Court of Appeal
30 September 1999
Before:. R C Southwell, QC, (President);
The Hon M J Beloff, QC, and J P C Sumption, QC
Between: Veka AGPlaintiff/RESPONDENT.
And:(1) TA Picot (CI) Ltd
(2) Vekaplast Windows (CI) Ltd
(3) Vekaplast Windows (Export) Ltd
(4) Terence Alan PicotDefendants/APPELLANTS.
Appeal by the Defendants/APPELLANTS against the Orders of the Royal Court of 30 December 1998 [1998.257] that:
Advocate C M B Thacker for the Plaintiff/RESPONDENT
Mr TA Picot on his own behalf and as a director of the First, Second and third Defendants/APPELLANTS.
JUDGMENT
SUMPTION, JA: This is an appeal by the Defendants from final orders made by the Royal Court in a passing-off action. The effect of the orders, broadly summarised, was to restrain the First, Second and Fourth Defendants from using the words ‘Veka’ or ‘Vekaplast’ in Jersey in connection with their business or products. There has been a good deal of argument around the periphery of the case, but the essential facts are substantially undisputed.
The Plaintiff, Veka GmbH (now AG), is a German company limited by shares, which is the successor in title of a partnership by the name of Vekaplast Heinrich Laumann KG. This change was effected in 1990 by a resolution of the former partners followed by registration in the commercial registry in Germany, a procedure which is provided for by German legislation. There is unchallenged evidence that under the relevant legislation the effect is to transfer all the rights and liabilities by operation of law, thereby making the limited company the universal successor of the partnership. I shall refer to both partnership and company as ‘the Plaintiff’ without distinguishing between them
The Plaintiff manufactures PVC profiIes for use in making windows and glass doors. The profile forms the frame. It is sold to fabricators in long strips. The fabricator cuts the strip to length, mitre joins the lengths, fixes the glass and adds locks, latches, stops and other furniture. He, or a builder to whom he supplies the completed door or window, then fits it to the opening. The Plaintiff supplies its profiles under the name ‘Vekaplast’ or ‘Veka’. In the 1970s and 1980s both names were used, but more recently the Plaintiff has used the name ‘Veka’ alone. Mr. Harding, an architect who practised in England from 1979 to 1988 and in Jersey after 1988, gave evidence to the Royal Court that the Plaintiff was a market leader in this field. It was known mainly for the high quality of its materials, for its technical design service, and for its guarantees and after-sales service, which were supported by a large back-up organisation. The Veka system is listed in the RIBA product selector, which is a prime source of information about building products available to practising architects both in the United Kingdom and in Jersey.
The First and Second Defendants are both companies associated with the Fourth Defendant, Mr. Picot. Mr. Picot's principal company in Jersey is T. A. Picot (CI) Ltd., the First Defendant. Early in 1980 this company began to buy completed windows from a fabricator in England called Sovereign Frames Ltd. Sovereign acquired their profiles from the Plaintiffs, and made them up into windows and doors, which they sold under the product name ‘Sovereign Veka’. The First Defendant sold them in the Channel Islands under the same name. Shortly after the First Defendant had embarked on this business, Mr. Picot decided, initially with a business colleague, to move into manufacture, instead of buying finished joinery from Sovereign. In September 1980 the Second Defendant was incorporated for this purpose in Guernsey. From 1981 onwards, the Second Defendant made up windows and doors from Veka profiles at a factory in Guernsey, and sold them to the First Defendant for onsale to builders and building owners in Jersey.
It is clear from Mr. Picot's evidence in this action that one of his abiding concerns has been to protect himself against competitors in the Channel Islands, who might be tempted to try to obtain supplies directly from the Plaintiff and to sell them into the local market in competition with him. He was therefore most anxious to obtain for his companies some right in the names ‘Veka’ or ‘Vekaplast’ which would enable him, as he thought, to see off interlopers. For this reason he decided to call his manufacturing company in Guernsey Vekaplast Windows (CI) Ltd. We infer that it was for the same reason that in October 1982, he caused his sales company, the First Defendant, to register ‘Vekaplast Windows’ and ‘Veka Windows’ as business names in the Jersey Business Names Register. On at least one occasion in this early period, and one occasion more recently, Mr. Picot has claimed as against third parties to have the exclusive right to sell PVC joinery under the names ‘Veka’ and ‘Vekaplast’, and instructed his lawyers to warn off competitors who were trying to sell windows made with Veka profiles in the Channel Islands.
Between May 1980 and June 1984 there were prolonged but ultimately fruitless negotiations between Mr. Picot and the Plaintiffs. The object of these negotiations as far as Mr. Picot was concerned was to obtain from the Plaintiffs some contractual exclusivity for his companies in the Channel Islands in the manufacture and sale of doors and windows made with Veka profiles. The details of these negotiations do not matter. The parties came close to making an agreement in June 1981 which would have conferred a high degree of exclusivity on the Second Defendants. But negotiations broke down because Mr. Picot was unwilling to accept a provision by which such an agreement would have been terminable on six months notice by either side. In the event no agreement was ever made putting the relations between the Second Defendant and the Plaintiff on a formal basis. The Plaintiff continued to make regular sales to the Second Defendant, and treated it in practice as its local franchisee. The Plaintiff knew of course about the name chosen for the Second Defendant, but decided not to object. It soon learned about the First Defendant's registration of ‘Veka’ and ‘Vekaplast’ as its business names and, although it uttered a mild protest at the time, the matter was allowed to pass and no steps were taken to have the registration discharged. The Plaintiff’s evidence to the Royal Court was that it was prepared to put up with the use of its name in connection with a business so long as that business consisted in the manufacture or sale of PVC joinery made with its products.
Until 1984, the First Defendant's advertising literature strongly emphasised the connection between its products and the Plaintiff's profiles. The brochure in use in this period described the ‘Veka system’ as ‘the best window system in the world today’. It told potential customers that the First Defendant manufactured Vekaplast windows from Vekaplast profiles extruded in Germany and shipped to Guernsey. A detailed specification of the profiles was included, with a glowing account of their performance. Anyone reading this brochure would have got the (entirely correct) impression that the First Defendant was marketing in the Channel Islands PVC joinery based on a well established international branded type of profile which was imported from its German manufacturer.
In June 1984, relations between the Plaintiffs and Mr. Picot broke down. The Plaintiff’s profiles were thereafter sold to other companies in the Channel Islands, initially a Guernsey company associated with Sovereign Frames Ltd. called Sovereign Windows (CI) Ltd., more recently a company called Creative Windows Ltd. For its part, the Second Defendant made arrangements with another German manufacturer of PVC joinery profiles called Kommerling. Since 1984, virtually all doors and windows manufactured by the Second Defendant and sold by the First Defendant have been made from Kommerling profiles. No further profiles were supplied by the Plaintiffs to Mr. Picot's companies. The Defendants continued to sell small volumes of windows and doors made with Veka profiles in stock, but these were generally repeat orders from those who had bought joinery of this type before June 1984. In his evidence, Mr. Picot estimated these sales at only about 5% of the total.
The change in the Second Defendant's source of profiles led to the production of a new brochure which was much shorter, and emphasised the whole window as the product. There was nothing in the new brochure about Veka or Vekaplast. Indeed there was almost nothing about the profiles used, except that they were extruded by Kommerling of West Germany and carried a ten year guarantee. The same statement appeared among the terms set out on the back of the First Defendant's standard form of quotation. However, notwithstanding that there was no longer any trading connection with the Plaintiff, the First Defendant continued to use the trading names ‘Veka’ and ‘Vekaplast Windows’ prominently for example on its quotations, and the Second Defendant continued to call itself Vekaplast (CI) Ltd. They have also asserted rights in these names as I have pointed out against other companies, including those selling windows from Veka profiles.
Once the Defendant companies had begun to obtain their profiles from Kommerling, the Plaintiff was no longer content that the Defendants should continue to use its trading names. The Plaintiff took a number of steps to assert its rights over these names. In the first place, on 28 June 1984 it registered in Guernsey a company called Veka Guernsey Ltd. Mr. Picot successfully frustrated this endeavour by obtaining an injunction from the Royal Court in Guernsey requiring the company to change its name. When it attempted to change its name to Sovereign Veka Ltd., that too was prevented by an order of the Guernsey Court but we do not know on what grounds these orders were made. Secondly, the Plaintiff began proceedings in Jersey at about the same time against the First and Second Defendants to prevent their use of the trade marks or names ‘Veka’ and ‘Vekaplast’ in that island. On this occasion the Plaintiff met with rather better success. On 21 August 1986, the First and Second Defendants submitted to a number of injunctions. These injunctions did not require the Second Defendant to change its name although that had in fact been part of the relief which the Plaintiff had originally sought. They did, however, require the First and Second Defendants to acknowledge that the right of ownership of the trade marks and names ‘Vekaplast’ and ‘Veka’ and ‘Vekaplast Windows’ is vested in the Plaintiff. Thirdly, in 1988 the Plaintiff began the present proceedings in September. There is some dispute about whose fault it is that they took ten years to get to trial. But it is enough for present purposes to note that the Plaintiff has maintained its claims throughout, and ultimately pressed them to judgment. Hence this appeal.
There is no dispute in this appeal about the relevant principles of law. The essence of the tort of passing off is that it is an invasion of the Plaintiff’s proprietary right in the goodwill associated with his product. In order to establish a cause of action for passing off, the Plaintiff must prove (i) that its goods have established a reputation in Jersey which is associated with the names ‘Veka'’ and ‘Vekaplast’, (ii) that the Defendants’ use of those names is likely to lead customers or potential customers to believe that the Defendants’ goods are the Plaintiffs or that the Defendant is in some material way associated with the Plaintiff, and (iii) that this belief is likely to cause damage to the Plaintiff. It is not necessary for customers or potential customers to be aware of thePlaintiff’s identity, provided that they are accustomed to the Plaintiff’s goods and have been led to believe that the Defendants’ goods come from the same source.
Mr. Picot represented himself both in the Royal Court and before us. He made a large number of points, and it was not always clear to what issues particular points went. Although he did not put it precisely in these terms, it appears to us that he was really advancing three arguments, to which all his points were in one way or another directed. First, he was contending that the Plaintiff’s profiles did not have any reputation in Jersey which was capable of being protected by the law relating to passing off. Secondly, Mr. Picot was saying that his use of the names was not deceptive because no one would deduce from it that he was supplying goods associated with the Plaintiff. Thirdly, he was saying that his companies had what amounted to an informal perpetual licence to use the names, by virtue of his dealings with the Plaintiff between 1980 and 1984.
The first question, therefore, is whether the Plaintiff has proved that its goods enjoy a reputation in Jersey which is associated with the names ‘Veka’ and ‘Vekaplast’. In our judgment it has. We have already referred to Mr. Harding’s evidence. It established that the Veka system was a well-known international brand of PVC joinery profiles, which would be known to building professionals (in particular architects) in Jersey and to some clients. The fact, which was pressed on us by Mr. Picot, that he had not personally specified it in the course of his practice in Jersey, does not diminish the force of his evidence on these points. Moreover the First Defendant itself, during the three years when its associated company was doing business with the Plaintiff, advertised the merits of the Veka system by name in its literature. It is true that the windows and doors made with Veka profiles are sold in Jersey by fabricators and not by the Plaintiff itself. But it is clear law that a manufacturer may enjoy a local reputation for its goods which is associated with a name, although those goods are sold onto the relevant market by others further down the chain of supply: S.A. des Anciens Établissements Panhard et Levassor -v- Panhard Levasssor Motor Company Ltd. [1901] 2 Ch 513.
In the end Mr. Picot was constrained to accept that the Plaintiff’s profiles did have a reputation associated with the names ‘Veka’ and ‘Vekaplast’. His main argument turned out to be based on a distinction between the profiles which the Plaintiff sold and the finished windows and doors which the Defendant sold. In our judgment this argument is unsound. We do not doubt that the Defendants add considerable value to the profiles by cutting and joining them, making them up into finished windows and doors and fixing them. However, the essential element in the finished window or door is the PVC profile which forms the frame and gives the window most of the characteristics which provide its selling points: weather resistance, low maintenance and so on. The source of the profiles was plainly of some commercial significance: its reputation was emphasised by the Defendants’ early literature, and its guarantee was a significant part of the after sales service which windows made from Veka profiles were perceived to offer. The fact that the Plaintiff’s product is only one element in the finished article does not mean that it has no reputation capable of being protected by the law of passing off. If (as the evidence demonstrated) a reputation attaches to the finished windows and doors made from ‘Veka’ or ‘Vekaplast’ profiles, that reputation may as a matter of law be injured by the use of the same names in connection with the sale of finished windows and doors made from someone else’s profiles.
As Mr. Picot developed his case before us, it became clear that his real complaint was that after nineteen years of trading his companies had acquired goodwill of their own associated with the names ‘Veka’ and ‘Vekaplast’. Indeed Mr. Picot went as far as to suggest that without these names, the goodwill of his own business would be destroyed. It may be well be true that to some limited extent the names have become associated with Mr. Picot’s own business, although we think that Mr. Picot has greatly exaggerated the point and that the goodwill of his own business will probably not be seriously damaged by ceasing to use them. But the point is irrelevant, because the question at issue here is whether Mr. Picot’s companies are entitled to make use of the goodwill of the Plaintiff’s business. This depends not on whether the Defendants’ reputation is associated with these names, but on whether the Plaintiff’s reputation is. The 1986 consent order establishes that the trade marks and the names ‘Veka’ and ‘Vekaplast’ belong to the Plaintiff. The fact that the Defendants have used these names could make a difference on this issue only if their use of them had entirely displaced in the minds of customers or potential customers any connection which previously existed between the names and the Plaintiff’s goods. That would be an extreme suggestion, and the evidence came nowhere near to justifying it.
We turn, therefore, to the second of Mr. Picot’s arguments, which was that his use of the names was not deceptive. It is important to point out at the outset that the Plaintiff does not have to prove that Mr. Picot had any intention to deceive, only that in the ordinary course this was likely to be the consequence of his acts, at least in a significant number of cases. Have they proved that much? We think that they have.
There was no evidence at the trial of any specific cases of confusion among customers or potential customers. Nevertheless we are satisfied that such confusion is likely to have occurred in the past and to go on occurring in the future. Once it is established, as it has been, that the Plaintiff’s products enjoy a reputation in Jersey associated with the names, the ordinary consequence of the use of the same names in connection with other products will be confusion among customers. This is borne out by the persistence with which Mr. Picot’s companies have clung on to the names since 1984. For the past fifteen years they have continued to use the names associated with a well-known international brand of PVC joinery profiles, notwithstanding that they are not supplying the brand-owner’s goods or goods made from them, apart from an insignificant number of repeat orders supplied from old stock. As recently as 1997, Mr. Picot has sought to stop Creative Windows Ltd. from using those names, even in connection with PVC joinery which is made from the Plaintiff’s profiles. He has mounted a determined resistance to the Plaintiff’s attempts in the courts of Guernsey and Jersey to assert their own rights in the names, at considerable inconvenience and some expense to himself. Mr. Picot is a rational businessman. We cannot accept his assertion that in doing all this he has merely been trying to protect the goodwill of his own companies which has come to be associated with the names. The only plausible explanation of his conduct is that he recognises that the name of an international brand such as Veka is a valuable means of promoting his own business, and would be correspondingly valuable to a competitor.
The most substantial point to be made in Mr. Picot’s favour is that the First Defendant’s post-1984 brochure and quotation documents did say that its profiles were made by Kommerling. This point has some force, but it does not in our judgment go far enough. As Lord Jauncey observed in Reckitt & Colman Products Ltd. -v- Borden Inc. [1990] 1 All ER 880, the parties must take customers as they find them, including the imprudent and unwary. It is quite likely that some customers (or their professional advisers) who would otherwise have been deceived by the use of the names were undeceived by these statements. But it is unlikely that very many customers were undeceived. The statements were tucked away in parts of the document which must have had much less impact on the generality of readers than the use of the trading names. Moreover, in themselves the statements were consistent with the possibility that Kommerling were manufacturing Veka profiles pursuant to some arrangement with the Plaintiff.
The third of Mr. Picot’s arguments was founded on the Plaintiff’s acquiescence in his choice of Vekaplast as the Second Defendant’s name in 1980, and in his registration of Veka and Vekaplast as the First Defendant’s business names in 1982. This, he says, means that the Plaintiff and his companies shared the rights in the names in Jersey, and entitled the Defendants to continue to use them indefinitely. In our judgment, this argument is unsustainable. There was no express licence to use the names, but only an implied licence to do so. The question is: how long must the parties be taken to have intended that licence to last? The ordinary legal inference where the owner of a trade name permits its use in the course of a broader commercial relationship, is that the licence is intended to last no longer than the relationship. This is what the Privy Council held, on very similar facts, in J.H. Coles Pty. Ltd. -v- J.F. Need [1934] AC 82, and the Court of Appeal in England on analogous but less similar facts in Dawnay Day & Co. Ltd. -v- Cantor Fitzgerald International (24th June 1999) Unreported. It is the obvious inference in this case. No reasonable person could have supposed between 1980 and 1984 that the Plaintiff was content that its trading names and associated goodwill should be available to the Defendant companies not only while they were dealing with the Plaintiff’s profiles but after they had ceased to have any business connection with them. Once the underlying commercial relationship ended, in June 1984, the Plaintiff ceased to acquiesce in the use of the names. On the contrary, they took a series of steps, with greater or lesser success, to prevent it.
In our judgment therefore the orders made against the Defendants at the trial were justified.
There is, however, one other aspect of this appeal which we must deal with before parting with it. Among the Defendants’ grounds of appeal was the contention that Sir Peter Crill, a former Bailiff of this island, who presided as Commissioner at the trial, (i) ought to have recused himself before the trial, and (ii) having failed to recuse himself before the trial, conducted the trial in an unfair and partisan fashion. The first of these contentions was based on the fact that the Defendants were at one stage represented in their dispute with the Plaintiffs by the firm of which Sir Peter had previously been a partner. The Defendants have made allegations of professional negligence against this firm, and there are proceedings on foot in the Royal Court. We were told that the Defendants include Sir Peter’s nephew. Sir Peter had been a judge of the Royal Court for many years before the trial of this action, and we do not consider that the mere fact of his ancient connection with a firm in dispute with Mr. Picot’s companies was a ground for recusing himself.
The second of the Defendants’ complaints against Sir Peter has, unfortunately, more substance. Sir Peter continually interrupted Mr. Picot’s submissions and his attempts to cross-examine witnesses. Some of his interventions were overtly hostile and rude and at least one of them suggested on the face of it a personal animus against Mr. Picot. When Mr. Picot entered the witness box to give his own evidence, Sir Peter proceeded to cross-examine him himself in the most aggressive fashion for a long time before the Plaintiff’s counsel had even begun his own cross-examination. The result was to blunt the impact of Mr. Picot’s points at the trial, to put him repeatedly off his stride, and to prolong the trial unnecessarily. It is fair to say that Mr. Picot was at times discursive and that not all of his evidence or questions in cross-examination were relevant. But a litigant in person is entitled to a reasonable degree of latitude, and Mr. Picot never strayed beyond those limits. On the whole, he conducted the case with courtesy and moderation, and his points were fairly taken even if they ultimately failed to convince. There was nothing in the way that he conducted the case before the Royal Court which justified the way in which he was treated by the Commissioner. This kind of judicial behaviour puts an appellate court in some difficulty. Where issues of credibility arise, it makes it difficult to take the trial judge's assessment of witnesses at face value. It is also apt to discourage litigants from adducing evidence of their own and to prevent them from eliciting helpful admissions in cross-examination. It was only because Mr. Picot is a robust litigant and because there was little dispute about the primary facts, that it did not have that effect in this case. Otherwise we should probably have felt obliged to order a new trial. As it is, the way in which the trial was conducted left Mr. Picot with a strong and justifiable sense of grievance and a feeling that he had not received a fair hearing. This is extremely unfortunate. Because of the rather unusual course taken at the trial, we have thought it right to form our own view of the merits on the material before us, without reference to the findings of the Royal Court. Having done that, however, we have independently reached the same conclusion as they did. The appeal must therefore be dismissed.
SOUTHWELL JA: I agree with the judgment which has just been delivered and add only two points: first I want to pay my personal tribute to the excellent way in which Mr. Picot presented his case in this Court, both in writing and in Court. He faced some ‘fast bowling’ from this Court, particularly from me, intended to make certain that we had a proper understanding of his case and he remained throughout courteous and most helpful.
The second matter is that the consequences of our decision are not in my judgment so doom-laden for Mr. Picot and his companies as he suggested to us. I consider that relatively minor changes will need to be made to the way in which he and his companies carry on business in Jersey so as to avoid confusion with Veka’s names and business.
BELOFF JA: I agree with both judgments which have been delivered and have nothing to add to either of them.
Authorities
Athletes Foot Marketing Associates Inc -v- Cobra Sports & Anor [1980] RPC 343.
Dawnay Day & Co Ltd -v- Cantor Fitzgerald International (24th June, 1999) Unreported Judgment of the Chancery Division of the High Court of England.
Sayers -v- Briggs & Company (Jersey) Ltd (1963) JJ 249.
Sellars Ltd -v- Melrose Company Ltd (1977) JJ9.
SA des Anciens Établissements Panhard et Levassor Motor Company Ltd [1901] 2 Ch 513.
Reckitt & Colman Products Ltd -v- Borden Inc [1990] 1 All ER 880.
JH Coles Pty Ltd -v- JF Need [1934] AC 82.