MALAYSIA: STICKY ISSUES

June 26th, 2015

 

In the case of Angel Candies Sdn. Bhd. v Loo Yan Wah & I Candy Studio Sdn. Bhd. & Mah Wing Hong, the High Court of Malaya in Shah Alam held that the defendants must paid costs amounting to RM40,000.00 to the plaintiff.

By way of background, Angel Candies Sdn. Bhd. (hereinafter referred as “the Plaintiff”) is a private company limited in the business of import, export, wholesale and retailing all of candies. Mr. Loo Yan Wah is an individual and a former employee of the Plaintiff (hereinafter referred as “the 1st Defendant”), I Candy Studio Sdn. Bhd. is a private limited company manufacturing, buying and selling all types of candies and food products (hereinafter referred as “the 2nd Defendant”) and Mah Wing Hong is an individual appointed by the plaintiff as an authorized dealer to market and sell candies (hereinafter referred as “the 3rd Defendant”).

The Plaintiff entered into a Master Franchise Agreement (Malaysia) with an Australian company known as Dotball Pty Ltd (DPL) who is the original maker of handmade rock candy and candy art branded known as “Sticky”. DPL has given an exclusive right to the Plaintiff to operate and sell Sticky candies at retail outlets within Malaysia. The Plaintiff received confidential information and the methods, techniques, trade-secret, procedures and recipes of making Sticky Candies from DPL.

The Plaintiff took this opportunity and set up Sticky Candies outlets within shopping complexes in Kuala Lumpur. The Plaintiff had appointed the 3rd Defendant as an authorised dealer to market and to distribute the product.

The Plaintiff employed 1st Defendant as a candy maker with an access to the confidential information and details of ingredients, the process flow to make Sticky Candies and database distribution including customer lists. It is alleged that the 1st Defendant owes the Plaintiff with duty of good faith and fidelity, the duty of confidence in relation to information and trade secrets during the course of his employment with Plaintiff.

After sometime, the 1st Defendant resigned from the Plaintiff. However, he had re-joined employment in few months’ time and he was promoted as a Supervisor and Master Confectioner where his duty is to supervise the Sticky Central Kitchen. The 1st Defendant had then left his employment again with Plaintiff.

The Plaintiff deals with packaging, labelling and promotion of Sticky Candies at GRG with a company called T Dot Impression Sdn. Bhd. (DISB) which shares the similar address to the 2nd Defendant.

Meanwhile the 3rd Defendant had a 3-year Dealership Agreement with the Plaintiff. One of the clauses in the Agreement indicates that the 3rd defendant’s must not do illegal trade practice or commit any act that would infringe the goodwill of Sticky Candies.

The Plaintiff brought an action against the three Defendants due to the fact that the Defendants had produced products called I-Candy which are similar to Sticky Candies and they have infringed the Plaintiff’s trade mark and trade secrets to achieve an end product. The Plaintiff had also claimed that it has suffered losses and damages to substantial goodwill and reputation.

During the trial, both the 1st and 2nd Defendant argued that Plaintiff does not have any source of proof that they have acquired confidential information in making I-Candy from the Plaintiff. The Defendants submitted that they did not rely on the confidential information given by the Plaintiff. The Defendants also argued that the Plaintiff failed to establish the goodwill and reputation of Sticky Candies product and there is no similarity or appearance of Plaintiff’s Sticky Candies.

The High Court considered whether the 1st Defendant used the confidential information in making candies, the 2nd Defendant liable in tort and passing off and whether the 3rd Defendant breached the Dealership Agreement.

The Court took the view that the Plaintiff is to show the all information is confidential and must be protected and is in nature of a trade secret. The Court noted that methods and detailed process of how sticky candies are made are confidential information of Plaintiff; hence there is a breach of confidence.

The Court held that the 1st Defendant owes a duty in good faith to the Plaintiff and he was not given any authority or consent to disclose Plaintiff’s confidential information to third parties. Therefore, the Court held that the 1st Defendant had breached the obligation of confidential information belongs to Plaintiff.

As for the 2nd and 3rd Defendants, the Court held that the information and knowledge were gathered from the 1st Defendant and therefore they were also held to be liable.