Lifestyle 1.99 Pte Ltd v S$1.99 Pte Ltd (trading as ONE.99 SHOP)

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 12 April 2000
• Neutral Citation: [2000] SGCA 19
• Docket Number: Civil Appeal No 160 of 1999
• Date: 12 April 2000
• Published date: 19 September 2003
• Year: 2000
• Plaintiff Counsel: Hee Theng Fong and Chua Ai Chun (Hee Theng Fong & Co)
• Citation: [2000] SGCA 19
• Defendant Counsel: Morris John, Jupiter Kong and Yvonne Tang (Drew & Napier)
• Court: Court of Appeal (Singapore)
• Subject Matter: Inevitability of misconception when businesses adopt similar descriptive names,Unfair competition,Relationship between name and nature of business,Tort,Establishment of secondary meaning,Whether respondents can claim monopoly to concept of selling goods at $1.99,Passing off,Confusion amongst public that appellants' and respondents' businesses related,Whether desirable to grant respondents their claim,Misrepresentation,Whether reasonable probability of deception,Difficulty of showing distinctiveness for descriptive names,Whether tort of unfair competition exists,Whether appellants took adequate measures to distinguish their business,Goodwill,Whether "ONE.99" descriptive,Intention of respondents to sell products at $1.99,Perception that appellants riding on respondents' publicity,Acquisition and evidence of goodwill,Three elements to prove,Whether appellants took unfair advantage of respondents' name

(delivering the judgment of the court): This is an appeal against a decision of the High Court granting an injunction restraining the appellants from naming their retail business `Lifestyle 1.99` on the ground that it constituted a passing off of their business as and for the business of the respondents.

The facts

The plaintiff-respondents, S$1.99 Pte Ltd, are the owners of a chain of retail shops which operate under the style `ONE.99 Shop`, which name was registered with the Registry of Businesses on 1 December 1995. The respondents opened their first retail outlet with that name on 6 April 1997 at The Heeren, an upmarket shopping centre along Orchard Road. By the time of the trial, the respondents had opened a total of seven such outlets at various shopping centres all over the island, of which one was a franchised outlet. An important characteristic of the respondents` outlets is that all the goods sold in the outlets, ranging from Japanese snacks and other foodstuffs to cosmetics, fashion accessories, stationery, toiletries, common household products, plastic-ware and toys, are priced at a fixed price of $1.99.

The person behind the respondents is one Ms Nanz Chong, the Managing Director. She is a relatively well-known former-model-turned-entrepreneur. According to her, she first conceived the idea of a `one-price store` following her travel to Japan in the mid-nineties in the course of her work as a model when she noticed numerous stores there selling all items at one fixed price. She felt that this kind of a sales concept would catch on and be popular in Singapore. So for three years preceding the opening of the first store, she put in considerable effort sourcing for goods and preparing for the opening. The logo she chose for the shop consisted of the words `ONE.shop` written in black against a stark white background with the numbers `99` appearing in a larger, bold red-coloured font over the word `shop`.

Following the opening of the first ONE.99 outlet at The Hereen, the shop received immense publicity in the media, both in terms of news reports as well as feature articles. It seems to us clear that to a large extent this was due to Ms Chong`s own earlier fame as a fashion model. Another reason was obviously due to the fact that the articles sold at the shop were at a relatively cheap price of $1.99[cent ]. A bargain shop like this at an upmarket location was obviously something the public would be curious about. The shop was variously referred to by the media as the `$1.99 Shop`, the `1.99 Shop` and the `$1.99 Store` .

Ms Chong attributed the success of the shop to two factors: pricing policy and good service by her staff. `Service with a smile` is the respondents` hallmark and the respondents sought to drive home the point that you can obtain good quality goods at an upmarket location without paying for the sky.

From the volume of business done, it was clear that the venture was a success. During the first 11 months of business, from April 1997 to February 1998, the sales turnover amounted to slightly more than $3.5m. In the year ending February 1999, the turnover almost doubled to $6.9m. For advertising in 1997, they spent $23,000 while it was $29,000 for 1998. Although in absolute terms these advertising figures are not very large, they are no doubt significant when one bears in mind that we are here concerned with goods priced at only $1.99.

Turning to the appellants, they were incorporated on 8 September 1998. They are almost a wholly owned subsidiary of Rubber Band Enterprises Pte Ltd (`Rubber Band`), as only 1% of the shares are owned by another party. Rubber Band was itself incorporated in 1992 and has a paid-up capital of $4m. It is a major player in the toy industry, being the licensee or agent for various popular overseas brands of toys including Disney from America, and Sanrio, a toy and gift company from Japan.

In September 1997, Rubber Band started selling Sanrio products at various department stores at $1.99. This move was prompted by the sales strategy of a competitor who was then selling a certain range of Sanrio products at a standard price of $2. To match that, they decided to go for the price of $1.99 and had appointed a manufacturer in Hong Kong to supply them that range of products. According to the appellants, three factors contributed to their choosing the price of $1.99. First, it was then very much the market norm to retail goods at prices ending with 99[cent ] such as $1.99, $2.99 or $9.99. In the case of the Sanrio products in question, $1.99 was the most appropriate price after taking costs and profit margins into account. Secondly, `99` is auspicious because it can be translated to mean `everlasting` or `perpetuity` in Mandarin. Thirdly, the price $1.99 was more competitive than $2, which was the retail price adopted by the appellants` competitor. At the time `100 Yen` shops were very popular in Japan and Rubber Band was encouraged by that.

In 1998, Rubber Band adopted another strategy of holding joint promotional sales of products at $1.99 with the Watson`s retail chain. Between February and October 1998, more than 40 such joint promotions were held at various Watson`s outlets, raking in a total of more than $1m in sales. With the success of the Watson`s promotions, Rubber Band was subsequently approached by major department stores to hold similar `$1.99` sales promotions. Thus a joint promotion was held at Takashimaya`s `Talking Hall` from 31 July to 19 August 1998 and the sales generated came up to some $150,000. Joint promotions were also held with Daimaru, at both Junction 8 and Liang Court Shopping Centres locations. At the sites of these promotions, various posters and placards contained the figure `$1.99`, preceded by a clasped hand with its index finger pointing upwards. At the opposite end were several Japanese characters written vertically, which when translated meant `this is good`.

While promotional sales were successful, because of the low profit margin for retailers, few of them were willing to enter into long-term partnership with Rubber Band. Thus Rubber Band felt it could no longer just concentrate on distribution and wholesale. There was a need for it to actually go into retail. Furthermore, the continued holding of such ad hoc promotional sales with others posed a severe strain on its limited manpower. The appellants were, therefore, incorporated to function as the retail arm of Rubber Band. They decided to start with the $1.99 retail concept as it was something they had been doing with the various department stores since 1997, and for which they had ready products and suppliers.

The appellants also explained why their name bears the word `Lifestyle`. They said that from February 1997 Rubber Band had used the slogan `A leading Lifestyle creator` on posters to promote the toys and household products which they distributed. A director of Rubber Band, one Mr Ong Choon Seng, who coined the slogan, felt that since toys, household items and gifts would always be a part of our lifestyle, by bringing these products into the lives of Singaporeans, Rubber Band was thereby `creating a lifestyle`. As such, it was thought desirable to have the word `lifestyle` as part of the subsidiary`s name in order to give the subsidiary a common identity with the parent company. As it was also important that the name of the new company should be reflective and descriptive of the business of selling products at a fixed price of $1.99, the appellants` retail outlets were and are therefore called `Lifestyle 1.99`. The appellants said the `$` sign was omitted from the name as just `Lifestyle 1.99` was easier to pronounce. The clasped hand with the index finger pointing up was similarly discarded in favour of a simpler new logo which consisted of the word ` Lifestyle ` above the number `1.99`, all of which were printed in a distinctive white-coloured font against an oval-shaped cyan-coloured background.

However, not all the goods sold at each `Lifestyle 1.99` outlet were priced at $1.99. This was because in each outlet, there were `Premium Counters` where products were sold at prices other than $1.99, such as $3.99, $4.99 and the like. These premium products were generally products distributed by Rubber Band to other retailers but they cost more than $1.99. As a concession to the customers of `Lifestyle 1.99`, these products were offered to them at highly discounted prices. The appellants said that the number of `premium items` for sale in any outlet was highly insignificant when compared with the number of `$1.99` items and none of the premium items cost more than $10.

On or about 18 February 1999, the respondents` solicitors, M/s Drew & Napier, sent a letter to the appellants stating that the respondents had acquired goodwill in the name `ONE.99` and demanded that the appellants cease the use of the name `Lifestyle 1.99`, as the latter is confusingly similar to the name `ONE.99`. The appellants did not comply. Thus the institution of this action by the respondents.

The decision below

At the hearing below, the learned judge granted an order restraining, inter alia, the appellants from passing off their business as and for the business of the respondents, and from misleading the public into thinking that the appellants were in some way connected or associated with the respondents.

The learned judge found that the name `ONE.99` is a fanciful one as it is pronounced as `One Point Nine Nine`, which has nothing to do with the price of the products sold at $1.99. He further found that in the light of the wide extent of media publicity concerning the ONE.99 Shop and the large sales turnover for the period of over one and a half years (until the incorporation of the appellants), the respondents had demonstrated that they had acquired goodwill in the name `ONE.99` and its variants `1.99 Shop` and `$1.99 Store`. He felt that part of the respondents` goodwill came from a...