The Monarch Beverage Company (Europe) Ltd v Kickapoo (Malaysia) Sdn Bhd and Another

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 06 March 2009
• Neutral Citation: [2009] SGHC 55
• Court: High Court (Singapore)
• Published date: 09 March 2009
• Citation: [2009] SGHC 55
• Plaintiff Counsel: Ponampalam Sivakumar (Joseph Lopez & Co)
• Defendant Counsel: R Chandran (Leo Fernando & Co),Tan Siew Tiong (Lawhub LLC)
• Year: 2009

6 March 2009 Judgment reserved

Tan Lee Meng J:

1 The plaintiff, The Monarch Beverage Company (Europe) Limited, an Irish company (hereinafter referred to, together with all its affiliated companies, as “Monarch”), is the registered proprietor of two trade marks in Class 32 in respect of “non-alcoholic beverages and juices”, namely “Kickapoo Joy Juice” (TM No T86/05341I) and “Kickapoo” (TM No T86/05246G) (both marks will be referred to as the “Kickapoo marks”).

2 The first defendant, Kickapoo (Malaysia) Sdn Bhd (“KM”), a Malaysian company, was granted an exclusive licence to produce and sell “Kickapoo Joy Juice” in cans and PET bottles in Malaysia and Singapore (“the licence agreement”) by Monarch’s predecessor in title, The Monarch Company Inc (“TMCI”), an American company, in 1996. The 2^nd defendant, Kickapoo Beverage Pte Ltd (“KB”), is KM’s Singapore subsidiary.

3 Monarch, which claimed to have terminated the licence agreement, sued KM and KB for infringement of the Kickapoo marks and passing off. KM, which asserted that it is still Monarch’s licensee, counterclaimed against Monarch for breaching the licence agreement. KM also made a counterclaim against Monarch and four other defendants with respect to the tort of conspiracy in relation to the breaching of its licence agreement with Monarch and its sole distributorship agreement with, Heng Sheng Company (“HSC”), a Singapore company whose business was subsequently taken over by Heng Sheng Corporation Pte Ltd (“HSCPL”). The parties who allegedly conspired with Monarch are:

(a) the 2^nd defendant in the counterclaim, Ying F & B Pte Ltd, whose name was imprinted on China-made Kickapoo beverage imported into Singapore in alleged breach of KM’s sole distribution agreement with HSC;

(b) the 3^rd and 4^th defendants in the counterclaim, Mr Chia Yong Khoon and his wife, Mdm Yeo Puoy Cheng, who were the partners of HSC; and

(c) the 5^th defendant in the counterclaim, HSCPL, which was formed on 15 November 2004 to acquire the business of HSC.

Background

4 The Kickapoo marks were first registered in the name of Monarch’s predecessor in title, TMCI.

5 On 12 February 1996, TMCI assigned its business and its rights to the Kickapoo marks, to Monarch.

6 KM claimed that it appointed HSC as the Singapore distributor of its Kickapoo drinks in 1996. However, HSCPL asserted that HSC was appointed KM’s sole distributor in 1998. In that year, HSC appointed PH Sales & Marketing Pte Ltd (“PH”) as its co-distributor of KM’s Kickapoo drinks in Singapore.

7 The Kickapoo beverage produced by KM made inroads in the Singapore and Malaysian beverage market. Indeed, sales of the said beverage in these two countries accounted for 90% of Kickapoo worldwide beverage sales. Kickapoo beverage sales were also crucial to KM’s business as they accounted for 95% of its total business.

8 The original licensor, TMCI, intended its relationship with KM to be a long-term one. However, relations between KM and Monarch, to whom the Kickapoo marks had been assigned, turned sour.

9 By the end of 2001, Monarch was quite determined to terminate the licence agreement with KM. On 9 December 2001, Monarch served on KM a notice of termination of the licence agreement without giving any reason for its action.

10 One day later, on 10 December 2001, Mr Raymond Chow (“Mr Chow”) of Yeo Hiap Seng (“YHS”), a Singapore company that bottles and packs a variety of beverages, requested Monarch to forward him a letter of appointment so that the terms and conditions of the proposed agreement could be outlined while the legal contract was being sorted out by Monarch and YHS.

11 That Monarch had already made up its mind to abandon KM was evident. On 11 December 2001, its representative, Ms Nella Aguf, replied to YHS’ Mr Chow as follows:

[I] think we are going to go ahead and cancel the [licensing agreement with KM] anyway and see what happens.

[emphasis added]

12 As it turned out, the proposed business relationship between Monarch and YHS did not materialise. Shortly thereafter, Mr Chow left YHS to join Monarch as the vice-president of its local subsidiary.

13 Between December 2001 and June 2005, Monarch served six termination notices on KM, which rejected the said notices and affirmed the licence agreement.

14 On 20 September 2002, Monarch gave HSC, KM’s sole distributor of Kickapoo beverage in Singapore, a licence to manufacture and sell Kickapoo beverage in Shanghai (“the Shanghai licence”). As all the Kickapoo drinks made under the Shanghai licence were imported into Singapore and no serious attempt was made to penetrate the Shanghai beverage market, KM asserted that the Shanghai licence was part of a plan to sabotage it.

15 Just three days after HSC was granted the Shanghai licence, Monarch informed KM on 23 September 2002 that as from 1 October 2002, Kickapoo beverage bases, from which Kickapoo drinks are produced, would be sold to KM at USD 602 per gallon instead of the current price of around USD 60 per gallon. This phenomenal price increase of 1,000%, which was unheard of in the beverage market, made it economically unviable for KM to produce any Kickapoo beverage. Monarch conceded that to date, no other licensee has been charged this exorbitant price of USD 602 per gallon.

16 KM, which alleged that this unwarranted price increase was to cripple it financially and was a serious breach of the licence agreement, responded by ordering from Monarch about a year’s supply of beverage bases, which amounted to 1,000 gallons at the old price. However, Monarch supplied KM with only 200 gallons. Monarch did not deliver any more Kickapoo beverage bases to KM thereafter despite being reminded by the latter to deliver the balance of 800 gallons.

17 Under the licence agreement, KM was required to purchase beverage bases from “approved” sources. In the face of the depletion of its beverage bases from “approved” sources, KM sought the assistance of Mr Joseph Norman Stutz (“Mr Stutz”), who was part of the TMCI team in the 1990s and had played an active role in the concluding of the licence agreement between TMCI and KM. Mr Stutz arranged for KM to purchase beverage bases for its Kickapoo products from BevTech International, which is not an authorised source for Kickapoo beverage bases under the licence agreement. Subsequently, he arranged for another unauthorised source under the licence agreement, Tropical International (Bahamas) Limited (“Tropical”), which owns Kickapoo trade marks in Bahamas and Barbados, to ship beverage bases to KM. According to Mr Stutz, Tropical’s beverage bases were produced in accordance with the formula for the Kickapoo beverage bases previously supplied by Monarch to KM.

18 While KM used Tropical’s beverage bases to produce its “Kickapoo” beverage for the Singapore market, HSC, which stopped buying KM’s “Kickapoo” products, arranged for the Kickapoo beverage produced in China under its Shanghai licence to be shipped to and sold in Singapore.

19 On 23 May 2003, KM asked HSC why the latter had stopped purchasing its Kickapoo beverage since April 2002. In the same letter, KM asked HSC to comment on why a large number of retailers in Singapore were selling China-made Kickapoo drinks. HSC did not reply to this letter.

20 On 28 January 2004, KM wrote to HSC to demand that it stop its activities of supplying, selling or distributing Kickapoo drinks without its authority. Another letter was sent to HSC on 2 March 2004. HSC maintained a stony silence.

21 Monarch suspected that KM must have been purchasing beverage bases from unauthorised sources because it had not been supplying KM with beverage bases and the expiry date for the beverage bases previously supplied by it to KM had already passed. On 24 November 2004, officers from the Malaysian Ministry of Health visited KM’s bottling plant in Seremban, Malaysia, and found beverage bases from Tropical on the premises. As has been mentioned, the Tropical beverage bases are not an approved source for Kickapoo beverage bases under the licence agreement. On 15 June 2005, Monarch relied on the use of the unauthorised beverage bases to terminate the licence agreement with KM.

22 Shortly after terminating KM’s licence on 15 June 2005, Monarch swiftly appointed HSCPL as bottlers and distributors of Kickapoo drinks for the Singapore market on 1 July 2005. Interestingly enough, HSCPL ceased to manufacture Kickapoo drinks in China under the Shanghai licence in 2005.

Monarch’s Claim on Infringement and Passing Off

23 Monarch’s claim regarding infringement of its trade marks and passing off will first be considered.

Infringement of trade marks

24 Section 27(1) of the Trade Marks Act (Cap 332, 1998 Rev Ed), which concerns infringement of a trade mark, provides as follows:

A person infringes a registered trade mark if, without the consent of the proprietor of the trade mark, he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.

[emphasis added]

25 On 14 February 2005, Monarch’s representative purchased from Sheng Siong Supermarket Pte Ltd a PET bottle and a can, both of which bore the Kickapoo marks and had the names of KB and KM imprinted on them. It was stated on the PET bottle and can that the beverage was produced under the authority of “The Monarch Company, Atlanta GA 30326 USA”.

26 KM admitted that it had used the Kickapoo marks on the beverage made from bases supplied by BevTech and Tropical. There is no doubt that these beverage bases were obtained from unauthorised sources and Monarch obviously did not consent to the use of the Kickapoo marks on the beverage produced from beverage bases supplied by BevTech and Tropical.

27 When cross-examined, KM’s Chief Executive Officer (“CEO”), Mr Lam Hoy Por (“Mr Lam”), conceded that KM did not seek Monarch’s consent for the use of the bases supplied by Bevtech. He also admitted that KM is still using...