National Aerated Water Company Pte Ltd v Monarch Company, Inc.

• Jurisdiction: Singapore
• Judgment Date: 12 January 2000
• Date: 12 January 2000
• Docket Number: Civil Appeal No 86 of 1999
• Court: Court of Appeal (Singapore)

National Aerated Water Co Pte Ltd

Plaintiff

and

Monarch Co, Inc

Defendant

[2000] SGCA 2

Yong Pung How CJ

,

L P Thean JA

and

Chao Hick Tin JA

Civil Appeal No 86 of 1999

Court of Appeal

Contract–Contractual terms–Licence to bottle trade mark beverage–Clause restraining sale or distribution of other products–Whether clause constituting restraint of trade–Effect of clause confining restraint to duration of licensing agreement–Contract–Contractual terms–Restraint of trade–Determination of reasonability of restraint by court–Considerations of freedom to contract against freedom to trade–Whether mutual consent excluding rule against restraint–Contract–Contractual terms–Restraint of trade–Enforcement of restraint by court –Considerations of public interest–Contract–Contractual terms–Restraint of trade–Whether clause ex facieunreasonable–Contract–Contractual terms–Restraint of trade–Whether severance of unenforceable portion possible–Whether severance altering nature of agreement–Damages–Compensation and damages–Counterclaim for damages–Whether any loss proven–Whether relief necessary if breach causing no loss–Trade Marks and Trade Names–Infringement–Registered trade mark–Distribution continuing after licence agreement terminated–Whether relief should be granted

The appellants (“NAWC”) had a licence from the respondent (“Monarch”) to produce, distribute and sell carbonated drinks bearing the trade marks “Kickapoo Joy Juice” and “Kickapoo” (“the beverage”) in glass bottle form (the “licensing agreement”). Subsequently, permission was orally granted to NAWC to sell the beverage in clear plastic bottles (“PET bottles”) and cans. Monarch later purportedly terminated the licence for the sale of the beverage in cans. It was common ground between the parties that this termination was wrongful because the contractual period of notice of termination was not given. NAWC did not accept this wrongful termination and continued to deal with the canned beverage.

Monarch later discovered that NAWC was selling a soft drink called “Kick”. Monarch gave NAWC notice of immediate termination of the licensing agreement, on the basis that NAWC's sale of “Kick” soft drink violated cl 8 of the licensing agreement. This clause prohibited NAWC, during the life of the agreement, from inter alia selling any product which contained as a part of its name the term “Kickapoo Joy Juice” or any syllable or part of the term “Kickapoo Joy Juice”. NAWC claimed that it bottled the “Kick” soft drink on behalf of a third party, in order to mitigate its loss arising from Monarch's wrongful refusal to supply the concentrates for the production of the beverage in cans. Notwithstanding Monarch's immediate termination of the licensing agreement, NAWC continued to sell the canned and PET-bottled beverage.

Monarch instituted the present action alleging that NAWC had infringed its trade mark by trading in goods not manufactured or sold with their licence, and had passed off the beverages as being manufactured under licence, thereby deceiving and misleading the public. NAWC denied that it had breached cl 8 of the licensing agreement and counterclaimed for Monarch's wrongful breach. It also argued that cl 8 was illegal or unenforceable as it was an unreasonable restraint of trade.

The trial judge held that the oral licences were part of the licensing agreement and that cl 8 was not an unreasonable restraint of trade. NAWC had breached the licensing agreement by selling the beverage “Kick”, and its continued use of Monarch's trade mark was an infringement and constituted passing off.

The main issues on appeal were (a) the enforceability of cl 8, (b) whether NAWC had breached cl 8 entitling Monarch to terminate the agreement, and (c) whether the oral permission granted to NAWC to produce the beverage in PET bottles and cans constituted a separate agreement from the original licensing agreement.

Held, dismissing the appeal:

(1) Clause 8 constituted a restraint of trade as it restricted the freedom of NAWC to trade or sell any beverage of its choice that came within the criteria listed therein. Further, the fact that the restraint imposed was confined to the life of the agreement did not exempt the clause from the doctrine: at [29] and [30].

(2) To protect the public interest, the court would not enforce a restraint that went further than affording adequate protection to the legitimate interests of the party in whose favour it was granted: at [31].

(3) To determine whether a restraint was reasonable, the court would balance the freedom to contract against the freedom to trade. It did not matter that the parties had freely entered into the restraint as the rule against unreasonable restraint was based on public policy and could not be excluded by mutual consent: at [31].

(4) While the court recognised that cl 8 did not impose an absolute bar on NAWC to manufacture and sell other carbonated drinks so long as they did not infringe the criteria set out therein, the restraint sought to restrict NAWC from the use of the common English words “joy” and “juice”. Hence, it was ex facie unreasonable and too wide in this regard. However, in the absence of complete evidence of the prevailing circumstances at the time the licensing agreement was entered into, the same could not be said of the restraint covering any syllable of the word “Kickapoo”: at [32] to [35].

(5) The court permitted the severance of the two words “Joy Juice” from cl 8 as the clause was intended to cover any of the syllables in the trade mark and could therefore be construed as distinct restrictions in respect of each of them. This did not alter the nature of the covenant, and brought the protection within the legitimate ambit of Monarch's proprietary interest in the trade mark: at [44] and [45].

(6) As the “Kick” beverage consisted of a part of or a syllable of “Kickapoo” and by selling the “Kick” beverage before the licensing agreement was wholly terminated, NAWC had breached cl 8: at [47].

(7) The court agreed with the trial judge's reasoning that the oral agreements were a logical development of the licensing agreement in the face of technological advances and was really a variation thereof. Further, there was no apparent reason for creating a wholly-separate agreement simply to allow for the packaging of the beverage in a different form: at [55].

(8) As NAWC continued to sell the beverage in PET bottles bearing the trade mark and represented that the beverage was manufactured under licence after the licensing agreement was terminated, it had infringed Monarch's trade mark, and relief for trade mark infringement and passing off was granted: at [59].

(9) NAWC's counterclaim for damages was dismissed as it failed to prove that it suffered any loss as a result of the purported termination of the canning licence and Monarch's refusal to supply concentrates for the production of the beverages to be canned. No relief was necessary as this was a case where there was a breach by Monarch without any loss having been suffered by NAWC: at [62].

A Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308; [1974] 3 All ER 616 (refd)

Attwood v Lamont [1920] 3 KB 571 (refd)

Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 (refd)

Goldsoll v Goldman [1915] 1 Ch 292 (refd)

Hawkesbury Bakery Pty Ltdv Moses [1965] NSWR 1242 (refd)

Haynes v Doman [1899] 2 Ch 13 (refd)

Herbert Morris, Limited v Saxelby [1916] 1 AC 688 (refd)

Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526; [1970] 1 All ER 1227 (refd)

McEllistrim v Ballymacelligott Co-operative Agricultural and Dairy Society, Limited [1919] AC 548 (refd)

North Western Salt Company, Limited v Electrolytic Alkali Company, Limited [1914] AC 461 (refd)

Petrofina (Gt Britain) Ltd v Martin [1966] Ch 146 (refd)

Thorsten Nordenfelt (pauper) v The Maxim Nordenfelt Guns and Ammunition Company, Limited [1894] AC 535 (refd)

Vinodh Coomaraswamy (Shook Lin & Bok) for the appellant

Howard Cashin and Lim Khoon (Lim Hua Yong & Co) for the respondent.

Judgment reserved.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This appeal concerns a decision of the High Court which held that the plaintiff, The Monarch Company Inc, a corporation of the United States of America (the respondent herein, whom we shall refer to as “Monarch”), was entitled to terminate a licensing agreement involving the trade marks “Kickapoo Joy Juice” and “Kickapoo” registered in respect of non-alcoholic beverages and where the appellant herein, National Aerated Water Co Pte Ltd (“NAWC”), was the licensee.

The background

2 On 3 October 1966, Kickapoo Joy Juice Ltd (“KJJ”), a Canadian company, and which was then the proprietor of the trade marks, entered into a licensing agreement with NAWC, which was in the business of producing and selling carbonated drinks (“the 1966 agreement”). NAWC is a Singapore-registered company.

3 Under this agreement NAWC was permitted to produce, distribute and sell bottled carbonated drinks in Singapore and Malaysia bearing the trade marks (“the beverage”). A similar agreement entered into by KJJ with NAWC's sister company in Malaysia, National Aerated Water Co (KL) Ltd (“NAWC (KL)”), permitted the latter to produce and sell the beverage in bottles in Malaysia only. The founder and managing director of both these companies is one Mr Ching Kwong Yew (“CKY”).

4 It is not in dispute that KJJ's rights to the trade marks were eventually assigned to Monarch. The rights of KJJ under the 1966 agreement were also assigned to Monarch.

5 The clauses of the 1966 agreement which are relevant to the present action are the following:

1. (a) The bottler (NAWC) was licensed to use the trademark only on and in connection with the preparation, distribution and sale of the beverage in the bottle form in Singapore and Malaysia. The concentrate for the preparation of the beverage...