Guy Neale & Ors v Nine Squares Pty Ltd  SGCA 64
The Singapore Court of Appeal decision in Guy Neale & Ors v Nine Squares Pty Ltd concerned the ownership and use of two trade marks bearing the name “Ku De Ta” which were registered in Singapore, with the respondent named as their registered proprietor. After a detailed consideration of the facts, the Court of Appeal found that the respondent had created an express trust over the trade marks for the appellants from the respective dates of registration of the two marks. The Court of Appeal ordered the respondent to account for the profits derived from the exploitation of the trade marks.
The appellants in the dispute constituted a partnership (the “Partnership”) which owned and operated a well-known restaurant, bar and club in Bali called Ku de Ta (“Ku De Ta Bali”). Although nominally a plaintiff, one of the members of the Partnership, Arthur Chondros (“Chondros”), opposed the present proceedings.
In 2000, Chondros, Guy Neale (“Neale”), Aki Kotzamichalis (“Aki”) and Made Wiranatha (“Kadek”) (the “Founders” in the Partnership) entered into an agreement to, inter alia, establish Ku De Ta Bali. A trade mark of the “Ku De Ta” name was registered in Indonesia with Kadek named as the registered proprietor. Trade marks for “Ku De Ta” were later registered in Australia (in 2002), Singapore (in 2004 and in 2009) (the “1st Singapore Mark” and the “2nd Singapore Mark” respectively, and the “Singapore Marks” collectively) and elsewhere in the name of the respondent company Nine Squares (the “Overseas Marks”), an Australian-incorporated company owned by Chondros and one Daniel Ellaway (“Ellaway”). In 2009, without Chondros’ knowledge, Ellaway caused Nine Squares to enter into a licence agreement with one Chris Au (“Au”), under which Nine Squares purported to license to Au the use of the 1st Singapore Mark (the “Licence Agreement”). Au subsequently assigned his rights under the Licence Agreement to Ku De Ta SG Pte Ltd (“KDTSG”), which currently operates the restaurant business named “Ku De Ta” at the Skypark at the Marina Bay Sands development (“MBS”) in Singapore (“Ku De Ta Singapore”). After Chondros found out about the Licence Agreement in February 2010, he sent letters to Ellaway and to various MBS personnel disputing Ellaway’s right to cause Nine Squares to enter into overseas ventures under the “Ku De Ta” name. Ellaway resigned as a director of Nine Squares on 16 February 2010. In April 2010, KDTSG and Au commenced legal proceedings in Australia against Nine Squares seeking, among other things, a declaration that the Licence Agreement was valid (the “Australian proceedings”). The Australian proceedings were settled in July 2010.
The Partnership commenced an action in Singapore seeking a declaration that the Singapore Marks were held on trust for the Partnership or, in the alternative, that the registration of the Singapore Marks should be invalidated. Nine Squares’ defence was that the Singapore Marks were beneficially owned by it and were not held on trust for the Partnership.
The Partnership failed before the High Court and appealed. The Court of Appeal allowed the appeal, and the grounds of the Court of Appeal’s decision are set out briefly below.
Whether an express trust was established
The Court of Appeal considered whether Nine Squares held the Singapore Marks on an express trust for the Partnership. The Court of Appeal set out the principles that an express trust is created by the actual intention of the settlor; the intention may be apparent from the express use of the word “trust” in the relevant instrument or inferred from the settlor’s words or conduct. Three certainties must be present for the creation of an express trust: certainty of intention, certainty of subject matter and certainty of the objects of the trust.
The Court of Appeal found that, in the present case, the main contention between the parties was whether there was sufficient certainty of intention. The evidence adduced was directed at proving or disproving that Nine Squares intended to hold the Singapore Marks and the benefits derived therefrom on trust for the Partnership. As Nine Squares acted through Chondros and/or Ellaway at the material times, the analysis centred largely on their words and actions.
In particular, the Court of Appeal considered an e-mail sent by Neale to all the Founders, including Chondros, on 6 July 2007 (the “Email Memorandum”), which stated that “[a]ny use of the Ku [De] Ta name for whatsoever reason must be approved by all partners. Any subsequent agreement must then be governed by a license agreement which details, inter alia, what royalties are to be paid to Ku [De] Ta Bali. Currently, no such arrangement is in force”. The Court of Appeal found that it was significant that Chondros never replied to object to the contents of the Email Memorandum or to assert that he alone would have the right to use the “Ku De Ta” name and/or that Nine Squares was both the legal and beneficial owner of the Overseas Marks. The Court of Appeal found that Chondros’ silence was inexplicable if his assertion as to Nine Squares’ legal and beneficial ownership of the Singapore Marks was correct or to be believed. The Court of Appeal found Chondros’ evidence that he had asked Kadek about the Email Memorandum and had been told by Kadek not to worry about it but to continue with his work, to be inconsistent and not credible.
Turning to the Australian proceedings, the Court of Appeal held that there was “no escaping” the fact that, in Chondros’ affidavit and Nine Squares’ defence filed in the Australian proceedings, Chondros had expressly stated that the Overseas Marks were registered by Nine Squares in its name, but were held on trust for the Partnership as a whole; and further, that all the members of the Partnership were entitled to the benefits flowing from the use of those marks. This was consistent with the position taken by the other Founders in the Email Memorandum. The Court of Appeal considered that, in the present proceedings, Nine Squares was essentially asking the Court of Appeal to conclude that Chondros was lying in the Australian proceedings in order to try to defeat the claim that was pursued there; and that he was not lying in the present proceedings in order to try to defeat the claim that the Partnership was pursuing here.
In the present proceedings, Chondros contended that he alone was the owner of the “Ku De Ta” name or mark from its conception. He gave two explanations for the inconsistency between his evidence in the Australian proceedings and his evidence in the present proceedings: first, in his affidavit in the Australian proceedings, he had wanted to make the point that Ellaway could not use the 1st Singapore Mark without his permission; and second, he had mentioned the other members of the Partnership as having a beneficial ownership in the Overseas Marks because he wanted to maintain professional ties with them and involve them in “Ku De Ta”-named ventures outside of Bali. In respect of the first explanation, the Court of Appeal found that, if Chondros’ purpose was to defeat Ellaway’s alleged right to cause Nine Squares to enter into the Licence Agreement with Au, the clearest way for him to do so was to state that he alone was and had always been the beneficial owner of the Overseas Marks. There was no need to mention the other members of the Partnership as being fellow beneficial owners. As for the second explanation, the Court of Appeal found that this neither explained nor detracted from the position stated in Chondros’ affidavit in the Australian proceedings that the Overseas Marks were beneficially owned by the Partnership as a whole, and not just by him.
Following a thorough review of the evidence, the Court of Appeal was satisfied that Nine Squares had created an express trust over the Singapore Marks for the Partnership from the respective dates of registration of the two marks.
Whether an institutional constructive trust should be imposed
The appellants had also argued that, if an express trust over the Singapore Marks was not found, an institutional constructive trust should alternatively be imposed over those marks from the time of their registration. It was undisputed that Chondros, as a member of the Partnership, owed fiduciary duties to the other members of the Partnership. The appellants argued that the facts demonstrated that Chondros had breached his fiduciary duties either by misappropriating partnership property or by usurping a corporate opportunity that belonged to the Partnership when he caused Nine Squares to register the Singapore Marks in Nine Squares’ name. The Court of Appeal held that, had it been necessary for the Court of Appeal to decide the constructive trust issue, and had the Court of Appeal found that Chondros had caused Nine Squares to register the Singapore Marks in its name in contemplation of using them for a private venture to benefit himself, the Court of Appeal would also have found that Chondros had breached the fiduciary duties which he owed to the other members of the Partnership, in that by causing Nine Squares to register the Singapore Marks for that purpose, he would have usurped a corporate opportunity that belonged to the Partnership collectively. On this basis, an institutional constructive trust would have arisen over the Singapore Marks from their respective dates of registration as well as over the profits derived from their exploitation.
Given the Court of Appeal’s findings on the appellants’ trust arguments, the Court of Appeal stated that it did not need to consider the appellants’ arguments in relation to invalidation of the registration of the Singapore Marks.
For the reasons stated above, the Court of Appeal found that Nine Squares created an express trust over both of the Singapore Marks for the Partnership. The Court of Appeal further ordered Nine Squares to account for the profits derived from the exploitation of the Singapore Marks, including what had accrued or may accrue from the Licence Agreement.