Lifestyle Equities C.v v. Mr Kashif Ahmed
| Jurisdiction | England & Wales |
| Judge | Lord Justice Birss,Lord Justice Nugee,Lord Justice Moylan |
| Judgment Date | 07 May 2021 |
| Neutral Citation | [2021] EWCA Civ 675 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2020/0853 |
| Date | 07 May 2021 |
[2021] EWCA Civ 675
Lord Justice Moylan
Lord Justice Nugee
and
Lord Justice Birss
Case No: A3/2020/0853
A3/2020/0929
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST
MR RECORDER DOUGLAS CAMPBELL QC (Sitting as a judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Thomas St Quintin (instructed by Brandsmiths) for the Respondents/Appellants
Peter Knox QC and Timothy Sampson (instructed by Ronald Fletcher Baker LLP) for the Appellants/Respondents
Hearing dates: 09/10 th March 2021
Approved Judgment
These appeals arise from a trade mark dispute. The claimants below brought proceedings for infringement of registered trade marks and passing off. The relevant trade marks include word marks for BEVERLY HILLS POLO CLUB and devices based on horse riding polo players. The claimants can be called “Lifestyle”. There is no relevant distinction between the two claimant companies. The proceedings were brought against a group of sixteen defendants who were associated with the use of a sign SANTA MONICA POLO CLUB along with devices based on horse riding polo players. Most of the defendants were companies, but Mr Kashif Ahmed and his sister Ms Bushra Ahmed were also named as defendants (D5 and D12 respectively). They were alleged to be jointly and severally liable for the torts committed by at least two of the companies of which they were directors (D3 and D11). Each of those two companies at one time or another had traded as “Juice Corporation”. I will refer to persons found to be jointly and severally liable with another as accessories and the person with whom they are jointly liable as the principal.
The matter came to a first trial in October 2017 before Mr Recorder Douglas Campbell QC sitting as a judge of the High Court. The first trial was concerned with the liability of eight of the corporate defendants including D3 and D11. The question of the accessory liability of D5 and D12 had been separated out to be addressed at a second hearing (if necessary). At the first trial the judge held that all eight defendants were liable on both grounds. There was no appeal from that first trial. Following the first trial Lifestyle elected to pursue an account of profits against D3 and D11 but those companies went into insolvent administration. There was then a second trial. The second trial addressed the accessory liability of the Ahmeds, and Lifestyle's claim for an account of profits against them. The trial took place in February 2020 before the same judge. This appeal is from the judge's order dated 29 th May 2020 made following the second trial. In his judgment ( [2020] EWHC 688 (Ch)) the judge decided that the Ahmeds were each jointly and severally liable. Lifestyle had contended that a finding of joint and several liability would mean that the accessories should be liable for the whole profits for which D11 was liable to account to Lifestyle. The judge rejected that submission as a matter of law and held that the accessories should only be liable for profits they themselves made from the wrongful acts. He decided that the sum by way of profits which Mr Ahmed had to pay to Lifestyle was £779,981.20, consisting of a loan of £635,789 and 10% of his overall salary amounting to £144,192.20. The sum Ms Ahmed had to pay was £57,007.60, which represented 10% of her salary in the period. The judge also assessed the sums which would be due if the Ahmeds were liable for the profits of D11 on the footing he was wrong on the law. Those sums would have been £3,129,921 for Mr Ahmed and £312,992 for Ms Ahmed.
With the permission of the judge Lifestyle appeals the ruling on the law about whether the Ahmeds should be liable for the whole profits made by D11 or only liable for profits they themselves made.
The Ahmeds resist Lifestyle's appeal and themselves appeal against the judge's order on six grounds, with permission given by Floyd LJ. The issues on the Ahmeds' appeal can summarised as follows. First (Ground 1) the judge erred in law in finding that the Ahmeds were jointly and severally liable with the relevant company. Second (Ground 2) even if they were liable, the judge erred in ordering an account of profits to be taken against them. Third (Grounds 3 and 4) the judge erred in concluding that the loan was a profit earned by Mr Ahmed. Fourth (grounds 5 and 6) the judge erred in treating the salaries or a portion of them as profits earned by Mr Ahmed or Ms Ahmed respectively.
Before us Lifestyle was represented by Mr Thomas St Quintin, as it had been at the trial. The Ahmeds were represented in this court by Mr Peter Knox QC leading Mr Timothy Sampson. In the court below Mr Knox did not appear. For the trial itself the Ahmeds represented themselves although Mr Sampson did appear for them at a failed application to adjourn before the trial and at the hearing to determine the form of order (which also included a failed application on Mr Ahmed's behalf to reconsider aspects of the judgment).
Lifestyle's appeal
The origins of the remedy of an account of profits were discussed in detail by Lord Nicholls in Attorney-General v Blake [2001] 1 AC 268. The remedy is available in various situations. It is a well established remedy for infringement of intellectual property rights, such as trade marks. The remedy, and its relationship with damages, was explained by Kitchin LJ in Hollister v Medik Ostomy [2012] EWCA Civ 1419 as follows:
“54 A claimant who has succeeded in an action for infringement is entitled to damages as of right. If it seems the claimant may have suffered more than nominal damage then he will generally be entitled to an inquiry, the central purpose of which is to ascertain the extent of his losses and so restore him to the position he would have been in if the infringement had not been committed.
55 Alternatively, a successful claimant may seek an account of the profits made by the infringer. This is an equitable remedy and the court has a discretion whether to order it. It may be refused if, for example, the infringer was entirely innocent or the trade mark owner has delayed in bringing proceedings. The purpose of an account is very different from an inquiry as to damages. It is to deprive the infringer of the profits he has made by the infringement. He is treated as if he has conducted the infringing business on behalf of the claimant. The losses the claimant has suffered by reason of the infringement are therefore not relevant.”
As a species of equitable relief, accounts of profits are also available in other circumstances such as cases of breach of fiduciary duty and dishonest assistance. Some of the cases addressed below are from that sphere. One of Lifestyle's submissions before us was that the principles applied to accounts of profits in fiduciary or dishonest assistance cases did not necessarily apply to accounts of profits in intellectual property cases. I disagree. The circumstances will differ, but I can see no reason why the principles applicable to this remedy should differ in that way.
The question we have to decide is whether, when an account of profits is to be given in a case when an accessory is jointly and severally liable with a principal as joint tortfeasor, is the accessory liable for profits they have made for themselves or are they liable for the profits made by the principal?
As the judge did, I start with Hotel Cipriani v Cipriani Grosvenor Street [2010] EWHC 628 (Ch). In that case Briggs J (as he then was) was dealing with the liability of an accessory in an account of profits in a trade mark case. At paragraph 7 he held as follows:
“I must first deal with the relevant legal principles. By contrast with joint liability as tortfeasors for damages, including damages calculated on a royalty basis, an account of profits operates against each defendant separately, requiring him or it to disgorge such profits as are shown to have been derived by that defendant from the relevant infringements. In that respect, there is no difference between trademark infringement and passing off, even though the basis of liability for one is statutory and, for the other, based on the common law… The measure of liability is the profit derived by the defendant from the infringement.”
That is a clear conclusion in favour of the finding that the accessory is liable to account for their own profits and not for those of the principal. Nevertheless, as the judge below recognised in paragraph 30 of the judgment, in Hotel Cipriani the receiving party was arguing in favour of that conclusion, no doubt because it would have increased their recovery, and Briggs J did not hear adversarial argument on the point because the defendants did not appear.
Next I refer to the conclusion reached by Lewison J (as he then was) in Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch). That was a case about dishonest assistance and breach of fiduciary duty. After hearing full argument and addressing a Canadian case which went the other way ( Canada Safeway Ltd v. Thompson [1951] 3 DLR 295 and [1952] 2 DLR 591) and an unreported decision of HHJ Seymour QC in Comax Secure Business Services Ltd v. Wilson (21 June 2001), Lewison J held:
“1600. I can see that it makes...
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