Mohammad Hafiz bin Hamidun v Kamdar Sdn Bhd: Exploring Locus Standi In Passing Off Claims
The use of famous personalities to endorse products and services has become a popular trend in marketing. Whether it is a popular K-pop group promoting air purifiers or a celebrity influencer aesthetically showcasing products on social media, celebrity advertising is hard to ignore. However, with the increase in celebrity endorsements comes the issue of false endorsements or associations, where businesses may use a celebrity's name without their consent to promote goods or services.
The landmark case of Mohammad Hafiz bin Hamidun v Kamdar Sdn Bhd [2021] 4 MLJ 878 considered the issue of ownership of goodwill in an unregistered trademark and the locus standi of celebrities in passing off claims.
General Principles
The House of Lords summarised the meaning of “passing off' in Frank Reddaway and Frank Reddaway & Co, Limited v George Banham and George Banham & Co, Limited [1896] AC 199 as “… I believe the principle of law may be very plainly stated, and that is, that nobody has any right to represent his goods as the goods of somebody else.”
To succeed in a claim of passing off, a claimant must establish:
(i)Goodwill
(ii)Misrepresentation
(iii)Damage or possibility of damage
Brief Facts
It is common for celebrities to venture into different businesses throughout their career be it through a third party or themselves. This was the case for singer and song composer Mohammad Hafiz bin Hamidun (Hafiz) who ventured into the business of selling baju Melayu and kurta. He sold the costumes online and in boutiques under the label of ‘Hafiz Hamidun’ through his company Haje Sdn Bhd (Haje) in 2014. Kamdar (Kamdar) on the other hand, is a well-established fabric retailer with 29 stores throughout various locations in Malaysia.
In February 2017, Hafiz received numerous messages from his fans and followers on social media asking him whether certain goods sold by Kamdar bearing the label ‘Hafiz Hamidun’ were his. Shortly after this came to light, Hafiz sent a complaint to Kamdar for using his name without his consent. Upon his complaint, Kamdar stopped using the words ‘Hafiz Hamidun’ but instead replaced it with ‘Afiz Amidun’. Aggrieved by Kamdar’s conduct, Hafiz then initiated an action against Kamdar for the tort of passing off. Kamdar raised, among others, that Hafiz did not have the locus standi to maintain his claim against them as Haje was a separate legal entity and thus, should be joined as a co-plaintiff in the case.
Findings Of The High Court
The High Court found that the goodwill in the name ‘Hafiz Hamidun’ belonged to Hafiz as the name was inextricably linked to him and he had personally established goodwill to that label.
Secondly, the technical contention that Hafiz had no standing to sue and it was purportedly fatal that Haje was not joined as a co-plaintiff was unmeritorious in that the facts justified the Court to disregard the doctrine of separate legal entity. The High Court was of the view that even if the goodwill in Hafiz’s name vested with Haje and not himself, the corporate veil ought to be lifted in the interests of justice to reveal Hafiz as the alter ego and effective owner of Haje.
Findings Of The Court Of Appeal
The Court of Appeal allowed Kamdar’s appeal and reversed the High Court’s decision. The appellate court held that Hafiz did not have the locus standi to maintain his claim against Kamdar as the goodwill was vested in the company, Haje as a separate legal entity. As such, it was for Hafiz’s company to initiate the claim for passing off against Kamdar. The Court of Appeal also held that as there was no evidence of fraudulent conduct, it was not appropriate to lift the corporate veil between Hafiz and his company, Haje.
Findings Of The Federal Court
In a unanimous decision, the Federal Court allowed the appeal and set aside the Court of Appeal’s judgment, reinstating the High Court’s decision. The question posed to the Federal Court were as follows:
(i)In a common law claim for passing off where two entities may be entitled to claim goodwill, who has the locus standi to commence an action in passing off as the owner of such goodwill?
(ii)Is there a distinction between lifting and piercing the corporate veil having regard to the Supreme Court decision ins Prest v Petrodel Resources Ltd and others [2013] UKSC 34?
The Federal Court held that in cases having the nature and factual characteristics as in the appeal, the arrangement between Hafiz and his company, Haje, was internal and did not negate the fact that Kamdar, an outsider, has no right to use the unregistered mark. The Federal Court concluded that the Court of Appeal had wrongly held that it was Haje and not Hafiz who owned the goodwill in law. The doctrine of separate legal entity relied upon by the Court of Appeal in setting aside the decision of the High Cout was incorrect due to these circumstances.
The Federal Court also provided much needed guidance on the definition of goodwill. In summary:
(i)There is a distinction between goodwill and reputation. Goodwill is “the attractive force which brings in custom” and something which is reputable and popular may not necessarily have goodwill.
(ii)Goodwill is proprietary whereas reputation is not.
(iii)Goodwill, by its definition and in a business may not necessarily be attached so strictly to any particular individual or group of persons.
(iv)Goodwill resides in a trade or goods or services, or in the name, description or any other insignia, mark or distinguishing feature relevant to those goods or services.
(v)Goodwill is a flexible and malleable asset.
(vi)The fact that celebrities engage corporations to further advance their businesses which draw on their goodwill does not itself make the goodwill of those celebrities in those business any less their own.
(vii)Any misappropriation and deceptive use of a celebrity’s name or statute for commercial gain, such as by causing the public into believing that the celebrity had endorsed it, is in line with the purpose for which the tort of passing off was developed to counter and remedy the misrepresentation and the deceit caused.
Conclusion
This case highlighted several issues including the unauthorised commercial exploitation of celebrities and the issue of ownership of goodwill in an unregistered trademark. The grounds available for celebrities to commence action in passing off against any unauthorised commercial exploitation and misrepresentation of their name is clear from the above. In essence, a person with established goodwill in his name has the locus standi to commence an action for passing off against another who has used his name without his consent. The importance of establishing the ownership of goodwill in a brand name, especially when dealing with unregistered trademarks is significantly clear. It is essential for individuals and businesses to be cautious when using a celebrity's name which may have legal consequences.
11 July 2023