Low Chi Yong v Low Chi Hong (02(f)-16-03/2017 (K))

REYNOX SDN BHD (No. Syarikat: 796218-T) …RESPONDENTS (In the Court of Appeal Malaysia Civil Appeal No: K-02(NCVC)(W)-426-03/2015) Between

Low Chi Hong

Reynox Sdn. Bhd. (No. Syarikat: 796218-T) … Appellants And Low Chi Yong (Berniaga sebagai Reynox Fertichem Industries) … Respondent CORAM: ZULKEFLI AHMAD MAKINUDIN, PCA SURIYADI HALIM OMAR, FCJ HASAN LAH, FCJ ZAINUN ALI, FCJ AZIAH ALI, FCJ 2 JUDGMENT OF THE COURT [1] The plaintiff, [hereinafter referred to as the appellant], filed a claim at the High Court at Alor Setar against the defendants (hereinafter referred to as the respondents) for infringement of his “Reynox” registered trade mark (the trade mark) and for passing off. Reynox was the trade mark name for liquid fertilizer. [2] The 1st respondent is the brother of the appellant. [3] In their defence the respondents alleged that the registration of the trade mark for liquid fertilizer had been obtained by the appellant by fraud committed on the 1st respondent. The respondents alleged that the trade mark was to be registered in the name of the appellant and the 1 st respondent initially, and thereafter to be transferred to the 2nd respondent. [4] The 2nd respondent was formed to take over the production, business, sale and distribution of the 3 abovementioned Reynox liquid fertilizer, with the appellant and the 1st respondent each owning equal share in the 2nd respondent. The appellant was also a director in the 2nd respondent. [5] In short, it was a family business, to trade in the Reynox liquid fertilizer business acquired from RH One Marketing earlier by the appellant and the 1st respondent. [6] A partnership (partnership firm) was also formed by the appellant and the 1st respondent, which also used the trade mark. Since the question before us relates to the 2nd respondent only, the answer to the leave question will only be confined to the 2nd respondent [see paragraph 13]. [7] By way of a counterclaim, the respondents alleged that the action by the appellant in registering the Reynox trade mark in his sole name had been done mala fide and by deception, and as such the appellant’s right to register the said trade mark was disputed. The 1st respondent’s counterclaim against the appellant was for a declaration 4 that the appellant was not entitled to the trade mark in his own name. [8] After a full trial, the High Court allowed the appellant’s claim and dismissed the respondents’ counterclaim, with costs of RM20,000.00. In gist, the High Court held that the trade mark “Reynox” had been registered in the name of the appellant and was the registered owner of the trade mark. He thus had the exclusive right pursuant to section 35(1) of the Trade Marks Act 1976 (the TMA 1976) to use the trade mark. [9] The High Court decided that the appellant had successfully established all the elements under section 38 of the TMA 1976, and that the respondents had infringed the trade mark. [10] The High Court also held that the respondents could not rely on section 40(1)(a) of the TMA 1976 as it was not pleaded in their defence. This sub-section promulgates the use of the trade mark in good faith by a person in his own 5 name, in order to avoid an infringement of the trade mark under section 38 (1) of the TMA 1976. [11] Being dissatisfied with the decision of the High Court, the respondents filed a Notice of Appeal to the Court of Appeal. On 23.4.2015 the Court of Appeal allowed the respondents’ appeal and set aside the whole decision of the High Court. The Court of Appeal held the view that the trade mark had been used by the respondents with the consent and approval of the appellant. [12] Further, the Court of Appeal opined that the conduct of the appellant was not only unjust and inequitable, but also oppressive when the appellant took upon himself to terminate the use of the trade mark without reasonable notice. The conduct of the appellant would have caused immediate loss and damage to the 2nd respondent, which was an active trading company. The Court of Appeal therefore refused to entertain such inequitable and oppressive conduct of the appellant. 6 [13] Dissatisfied with the decision of the Court of Appeal, the appellant successfully applied for leave before us on 6.2.2017, on the following question of law: “Whether by giving his consent to the use of his registered trade mark to a company or a firm he is still a shareholder/director of the company or a partner of the partnership firm, can he be considered as having abandoned his exclusive right to the trade mark in perpetuity even if he does not derive any benefit therefrom (and has withdrawn from the company) and also be said to be guilty of estoppel, acquiescence or laches.” [14] The above leave question relates to the issue of whether the appellant has abandoned his exclusive right to the trade mark in perpetuity, by giving his consent to the use of his registered trade mark to a company or a firm, when he was still a shareholder/director of the company or a partner of the partnership firm, even though not deriving any benefit therefrom (and withdrew subsequently from the 7 company), and whether he could be said to be guilty of estoppel, acquiescence or laches in the circumstances of the case. [15] As the issue of passing off is not part of the leave question, we have consciously avoided commenting on it. We also have not touched on the effect of the leave question on the partnership firm as it is not a party to this proceedings. [16] A scrutiny of the Notice of Appeal to the Federal Court filed by the appellant shows that it was an appeal against the partial decision of the Court of Appeal for having reversed the High Court’s decision in respect of the appellant’s claim. However, the dismissal of the counterclaim by the High Court was upheld. The appellant’s submission [17] The appellant submitted that he is the sole registered proprietor of the trade mark since 13.5.2005, and had not committed any fraud in registering the trade mark 8 in his name, as the business of liquid fertilizer under the trade mark was started by him. [18] He also submitted that he never assigned his trade mark to the 2nd respondent i.e Reynox Sdn Bhd, any entity or to anyone, at all material times. There was certainly no express assignment and no exclusive license granted to th e respondents in using the trade mark. He argued that although he had allowed the trade mark to be used by the 2nd respondent, he did not assign the trade mark to be used in perpetuity. [19] As the registered proprietor of the trade mark, he was entitled to withdraw the consent given to the 2nd respondent to use his trade mark for a product under the same class. After the appellant withdrew from the 2nd respondent, the respondents were thus disentitled to use the trade mark, in light of the consent or license to use it having been terminated by a notice of withdrawal dated 20.12.2012. 9 [20] Learned counsel for the appellant contended that prior to the setting up of the 2nd respondent, the trade mark was used exclusively by the appellant and was only allowed to be used by the 1st respondent after he was brought in as a shareholder into the 2nd respondent. Regardless of the concession by the appellant, he still enjoyed his exclusive right to the trade mark as the registered owner under section 35 of the TMA 1976. [21] The appellant submitted that he never abandoned his rights over the trade mark. The fact that the 1st respondent was attempting to register the appellant’s trade mark demonstrated that the appellant had not abandoned his rights. His consistent conduct could not in any way amount to abandonment, acquiescence or laches. [22] The appellant also submitted that the 1st respondent did not come to court with clean hands and had acted in bad faith. He ventilated that the High Court was right in holding that the 1st respondent did not fall within the exceptions under section 40 of the TMA 1976 as he was not 10 an innocent party. He knew that the trade mark belonged to the appellant but yet attempted to misappropriate and register it in his own name. The unclean hands of the 1st respondent was compounded when he used the 2nd respondent to make a 4th application dated 6.3.2013 to register the trade mark. The respondents’ submission [23] In reply, learned counsel for the respondents argued that the appellant had compromised the exclusive use of the trade mark when he allowed the respondents to use it without any restriction. Further, no evidence was presented in court by the appellant to demonstrate that he had imposed any conditions on the use of the trade mark. [24] Apart from the issue of consent, the respondents’ basis for the challenge of the trade mark was co-ownership of the trade mark. The 1st respondent argued that at all times, he was under the mistaken belief that the trade mark was registered under the names of both the appellant and 11 himself. It was the contention of the respondents that the appellant surreptitiously registered the trade mark in his name on 13.5.2005 but yet informed the 1st respondent that it was registered in both their names. [25] In the course of the appeal, the respondents argued that in light of the appellant’s actions and conduct (in not enforcing the exclusive right over the trade mark since 2005) showed that he had waived his rights over the use of the trade mark. The appellant was thus precluded from exercising his legal rights over the trade mark due to his abandonment of his rights, let alone subject to the doctrine of estoppel, acquiescence and laches. [26] The respondents rested their case on the submission that, as assignees of the trade mark, they had the right to use and freely carry on the business of liquid fertilizer carrying the trade mark. The appellant thus had failed to maintain his action against them for infringement of the trade mark. 12 Our decision [27] Generally, the burden of proof in a trade mark infringement case lies with the plaintiff (in this case the appellant). He has to establish by a preponderance of evidence that he owns a valid registered trade mark (there can be no infringement if the appellant owns an invalid trade mark), and the defendant (in this appeal the respondents) has used the plaintiff’s trade mark in the course of trade without consent. That unlawful usage of the trade mark owned by the plaintiff (appellant) has caused deception or confusion among the prospective customers (Boh Plantations Sdn Bhd v Gui Nee Chuan & Ors (1975) 2 MLJ 213). In the latter case of Boh Plantations Gill CJ had occasion to state: “In an action for infringement the plaintiff complains that the defendant has infringed his trade mark by taking in its entirety, or by taking a substantial portion of it, or by colourably imitating it, and he relies on his 13 statutory title to the exclusive use of the mark in question for goods of a specified kind.” [28] In the current appeal the respondents have taken the trade mark in its entirety and carrying on trade using that trade mark. [29] We now touch in detail the evidence and law pertaining to this appeal. It is not disputed that the appellant had registered the “Reynox” trade mark with the Intellectual Property Corporation of Malaysia (MyIPO), on 13.5.2005. The registration was for liquid fertilizer under Class 1 in respect of chemicals used in agriculture, and was for a period of ten (10) years i.e. from 13.5.2005 to 13.5.2015. The appellant then renewed it until 13.5.2025

(a) the original registration was obtained by fraud;

(b) the trade mark offends against section 14; or

(c) the trade mark was not, at the commencement of the proceedings, distinctive of the goods or services of the registered proprietor. [32] On the facts before us, there is not an iota of evidence to show that the respondents have been successful 15 in establishing the ingredients of section 37 of the TMA 1976 to rebut section 36 of the TMA 1976. Therefore the registration of the trade mark is valid. [33] With the trade mark being valid, pursuant to section 35(1) of the TMA 1976, the appellant has the exclusive right to use the “Reynox” trade mark, and also the right to prevent other persons (not being registered users) from using the trade mark or any mark similar to it for liquid fertilizer used in agriculture. [34] Section 35(1) of the TMA 1976 reads as follows: “35 Rights given by registration

(a) as being use as a trade mark;

(b) in a case in which the use is use upon the goods or in physical relation thereto or in an advertising circular, or other advertisement, issued to the public, as importing a reference to a person having the right either as registered proprietor or as registered user to use the trade mark or to goods with which the person is connected in the course of trade; or

(c) in a case in which the use is use at or near the place where the services are available or performed or in an advertising circular or other advertisement issued to the public, as importing a reference to a person having a right either as registered proprietor or as 18 registered user to use the trade mark or to services with the provision of which the person is connected in the course of trade.” [37] Under section 38 of the TMA 1976 the appellant needs to establish the following ingredients, inter alia:

(i) the respondent used a mark identical with or so nearly resembling the trade mark as is likely to deceive or cause confusion;

(v) the respondent used the offending mark in such a manner as to render the use likely to be taken either as being use as a trade mark or as importing a reference to the registered 19 proprietor or the registered user or to their goods or services. (see Fabrique Ebel Societe Anonyme v. Sykt Perniagaan Tukang Jam City Port & Ors [1989] 1 CLJ 919; [1989] 1 CLJ (Rep) 537 and Leo Pharmaceutical Products Ltd A/S (Lovens Kemiske Fabrik Producktionsaktieselskab) v. Kotra Pharma

(M) Sdn Bhd [2012] 10 CLJ 507; [2009] 1 LNS 548). [38] The evidence reveals that the respondents did use the appellant’s trade mark on notice boards, brochures, receipts and business cards, with the dressing and get up of the respondents’ fertilizer being similar to the appellant’s liquid fertilizer bearing the trade mark. This has led to confusion, and leading to purchasers to believe that the respondents’ products and the appellant’s products are the same and/or associated despite the want of business relationship between them, after the appellant and the respondents had split up. [39] In dealing with section 38 of the TMA 1976, Zulkefli Ahmad Makinudin J (as he then was) in Hu Kim Ai & Anor v. 20 Liew Yew Thoong [2004] 5 CLJ 515; [2004] 7 MLJ 590; [2005] 6 AMR 363 held, inter alia: “In using the 'Five Stars Device' trademark, the defendant used a trademark, which was identical in every sense with the plaintiff's registered trademark with the exception of the word 'Blansacar'. The defendant copied the exact stylised design of the plaintiffs' trademark, the arrangement of the five stars and the position of the 'Five Stars Device'. The evidence adduced further shows that there was actual confusion caused by the defendant's offending watches as it so nearly resembles the plaintiffs' registered trademark and as both watches were also referred by the same Chinese characters 'Wu Xing Shang Jiang', it would be difficult for buyers who do not understand English to differentiate between the two watches. It was also not disputed that the plaintiff's registered trademark and the defendant's trademark were both applied to and used on watches. On the evidence, the 21 defendant had therefore infringed the plaintiffs' registered trademark as the elements for infringement of trademark laid down in s. 38 of the Act had been fulfilled (emphasis supplied).” (See also Yomeishu Seizo Co Ltd & Ors v. Sinma Medical Products (M) Sdn Bhd [1996] 2 BLJ 142; [1996] 2 MLJ 334; [1996] 3 AMR 3058; Aristoc Ltd v. Rysta Ltd & Anor (1945) 62 RPC 65). [40] In view of the evidential finding, we are satisfied that the appellant has established a prima facie case of infringement of his trade mark by the respondents. [41] The substantive defence of the respondents is that the appellant had consented to the use of the trade mark by the respondents. For this defence, the respondents relied on section 40 of the TMA 1976, a statutory exception to section 38(1) of the TMA 1976. Section 40 of the TMA 1976 reads as follows: “40 Acts not constituting infringement 22

(a) the use in good faith by a person of his own name or the name of his place of business or the name of the place of business of any of his predecessors in business;

(b) the use in good faith by a person of a description of the character or quality of his goods or services, and in the case of goods not being a description that would be likely to be taken as importing any reference as is mentioned in paragraph 38(1)(b) or paragraph 56(3)(b);

(c) the use by a person of a trade mark in relation to goods or services in respect of which he has by himself or his predecessors in business, continuously used the trade mark from a date before-

(i) the use of the registered trade mark by the registered proprietor, by his predecessors in 23 business or by a registered user of the trade mark; or

(d) in relation to goods connected in the course of trade with the registered proprietor or a registered user of the trade mark if, as to those goods or a bulk of which they form part, the registered proprietor or the registered user in conforming to the permitted use has applied the trade mark and has not subsequently removed or obliterated it or has at any time expressly or impliedly consented to the use of the trade mark;

(e) the use of the trade mark by a person in relation to goods or services adapted to form part of, or to be accessory to, other goods or services in relation to which the trade mark has been 24 used without infringement of the right given or might for the time being be so used, if the use of the trade mark is reasonably necessary in order to indicate that the goods or services are so adapted and neither the purpose nor the effect of the use of trade mark is to indicate otherwise than in accordance with the facts a connection in the course of trade between any person and the goods or services; and

(f) the use of a trade mark, which is one of two or more registered trade marks which are substantially identical, in exercise of the right to the use of that trade mark given by registration as provided by this Act.” [42] Under section 40(1)(dd) of the TMA 1976, infringement of the trade mark is avoided if the appellant, being the registered proprietor of the trade mark, at any time expressly or impliedly consents to the use of it by any other person. 25 [43] There is ample evidence to establish that the appellant had instructed his solicitors to send out notices dated 20.12.2012 to the 1st respondent and to the 2nd respondent respectively stating, inter alia, that the appellant was the sole registered proprietor of the trade mark, and as such the respondents and their servants and/or agents should refrain from using the trade mark with immediate effect in any way or manner in the course of trade which would infringe the appellant’s trade mark. [44] The evidence reveals that despite the receipt of the said notices, the respondents produced, sold and supplied products which were similar to the appellant’s products under the trade mark. The respondents argued that the consent continued on and still existed despite the withdrawal of the consent by the appellant vide the abovementioned notices of 20.12.2012. That consent to use the trade mark was by way of an assignment or license given to the 2nd respondent when the appellant was still with it. 26 [45] There is no doubt that consent was given by the appellant when he still was the shareholder and director of the 2nd respondent. The next relevant question is whether the consent was still valid after his resignation from the 2 nd respondent, particularly after the withdrawal of the consent through the notices dated 20.12.2012. As stated above the respondents argued that the consent persists due to an assignment granted by the appellant to the respondents. [46] Black’s Law Dictionary (Edited by Bryana A. Garner, Deluxe Ninth Edition) states that “consent” means “Agreement, approval, or permission as to some act or purpose, esp. given voluntarily by a competent person; legally effective assent”. “Express consent” means “Consent that is clearly and unmistakably stated” whereas “Implied consent” means “Consent inferred from one’s conduct rather than from one’s direct expression”. Without the need of an exhaustive and laborious research, consent entails permission given by a competent person. In this case, as given by the appellant who has a valid trade mark. 27 [47] Going by Black’s definitions, once that consent is withdrawn the legally effective assent ends. Therefore the question posed in paragraph 44 must be answered in the negative i.e. after withdrawing from the 2nd respondent, and after the notices were issued. [48] It is trite law that the appellant being the proprietor of the trade mark can assign his trade mark to an assignee by way of registration pursuant to section 47 of the TMA

Section 47 of the TMA 1976 reads as: “47 Registration of assignment