Lifestyle Equities CV and another v Ahmed and another

A person is jointly liable for procuring a tort only if they intended to cause the primary actor’s conduct and knew the essential facts which made it wrongful. Liability for assisting pursuant to a common design likewise requires knowledge of those facts. These requirements apply even where the primary tort is one of strict liability.

Company directors enjoy no special immunity from ordinary principles of tort or accessory liability. Corporate attribution does not remove personal responsibility for an individual’s own conduct.

An account of profits requires each defendant to surrender only profits which that defendant derived from the infringement. A company’s profits cannot be recovered from its directors merely because they were jointly responsible. An ordinary salary paid for services, and money received as a genuine loan, are not profits made from an infringement.

Lifestyle alleged that companies trading as Juice Corporation infringed its registered trade marks by selling goods bearing “Santa Monica Polo Club” signs. It also sued two directors, Mr and Ms Ahmed, for procuring the infringements and participating in a common design.

The Chancery Division held the directors jointly liable and ordered them to account for portions of their salaries and, in Mr Ahmed’s case, a company loan: [2020] EWHC 688 (Ch). The Court of Appeal upheld their liability and the treatment of their salaries, but reversed the ruling concerning the loan and allowed deductions for income tax: [2021] EWCA Civ 675.

The directors appealed on liability and remedy. Lifestyle appealed seeking an account from them of the company’s profits. The central questions were whether accessory liability for a strict-liability tort requires knowledge of the facts constituting the tort, and which gains may be recovered through an account of profits.

1. Disposition. Lifestyle’s appeal was dismissed and the Ahmeds’ appeal was allowed. Lord Leggatt delivered the sole judgment, with which Lord Lloyd-Jones, Lord Kitchin, Lord Stephens and Lord Richards agreed. The claims against the Ahmeds failed and the orders requiring them to account for profits were set aside.

2. Liability under sections 10(2) and 10(3) of the Trade Marks Act 1994 is strict. A primary infringer need not know that the relevant use infringes a trade mark. The statutory acts of infringement do not, however, include merely procuring or authorising another person to use an offending sign. Accessory liability arises separately under the common law.

3. Directors are governed by the ordinary principles of tort law. Attribution of an individual’s act to a company does not remove responsibility from the individual. Separate corporate personality and limited shareholder liability afford no special immunity to directors. The principle associated with Said v Butt is confined to inducing a principal’s breach of contract, or analogous liability arising from a voluntary allocation of risk.

4. Procurement and participation in a common design are distinct forms of accessory liability. A procurer must intend to cause the primary actor’s conduct and must know, or deliberately turn a blind eye to, the essential facts which make that conduct wrongful. Common-design liability requires a primary tort, more than trivial assistance pursuant to a shared design, and the same knowledge of the essential facts. Knowledge of the law and an intention to injure the claimant are unnecessary.

   The knowledge requirement applies even when the primary tort is one of strict liability. The courts below therefore applied the wrong legal standard. Although the Ahmeds procured acts which constituted infringement, Lifestyle neither pleaded nor proved that they knew the essential facts which made the signs infringing.

5. An account of profits is measured separately against each defendant. It requires surrender of profits made by that defendant, rather than profits made by a company or another joint wrongdoer. Requiring a director to pay an amount equal to the company’s profit would impose a penalty rather than remove the director’s gain.

6. The company loan was not a profit. Its later forgiveness or non-enforcement could not retrospectively alter its original character. The Ahmeds’ salaries were ordinary remuneration for services and were not profits from infringement. The findings therefore established no personal profits for which either director could account.

7. In obiter observations, an innocent primary infringer may be ordered to account because the remedy allocates profits from exploiting the intellectual property right to its owner rather than punishing wrongdoing. Further, an account should isolate the profit caused by use of the infringing sign; it should not automatically include all profit from selling the goods.

• United Kingdom Supreme Court: Lifestyle’s appeal was dismissed and the Ahmeds’ appeal was allowed unanimously: [2024] UKSC 17. The orders against the Ahmeds for an account of profits were set aside.
• Court of Appeal: Lifestyle’s appeal was dismissed. Most of the Ahmeds’ appeal was dismissed, but Mr Ahmed succeeded concerning the company loan, and deductions for income tax were allowed: [2021] EWCA Civ 675; [2021] Bus LR 1020.
• High Court, Chancery Division: The Ahmeds were held jointly liable for specified company infringements and were ordered to account for portions of their salaries; Mr Ahmed was also ordered to account for a company loan: [2020] EWHC 688 (Ch); [2020] FSR 29.
• High Court, Chancery Division: At the first trial, Hornby Street was found liable for trade mark infringement and passing off: [2017] EWHC 3313 (Ch); [2018] FSR 15.