This is a case analysis regarding the decision in Chanel v. Melwani2 International Sdn Bhd, Lachmandas Ishwarlal Melwani & Ang Chong Leng.
Facts
The Plaintiffs were the proprietors of registered trademarks for various goods. The 1st Defendant was a company, the 2nd Defendant was a director and owner of 78% shares in the 1st Defendant, and the 3rd Defendant was a director and owner of 17% shares in the 1st Defendant. The 1st Defendant, who is not the Plaintiffs’ authorised distributor or retailer, sold goods bearing the Plaintiffs’ Registered Trade Marks at the 1st Defendant’s business premises. The Plaintiffs’ representatives purchased the Infringing Goods, and the 1st Defendant’s premises were raided by the Ministry of Domestic Trade, Co-operatives and Consumerism whereby the Infringing Goods were seized.
The Plaintiffs filed the four suits against the 1st, 2nd and 3rd Defendants based on the infringement of the Plaintiffs’ Registered Trade Marks under Section 38(1)(a) of the Trade Marks Act (TMA) 1976. The Plaintiffs then filed applications for summary judgment against all the Defendants to pierce the 1st Defendant’s corporate veil so as to impose personal liability on the 3rd Defendant for the trade mark infringement. The main question was whether an individual may be personally liable for a company’s infringement of a registered trade mark under Section 38(1)(a) of TMA.
Decision
From the outset, the High Court granted judgment in default of defence against the 1st and 2nd Defendant for their failure to enter appearance and file a defence.
To hold the 3rd Defendant personally liable for trade mark infringement, the Judge held that two conditions must be fulfilled to pierce a corporate veil:
(i) it is in the interest of justice; and
(ii) there exists special circumstances to pierce or lift the corporate veil.
In this case, the first condition was satisfied as the 3rd Defendant personally paid the RM318,000.00 fine for the 1st Defendant which was imposed as a result of criminal charges proffered against it. Also, the 3rd Defendant was still a director of the 1st Defendant. The second condition was fulfilled because the 3rd Defendant should not evade statutory liability for trade mark infringement and the company’s corporate personality should not be abused by the 3rd Defendant. As such, the Court granted summary judgment for trade mark infringement against the 3rd Defendant.
Conclusion
The Courts will pierce or lift the corporate veil in the interest of justice and where there are special circumstances justifying such action.
Therefore, although a company and its directors have separate legal personalities, a director may not escape liability for intellectual property infringement committed by the company.
