England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

		Royal Courts of Justice Strand London WC2A 2LL
		3rd March 2009

1. LORD JUSTICE GOLDRING: On 16th May 2008 the respondent, who was a man of good character, appeared before the Essex Justices in Basildon. He was charged as follows. The first allegation was that on 1st September 2007, at Pitsea Market, Basildon, in the County of Essex, he did, with a view to gain for himself or another, without the consent of the proprietor, have in his custody or control in the course of a business certain goods, namely 392 pairs of trainers bearing the Nike sign or logo, such sign or logo being likely to be mistaken for the registered trademark of Nike International Limited of Oregon, USA, contrary to section 92(1)(c) of the Trade Marks Act 1994. The second allegation was in similar terms. It related to 15 pairs of trainers bearing the BAPE sign or logo.
2. The relevant statutory provisions are sections 92(1)(c) and 92(5) of the Trade Marks Act 1994. They read as follows (section 92(1)):

"A person commits an offence who with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the proprietor—

(a) applies to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark, or

(b) sells or... exposes for sale... goods which bear, or the packaging of which bears, such a sign, or

(c) has in his possession, custody or control in the course of a business any such goods with a view to the doing of anything, by himself or another, which would be an offence under paragraph (b)."

3. The justices found the following facts:

"a) [The respondent] was not employed at the time. He was caring for his wife, who had depression, and his two children.

b) [The respondent] and Mr Hooper have known each other for approximately 20 years. Mr Hooper had a serious drug problem and at the time was suffering withdrawal from those drugs.

c) Mr Hooper works as a market trader in sports shoes. Mr Hooper ran the stall and owned all [the] goods on the stall. He asked [the respondent] to help him at the market stall the following day as he was not in a fit state to run the business.

d) On 31st August 2007 Mr Hooper asked [the respondent] to help him out on the stall. [The respondent] asked Mr Hooper about the goods he sold and asked if they were okay and if they were counterfeit. Mr Hooper informed [the respondent] that the goods were bought as clearance stock, were bought as a job lot and that he can trust that there is nothing wrong with them. [The respondent] had no experience in selling sports shoes, but had experience in selling ladies' fashion shoes. He would not have recognised the goods as counterfeit on seeing them at the stall.

e) [The respondent] was not paid for the work he did at the stall and did not intend to stay all day. [The respondent], whilst on his way to get refreshments, was asked by Mr Hooper to pay and sign the stall rent agreement, as Mr Hooper was feeling too unwell to do so himself. Evidence that Mr Hooper was not well was given by [a] Trading Standards Officer, the police and [the respondent].

f) [The respondent] looked after the stall while Mr Hooper went to rest in the van. During that time [the respondent] made two sales at £25 per pair of trainers. [The respondent] had his two children, who were both under 10 years old, at the stall.

g) When police attended [the respondent] gave all his correct details and informed the officers that Mr Hooper was the owner, in the front of the van and took the police to him, unlike Mr Hooper who, when questioned, had provided incorrect details.

h) [The respondent] and Mr Hooper were arrested and taken to Basildon Police Station. At the time [the respondent] was arrested, he had money on him from an endowment policy to pay for the children's school uniform, which he intended to buy on 1st September 2007. He also had £50, which was the equivalent to the sale of two pairs of shoes.

i) [The respondent] and Mr Hooper were both interviewed separately and gave corroborative accounts of what happened. There was no opportunity to collude prior to the incident, arrest and interview."

I should add that the respondent denied that he knew the goods were counterfeit. Mr Hooper said that he misled the respondent, which he repeated in evidence.

"j) The Trading Standards Officer recognised the vehicle at the market from a previous occasion and thought [the respondent] was the same person involved until a time after [the respondent] was confronted, they realised he was not the same person."

4. In the course of their stated case, the magistrates set out the evidence lying behind those findings of fact. As to the inquiry made of Mr Hooper by the respondent, regarding the provenance of the trainers, they say that the following was the evidence:

"[The respondent] asked Mr Hooper what he was doing and if the items were okay and he said 'it was all sweet, they are stock clearance, bought a job lot'. [The respondent] said he would not have gone to assist at the stall if he knew they were counterfeit."

In cross-examination:

"[The respondent] confirmed he asked if the goods were counterfeit. He said that although Mr Hooper was taking drugs he was a person he could trust as he had known him for a long time and would not normally lie."

5. There is a question mark as to whether the magistrates have correctly set out the evidence. The legal adviser's notes indicated that in chief the respondent said, when asked whether the goods were okay, that Mr Hooper said they were "sweet". It is suggested that both the accounts given by the magistrates of what was said, and therefore their findings of fact, do not accurately reflect the evidence and that, in particular, the word "counterfeit" was never used by the respondent. As it seems to me, it does not matter. The real issue is whether asking if they were okay or counterfeit was sufficient to displace the burden, to which I shall shortly come, imposed on the respondent by section 92(5) of the Act.
6. Although not mentioned in the magistrates' findings, the evidence was that the van in which the respondent and Mr Hooper took the trainers to the market was the respondent's brother's van. There was also evidence that the respondent knew that his brother had a caution for selling counterfeit goods.

The submissions made to the magistrates on the facts

7. It was contended by the appellant that:

"a) [The respondent] had in his custody or control the Nike trainers and Bathing Ape trainers, as he was the only adult at the stall and had signed the rental agreement for that day.

b) [The respondent] was in the course of business by selling the items and offering those goods for sale, being open to the public for purchase.

c) The goods at the store bore the signs of registered trademark [of both trainers].

d) Any such sale was with a view to gain for himself or another and without the consent of the proprietor of the sign.

e) That there had been an infringement of [the] registered trademark and [the respondent] knew the goods were counterfeit."

8. The respondent contended that he was "in control and custody of the goods to the extent [that] he was helping his friend Mr Hooper. The goods were counterfeit, but that [the respondent] had trusted a man he had known for over 20 years. He had asked the question whether the goods were counterfeit." He believed on reasonable grounds that they did not infringe the registered trademarks and, finally, that he, the respondent, had not been in such a situation. He gave a full account in interview. There was no opportunity to agree that account with Mr Hooper in advance and he had not come to the court to lie.
9. Two authorities were referred to: S v London Borough of Havering [2002] EWCA Crim 2558 and R v Johnstone [2003] 3 All ER 884.
10. The justices were of the following opinion:

"a) From the evidence of the witnesses and [the respondent]'s own admission, giving evidence, he was in control and had custody of the [trainers]... It is not in dispute that these goods were counterfeit. On that basis, we are satisfied beyond reasonable doubt that the elements of the offences have been made out. However, we now turn to consider the statutory defence as to whether or not [the respondent] believed on reasonable grounds that what he was doing was infringing the registered trademarks.

b) While the Trading Standards Officers have professional knowledge of judging counterfeit goods, [the respondent], in his evidence, has said he has been a market trader selling ladies' shoes and not experienced in selling Nike and Bathing Ape range. We have seen examples for ourselves and understand [the] difficulties in recognising if any are counterfeit.

c) [The respondent] had asked Mr Hooper if the stock was dodgy, ie counterfeit, and gave evidence that he would not have gone to Pitsea if the stock had been counterfeit. This was corroborated by Mr Hooper's evidence.

d) More weight is added to this by the fact that the accounts given by [the respondent] and Mr Hooper in interviews shortly after the incident were similar, without the opportunity for parties to collude.

e) We have heard [the respondent] is of good character and we place weight on this. Therefore, we are satisfied on the balance of probabilities that the defence has been made out and we find [the respondent] not guilty."

11. The justices pose three questions for this court:

"1. Were we wrong in law to apply the principles set out in R v Johnstone [see above], namely that 'those who act honestly and reasonably are not to be visited with criminal sanctions' in the instant case, when the defendant argued that he did not know the goods were counterfeit?

2. If we were correct to apply the above principle, were we entitled to give weight to the fact that the defendant is of previous good character?

3. Was the evidence on which we made findings such that no reasonable bench could have come to this decision, namely, on the balance of probabilities, that [the respondent] was unaware the goods were counterfeit; that the only action he took was to inquire of his friend, a drug addict, whom he claimed to be assisting?"

The issue

12. The respondent knew that the goods had to be genuine. As the authorities establish, he must be treated as having been aware of the existence of the registered trademark. Section 92(5) places a legal persuasive burden on the respondent: see S v London Borough of Havering (see above) at paragraphs 18 and 47, and the speeches of their Lordships in Johnstone (see above).
13. The issue is whether the respondent discharged the burden upon him under section 92(5). Did he show that he believed on objectively reasonable grounds that these were genuine goods? Or, to put it in the way that this court has to consider it, were the magistrates entitled to conclude, on the evidence they heard, that he did show, on reasonable grounds, that he believed they were genuine?
14. In my view, the evidence advanced by the respondent falls far short of that needed to displace the burden. The goods were taken in a van which was not Mr Hooper's. The respondent knew their price was low. The sole basis for his professed belief was the word of a drug addict, who was apparently suffering from an overdose and unwell nearby. The respondent neither saw nor sought independent evidence, such as documentation, relating to the goods' supply or their provenance. Indeed, he could hardly have done less. In my view, no Magistrates' Court could reasonably have concluded that his belief that the goods were not counterfeit was arrived at on reasonable grounds.
15. As to their reference to the application of the principles in Johnstone, they failed, as it seems to me, to have regard to both of the elements referred to in that part of the case which they have cited in Question 1 of the questions they pose. It is not enough to conclude that the defendant acted honestly. He has, too, to act reasonably, in other words on reasonable grounds. This, the respondent did not do, as on the evidence the magistrates were bound to conclude.
16. My answer, therefore, to the first question which the magistrates pose is yes. As to their second question, they were entitled to have regard to the respondent's good character in deciding whether or not he was acting honestly. His character, however, was irrelevant in deciding whether the grounds upon which he relied were reasonable. As to the third question, I have already answered that: no reasonable bench could have decided as did this bench.
17. In the circumstances, for the reasons I have given, I would allow this appeal.
18. MR JUSTICE SWEENEY: I agree.
19. LORD JUSTICE GOLDRING: Thank you, Mrs Lambert.
20. MRS LAMBERT: I am grateful.
21. LORD JUSTICE GOLDRING: Thank you for your helpful skeleton argument.
22. MRS LAMBERT: I am very grateful, my Lord. Would your Lordship entertain the costs of that argument in this matter.
23. LORD JUSTICE GOLDRING: Certainly we will entertain such an argument.
24. MRS LAMBERT: I am very grateful. My Lord, I draw you to the case of Kahraman, in which the appellant argued, in a very similar situation to this, that the appellant should be entitled to their costs, both in the Magistrates' Court and in the higher court.
25. LORD JUSTICE GOLDRING: Just give me the case again.
26. MRS LAMBERT: It is the case of Kahraman, and it is page 88 of the bundle.
27. LORD JUSTICE GOLDRING: Yes, it is in this bundle, is it not?
28. MRS LAMBERT: The respondent argued that they should not be liable for the costs, because in the lower court it was not the respondent's fault that the magistrates had erred in law in applying (?) the defence, but the Lord Justices on that occasion did not agree and they actually allowed the costs in both the higher and the lower courts. In those circumstances, I would make a costs application for the costs of both courts, for this appellant, although I am mindful that I do not have a costs schedule to hand up to your Lordship.
29. LORD JUSTICE GOLDRING: Could you give us any idea of the sort of costs that we are talking about, Mrs Lambert?
30. MRS LAMBERT: The sum is in total £6,112. My Lord, these cases are not brought by the Crown, and the appellant is entitled, in the lower court, especially to costs that can be put down to the investigation, and the investigation officer's time that has been expended. So costs applications in these matters are generally much higher than those brought by the Crown.
31. LORD JUSTICE GOLDRING: Can you give us any idea as to what the legal costs are, the hearing costs both here and below?
32. MRS LAMBERT: The hearing cost for this hearing is £2,100. (Pause). It is £735 for the Magistrates' Court hearing.
33. LORD JUSTICE GOLDRING: Obviously there is not a detailed costs schedule, but I just wanted to have some idea. Thank you. Would you give us a moment?
34. MRS LAMBERT: Yes, my Lord.
35. LORD JUSTICE GOLDRING: (Pause). We will give you your costs, limited to £2,750.
36. MRS LAMBERT: I am very grateful, my Lord. May I ask whether you are going to remit the case back to the Magistrates' Court with a direction that they convict this defendant?
37. LORD JUSTICE GOLDRING: That is what you would ask us to do?
38. MRS LAMBERT: I would, yes, my Lord.
39. LORD JUSTICE GOLDRING: We agree.
40. MRS LAMBERT: I am very grateful, my Lord.