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Intellectual Property Enterprise Court |
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You are here: BAILII >> Databases >> Intellectual Property Enterprise Court >> The Military Mutual Ltd v Police Mutual Assurance Society Ltd & Ors [2018] EWHC 1575 (IPEC) (22 June 2018) URL: http://www.bailii.org/ew/cases/EWHC/IPEC/2018/1575.html Cite as: [2018] EWHC 1575 (IPEC) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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THE MILITARY MUTUAL LIMITED |
Claimant |
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- and - |
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POLICE MUTUAL ASSURANCE SOCIETY LIMITED PMGI LIMITED PMHC LIMITED MORTGAGE EXCELLENCE PLC STUART HARVEY INSURANCE BROKERS LIMITED |
Defendants |
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Simon Malynicz QC and Tim Austen (instructed by Clifford Chance LLP) for the Defendants
Hearing dates: 9-11 May 2018
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Crown Copyright ©
Judge Hacon :
Introduction
Background
The law
"My Lords, A. G. Spalding & Bros. v. A. W. Gamage Ltd., 84 L.J.Ch. 449 and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off: (1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so."
"It is essential for the plaintiff in a passing off action to show at least the following facts:- (1) that his business consists of, or includes, selling in England a class of goods to which the particular trade name applies; (2) that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods; (3) that because of the reputation of the goods, there is goodwill attached to the name; (4) that he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value; (5) that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached."
"[23] The view expressed by the editors of Kerly's Law of Trade Marks and Trade Names (14th edition) is that the classic and extended forms of passing-off are not different torts but are simply convenient labels to describe the two most obvious situations in which the law will intervene to render actionable the misappropriation of established goodwill by a seller based on a misrepresentation by him as to the nature and provenance of his own goods. The question whether this is the correct juristic analysis is probably not critical to the outcome of this appeal. Our task is to apply the law in the form it has now reached rather than to worry about its historical antecedents. But the value of this analysis (which I endorse) is that it confirms what is the essence of the tort of passing-off in all its forms: namely that it is there to protect the goodwill created by the product (whether in conjunction with the claimant's mark or alone) and is not there simply to prevent the misdescription of the goods or the unauthorised use of the claimant's name."
Goodwill
"(2) that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods;"
"Of course it is necessary to be able to identify with reasonable precision the members of the class of traders of whose products a particular word or name has become so distinctive as to make their right to use it truthfully as descriptive of their product a valuable part of the goodwill of each of them; but it is the reputation that that type of product itself has gained in the market by reason of its recognisable and distinctive qualities that has generated the relevant goodwill. So if one can define with reasonable precision the type of product that has acquired the reputation, one can identify the members of the class entitled to share in the goodwill as being all those traders who have supplied and still supply to the English market a product which possesses those recognisable and distinctive qualities."
"[123] It seems to me that the reason why it is necessary for the protected class of goods to be clearly defined, or defined with reasonable precision, is because the goodwill that the tort seeks to protect is a species of property. In some intellectual property cases there is too much 'intellectual' and not enough 'property'. The essence of a right of property is that it distinguishes between what is mine and what is not mine. So there needs to be a boundary. Thus the debate about the definition of the class is essentially an intellectual property boundary dispute. The boundaries are needed in order to delineate both what is protected and also who shares in the ownership of the protected subject matter. The action in passing off is directed against those who cross the boundary."
" he must show that the name has come to denote a particular kind of product which has recognisable characteristics which distinguish it from other products, and that the public are motivated to buy the product by reason of those characteristics."
" the new entrant must have himself used the descriptive term long enough on the market in connection with his own goods and have traded successfully enough to have built up a goodwill for his business."
"The difference in this respect between the proprietor's rights in marks protectable by classic passing off proceedings and his rights in famous generic terms protectable by the extended form of passing off inevitably has impact on other parts of the action. In Advocaat it was said that mere entry into the market by a new trader who uses the term accurately on his products would not give him any right of action for passing off. Lord Diplock said, although it was not strictly in issue in the Advocaat case, that the new entrant must have himself used the descriptive term long enough on the market in connection with its own goods and have traded successfully enough to have built up a goodwill for his business before he could sue. In this respect the House of Lords was carrying over one of the factors which a plaintiff needed to prove in a classic passing off action. However the reality is somewhat different. Once a trader becomes a legitimate member of the trade using a protected descriptive term, he cannot be sued for passing off by other members of the trade and, if he joins in a passing off action to protect the term, the courts have not inquired too deeply into how extensive his own trade has been."
Misrepresentation
"The misrepresentation was not that the defendants' product was the product of the plaintiffs, or even that it came from France. The misrepresentation was that 'Spanish Champagne' was wine of the kind that enjoyed the reputation and goodwill which attached to genuine champagne, and in which the plaintiffs had a property right."
"A man who does not know where Champagne comes from can have not the slightest reason for thinking that a bottle labelled 'Spanish Champagne' contains a wine produced in France. But what he may very well think is that he is buying the genuine article real Champagne, and that, I have no doubt, was the sort of deception which the judge had in mind. He thought, as I read his judgment, that if people were allowed to call sparkling wine not produced in Champagne 'Champagne', even though proceeded by an adjective denoting the country of origin, the distinction between genuine Champagne and 'champagne type' wines produced elsewhere would become blurred; that the word 'Champagne' could come gradually to mean no more than 'sparkling wine'; and that the part of the plaintiffs' goodwill which consisted in the name would be diluted and gradually destroyed. If I may say so without impertinence I agree entirely with the decision in the Spanish Champagne case but as I see it it uncovered a piece of common law or equity which had till then escaped notice for in such a case there is not, in any ordinary sense, any representation that the goods of the defendant are the goods of the plaintiffs, and evidence that no one has been confused or deceived in that way is quite beside the mark. In truth the decision went beyond the well trodden paths of passing off into the unmapped area of 'unfair trading' or 'unlawful competition'."
" the misrepresentation was that the respondents' 'Old English Advocaat' was a liqueur of the kind that enjoyed the reputation attached to genuine advocaat in England."
"Before dealing with the facts of this case I must say something as to the law which the Court has to apply. The law, as I understand it, is this: if a man makes a statement which is true, but which carries with it a false representation and induces the belief that his goods are the plaintiffs' goods, he will be restrained by injunction. He cannot rely on the fact that his statement is literally and accurately true, if, notwithstanding its truth, it carries with it a false representation. Instances of that proposition are found in the 'Glenfield Starch' case, the 'Camel-Hair Belting' case, and the 'Stone Ale' case; and many other instances might be adduced."
"As to reputation, the producers will face the obvious difficulty that many people's normal, perhaps their only, experience of Parma ham in this country comes from consuming it in restaurants, where it is very rarely, if ever, sliced off the leg in their presence. However, the judge accepted that the evidence certainly disclosed that to some people in England Parma ham was synonymous with a whole ham bearing the crown sliced in the presence of the ultimate purchaser. That evidence came from people in the wholesale and retail food trades, restaurateurs and publishers and writers of books on food. I am not quite sure whether the judge was of the view that it established a serious question to be tried as to the existence of the alleged reputation amongst a section of the public, but for my part I am prepared to assume that it does.
Where then is the misrepresentation leading to confusion? There must be both. Let us assume, first, that there is a misrepresentation. It will not confuse the section of the public to whom the reputation is known. They will know that Marks & Spencer's ham cannot be the real thing and may decide to buy it or not as they choose."
"Misrepresentation is an essential element in the tort of passing-off. But misrepresentation, in this context, lies in marketing goods in a way which will lead a significant section of the public to think that those goods have some attribute or attributes which they do not truly possess. That arises where there is confusion, or the likelihood of confusion, in the minds of the public between the goods of the defendant and other goods which do possess that attribute or those attributes."
"Morritt LJ implied that starting with the relevant minimum proportion of the public is the wrong way around. I think the better approach is instead to assess whether it is likely that sufficient individuals have made or will make the false assumption such as to cause material damage to the goodwill of the claimant."
Damage
Relevant date
Services and types of organisation
The definition of 'mutual' relied on by MML
"16. In the premises of the foregoing, consumers recognised the term 'Mutual' as designating an organisation with the characteristics identified in paragraph 10-15 above and that the benefits of being a member of the mutual company will be available in relation to products and services owned by that company."
"11. The Oxford English Dictionary contains the following definition of 'mutual':
'Designating or relating to a financial institution (as a building society, insurance company, etc) without capital stock, that is owned by its members who subscribe to a common fund from which claims, loans etc., are paid, profits after deductions being shared between them. Freq. in mutual company, mutual society.'
13. The Department for Business Innovation & Skills' Guide to Mutual Ownership states:
'The distinguishing characteristic of a mutual is that the organisation is owned by, and run for the benefit of its members, who are actively and directly involved in the business whether its employees, suppliers, or the community or consumers it serves, rather than being owned and controlled by outside investors.' "
"There is no doubt I'm not going to shy away from this the term 'mutual' has what my learned friend describes as an amorphous and malleable technical meaning, and it's become particularly malleable since the passing of [the Cooperative and Community Benefit Societies Act 2014]."
"The term 'mutual' defines and describes a business which is owned and controlled by its members working for their mutual benefit. It does not have external shareholders but it may have customers who are not members. This form of mutual is universal in financial mutuals with which this case is concerned."
The witnesses
MML's argument in summary
Goodwill
Misrepresentation
Damage
The main issue to be resolved
The meaning of 'mutual' in the mind of the relevant public
The regulatory structure
"The Mutuals Public Register is the public record of registered mutual societies:
- building societies
- credit unions
- friendly societies
- registered societies"
" 'Registered societies' include:
- co-operative societies businesses that are run for the benefit of their members, distributing profits between their members
- community benefit societies businesses that are run for the benefit of the wider community, re-investing profits in the community
- 'pre-commencement societies' (industrial and provident societies, registered before 1 August 2014)"
The dictionaries
"Denoting a building society or insurance company owned by its members and dividing some or all of its profits between them."
"of or relating to a plan whereby the members of an organization share in the profits and expenses; specifically: of, relating to, or taking the form of an insurance method in which the policyholders constitute the members of the insuring company"
"[ONLY BEFORE NOUN] BUSINESS a mutual insurance company, building society etc is owned by all of its customers, who share its profits"
"If a building society or an insurance company has mutual status, it is not owned by shareholders but by its customers who receive a share of the profits."
"denoting an insurance company, etc, in which the policyholders share the profits and expenses and there are no shareholders."
"If a savings and loan association or an insurance company has mutual status, it is owned by its customers. Mutual companies are owned by the policyholders, while stock holders own stock insurance companies. A mutual insurance company has no formal stockholders or capital stock, and is owned by its policyholders. If a savings and loan association or an insurance company has mutual status, it is owned its customers."
"a financial organisation that is owned by its members, rather than by shareholders"
"An insurance system in which the insured persons become company members, each paying specified amounts into a common fund from which members are entitled to indemnification in case of loss"
"(Insurance) a system of insurance by which all policyholders become company members under contract to pay premiums into a common fund out of which claims are paid."
The witnesses
"Mutual organisations are owned by their customers. In the UK this includes mutual insurers, friendly societies, building societies, credit unions and co-operatives. Mutuals may have their own unique structural form, established by statute, such as the Friendly Societies Act 1992.
Customer ownership is the key factor in mutuality. The owners ('Members') are the reason the mutual exists and are its primary concern."
"Mutual organisations are owned by members usually their customers."
"What is a mutual?
Mutual insurers, friendly societies and building societies they are all owned by you!
These days the mutual sector is very diverse and includes:
Housing Associations
Clubs
Credit Unions
Employee owned bodies
Specialist bodies: such as football supporter trusts and community mutuals
There are also lots of new mutuals in the public sector such as:
NHS Foundation Trusts
Leisure Trusts
Co-operative Schools
Community Housing Schemes
The mutual philosophy is built on a sense of ownership, 'belonging to an organisation' and trust. As mutuals are owned by you, their customers (members) and have no obligation to shareholders they are free to focus entirely upon their customers' needs."
" through their different, customer-owned form adds to the financial stability of the market as a whole "
"While the term mutuality is widely used within the sector, there is no generally accepted definition of the term, therefore interviewees were asked to articulate what mutuality meant to them.
It was clear from the interviews that the meanings and practices of mutuality, and how these apply to financial mutuals, is the subject of ongoing inquiry and debate in the financial mutuals sector."
Mr Shaw agreed with statement in the bullet point.
Conclusion on the meaning of a financial 'mutual'
The consequence of the public understanding of 'mutual'
The further arguments
Whether Forces Mutual existed
Whether MML could have shared in the goodwill
Whether there could have been a misrepresentation
Whether there could have been damage
Conclusion