South State Food & Beverage Pty Ltd (ACN 083 873 312) v Chanda Kaur trading as Desaron Singapore

REASONS FOR JUDGMENT 1 South State Food & Beverage Pty Ltd ("South State") is based in Adelaide and specialises in the production and distribution of alcoholic beverages. The first respondent, Ms Chanda Kaur, is a resident of Singapore who trades under the business name "Desaron Singapore" ("Desaron") and imports alcoholic beverages and other products into Singapore for distribution to retailers. The second respondent, Euro Pacific Beverages Pte Ltd ("Euro Pacific"), is a corporation registered in Singapore. 2 South State has filed an Application and Statement of Claim against the respondents. It has now moved under O 8 of the Federal Court Rules ('the Rules") for leave to serve the originating process on the respondents in Singapore in accordance with the provisions of that Order. Singapore is not a convention country for its purposes: see O 8 r 1A(2). 3 It will be necessary to outline in some detail the actual causes of action South State seeks to prosecute in the proceeding but, first, I need to set out the factual setting as disclosed in South State's affidavit evidence which is said to be sufficient to satisfy me that there is a prima facie case for the relief sought: see O 8 r (2)(c) in respect of proceedings for which I can grant leave to serve an originating process under O 8 r 1 of the Rules.

THE FACTUAL SETTING 4 South State supplied alcoholic beverages first to Desaron and then to Euro Pacific from September 2001 to March 2004. These included beverages already produced by South State as well as a product called Long Island T ("LIT") which is central to the present matter. 5 According to Simon Williams, South State's Chief Executive Officer for Export, the company first entered into negotiations with Desaron in February 2001. It was then approached by Dave Randhawa, a representative of Desaron, to discuss the possibility of South State manufacturing LIT for import by Desaron. 6 South State did not manufacture LIT within its product range until its dealings with the respondents. Desaron had the brand name for LIT but was unhappy with its current manufacturer, a New Zealand company Independent Liquor Limited. The parties also had preliminary conversations via telephone and email about the possibility of Desaron distributing other products for South State as well. 7 Mr Randhawa met face-to-face with South State representatives on 9 and 10 March 2001 in Adelaide. 8 South State claims that at this meeting Mr Randhawa agreed that South State would own the intellectual property in all aspects of the LIT product - its labels, design, logo and recipe. It claims that to facilitate LIT's manufacture Mr Randhawa produced a manufacturing certificate outlining details of LIT's ingredients and their quantities which Independent Liquor had prepared, as well as a copy of a simple label for the LIT bottle. 9 At this meeting the parties also signed a Confidentiality Agreement in (inter alia) the following terms: "WHERE AS: A. [South State] agrees to provide confidential information relating to South State's products known as DNA Alcoholic Spring Water, 'Q' Vodka (all flavours), Tequila 'Slamma' and Long Island Tea to [Desaron] or [sic] the purpose of making an assessment of the suitability of the product to meet [Desaron's] requirements. B. [Desaron] hereby acknowledges the contents of the following Confidentiality Undertaking given by [Desaron] in favour of [South State] and agree to be bound thereby. NOW THIS AGREEMENT WITNESSES AS FOLLOWS: 1. [Desaron] acknowledges that all of the information provided to [Desaron] by [South State] is confidential and is being provided to [Desaron] in order to enable an assessment as specified above. 2. [Desaron] acknowledges that it is a condition of [South State] supplying this confidential information to [Desaron] that [Desaron] gives this undertaking both on behalf of itself and on behalf of any other person who is under its control. 3. [Desaron] agrees to treat as confidential all such information including, but without limiting the general nature and extent of this undertaking, relating to the technology know-how, trade secrets, plans, patents (including patents pending), feasibility studies, business plans, marketing plans and customer lists relating to the product of [South State]. 4. [Desaron] undertakes that it will not, without the prior written consent of [South State], disclose any of the confidential information to any other person, nor will it use or permit the use of any such information by any officer, employee or agent of [Desaron] or any other person under its control for any purpose other than in respect of evaluating such confidential information for the purposes for which it is intended." 10 The trading terms of the relationship said by South State to have been agreed at the Adelaide meeting, were confirmed via a facsimile to Desaron from South State on 12 March 2001. Those of present relevance are: "7. LIT formulation and the manufacturing process to remain the intellectual property of South State Food & Beverage Pty Ltd. 8. The signed 'Confidentiality Agreement' (09/03/01) forbids Desaron and or its nominees to circulate any information regarding the production know how, intellectual property rights or manufacturing data of the products to any party without the written authority of South State. 9. Any amendments made to the LIT label design and/or packaging remain the property of South State, unless fully funded by Desaron." The products included LIT and existing South State products DNA Alcoholic Spring Water, Tequila Slamma, Espri Spritzer and Q Vodka (all flavours). There is no evidence before me that Mr Randhawa or Desaron expressly agreed to these terms. 11 Desaron was appointed the exclusive distributor of South State's products in Singapore and Malaysia. 12 LIT and its packaging were developed between April and September 2001. A graphic designer employed by South State improved the LIT label that Mr Randhawa is said to have provided at the Adelaide meeting. South State arranged for South Australian Brewing Company Pty Ltd ("SAB") to formulate a recipe and manufacture LIT as well as manufacture the other products that were to be supplied to Desaron. An agreement between South State and SAB, which is not in evidence, is said to provide that SAB would own the intellectual property in respect of the recipe and the formulation of the LIT product once it was developed. It is claimed that SAB analysed samples of LIT provided by Mr Randhawa to discern ingredients and quantities before developing its own formulation. According to South State, both the final recipe and labelling developed some months later were substantially different from the initial recipe, label and samples Mr Randhawa had provided at the Adelaide meeting. Significant development costs were incurred by both South State and SAB. 13 LIT was ready for export to Singapore in about September 2001. There were two formulations: one that was 8 per cent alcohol and one that was 10 per cent alcohol. Desaron then imported LIT and other South State products into Singapore and on-sold them to retailers for approximately two and a half years. Normally one container a month was ordered. South State's sales approximated to $15,000 per month over the period. 14 In March 2004, Euro Pacific was incorporated in Singapore and Desaron Beverages Pty Ltd was incorporated in Australia to distribute South State's products in place of Desaron. South State agreed with the request to deal with these companies on what it says were the same terms as those on which it dealt with Desaron. 15 South State's last shipment of stock to Singapore took place in June 2004. On 29 June one of the major retailers of South State products in Singapore, 7-Eleven, indicated to South State via an email that it was having a number of problems dealing with Euro Pacific. Supply problems continued into August. South State claims it was unable to contact Desaron during this period despite numerous attempts. 16 On 27 August 2004 South State arranged for another Singaporean company, Ban Dee Heng Trading Pte Ltd ("Ban Dee Heng"), to become the exclusive distributor of South State's products in Singapore and Malaysia. South State also changed the design and logo for LIT. 17 On 30 September 2004 South State demanded from Desaron immediate payment of outstanding invoices. No payments were received. I would note that as at 9 November 2004 South State claims the sum of $10,500.00 is due and payable from Desaron. 18 The particular conduct said to form the basis of South State's causes of action occurred in October 2004. 19 On 6 October 2004 Ban Dee Heng received a facsimile from Singaporean solicitors acting for Euro Pacific asserting that Euro Pacific was the owner of the LIT product including its packaging, goodwill and other intellectual property rights. It demanded that Ban Dee Heng immediately refrain from importing, distributing and supplying the product. 20 On 13 and 23 September 2004 Euro Pacific had applied in the Trade Marks Office of Singapore and in the Trade Marks Office of Australia for registration of a trade mark in respect of the LIT logo that appears on its face to be similar to that prepared by South State in 2001. On 7 October 2004 South State lodged an application for registration of the new logo for LIT in the Australian Trade Marks Office. 21 On 11 October 2004 South State received a facsimile from Australian solicitors acting for both Euro Pacific and Ms Chanda Kaur in (inter alia) the following terms: "We act for Euro Pacific Beverages Pte Ltd ('Euro Pacific') and Ms Chanda Kaur. … In particular, our client created and is the owner of the 'Long Island T' 10% Alcohol logo incorporating the distinctive blue 'effervescent' ball device surrounding the letter 'T' at the centre of the label (a copy of which is enclosed). This is a highly distinctive label and is instantly recognisable to consumers in Singapore and other South East Asian countries where it is currently sold. Our client is therefore the owner of the copyright in the label, the logo and all intellectual property rights associated with the Product including its get-up. It has recently come to our client's attention that the Product has been sent to distributors in Singapore without our client's authorisation who are not affiliated or authorised with our client. In particular, our client has evidence from prominent distribution channels in Singapore including the Seven Eleven franchise and the Cheers outlets that they have been approached by a Chinese company, Ban Dee Heng Trading Pte Ltd to acquire quantities of the Product from it. Our client has retained Singaporean lawyers to stop this unauthorised and unlawful activity. Of concern to our client is certain correspondence which your company has sent to Cheers convenience stores stating that the Product 'Long Island Tea' is a registered trade mark and sole intellectual property of South State Food & Beverage Pty Ltd and that Desaron Singapore (the predecessor in title to Euro Pacific) does not own this brand nor have any rights to that brand. Further, the correspondence we have sighted claims that Desaron Singapore is no longer entitled to be an importer/distributor of that brand in Singapore. Our client believes having regard to this and other evidence that [South State] is passing itself off as being the owner of the Product and attempting to sell the Product to retail outlets through unauthorised distributors in Singapore. If it is the case that your company is engaging in such conduct then it is doing so knowingly in an attempt to divert proper custom and to wrongfully trade on our client's goodwill in the Product. Such conduct constitutes passing off and breaches section 52 and sections 53(aa), (c), (d) and (eb) of the Trade Practices Act 1974 (Cth). We further note that the reach of the Trade Practices Act extends to the engaging in conduct outside of Australia by any bodies corporate incorporated or carrying on business within Australia. Further, if the label is being manufactured and applied to bottles that have not been authorised by our client, then such conduct amounts to a breach of copyright under the Copyright Act 1968 (Cth). We are instructed that Euro Pacific as a successor in title to the business is the assignee of the copyright and all other intellectual property rights in the Product from Chanda Kaur. Our client therefore provides you with immediate notice that [South State] is no longer authorised to arrange any manufacturing of the Product whatsoever." 22 The letter went on to demand (inter alia) that South State destroy all copies of the logo and product label within seven days and that it cease authorising the manufacture etc of the LIT product. The respondents reserved their rights to take legal action noting they would "not sit idly by and let another trader pass itself off as the owner of the product". 23 I would note in passing that these and other facsimiles from the respondents' lawyers cast the respondents' role in the production of LIT in a substantially different light to that set out in South State's evidence summarised earlier. 24 Assertions in respect of Euro Pacific's rights were made to South State again by the same solicitors on 21 October 2004 (which this time attached a copy of the LIT logo) and concluded with: "We reiterate our client's demands that South State immediately cease and desist from further activities of passing-off, misleading and deceptive conduct and copyright infringement. Our client reserves it rights to take legal action against your client to recover the damages including on an account of profits in all jurisdictions where South State has, without authorisation, sold the Product infringing copyright in the label and passing off the Product as its own." Similar assertions were also made to SAB on 12 October 2004 in a letter which included a copy of the LIT logo. SAB notified South State on 14 October that they had received a letter from Euro Pacific's lawyers claiming that reproduction of the LIT label would infringe Euro Pacific's copyright. The letter suggested SAB seek legal advice in relation to the copyright and to any request from South State to continue to manufacture LIT. SAB informed South State that its own advisers had advised that it cease any work on LIT "until the uncertainty surrounding the legal matter is resolved". 25 On 22 October 2004 both Ban Dee Heng and 7-Eleven received letters from Euro Pacific's lawyers asserting that their client, not South State, was the owner of LIT and requiring them each to refrain immediately from importing, etc the South State product. 26 It is Mr Williams' evidence that LIT is a highly successful product in the Singaporean and Malaysian markets; sales of South State's product have consistently increased; the correspondence from Euro Pacific to Ban Dee Heng, SAB and 7-Eleven is potentially disastrous commercially; and if the product is withdrawn from the shelves, market share will be lost.