The Edge Court Judgement Report

TheEdge Fri, Dec 20, 2019 02:00pm - 4 years View Original


PATENT INVALIDATION

Independent claims and dependent claims in a patent

A patent normally consists of independent claims (‘ICs’) and dependent claims (‘DCs’). An IC is a standalone claim which contains all the limitations necessary to define an invention. A DC makes reference to another claim and further limits that claim. In a 2015 decision (‘SKB Shutters’), the Federal Court (‘FC’) held that when an IC is rendered invalid, DCs that are dependent upon the invalidated IC are also automatically invalidated. 

Issue

In August 2019, the FC in Merck Sharp & Dohme Corp & Anor v Hovid Berhad revisited its 2015 decision in SKB Shutters — when an IC is declared invalid, are DCs that are dependent upon that IC will also be automatically invalidated without need on the part of the trial Judge to separately consider the validity of each DC? 

Case summary

The plaintiffs own a patent on the dosing regimen of alendronate (‘194 Patent’) and claimed that the defendant had infringed its patent. 194 Patent contains a single IC and 21 DCs. The defendant counterclaimed to invalidate 194 Patent. The High Court (‘HC’) held that the sole IC in 194 Patent is invalid. Following the principle in SKB Shutters, the 21 DCs are invalid as well. The plaintiffs appealed to the Court of Appeal, which upheld the HC’s decision. The plaintiffs appealed to the FC. 

The FC by a majority held that when an IC is declared invalid, that does not automatically invalidate the DCs. The validity of the DCs must be assessed separately by the trial Judge, departing from the ruling in SKB Shutters. The minority held that when an IC is declared invalid and it is clear that the DCs do not have independent features of their own, the DCs are invalid and it is not necessary to remit the matter back to the trial Judge for assessment.

Majority decision

Nallini Pathmanathan FCJ (Tengku Maimun binti Tuan Mat CJ and Mohd Zawawi bin Salleh FCJ concurring) delivered the majority judgment. The majority highlighted that DCs are narrower in scope than ICs and gave a detailed analysis on the form of patent claims and the different types of claims which may be made — Type 1 claim and Type 2 claim as illustrated below (Chart 1).

Type 1 claims consist of ICs, which are supersets of their DCs and their DCs incorporate the features listed in the specification of the ICs ( A to F in Type 1 claims in the illustration). Naturally, such DCs are subsets of the Type 1 ICs. On the other hand, Type 2 claims consist of ICs ‘which do not necessarily include all of the features listed in its specification.’ Their DCs include additional features over and above the ICs (+ F and +E+F in the illustration). The validity of DCs depends on whether it is a Type 1 or Type 2 claim, including the basis of challenge to their validity. 

If the basis of challenge relates to prior art (lack of inventive step/obviousness or lack of novelty/anticipation) of the ICs, upon invalidation of the ICs in a Type 1 claim, the DCs will also be invalidated subject to evidential process by the trial Judge (unless there is an express concession). In a Type 2 claim, the DCs must be addressed separately to determine their validity due to their additional features (+ F and E+F in the illustration), which may not have been disclosed by prior art. 

On the other hand, if the basis of challenge does not relate to prior art, then the language and structure of all claims would have to be addressed separately to determine their scope, interdependency, and validity on a case-by-case basis, subject to the Court undertaking the evidential process. The majority ordered that the case be remitted back to the High Court to determine the validity of only the DCs and the IC in 194 Patent that had been invalidated by the HC remains invalid. 

From left: Tengku Maimun CJ, Mohd Zawawi and Nallini Pathmanathan FCJJ

‘The validity of these dependent claims will ultimately depend on the form of claim used, whether Type 1 or Type 2, and the basis of the challenge to their validity. A trial court can only ascertain the type of claim before it through undertaking the evidential process of examining each claim separately. If it fails to do so, the trial court may well overlook any additional features embedded within a dependent claim that could render such claim invalid. The serious consequence… is that a patentable invention would not be protected. 

… the principle established in SKB Shutters that when an independent claim is invalid, all dependent claims dependent on the said independent claim also fall with it, fails to take into account the myriad of other claims and bases of challenge that routinely arise in patent adjudication.’
Justice Nallini Pathmanathan

Minority decision

Ramly Hj Ali FCJ (as he then was) (Ahmad Haji Maarop PCA as he then was concurring) delivered the minority decision. The minority held that ‘based on [their] own evaluation of the factual matrix of the case, involving 194 Patent, without making any reference to the earlier ruling’ in SKB Shutters, concluded that the validity of all the DCs depended entirely on the strength and validity of the IC in 194 Patent and there was only one (1) invention in 194 Patent (‘Minority’s Evaluation’). Since the HC found that the 194 Patent lacked inventive step which rendered it invalid and based on the Minority’s Evaluation that the DCs do not have ‘separate independent features of themselves’, to remit the case back to the HC as contended by the plaintiffs would be ‘an act of futility and serves no purpose’.

JUDICIAL REVIEW OF ADMINISTRATIVE POWERS

Federal Court (‘FC’) upholds the primacy of house buyers’ interests under the Housing Development (Control and Licensing) Act 1966 (‘Act’) and it was ultra vires the Act for the Minister to sub-delegate personal duties through regulations

Generally, regulatory statutes are designed to regulate the conduct of a few that affects a large section of society. In that statutory design, it is common that (a) a person holding a prescribed office is identified as being responsible to achieve the objectives of the statute; (b) authority is conferred upon the person responsible to appoint other persons to administer certain regulatory aspects of the statute; and (c) power is conferred upon the person responsible to make regulations to advance the objectives of the statute.

The Act is a classic regulatory statute. It identified the Minister of Urban Wellbeing, Housing and Local Government (‘Minister’) as the responsible person and empowered the Minister to appoint a Controller of Housing (‘Controller’), inspectors and other officers. The Controller is charged with specific duties under the Act — managing the Housing Development Account and he may on his own volition, or when directed by the Minister, investigate the commission of offences under the Act. Inspectors are given non-exclusive specific powers in sections 10A-10F in that those powers are also exercisable by the Controller. 

The Act separately sets out the Minister’s duties and responsibilities. Section 11 empowers the Minister to give directions under section 12 for the purpose of safe-guarding the interest of purchasers and to take actions to carry out the effects of the Act. Also, section 24 empowers the Minister to make regulations to regulate and prohibit the terms and conditions of any contract between licensed developers and purchasers.

Acting under section 24, the Minister promulgated the Housing Development (Control and Licensing) Regulations 1989 (‘Regulations’), which included a statutory form of contract in Schedule H (‘SPA’). Regulation 11(3) of the Regulations conferred a right upon developers to apply to the Controller to extend time to deliver vacant possession beyond the time stipulated under the SPA. The Controller, if satisfied that owing to special circumstances or hardship or necessity, compliance with any of the provisions of the SPA is impracticable or unnecessary, he may waive or modify the terms and conditions of the SPA. Persons aggrieved by the Controller’s decision may appeal to the Minister under Regulation 12. 

Issues 

Are the Regulations, particularly Regulation 11(3), designed to protect purchasers or developers and who is charged with this duty under the Act (‘Primacy Issues’)? In the context of the Primacy Issues, is the Controller’s power to waive or modify the provisions of the SPA through Regulation 11(3), an act of sub-delegation by the Minister which is ultra vires the Act (‘Ultra Vires Issue’)? The FC was confronted with these issues in Ang Ming Lee & 34 others v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempataan & Anor and 5 other related appeals and which led to a landmark decision. 

Case summary and decision 

The developer (‘BHL’) applied to the Controller for extension of time to deliver vacant possession (‘VP’) under Regulation 11. It was rejected. BHL appealed to the Minister under Regulation 12. The Minister purportedly granted an extension in a letter signed on behalf of the Controller (‘Letter’). This destroyed the purchasers’ right to liquidated damages (‘LAD’) for delay in delivering VP. Aggrieved purchasers filed an application for judicial review against the Minister, the Controller and BHL. It was to quash the decision contained in the Letter. 

In a majority decision delivered by Tengku Maimum binti Tuan Mat CJ prepared pursuant to section 78(1) of the Courts of Judicature Act 1964 (Azahar bin Mohamed, now CJM), Idrus bin Harun and Nallini Pathmanathan FCJJ concurring), the FC struck down the sub-delegation of powers to the Controller through regulation 11(3) of the Regulations. The submission that it was the Minister who personally granted the extension in that the Letter merely conveyed the Minister’s decision was rejected. 

First primacy Issue

Does the Act assert the primacy of the interests of developers or house buyers? The learned CJ held that the right of developers to apply and obtain extension of time to deliver VP (if the conditions are satisfied) must be balanced against the purchasers’ right to VP within the prescribed time under the SPA. Upon a true construction of the Act, its object is to protect and assert the primacy of the interest of house buyers over that of developers and the design of the SPA limiting the time for delivery of VP upholds that interest asserted by the Act. BHL’s arguments that it was the other way around was rejected.

Clockwise from top left: Tengku Maimun CJ, Azahar Mohamed (now CJM), Nallini Pathmanathan and Idrus Harun FCJJ

‘It was submitted for the developer that the purchasers would suffer greater hardship if the project is not completed as compared to not being able to claim for LAD… we fail to see the merit of this submission. If the developer fails to obtain an extension of time to deliver vacant possession, that in itself does not mean that the developer has failed to complete and hence, have abandoned the project. [Granting] an extension of time does not necessarily determine the fate of the project. The extension of time only determines payment of LAD. In this regard, we must not lose sight of the purchasers’ obligations to pay for progress instalment to their respective housing financier and/or payment of rental to their landlord. It is a matter of balancing the commercial interest of a multi-million housing development company against the life-time loan commitment of a purchaser for a basic living necessity…’
Tengku Maimun CJ

Second primacy issue

This issue is intertwined with the ultra vires issue — can the Controller under Regulation 11 (3) extend time instead of the Minister? The learned CJ held that where a statute confers discretionary powers upon a person, it indicates that Parliament had reposed trust in that person’s judgment and discretion. Accordingly, that person must exercise the powers personally unless contrary indications are found in the language and the scope or object of the statute that the powers may be sub-delegated. There are no contrary indications to this effect in the Act.

‘The Act being a social legislation designed to protect the house buyers … Parliament has entrusted the Minister to safeguard the interests of the purchasers and the Minister has prescribed the terms and conditions of the contract of sale as per Schedule H. We find no contrary indication in the language, scope or object of the Act that such duty to safeguard the interests of the purchasers may be delegated to some other authority…

The legislative intent that the duties shall remain with the Minister, may be discerned from sections 11 and 12 of the Act…’
Tengku Maimun CJ

In particular, it was observed that the Act allowed the Controller to exercise the powers of an Inspector and may delegate his specified powers to named persons. In contrast, ‘there is no such provision enabling the Controller to exercise the Minister’s powers’. 

The ultra vires issue

The Minister’s power under the Act to make regulations does not include the power to delegate his personal duties to the Controller. This was done through Regulation 11(3) of the Regulations and which exceeded Parliament’s intention. 

‘By delegating the power, vide regulation 11(3) to the Controller to waive or modify the prescribed terms and conditions of the sale of contract, it is now the Controller who has been entrusted to regulate the terms and conditions of the contract of sale.

… section 24 of the Act does not confer power on the Minister to make regulations for the purpose of delegating the power to waive or modify the Schedule H contract of sale to the Controller. And it is not open to us to read into the section an implied power enabling the Minister to do so. We consequently hold that regulation 11(3) of the Regulations, conferring power on the Controller to waive and modify the terms and conditions of the contract of sale is ultra vires the Act’.
Tengku Maimun CJ

The letter 

The argument that it was the Minister who made the decision in that the Letter merely conveyed the Minister’s decision was rejected. The face of the Letter showed that it was signed on the Controller’s behalf. It did not state that the Minister had made the decision under Regulation 12. Instead, the Letter stated that the decision was made under Regulation 11. 

 

DIVORCE AND MATRIMONIAL ASSETS

The Court has the power to order a division of matrimonial assets under s 76 of the Law Reform (Marriage and Divorce) Act 1976 (‘the Act’) upon granting a decree of divorce or judicial separation. Such assets may be acquired during or before the marriage. In relation to the latter, section 76(5) of the Act provides that an asset acquired before marriage by one party can be considered a matrimonial asset if it has been substantially improved during the marriage by the other party or by their joint efforts. The matrimonial home may not, therefore, necessarily be a matrimonial asset to which both parties can make a claim in divorce.

Issue

In determining whether an asset acquired before marriage is a matrimonial asset subject to division between the parties in a divorce, can factors beyond section 76(5) of the Act, such as a resulting trust, be taken into consideration? In Balakrishnan Kaliappan v Shameena Nathesan [2019] 7 CLJ 762, the Court of Appeal (‘CA’) considered this issue. In a unanimous decision delivered by Rhodzariah Bujang JCA (David Wong Dak Wah now CJSS and Zaleha Yusof JJCA, concurring), it was held that matters outside the Act are not relevant. 

Case summary and decision 

Here, the matrimonial home was a house registered under the wife’s name and bought by her two years before the marriage was registered. The parties had cohabited there from the time of their marriage to their separation. In the divorce proceedings, the husband claimed an entitlement to the house on the basis that he paid the 10% deposit of the purchase price, the loan installments as well as the cost of substantial renovations towards the house. The High Court, with whom the CA agreed, found that the wife had repaid the 10% deposit to the husband and that the husband’s alleged payment of the loan installments and renovation costs to be unsubstantiated by the evidence. There was, as such, no substantial improvement to the house by the husband after the marriage within the meaning of section 76(5) of the Act. 

The husband also claimed that he was entitled to the house on the basis of a resulting trust, relying on an earlier decision of the CA. In view of the findings of fact made by the High Court, the CA found that there was no such resulting trust. The CA went on to hold that a resulting trust was in any event not relevant as recourse to rights outside the Act should not be allowed, especially where such rights have been specifically provided for by the Act. This includes the parties’ entitlement to matrimonial assets.
 

From left: David Wong (now CJSS), Zaleha Yusof (now FCJ) and Rhodzariah Bujang JJCA

‘... given the clear wordings of the said section 76(5), the court’s consideration of the claim for the matrimonial home must be based, from the facts of this case on the evidence pertaining to the monetary contribution to its acquisition and improvement. 

... we are of the view that given the clear and explicit provision which caters for acquisition of property prior to the marriage under section 76(5), the issue of a resulting trust does not arise at all. Such a trust is only an issue for parties not in matrimony for those who are, their rights to matrimonial assets acquired before and after marriage have been adequately provided for under the LRA.

... the whole purpose of enacting the LRA is to provide for matters relating to and incidental to marriages contracted thereunder, recourse to rights provided outside of the LRA, particularly pertaining to one which has been specifically spelt out in it, which in this case was the parties entitlement to matrimonial property, should not be allowed.’ 
Justice Rhodzariah Bujang

LANDLORD AND TENANT

When are landlords entitled to double rental from tenants

During the term of a tenancy, a tenant is contractually bound to pay the rent agreed between the landlord and tenant. Upon natural expiration of the term or earlier lawful termination, a tenant who ‘holds over’ the rented premises is liable under section 28(4)(a) of the Civil Law Act 1956 or the tenancy agreement to pay the landlord double the rent until he hands over possession. 

Issues 

Are tenants automatically liable to pay double rental if they do not hand over possession at the end of the tenancy, or is there judicial discretion to imposing double rental under section 28(4)(a) and in interpreting a written provision to impose double rental under the tenancy agreement? These issues were decided by the Court of Appeal in Rohasassets Sdn Bhd (dahulunya dikenali sebagai Wisma Perkasa Sdn Bhd) v Weatherford (M) Sdn Bhd & Weatherford Solutions Sdn Bhd [2019] MLJU 428.

Case summary and decision

Perkasa at first rented out the 11th, 12th and 14th floors of a building to Weatherford and Weatherford Solutions for various periods. The 11th floor tenancy expired on 30.4.2009, the 12th floor tenancy on 31.3.2009 and the 14th floor on 31.1.2011. There were negotiations for fresh tenancies but these failed and notices dated 19.8.2011 to terminate the 11th, 12th and 14th floors were given by Perkasa to Weatherford and Weatherford Solutions on 1.10.2011. Vacant possession of the premises was delivered on 31.10.2011. Perkasa claimed double rental from the determination of the tenancies on the basis of section 28(4)(a) and the express ‘holding over’ clauses in the tenancy agreement.

Vernon Ong JCA (now FCJ) (Rohana Yusof JCA (now FCJ ) and Abdul Karim Abdul Jalil JCA, concurring) held that there must be wilful or contumacious holding over on the part of the tenant in order for the landlord to claim double rental.

From left: Rohana Yusof (now FCJ and PCA), Vernon Ong (now FCJ) and Abdul Karim JCA

 ‘…the expression ‘holding over’ requires an intention on the part of the tenant to refuse to deliver up the premises with knowledge that he has no right to remain in possession … it is a requirement under ... that there must be a willful or contumacious holding over on the part of the tenant in order for the landlord to claim double rental.’
Justice Vernon Ong

On appeal, the Federal Court recently held that willful and contumacious conduct need not be shown by the landlord.

 

LIQUIDATION LAWS

The ambit of liquidators’ right to seek directions from the Court 

Under the repealed section 237(3) of the Companies Act 1965 (now, section 487(3) of the Companies Act 2016), liquidators may apply for directions seeking guidance of the Court when carrying out its duties. Where directions are given, it is not a judgment or order and is therefore not subject to an appeal: Ooi Woon Chee & Another v. Dato’ See Teow Chuan & Ors [2012] 2 MLJ 713 (FC). Liquidators had at times taken this decision literally — the High Court could give all sorts of directions, including directions affecting substantive rights.

Issue 

Can liquidators seek directions from the High Court (‘HC’) with a view of determining matters affecting substantive rights of parties and later contend that the ‘directions’ granted by the HC are non-appealable? This issue arose in the Court of Appeal (‘CA’) in Equiticorp Holdings Ltd (in statutory management) v. Mak Kum Choon & 5 Ors (and Another Appeal) [2019] 5 AMR 817, affording the CA opportunity to clarify the often misunderstood effect of the Federal Court’s decision in Ooi Woon Chee. 

Case summary and decision

Overseas Union Bank Limited (later as a merged entity known as United Overseas Bank Limited Singapore (‘UOB Singapore’) granted a loan to United Securities Sdn Bhd (‘USSB’) for the purchase of shares amounting to 50% equity in City Centre Sdn Bhd (‘CCSB’). CCSB owned 16 parcels of land in Kuala Lumpur. As part of the loan agreement, USSB executed a debenture whereby a charge was created in favour of UOB Singapore’s nominee, UOB Nominees, over the shares purchased and all other assets. Both USSB and CCSB were subsequently wound up. 

The liquidators of CCSB sought directions from the High Court as to the sole and rightful contributory of CCSB for purposes of distribution of surplus funds from the proceeds of the sale of the land. UOB Singapore was not made a party to the proceedings before the High Court. 

The High Court held that UOB Nominees as the 100% registered shareholder of CCSB shares was the sole contributory of CCSB for purposes of distribution of assets. The High Court also sought to determine the matter of the debt between UOB Singapore and USSB on a summary basis. On appeal, the liquidators and UOB Nominees contended that the ‘directions’ obtained from the HC was non-appealable. 

In a unanimous decision of the CA delivered by Mary Lim JCA (Tengku Maimun JCA (now CJ) and Hasnah Mohammed Hashim JCA) the decision was reversed. The CA clarified that the decision in Ooi Woon Chee was not meant to be of general application and ‘directions’ do not include asking the HC to make decisions affecting the substantive rights of the parties who are involved and are not properly before the Court and the HC should have declined the jurisdiction. It was seriously doubted that the security documents allowed UOB Nominees to be paid the surplus funds as contributory. This issue could not be determined under the guise of seeking ‘directions’ and the liquidators could not bypass liquidation procedures, including first settling the of list of contributories.

From left: Tengku Maimun (now CJ), Mary Lim and Hasnah Hashim (now FCJ) JJCA

‘…Section 237(3) is not available nor is it suitable for application under the guise of directions for general administration when the pith and substance of the application is to decide substantive questions as against persons making proprietary claims adverse to the assets of the wound up company.’ 
Justice Mary Lim 
 

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

SKBSHUT 0.590

Comments

Login to comment.