The National Guild of Removers & Storers Ltd v Central Moves Ltd & Anor

A company cannot acquire primary liability for passing off merely because it has the same controlling mind as a company that committed the tort. Liability depends on whether the second company itself made a misrepresentation satisfying the requirements of passing off. A dormant company’s liability after it ceases trading was left open.

In assessing damages, a standard licensing rate is not automatically applicable where the licence would grant rights materially wider than the unlawful use. The court may use the user principle and estimate the royalty that willing parties would have agreed for the limited use. In IPEC proceedings, small-claims costs rules may apply to costs incurred before formal allocation to that track.

The claimant appealed from an order of Deputy District Judge Vary dated 29 January 2016. The underlying passing-off claim concerned an online directory entry stating that the claimant’s former member was a member of the claimant organisation. The former member had ceased trading, and its business had later been continued by Central Moves Ltd, operated by the same individual.

The District Judge found the individual jointly liable for the former company’s passing off, but dismissed the claim against Central Moves. He assessed damages using the user principle and awarded costs under the IPEC small-claims regime. The appeal challenged Central Moves’ liability, the duration and assessment of the individual’s liability, damages and costs.

1. Appeal dismissed. The District Judge was entitled to find that Central Moves was not liable for passing off.
2. A joint tortfeasor cannot transfer primary liability from one company to another merely by ending the first joint design and beginning a similar activity through the second company. The question is whether an act done by the second company itself satisfies the requirements of passing off. The same party may, in principle, be jointly liable for a tort committed by a non-party, but the evidence did not establish that Central Moves made an actionable misrepresentation.
3. The court did not decide whether a dormant company could remain liable for passing off after it ceased active trading. Passing off is analysed as a misrepresentation made by a trader in the course of trade, although “trader” has a broad meaning.
4. The District Judge was correct to assess damages using the user principle. The existence of standard licence terms does not require their unconditional application where the rights granted under those terms are materially wider than the unlawful use. Annual membership fees could provide a starting point, but the hypothetical royalty had to reflect the limited use of the claimant’s name on a trade-only website. The willing licensor and willing licensee approach was appropriate.
5. The hypothetical licence period could properly attract no royalty after the former company became dormant, because the licence would confer no benefit and the continued directory entry could cause no loss of business to other members.
6. Although the proceedings had initially been issued in the multi-track, they were formally allocated to the IPEC small-claims track at the case management conference. The District Judge was entitled to assess costs before and after allocation under the IPEC small-claims rules.

• High Court (Intellectual Property Enterprise Court): appeal from the order of Deputy District Judge Vary dated 29 January 2016 dismissed.
• IPEC Small Claims Track: claim against Central Moves dismissed; judgment entered against Mr Rust, with damages and costs awarded.