TRADE MARKS, TERRITORIALITY AND TRUSTS

• Citation: (2016) 28 SAcLJ 277
• Author: Hannah LIM Yee Fen BSc, LLB, LLM (Hons) (University of Sydney); Advocate and Solicitor (Singapore); Associate Professor of Business Law, Nanyang Technological University, Singapore.
• Date: 01 December 2016
• Published date: 01 December 2016

Case Note

An Uncomfortable Trinity

Guy Neale v Nine Squares Pty Ltd [2015] 1 SLR 1097

The recent December 2014 decision of Guy Neale v Nine Squares Pty Ltd by Singapore's highest court, the Court of Appeal, concerned trade marks that had been registered in Indonesia and Singapore. The governing law of the dispute, however, was Australian law as that was the stipulation in the partnership agreement. The judgment was decided based on Australian trusts law with seemingly little deference to the territorial limitation of the trade marks system. It is also unfortunate that this decision impacted on the outcome of another case that was related and affected the rights of assignees of the Singapore trade mark in a negative way.

I. Facts

1 The facts of this case are somewhat convoluted and span numerous proceedings in more than one jurisdiction. At the centre of the dispute is a partnership which owns and operates a well-known restaurant, bar and club in Bali, Indonesia called Ku De Ta (“Ku De Ta Bali”). The name “Ku De Ta” is the brainchild of one of the founding partners, Arthur Chondros.1 Chondros was also the partner who found a site for the development in 1999 but in order to establish the restaurant, Chondros sought the help of three investors and the four of them became the founding partners.2

2 In February 2000, the founding partners entered into an agreement entitled “Heads of Agreement” (“the 2000 HOA”)3 and on

20 March 2001, the trade mark “Ku De Ta” was registered in Indonesia in Class 42 (restaurants, etc) with Kadek, one of the founding partners, named as the registered proprietor.4 At the time of the trial, there were six partners in the partnership (“the Partnership”), including Chondros.5

3 Chondros was, however, a dissenting partner in relation to the proceedings and gave evidence for Nine Squares Pty Ltd (“Nine Squares”), the respondent in the appeal.6 Nine Squares was set up by Chondros in January 2003 as a public company in the State of Victoria, Australia, but has since been converted into a private company.7 Nine Squares had two equal shareholders and directors, Chondros and Daniel Ellaway, until 16 February 2010 when Ellaway resigned as a director of Nine Squares. At the time of the Singapore court trial, Ellaway was no longer a shareholder. Chondros had become a minority shareholder and there was a new majority shareholder.8

4 Under the terms of the 2000 HOA, Chondros would manage the daily operations of Ku De Ta Bali; initially, he drew a salary but in July 2003, the founding partners agreed that he would be paid a management fee instead of a salary.9 They also did not object to Chondros using Nine Squares to help him as he deemed fit in relation to the running of Ku De Ta Bali.10 So this is how Ellaway came to be involved in the operations of Ku De Ta Bali.11

5 Two trade marks bearing the name “Ku De Ta” were registered in Singapore by Nine Squares, the first on 16 February 2004 in Class 43 (restaurants, etc)12 and the second on 30 June 2009 in Classes 9 (music) and 25 (apparel) (“the Singapore Marks”).13 The other three founding partners claimed that at the time, they had no knowledge of the trade mark registration in 2004.14

6 During 2009, the relationship between Chondros and Ellaway broke down over alleged wrongdoing by Ellaway. In an e-mail on 24 June 2009, Chondros insisted that Ellaway “should not enter into any

agreements or incur any expenditure without [Chondros'] express written consent”.15

7 On 29 June 2009, without Chondros' knowledge, Ellaway proceeded to have Nine Squares enter into a licence agreement with Chris Au giving a licence to Au to use the “Ku De Ta” trade mark in Class 43 within Singapore (“the Licence Agreement”).16 Au then on 23 November 2009 assigned his rights under the Licence Agreement to Ku De Ta SG Pte Ltd (“KDTSG”), a Singapore company which began to use the “Ku De Ta” name for an exclusive restaurant, bar, lounge and club which it operated at the high-end Marina Bay Sands development in Singapore (“Ku De Ta Singapore”).17

8 Chondros discovered the existence of the Licence Agreement in February 2010 and disputed Ellaway's right to enter into the Licence Agreement through written letters to various parties.18 As already mentioned, pursuant to this break down in relations, Ellaway resigned as a director of Nine Squares on 16 February 2010.

9 The refusal of Chondros to recognise the Licence Agreement led to KDTSG and Au commencing legal proceedings in April 2010 in Victoria, Australia, against Nine Squares seeking, inter alia, a declaration that the Licence Agreement was valid (“the Australian proceedings”).19 On 9 July 2010, the Australian proceedings were settled and terms of settlement included an affirmation of the Licence Agreement with slight variations.20

10 Ku De Ta Singapore was opened in September 2010 and in December 2010, the Partnership commenced proceedings in Singapore against KDTSG for, inter alia, an order to enjoin KDTSG from using the mark “Ku De Ta” and damages for passing off.21

11 In 2011, the Partnership started a separate action against Nine Squares, seeking a declaration that the Singapore Marks were held by Nine Squares on trust for the Partnership and in the alternate, the Partnership contended that the registration of the Singapore Marks ought to be invalidated.22

12 The two Singapore legal suits were heard together and this decision was the final appeal of the 2011 action against Nine Squares. The 2010 action against KDTSG, which also went on appeal to the same court, was subsequently handed down and was impacted negatively by this decision.23

II. The Court of Appeal's decision

13 The court considered the possibility of a trust existing through the creation of an express trust as well as through operation of a constructive trust for the Partnership, had Chondros caused Nine Squares to register the Singapore Marks in its name in contemplation of using them for a private venture to benefit himself. The court found that there was an express trust and a constructive trust.

14 The express trust issue will not be dealt with in this article as it relied heavily on the affidavit of Chondros in the Australian proceedings. There was significant unclarity in the actual wording of Chondros' affidavit, which unfortunately was not convincingly spelled out in the judgment due to the various redactions of the wording of Chondros' affidavit by the court. This case note will deal only with the constructive trust issue as it has significant bearing on the operation of the trade mark system.

III. The partnership agreement

15 The Court of Appeal noted that cl 13 of the 2000 HOA provided that the HOA was governed by the laws of the State of Victoria, Australia.24 And in this part of the judgment, unfortunately, with respect, the court accorded undue weight to the opinion of the appellants' Victorian law expert, Raymond A Finkelstein QC, who is a former judge of the Federal Court of Australia.

16 Finkelstein testified that the 2000 HOA was an incomplete record of the founding partners' rights and obligations, and the conduct of the founding partners and all the surrounding circumstances needed to be considered in order to determine what other...