West Sussex County Council, R (on the application of) v Kahraman

The defence under section 92(5) of the Trade Marks Act 1994 requires the defendant to prove an objectively reasonable belief that the use of the sign was lawful. It is not a general defence of honesty or good faith. The objective standard applies equally to experienced and inexperienced traders. A trader who buys goods bearing well-known designer marks at very low prices from an unidentified person, without positive evidence of that person’s trading reputation and without making reasonable enquiries, cannot discharge the burden of proof merely by relying on the practices of other traders or personal inexperience.

The Council appealed by way of case stated from the decision of the Sussex (Western) Justices at Chichester Magistrates’ Court on 25 October 2005. Mr Kahraman had been charged under sections 92(1)(b) and 92(6) of the Trade Marks Act 1994 with selling or offering for sale clothing bearing counterfeit trade marks.

The Justices accepted that he genuinely believed that the goods were clearance stock and held that he had proved, on objectively reasonable grounds, that he believed the use of the marks was not an infringement. They asked whether that conclusion was open to them where he had taken no action to establish whether the goods were genuine and had bought them from a person known only as John. The central issue was the proper application of section 92(5).

1. The appeal was allowed. The matter was remitted to be reheard by a differently constituted Magistrates’ Court.

2. Section 92(5) of the Trade Marks Act 1994 provides a specific defence where the defendant believed on reasonable grounds that the use of the sign was not an infringement. The provision imposes an objective test as to the reasonableness of those grounds, and the burden of proving the defence rests on the defendant.

3. The defence is concerned with a reasonable belief in the lawfulness of the defendant’s conduct. It is not a general defence of good faith. The statutory scheme creates offences of near absolute, or initially strict, liability, reflecting the public importance of preventing trade in counterfeit goods. The court relied on R v Johnstone [2003] UKHL 28 and R v McCrudden [2005] EWCA Crim 466.

4. A trader purchasing goods bearing well-known designer marks at very low prices from a person of unknown identity, without positive evidence of trade reputation, cannot begin to discharge the section 92(5) burden merely by observing other traders, relying on the seller’s previous dealings, or pointing to personal inexperience. The objective standard applies equally to experienced and inexperienced traders.

5. On the facts found by the Justices, no reasonable person would have taken the risk of selling the goods in those circumstances. The Justices therefore misdirected themselves in law when they concluded that Mr Kahraman had proved reasonable grounds for his belief. The appeal was allowed with costs in both courts, subject to detailed assessment if not agreed.

• High Court (Administrative Court): The appeal by case stated from the decision of the Sussex (Western) Justices at Chichester Magistrates’ Court was allowed. The matter was remitted to a differently constituted Magistrates’ Court.