1. Sponsorship agreement dispute — unlawful termination of contract — claims for breach of contract and defamation. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 )
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2018 MarsdenLR 2812
HIGH COURT (JOHOR BAHRU)
AHMAD KAMAL, JC
Box 55 Sociedad Limitada & Ors – Plaintiff
Versus
Drive M7 Sdn Bhd – Defendant
CIVIL SUIT NO 22NCVC-66–05 OF 2015
Advocates:
Dhinesh Bhaskaran (Serena Azizuddin with him) (Shearn Delamore & Co) for the plaintiffs.
Meyappan Pillai (Alvin Teo Sze Pin with him) (Mak, Ng, Shao & Kee) for the defendant.
Dhinesh Bhaskaran (Serena Azizuddin with him) (Shearn Delamore & Co) for the plaintiffs.
Meyappan Pillai (Alvin Teo Sze Pin with him) (Mak, Ng, Shao & Kee) for the defendant.
A trade name lacks legal personality; privity resides with the underlying legal entity. Termination without adhering to specified notice periods is unlawful. Frustration cannot be claimed for self-induced events or breaches of warranties. Defamation defenses of fair comment fail if statements are presented as facts rather than opinions.
Headnote:(A) Contract Law - Privity of Contract - Legal Entity vs. Trade Name - Where an agreement is entered into using a trade name, the legal entity owning that trade name is the actual contracting party and possesses the locus standi to sue. A trade name, lacking legal personality, cannot enter into a contract or file a suit. (Paras 64, 68, 78)
(B) Contract Law - Termination and Breach - Sanctity of Contract - Pursuant to Section 38(1) of the Contracts Act 1950, parties are obliged to honor their bargains. Where a contract specifies a strict deadline for written notice of termination, failure to provide such notice renders the subsequent termination unlawful. External factors, such as lack of government funding or support, do not provide a legal basis to excuse a breach of a sponsorship agreement. (Paras 80, 87, 89)
(C) Contract Law - Doctrine of Frustration - Self-Induced Frustration - A party cannot rely on the doctrine of frustration if the frustrating event is self-induced or results from their own breach of contract. Where a party warrants that their trademarks do not violate third-party intellectual property rights, any subsequent trademark disputes are the responsibility of that party and do not frustrate the agreement. (Paras 104, 123, 125)
(D) Law of Defamation - Libel - Defense of Fair Comment - To succeed in a defense of fair comment, the statements must be comments (opinions) on a matter of public interest, based on true facts, and made by a fair-minded person. If a statement is presented as a factual assertion rather than an opinion, or is based on inaccuracies, the defense of fair comment fails. (Paras 154, 155, 159) (E) Law of Defamation - Defense of Justification - Where a statement is proven to be true in substance and in fact, the defense of justification succeeds, and the defendant is not liable for damages. (Para 196)
Facts of the case:
A sponsorship agreement was entered into for a professional racing team for a three-year period. The sponsor paid for the first year but refused to proceed with the second year, citing a lack of government support and trademark infringement issues in certain international territories. The racing team sued for the second year's sponsorship fees and damages for defamation following a press statement issued by the sponsor. The sponsor counterclaimed for defamation based on a press statement made by the team's principal.
Findings of Court:
The court found that the legal entity behind the racing team's trade name had privity of contract. The termination of the agreement for the second year was unlawful as no written notice was provided by the stipulated deadline. The trademark issues did not frustrate the contract because the sponsor had warranted the trademarks' validity. The sponsor's press statement was defamatory and did not qualify as fair comment. The team's statements were defamatory but the defense of justification succeeded as the sponsor had indeed unlawfully terminated the contract.
Issues: Whether a trade name has the legal capacity to contract; whether the failure to provide termination notice by a specific date constitutes a breach; whether trademark disputes constitute frustration of contract; and whether the press statements by both parties were defamatory and if any legal defenses applied.
Ratio Decidendi: The court ruled that the legal entity owning a trade name is the party with privity. Contracts must be performed according to their terms, and termination clauses must be strictly followed. Frustration is inapplicable when the event is self-induced or falls under a party's warranty. For a defamation defense of fair comment to hold, the statement must be an opinion based on truth, not a factual misrepresentation.
Result: Plaintiffs' claim allowed; Defendant ordered to pay sponsorship fees for the second year and general damages for defamation. Defendant's counterclaim dismissed.
Legal Category Hierarchy
- contract law
-
tort
-
defamation
- libel (Para 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 199)
-
defamation
- practice and procedure
Table of Contents
2. Privity of contract — validity of termination notice — frustration due to trademark infringement — defense of fair comment — justification for defamatory statements. (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 )
3. Trade name versus legal entity — strict adherence to termination notice deadlines — responsibility for trademark warranties — elements of defamation and failure of fair comment defense. (Para 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 101 , 102 , 103 , 104 , 105 , 106 , 107 , 108 , 109 , 110 , 111 , 112 , 113 , 114 , 115 , 116 , 117 , 118 , 119 , 120 , 121 , 122 , 123 , 124 , 125 , 126 , 127 , 128 , 129 , 130 , 132 , 133 , 134 , 135 , 136 , 137 , 138 , 139 , 140 , 141 , 142 , 143 , 144 , 145 , 146 , 147 , 148 , 149 , 150 , 151 , 152 , 153 , 154 , 155 , 156 , 157 , 158 , 159 , 160 , 161 , 162 , 163 , 164 , 165 , 166 , 167 , 168 , 169 , 170 , 171 , 172 , 173 , 174 , 175 , 176 , 177 , 178 , 179 , 180 , 181 , 182 , 183 , 184 , 185 , 186 , 187 , 188 , 189 , 190 , 191 , 192 , 193 , 194 , 195 , 196 , 197 , 198 , 199 , 200 , 201 , 202 , 203 , 204 , 205 , 206 , 207 , 208 , 209 )
4. Sanctity of contract requires strict compliance with termination clauses — self-induced frustration cannot be used to escape contractual obligations — truth is a complete defense to defamation. (Para 64 , 87 , 123 , 125 , 197 )
5. Claim for sponsorship fees and general damages allowed — defendant's counterclaim dismissed. (Para 210 , 211 )
6. Does a contract signed using a trade name bind the legal entity owning that name?
Yes. A trade name has no legal standing, but if it is the trade name of a legal entity, the entity has standing to sue. The court examines the agreement in totality and the parties' conduct to determine the contracting party. (Para 64 , 68 , 69 , 71 , 73 , 77 , 78 , 79 )
7. Can a party terminate a contract without following the specific notice requirements set out in the agreement?
No. Contracting parties are obliged to uphold the sanctity of contract and honor their bargain. Failure to provide written notice by the agreed deadline renders the termination unlawful. (Para 80 , 81 , 87 , 88 )
8. Can a party rely on the doctrine of frustration if the frustrating event was caused by their own breach or warranty?
No. The doctrine of frustration does not protect a party whose own breach of contract brings about the frustrating event. Such an occurrence is considered self-induced frustration and cannot be used to excuse performance. (Para 123 , 124 , 125 )
9. What are the requirements for a successful defense of fair comment in a defamation suit?
The defendant must establish that the words are comments on a matter of public interest, based on true facts, and are comments that a fair-minded person could honestly make on those facts. (Para 153 , 154 , 155 , 158 , 159 , 161 )
10. How does the defense of justification operate in a defamation claim?
The party raising the defense of justification bears the burden of proving that the defamatory statements were true in substance and in fact. (Para 195 , 196 , 197 )
Ahmad Kamal JC:
JUDGMENT
Introduction
[1]The First Plaintiff is a company incorporated in Spain with its registered office at Poligono Industrial de Picassent, Calle 6, parcela 49, 46220 Picassent (Valencia) Spain.
[2]The First Plaintiff owns a professional motorcycle race team under the trade name of “Aspar Team” consisting of professional motorcycle race athletes competing in the MotoGP World Championship under the MotoGP series open class (Race) Moto 2 and Moto 3.
[3]The Second and Third Plaintiff are individual with an address at Poligono Industrial de Picassent, Calle 6, parcela 49, 46220 Picassent (Valencia) Spain.
[4]The Second Plaintiff was the founder and is the owner of Aspar Team. The Third Plaintiff joined Aspar Team in 2001 as Managing Director.
[5]The Defendant is a company incorporated in Malaysia under the Companies Act 1965 with a registered address at 23A, Jalan Pembangunan, Off Jalan Tampoi, Taman Desa Rahmat, 81200 Johor Bahru and a business address at Bangunan Mutiara Motors, No 111, Bt. 4 1/2 , Jalan Tebrau 80250 Johor Bahru.
[6]The Defendant manufactures and sells energy drink products (products) and is part of the Mutiara Motors Group of Companies (Mutiara Group) which includes Mutiara Food & Drinks (M) Sdn Bhd (Mutiara).
[7]The Plaintiffs’ cause of action against the Defendant are set out in the Plaintiffs’ statement of claim dated 28.4.2015. In summary, the Plaintiffs seek the following main relief against the Defendant:
(i)The First Plaintiff seeks €1,890,000.00 and exemplary damages for breach of Sponsorship Agreement dated 23.1.2014 (Agreement) entered into between the First Plaintiff and the Defendant.
(ii)The First Plaintiff seeks general and exemplary damages for defamatory statements made by the Defendant.
(iii)The Second and Third Plaintiffs seek general, aggravated and exemplary damages for defamatory statements made by the Defendant.
[8]The Defendant have filed the statement of defence and counter claim against the Plaintiffs’ claim. The Defendant’s defence and counterclaim are set out in Defendant’s statement of defence and counterclaim dated 15.6.2015. Essentially, the Defendant’s defence is that the First Plaintiff has no privity with the Defendant and the termination of the Agreement was lawful. The Defendant counterclaim for reputational damage and defamation.
The Trial
[9]Trial of the suit took place on 20.6.2017, 21.6.2017, 15.10.2017, 5.12.2017 and 6.12.2017. 4 witnesses testified. The Plaintiffs called three (3) witnesses and the Defendant one (1). I decided to allow the claim by the Plaintiffs and dismiss the Defendant’s counterclaim.
Background Facts
[10]The First Plaintiff, Box 55 Sociedad Limitada (Box 55), is a Spanish company which owns a professional motorcycle race team under the name of ‘Aspar Team’.
[11]The First Plaintiff is known in the motorcycle high performance and competition world as Aspar Team and Aspar Team is Box 55’s trade name.
[12]The Aspar Team is a team of professional motorcycle race athletes competing in the MotoGP World Championship under the Race, Moto 2 and Moto 3.
(i)The MotoGP World Championship is the most prestigious motorcycle racing competition in the world, with a history dating back to 1949. It is a showcase of international
(ii)competitions over an 8-month season every year, divided into 18 Grand Prix races in 13 different countries and in 3 categories, namely the Race, Moto2 and Moto3.
(iii)The MotoGP World Championship has a large number of spectators. In 2014, the total attendance of spectators at all 18 circuits in all 13 countries was 2,276,624 and there were a total of 8,442 media representatives from 55 countries. A total of 207 countries and territories, including Malaysia, receive live or same day delayed broadcasts of the MotoGP World Championship.
(iv)The Aspar Team is a very successful racing team that has 3 riders in the Moto3 category and 2 riders in the Race. From the time Box 55 was set up in 1992 until 2014, Aspar Team recorded 87 GP Victories, 102 2
