The assessment of damages in passing off cases should focus on actual business profits lost rather than speculative sales figures or nett profit calculations.

Introduction

[1] On 23 November 2000 the appellant obtained judgment on liability against the respondent in an action for passing off and with damages to be assessed. There was no appeal against the finding of liability. This appeal is therefore only on the assessment of damages, in particular the principle applicable when assessing damages in passing off action.

[2] On 18 March 2004 the learned Senior Assistant Registrar (SAR) after hearing the assessment of damages made the following awards:

(a) RM1,139,655.14 for the year 1995;

(b) RM1,014,771.65 for the year 1996;

(c) RM37,400 for expenses during the hearing;

(d) Interest on RM2,154,426.79 at 8% pa from 3 May 1996 to the date of full realization; and

(e) costs.

[3] The High Court on appeal reduced the awards as follows:

(a) Damages in the sum of RM14,759 for loss of net profits in respect of infringement for the years 1995 and 1996;

(b) Damages in the sum of RM50,000 for loss of goodwill.

[4] The Court of Appeal affirmed the decision of the High Court in its judgment on 7 April 2010.

[5] Leave to appeal to this Court was granted to the appellant on 7 December 2009 with the question posed thus:

(a) whether the correct principle of law to be applied when assessing damages in a trademark infringement and passing off case is to assess the "loss of sales" of the successful Plaintiff and not by way of using the accounting formula of "nett profit after deducting tax and charging overheads" or the accounting concept of "loss of nett profits".

Background Facts

[6] The appellant is the registered owner of a trademark "HAITOP". which it registered on 27 August 1992 under the Trade Mark Registration NO 92/06073 in class 18 in respect of, among others, travel and hand luggage and school bags, purse, harvest set, brief case and roller bags.

[7] The respondent is a partnership dealing with the buying and selling of bags of various types.

[8] The appellant commenced an action on 3 May 1996 against the respondent for infringement of its registered trademark "HAITOP" and/or passing off alleging that from a date unknown to it and without its consent the respondent had sold and/or offered to sell bags of various types under a trademark "HIGERTOP" which the appellant said to be deceptively or confusingly similar to its trademark.

[9] The reliefs prayed for were for prohibitory and mandatory injunctions and for an enquiry as to damages or at the appellant's option, for an account of profits and for payment of all sums found due upon taking such enquiry or account and interest thereon.

[10] After a full trial the High Court found the respondent liable, granted the injunctions as prayed for and ordered an enquiry for the assessment of damages.

Assessment Of Damages By The High Court And The Court Of Appeal

[11] In reducing the awards for the infringement and passing off given by the learned SAR the learned High Court judge stated his reasons as follows:

(a) that sum of money which will put the party who has been injured, or who has suffered in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation' Per Lord Blackburn in Livingstone v. Rawyards Coal Co [1880] 4 App Cas 25 at 39;.

(b) In awarding damages the plaintiff should not be allowed to profit by it;

(c) the loss suffered by the plaintiff should be the net loss of profits only for the Haitop bags that it produces;

(d) The plaintiff should in addi