Woolley and Another v Ultimate Products Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lady Justice Black,Lord Justice Pill |
| Judgment Date | 26 July 2012 |
| Neutral Citation | [2012] EWCA Civ 1038 |
| Docket Number | Case No: A3/2012/0656 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 July 2012 |
[2012] EWCA Civ 1038
Lord Justice Pill
Lady Justice Arden
and
Lady Justice Black
Case No: A3/2012/0656
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
ROBERT ENGLEHART QC,
SITTING AS A DEPUTY HIGH COURT JUDGE
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Thomas Moody-Stuart (instructed by Kuit Steinart Levy LLP) for the Appellants
Mr Simon Malynicz (instructed by Collyer Bristow LLP) for the Respondents
Hearing date: 4 July 2012
This is an appeal from the order of Robert Englehart QC sitting as a Deputy Judge of the Chancery Division dated 1 March 2012. The judge held that the appellants, Ultimate Products Limited ("Ultimate") and Henleys Clothing Limited ("HCL"), through using the name of HENLEYS for their watches, were liable for passing off their watches as goods of the respondents, Mr Woolley and Timesource Limited ("Timesource"), who sold watches under the name of HENLEY. The fundamental issue on this appeal is whether the judge was entitled in fact and law to find that two of the essential ingredients of the tort, namely misrepresentation and damage, were satisfied.
There are in all three requirements for passing off: they are goodwill, misrepresentation and damage (see per Lord Oliver, with whom the other members of the House agreed, in Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341 at 499 ("the Jif Lemon case")). Little needs to be said about goodwill as it is accepted that goodwill attached to the respondents' business of the importation and sale of watches.
The second requirement for the tort of passing off is that there must be a misrepresentation by the defendant that his goods emanate from the claimant. It is not enough to show that purchasers were merely confused as to the provenance of the defendant's goods: purchasers must be led to believe that the goods emanate from the claimant (see per Lord Jauncey, with whom the other members of the House also agreed, in the Jif Lemon case at 510–1). There is some flexibility in this. As Lord Jauncey explained, it is enough that the defendant:
"misrepresents his goods in such a way that it is a reasonably foreseeable consequence of the misrepresentation that the plaintiff's business or goodwill will be damaged. Thus a misrepresentation by B that his inferior goods are of a superior quality, which is that of A's goods, whereby people buy B's goods instead of A's, is actionable."
The misrepresentation must be more than transitory: it is not sufficient that a purchaser is misled initially but his misunderstanding is dispelled before any material step is taken (see Cadbury-Schweppes Pty Ltd v Pub Squash [1981] 1 WLR 193, PC). In this case, for example, trade purchasers who were confused as to HENLEYS watches checked the position with Mr Woolley so that any misrepresentation to them was not operative.
Misrepresentation must operate to mislead a substantial number of members of the public. Substantiality is not a question of counting heads. It is relative to the product and market in question. The judge has to make both a qualitative and quantitative assessment of substantiality: Neutrogena Corpn v Golden Ltd [1996] RPC 473. The judge found that there was little direct evidence of misrepresentation in this case. There is an issue as to whether he gave adequate consideration to the need for substantiality and whether it was satisfied.
Misrepresentation must be "the right way round", that is to say, members of the public must be confused into believing that the goods of the defendant are goods of the claimant. It is not enough for them to be misled into thinking that goods of the claimant are goods of the defendant. This is "the wrong way round", or "reverse misrepresentation", as I shall call it. It may suffice for trade mark infringement but not for passing off.
The third requirement for the tort of passing off is damage. The claimant must show that he or she has suffered damage as a result of the misrepresentation. There is an exception for actions to prevent future passing off, when it is enough to show that such damage is likely. This action does not fall within that exception. Heads of potential damage include:
? a loss of sales
? damage to reputation
? an erosion or diminution in the value of goodwill.
It is sufficient that the claimant proves damage under only one of these heads. In this case, there was no damage to reputation because the quality of the products of the parties was similar, but the judge found damage in the form of a loss of sales.
BACKGROUND
I will consider the background against two particular features of HCL's trading in watches:
? HCL has at all material times had an established reputation of its own for its trading name of HENLEYS in the field of clothing.
? In 2007 Mr Woolley had granted Ultimate a licence ("the Woolley licence") to use the name HENLEY for the sale of men's watches. This licence contained safeguards for the respondents. No dispute arose over the use which Ultimate or HCL made of the HENLEYS name until after Ultimate terminated the Woolley licence in 2009.
HCL's concurrent goodwill: The judge held that HCL has concurrent goodwill in the name HENLEYS CLOTHING. This is confirmed by the fact that the injunction granted by the judge at trial, aimed at further passing off, excluded trading in watches using the name HENLEYS CLOTHING. Ultimate is an importer and wholesaler of fashion goods and accessories which it sells to mail order companies, retailers and online sales companies. The articles that it sells may have the retailers' brand applied for the purpose of retail sale. The second appellant ("HCL") is a retailer of fashion garments and accessories in the youth market. It uses the brand HENLEYS. Ultimate imports goods for retail by HCL, and has been importing watches to be sold as accessories for HCL's clothing range since about 2007. It obtained a licence from HCL to use its brand name HENLEYS for the purpose of selling watches.
The Woolley Licence: The Woolley licence had been executed at the suggestion of Ultimate. HCL had decided to enter the watch market but had discovered that Mr Woolley held a Community Trade Mark for the name HENLEY in relevant classes. Founded by Mr Woolley in 2004, Timesource had developed a substantial reputation as a wholesaler of watches, the majority of which were ladies' watches. These watches were marketed under three brand names, the most successful of which was HENLEY.
The Woolley licence pre-empted passing off issues so long as it was in force. The Woolley licence was restricted to men's watches. It contained safeguards for the name HENLEY. Ultimate's sales were confined by the terms of the Woolley licence to mail order companies and regular retail shops rather than discount retailers and wholesalers. In addition Ultimate's customers had to be approved by Mr Woolley so as to avoid conflicts with Timesource sales. Ultimate was only to use the name in a manner (a) which Mr Woolley approved and (b) which was not confusing or misleading. Publicity for Ultimate's watches was subject to Mr Woolley's approval. In return Mr Woolley received a 5% royalty on sales.
However, in July 2009, Ultimate gave three months' notice to terminate the Woolley licence with effect from 31 October 2009 and after that date there was no contractual restriction on Ultimate's use of the HENLEY name. The judge found that HCL came to the view that the Woolley licence was not needed or at least that to carry on business without the Woolley licence would be a commercial risk worth taking.
In December 2010, following the termination of the Woolley licence, Mr Woolley and Timesource sued Ultimate and HCL for trademark infringement and passing off. The trademark infringement claims were stayed as the appellants have a pending UK application and have applied to the Office of Harmonisation for the Internal Market (OHIM) to invalidate the registration of Mr Woolley's mark.
THE JUDGE'S REASONS FOR CONCLUDING THAT THERE HAD BEEN MISREPRESENTATION AND DAMAGE
With respect to misrepresentation, the judge had to look at the various strands of evidence in turn. It is common ground that, in determining whether there had been misrepresentation about the watches, the judge had to assess all the evidence in the case and use his own common sense and experience as a member of the public (see per Lord Diplock in Re GE Mark (1973) RPC 297). In the well-known words of Lord Parker in A.G. Spalding & Bros v A.W. Gamage [1915] 32 RPC 274, which the judge quoted:
"There may, of course, be cases of so doubtful a nature that a Judge cannot properly come to a conclusion without evidence directed to the point; but there can be no doubt that in a passing-off action the question whether the matter complained of is calculated to deceive, in other words, whether it amounts to a misrepresentation is a matter for the Judge, who, looking at the documents and evidence before him, comes to his own conclusion, and, to use the words of Lord Macnaughten in Payton & Co Ltd v Snelling, Lampard & Co Ltd (17 RPC 635) 'must not surrender his own independent judgment to any witness whatever'."
One strand of relevant evidence was the existence of the Woolley licence and the judge, having considered the various factors that could be deduced from the Woolley licence in either direction, decided to leave it out of account for all the purposes of the passing off claim. This was because the factors went...
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