Lifestyle Equities CV and another v Ahmed and another
| Jurisdiction | England & Wales |
| Judge | Lord Leggatt,Lord Lloyd-Jones,Lord Kitchin,Lord Stephens,Lord Richards |
| Judgment Date | 15 May 2024 |
| Neutral Citation | [2024] UKSC 17 |
| Court | Supreme Court |
Lord Lloyd-Jones
Lord Kitchin
Lord Leggatt
Lord Stephens
Lord Richards
Appellants (Appeal 2021/0147) – Ahmed and anr
Peter Knox KC
Timothy Sampson
Adam Riley
(Instructed by Ronald Fletcher Baker LLP (West End))
Respondents (Appeal 2021/0147) / Appellants (Appeal 2021/0150) – Lifestyle Equities C.V. and anr
Thomas St Quintin
Rory Brown
(Instructed by Brandsmiths (London))
Respondents (Appeal 2021/0150) – Ahmed and anr
Peter Knox KC
Laurent Sykes KC
Timothy Sampson
(Instructed by Ronald Fletcher Baker LLP (West End)
Heard on 20 and 21 February 2023
Lord Leggatt ( with whom Lord Lloyd-Jones, Lord Kitchin, Lord Stephens and Lord Richards agree):
The main issues raised by this appeal and cross-appeal are these. When are directors of a company liable as accessories for causing the company to commit a tort of strict liability — in this case, trade mark infringement? In particular, is such liability also strict or does it depend on knowledge (or some other mental element)? And if directors are strictly liable, should they be ordered to account for profits made by either (i) the company or (ii) the directors themselves?
The claimants are two companies who can together be called “Lifestyle”. Lifestyle brought these proceedings against some 16 defendants claiming remedies for infringement of registered trade marks and passing off. Those sued included two family-owned companies, Continental Shelf 128 Ltd and Hornby Street Ltd, which both traded under the name “Juice Corporation”. The defendants also included Mr Kashif Ahmed and his sister, Ms Bushra Ahmed. Mr Ahmed was the sole director of Continental Shelf and they were both directors of Hornby Street at all relevant times. Lifestyle and the Ahmeds are the respective parties to these appeals.
Juice Corporation was a wholesale business which arranged for the manufacture of clothing, footwear and headgear and sold it to retailers, mainly in the UK. Mr Ahmed's role included managing the intellectual property rights of the companies. Ms Bushra Ahmed was head of sales for a “division” of Hornby Street called the “House of Brands”.
Lifestyle complained that the Juice Corporation companies had been offering for sale various items of clothing and footwear with logos displaying the name “Santa Monica Polo Club” and pictures of polo players riding horses. Lifestyle claimed that the use of these signs infringed trade marks registered by Lifestyle which included the words “Beverly Hills Polo Club” and depicted a polo player on a horse. Breaches of both section 10(2) and 10(3) of the Trade Marks Act 1994 were alleged. The Ahmeds were sued on the basis that they had authorised or procured the companies to do the acts complained of or had engaged in a common design with each other or the companies to cause them so to act.
The trial was split into two parts. Both hearings took place before the same judge, Mr Recorder Douglas Campbell QC sitting as a judge of the Chancery Division. The first trial dealt with the liability of certain defendants including Hornby Street but not Continental Shelf or the Ahmeds. Hornby Street was found liable under both section 10(2) and 10(3) of the Trade Marks Act 1994 for infringing Lifestyle's registered trade marks and also for passing off: [2017] EWHC 3313 (Ch); [2018] FSR 15. There was no appeal from that decision. Hornby Street later went into administration at the instigation of its bankers. The company has since been dissolved.
The second trial addressed the remaining issues. None of the defendants was legally represented at this trial but the Ahmeds appeared as litigants in person. The judge decided that: (i) Mr Ahmed was jointly and severally liable with the two Juice Corporation companies for the acts of infringement; and (ii) Ms Ahmed was jointly and severally liable with Hornby Street for acts of infringement in so far as its “House of Brands” division was concerned, which the judge found represented 10% of Hornby Street's business: [2020] EWHC 688 (Ch); [2020] FSR 29, para 104.
In reaching those conclusions, the judge did not think it necessary to decide whether, as Mr Ahmed maintained, Mr Ahmed had no improper motive, acted on advice and delegated the design of logos to a professional design team. In the judge's view, none of these matters gave rise to a defence in law. The same applied to defences raised by Ms Ahmed that she had no improper motive or intention to infringe. The judge made no finding that either Mr Ahmed or Ms Ahmed knew or ought to have known that there was a likelihood of confusion or infringement. On the judge's view of the law, those matters were not relevant to their liability.
Rather than claiming damages, Lifestyle elected to claim against the Ahmeds the remedy of an account of profits. The judge found that sales of infringing goods accounted for about 10% of Hornby Street's turnover on average during the relevant period and calculated that the profits made by Hornby Street from such sales amounted to £3,129,921. He rejected Lifestyle's claim that the Ahmeds were liable to account to Lifestyle for these profits but held that they were liable to account to Lifestyle for profits which they had personally made from the infringements. He apportioned 10% of their salaries during the relevant period to such profits. This gave rise to a liability of £144,192 on the part of Mr Ahmed and £57,007 on the part of Ms Ahmed. The judge also found that a loan of £635,789 made by Hornby Street to Mr Ahmed was a profit derived from the infringements for which Mr Ahmed was liable to account to Lifestyle.
Lifestyle appealed to the Court of Appeal against the decision that the Ahmeds were not liable to account for the profits made by Hornby Street from its infringements. The Ahmeds cross-appealed against the decision that they were jointly and severally liable for the infringing acts of Hornby Street and that they had made profits from those infringements for which they were liable to account to Lifestyle.
For reasons given by Birss LJ in a judgment with which Moylan and Nugee LJJ agreed, the Court of Appeal dismissed Lifestyle's appeal and rejected most of the Ahmeds' grounds of appeal: [2021] EWCA Civ 675; [2021] Bus LR 1020. On the Ahmeds' appeal, the Court of Appeal upheld the judge's conclusions that the Ahmeds were jointly and severally liable for the infringing acts of Hornby Street and that they should be ordered to account for profits which they had personally made from the infringements. The Court of Appeal also held that the judge was entitled to find that 10% of the Ahmeds' salaries during the relevant period represented such profits. But the Court of Appeal allowed Mr Ahmed's appeal in relation to the loan made to him by Hornby Street and also decided, having raised the point themselves, that income tax payable on the relevant portions of the Ahmeds' salaries should be deducted from the sums payable to Lifestyle.
Against that decision both the Ahmeds and Lifestyle appeal to this court pursuing the arguments on which they lost in the Court of Appeal. The issues fall into two categories. First, there is the liability issue. The question here is whether the judge and the Court of Appeal were wrong in law to hold that the Ahmeds were jointly liable with Hornby Street in the absence of any finding that they knew or ought to have known that the company's use of the Santa Monica Polo Club signs infringed Lifestyle's trade marks. Second, there are issues relating to the remedy of an account of profits. If the Ahmeds were jointly liable with Hornby Street for its infringements, was it appropriate to award this remedy when there was no finding that the Ahmeds had acted unconscionably or in bad faith? If it was, should they, as Lifestyle contends, have been ordered to account to Lifestyle for profits which the company had made from its infringing trade? If not, but it was in principle correct to order the Ahmeds to account for profits which they had themselves made from the infringements, was the judge right to regard the loan made to Mr Ahmed and a proportion of the Ahmeds' salaries as such profits? And if it was in principle right to treat a proportion of the Ahmeds' salaries as profits, was the Court of Appeal entitled and correct to hold that in calculating those profits deductions should be made for income tax?
I will first consider the liability issue. Then I will consider the issues relating to the remedy of an account of profits.
Although it is not how the claims against them have been put, in addressing the liability issue it is useful to begin by asking whether, on the facts found by the judge, the Ahmeds themselves infringed Lifestyle's trade marks. If they did, that would have been a straightforward basis on which to find them liable.
Section 9(1) of the Trade Marks Act 1994 states that the proprietor of a registered trade mark “has exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent. The acts amounting to infringement, if done without the consent of the proprietor, are specified in … section 10.”
The judge found at the first trial that acts attributable to Hornby Street, done without Lifestyle's consent, amounted to infringements of Lifestyle's trade marks under both section 10(2) and 10(3). Section 10(2) states:
“A person infringes a registered trade mark if he uses in the course of...
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AGA Rangemaster Group Ltd v UK Innovations Group Ltd
...was liable to be found to be a joint tortfeasor unless he was saved by the then awaited decision of the Supreme Court in the Lifestyle Equities v Ahmed litigation. Relatively shortly after the end of the hearing, that decision was handed down (see ( [2024] UKSC 17). As a result, joint tort......