Fraser & Neave Ltd v Yeo Hiap Seng Ltd

• Jurisdiction: Singapore
• Judge: Chua F A J
• Judgment Date: 16 November 1988
• Neutral Citation: [1988] SGCA 12
• Citation: [1988] SGCA 12
• Date: 16 November 1988
• Year: 1988
• Plaintiff Counsel: Robin Jacob QC and Lai Siu Chiu (Allen & Gledhill)
• Docket Number: Civil Appeal No 4 of 1987
• Defendant Counsel: M Karthigesu (Cooma Lau Loh & M Karthigesu)
• Court: Court of Appeal (Singapore)
• Published date: 19 September 2003

Cur Adv Vult

(delivering the judgment of the court):This is an appeal by Fraser & Neave Ltd against the decision of Punch Coomaraswamy J, who allowed the appeal of Yeo Hiap Seng Ltd against the decision of the assistant registrar. The parties will hereinafter be referred to as `F&N` and `YHS` respectively.

The facts

F&N and YHS are manufacturers of soft drinks. F&N is particularly strong in carbonated drinks while YHS`s strength lies in still soft drinks. F&N have been bottling the drink Sarsaparilla and marketing it as `Sarsi` in Singapore from about 1929. In December 1977, YHS introduced a new carbonated drink known as `Mirinda Sarsi`.

F&N thereupon commenced a suit against YHS, claiming an injunction and damages for infringement of their registered trademark and for passing off `Sarsi`. On 13 April 1978, F&N obtained an interlocutory injunction in the following terms:

(1) The defendants Yeo Hiap Seng Ltd be restrained from infringing the plaintiffs` registered trade mark no 4551 (whether acting by their servants or agents or any of them or otherwise howsoever) from using the Chinese characters as descriptive of or in connection with any aerated waters manufactured by them in all advertisements or posters appearing in the locally distributed newspapers and in the radio and television media in Singapore until after the trial of this action or until further order.

(2) The defendants remove and pull down all posters containing the said Chinese characters and exhibits in all or any parts of Singapore wherever they appear in any premises in the Republic of Singapore.

The order for injunction contained the usual undertaking by the plaintiffs to abide by any order the court may make as to damages.

On 29 August 1980, at the end of a lengthy trial, Sinnathuray J dismissed F&N`s action and discharged the injunction. He also directed the registrar to assess damages pursuant to the undertaking given in the injunction. The judgment is reported in [1982] 1 MLJ 122 . A stay of the assessment pending F&N`s appeal to the Court of Appeal was granted.

However, F&N did not pursue the appeal which was deemed withdrawn on 22 January 1982 pursuant to Rules of the Supreme Court 1970, O 57 r 6(3). Accordingly, YHS proceeded with the assessment of damages as ordered by Sinnathuray J.

The assessment before the assistant registrar took almost seven days. In a reasoned judgment, the assistant registrar rejected the basis of YHS`s claim. He also found that a proper computation of YHS`s costs would have resulted in a negative figure (ie a loss) in any event and that no damages were therefore payable. We shall come to his findings shortly and will deal at some length with them, as many of the points canvassed before him were repeated before us.

From that decision, YHS appealed to a judge in chambers. P Coomaraswamy J allowed the appeal with costs and ordered F&N to pay YHS the sum of $674,000 by way of damages. He awarded interest at 6% pa from 13 April 1978 (the date of the injunction) to the date of his judgment.

Against that decision, F&N have now appealed to us.

The assistant registrar`s decision

In the proceedings before the assistant registrar, YHS put forward the following basis for computing the sales that they claimed to have lost. They asserted that, but for the injunction, the ratio of sales of their Mirinda Sarsi to Mirinda Orange would have been the same as the ratio sales of F&N Sarsi to F&N Orange. This, YHS said, would be a comparison on a like-for-like basis.

Accordingly, YHS contended that the damages that flowed from the injunction would be the difference between their Mirinda Orange sales and their Mirinda Sarsaparilla/Sarsi sales. Further, the period over which the loss of sales should be accounted for should be from 13 April 1978 (the date of the injunction) to 30 September 1984 (the end of YHS`s Financial year for 1984, a period of almost 6 1/2 years). This was because, YHS submitted, a new flavoured drink would find its level of sales within one year of its introduction. In the case of a re-launch, a longer period must of necessity lapse before the reintroduced soft drink could find its level of sales. YHS maintained that they could not use `Sarsi` from 13 April 1978 to 22 January 1982 (the date F&N`s appeal against Sinnathuray J`s decision was deemed withdrawn).

The assistant registrar found that the restriction contained in the injunction lasted from 13 April 1978 to 29 August 1980 only (the date F&N`s action was dismissed and the injunction discharged). He would have confined any award of damages to the period 13 April 1978 to 29 August 1982 (two years after the discharge of the injunction).

However, the assistant registrar rejected the basis put forward by YHS for the computation of damages for the following reasons:

(1) All four products were distinctly different in formulation and taste.

(2) Mirinda Sarsi was introduced only in late 1977 whereas F&N Sarsi was introduced around 1929. F&N Sarsi was also a clear market leader in Singapore. The assistant registrar doubted that what F&N had achieved in 50 years of marketing their Sarsi, YHS could achieve in five months.

(3) The sales trends between F&N Orange and F&N Sarsi were different, and were further different from those between Mirinda Orange and Mirinda Sarsi.

(4) There was no functional relationship between Mirinda Orange advertisement and its sales, and by that same token, Mirinda Sarsi advertisement would not have a functional relationship with its sales volume.

The assistant registrar then went on, nevertheless, to deal with the evidence and the arguments on the detailed computation of YHS`s claim. His main findings were:

(1) Although there had been a cost increase of production items amounting to $1.205 per case during the period of the claim, YHS had accounted for only 18 cents, resulting in an omission of $1.02 per case. This would have meant lower production costs, and thus greater profitability.

(2) Certain production items like bottles and crates, that ought to have been taken into account in the computation of production costs, had been omitted. The so-called `base costs` omitted amounted to 71.66 cents per case.

(3) Advertisement costs for Mirinda Sarsi, if its sales volume was to be as large as Mirinda Orange`s, should logically be as large as those for Mirinda Orange for each year, and should not be based on the lowest differential of 26% in 1984. This figure of 26% was the difference in sales volume between Mirinda Orange and Mirinda Sarsi in 1984. According to YHS, to get Mirinda Sarsi sales up to the level of Mirinda Orange`s, all that was needed was 26% of the advertisement costs spent on Mirinda Orange. That figure applied throughout all the years although the difference in sales volume in all the other years was considerably higher than 26%. The assistant registrar dismissed this argument as incorrect as it defied logic.

(4) Price discounting and funds for sales promotion had not been properly accounted for in YHS`s computation. They had been understated.

In the result, what was arrived at was a composite negative figure for the period of YHS`s claim. The assistant registrar found that such conclusion, though seemingly absurd, was in fact not so. Volume was a critical factor in the soft drinks industry, and F&N Sarsi, with a sales volume ten times larger than Mirinda Sarsi, made an aggregate loss of $572,700 for the period 1 April 1977 to 31 March 1982.

Accordingly, the assistant registrar certified that no damages were due to YHS and ordered that YHS pay F&N the costs of the assessment.

The appellate judge`s decision

On the first issue of whether YHS`s basis of claim was an acceptable one, Punch Coomaraswamy J had this to say:

The plaintiff`s criticism of this method which the assistant registrar accepted was that it was not logical for the defendants to use the plaintiffs` (F&N) products as a basis for comparison, for which he gave a number of reasons, as it was `not on a like-for-like basis`. I fail to understand this argument. Both the plaintiffs and the assistant registrar proceeded on a direct comparison basis and failed to understand the comparison between F&N Orange and Sarsi on the one hand and the defendants` Mirinda Orange and Mirinda Sarsi on the other was simply to work out the sales trend (which could be up or down) and to get the differential between the defendants` Mirinda Orange and Mirinda Sarsi. Once this was done the profit element was worked out by relation to the defendants` own production cost and sales figures, actual or projected.

I am of the view that the assistant registrar was wrong to have rejected the defendants` method of computing the damages due to them as a consequence of the undertaking given by the plaintiffs when the interim injunction order was made. I find the method employed by the defendants the only method open to them in the circumstances and can find no valid criticism of it.

In so far as the computation was concerned, the judge said:

The real dispute in this case is whether such items as electricity, boiler fuel and water should be classified under manufacturing overheads, ie direct variable costs, as the defendants contend or should they be omitted

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