In a recent summary judgment application in the Intellectual Property Enterprise Court (“IPEC”), Hacon HHJ has found a company director jointly liable with the company for trade mark infringement and passing off.
The claimant, a marketer of food and drinks for the sports market, sold under two trade marks: GRENADE as a word mark, and a logo mark containing the word GRENADE in a stylised font, with an image of a grenade firearm in place of the A. The claimant had traded on a substantial scale under these marks since 2010, and acquired the associated goodwill, as well as two registered EU trade marks (“EUTMs”), in the two forms described.
The first defendant, Grenade Energy Limited (“GEL”), was incorporated in June 2013, and supplied drinks (including energy drinks), including an energy drink called Epic, which were sold and advertised in a number of ways, including on GEL’s website. The website also featured GEL’s name and the logo. The second defendant, Mr Chawla, was the sole director and shareholder of GEL, and it was argued that he was jointly liable with GEL for infringing the claimant’s EUTMs and passing off its products as those of the claimant or as being otherwise associated with the claimant, through authorisation by him or in furtherance of a common design between him and GEL.
The defendants admitted infringement of the EUTMs. Two of the three elements required for passing off – namely goodwill connected with GRENADE and misrepresentation on the part of the defendants – were also admitted. However, it was argued that the defendants had an arguable defence to passing off for lack of damage suffered by the claimant. The second defendant also sought to argue that he was not jointly liable with GEL and that the matter should go to trial.
As this was a summary judgment application, the judge needed to be satisfied that the defendants had no real prospect of successfully defending the claim, either in relation to passing off or joint tortfeasorship.
The matter of passing off was dealt with swiftly. Having noted that the claimant had produced evidence of actual confusion, and in light of the fact goodwill and misrepresentation had been admitted, Hacon HHJ suggested that it was inevitable that the claimant would suffer damage on the facts. Even if lost sales to GEL could not be established, damage would occur through a loss of control over the claimant’s goodwill. Hacon HHJ therefore found there was a lack of reality in the defendants’ suggestion that the claimant would not suffer damage, and therefore summary judgment was given.
In defence of the second defendant, two well-established propositions of law were raised, which Hacon HHJ accepted.
- A director of a company is not automatically to be identified with his company for the purposes of the law of tort, however small the company may be and however powerful his control over its affairs.
- There has to be “knowing, willing or a wilful quality” to the participation of the director in order for him to be jointly liable with his company.
Hacon HHJ also pointed to his summary of the Supreme Court’s position in Shepherd UK v Fish & Fish Ltd  UKSC 10 as given in Vertical Leisure Ltd v Polepus Ltd  EWHC 841 (IPEC):
“I interpret this to mean that in order to fix an alleged joint tortfeasor with liability, it must be shown both that he actively co-operated to bring about the act of the primary tortfeasor and also that he intended that his co-operation would help to bring about that act (the act found to be tortious).”
It is important to note that the joint tortfeasor need not necessarily have the intention to commit the infringement or misrepresentation, but needs only to intend to commit the act (which then may result in an infringement of rights or a misrepresentation to the public).
As the second defendant was the sole director and sole shareholder of GEL, this gave rise to an evidential presumption that all acts done by GEL were done at the instigation of the second defendant alone. Hacon HHJ continued that, once this has been established, the evidential burden switches to the second defendant to show why the acts complained of were not initiated and controlled by him, contrary to what one might expect.
The fact that the second defendant did not identify anybody else who was responsible for the acts complained of meant there was, to the judge’s mind, no real doubt that the second defendant was the sole instigator and controller of those acts. Therefore, Hacon HHJ held that the second defendant had procured or actively cooperated with GEL to bring about the infringement of the EUTMs and passing off, and had intended his cooperation to bring about those acts, and there was no real prospect of the contrary being established at trial. Summary judgment on the joint tortfeasance was given.
It may be rare that companies will have a sole director and sole shareholder, and no other individual is generally involved in the day-to-day decision-making activities of the business. However, it is abundantly clear that in such cases, this decision will be extremely helpful in establishing joint tortfeasorship against such individuals, particularly where it appears likely the corporate entity has been set up in an attempt to avoid personal liability.
Hacon HHJ’s comments on the evidential burden shifting to the defendant, once sole directorship and sole shareholding has been established, are interesting, as it may be difficult to prove – even where there are other employees involved – that the sole director was not “willing” and otherwise responsible for those actions being taken by the company.
However, the two principles set out above are still key in issues of joint tortfeasorship and it may not always be apparent at the outset when proceedings are issued who is the controlling spirit behind the corporate entity.