Full Judgment Text & Judicial Ruling

2025 C L D 750 [Supreme Court of UK]* Present: Lord Lloyd-Jones, Lord Kitchin, Lord Leggatt, Lord Stephens and Lord Richards LIFESTYLE EQUITIES CV and another---Appellants Versus AHMED and another---Respondents Decided on 15th May, 2024. (On appeal from: [2021] EWCA Civ. 675). Trade Marks--- ----Infringement by use of deceptively similar sign---Likelihood of confusion---Unfair advantage/detriment to distinctive character or reputation---Joint liability of company directors as accessories---Strict liability tort---Knowledge requirement---Remedies---Account of profits---Apportionment ---Directors' personal liability---A person is not liable as an accessory for a strict liability tort, such as trade mark infringement, unless they have knowledge of the essential facts that make the act wrongful---Liability of accessories is not strict and requires a mental element; mere involvement in the company's activities is insufficient---An account of profits is an equitable remedy aimed at preventing unjust enrichment---It is not punitive and should not be ordered against a person who did not personally benefit from the infringement. The appellants, Lifestyle Equities CV and another, owned UK-registered trade marks for "BEVERLY HILLS POLO CLUB" and associated logos. They brought proceedings against Hornby Street Ltd and its directors, Mr Kashif Ahmed and Ms Bushra Ahmed, alleging that the company's use of "SANTA MONICA POLO CLUB" signs infringed their trade marks under sections 10(2) and 10(3) of the Trade Marks Act 1994. At first instance, the High Court found that Hornby Street Ltd had infringed the trade marks and that the Ahmeds were jointly liable as accessories, despite no findings that they knew or ought to have known of the infringement. The Ahmeds were ordered to account for profits, including a portion of their salaries and a director's loan. The Court of Appeal upheld the finding of liability but set aside the order regarding the director's loan. On appeal to the Supreme Court, the issues were: (1) whether a company director can be held liable as an accessory for the company's strict liability tort of trade mark infringement without knowledge of the essential facts constituting the tort; and (2) whether such a director can be ordered to account for profits not personally received. Accessory liability requires knowledge: A person will only be liable in tort as an accessory if they have knowledge of the essential facts that make the act in question tortious. This applies even where the underlying tort is one of strict liability, such as trade mark infringement under the Trade Marks Act 1994. Accessory liability arises under common law doctrines, principally procuring or authorising the tort, or participation in a common design, each of which requires a fault element. Strict liability applicable to the primary in fringer does not extend to accessories. For a director or third party to be held jointly liable, they must know or wilfully turn a blind eye to facts such as the likelihood of confusion or the unlawful character of the conduct. This requirement ensures that personal fault underlies secondary liability.

Rainham Chemical Works Ltd. v. Belvedere Fish Guano Co Ltd [1921] 2 AC 465, 488; Performing Right Society Ltd. v. Ciryl Theatrical Syndicate Ltd. [1924] 1 KB 1, 14-15; C Evans & Sons Ltd. v. Spritebrand Ltd. [1985] 1 WLR 317, Vestergaard Frandsen A/S v. Bestnet Europe Ltd. [2013] UKSC 31; [2013] 1 WLR 1556; Twinsectra Ltd. v. Yardley [2002] UKHL 12; [2002] 2 AC 164 and OBG Ltd. v Allan [2007] UKHL 21; [2008] AC 1 ref. There is a general principle of the common law that a person who knowingly procures another person to commit an actionable wrong will be jointly liable with that other person for the wrong committed. The liability of the procurer is an accessory liability. Where the primary wrong is a breach of contract, this accessory liability takes the form of a distinct tort. Where the primary wrong is a tort, however, there is no need to posit a separate tort of procuring another person to commit a tort. Where the general principle applies, the procurer is made jointly liable for the tort committed by the primary wrongdoer. There is a further, distinct principle of accessory liability by which a person who assists another to commit a tort is made jointly liable for the tort committed by that person if the assistance is more than trivial and is given pursuant to a common design between the parties. On the facts of a particular case both principles may be engaged. But on the present state of the law assistance which falls short of procuring the primary wrongdoer to commit the tort cannot lead to liability unless it is given pursuant to a common design. Although procuring a tort and assisting another to commit a tort pursuant to a common design are distinct bases for imposing accessory liability, they must operate consistently with each other and such that the law of accessory liability in tort is coherent. Considerations of principle, authority and analogy with principles of accessory liability in other areas of private law all support the conclusion that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. This is so even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge. In the present case, the appellants, Mr and Ms Ahmed, were directors of two companies found liable for infringing the respondents' trade marks. The companies accepted liability for marketing clothing under "Santa Monica Polo Club" branding. The claimants argued that the directors were jointly liable by reason of their role in authorising the acts of infringement. However, the case advanced at trial was based solely on the directors' involvement and control, without proving that they knew of any likelihood of confusion or that the branding was legally infringing. No findings were made that the directors had knowledge or blind-eye knowledge of the relevant facts. Therefore, the legal test for accessory liability had not been satisfied, and the imposition of personal liability was ill-founded.

Account of Profits limited to personal gains: The equitable remedy of an account of profits is directed at preventing unjust enrichment. It may be awarded against a defendant who has made gains from the wrongful use of another's property or rights, including trade marks. However, such an account is limited to the profits actually made by the defendant personally. It does not extend to profits earned by others, including companies, unless those profits were received or retained by the individual defendant. Colbeam Palmer Ltd. v. Stock Affiliates Pty Ltd (1968) 122 CLR 25 ref. An account of profits is not punitive in nature; it is compensatory and restorative. Accordingly, where no profit was made by the individual, regardless of their level of involvement in the tort, the remedy will be unavailable. This principle also safeguards against the improper use of the account as a means of indirectly punishing or extending liability to non-beneficiaries. Even if a director is found liable for participating in a tort, the account of profits can only be ordered in respect of benefits directly acquired by the individual, and the remedy remains discretionary. In the present case the respondents (Lifestyle) sought to recover both the profits made by the infringing companies and the personal profits of Mr. and Ms Ahmed. Court of Appeal was correct in concluding that the directors could not be liable for company profits in the absence of evidence that those profits were transferred to or retained by them.

As there was no finding of personal benefiteven if liability had been established, no account of profits could be granted. A defendant cannot be required to account for someone else's profits. Since no personal gain from infringing acts was proven, and the account was based only on strict liability, no order for an account of profits could be sustained. Salaries and loans not subject to account: A salary paid to a director or employee is not, without more, considered a profit arising from infringing acts. Likewise, the repayment of a legitimate loan advanced by the director to the company is not a benefit derived from infringement. Only where it is shown that such payments were inflated, excessive, or causally connected to infringing profits can they be brought within the scope of an account. General remuneration for services or repayment of legitimate loans will not be considered "profits" derived from wrongful conduct for the purposes of an account. Court of Appeal was right in holding that it was wrong in principle to treat the loan as a profit. A person does not make a profit just by borrowing a sum of money. If the loan is interest-free or at a rate of interest lower than a commercial rate, this difference might generate a profit for the borrower. But Lifestyle had not attempted such a calculation or put its case in this way. Equally, had it been shown that the loan was not really a loan at all but a disguised dividend, the position would be different. But there was no evidence or finding to that effect. Lifestyle had argued that the loan became a profit when Hornby Street was dissolved. This was not an argument which Lifestyle could have made at the trial, as the company was then still in existence and in the hands of administrators. But in the Court of Appeal Lifestyle argued that, even if the judge were wrong to characterise the loan as a profit, his decision should be upheld because the subsequent dissolution of the company meant that what had been a loan had become a profit. Alternatively, Lifestyle argued that, even at the time of the trial, it was apparent that the administrators were not going to pursue Mr. Ahmed for repayment of the loan. The Court of Appeal rightly regarded these matters as irrelevant. If, as a result of supervening events, a loan is forgiven or otherwise ceases to be repayable, that does not alter its character as a loan. Where the Court of Appeal erred was in upholding the judge's decision that part of the salaries paid to the Ahmeds could properly be treated as profits. Again, payments made ostensibly as remuneration may in reality be a way of extracting profits from a company. But there was no allegation, evidence or finding that the salaries paid to the Ahmeds were anything but ordinary remuneration for their services. Whereas an employer may of course profit from the labour of an employee in that the work done by the employee may earn more income for the employer than it costs to employ that person, an employee who receives in return for their services a sum no greater than the fair market value of those services does not make a profit. It was not suggested that the Ahmeds were paid more for their services to Hornby Street than their services were worth. Supreme Court dismissed the appeal filed by Lifestyle and allowed the one filed by Ahmeds. Peter Knox KC, Timothy Sampson and Adam Riley (Instructed by Ronald Fletcher Baker LLP (West End)) for Appellants (in Appeal 2021/0147). Thomas St. Quintin, Rory Brown (Instructed by Brandsmith (London)) for Respondents (in Appeal No.2021/0147) and for Appellant (in Appeal No.2021/0150). Peter Knox KC, Laurent Sykes KC and Timothy Sampson (Instructed by Ronald Fletcher Baker LLP (West End) for Respondents (in Appeal No.2021/0150). Dates of hearing: 20th and 21st February, 2023. JUDGMENT LORD LEGGATT (with whom Lord Lloyd-Jones, Lord Kitchin, Lord Stephens and Lord Richards agree): The main issues raised by this appeal and cross-appeal are these. When are directors of a company liable as accessories for causing the company to commit a tort of strict liability - in this case, trade mark infringement? In particular, is such liability also strict or does it depend on knowledge (or some other mental element)? And if directors are strictly liable, should they be ordered to account for profits made by either (i) the company or (ii) the directors themselves? I. THE PROCEEDINGS The claim 2. The claimants are two companies who can together be called "Lifestyle". Lifestyle brought these proceedings against some 16 defendants claiming remedies for infringement of registered trade marks and passing off. Those sued included two family-owned companies, Continental Shelf 128 Ltd and Hornby Street Ltd., which both traded under the name "Juice Corporation". The defendants also included Mr. Kashif Ahmed and his sister, Ms Bushra Ahmed. Mr Ahmed was the sole director of Continental Shelf and they were both directors of Hornby Street at all relevant times. Lifestyle and the Ahmeds are the respective parties to these appeals. 3. Juice Corporation was a wholesale business which arranged for the manufacture of clothing, footwear and headgear and sold it to retailers, mainly in the UK. Mr. Ahmed's role included managing the intellectual property rights of the companies. Ms Bushra Ahmed was head of sales for a "division" of Hornby Street called the "House of Brands". 4. Lifestyle complained that the Juice Corporation companies had been offering for sale various items of clothing and footwear with logos displaying the name "Santa Monica Polo Club" and pictures of polo players riding horses. Lifestyle claimed that the use of these signs infringed trade marks registered by Lifestyle which included the words "Beverly Hills Polo Club" and depicted a polo player on a horse. Breaches of both section 10(2) and 10(3) of the Trade Marks Act 1994 were alleged. The Ahmeds were sued on the basis that they had authorised or procured the companies to do the acts complained of or had engaged in a common design with each other or the companies to cause them so to act. The judge's findings 5. The trial was split into two parts. Both hearings took place before the same judge, Mr. Recorder Douglas Campbell QC sitting as a judge of the Chancery Division. The first trial dealt with the liability of certain defendants including Hornby Street but not Continental Shelf or the Ahmeds. Hornby Street was found liable under both sections 10(2) and 10(3) of the Trade Marks Act 1994 for infringing Lifestyle's registered trade marks and also for passing off: [2017] EWHC 3313 (Ch); [2018] FSR 15. There was no appeal from that decision. Hornby Street later went into administration at the instigation of its bankers. The company has since been dissolved. 6. The second trial addressed the remaining issues. None of the defendants was legally represented at this trial but the Ahmeds appeared as litigants in person. The judge decided that: (i) Mr. Ahmed was jointly and severally liable with the two Juice Corporation companies for the acts of infringement; and (ii) Ms Ahmed was jointly and severally liable with Hornby Street for acts of infringement in so far as its "House of Brands" division was concerned, which the judge found represented 10% of Hornby Street's business: [2020] EWHC 688 (Ch); [2020] FSR 29, para 104. 7. In reaching those conclusions, the judge did not think it necessary to decide whether, as Mr. Ahmed maintained, Mr. Ahmed had no improper motive, acted on advice and delegated the design of logos to a professional design team. In the judge's view, none of these matters gave rise to a defence in law. The same applied to defences raised by Ms Ahmed that she had no improper motive or intention to infringe. The judge made no finding that either Mr. Ahmed or Ms Ahmed knew or ought to have known that there was a likelihood of confusion or infringement. On the judge's view of the law, those matters were not relevant to their liability. 8. Rather than claiming damages, Lifestyle elected to claim against the Ahmeds the remedy of an account of profits. The judge found that sales of infringing goods accounted for about 10% of Hornby Street's turnover on average during the relevant period and calculated that the profits made by Hornby Street from such sales amounted to 3,129,921. He rejected Lifestyle's claim that the Ahmeds were liable to account to Lifestyle for these profits but held that they were liable to account to Lifestyle for profits which they had personally made from the infringements. He apportioned 10% of their salaries during the relevant period to such profits. This gave rise to a liability of 144,192 on the part of Mr Ahmed and 57,007 on the part of Ms Ahmed. The judge also found that a loan of 635,789 made by Hornby Street to Mr Ahmed was a profit derived from the infringements for which Mr Ahmed was liable to account to Lifestyle. The appeals to the Court of Appeal 9. Lifestyle appealed to the Court of Appeal against the decision that the Ahmeds were not liable to account for the profits made by Hornby Street from its infringements. The Ahmeds cross-appealed against the decision that they were jointly and severally liable for the infringing acts of Hornby Street and that they had made profits from those infringements for which they were liable to account to Lifestyle. 10. For reasons given by Birss LJ in a judgment with which Moylan and Nugee LJJ agreed, the Court of Appeal dismissed Lifestyle's appeal and rejected most of the Ahmeds' grounds of appeal: [2021] EWCA Civ 675; [2021] Bus LR 1020. On the Ahmeds' appeal, the Court of Appeal upheld the judge's conclusions that the Ahmeds were jointly and severally liable for the infringing acts of Hornby Street and that they should be ordered to account for profits which they had personally made from the infringements. The Court of Appeal also held that the judge was entitled to find that 10% of the Ahmeds' salaries during the relevant period represented such profits. But the Court of Appeal allowed Mr. Ahmed's appeal in relation to the loan made to him by Hornby Street and also decided, having raised the point themselves, that income tax payable on the relevant portions of the Ahmeds' salaries should be deducted from the sums payable to Lifestyle. The issues on these appeals 11. Against that decision both the Ahmeds and Lifestyle appeal to this court pursuing the arguments on which they lost in the Court of Appeal. The issues fall into two categories. First, there is the liability issue. The question here is whether the judge and the Court of Appeal were wrong in law to hold that the Ahmeds were jointly liable with Hornby Street in the absence of any finding that they knew or ought to have known that the company's use of the Santa Monica Polo Club signs infringed Lifestyle's trade marks. Second, there are issues relating to the remedy of an account of profits. If the Ahmeds were jointly liable with Hornby Street for its infringements, was it appropriate to award this remedy when there was no finding that the Ahmeds had acted unconscionably or in bad faith? If it was, should they, as Lifestyle contends, have been ordered to account to Lifestyle for profits which the company had made from its infringing trade? If not, but it was in principle correct to order the Ahmeds to account for profits which they had themselves made from the infringements, was the judge right to regard the loan made to Mr. Ahmed and a proportion of the Ahmeds' salaries as such profits? And if it was in principle right to treat a proportion of the Ahmeds' salaries as profits, was the Court of Appeal entitled and correct to hold that in calculating those profits deductions should be made for income tax? 12. I will first consider the liability issue. Then I will consider the issues relating to the remedy of an account of profits. II. THE LIABILITY ISSUE Did the Ahmeds infringe Lifestyle's trade marks? 13. Although it is not how the claims against them have been put, in addressing the liability issue it is useful to begin by asking whether, on the facts found by the judge, the Ahmeds themselves infringed Lifestyle's trade marks. If they did, that would have been a straightforward basis on which to find them liable. 14. Section 9(1) of the Trade Marks Act, 1994 states that the proprietor of a registered trade mark "has exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent. The acts amounting to infringement, if done without the consent of the proprietor, are specified in section 10." 15. The judge found at the first trial that acts attributable to Hornby Street, done without Lifestyle's consent, amounted to infringements of Lifestyle's trade marks under both sections 10(2) and 10(3). Section 10(2) states: "A person infringes a registered trade mark if he uses in the course of trade a sign where because - (a)

(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered, there exists a likelihood of confusion on the part of the public " Section 10(3) states: "A person infringes a registered trade mark if he uses in the course of trade, in relation to goods or services, a sign which - (a) is identical with or similar to the trade mark, (b) ... where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark." 16. Section 10(4), at the relevant time, said that "a person uses a sign if, in particular, he - (a) affixes it to goods or the packaging thereof; (b) offers or exposes goods for sale, puts them on the market or stocks them for those purposes under the sign ; (c) imports or exports goods under the sign; or (d) uses the sign on business papers or in advertising." 17. It is common ground that under both sections 10(2) and 10(3) liability is strict. To establish an infringement, there is no need to prove knowledge or fault - only that the person concerned, without the consent of the proprietor of the trade mark, did an act of the kind specified in one of those subsections. Nor is it a defence that the person concerned acted in good faith and without any improper motive. 18. The judge's findings at the first trial conclusively established that the Santa Monica Polo Club signs used by Hornby Street fell within the scope of both sections 10(2) and 10(3): that is to say, (i) the signs were similar to Lifestyle's Beverly Hills Polo Club trade marks and were used in relation to goods similar to those for which Lifestyle's trade marks were registered; (ii) because of this, there existed a likelihood of confusion on the part of the public (the test under section 10(2)); and (iii) in circumstances where Lifestyle's trade marks had a reputation in the United Kingdom, the use of the signs, lacking due cause, took unfair advantage of, or was detrimental to, the distinctive character or the repute of the trade marks (the test under section 10(3)). 19. The question then is whether the Ahmeds were themselves persons who used what I will call "the offending signs" in the course of trade. If they did, it would follow that they, as well as Hornby Street, were persons who infringed Lifestyle's trade marks within the meaning of sections 10(2) and 10(3). They would therefore be liable to Lifestyle under section 14(1) of the Trade Marks Act 1994, which renders an infringement of a registered trade mark actionable by the proprietor of the trade mark. 20. The judge made findings at the second trial that Mr Ahmed was the managing director of the Juice Corporation companies and the "ultimate decision-maker"; that he was the person who managed the intellectual property portfolio for the companies; that he instructed Hornby Street's design director to oversee designing a logo for the Santa Monica Polo Club brand; and that he selected the factory with which to place orders and agreed prices with the factory for the manufacture of Santa Monica Polo Club polo shirts: [2020] EWHC 688 (Ch); [2020] FSR 29, paras 41 and 42. The judge did not make any finding that Mr Ahmed personally did any acts which were uses of any of the offending signs. 21. As for Ms Ahmed, the judge found that, as head of sales for the "House of Brands" division of Hornby Street, her role was a very hands-on one managing the day to day running of this business, with the help of two members of staff: a salesperson and a warehouse assistant. She had a showroom which stocked Santa Monica Polo Club goods; it was her decision to display those goods; and she sold them to customers: [2020] EWHC 688 (Ch); [2020] FSR 29, para 45. 22. Did Ms Ahmed, in choosing what goods to display and in making sales to customers of goods bearing the offending signs, herself "use" the signs "in the course of trade"? Neither party has found any authority which has decided or even considered whether those words apply to an employee who in the course of their employment does such acts on behalf of their employer. But for the Ahmeds, Mr…

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