1 May, 2018
Schwan-Stabilo Schwanhaeusser Gmbh & Co. Kg ("Schwan-Stabilo"), the second plaintiff, is the registered proprietor of the Stabilo trade marks and is involved in the manufacturing and selling of stationery products bearing the marks whilst the first plaintiff, Schwan-Stabilo Marketing Sdn Bhd ("Schwan-Stabilo Marketing"), is a subsidiary company of Schwan-Stabilo. Schwan-Stabilo Marketing distributes and sells Schwan-Stabilo's goods in Malaysia.
The first defendant ("S & Y Stationery"), on the other hand, is in the wholesale and retail business of stationery products and had previously purchased Schwan-Stabilo's goods from Schwan-Stabilo Marketing for re-sale to retailers and the public.
S & Y Stationery owed a sum of money to Schwan-Stabilo Marketing and could not repay the outstanding sum. As a result, S & Y Stationery returned a quantity of Schwan-Stabilo's goods to Schwan-Stabilo Marketing. Schwan-Stabilo Marketing subsequently discovered that a part of the returned goods were counterfeit.
The High Court found in favour of Schwan-Stabilo Marketing and Schwan-Stabilo ("Plaintiffs") and had ordered, among others, an assessment of compensatory damages to be paid by S & Y Stationery, Chong Moy Chai @ Chong Fooi Lin and Tang Kok Seng ("Defendants") to the Plaintiffs for:
- trade mark infringement;
- tort of passing off; and
- tort of unlawful interference with trade.
Pursuant to the High Court's decision, the learned Deputy Registrar of the High Court had conducted an assessment of compensatory damages.
This case is an appeal by the Defendants against an assessment of compensatory damages where the Plaintiffs has attempted to profit unjustly by claiming an exorbitant amount as compensatory damages. The High Court considered, amongst others, the following questions:
- Whether the Court can rely on adverse inference to justify the amount of damages claimed by the Plaintiffs;
- Whether Loss Profits Basis or Royalty Basis should be applied in this case;
- Whether the Court should award three different types of compensatory damages for three causes of action.
- Whether the Court can rely on adverse inference to justify the amount of damages claimed
The High Court held that, even where an adverse inference is drawn against a defendant in the assessment proceedings, the plaintiff still has the evidential burden to prove compensatory damages. Accordingly, in the event where the plaintiff has failed to prove loss or damage, he is only entitled to nominal damages.
Nonetheless, the Court may rely on adverse inference against the defendant where:
- the relevant evidence has been adduced in assessment proceedings by the plaintiff; and
- there are two or more inferences which may be drawn based on such evidence.
The Court may then rely on adverse inference against the defendant to justify drawing a particular inference regarding the evidence which has been suppressed by the defendant. It would appear from this that adverse inference drawn from suppressing evidence will affect the amount of damages that can be claimed by the plaintiff.
Whether Loss Profits Basis or Royalty Basis should be applied in this case
The High Court held that the Loss Profits Basis rather than the Royalty Basis is to be applied in this case. The Court had considered, amongst others, the following:
- Schwan-Stabilo did not provide any evidence that it has issued any licence in Malaysia for the use of the Stabilo marks. Further, Schwan-Stabilo Marketing is a subsidiary of Schwan-Stabilo and is not its licencee;
- The English Court of Appeal had questioned the application of the Royalty Basis in trade mark infringement and passing off cases where the mark in question was not available for hire;
- There was no evidence of the "going rate" of Schwan-Stabilo's purported licence (a requirement under case law to apply the Royalty Basis);
- Although the sale of counterfeit goods by S & Y Marketing did infringe the Stabilo trade marks under section 38(1)(a) of the Trade Marks Act 1976("TMA"), it did not wholly deprive Schwan-Stabilo of its exclusive right to use the Stabilo trade marks under section 35(1) of the TMA.
Whether the Court should award three different types of compensatory damages for three causes of action
The Court held that the number of causes of action does not determine the nature and quantum of relief to be granted.
Conclusion
The Court was unable to compute compensatory damages by applying the Loss Profits Basis as Schwan-Stabilo did not adduce the relevant evidence and is now barred from adducing any fresh evidence for the appeal.
Therefore, the Plaintiffs had failed to discharge its evidential burden to prove its loss of business profits. Accordingly, the Appeal was allowed.
For further information, please contact:
Mike Ho Mun Keat, Shearn Delamore & Co
mikeho@shearndelamore.com
