not too remote and is recoverable in law. D(4). How compensatory damages be assessed?

I apply the Lost Profits Basis to assess compensatory damages because this case concerns competing sales of rice products of the 1st Plaintiff and the 1st Defendant - Taiping Poly, at paragraph 19. The Royalty Basis is not applicable because no license has been issued by the 1st Plaintiff or by any other party in the rice industry. 16 D(5). Whether Court may consider accountant’s expert evidence in applying Lost Profits Basis

The Defendants’ learned counsel, Mr. Michael Soo Chow Ming, has submitted as follows, among others:

Encik Ong is an accountant whose expert evidence is admissible under s 45(1) EA and O 40A rr 1 to 3 RC;

the Court should give weight to Encik Ong’s expert opinion because he is an independent, competent and experienced accountant; and

Encik Azhar is not an expert in accounting and his evidence is thus not admissible in this Assessment. Alternatively, even if the Court admits Encik Azhar’s evidence, no weight should be attached to his evidence. This is because Encik Azhar is an employee of the 1st Defendant and is not impartial.

I reproduce below s 45(1) EA and O 40A rr 1 to 3 RC: “Opinions of experts 45(1) When the court has to form an opinion upon a point of foreign law or of science or art, or as to identity or genuineness of handwriting or finger impressions, the opinions upon that point of persons specially skilled in that foreign law, science or art, or in questions as to identity or genuineness of handwriting or finger impressions, are relevant facts. O 40A Experts of Parties Limitation of expert evidence 17 r 1(1) The Court may, at or before the trial of any action, by order limit the number of expert witnesses who may be called at the trial to such number as it may specify. r 1(2) A reference to an “expert” in this Order is a reference to an expert who has been instructed to give or prepare evidence for the purpose of Court proceedings. Expert’s duty to the Court r 2(1) It is the duty of an expert to assist the Court on the matters within his expertise.

This duty overrides any obligation to the person from whom he has received instructions or by whom he is paid. Requirements of expert’s evidence r 3(1) Unless the Court otherwise directs, expert evidence to be given at the trial of any action, is to be given in a written report signed by the expert and exhibited in an affidavit sworn to or affirmed by him testifying that the report exhibited is his and that he accepts full responsibility for the report. r 2(2) An expert’s report shall -

give details of the expert’s qualifications;

give details of any literature or other material which the expert witness has relied on in making the report;

contain a statement setting out the issues which he has been asked to consider and the basis upon which the evidence was given;

if applicable, state the name and qualifications of the person who carried out any test or experiment which the expert has used for the 18 report and whether or not such test or experiment has been carried out under the expert's supervision;

where there is a range of opinion on the matters dealt with in the report -

summarise the range of opinion; and

(ii) give reasons for his opinion;

contain a summary of the conclusions reached;

contain a statement of belief of correctness of the expert’s opinion; and

contain a statement that the expert understands that in giving his report, his overriding duty is to the Court and that he complies with that duty.” (emphasis added).

Firstly, there is nothing in s 45(1) EA or O 40A rr 1 to 3 RC which requires an accountant’s expert evidence to be adduced in support of a plaintiff’s claim for compensatory damages. Nor is there any written law which requires such an expert opinion. My research is unable to show any decided case in Malaysia and the other Commonwealth countries which requires a plaintiff to call an accountant to give expert evidence in support of the plaintiff’s claim for compensatory damages. On the contrary, there are many cases, including Taiping Poly, which have awarded compensatory damages based solely on evidence of “non-experts”. Accordingly, the Plaintiffs are not required to adduce an accountant’s expert opinion to support this Assessment. 19 Despite the above, there is nothing in law to prevent a plaintiff and/or defendant from tendering an accountant’s expert opinion to assist the Court in the assessment of compensatory damages. In an adversarial litigation system, parties in assessment proceedings have a discretion to adduce an accountant’s expert evidence as they see fit. Needless to say, it is a question of fact in each assessment proceedings as to whether the Court may accept an accountant’s expert view and to attach any weight thereto.

Based on the reasons in above paragraph 20 -

the Plaintiffs are not obliged to adduce an accountant’s expert opinion regarding the 1st Plaintiff’s loss of business profits in the sales of the Affected Brands; and

the Defendant could adduce Mr. Ong’s expert evidence regarding EBITA to assist this Court in the Assessment.

Encik Azhar is not an expert within the meaning of s 45(1) EA. Consequently, s 45(1) EA does not apply to Encik Azhar.

O 40A rr 1 to 3 RC do not provide for admissibility or exclusion of expert evidence - please see Kingtime International Ltd & Anor v Petrofac E & C Sdn Bhd [2018] MLRHU 1328, at sub-paragraph 24(5)(i). As Encik Azhar is not an expert witness, his evidence is not subject to O 40A RC.

Regarding the Defendants’ submission that Encik Azhar is not an independent witness, I refer to the judgment of Raus Sharif CJ in the 20 Federal Court case of Spind Malaysia Sdn Bhd v Justrade Marketing Sdn Bhd & Ors [2018] 4 MLJ 34, at paragraph 136, as follows: “[136] The appellant’s counsel challenged the evidence of DW3 on two grounds, namely his lack of independence as a party to the suit, and his admission that he is not a person skilled in the art. The first ground does not in itself render DW3’s evidence inadmissible, and the acceptance of DW3’s evidence does not mean that the learned trial judge failed to accord proper weight to the evidence of an interested party.” (emphasis added). The above judgment in Spind has been followed in Kingtime, at sub-paragraph 24(5)(iii).

Notwithstanding the fact that Encik Azhar is an employee of the 1st Plaintiff, I accept his evidence regarding the 1st Plaintiff’s loss of business profits in the sales of the Affected Brands (Encik Azhar’s Computation). This decision is premised on the following evidence and reasons:

Encik Azhar’s Computation is based on the Loss of Profits Basis as laid down in Taiping Poly;

Encik Azhar’s Computation is based on the 1st Plaintiff’s records. There is no evidence that the contents of such records are incorrect or unreliable; and

the cross-examination of Encik Azhar does not reveal any reason to doubt his credibility. 21 D(6). Whether Court could consider EBITA

Regarding the 5 Brands, Encik Azhar’s Computation is as follows:

Encik Azhar obtained 5.31% as the average annual percentage increase of the 1st Plaintiff’s revenue from the 5 Brands [Average Annual Revenue Increase Rate (5 Brands)]. The Average Revenue Increase Rate (5 Brands) of 5.31% is derived as follows - Percentage increase of revenue for 5 Brands from 2010 to 2011 [(Revenue from 5 Brands in 2011) - (Revenue from 5 Brands in 2010)] ÷ (Revenue from 5 Brands in 2010) × 100% = 5.63% Percentage increase of revenue for 5 Brands from 2011 to 2012 [(Revenue from 5 Brands in 2012) - (Revenue from 5 Brands in 2011)] ÷ (Revenue from 5 Brands in 2011) × 100% = 8.04% Percentage increase of revenue for 5 Brands from 2012 to 2013 [(Revenue from 5 Brands in 2013) - (Revenue from 5 Brands in 2012)] ÷ (Revenue from 5 Brands in 2012) × 100% = 2.70% Percentage increase of revenue for 5 Brands from 2013 to 2014 [(Revenue from 5 Brands in 2014) - (Revenue from 5 Brands in 2013)] ÷ (Revenue from 5 Brands in 2013) × 100% = 4.88% Average Annual Revenue Increase Rate (5 Brands) [5.63% + 8.04% + 2.70% + 4.88%] ÷ 4 years = 5.31% 22 It is to be noted that Encik Azhar excluded the 1st Plaintiff’s actual revenue of the 5 Brands in 2015;

based on the Average Annual Revenue Increase Rate (5 Brands) of 5.31%, the predicted revenue of the 1st Plaintiff for the 5 Brands in 2016 [1st Plaintiff’s Predicted Revenue in 2016 (5 Brands)] is RM226,889,404.00;

the 1st Plaintiff’s profit before tax (PBT) for the 5 Brands is derived as follows - PBT = [total of 1st Plaintiff’s revenue from sales and all other income] – [cost of goods sold] – [operating expenses] – [depreciation] – [finance cost];

an average PBT margin for the 5 Brands [Average PBT Margin (5 Brands)] of 1.75% for 6 years (from 2010 to 2015) is obtained as follows -

1.75% [Average PBT Margin (5 Brands)] = [(PBT margin of 2% in 2010) + (PBT margin of 1% in 2011) + (PBT margin of 2% in 2012) + (PBT margin of 4% in 2013) + (PBT margin of 0.5% in 2014) + (PBT margin of 1% in 2015)] ÷ 6 years;

the predicted net profit for the 5 Brands which should have been earned by the 1st Plaintiff in 2016 [1st Plaintiff’s Predicted Net Profit in 2016 (5 Brands)] is RM3,970,564.57 which is arrived as follows - 23 RM3,970,564.57 [1st Plaintiff’s Predicted Net Profit in 2016 (5 Brands)] = RM226,889,404.00 [1st Plaintiff’s Predicted Revenue in 2016 (5 Brands)] × 1.75% [Average PBT Margin (5 Brands)];

in 2016, regarding the 5 Brands, the 1st Plaintiff suffered a loss of RM4,437,513.00 [1st Plaintiff’s Actual Loss in 2016 (5 Brands)]. Encik Azhar then deducted the Penalties from the 1st Plaintiff’s Actual Loss in 2016 (5 Brands). According to Encik Azhar, the 1st Plaintiff’s loss in 2016 regarding the 5 Brands which arose from the 4 Causes of Action was RM501,266.00 [1st Plaintiff’s Claimable Loss in 2016 (5 Brands)]; and

the loss of business profits for the 5 Brands suffered by the 1st Plaintiff in 2016 is the total sum of 1st Plaintiff’s Predicted Net Profit in 2016 (5 Brands) and the 1st Plaintiff’s Claimable Loss in 2016 (5 Brands). For the 5 Brands, the 1st Plaintiff would have suffered a total loss of business profits of RM4,471,831.00 which is calculated as follows - RM4,471,831.00 = RM3,970,565.00 [1st Plaintiff’s Predicted Net Profit in 2016 (5 Brands)] (this sum is rounded up to the nearest RM by Encik Azhar) + RM501,266.00 [1st Plaintiff’s Claimable Loss in 2016 (5 Brands)].

Encik Azhar’s Computation for the Other Brands is as follows:

from 2011 to 2014, there had been a decline in the sales of the Other Brands with a (-5.82%) as the average annual percentage decrease 24 rate of the 1st Plaintiff’s revenue from the Other Brands [Average Annual Revenue Decrease Rate (Other Brands)];

based on the Average Annual Revenue Decrease Rate (Other Brands) of (-5.82%), the predicted revenue of the 1st Plaintiff for the Other Brands in 2016 [1st Plaintiff’s Predicted Revenue in 2016 (Other Brands)] is RM30,154,455.00;

due to the Infringing Products, the sales of the Other Brands in 2015 and 2016 suffered a decline greater than (-5.82%) [Average Annual Revenue Decrease Rate (Other Brands)] as follows -

in 2015, there was a drop in the sales of the Other Brands of (–

9.67%) (as compared to the sales of the Other Brands in 2014); and

there was a decline of (-16.32%) in the sales of the Other Brands in 2016 (as compared to the sales of the Other Brands in 2015);

the average PBT margin for the Other Brands from 2010 to 2015 is 1.75% [Average PBT Margin (Other Brands)];

based on the Average PBT Margin (Other Brands) of 1.75%, the 1st Plaintiff should have enjoyed a profit of RM527,702.97 in 2016 [1st Plaintiff’s Predicted Net Profit in 2016 (Other Brands)];

due to the Infringing Sales, the 1st Plaintiff suffered a loss of RM623,505.00 in 2016 [1st Plaintiff’s Actual Loss in 2016 (Other Brands)]. The Penalties were then excluded from the 1st Plaintiff’s 25 Actual Loss in 2016 (Other Brands). Hence, the 1st Plaintiff’s loss in 2016 regarding the Other Brands which arose from the 4 Causes of Action was RM70,432.00 [1st Plaintiff’s Claimable Loss in 2016 (Other Brands)]; and

the loss of business profits for the Other Brands suffered by the 1st Plaintiff in 2016 is the total sum of the 1st Plaintiff’s Predicted Net Profit in 2016 (Other Brands) and the 1st Plaintiff’s Claimable Loss in 2016 (Other Brands). For the Other Brands, the 1st Plaintiff would have suffered a total loss of business profits of RM598,135.00 which is derived as follows - RM598,135.00 = RM527,703.00 [1st Plaintiff’s Predicted Net Profit in 2016 (Other Brands)] (this sum is rounded up to the nearest RM by Encik Azhar) + RM70,432.00 [1st Plaintiff’s Claimable Loss in 2016 (Other Brands)].

Encik Ong gave the following evidence, among others:

in calculating the predicted revenue of the 1st Plaintiff for the Affected Brands in 2016, Encik Azhar should have taken into account the 1st Plaintiff’s revenue for the Affected Brands in 2015; and

EBITA should be used instead of the predicted profit of the 1st Plaintiff before tax.

The Plaintiffs’ learned counsel, Ms. Kuek Pei Yee, has accepted the above expert opinion of Encik Ong. 26

On the facts of this case, I accept EBITA in applying the Lost of Profits Basis. I should clarify that my reliance on EBITA in this case does not mean that a plaintiff is mandatorily required to adduce an accountant’s expert opinion regarding EBITA to prove compensatory damages. This is because firstly, there is no legal requirement for a plaintiff to tender an accountant’s expert opinion, let alone the accountant’s expert evidence regarding EBITA, in an assessment of compensatory damages (please see the above paragraph 20). Furthermore, there is no hard and fast rule as to how the Court may assess compensatory damages - Taiping Poly.

Based on Mr. Ong’s expert opinion in the above paragraph 28, I decide as follows:

regarding the 5 Brands, the 1st Plaintiff’s revenue in 2015 should be considered -

taking into account the 1st Plaintiff’s revenue decrease rate for the 5 Brands in 2015 (-6.60%), the Average Annual Revenue Increase Rate (5 Brands) from 2011 to 2015 is 2.93%; and

based on the Average Annual Revenue Increase Rate (5 Brands) of 2.93% and the actual revenue of the 1st Plaintiff for the 5 Brands in 2015 (RM191,086,048.00), the 1st Plaintiff’s Predicted Revenue in 2016 (5 Brands) is RM196,684,869.00 [RM191,086,048.00 × (100% + 2.93%)]; and

in respect of the Other Brands, the 1st Plaintiff’s revenue in 2015 for the Other Brands should be taken into account - 27

taking into account the 1st Plaintiff’s revenue in 2015 for the Other Brands, the 1st Plaintiff’s Average Annual Revenue Decrease Rate (Other Brands) from 2011 to 2015 is -2.94%; and

the 1st Plaintiff’s actual revenue for the Other Brands in 2016 was RM30,724,736.00. Accordingly, the 1st Plaintiff’s Predicted Revenue in 2016 (Other Brands) is RM29,821,429.00 [RM30,724,736.00 × (100% - 2.94%)]. D(7). Whether Court should accept Average EBITA Margin or Actual

An EBITA margin (in %) for a particular year (Year X) is as follows: [(earnings before interest, tax and amortization in Year X) ÷ (total revenue in Year X)] × 100%.

Encik Ong and the parties’ learned counsel use the term “Predicted EBITA Margin”. I will use the description “Average EBITA Margin” due to how the margin is derived. According to Encik Ong, for the Affected Brands, the Average EBITA Margin for the 1st Plaintiff in 2016 is 3.66% which is derived as follows:

3.66% = [(total of all EBITA Margins from 2011 to 2015) ÷ 5 years] × 100%.

Despite computing the Average EBITA Margin, Encik Ong opined that the 1st Plaintiff’s loss of business profits from the Affected Brands in 2016 should be computed based on the 1st Plaintiff’s Actual EBITA Margin in 28 2016 (2.06%) [Actual EBITA Margin (2016)]. Based on the Actual EBITA Margin (2016), Encik Ong calculated the 1st Plaintiff’s total loss of business profits for the Affected Brands in 2016 to be RM369,288.00 as follows:

regarding the 5 Brands, the loss of profits is RM284,315.00 which is computed as follows - RM284,315.00 = {RM196,684,869.00 [1st Plaintiff’s Predicted Revenue in 2016 (5 Brands)] × 2.06%} – RM3,767,393.00 (actual EBITA in 2016);

for the Other Brands, RM84,973.00 is the loss of business profits which is derived as follows - RM84,973.00 = {RM29,821,429.00 [1st Plaintiff’s Predicted Revenue in 2016 (Other Brands) × 2.06%} – RM529,348.00 (actual EBITA in 2016); and

RM369,288.00 = RM284,315.00 + RM84,973.00.

I am not able to accept Encik Ong’s expert view regarding the use of the Actual EBITA Margin (2016). This is because the Actual EBITA Margin

is “caused” by the Infringing Products (which constitute the 4 Causes of Action)! If the Defendants can rely on the Actual EBITA Margin

(2016), this is tantamount to allowing the Defendants to profit from their own wrong-doing in committing the 4 Causes of Action. 29

Based on the Average EBITA Margin of 3.66%, I find as a fact that the 1st Plaintiff’s loss of business profits from the Affected Brands in 2016 is RM3,993,389.00 which is computed as follows:

the 1st Plaintiff’s loss of business profits for the 5 Brands in 2016 is RM3,431,273.00 - RM3,431,273.00 (rounded to the nearest RM) = {RM196,684,869.00 [1st Plaintiff’s Predicted Revenue in 2016 (5 Brands)] × 3.66%} – RM3,767,393.00 (actual EBITA in 2016);

the 1st Plaintiff’s loss of business profits for the Other Brands in 2016 RM562,116.00 - RM562,116.00 (rounded to the nearest RM) = {RM29,821,429.00 [1st Plaintiff’s Predicted Revenue in 2016 (Other Brands) × 3.66%} – RM529,348.00 (actual EBITA in 2016); and

RM3,993,389.00 = RM3,431,273.00 + RM562,116.00. D(8). Loss of 1st Plaintiff’s goodwill

In a tort of passing off, a plaintiff may claim for compensatory damages in the form of loss of the plaintiff’s goodwill or damage to the plaintiff’s goodwill - Taiping Poly, at paragraph 37. It was decided in Schwan-Stabilo Marketing, at paragraph 23, as follows: 30 “23. In addition to loss of business profits or loss of royalty/license fee due to the 3 Causes of Action -

the court will presume that there is loss of goodwill to a plaintiff due to the defendant’s commission of the tort of passing off - Taiping Poly, at paragraph 37;

it is an exercise of the court’s discretion to award a sum for damage to a plaintiff’s goodwill due to the defendant’s passing off - Taiping Poly, at paragraph 37; and

in Draper v Trist & Ors [1939] 3 All ER 513, at 524, Wilfred Greene MR (as he then was) held in the English Court of Appeal that the court would use “ordinary business knowledge and common sense” in assessing loss of goodwill due to passing off.” (emphasis added).

The Plaintiffs have claimed for a sum of RM200,000.00 as damages for the loss of the 1st Plaintiff’s goodwill. I however exercise my discretion to award a sum of RM100,000.00 as compensatory damages for the loss of the 1st Plaintiff’s goodwill. This award is based on the following evidence and reasons:

in this case, the Plaintiffs had proven that the Defendants had caused actual damage to the 1st Plaintiff’s goodwill - please see paragraph 116 of the Judgment;

the 1st Defendant’s Promotion Expenditure aggravates the Likelihood of Confusion/Deception and this in turn, causes severe damage to the 1st Plaintiff’s goodwill; 31

this Court may presume there is a loss of the 1st Plaintiff’s goodwill arising from the Defendants’ commission of the tort of passing off - Taiping Poly; and

as decided in Draper, an award of RM100,000.00 for a loss of the 1st Plaintiff’s goodwill is in accordance with “ordinary business knowledge and common sense”. E. Assessment of non-compensatory damages

The relevant part of s 37 CA is reproduced below: “Action by owner of copyright and relief 37(1) Infringements of copyrights …, the court may grant the following types of relief:

… ;

damages;

… ;

statutory damages of not more than twenty-five thousand ringgit for each work, but not more than five hundred thousand ringgit in the aggregate; or

... …

Where in an action under this section an infringement of copyright …, the court may, in assessing damages for the infringement or commission of the prohibited act, award such additional damages 32 as it may consider appropriate in the circumstances if it is satisfied that it is proper to do so having regard to -

the flagrancy of the infringement or prohibited act;

any benefit shown to have accrued to the defendant by reason of the infringement or prohibited act; and

all other relevant matters.

In awarding statutory damages under paragraph (1)(d), the court shall have regard to -

the nature and purpose of the infringing act or prohibited act, including whether the infringing act or prohibited act was of a commercial nature or otherwise;

the flagrancy of the infringement or prohibited act;

whether the defendant acted in bad faith;

any loss that the plaintiff has suffered or is likely to suffer by reason of the infringement or prohibited act;

any benefit shown to have accrued to the defendant by reason of the infringement or prohibited act;

the conduct of the parties before and during the proceedings;

the need to deter other similar infringement or prohibited act; and

all other relevant matters. …” (emphasis added). 33

I am of the following view regarding Statutory Damages, Additional Damages, exemplary damages and aggravated damages:

the Court has a discretion to award Statutory Damages under s 37(1)(d) and (8) CA. This discretion is clear from the permissive word “may” in s 37(1) CA;

when the Court decides to grant Statutory Damages, the Court “shall have regard to” the matters enumerated in s 37(8)(a) to (h) CA. Our s 37(1)(d) is different from s 119(2)(d) of the Copyright Act of Singapore [CA (Singapore)]. Section 119(2)(d) CA (Singapore) provides as follows - “119(2) Subject to the provisions of this Act, in an action for an infringement of copyright, the types of relief that the court may grant include the following: …

where the plaintiff has elected for an award of statutory damages in lieu of damages or an account of profits, statutory damages of –

not more than $10,000 for each work or subject-matter in respect of which the copyright has been infringed; but

(ii) not more than $200,000 in the aggregate, unless the plaintiff proves that his actual loss from such infringement exceeds $200,000.” (emphasis added). 34 In view of the difference between our s 37(1)(d) CA and s 119(2)(d) CA (Singapore), Singapore cases on Statutory Damages should be read with caution;

if the Court decides to exercise its discretion to order Statutory Damages, according to s 37(1)(d) CA the Court cannot order Statutory Damages which exceeds -

RM25,000.00 for each work; and

RM500,000.00 in the aggregate for all the works in question;

the words in s 37(7) CA (the court may, in assessing damages for the infringement or commission of the prohibited act, award such additional damages as it may consider appropriate in the circumstances if it is satisfied that it is proper to do so) confer a discretion on the Court to grant Additional Damages;

in the exercise of the Court’s discretion to award Additional Damages, the Court may consider the matters stated in s 37(7)(a) to (c) CA;

the Court may order a global or lump sum for Statutory Damages, Additional Damages, exemplary damages and/or aggravated damages - Motordata Research Consortium, at sub-paragraph 75(3). This is to avoid giving an unjustifiable windfall to a plaintiff (in the form of overlapping heads of non-compensatory damages) as well as to prevent the defendant’s financial destruction in an unjust manner (2 Purposes) - Motordata Research Consortium, at sub-paragraph 75(2); and 35

the Court’s exercise of discretion to grant or refuse to order non-compensatory damages is dependent on the particular facts of each case. Hence, cases regarding non-compensatory damages do not constitute binding precedents from the view point of the stare decisis doctrine. E(1). Statutory Damages

I will first decide regarding Statutory Damages because s 37(1)(d) CA has prescribed a maximum amount of Statutory Damages for copyright infringement.

In this case, the Defendants have infringed the 1st Plaintiff’s copyright in six works (6 Works). The Plaintiffs have applied for RM25,000.00 [the maximum amount of Statutory Damages for each work in s 37(1)(d) CA] as Statutory Damages for each of the 6 Works.

I exercise my discretion under s 37(1)(d) and (8) CA to award Statutory Damages in this case because -

the Defendants’ infringement of the 1st Plaintiff’s copyright in the 6 Works (Defendants’ Copyright Infringement) was of a commercial nature within the meaning of s 37(8)(a) CA - please see Azizah Nawawi J’s judgment in the High Court in Honda Giken Kogyo Kabushiki Kaisha v DNC Asiatic Holdings Sdn Bhd & Ors and another case [2017] 1 LNS 1647, at paragraph 106 (Honda’s Case); 36

the Defendants’ Copyright Infringement was flagrant - please see s 37(8)(b) CA. The word “flagrant” is also provided in s 37(7)(a) CA regarding Additional Damages. The following High Court cases have explained the meaning of the word “flagrant” in the context of Additional Damages -

in Creative Purpose Sdn Bhd & Anor v Integrated Trans Corp Sdn Bhd & Ors [1997] 2 MLJ 429, at 450, Kamalanathan Ratnam JC (as he then was) decided as follows - “[The then s 37(2) CA] allows for the court to assess damages in cases of infringement. However, the same Act allows for additional damages … The burden is on the plaintiff to prove damage, but not to a degree of certainty. Flagrancy implies scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would have been found liable for; see Revenscroft v Herbert & Anor [1980] RPC 193 at p 206.” (emphasis added);

Low Hop Bing J (as he then was) held as follows in Megnaway Enterprise Sdn Bhd v Soon Lian Hock (sole proprietor of the firm Performance Audio & Car Accessories Enterprise) [2009] 3 MLJ 525, at paragraph 66(7) - “66(7) For the purpose of [the then 37(2) CA], 'flagrancy' means 'the existence of scandalous conduct, deceit and such 37 like', including 'deliberate and calculated copyright infringements, infliction of humiliation and loss, and dishonesty' Ravencroft v Herbert [1980] RPC 193 at 208 …” (emphasis added); and

Abang Iskandar J (as he then was) decided as follows in Kohwai & Young Publication (M) Sdn Bhd v Lembaga Pengelola Dewan Bahasa dan Pustaka [2013] 10 CLJ 365, at paragraphs 11 and 12 - “[11] … As alluded to earlier by me, the plaintiffs had also prayed in their statement of claim, additional damages under [the then s 37(2)CA] … [12] No decided case on the interpretation of that statutory provision had been cited to me and for my part I had not been able to locate such a local case. Even at common law, exemplary damages will ordinarily be awarded against a defendant who has engaged in conscious wrongdoing in contumelious disregard of another's rights (see the case of Gray v. Motor Accident Commission [1998] 196 CLR 1). What is patently clear is that the 'additional damages' sought by the plaintiffs are those grounded as they were in the statute book. Assistance in construing the nature of the discretion as envisaged under [the then s 37(2)CA] may however, be had from reading the Australian case of Sullivan v. FNH Investments Pty Ltd [2003] 57 IPR 63, where Jacobsen J had said that the assessment of additional damages pursuant to s. 115(4) is at large and that the discretion of the court is not fettered in any arithmetic or mathematical way. It is also noted that the word 'flagrancy' as 38 appears in [the then s 37(2)CA], it is not defined therein or anywhere in the [CA]. Again, a reference may indeed be made to the case of Scientific International Pty Ltd v. SC Johnson & Sons Pty Ltd [1998] 43 IPR 275 where it was said that 'flagrancy' involved calculated disregard of the plaintiff's rights, or a cynical pursuit of benefit. The earlier cited case of Aristocrat (supra) also had ruled that awards of further damages were intended to deter infringing conduct and that in that sense an element of penalty was therefore deemed acceptable. I would venture to add here that the court in the Scientific International Pty Ltd case (supra ) had assigned to the word 'flagrancy' an open ended interpretation rather than a restrictive meaning. To my mind, its interpretation of the word is not inconsistent with what the same word is intended to convey as employed under [the then s 37(2)CA]. …” (emphasis added);

in this case, the Defendants had acted in bad faith within the meaning of s 37(8)(c) CA as follows -

the Defendants had maliciously claimed copyright in the 6 Works and counterclaimed that the Plaintiffs had infringed the Defendants’ copyright in the 6 Works;

the 2nd Defendant had affirmed false Statutory Declarations to support the Defendants’ claim to the copyright in the 6 Works and to oppose the Plaintiffs’ interlocutory injunction application - please see sub-paragraphs 27(1), (4) and (5) of the Judgment; 39

a false affidavit had been affirmed by the 2nd Defendant to resist the Plaintiffs’ interlocutory injunction application - please see sub-paragraph 27(3) of the Judgment; and

the 2nd Defendant had suppressed material evidence at the trial of these cases - please see sub-paragraph 20(1) of the

the 1st Plaintiff had suffered extensive loss due to the Defendants’ Copyright Infringement - please see s 37(8)(d) CA and the above Parts D(2) to D(8);

the Defendants had derived benefit from the Defendants’ Copyright Infringement - please see s 37(8)(e) CA and Honda’s Case (at paragraphs 106 and 107); and

there is a need to deter the Defendants and other like-minded persons from committing copyright infringement - please see s 37(8)(g) CA and Honda’s Case (at paragraph 108).

I exercise my discretion to award only RM10,000.00 as Statutory Damages for each of the 6 Works. This exercise of discretion is based on the following reasons:

as elaborated in the above paragraphs 36 and 38, I have awarded a substantial sum of RM4,093,389.00 as compensatory damages (loss of business profits and loss of goodwill). Hence, in accordance with the 2 Purposes, this Court should not award excessive Statutory Damages; and 40

as explained in Part E(2) below, a further lump sum of RM100,000.00 as Additional Damages, exemplary damages and aggravated damages is awarded to the Plaintiffs in this case. E(2). Additional Damages, exemplary damages and aggravated damages

To achieve the 2 Purposes, I exercise my discretion to grant the Plaintiffs a global sum of RM100,000.00 as Additional Damages, exemplary damages and aggravated damages (Global Sum).

The reasons for my exercise of discretion in awarding the Global Sum are the same as explained in the above sub-paragraphs 43(1) to (6).

Based on the above evidence and reasons, I order as follows:

compensatory damages as follows -

a total sum of RM3,993,389.00 which represents the 1st Plaintiff’s loss of business profits for the Affected Brands in 2016; and

RM100,000.00 for the loss of and damage to the 1st Plaintiff’s goodwill;

non-compensatory damages as follows - 41

a total sum of RM60,000.00 as Statutory Damages for all the 6 Works; and

a Global Sum of RM100,000.00 for Additional Damages, exemplary damages and aggravated damages; and

costs of Assessment (subject to allocatur fee) shall be paid by the Defendants to the Plaintiffs because the Plaintiffs have succeeded to prove the above sums of damages. WONG KIAN KHEONG Judge High Court (Commercial Division) Kuala Lumpur DATE: 26 NOVEMBER 2018 Counsel for Plaintiffs: Ms. Kuek Pei Yee, Ms. Alyshea Low Khye Lyn & Mr. Gooi Yang Shuh (Messrs Skrine) Counsel for Defendants: Mr. Michael Soo Chow Ming, Ms. Wendy Lee Wan Chieh & Mr. Loo Wai Hoong (Messrs Shook Lin & Bok)