Goodwill has often been associated with commercial or trading activities, as seen in the case of Inland Revenue Commissioners v. Muller & Co’s Margarine, Ltd [1901] AC 217 in which goodwill is described as “the benefit and advantage of the good name, reputation, and connection of a business.” This could well be that past cases have mostly involved commercial entities only. The recent case of St. John Ambulans Malaysia v. PJ Uniform Sdn Bhd puts to test the versatility and adaptability of goodwill when it comes to non-trading organizations. In determining the quantum for loss of goodwill, should a charitable organization be distinguished from an entity which carries out business activities?

In this case, the plaintiff, St. John Ambulance of Malaysia, is a statutory body which promotes and carries out humanitarian work in Malaysia, while the defendant is in the business of selling uniforms and other related goods. The plaintiff commenced an action for trademark infringement and passing off, in which it succeeded against the defendant. Subsequently, the plaintiff elected for assessment of damages based on account of profits.

During the assessment of damages, the Learned Registrar ordered the defendant to pay RM100,000 (US$23,800) as damages for the loss of the plaintiff’s goodwill and reputation, in addition to the accounts of profit. Both parties then appealed to the High Court Judge in chambers.

The defendant took the conventional approach by arguing that being a charity, the plaintiff should be awarded a nominal sum because its goodwill should not be equated to that of a commercial business. Further, the defendant also argued that the plaintiff has no goodwill which was damaged as it does not have a brand to which customers owe loyalty.

The High Court Judge disagreed with the defendant’s submission. The judge seemed to be of the view that the phrase “in the course of trade” in Section 38 of the Trade Marks Act 1976 should be liberally interpreted to encompass the provision of any form of services rendered including that by non-commercial business or undertaking. Thereafter, the High Court dismissed the defendant’s appeal and allowed the plaintiff’s appeal, whereby the quantum for loss of goodwill was revised to RM222,000 (US$52,900). Subsequently, the defendant appealed to the Court of Appeal against part of the High Court’s decision on the quantum for loss of goodwill.

Court of Appeal

The defendant raised similar arguments before the Court of Appeal. Judge Nalini Pathmathan, delivering the judgment affirming the High Court’s decision, stated that the plaintiff’s goodwill should be greater than that of a commercial business. On the issue of brand loyalty, the Court of Appeal observed that the public purchased the trademarked goods to generate funds to serve the objectives of the organization.

A leave to the Federal Court has been granted for this case, in relation to the question of “whether the commercial goodwill test for assessment of damages for loss of goodwill and reputation applied as against a plaintiff who is business and profit making entity in a claim for infringement of trade mark and passing off is equally applicable against a plaintiff who is a statutory non-profit charitable organization like the plaintiff herein.” Essentially, the question is asking whether there should be a different basis to determine the damages for loss of goodwill between a commercial business and a non-trading organization.

On this point, Christopher Wadlow, in his book The Law of Passing Off, opined that as charities do depend on the financial contributions of their members or the public, there is something which corresponds sufficiently closely to the goodwill of a business and that certain activities by the charities may also involve carrying on a trade despite making no profit. It can be seen that the Court of Appeal took a similar approach in its decision. It could well be argued that activities conducted under a sign for the purpose of raising funds via donation or sponsorship, or activities funded by donations or sponsorship, may have sufficient commercial character to establish that the use of the trade mark is in the course of trade.

A decision from the Federal Court would lend certainty to this sphere of activities, and is thus very much awaited.