This article first appeared in The Edge Malaysia Weekly on August 8, 2022 - August 14, 2022
This monthly report is compiled and briefly summarised by a group of lawyers on a voluntary basis for the benefit of readers of The Edge.
Please consult your own lawyers if you need advice on the cases, issues and related matters highlighted here.
CONSTITUTIONAL LAW
Federal Court (‘FC’) rules that Article 14A of the Penang State Constitution (popularly known as ‘anti-hopping’ law) does not contravene the fundamental right of citizens to freedom of association guaranteed under the Federal Constitution
The Penang State Constitution (‘PSC’) was amended by the Constitution of the State of Penang (Amendment) 2012 (Enactment A13). The amendment introduced Article 14A. The material parts of Article 14A read:
Change of a member’s political party
14A. (1) Subject to this Article, a member of the Legislative Assembly shall vacate his seat if –
(a) Having been elected as a candidate of a political party, he resigns or is expelled from, or ceases for any reason whatsoever to be a member of that party; or
(b) Having been elected otherwise than as a candidate of a political party, he joins a political party.
(2) A member of the Legislative Assembly shall not be required to vacate his seat pursuant to this Article only by reason of –
(a) the dissolution or cancellation of the registration of his party; or
(b) his resignation from the membership of his party upon election as Speaker.
The effect of Article 14A of the PSC is that it seeks to forestall an elected representative’s right to change political parties. If the elected representative does so, it results in vacation of his membership to the State Legislative Assembly of Penang.
Subject to certain restrictions, Article 10 (1)(c) of the Federal Constitution provides that all citizens have the right to form associations.
Issue
Does the State of Penang have the right to amend the PSC with respect to qualification for membership to the Legislative Assembly of the State of Penang? In effect, the constitutional issue referred to the FC was whether Article 14A of the PSC is void for the reason that it is inconsistent with Article 10 (1)(c) of the Federal Constitution?
Case summary and decision
Three members of the Legislative Assembly of the State of Penang (‘Assemblymen’) challenged the State Government of Penang to table a motion for them to vacate their seats in the State Legislative Assembly. The tabling of the motion was deferred pending disposal of an action filed by them to prevent the State Legislative Assembly from declaring their seats vacant. The High Court allowed an application by the Penang State Legislative Assembly and its Speaker to refer to the FC the sole constitutional question as to whether its ‘anti-hopping’ law is void: ‘Whether Article 14A of the Constitution of the State of Penang is void for being inconsistent with Article 10(1)(c) of the Federal Constitution?’
In the FC, the Assemblymen, relying upon a decision (Dewan Undangan Negeri Kelantan & Anor v Nordin bin Salleh & Anor or ‘Nordin Salleh’) of the Supreme Court (now the Federal Court), argued that Article 14A infringed upon their right to form associations guaranteed by Article 10(1)(c) of the Federal Constitution. The rival argument was that the enactment of Article 14A dealing with issues relating to qualification of membership in the State Legislature is a matter contemplated within the Eighth Schedule of the Federal Constitution and that the respective State Legislatures are competent and empowered to amend their State Constitution to deal with issues relating to qualification for membership. Therefore, Article 14A does not violate Article 10(1)(c) of the Federal Constitution.
In the FC’s broad grounds of a unanimous decision (‘Broad Grounds of Judgment’) of a seven-member Bench delivered by Tengku Maimum CJ (Nallini Pathmanathan, Vernon Ong, Mary Lim, Harmindar Singh Dhaliwal, Rhodzariah Bujang and Mohamad Zabidin FCJJ), the FC held that the State Government of Penang was entitled to enact a law which relates to qualification for membership itself and Article 14A of the PSC is not void as it is not inconsistent with Article 10(1)(c) of the Federal Constitution. In the Broad Grounds of Judgment, the FC held that the right to remain a member is not a right guaranteed by Article 10(1)(c) and an elected representative’s ability to change his membership of a political party does not take the character of the right of a citizen to form associations in Article 10(1)(c).
[10] It is our view that, with respect, Nordin Salleh though correct to say that the right to form associations includes the right to dissociate, was incorrect to find that the right of an elected representative to change political parties is, in the first place, part and parcel of the right of association guaranteed by Article 10(1)(c). The right to be a member or to remain a member of the House or a State Assembly is not a right guaranteed by Article 10(1)(c). In point of fact, Article 10(1)(c) is not engaged…
[12] In our judgment, an elected representative’s ability to change or have changed his membership of a political party, for whatever reason, does not take on the character of the personal right of a citizen to form associations as envisioned in Article 10(1)(c) of the Federal Constitution It is instead, part and parcel of the proper functioning of Parliamentary democracy and as such, can be validly restricted and regulated by laws passed, in this case, by the State Legislature with the view to regulating the terms for qualification of membership in the first respondent…
[15] …it is our view that the terms for qualification of membership in the House or a State Assembly are matters which pertain to Parliamentary democracy and do not concern the individual elected representative’s personal right or choice to associate with a certain political association or party under Article 10(1)(c) of the Federal Constitution. For these reasons, we find that Nordin Salleh to the extent that it says that elected representatives have the right to change political associations once elected – as a right to form associations under Article 10(1)(c) as constitutionally incorrect. Nordin Salleh, is, to that extent hereby overruled.
Chief Justice Tengku Maimun
The FC also held that where a person has elected a particular political platform in an electoral contest and he wins the electoral contest, he cannot subsequently change his “ticket” to another “ticket” for it is no longer his personal right to associate on account of the fact that he had been given the mandate by the electorate that entrusted him to that position.
The FC, having answered the referral question in the negative, directed that the High Court is to proceed to continue with and dispose of the pending proceedings in accordance with the judgment of the FC and otherwise according to law.
Postscript: The full grounds of the decision of the FC will be issued at a later date.
TRADEMARKS AND PARALLEL IMPORTS
Federal Court (‘FC’) rules on the lawfulness of parallel imports under the Trademarks Act 1976 (‘TMA’)
‘Parallel imports’ are not counterfeit goods as such. The term refers to goods that are lawfully manufactured overseas but imported into and sold in Malaysia without the consent of the registered trademark owner of the goods in that foreign country and in Malaysia. Usually, a Malaysian company is registered as the user of the trademark. The packing of a product bearing the registered trademark may contain a statement by the brand owner that the product is meant to be sold in a specific country or region or geographical area, e.g. ‘to be sold in China only’. The TMA permits parallel imports subject to certain conditions, chief of which is the consent of the brand owner.
Issues
Are there any limits to the defence of parallel importation in a claim for trademark infringement and passing off? Is the defence of parallel importation available if (i) the parallel imports differ materially in content, quality, and packaging from those permitted to be sold in the local market by the trademark owner; and (ii) there are territorial restrictions over the goods? Can bulk purchases of goods be taken as implied consent for parallel importation outside of the restricted territory? These issues came before the FC for consideration in Guangzhou Light Industry & Trade Group & 2 Ors v Lintas Superstore Sdn Bhd (Judgment dated 3.6.2022)
Case summary and decision
Guangzhou Light Industry & Trade Group (‘Glit’) is a canned food manufacturing company and is the registered brand owner of the ‘Eagle Coin’ trademark (‘the Mark’), which is registered in China and Malaysia. Its subsidiary, Guangzhou Eaglecoin Enterprises Group Corporation (‘Gee’), is the assignee of the Mark. A Malaysian company (‘Kim Guan’) is the sole authorised distributor of canned food products in Malaysia bearing the Mark and is a registered user of the Mark under the TMA. Another Malaysian company, Lintas Superstore (‘the Defendant’), operates a supermarket in Kota Kinabalu. The Defendant’s agent purchased and shipped canned food products directly from a retail outlet of Gee in China bearing the Mark, which were labelled ‘to be sold in China only’ (‘Infringing Products’), for sale in its supermarket. Glit, Gee and Kim Guan (‘the Plaintiffs’) sued the Defendant for trademark infringement and passing off. The Defendant relied on the defence of parallel importation. The High Court (‘HC’) held that there was trademark infringement and passing off and the defence of parallel import failed. The Court of Appeal (‘CA’) allowed the appeal and in its broad grounds of judgment, the CA held that considering the bulk quantity of the Infringing Products purchased by the Defendant, there was implied consent given by the Plaintiffs to the Defendant for re-selling purposes. On appeal by the Plaintiffs to the FC, the FC in a unanimous decision delivered by Zabariah Yusof FCJ (Abang Iskandar CJSS and Mohd Zawawi Salleh FCJ (as he then was) concurring) reversed the decision of the CA and reinstated the decision of the HC. The FC dismissed the defence of parallel import. In particular and notwithstanding the bulk purchase by the Defendant, the Plaintiffs had not expressly or impliedly consented to the Defendant reselling the Infringing Products in Malaysia as it could not be inferred from the facts and the circumstances of the case that the Plaintiffs had renounced their rights to oppose the placing of the Infringing Products for sale in the Malaysian market. Additionally, there was no affiliation between the parties to warrant any implied consent. Accordingly, there was no exhaustion of the rights attached to the Mark, whether nationally nor internationally. The labelling on the Infringing Products clearly indicated that the goods were not meant for sale outside China.
[81] The defence of the defendant is that there is no infringement of trademark but it is a case of “Parallel Import” and that it has implied consent from the plaintiffs under subsection 40(1) (dd) of the TMA…
[83] In simple terms, parallel imports are goods that are imported into and sold in a particular country, territory or market without the express permission of the brand owners in that country. Parallel imports are not counterfeit products as they originated from the same brand owner or its group of companies. Parallel imports which are often referred to as “gray products” are, more often than not, implicated in issues of international trade, and intellectual property…parallel imports are goods which are lawfully manufactured overseas but imported and distributed in Malaysia by a person other than the registered proprietor of the trade mark..
[133] …The retail store in China sold the infringing goods to the agent of the defendant, a Chinese citizen. Although the infringing goods were bought in bulk, that cannot be inferred that the plaintiffs knew that the infringing goods were purchased for purposes of re-selling, marketing and distributing in Malaysia. The infringing goods were arranged for transportation and shipment to Malaysia by the defendant through its agents in China, not through the plaintiffs or the plaintiffs’ agents. The transporter and the forwarding company that were responsible for the shipment of the goods to Malaysia have nothing to do with [Glit] nor [Gee]. The representative of the defendant … had gone to the retail outlet of [Gee] in China to purchase the goods, could read Mandarin and it was the finding of the learned High Court Judge that [the Defendant’s agent] would have known that the labelling on the products indicated that the goods were not meant to be sold outside the China market. We have no reason to disturb such findings by the learned High Court Judge…
[136] There was no consent, be it express nor implied, by the plaintiffs, to the resale of the products in Malaysia. There is no affiliation between the plaintiffs and the defendant to warrant any implied consent, rather it invites confusion and deception amongst consumers due to the unauthorized sale of the products. Therefore, there is no exhaustion of their trademark rights, be it nationally nor internationally…
[150] Due to the clear objection by virtue of the territorial restriction on the packaging, it would be absurd to rely on the sheer quantity of the purchase to imply consent to importing the goods into Malaysia for reselling. For consent to be implied, it must be shown that there was an unequivocal renunciation of rights by the manufacturer/brand proprietor/trademark owner.
Justice Zabariah Yusof
DEFAMATORY STATEMENTS AND FAIR COMMENT
Federal Court (‘FC’) illuminates upon the constituent elements of the defence of ‘fair comment’ in the controversy concerning the National Feedlot Centre Project (‘Project’)
In a defamation action based upon defamatory statements, ‘fair comment’ is a defence. A ‘comment’ is a statement of opinion based on or inferred from facts, and containing the person’s belief for his conclusions based on or drawn from those facts. It is not a comment if a person asserts statements of fact, or his imputation of dishonourable conduct against another person is one of fact. In the latter case, the defence is justification or privilege, not fair comment.
Issues
What is meant by ‘fair’ and how does one go about ascertaining whether a person is asserting statements of fact, or is making a comment or opinion based on inferences drawn from facts? What is the applicable test? These issues came before the FC in Dato’ Sri Dr. Mohammad Salleh bin Ismail and anor v Mohd Rafizi bin Ramli (Decision dated 21.4.2022).
Case summary and decision
The Respondent (‘Rafizi’) was the director of strategy of a political party. The 1st Appellant was the chairman and director of the 2nd Appellant, National Feedlot Corporation Sdn Bhd (‘NFC’). NFC entered into an Implementation Agreement and a RM250 million Loan Facility Agreement (‘LFA’) with the Government of Malaysia. The purpose was to implement the National Meat Policy 2006 to promote and nurture competency in the farming of beef and cattle for the production of beef and beef products (‘Project’). A term of the LFA was that money disbursed pursuant to the LFA must only to be used for the Project. RM71 million was disbursed or drawn down and held in a fixed deposit account of NFC maintained with Public Bank. In November 2011, the Auditor General published its report on the status of the Project and highlighted a number of failings. At a press conference, Rafizi made allegations against the Appellants that the sum of RM71 million was ‘used as a leverage for personal loans that were used for the purchase’ of eight condominium units. The allegations were based on documents of Public Bank said to have been received anonymously by Rafizi. Certain of the documents were appended to the press release in redacted form- print-outs from Public Bank’s records. The Appellants sued Rafizi in that the statements carried defamatory imputations that (a) the Appellants misused public funds for their own personal gain contrary to public interest, in particular the government loan given to the 2nd Appellant for the Project; (b) the 1st Appellant had abused his position as the chairman and director of the 2nd Appellant to misappropriate the government loan to purchase eight condominium units; and (c) the 1st Appellant took advantage of his marital status with a Member of Parliament to acquire the eight condominium units. At the time of the press statements, Public Bank had withdrawn the loan. This fact was not disclosed in the Appellant’s letter of demand sent to Rafizi (‘Appellants’ Letter’). The High Court (‘HC’) found Rafizi was liable. On appeal to the Court of Appeal, the decision was reversed and on further appeal to the FC, the only issue was whether the defence of fair comment was available to Rafizi.
The FC in a unanimous decision delivered by Azahar Mohamed CJM (Zaleha Yusof FCJ (as she then was) and Zabariah Yusof FCJ concurring), the FC dismissed the appeal. The FC held that to determine whether the defence of fair comment is available or not, ‘the Impugned Statements must be read and considered in the context of the entire statements and not in isolation’. On the facts, the Respondent had established all 4 elements of fair comment – (a) the words complained of are comment, although they may consist or include inferences of fact; (b) the comment is on a matter of public interest; (c) the comment is based on facts; and (d) the comment is one which a fair-minded person can honestly make on the facts proved. Therefore, the Respondent could not be liable for damages for defamation. In particular, the FC held that the decision of the HC that Rafizi was liable because the loan had been withdrawn failed to appreciate that (a) the withdrawal confirmed that the loan had been granted to the 1st Appellant and his son despite their lack of solid savings with Public Bank, which coincided with the 2nd Appellant’s fixed deposit in the sum of approximately RM71 million at the same time with Public Bank; (b) the facts showed that the Appellants knew Rafizi did not know that the loan had been withdrawn; (c) the Appellants’ Letter did not mention the withdrawal of the loan; and (d) Rafizi had stated facts existing within his knowledge which he had relied upon to draw inferences and making comments on misappropriation of public funds.
Words must be in the form of comment/inferences
[30] …the first task [is] to ascertain whether the Impugned Statement is a statement of fact or is it the Respondent’s opinion and inferences made from the facts… This is because “if the imputation is one of fact, the defence must be justification or privilege” … and therefore the Respondent could not rely on the defence of fair comment…
[33] …the Impugned Statement must be read and considered in the context of the entire statements made by the Respondent and not in isolation.
[34] …an ordinary or reasonable man upon reading the Impugned Statement and the way it was expressed, the context in which it was set out and the content of the entire statement would regard them as the Respondent’s comments and inferences made from the facts… A key point to note is that the Impugned Statement did not single-out an action nor independently alleging a particular conduct of the Appellants per se. The more closely one looked at the entire statements, the more apparent it became that based on a series of facts… there is misappropriation of public funds which needed to be accounted for. Materially, …the language of the statements… clearly identified the facts relied on by the Respondent to state his comment and inferences, which enables the readers to come to their own conclusions whether the Respondent’s opinion was correct.
[38] …looking objectively on how the Impugned Statement was expressed, there is no independent statements… to conclude that the statements are statements of fact per se and not comment or inferences of fact… the Impugned Statement was the Respondent’s opinion and inferences made from the facts.
Opinion/inferences must be based on true substratum of facts
[39] … the more delicate and difficult issue whether the Impugned Statement made by the Respondent was comment or inferences based on facts…
[54] …The breadth of the defence of fair comment only revolves around comments or inferences honestly made based on certain existing substratum of facts that are truly stated. What is required is that the comment has to identify, at least in general terms, the matters on which it is based. This, in my view, the Respondent had made out to admit the defence of fair comment. After all, that is what defence of fair comment is, as opposed to the defence of justification. The primary reasoning for the creation of the defence of fair comment is the desirability that a person should be entitled to express his view freely about a matter of public interest.
Comment/inferences must be fair
[60] …the Respondent’s conclusion that public fund had been misused as a leverage for the Public Bank’s loan was an opinion and inferences that a fair-minded person would have honestly made in the circumstances.
Chief Justice of Malaya Azahar Mohamed
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