Kagoma Brand Tea Packers Limited v Lutaya (Civil Suit No. 20 of 1998) [2012] UGHC 424 (11 December 2012)

## **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT JINJA**

#### **CIVIL SUIT NO. 20 OF 1998**

**KAGOMA BRAND TEA PACKERS LTD PLAINTIFF**

### **VERSUS**

**SWAIBU LUTAYA DEFENDANT <sup>I</sup> <sup>O</sup>**

#### **BEFORE HON. LADY JUSTICE FAITH MWONDHA**

#### **JUDGMENT**

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This suit was brought before me by counsel for the plaintiff M/S Tuyiringire & Co. Advocates. The plaintiff company was seeking for an injunction to restrain the defendant, his agents and servants among others from packing and offering for sale as Kagoma Brand Tea Packers (not of the plaintiffs company packing). An account for profits or inquiry as to the damages, delivery up or destruction of all the tea already packed by the defendant, the sale of which the defendant would be in breach of the foregoing injunction, costs of the suit.

According to the plaint filed in court on 20/5/98 in paragraph 3 it was pleaded that the directors of the plaintiff company used to be in partnership (business) with the defendant doing the business of packing and selling tea under the name Kagoma Brand Tea Packers and they registered their trade mark on <sup>15</sup>th September <sup>1997</sup> - Annexture "A", that the said partnership

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was by consent of all partners dissolved on the 3rd January 1997 after about 6 months of operation as a partnership and the defendants contributions were paid back to him saying that he was going to carry out other business activities other than tea packing. The form known as Kagoma Brand Tea Packers accordingly ceased to exist as Annextures "B-l", "B-2", "B-3", that the said names have been widely publicized and has become known in the trade and general public in Uganda as signifying the plaintiff company tea exclusively and he has acquired substantial reputation in and by the use of the said name, that the defendant has subsequent to the formation of the plaintiff company packed and sold and is still packing, in packages similar to those of the **plaintiff and bearing** the plaintiff's incorporated name and **trade mark.**

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The defendant filed a written statement of defence in court according to the stamp on 17/01/07 though counsel signed it on 26/06/1998. He pleaded in paragraph 4 in answer to paragraphs 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 of the Plaint were denied and he categorically stated that the trade marks belonged to a firm Kagoma Brand Tea Packers which is the registered proprietor and the defendant was the managing partner. That therefore the defendant was using the trade mark as of right in relation to the goods and business of the firm. That the alleged dissolution, cancellation and or ceasation of the said firm was unlawful, fraudulent and of no legal consequence and executed in bad faith by the two plaintiff Directors who were also nominal capital contributors in the said firm. ^iat the firm was still a going concern and he annexed the partnership deed as "A".

The defendant also filed a counter claim in which he repeated what he pleaded in paragraph 4. He pleaded that the plaintiff has continuous infringed the firm's trade mark when its neither the proprietor or registered owner. <sup>I</sup> hat as a 'result Kagoma Brand Tea Packers has suffered loss and damages. That the firm has suffered reduced market for the defendant and the plaintiff is selling inferior quality tea. That he has lost profits and reputation due to the said infringement. That the plaintiff alleged that the defendant consented to the dissolution of the said firm **"Kagoma Brand Tea Packers** well knowing that it was not so among others. The defendant/counter claimant prayed that the suit may be dismissed and judgment entered in favour of the defendant/counter claimant with the following orders:-

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- **(1)** The plaintiff company be permanently restrained from any further infringement of using the firms trade mark. - (2) That the plaintiff pays general damages for infringement. - ■) (3) That the registration of the plaintiff's limited liability company in the names of Kagoma Tea Brand Packers Ltd and the purported cancellation of the registration of Kagoma Brand Tea Packers as a business name be declared null and void.

It is trite that **"whosoever desires any court to give Judgment as to any legal right or liability dependant on the existence of facts which he or she asserts must prove that those facts exist."** See Section 101 (1) of Evidence Act Cap. 6 Laws of Uganda 2000.

In order to prove their cases on a balance of probabilities both parties filed a joint scheduling conferencing memorandum in which issues were identified and agreed as follows:

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- **■1)** Whether the plaintiff or the defendant was the owner of the trade mark **"Kagoma Brand Tea Packers"** - (2) Whether there was passing off of the said trade mark by any of the parties. - (3) If so, whether damage was suffered by the party offended by the passing off. - (4) Whether the defendant is entitled to the remedies prayed by way of counter-claim.

Th? plaintiff company adduced evidence from one witness who was one of its Directors. To resolve the 1st issue, it was not in dispute that the plaintiff's company director one Abdu Kabuye, was a former partner in the Firm Kagoma Brand Tea Packers and so was the defendant who all contributed to the capital of their firm. It was the firm which had the trade mark registered in the names of Kagoma Brand Tea Packers. The trade mark photocopy was tendered for identification and was described by the witnesses. He also stated that the original was with the defendant. He stated that in 1997 they held a meeting on 3rd January to discuss how the business was going to be carried out and all partners attended. That before holding the meeting he had suggested that they read the partnership deed to guide them (Annexture "A") but the defendant disagreed because he did not agree on the contents therein especially on the responsibilities particularly on the part of disclosing or accounting for the expenses. That they carried out stock taking. That the defendant demanded for his share

so that he goes and does his own business. That the defendant was given his share in kind i.e. terms of stock like tea leaves, tea packing packets some packed tea leaves, labels with the trade mark and routes and areas he would be marketing the products. That they also divided their routes and areas of operation. That after selling his share he had to go out of the business. That he remained with the trade mark. That the value of goods he was given as share was $4m/=$ .

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The defendant did not dispute the sharing of stock but he stated that the trade mark was his. At the same time he did not contest that the trade mark was registered in the names of the firm Kagoma Brand Tea Packers which had 4 partners including the plaintiff's company witness and the defendant. They parted ways 6 months after registration of the trade mark which fact was not also in dispute.

From the evidence adduced the trade mark was Partnership property in line with the Partnership Act. Being a partnership property, neither the plaintiff company or its witness Abdu Kabuye nor the defendant had the right to The trade mark from the evidence of the plaintiff's claim ownership. company as adduced by PWI a Director therein was clear and besides the plaintiff company had never been a partner of Kagoma Brand Tea Packers. The Partnership Deed had only (4) partners who were Swaibu Lutaya the defendant/Managing Partner, Abudu Kabuye, Tezita Mutwalubi and Awali Kibuka. So the plaintiff company had no claim at all on the trade mark in On the other hand Swaibu Lutaya much as he was managing issue. partner, he was nonetheless a partner and the partnership law required him like other partners to hold that property and apply it exclusively for

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I Certify that this is a true Copy of the Original

purposes of the partnership and in accordance with the partnership agreement. Indeed Clause 7 of the Partnership Deed of Kagoma Brand Tea Packers provided among others that **"Each partner shall keep account of all moneys, property and assets of the partnership which are either being** handled **by him or are in his custody."** So the defendant was keeping that trade mark for purposes of account in trust for the partnership (Kagoma Brand Tea Packers). The meaning of this it seems to me is that if the partnership is at the end of the day dissolved or mutually divided as they did then it had to be agreed by the partners on what should be done on such monies, properties or assets of the partnership. My well considered opinion is that, that provision in the Partnership Deed did not bestow ownership on the defendant or the plaintiffs' company witness. So the first issue could not be resolved in favour of the plaintiff or defendant. None of the parties had a right to claim ownership of the trade mark. Section 59 (1) of the Trade mark Act Cap. 217 Laws of Uganda provides **"where the relations between two or more partners interested in a Trade mark are such that no one of them is entitled as between himself or herself and the other or others of them to** use **it except**

- (a) **On behalf of both or all of them** - (b) **In relation to articles with which both of them or all of them are connected in the course of trade, those persons may be registered as joint proprietors of the Trade mark and this Act shall have effect in relation to any rights to the use of the trade mark vested in those persons as if those rights had been vested in a single person**

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# **(2) Subject as aforesaid, nothing in this Act shall authorize the registration of two or more persons who use a trade mark independently or propose so to use it as joint proprietors of the Trade mark."**

Those provisions are ciear the Trade mark was registered to be used jointly as partners of Kagoma Brand Tea Packers as a partnership, so the separation/division of the partners and continued use of the Trade mark by both parties when they separated on the 3/1/97 was void, in my opinion according to those provisions (section 59 of the Trade Marks Act). It follows that the plaintiff company adopting it and using the same was equally void by virtue of section 59 (2) of the Trade marks Act.

As I stated earlier nobody was permitted to use it, the way it was being used. Use of it was violation of the above cited provisions.

On the 2nd issue of whether there was passing off by any party. According to David Bainbridge **"Intellectual Property Law 5th Edition page 8,** he wrote **"that Trademarks may not have the glamour of inventions or creative works but, they are nevertheless of substantial importance in an industrial and commercial sense."** At pagey he wrote **"that passing off protects the good will a trader has developed and which is associated with his business. He further wrote that the tort of passing off, is in effect a common law version of Trade mark Law. Indeed trade mark law developed from passing off, which in turn developed from the tort of deceit. That passing off is more flexible than trade mark law and can**

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**\ o** **protect marks that would not be sufficiently distinctive for registration as a trade mark or are otherwise** unreqisterable."

According to PWl's evidence, he was testifying as a partner of Kagoma Brand Tea Packers which had long been dissolved by their actions, and at the same time as the plaintiff company himself. As I said earlier the evidence on record clearly showed that the plaintiff company had never been a partner in Kagoma Brand Tea Packers. And the plaintiff company according to the evidence was registered and incorporated as Kagoma Brand Tea Packers Ltd with a new Trade mark with a circle in white colour surrounding the drum. The same had been exhibited as Ex. P2 and the defendant was using the old one which had the black, yellow and red colours. And in any case there was evidence by both the plaintiffs company witness that the partnership had been mutually dissolved. The most important print here is that the trade mark the plaintiff company was using was distinguishable from that of the firm trade mark by there being white circle surrounding the drum and a letter ®. Ordinarily and indeed as PWI testified he took it as the same trade mark as that the partnership had registered. His intention was to continue using the same as he testified that his business had progressed using the same.

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The plaintiff company was not entitled to carry on with the trade mark because it had 3 of the Partners and Directors. The use of the trade mark was left undecided when the partners dissolved the partnership. It was in their power also to decide on the way forward for the trade mark. And in any case the trade mark which the defendant continued to use was different in some particulars though it could not be easily distinguishable by

an ordinary local person. The issue of determining the way forward for the trade mark ought to have been resolved by the partners of the firm on the day they shared the stock. The plaintiff company was not a partner in the Partnership and there is no way it could preclude the defendant from the use of the same. PWI did not adduce any evidence that he registered that new trade mark which has white and ® and definitely this was suspect. Why didn't he' He was using the same names only that the plaintiff company was incorporated and started using the name with the distinct features as already stated above.

From the above evidence it is clear that it's the plaintiff company which was infringing the rights of the defendant by its continuous use of seemingly similar trade mark, which was not permissible by law. So in a way the plaintiff company was pass off.

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On the 3rd issue whether any party was offended by the passing off. There was evidence on record that when the partnership was mutually dissolved, there was share of stock and routes and areas which each party was to market the tea leaves. The issue of trade mark use was not settled. PW1 and his other two partners incorporated a name with similar name of the partnership save the words "Ltd" the purported trade mark used^was changed with white circle surrounding the down and <sup>a</sup> letter "R" when the 3 incorporated that company they became a body corporate as per the provisions of the Company Act. The defendant continued to use the trade mark in its old form. There was evidence unchallenged and confirmed by PWI in favour of the defendant that he had to go on radio to tell people that the Kagoma Brand Tea Packers was not genuine tea but his Kagoma Brand

Tea Packers Ltd. The defendant and his statements testified to this and they testified that they would be sometimes arrested and released when its late and this affected their sales. On the other hand PWI boasted of his prosperity in the business, and he claimed that it was the defendant who was selling cheap tea leaves because there was no vanity in the other tea leaves and that is when they started making announcements that the tea leaves without vanilla did not belong to the plaintiffs company products. PWI still testified that the defendants were still using the old packages i.e. which had a sign of a drum and with the 3 colours, red, black and yellow. So the announcements made denying that the other tea was not theirs and did not have vanilla was bad business practice calculated to decampaign the defendant's tea and yet it was the plaintiff company which infringed on the trade mark which was in custody of the defendant. PWI testified that, the defendant stopped selling tea in 2008. Much as PWI stated that the partnership was not dissolved, earlier he had told court that they separated and each one started doing business of packing and selling tea leaves on his own. He said that the name of the trade mark was kitunzi (meaning it sales).

He testified that he got a business on Oboja road Plot No. 38, he started construction in 1998, he even bought land at Mbiko, he bought a farm at Mubende in 2004 and there are cows. The farm is 18.2 hectares. He built a house at Njeru. On the other hand apart from the profits the defendant had made that very year they parted ways he kept on losing until he stopped business in 2008. He testified that his sales went down in 1998 -2002. He incurred a lot of debts and he sold his land to pay debts. He had been given loans of $30m/=$ and $10m/=$ . In turn I was unable to agree with


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counsel for the plaintiff's submissions that the only problem was that the two parties were competing for the same market with different brands. It was not proved that, there were different brands from the evidence adduced. It was very clear from PWI's evidence that he lacked business etiquettes when, he went on radio to announce malicious and destructive announcements when he was the one in the wrong. ' Those injured the business of the defendant, when the plaintiff company had never been <sup>a</sup> partner of Kagoma Brand Tea Packers. It is the one which was passing off and I was satisfied that, it is the defendant who was injured by the passing off. PWI was behaving as Kagoma Brand Tea Packers Ltd and at the same time as a former partner of Kagoma Brand Tea Packers which firm had been abandoned/dissolved. He infringed the Company Act since he could not be the company at the same time.

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On the 4th issue whether the defendant was entitled to the remedies as prayed in the counter-claim. According to the evidence as adduced, it is apparent in my mind that the defendant is entitled to some damages as there was overwhelming evidence, that the plaintiff company sued the defendant when it had no cause of action at all as it was not a partner of **"Kagoma Brand Tea Packers"** which had been mutually dissolved and had left the issue of determining the way forward on the trade mark which was in custody of the defendant as managing partner.

It was also evident that it was the plaintiff company which infringed on the trade mark and manipulated it giving it other features. By the actions of the plaintiff company of making announcements that the brand sold without

the white circle around the drum was not genuine or fake, culminated in the loss of business on part of the defendant.

- (1) The prayer in No.l cannot be tenable since the two trade marks were identical from the ordinary person's observation. The sign of the plaintiff company is of a distinctive nature since it has 4 colours where the drum is circled by white colour and an ® white that of the defendant is the old one with 3 colours, black, yellow and red with a drum. Besides the plaintiff company's sign is not registered and yet it was engaged in causing confusion and unfair competition. - (2) The purpose of awarding damages is to restore the person aggrieved to the position he/or she was in if the wrong had not been done. In the instant case there were just merely estimates of how much he would sale a day and there was no actual figure conclusively stated. - (3) As far as prayer No.3 is concerned, it was clear from the evidence that the Partnership Kagoma Brand Tea Packers had b^en abandoned as the partners, failed to comply with the deed thereto and worked outside it until the three partners parted ways. So by their own conduct of abandoning it, it was evident that it was dissolved and it was only the trade mark existing.

None of the parties was entitled to use the trade mark since the joint proprietorship was since dissolved by the separation of the partners

including the plaintiffs company witness as a person. This means that the plaintiff company which was incorporated using the words in the trade mark cannot stand as it is and so have to be deregistered. And the trade mark which the defendant was using and yet it was registered for joint proprietorship has to be deregistered as well as it violates the above provision of section 59 (2) of the Trade Mark Act.

Because the plaintiff company sued the defendant when there was no reasonable cause of action and caused unnecessary inconveniences to the defendant including loss of business, Judgment is entered in the defendant's favour and the plaintiff company's suit is dismissed in the following terms:

- (a) General damages awarded to the defendant for Shs.30,000,000/= (thirty million shillings only). - (b) The plaintiff company to be deregistered. - (c) The trade mark bearing Kagoma Brand Tea Packers be cancelled as well from the register of Trade marks. - (d) Costs of the suit provided for the defendant.

So be it done.

Faith Mwondha JUDGE 11/12/2012

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