Fearns (t/a Autopaint International) v Anglo-Dutch Paint & Chemical Company Ltd. & Ors

On an appeal against primary findings of fact, the Court of Appeal must give proper weight to the trial judge’s advantage in seeing witnesses and hearing the whole trial. It may assess documents, chronology and inherent probabilities, but should interfere only on a proper basis. Fresh evidence should not be admitted where it could have been produced at trial with reasonable diligence or would not materially affect the result. A trial judge may decide an aspect of causation where no split trial was ordered and the evidence permits it. However, causation cannot be finally determined until the extent of the relevant infringement or breach is known.

The claimant appealed from the decision of Christopher Floyd QC, sitting as a High Court Judge, reported at [2007] EWHC 955 (Ch). The judge found that an oral agreement permitted direct supplies to franchisees where the claimant could not supply them, but that supplies outside that limitation infringed the claimant’s trade mark and amounted to passing off. He nevertheless found that the unlawful conduct had not caused the claimant to lose his franchisees.

The appeal concerned the finding of consent, the treatment of causation at trial, and applications to adduce fresh evidence. The central questions were whether the trial judge had been entitled to uphold the alleged oral agreement and whether the causation issue could be finally determined before the extent of the relevant breaches was known.

Disposition. Waller LJ delivered the judgment, with Arden LJ and Toulson LJ agreeing. The appeal was allowed in part on causation. The challenge to the finding of consent failed, and the applications to adduce fresh evidence were refused.

1. The consent issue was one of primary fact, substantially dependent on the credibility of the witnesses. Applying the approach stated in Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577, the appellate court had to recognise the trial judge’s advantage in hearing the witnesses and the whole trial. It could examine documentary chronology and inherent probabilities, but the trial judge had considered the competing evidence and was entitled to accept the evidence supporting an oral agreement.
2. The agreement found by the trial judge was conditional. Direct supplies were permitted only where Autopaint was unable to supply the relevant products. The finding that supplies outside that limitation infringed the trade mark and constituted passing off therefore stood. The draft email was not independent corroboration, but was relevant to consistency. The October meeting and credit notes provided stronger support for the finding of consent, while the February 2005 fax supported consent without accurately recording all its terms.
3. Fresh evidence was rightly excluded under the Ladd v Marshall criteria. The material could have been identified or produced at trial with reasonable diligence and would not have had an important influence on the result. Litigation finality also weighed against allowing a party a further attempt on appeal.
4. There had been no direction for a split trial. The judge was therefore entitled to decide the demonstrated aspect of causation, namely the cause of the loss of the franchisees. But the court could not finally determine the effect of the infringements and breaches until their extent was established. The claimant had to remain able to attempt to prove loss flowing from breaches of the agreement, although the Court of Appeal considered that success on that issue appeared unlikely.

The appeal was allowed to the extent that the claimant was prevented from establishing loss of his business flowing from breaches of the May 2004 agreement.

• Court of Appeal (Civil Division). Appeal allowed in part on causation; the finding of an oral agreement and its limited scope was upheld.
• High Court, Chancery Division. Christopher Floyd QC, sitting as a High Court Judge, decided the claim at [2007] EWHC 955 (Ch). He found consent to limited direct supplies, unlawful conduct outside that consent, and no causative loss of the franchisees attributable to that conduct.