The National Guild of Removers & Storers Ltd v (1) Central Moves Ltd

Hearing date: 21 November 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

HIS HONOUR JUDGE Hacon

Introduction

This is an appeal from the order of Deputy District Judge Vary in the IPEC Small Claims Track dated 29 January 2016. In that order a claim by the Appellant (“NGRS”) against the First Respondent (“Central Moves”) for passing off was dismissed, but judgment was entered in a similar claim against the Second Respondent (“Mr Rust”). Mr Rust was ordered to pay damages and costs.

NGRS appeals the dismissal of its claim against Central Moves and also the quantum of damages and costs awarded against Mr Rust.

At the hearing of the appeal Jonathan Miller appeared for NGRS. Mr Rust appeared both as a litigant in person and on behalf of Central Moves. Mr Rust is the sole director of, and owner of all the shares in, Central Moves.

Background

NGRS is a trade body which promotes the interests of those trading in the removal and storage industry. Such traders may obtain membership of NGRS for a fee and among the benefits of membership is the entitlement to advertise that the trader is a member of NGRS.

Central Moves operates a removals and storage business in Twickenham. It is run by Mr Rust. Until December 2008 Mr Rust's corporate vehicle for his business was Central Moves UK Limited (“CMUK”). CMUK ceased trading in that month and was wound up on 22 December 2008. Its business was acquired and continued by Central Moves from January 2009. CMUK was dissolved on 26 April 2011.

CMUK became a member of NGRS in late 2001 or early 2002. Membership was terminated on 15 November 2005.

CMUK had an entry on a page of an online trade directory called Loadup (“the Loadup Website”). Loadup is not used by the public, only traders. Its purpose is to allow haulage and removal businesses to offer and find spare capacity, generally available in trucks on otherwise empty return trips. CMUK's entry read as follows:

“Central Moves UK Ltd

Removals and storage. National and International. BAR and GUILD

MEMBERS

http://www.centralmovesuk. com”

The reference to BAR is to another trade organisation of which CMUK was a member and which plays no part in this appeal.

After CMUK ceased trading its entry on the Loadup Website was not removed. This came to matter because of its online address, www.centralmovesuk. com (“the CMUK web address”), which appeared in the entry. Central Moves purchased that domain name and from January 2009 the address in the Loadup entry served as a link to Central Moves' website.

Jon Martin, a director of NGRS, gave evidence at trial. He said that on 10 December 2012 he was contacted by a customer who drew attention to the CMUK entry on the Loadup Website and asked whether CMUK was a member. Mr Martin looked at the entry and clicked on the CMUK web address, which led him to the Central Moves website. He sent an email to Central Moves, asking it to remove the entry as a matter of urgency. The same day Mr Rust replied, saying that CMUK no longer traded and that he had asked Loadup to remove CMUK's entry altogether. On 11 December 2012 Loadup confirmed to Mr Rust that the entry had been removed. NGRS was informed of this the next day.

NGRS was not satisfied. On 30 July 2013 it started the present proceedings in the Patents County Court. By a consent order dated 28 May 2015 the claim was allocated to the IPEC Small Claims Track.

CMUK having been dissolved in 2011 was not a defendant. But NGRS alleged that it had passed itself off as a member of NGRS because of the entry on the Loadup Website and that Mr Rust, as the controlling mind of CMUK, was jointly and personally liable for such passing off. NGRS also alleged that because the www.centralmovesuk. com address in CMUK's Loadup entry had served as a link to the Central Moves website, Central Moves had also passed itself off as a member of NGRS.

The judgment

The District Judge found that the word ‘Guild’ in CMUK's entry in the Loadup website was likely to lead the relevant public to believe that the services offered by CMUK were connected with NGRS. He said that this was capable of being a misrepresentation. By inference, he found that it became a misrepresentation after CMUK ceased to be a member.

The District Judge held that Mr Rust was the controlling mind of CMUK and was therefore jointly liable for CMUK's acts of passing off. As regards Central Moves' liability, however, he found that (a) Central Moves had not acquired the contractual or tortious liabilities of CMUK, (b) the CMUK website address in the Loadup entry was not a misrepresentation by Central Moves and (c) there had been no common design between Central Moves and Mr Rust to represent that Central Moves was a member of NGRS. Accordingly Central Moves was not liable for passing off.

The District Judge assessed damages to be paid by Mr Rust on the user principle. He referred to and followed my judgment in National Guild of Removers & Storers Ltd v Statham [2014] EWHC 3572 (IPEC) in which I found that a typical member of NGRS paid annual fees of between £1,600 and £1,800 per annum. In that case the defendant business had represented that it was a member of NGRS on a consumer-facing website. The District Judge found that a freely negotiated licence between NGRS and Mr Rust in relation to the use of ‘Guild’ on the Loadup website, not a consumer-facing website, would have fixed the royalty rate at £900 per year. He said that the relevant period started at 30 July 2007 and ended when CMUK ceased trading in December 2008. He assessed damages at £1275.

It is not immediately clear to me why the relevant period started on 30 July 2007 since CMUK's membership of NGRS ended on 15 November 2005. But no doubt there was a good reason because it was not a matter complained of in the Appellant's Notice or in argument. I need consider it no further.

Grounds of Appeal

The arguments raised in the Grounds of Appeal and pursued by Mr Miller at the hearing were as follows:

Liability of Central Moves

(1) The District Judge should have found that Central Moves was liable for passing off.

Extended liability of Mr Rust

(2) He should have found that Mr Rust's liability as joint tortfeasor with CMUK continued after CMUK stopped trading until CMUK was dissolved in April 2011.

Damages

(3) The District Judge approached the assessment of damages in the wrong way by applying the user principle. He should instead have based the assessment solely on the terms under which use of the NGRS name was licensed and in particular the post-termination fees due under those terms.

(4) If, contrary to ground (3), the District Judge was entitled to assess damages on the user principle, he should not have based his assessment on figures derived from NGRS v Statham. He wrongly arrived at a figure which constituted his view of what Central Moves should have paid for the relevant hypothetical licence, as opposed to the sum it would have paid.

Costs

(5) Costs were wrongly awarded on the basis that the claim had always been in the Small Claims Track. Until 28 May 2015 it was in the Multi-Track and costs up to then should have been awarded accordingly.

There was no Respondent's Notice.

Liability of Central Moves

Mr Miller, who appeared for NGRS, had an overarching argument based on a passage taken Spencer Bower & Handley, Actionable Misrepresentation, 5 ^th ed., at 8–10:

“The general principle that no-one can profit from the fraud of another emerged in equity. Lord Eldon said in Huguenin v Baseley that ‘it was against conscience, that one person should hold a benefit, which he derives through the fraud of another’”.

In my view this observation of Lord Eldon's has no application to the present appeal. Of course, in certain contexts it will be important to consider whether a benefit held by a party has been derived through the fraud of another. The topic in hand is not that; it is whether Central Moves is liable in law for passing off within the meaning of that tort as defined and developed by the courts over the years, mostly since the early 19 ^th century, as it happens by Lord Eldon among others, see Hogg v Kirby (1803) 8 Ves Jun 215; 32 ER 336 and Lord Byron v Johnston (1816) 2 Merivale 29; 35 ER 851.

Mr Miller had a more specific argument. It was accepted by Mr Rust that he had been the controlling mind behind CMUK and from January 2009 became the controlling mind behind Central Moves. The District Judge found CMUK liable for passing off and, because Mr Rust was its controlling mind, found Mr Rust to be jointly liable. Mr Miller submitted that when Mr Rust stopped controlling CMUK and began controlling Central Moves, he was the same man with the same knowledge. Mr Miller said that the District Judge should have looked more carefully at Mr Rust's knowledge and its relevance to Central Moves' liability.

Mr Miller drew attention to the contact details on CMUK's entry on the Loadup website, which changed from ‘Scott@Centralmovesuk. com’ to ‘http://centralmovesuk.co.uk’ between 2011 and 2012. He submitted that this must have been done at...