Lifestyle Equities CV and another v Ahmed and another

The Supreme Court addressed when directors can be held liable as accessories for a company's strict liability tort — here, trade mark infringement under the Trade Marks Act 1994 (notably section 10) — and what mental element, if any, is required for such accessory liability. The court held that personal liability under section 10 requires that the individual personally "use" the sign in the course of trade; employees or directors acting for the company do not themselves use the sign for the purposes of section 10. Accessory liability at common law (for procuring or participating in a common design) is not strict: the accessory must know the essential facts that make the primary actor's conduct an actionable wrong (turning a blind eye can suffice), even where the primary tort is one of strict liability. The court also held that an account of profits is confined to profits made by the person ordered to account, so a director cannot be ordered to disgorge profits made by the company when the director personally made no such profit. Applying these principles, the court allowed the Ahmeds' appeal and dismissed Lifestyle's appeal because the findings did not show the knowledge required for accessory liability and there was no basis to treat the Ahmeds as having personally derived profits from the infringements.

This appeal arose from two linked Chancery Division trials and a Court of Appeal decision. The claimants, Lifestyle, sued a number of defendants for registered trade mark infringement and passing off arising from use of "Santa Monica Polo Club" signs resembling Lifestyle's "Beverly Hills Polo Club" trade marks. The first trial ([2017] EWHC 3313 (Ch)) found Hornby Street liable; the second trial ([2020] EWHC 688 (Ch)) addressed the Ahmeds (directors of the companies) and found them jointly and severally liable with the companies and ordered the Ahmeds to account for certain profits. The Court of Appeal ([2021] EWCA Civ 675) largely upheld the judge but allowed limited adjustments.

The nature of the claim and relief sought:

• Lifestyle sued for trade mark infringement (sections 9 and 10 of the Trade Marks Act 1994) and passing off and elected an account of profits rather than damages.

Issues framed by the court:

• Whether directors (the Ahmeds) were personally liable as accessories for the company's strict liability tort of trade mark infringement, and whether accessory liability for such torts is itself strict or requires a mental element such as knowledge.
• Whether an account of profits could be ordered against directors who had not been found to have acted unconscionably or in bad faith, whether directors may be ordered to account for profits made by the company, and whether particular items (a loan, portions of salary) could be treated as the directors' profits for this purpose, including whether tax should be deducted.

Court's reasoning (concise):

1. Statutory infringement under section 10 is strict and requires personal "use" of the offending sign; an employee or director acting on behalf of a company does not, by those acts alone, "use" the sign on their own account. The Ahmeds therefore did not personally infringe under section 10 on the facts found.
2. Common law accessory liability (procuring or participating in a common design) applies alongside statutory rights, but to impose accessory liability where the primary tort is strict the accessory must know the essential facts that make the primary actor's conduct unlawful; mere absence of a mental element for the primary tort does not remove the knowledge requirement for accessory liability.
3. Directors are not immune from ordinary tort liability by virtue of acting as directors; arguments that company law duties or the attribution of acts to the company immunise directors were rejected.
4. An account of profits targets profits made by the defendant personally; a person should not be required to disgorge profits made only by another. A loan is not a profit simply because it exists or is later unrecovered; remuneration (salary) paid as fair market value is not a profit of the recipient.

Outcome: The court concluded the Ahmeds were not shown to have the requisite knowledge for accessory liability and in any event had not personally made profits from the infringements; the orders for an account of profits against them were therefore set aside.

The Ahmeds' appeal was allowed and Lifestyle's appeal was dismissed. The Supreme Court held that (1) directors and employees acting on behalf of a company do not themselves "use" a sign in the course of trade for the purposes of section 10 unless they act on their own account; (2) accessory liability for procuring or assisting a tort requires knowledge of the essential facts that make the primary actor's conduct unlawful (turning a blind eye can suffice), even if the primary tort is strict; and (3) an account of profits can only reach profits actually made by the defendant ordered to account, so the judge was wrong to treat a loan as a profit or to award to Lifestyle profits in respect of salaries where no personal profit was shown.

First-instance hearings in the Chancery Division: liability of Hornby Street found in the first trial ([2017] EWHC 3313 (Ch)); second trial dealing with the Ahmeds [2020] EWHC 688 (Ch). Appeal to the Court of Appeal: Birss LJ (with Moylan and Nugee LJJ) in [2021] EWCA Civ 675, which dismissed Lifestyle's appeal and allowed aspects of the Ahmeds' cross-appeal. Two appeals to the Supreme Court resulted in this judgment ([2024] UKSC 17).