Scottish Court of Session Decisions

In this case interim interdict was pronounced on the ex parte application of the pursuers on 19 August, 1998. The interlocutor of that date prohibited the defender, Mr McKeon, from "a) passing off in Edinburgh, as being textile goods sold or supplied by the pursuers under the name of Remnant Kings or King's Fabrics, any textile goods sold or supplied by the defender by trading under the name of Remnant Kings or King's Fabrics or any other name colourably similar thereto in Edinburgh, and (b) commencing to trade in Edinburgh from any establishment not already in existence under the name of Remnant Kings or King's Fabrics or any other name colourably similar thereto without the consent of the pursuers." The defenders enrolled for recall of the interim interdict. The motion was continued to enable parties to enter into negotiations and was ultimately debated on 20 October, 1998.

The parties are members of the McKeon family. The second named pursuers are the daughters of the late Francis James McKeon. Following the death of Francis Charles McKeon, Francis James McKeon and his three brothers, Hugh Thomas McKeon, Patrick Charles McKeon, and John Farrell McKeon, and his sons, agreed to carry on the family business in partnership in terms of a Minute of Agreement dated 17 February and 29 October, 1982. The business was that of textile merchants and household suppliers in Scotland and England. They agreed to use the firm name of King McKeon McGuigan & Co. There were to be two trading names, "Remnant Kings" and "King's Fabrics".

It was agreed that the business would be separated into four sections, the Head Office and three trading divisions. Properties were allocated to the four heads as follows:

It was agreed that the interest of Hugh Thomas McKeon would be ten percent of the Head Office division, and an equivalent interest in the other business assets, to be realised generally only in the event of their sale. Where a property was sold and the proceeds reinvested within six months, his interest was effectively rolled over into the substituted property. Provision was made for the use of the name "Remnant Kings", subject to the differentiations already noted, by any of the divisions. And there were provisions entitling Hugh Thomas McKeon to a share of any additional properties acquired by any division. The parties agreed to share head office expenditure, including a salary payable to Mrs Catherine King for the shorter of her lifetime or the duration of the partnership. So far as not applied for those purposes, the profits of the divisions were to be applied in the first place in paying a salary to Hugh Thomas McKeon, and otherwise the principals were to retain the profits of their respective divisions. Decisions regarding head office were to be made by a majority of partners. Provision was made for expulsion in the event of bankruptcy among other events.

Whether that agreement achieved the parties' intention of creating a partnership at that stage need not be considered. The agreement (sic) was dissolved by Minute of Agreement dated 17 August 1984 and 15 February, 1985, as at 30 June, 1984. For convenience, I will refer to it as the "Dissolution Agreement". The parties also entered into a "Partnership Agreement" on the same dates. In terms of the Dissolution Agreement, the trading properties held under the 1982 arrangements were made over to individuals, so far as still held by the former firm. Patrick Charles McKeon took 90% of all of the properties listed under West in the 1982 Agreement, along with a tenement at 2, Cathcart Street, Ayr, not previously identified. John Farrell McKeon took 90% of the Central properties other than 4, Orr Square, Paisley. It appears to be a reasonable inference that that place of business had been disposed of. Francis James McKeon took 90% of all of the properties listed under East. Hugh Thomas McKeon took ten per cent interests in all of the properties. It appears that at this date the scope of the business, in the broadest sense, had changed only in respect of the disposal of the Paisley property.

The Dissolution Agreement then provided:

By the Partnership Agreement, the parties purported to make provision for the continued existence of King McKeon McGuigan & Co. It was to hold the head office properties, now comprising 79, and 110-112 Sword Street, in addition to the trading names. It is unnecessary for present purposes to comment on the effectiveness of the attempt to create a partnership simply to hold property in this way. It is clear that whatever the description of the association they formed, the parties intended to enter into contractual relationships to enable them severally to enjoy the advantages associated with the businesses carried on using variants of the names Remnant Kings and King's Fabrics.

While a number of its provision may become material in the course of these proceedings, few need be noted at this stage. Clause Nine provided that decisions regarding the partnership would be made by a majority of the partners according to shares, crediting Hugh Thomas McKeon with ten per cent, and the remaining brothers with thirty per cent each. Clause Sixteen provided for expulsion on bankruptcy. On the death or retiral of Hugh Thomas McKeon his share was to be acquired by the other partners. Clause Eighteen provided:

In contrast to the 1982 Agreement, no reference at all was made to additional properties.

On a straightforward construction of the 1985 agreements, assuming that they were valid and effective, the use of the specified variants of the trading name "Remnant Kings" by the individual participants in the scheme, however one might describe it, was restricted to the use of the party's own variant in trading from the specified properties.

It is therefore of interest to note the basis on which the pursuers came before the court.

Patrick Charles McKeon was said to have been sequestrated in 1988, and to have ceased to be a partner in King McKeon McGuigan & Co. How he ceased, and whether there was a notice of default and an acquisition of his interest, is not averred. It appeared from information provided at the hearing that the procedure stipulated in the 1985 agreements was not followed. There was an informal arrangement, and Patrick Charles McKeon has been taken care of by John Farrell McKeon since that time. Francis James McKeon died in 1995.

The pursuers aver that trading is now carried on by them and by John Farrell McKeon using the names Remnant Kings, and King's Fabrics, and variants thereof. From the information provided, it appears that some of the properties formerly operated by Patrick Charles McKeon must have been disposed of, and some transferred to the two continuing operations. It is clear that there have been additional acquisitions by each. The present position, as averred by the pursuers, and subject to such modifications only as may be made by reference to additional information which was not disputed, is said to be as follows:

The pursuers make no reference to the Head Office divisions or its properties. The defender's averments include specification of names which differ from those in the list. But at this stage it is sufficient to proceed on the pursuers' averments.

It is abundantly clear, on the pursuers' averments, (a) that the 1985 agreements have been departed from in a wholesale fashion by both continuing enterprises, in respect of the use of names derived from the names reserved to the partnership, and (b) that numerous properties have been used in breach of the agreements. At the hearing on 20 October, Mr Wallace, for the pursuers, effectively abandoned the 1985 agreement as a basis for interim interdict, and contended only that the pursuers were entitled to the protection sought in the first part of the order on a common law passing off basis. He presented no argument in support of head (b), which falls to be recalled accordingly.

The structure of the pursuers' pleadings makes it difficult to accommodate the argument which was eventually advanced. Article 8 of condescendence proceeds on the basis of the 1985 agreements, and of understandings alleged to have been reached between the late Francis Charles McKeon and his brothers. Further, in article 4, the pursuers' rights are said to have been derived from the 1985 arrangements. There is no alternative averment of the means by which they came to be entitled to carry on their late father's business, nor is there any alternative explanation of the links between their activities and those of their late father which would entitle them to rely on his goodwill in a question with the first defender, John Farrell McKeon. Mr Wallace came ultimately to rely on the trading in Edinburgh by the pursuers following their father's death as sufficient to sustain the first branch of the interim interdict.

The pursuers' case, so far as concerns authority, is said to rely on Chill Foods (Scotland) Limited v Cool Foods Limited 1977 SLT 38, and Dash Limited v Philip King Tailoring Limited 1989 SLT 39. So far as relevant to the limited issue before me, these cases rather support the defender. If the pursuers cannot trace their right to use the specified names or derivants from or through their father, they have been in the position of newly established traders attempting to make use of those names when there was an established trader with a long history of use of the names. They would be interlopers, and, on authority, at a disadvantage relative to John Farrell McKeon. That in itself would be reason enough for recalling the interim interdict.

However, I consider that there are more substantial reasons for considering that the pursuers' case is fundamentally weak. As is averred in article 8, what the late Francis Charles McKeon carried on was part of a business. The McKeon business activities as a whole clearly were a single unit prior to 1982, with a set of business names by which they were known to and recognised by the public. The various contracts entered into in 1982 and 1985 had as their object the preservation of the goodwill associated with that unitary business while permitting the individual brothers to carry on more or less autonomous businesses and take care of those members of the family who were not to be involved actively in the conduct of the businesses. There were many methods that might have been adopted to achieve that end. Some would have been less controversial than the method adopted. In 1998 steps were taken to register the names Remnant Kings and King's Fabrics as trade marks belonging to King McKeon McGuigan & Company, and to treat the uses of the names made by the continuing units as under licence. That approach might have been adopted in 1982 or 1985. It was not. What the parties did was to differentiate their business names by agreement, as (West), (Central) and (East), and then to trade in overlapping areas of the country as if those differences were sufficient to distinguish them from one another. (Central) and (East) each had premises in Glasgow in 1982. The divisions were not defined geographically, despite the use of geographical terminology. No brother had an exclusive territory. Indeed, the pursuers' late father expanded his operations in Glasgow, asserting his right to do so in the face of protests by his brothers. It is to be observed that in Glasgow alone, according to the pursuers' averments, the name "Remnant Kings East" is used, at the original premises in Bowman Street and at Byres Road. The division of the outlets of (West) which were retained following Patrick Charles McKeon's insolvency created further overlapping. What Mr John Farrell McKeon proposes continues the practice of the members of his generation in business expansion, maintaining the single difference of name which was resolved on in 1982. Prima facie, he has a right so to do, at least in a question with members of the McKeon family. It would take a very strong case to tip the balance of convenience in favour of the pursuers even considering them to have a right to the benefit of their late father's business and goodwill.

There is no such case, in my opinion, either in the averments as they have now to be understood, or on a broader view of the information placed before me. The area over which they contend that they have an exclusive business connection is ill-defined. The interim interdict refers to "Edinburgh". The averments relate to the "Edinburgh area". The proposal is to develop in Leith. In argument, Mr Wallace contended that the right to protection would extend to preventing trade by John Farrell McKeon at any location from which the defined catchment area of superstore trade would overlap with the Newington Road and Lothian Road shops operated by the pursuers. In a sense that perhaps best characterises the pursuers' position. There is an anxiety to prevent overlapping trade, however generated, which might put them at a competitive disadvantage in and around Edinburgh. But overlapping of trade is inherent in the business arrangements the family have made to enable them all to continue to benefit from the business connection built up by their predecessors. The pursuers have investigated the prospects of expansion elsewhere in Scotland, and continue to do so without acknowledging any territorial limitation on their activities.

The interim interdict currently prevents the defender from entering into a new lease. I was told that the lease is threatened by the present litigation. I place little weight on this. If the position should prove to be that the pursuers are entitled to protection in an area which includes the Seafield store, John Farrell McKeon would properly be considered to be an interloper there. It would be his own responsibility that he had failed to clarify his right to open business before undertaking significant financial commitments.

In the whole circumstances I consider that the interim interdict should be recalled because of the weakness of the basis for claiming exclusive rights in the area involved. It is accepted on both sides that the parties must seek a solution to the problems which exist. Mr Wallace invited me to keep the first part of the interim interdict in position because it was proving useful in negotiations. That would not be a legitimate reason for refusing recall. If the pursuers succeed in establishing a case, no doubt after considerable further amendment and adjustment, the store at Leith will not be able to use any version of the protected names. John Farrell McKeon will require to abandon the name he intends to use, of "Remnant Kings Central - Curtain Warehouse". However, at this stage, that appears to be a name to which he has an established right. Since this is commercial procedure, there is no reason to envisage a lengthy delay before the final decisions are taken, if they must be taken by the court.