Scottish Court of Session Decisions

Previous to August 1884 James Smith and Joseph M'Bride carried on business in partnership as aerated water manufacturers at premises in Sugarhouse Lane and Waverley Lane, Greenock, under the firm name of “Smith & M'Bride.”

Upon 20th August 1884 the firm was dissolved by agreement between the partners, under which M'Bride sold to Smith for £300 his share and interest in the business, and Smith took over all the liabilities of the firm, and obtained right to collect all debts due to the firm, and to the goodwill of the business. The following notice of dissolution of partnership appeared in the Edinburgh Gazette of 22nd August 1884—“The co-partnership hitherto carried on by Smith & M'Bride, aerated water manufacturers in Greenock, by the subscribers, the sole partners thereof, has this day been dissolved by mutual consent. The subscriber James Smith has acquired the said business, with goodwill, and whole machinery and stock-in-trade. He will continue to carry on said business in his own name, and he is authorised to receive payment of all outstanding debts due to said firm, and he undertakes to pay all liabilities due by the firm.” Thereafter James Smith continued to carry on business in his own name at the same premises as formerly.

Upon 24th December 1885 M'Bride formed a partnership with William Smith, brother of the said James Smith, and David M'Kelvie, and under the firm of “M'Bride, Smith, & M'Kelvie” they carried on business as ærated water manufacturers at 61 Nicolson Street, Greenock, until 27th August 1887, when M'Kelvie retired from the partnership. Thereupon M'Bride and William Smith continued to carry on the business, but changed the name of the firm to “Smith & M'Bride.”

In September 1887 James Smith brought a petition in the Sheriff Court at Greenock against

Page: 23↓

M'Bride and William Smith to have them interdicted from trading under the firm name or style of “Smith & M'Bride.”

The pursuer averred that, although he commonly used his own name in the conduct of his business, he had not by agreement or otherwise parted with his right to use the style or firm of “Smith & M'Bride,” which he acquired when he purchased the goodwill of that business in 1884; that he was still known as “Smith & M'Bride;” that he was entitled to the sole use of that firm's name; and that he had suffered loss and injury in his business through the defenders' unwarrantable assumption of that name. He had intimated to the defenders that he would be satisfied if they made the name “M'Bride & Smith,” which it should have remained when M'Kelvie retired, or even if they made it “William Smith & M'Bride,” but they had refused to accede to either of these proposals.

The defenders averred that by the terms of the Gazette notice ( supra) the pursuer had renounced any right he might have had to the firm's name; that the old firm's name was extinct, and that upon M'Kelvie's retirement, “because of certain re-arrangement of their business and otherwise the defenders resolved thereafter to change their firm's name into that of Smith & M'Bride,” the actual names of the only remaining partners. The Sheriff-Substitute ( Nicolson) pronounced this interlocutor:—[After findings in fact in terms of the above narrative]—“Finds in law that the defenders are not entitled to assume and use the name of the firm whose business and goodwill the pursuer purchased from the defender M'Bride: Grants interdict in terms of the prayer of the petition, &c.

“ Note.—‘It seems settled law,’ says Clark on Partnership, p. 1431, ‘that when the goodwill of a business has been sold, the seller may recommence a similar business in the neighbourhood of the old premises, the only restrictions on this right being that in the case of a firm the seller shall not assume the old name, or represent himself as the successor of the former concern.’ I presume that if the pursuer had continued to use the firm name of ‘Smith & M'Bride’ the defenders would not have ventured to assume it. Their defence is that he abandoned his right to the name, and agreed to do so. His intimating in the advertisement of the dissolution of partnership that he will continue to carry on the business in his own name cannot be so interpreted. His choosing to carry on the business in his own name, and announcing it publicly, did not imply that he gave up the right to the firm name, which he acquired along with M'Bride's share of the business and the goodwill, and had thenceforth the exclusive right to use. He says he still carries on the business in the old premises, under the old name and his own, but there is no proof of this, and in the Directory he appears only as ‘James Smith, Aerated Water Manufacturer.’ Be that as it may, he acquired the right, and he has not lost it, to the firm name of ‘Smith & M'Bride,’ by which he says he is still known in the conduct of his business. When the defenders parted with M'Kelvie the name of the firm had to be changed, and the omission of M'Kelvie was all that was necessary. Instead of ‘M'Bride, Smith & M'Kelvie,’ it should thenceforth have been ‘M'Bride & Smith.’ But instead of that, the name of the junior partner has been put first, and that of the senior second. Why so? ‘Because of certain re-arrangement of their business and otherwise,’ say the defenders (art. 4). ‘Otherwise’ is a very vague and comprehensive word, and if here I take it to mean ‘because the name of Smith & M'Bride was already well known in the trade, while that of M'Bride & Smith was new,’ I believe I rightly interpret the words and the conduct of the defenders. Their further explanation that the new name ‘was simply adopted because of the individual partners composing said firm having said names,’ I must regard as scarcely tolerable, if not simply incredible.

That the assumption of this name by the defenders, and the consequent confusion of a new firm with an older firm represented by the pursuer is injurious to him, and that he is entitled to be protected from such injury, I cannot doubt.”

The defenders appealed to the Sheriff ( Moncreiff), who dismissed the appeal, and added the following note:—“The Sheriff-Substitute's judgment is clearly right. Whatever may be the defenders' legal rights, there can be little doubt as to their animus or intention in adopting the firm of ‘Smith & M'Bride,’ viz., to obtain any benefit that was to be derived from the name of the old firm. The Sheriff-Substitute has explained this so fully that I need add nothing. As to the law of the case, I think that in a question with a partner who has sold his interest in the ‘goodwill’ of a business it must be held that he loses the right to use the old firm. This is correctly laid down by Lindley on Partnership (4th edition) p. 861—‘The purchaser of a goodwill of a business acquires the right not only to represent himself as the successor of those who formerly carried it on, but also to prevent other persons from doing the like.’ In the case to which he refers (which closely resembles the present), viz., Churton v. Douglas, 1859, Johnson's Chan. Reps. p. 174, there will be found a valuable exposition of the law by Vice-Chancellor Page Wood, which fully supports the statement in the text.

“It is said that the pursuer bound himself not to assume the name of the old firm. I do not so read the notice in the Gazette. That notice means no more than this, that it was the intention of the pursuer to carry on the business in his own name; and I think it is clear that he would have been at least entitled to have added, ‘Successor of Smith & M'Bride,’ if he had thought fit. Even if the pursuer were not entitled to use the old name of ‘Smith & M'Bride’ (which I do not affirm), it by no means would follow that M'Bride, who was bought out, and had assigned his whole interest in the concern to Smith, was entitled to do so, and represent himself as carrying on the business of the old firm. As to the time which had elapsed without the pursuer using the old firm's name (if this is the case) I think a sufficient explanation is, that until the assumption of the name by the defenders it was quite understood by the public that the pursuer was carrying on the business of the old firm. I therefore think that he is entitled to the protection sought, and that interdict has been rightly granted.”

Page: 24↓

The defenders appealed to the Court of Session.

Argued for the appellants—The law put no restraint upon people using their own names to form a firm name, although there might be another firm of the same name in existence carrying on a similar business, provided there was no suspicion of fraud in the transaction. Everything here was done in bona fide. Besides,’ James Smith had renounced any right to the name of “Smith & M'Bride,” which had become extinct. It could not be argued that this combination of names was never to be revived in Greenock without James Smith's consent.— Burgess v. Burgess, March 17, 1853, 3 De G. M. & G. 896.

Argued for the respondent—He had bought the goodwill of the business of Smith & M'Bride, and with it the sole right to use the firm's name. He had continued to use the articles which he had bought, and which were stamped with the name “Smith & M'Bride.” He received letters so addressed. The name had not become extinct. M'Bride & William Smith had gone out of their way to put the junior partner's name first when M'Kelvie retired, in order to derive any benefit which might arise from the use of a name well known in the trade. His proposals had been most reasonable, and as they had not been acceded to he was forced to apply for the interdict to which he was entitled. — Churton v. Douglas, March 17, 1859, Johnson's Chan. Reps. 174; Levy v. Walker, February 5, 1879, 10 Ch. Div. 436.

At advising—