Malaysia: Amsteel’s case is strong as steel

October 28th, 2013

 

In a passing-off case of Amsteel Mills Sdn. Bhd. v Lifomax Woodbuild Sdn. Bhd., the High Court of Malaya at Kuala Lumpur, Malaysia ruled in favour of Amsteel Mills Sdn. Bhd.

Amsteel Mills Sdn. Bhd. (hereinafter referred to as “the Plaintiff”) is a steel manufacturer. Its business is in manufacturing and marketing of steel bars and wire rods.

Lifomax Woodbuild Sdn. Bhd. (hereinafter referred to as “the Defendant”) is in trading of building materials, including steel products, to, amongst others, construction companies.

It is reported that sometime between September and October 2011, the Defendant had supplied deformed steel bars of various diameter sizes to a construction company called Mammoth Empire Construction Sdn. Bhd. (hereinafter referred to as “Mammoth”). The dispute arose when the Defendant supplied generic deformed steel bars which were of interior quality to Mammoth but represented to Mammoth that the products had originated from the Plaintiff.

This led to Mammoth lodging a complaint to the Plaintiff. Upon investigation by the Plaintiff, the Plaintiff found that the Defendant had passed off the products as that of the Plaintiff’s own based on fake Mill Test Certificates and Product Tags of the Plaintiff. The Plaintiff then sued the Defendant for passing-off.

However, the Defendant denied the Plaintiff’s claims and also contended that they had supplied the deformed bars via NBH Marketing Sdn Bhd (hereinafter referred to as “NBH”) to Mammoth without Mill Test Certificates and Product Tags of the Plaintiff. Mammoth had accepted the deformed bars without any protest and/or objection within the 7-day period it was allowed to do so from the date of delivery. The Defendant further argued that Mammoth’s complaint to the Plaintiff was malicious in nature and an afterthought to avoid payment to the Defendant for the deformed bars delivered.

The Plaintiff alleged to have gained goodwill and reputation in respect of products in the steel industry. A witness had testified on the background and business activities of the Plaintiff and had provided documentary evidence in support of the same to show the goodwill and reputation of the Plaintiff in the steel industry. The Plaintiff commenced operations in 1978 and is the largest steel mill producing long steel products in Malaysia. Amongst the steel products manufactured and supplied by the Plaintiff are high tensile deformed steel bars for concrete reinforcement of various sizes of diameters. The Plaintiff has been selling the steel bars since 1978 in more than 21 countries including Malaysia, Australia, New Zealand, United States of America, United Kingdom and Singapore. The Plaintiff’s reliability and reputation is reflected in the use of the bars in many projects all over Malaysia.

Based on these facts, the High Court had agreed with the Plaintiff’s submission that it had gained goodwill and reputation.

The Plaintiff asserted that the Defendant did wrongly represent to Mammoth that the products supplied to Mammoth originated from the Plaintiff. Mammoth had issued the Purchase Orders (POs) to the Defendant to purchase deformed steel bars of various sizes. The POs had clearly stated that all the deformed bars need to meet the requirement of a certain grade and that Mill Test Certificates to be provided upon delivery of the products. In order to fulfill the POs, the Defendant issued POs to NBH which also contain the same requirement for Mill Test Certificates to be delivered together with the products.

Two other witnesses had testified that upon delivery of the products, the products were accompanied by the Defendant’s Delivery Orders, Mill Test Certificates and Product Tags purportedly issued by the Plaintiff. The Mill Test Certificates contained the name of the Plaintiff as the purported manufacturer, the name of the Defendant as the “Customer” and the name of Mammoth as the end user.

Another witness, who is the Quality Assurance and Product Control Executive of the Plaintiff, had also testified and confirmed that those same Mill Test Certificates and the Product Tags which were tied to the products supplied by the Defendant to Mammoth were fakes.

The Defendant denied forwarding the fake Mill Test Certificates and fake Product Tags to Mammoth. Defendant further contended that the Plaintiff had failed to prove passing off and that the Plaintiff’s claim be dismissed with costs.

The High Court found that the Plaintiff was successful in proving the Defendant’s actions had amounted to passing off. The Defendant had misrepresented the products supplied to Mammoth as having originated from the Plaintiff. The further Court agreed with the Plaintiff’s submission that the Defendant supplied the products with fake Mill Test Certificates and the fake Product Tags purportedly issued by the Plaintiff, had misled Mammoth that the Defendant was supplying products manufactured by the Plaintiff.

The High Court had agreed with the Plaintiff’s submission that the Defendant had supplied fake products to Mammoth purportedly manufactured by the Plaintiff and that these products were found to be of inferior quality as they do not meet the MS Standards.  In this case, there is more than a mere likelihood of damage to the Plaintiff’s goodwill and reputation. Since it was proved that the products supplied by the Defendant had failed to comply with MS Standards, the safety of any building structure built with those products has been seriously compromised as the strength and the tolerance of the deformed bars is not up to the standard and may cause unnecessary harm to the public. In that event, other third parties may hold the Plaintiff liable for any damages caused thereafter. All these matters would result in the Plaintiff’s reputation being ruined and cause irreparable harm not only to the Plaintiff but also to the public. Under these circumstances, the High Court found in favour to  the Plaintiff as well.

The High Court had also agreed with the Plaintiff’s submission that in the public interest, an injunction be issued against the Defendant to prevent the Defendant from further selling inferior steel products and passing it off as being manufactured by the Plaintiff which would pose a safety hazard to the public.

The High Court had rejected the Defendant’s entire counterclaim and decided that the Defendant committed an unlawful act of passing-off; thereby allowing the Plaintiff’s claim ordering costs against the Defendant.