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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lady Paton

Lady Smith

Lady Dorrian

[2008] CSIH 44

A123/08

OPINION OF LADY PATON

RECLAIMING MOTION

in the cause

WISE PROPERTY CARE LIMITED

Pursuers and Respondents;

against

WHITE THOMSON PRESERVATION LIMITED and OTHERS

Defenders and Reclaimers

_______

Pursuers and Respondents: Currie Q.C., Delibegovic-Broome; Maclay Murray & Spens

Defenders and Reclaimers: Martin Q.C., Logan; Drummond Miller LLP

16 July 2008

Introduction

[1] On 26 February 2008, interim interdict was granted in the following terms:

"The Lord Ordinary having heard Counsel on the unopposed motion of the pursuers, before calling no caveat having been lodged, ad interim interdicts the defenders or any of them, whether acting by themselves, their Agents, employees or anyone acting on their behalf or under their instruction from passing off as those of the pursuers any service or business provided by the defenders and in particular by trading or carrying on business under or using in their brochures, business cards, stationery, promotional material and signage or in any other manner in connection therewith (including but not limited to any use on the internet) the names 'White', 'White Thomson', 'White Preservation', 'White Thomson Preservation' and 'White Thomson Preservation (Northern)' or any other word or combination of words colourably similar thereto and likely to cause confusion with the business of the pursuers trading as 'White Preservation, a division of Wise Property Care Limited' and decerns."

[2] The defenders enrolled a motion for recall. The Lord Ordinary was provided with the Open Record dated March 2008, and certain productions including affidavits. On 7 March 2008, the motion for recall was refused, and an interlocutor pronounced in the following terms:

"The Lord Ordinary having heard Counsel on the defenders' motion to recall the interdict ad interim granted on 26 February 2008 refuses said motion; varies the said interdict ad interim by adding at the end the words 'provided that this order is not to interfere with any bona fide use by the third defender of his own name as an individual'; finds the first, second and third defenders liable to the pursuers in the expenses occasioned by the Motion Roll Hearing on 4 March, 2008 and of today; remits the account thereof, when lodged, to the Auditor of Court to tax."

The Lord Ordinary subsequently issued an opinion dated 20 March 2008.

[3] The defenders reclaimed against the refusal to recall the interim interdict. The case came before the Inner House on 29 and 30 May 2008.

Background

[4] The White family are specialists in the investigation and treatment of dry rot, rising damp, woodworm and similar problems. In 1976, Mr White senior and a colleague, Kenneth Thomson, set up a limited company called White Thomson Preservation Ltd. In 1982 Mr White's son Gavin joined the company.

[5] In 1983 Mr White and Mr Thomson decided to work independently of each other, and another limited company was created. Mr White's company traded as White Thomson Preservation (Northern) Ltd (company number SC059360). Mr Thomson's company was named White Thomson Preservation (Southern) Ltd. The latter company focused on the Edinburgh area, and for the purposes of the present case was of no further significance.

[6] White Thomson Preservation (Northern) Ltd offered property preservation services in the Fife and Kinross area. The company became well-known in that area. During 1984-85, Mr White's other sons, namely Ewan (the third defender) and Grant, joined the company. Thus all four members of the White family - Mr White senior and the three brothers Gavin, Ewan and Grant - worked together for the company in Fife and Kinross.

[7] In 2002, the three brothers decided to leave the company, and to set up their own property preservation company, again offering investigation and treatment of dry rot and similar problems. Their company was called White Preservation Ltd (company number SC227355). That company traded in Fife and Kinross, in competition with their father's company White Thomson Preservation (Northern) Ltd.

[8] In 2004, Ewan White left White Preservation Ltd. He became a self-employed specialist in property preservation, carrying out work for inter alios Richardson and Starling. His two brothers continued working with White Preservation Ltd, while his father continued to run White Thomson Preservation (Northern) Ltd.

[9] In October 2005, Mr White senior retired. His company White Thomson Preservation (Northern) Ltd was dissolved.

[10] In January 2006, Gavin and Grant White sold the business and assets of White Preservation Ltd to the pursuers, a large company of specialist property surveyors and consultants trading throughout Scotland. For the first time therefore the business and assets (including the goodwill) of White Preservation Ltd were transferred to someone outside the White family, although both Gavin and Grant White continued to work for the pursuers. The pursuers ran that part of their business as White Preservation, a division of Wise Property Care Limited. The shares in the company White Preservation Limited (SC227355) were not transferred to the pursuers. White Preservation Limited initially remained in existence, undergoing a change of name on 13 February 2006 to "Gragav Ltd", but the company was ultimately dissolved in November 2006. The pursuers, for their part, changed the name of one of their subsidiaries Devonside Ltd (SC294975) to "White Preservation Ltd" on 20 February 2006, but that company never traded.

[11] In 2007, Grant White left the pursuers and found other employment.

[12] In late 2007, Ewan White, who had been working as a self-employed specialist in the property preservation market since 2004, decided to set up a property preservation company which could, on one view, be seen as the successor to his father's business namely the dissolved company White Thomson Preservation (Northern) Ltd. On 23 October 2007, he formed a new company called White Thomson Preservation Ltd (company number SC332812, the first defender). He adopted the logo and letter-headings of his father's dissolved company. Thus the logo, a drawing of a pillared doorway with the words "Orig Est 1976", was identical to that used by his father's dissolved company. He started to trade in Fife and Kinross. On 17 January 2008 he formed a further company with a name identical to his father's dissolved company (White Thomson Preservation (Northern) Ltd, company number SC336335, the second defender). He let that company lie dormant. It is understood that he formed the company in order to have ownership of that particular name. On 5 February 2008 Ewan White undertook to honour the guarantees which had been issued by his father's company. That was a significant undertaking, which no-one else involved in the current dispute had been willing to give.

[13] Thus Ewan White was, on one view, resurrecting a business which had, during 2002 to 2005, been a competitor of White Preservation Ltd (whose business and assets had been acquired by the pursuers). The pursuers noted these developments, and began to monitor the activities of Ewan White and his new company. They took various steps, including employing private investigators. Ultimately they formed the view that Ewan White was, in the course of running his new business, seeking to pass off his company's services as those of the pursuers. They raised the present action of passing off, leading to the interim interdict hearings referred to in paragraphs [1] and [2] above.

Circumstances alleged to be likely to cause confusion

[14] The pursuers drew attention to inter alia the following circumstances as being likely to cause confusion:

[15] Ewan White was offering property preservation services (i.e. the investigation and treatment of dry rot, rising damp, woodworm and similar problems) in Fife and Kinross. The pursuers' division White Preservation offered identical services in roughly the same geographical area.

[16] Ewan White had chosen the business name White Thomson Preservation Limited (not, for example, a business name based on his own name). The pursuers aver in Article 10 of Condescendence:

"Due to the early history of [White Preservation Ltd], customers often refer to [White Preservation, a division of Wise Property Care Limited] not just as 'White Preservation' but still also as 'White Thomson Preservation' and as 'White Thomson'".

Thus the pursuers aver that, as a result of the past history of the businesses, the name chosen by Ewan White had connotations and associations with the business purchased by the pursuers.

[17] Ewan White had selected a business address at 14 Viewfield Terrace, Dunfermline; the pursuers' business premises for their White Preservation division included the address 22 Viewfield Terrace, Dunfermline.

[18] It was anticipated that much of the work introduced to Ewan White's new company would come from professionals such as solicitors. As Mr White senior explained in an affidavit (available to the Lord Ordinary) in relation to his own company:

" ... nearly all of our business came via Solicitors and Chartered Surveyors. The referrals would be as a result of personal relationships with the Solicitors and Chartered Surveyors."

Nevertheless Ewan White's new company also advertised its services to the public at large.

[19] During the short period in which Ewan White had been trading as White Thomson Preservation Limited, the pursuers discovered instances of actual confusion. Their averments in Article 13 of Condescendence relating to those instances include the following:

" ... the work of [Ewan White] in the field of property preservation work in Fife & Kinross has already caused customer confusion:

a. On or about 31 January 2008 [White Preservation, a division of Wise Property Care Limited] received a call from a lady caller, inquiring about a survey she arranged. It transpired that her solicitors advised her to arrange a survey by 'White "something or someone"'. Having checked their records, the pursuers' employees ascertained that the customer was not a customer of their business and that she must have had a survey booked with [White Thomson Preservation Limited].

b. On or about 31 January 2008, [White Preservation, a division of Wise Property Care Limited] received a call from another customer, Mr Wood, who wished to instruct a survey of a property in Inverkeithing. He said he was advised by his solicitors, Messrs Ross & Connel, to call 'Ewan White' of 'White Preservation' ..."

In addition, the pursuers instructed private investigators, who provided a report including details of conversations with Ewan White and his receptionist at White Thomson Preservation Ltd. In particular, one conversation between Ewan White and a prospective client, David Nelson, which took place on 12 February 2008, was said to have proceeded as follows:

"Ewan White: Hello

David Nelson: Hi there is that White Preservation?

EW: White Thoms ... yes, yes

DN: White Preservation?

EW: Yes White Thomson Preservation yes

DN: White is that the same?

EW: Yes

DN: Same company?

EW: Yes

DN: Right, ok erm and is it 22 Viewfield Terrace you are at in

Dunfermline?

EW: Eh no its 14 Viewfield Terrace

DN: 14 OK so is that the same company at 22 or?

EW: (hesitating) No they have a mail drop there

DN: They have a what sorry?

EW: I have a mail drop at 22

DN: OK alright so that is your company but its just a mail address?

EW: Exactly

DN: Right, OK, erm right I was just wondering what sort of cost

there would be to come and see if there is dry rot in a property."

On one view, the conversation could be seen as an attempt to mislead the caller into thinking that White Preservation and White Thomson Preservation Ltd were one and the same company.

[20] One further example of confusion relied upon, illustrated by correspondence inserted the Appendix by the pursuers and respondents (but not seen by the Lord Ordinary) was the receipt by the pursuers of a cheque intended to be payment for services rendered by Ewan White.

Submissions for the defenders and reclaimers

[21] Senior counsel submitted that the fundamental question was whether the defenders' use of the title "White Thomson Preservation" had the potential for passing off their business as that of the pursuers. The history of the companies was important. The father's company, White Thomson Preservation (Northern) Ltd, had always been separate from the three brothers' company White Preservation Ltd. The two companies had traded in open competition during 2002 to 2005. In January 2006, having purchased the business and assets of White Preservation Ltd, the pursuers applied their own trading logo to that part of their business, including the words "Wise" and "White Preservation", with a large tick emerging from the capital W. By contrast, when Ewan White set up his company in late 2007 as, in effect, a successor to his father's company, he adopted a name which was almost identical to his father's former company, and also the logo used by his father's company, namely a pillared doorway with the words "Orig Est 1976". Thus there were very different designs and get-ups, unlikely to mislead or to cause confusion between the two companies. The reference to 1976 was a clear indication that the business was not the pursuers' business, and that it was not White Preservation Ltd (which had only come into existence in 2002). Moreover White Preservation Ltd had never used the name "Thomson". It was accepted that the word "White" appeared in each business title, but the rest of the title was sufficiently distinctive to make clear that there were two separate entities: cf Sir Robert McAlpine Ltd v Alfred McAlpine plc [2004] RPC 36.

[22] Against that background, the Lord Ordinary had failed properly to identify the first prerequisite set out in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, at page 499, namely the nature of the goodwill which the pursuers were entitled to protect. If the pursuers had no right to the trading titles "White Thomson", "White Thomson Preservation", and "White Thomson Preservation (Northern)", and no right to any goodwill attached to those titles, then they were not entitled to try to prevent Ewan White and his company from carrying on business in a way which tended to attract the goodwill attached to those names or entities. The assets and goodwill of White Thomson Preservation (Northern) Ltd belonged to Mr White senior. Mr White senior was the person who could seek to protect that company's goodwill. However he had not objected to his son Ewan setting up his company in late 2007 in the way he had, adopting an almost identical name and an identical logo to those of Mr White's former company. It did not lie in the pursuers' hands to prevent such a situation. At best for the pursuers, the goodwill which they were entitled to protect was the goodwill attached to the name "White Preservation", which had been in existence since only 2002. Ewan White had never in fact traded as White Preservation, nor had he attempted to do so. Thus the requisite element justifying an apprehension of passing off did not exist.

[23] As for the second prerequisite set out in Reckitt & Colman Products Ltd, namely a prima facie case of likelihood of confusion, the Lord Ordinary had failed properly to weigh all the facts, including the different names (White Thomson Preservation as opposed to White Preservation), the different get-ups, the presentation of Ewan White's new company as the successor to his father's company (which had openly competed with White Preservation Ltd), and the specialities of the market in which the majority of the work was introduced to the companies in question by professionals such as solicitors. The three examples of alleged confusion set out in Article 13 of Condescendence did not provide an adequate basis for alleged confusion. In particular, the lady caller seeking to arrange a survey with "White 'something or someone'" had demonstrated some confusion, but not to the disadvantage of the pursuers. In any event, that was only one incident. The affidavit of Hugh Short of Messrs Ross & Connel, solicitors, 18 Viewfield Terrace, Dunfermline, showed that he was well aware of the difference between Ewan White's company and White Preservation. The inquiries made by John Haxton of Messrs Ross & Connel, and Julie Craigie of Messrs Andrew K Price Limited, solicitors, Kirkcaldy (the latter's affidavit being available to the court), illustrated an appreciation of the existence of two business entities with a request for clarification as to which one Ewan White had joined. In relation to the private investigators' report, the accuracy of the transcripts was not admitted. In one call, the receptionist had been careful to differentiate between Ewan White's new company and the pursuers' business division White Preservation. In another call on 12 February 2008, dealt with by Ewan White in person, and noted in para. [19] above, the recording was not clear, and the content of the conversation and the reference to a mail drop did not provide the pursuers with any substantial basis for drawing inferences. In any event, Ewan White's position was that he had suspected the caller to be someone such as a surveyor employed by the pursuers, checking on his business, and he had therefore "played along". The true nature of that telephone call required to be properly explored at a proof. The Lord Ordinary had treated the telephone call as a deliberate attempt to deceive, but the pursuers had not made any such averment in their pleadings. For all the foregoing reasons, the Lord Ordinary had failed properly to weigh up the facts when assessing any likelihood of confusion.

[24] So far as potential loss was concerned (the third element set out in Reckitt & Colman Products Ltd), the pursuers' case at its highest comprised the lady telephone-caller, whose actions had in fact benefited the pursuers. While there was perhaps a potential for loss, the averments did not justify the granting of interim interdict.

[25] In relation to balance of convenience, authorities such as NWL v Woods [1979] 1 W.L.R. 1294 established that the strength of any prima facie case was relevant when assessing balance of convenience. The Lord Ordinary had failed to have regard to the strength of any prima facie case. Ultimately, the use of the word "Thomson" in the trading title of Ewan White's new company was critical in distinguishing his business from that of the pursuers. There was no confusion. The prima facie case, if any, was weak, and did not justify interim interdict.

[26] Chill Foods (Scotland) Limited v Cool Foods Limited, 1977 S.L.T. 38 could be distinguished from the present case in two fundamental respects. First, the interim interdict in Chill Foods did not prevent the use of a name: rather it permitted the respondents to continue trading under their company name provided that they took sufficient steps to dissociate themselves from the petitioners. In the present case, the defenders had already taken steps amounting to a clear dissociation or distinction from the pursuers' White Preservation business, existent from 2006 until 2008, or at best from 2002 until 2008. For example, the defenders' use of the word "Thomson" in the trading title, and of the logo comprising the pillared doorway with the words "Orig Est 1976", amounted to a clear dissociation or distinction from the pursuers' business. The second ground for distinguishing Chill Foods was that the interim interdict in that case did not seek to prohibit the future use of the name generally, but affected only the petitioners' existing customers and suppliers.

[27] For all the foregoing reasons, which counsel supported by references to further authorities including Phones 4U Ltd v Phone4U.Co.UK.Internet Ltd [2007] RPC 5, Jacob LJ at paras. 9 to 10, 16 et seq; Dent v Turpin (1861) 2 J & H 139; Parker-Knoll Limited v Knoll International Limited [1962] R.P.C. 265, Lord Morris at page 279, Lord Hodson at page 284; and Inland Revenue Commissioners v Muller & Co's Margarine Limited [1901] AC 217, at page 223, interim interdict was not justified. The interim interdict was also too wide. It had been made clear to the Lord Ordinary that the defenders had no intention of using the titles "White Preservation" or "White Preservation Ltd". To that extent therefore the interim interdict granted was clearly unnecessary.

Submissions for the pursuers and respondents

[28] Senior counsel submitted that the Lord Ordinary had applied the correct principles in law, had given rational reasons, and had reached a conclusion which he was entitled to reach. His decision was not one which should be interfered with. Unlike Reckitt & Colman Products v Borden Inc, where the facts had been established at a proof, the Lord Ordinary had to make an assessment which was to a great extent prospective, as Ewan White's company had been trading for only a short period. He had to assess what was likely to happen by way of confusion and damage to the pursuers' business.

[29] In relation to the first prerequisite of passing off set out in Reckitt & Colman Products, namely a goodwill to protect, the truly relevant period was from January 2006 until the Lord Ordinary's decision. The goodwill which the pursuers had established in relation to White Preservation during that period was entitled to protection under the law of passing off. In late 2007 and early 2008, Ewan White's new company appeared as a newcomer in the market, and as an interloper in the sense used in Chill Foods (Scotland) Limited v Cool Foods Limited, 1977 S.L.T. 38. The honest concurrent use of a name illustrated in Dent v Turpin (1861) 2 J & H 139 (referred to by the defenders) was very different from the present case, as in Dent a father had set up both sons in business at the same time, under the same name. In his judgment, the Lord Ordinary accepted that goodwill resided in the division of the pursuers known as White Preservation. He could not be said to have erred in law in so doing.

[30] So far as the second prerequisite (likelihood of confusion) was concerned, it was well established that " ... it is not essential that the trader who sues should prove actual instances of confusion having taken place, but, if such are proved, the court will more readily grant interdict ...": Lord Hill Watson in Haig & Co Ltd v Forth Blending Co Ltd, 1954 SC 35, at page 37. The court had to assess whether there was likely to be confusion, and to do so on an objective basis. When addressing this issue, the Lord Ordinary took into account all the material before him, including the fact that the two companies had similar names, similar addresses, similar services, and traded in a similar geographical area. At para.[187] he correctly adopted an objective approach, viewing matters from the standpoint of customers. He rejected the defenders' contention that the addition of the word "Thomson" made all the difference, and concluded that there was a likelihood of confusion between the names "White Preservation" and "White Thomson Preservation" (cf Chill Foods, where Lord Maxwell held that there was a likelihood of confusion between non-identical names "Cool Foods Limited" and "Chill Foods (Scotland) Limited"). The Lord Ordinary could not be said to have erred in law in so doing, or to have assessed matters in an unreasonable or irrational way The defenders had further contended that there was a speciality of the market, namely that the defenders' main introducers of work were professionals such as solicitors, who appreciated the difference between the pursuers' division White Preservation and Ewan White's new company White Thomson Preservation Ltd. However the new company also advertised directly to members of the public, and as Mann J made clear in Sir Robert McAlpine Ltd v Alfred McAlpine plc [2004] RPC 36, at paras.39 and 44 to 46, the fact that professionals might know the difference between two companies did not mean that the public at large would not be confused. Further, there was in fact some evidence of confusion in the present case (albeit limited, as in Chill Foods). The example of the lady caller seeking to arrange a survey with "White 'something or someone'" was clear evidence of confusion in that a member of the public thought that one business was the other. Ewan White's telephone conversation of 12 February 2008 provided not only evidence of confusion, but material from which the Lord Ordinary could infer an intention to deceive or to cause confusion, with the result that, as Lord Maxwell commented in Chill Foods at page 41, proof of likelihood of passing off became easier. The Lord Ordinary was entitled to regard the telephone conversation as of significance. While there might be disputes about facts requiring to be resolved at a proof, and while there might be differing views about the proper construction to be placed on the telephone conversation, it could not be said that no reasonable judge could have found Ewan White's explanation for his responses implausible, or that no reasonable judge could have drawn an inference of deliberate intention to deceive.

[31] As for the third element specified in Reckitt & Colman Products Ltd, namely the likelihood of loss or damage, senior counsel submitted that evidence of specific loss or damage suffered by the pursuers was not required at the stage of interim interdict. The courts tended to proceed on the basis of what was foreseeable as a result of confusion, and to take a broad and general view of the sort of damage which could occur: cf Lord President Rodger in William Grant & Sons Limited v Glen Catrine Bonded Warehouse Limited, 2001 SC 901 at para.[79]; Sir Robert McAlpine Ltd, at paras.44 and 45. Diversion of trade was not the only type of damage which could occur. The disadvantages arising from confusion could take many forms, for example, damage to reputation as a result of the newcomer's different standards of workmanship. The Lord Ordinary's assessment of the likelihood of loss or damage could not be criticised, particularly bearing in mind the admissions made in Answer 18 of the Open Record.

[32] Finally, the Lord Ordinary addressed the issue of the strength of the prima facie case in paras. [203] and [204] of his judgment, albeit using slightly unusual language. Senior counsel submitted that there was in fact a strong prima facie case, but was content to accept the position adopted by the Lord Ordinary, namely that the prima facie case was neither weak nor strong, but was middle of the range. Against that background, as was pointed out in Chill Foods, the balance of convenience generally favoured the established business over the interloper. The pursuers trading as White Preservation were the established business in the present case, having been in business since early 2006, whereas Ewan White and his new company had commenced trading in late 2007/early 2008. A change of name would be far less damaging to a company starting to trade, than to an established trader. In any event, Ewan White claimed to be well-known to the professionals in the area, who were the main source of business. The Lord Ordinary was therefore entitled to conclude that Ewan White could re-brand (admittedly with some inconvenience and expense) and thereafter continue working in the area. The Lord Ordinary was also entitled to conclude that if the interim interdict were to be recalled, there was likely to be confusion with an unquantifiable effect upon the pursuers' business.

[33] In conclusion, senior counsel submitted that no error of law had been identified. The Lord Ordinary had applied the correct tests to the material presented to him. He had exercised a broad judgment, on the basis of sometimes conflicting facts, to reach an interim decision. Without the benefit of a proof on the facts, he had reached conclusions which he was entitled to reach. It could not be maintained that the Lord Ordinary had failed to take into account parts of the material presented to him (for example, an affidavit) simply because that item was not specifically referred to in his judgment. He had assessed the cogency of an application for an interim measure of protection, addressed all the issues, applied the correct tests, and reached conclusions which he was entitled to reach. The reclaiming motion should be refused.

Discussion

Interim interdict and balance of convenience

[34] As is noted in Burn-Murdoch, Interdict, at Ch IV (Interim Interdict) para. 143:

"Interim interdict ... is a matter of discretion, exercised often in the light of merely ex parte statements ... Even when the question is not decided until answers have been lodged, little more than a rough prima facie view of the facts is available, and the discretionary element is prominent. The question is thus on a footing entirely different from the ultimate claim of a successful litigant to decree of perpetual interdict ... in an interim question only the prima facie aspect can be considered. The question at this stage is not so much the absolute relevancy of the case as the seeming cogency of the need for interim interdict ..."

Further, at para. 152, it is stated that:

"In questions of interim interdict, the relative inconvenience resulting to either party from its grant or refusal is the dominating consideration ... ad interim, it is assumed that either party may be ultimately successful, and the balance [of convenience] is estimated on that assumption. This rule was more than once expounded by Lord President Inglis: 'The object in cases such as this is to regulate the interim possession in such a way as to do least damage in the meantime to either party, and at the same time to provide sufficiently for proper restitution being made for any damage suffered to the party who shall be found in the right when the case is over.' (Tennant & Co v Thomson, 1870 8 S.L.R. 15)."

Circumstances in which the Inner House may interfere with the decision of a Lord Ordinary

[35] Sheriff N.M.P. Morrison, Q.C., in his commentary on the Rules of the Court of Session at para.38.16.7, outlines the circumstances in which the Inner House may interfere with a decision of a Lord Ordinary involving the exercise of a discretion as follows:

" ... Discretion. A discretion will not be lightly interfered with. It is not enough that the appellate court would have exercised the discretion differently. The tests have been variously described, depending to some extent on the area of law concerned. The tests may be stated as follows: (a) has there been a failure to exercise the discretion at all (Orr Pollock & Co (Printers) Ltd v Mulholland, 1983 S.L.T. 558), (b) has the judge misdirected himself in law (Forsyth v A.F. Stoddard & Co Ltd, 1985 S.L.T. 51), (c) has the judge misunderstood, misused or failed to balance the evidence (Skiponian Ltd v Barratt Developments (Scotland) Ltd, 1983 S.L.T. 313, 314), (d) has the judge taken into account an irrelevant factor (Thomson v Glasgow Corporation, 1962 S.C. (H.L.) 36, 66 per Lord Reid), (e) has the judge failed to take into account a relevant factor (Thomson, above), (f) is the decision unreasonable (Thomson, above), (g) is the decision unjudicial (Thomson, above)."

Prima facie case of passing off

[36] "The principle is this, that no man is entitled to carry on his business in such a

way or by such a name as to lead to the belief that he is carrying on the business of another man or to lead to the belief that the business which he is carrying on has any connection with the business carried on by the other man ..." (Romer LJ in Clock Ltd v Clockhouse Hotel Ltd (1936) R.P.C. at page 275).

[37] In order to establish a prima facie case of passing off, the pursuers required to satisfy the Lord Ordinary in relation to the following three prerequisites:

(1) The pursuers have a goodwill to protect.

(2) There is a misrepresentation by the defenders to the public (whether or not intentional) leading or likely to lead the public to believe that services offered by the defenders are the services of the pursuers.

(3) The pursuers are suffering, or are likely to suffer, damage by reason of the erroneous belief engendered by the defenders' misrepresentation:

cf Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, Lord Oliver of Aylmerton at page 499D-H. Taking each element in turn:

(1) A goodwill to protect

[38] In January 2006, the pursuers purchased the assets and business of White Preservation Ltd. From early 2006 to late 2007, they ran that business as a property preservation branch of their company in Fife and Kinross, under the name "White Preservation, a division of Wise Property Care Limited". During that time they had no competitor trading as White Thomson Preservation (Northern) Ltd, White Thomson Preservation Ltd, or any similar name. They offer to prove that the business "has grown from strength to strength, and is a well-known business in the Fife and Kinross area" (Article 9 of Condescendence). Against that background, and on the material before him, the Lord Ordinary was entitled to form the view that the pursuers had during early 2006 to late 2007 built up goodwill in the property preservation market in Fife and Kinross associated with the trading name White Preservation. He was entitled to conclude, as he did in para. [182]:

"I had little difficulty in holding that there was a prima facie case that the pursuers had goodwill which they were entitled to protect."

(2) A misrepresentation by the defenders to the public (whether or not intentional) leading or likely to lead the public to believe that services offered by the defenders are the services of the pursuers

[39] I am prepared to accept that Ewan White's primary business strategy was to hold out his new company White Thomson Preservation Ltd (company number SC332812, formed in late 2007) as, in effect, the successor to his father's former company White Thomson Preservation (Northern) Ltd company number SC059360 (originally White Thomson Preservation Ltd established in 1976). Part of that business strategy was a willingness to undertake work formerly performed by his father's former company, coupled with undertakings to honour the former company's guarantees. No doubt it was largely in pursuance of such a strategy that Ewan White adopted the name White Thomson Preservation Ltd together with the logo depicting a pillared doorway with the words "Orig Est 1976", all suggestive, at the very least, of a strong connection with the original White Thomson Preservation Ltd, and with White Thomson Preservation (Northern) Ltd. Mr White senior for his part did not complain of passing off or of any other breach of his rights: para. 5 of his Affidavit dated 3 March 2008.

[40] However the question arises whether, in pursuance of that primary business strategy, circumstances arose which entitled the Lord Ordinary, on the material before him, to form the view that there was a risk of misrepresentation to the public leading or likely to lead the public to believe that the services offered by Ewan White and his new company White Thomson Preservation Ltd were those of, or were connected with, White Preservation, a division of Wise Property Care Ltd. In a case such as this, there may be scope for differing views: but the question in this reclaiming motion is whether the Lord Ordinary erred in law or failed in any other way as outlined in para. [35] above.

[41] The information and material placed before the Lord Ordinary included the following:

(i) Both the pursuers and the defenders offer property preservation services,

including the investigation and treatment of dry rot, rising damp, woodworm and similar problems.

(ii) Both the pursuers and the defenders offer those services in approximately the

same geographical area, Fife and Kinross.

(iii) The pursuers have business premises at 22 Viewfield Terrace, Dunfermline;

the defenders have business premises at 14 Viewfield Terrace, Dunfermline.

(iv) The pursuers trade as "White Preservation, a division of Wise Property Care

Limited"; the defenders trade as "White Thomson Preservation Ltd".

(v) In Article 10 of the Condescendence the pursuers offer to prove that:

(vi) While many of the introducers of business to the defenders are professionals,

in particular solicitors, the defenders advertise to the general public and do business with members of the public. In this connection, the defenders' Grounds of Appeal suggest that the Lord Ordinary did not take into account the affidavits of Hugh Short and Julie Craigie, referred to in para. [23] above, although no clear argument founded upon a failure to take into account a relevant factor or factors was presented in the Inner House. In my view, the Lord Ordinary clearly took all the material before him into account, and weighed that material in an objective manner. He was entitled to form the view at para. [207] of his judgment that members of the public were likely to be confused, even although certain professionals such as solicitors Hugh Short and Julie Craigie had indicated in their affidavits that they personally understood the difference between the companies. As Mann J pointed out in Sir Robert McAlpine Ltd v Alfred McAlpine plc [2004] RPC 36 at paras. 39 and 44 to 46, the fact that professionals might know the difference between two companies does not mean that the public at large would not be confused.

(vii) The pursuers offer to prove some instances of actual confusion between the

pursuers and defenders, as set out in Article 13 of Condescendence, quoted in para. [19] above.

(viii) The pursuers offer to prove the content of a telephone call dated 12 February

2008 between Ewan White and a prospective client, David Nelson, all as set out in para. [19] above. When dealing with that telephone call, the Lord Ordinary made the following observations in paras. [201], [210] and [211] of his judgment:

" ... I was satisfied that the contents of the telephone conversation with [Ewan White] provided a prima facie basis for an assertion that he was acting dishonestly and was deliberately fomenting confusion, albeit he may have been led into it [201] ... It will be seen that the contents of the telephone conversation were of significance in my opinion [210] ... While it would not have been appropriate to form a concluded view in the absence of evidence, the defenders' explanation for what he said [viz. "he had simply been playing along" para.141] assuming it was accurately recorded, appeared prima facie implausible [211]."

In my view, the Lord Ordinary was entitled to draw the inferences he did on the basis of the transcript, even although the pursuers had not averred in terms a deliberate intention to mislead. Those inferences made Lord Maxwell's comment at page 41 of Chill Foods particularly apposite:

" ... while it is well-settled that intention to cause confusion is not an essential element of a 'passing off' case, the existence of such intention will make proof of likelihood of passing off easier."

[42] The Lord Ordinary also noted and took into account inter alia the dissimilar get-up of the pursuers' and defenders' business stationery and advertising: para. [25] of his judgment; the history of the companies as set out in paras. [4] to [13] above; the fact that the three brothers' company White Preservation Ltd competed with Mr Smith senior's company White Thomson Preservation (Northern) Ltd; the lack of any complaint from Mr Smith senior; and the fact that professionals knew the difference between the pursuers' White Preservation division, and Ewan White's new company White Thomson Preservation Ltd.

[43] On the basis of all of the material before him, the Lord Ordinary was satisfied that the pursuers had made out a prima facie case of misrepresentation to the public (whether intentional or unintentional) leading or likely to lead the public to believe that the services offered by the defenders were the services of, or were associated with, the pursuers. Standing the material outlined in para. [41] above, it cannot in my opinion be said that he was not entitled to reach that view, or that he erred in so doing.

The pursuers are suffering, or are likely to suffer, damage by reason of the erroneous belief engendered by the defenders' misrepresentation

[44] The pursuers aver in Article 18 of Condescendence:

"The pursuer is likely to suffer substantial damage to its goodwill in [its White Preservation branch] by reason of the defenders' activities. The pursuer is also likely to suffer financial loss as existing customers of [White Preservation] are likely to be confused and to engage in error the defenders' services instead of those of [White Preservation]. In the event of a recommendation being made by an existing customer of [White Preservation] in respect of the services offered by [White Preservation], the recipient of the recommendation is likely to be confused by the defenders' use of the names White, White Thomson, White Preservation, White Thomson Preservation and White Thomson Preservation (Northern) or any other word or words colourably similar thereto and is likely to engage the services of the defenders instead of the [White Preservation]. The businesses operated by [White Preservation] and the defenders overlap in that they both provide similar services in Scotland for the same specialised and limited market."

The defenders' response in Answer 18 is as follows:

"It is admitted that the pursuers are likely to suffer a loss of goodwill and trade as a result of the activities of the defenders but that is because he will compete with them and win business from introducers. It is admitted that the businesses overlap in the services they provide and in the area in Scotland in which they provide those services. The pursuers have no right to prevent this. Quoad ultra denied."

[45] I consider that senior counsel for the pursuers was correct in his contention that all that the pursuers require to demonstrate is a likelihood of damage. As Mann J observed in Sir Robert McAlpine Ltd v Alfred McAlpine plc [2004] RPC 36, at para. 20:

"When it comes to considering damage, the law is not so naïve as to confine the damage to directly provable losses of sales, or 'direct sale for sale substitution'. The law recognises that damage from wrongful association can be wider than that. Thus in Ewing v Buttercup Margarine Ltd (1917) 34 R.P.C. 232, Warrington LJ said:

'To induce the belief that my business is a branch of another man's business may do that other man damage in all kinds of ways. The quality of the goods I sell; the kind of business I do; the credit or otherwise which I might enjoy. All those things may immensely injure the other man, who is assumed wrongly to be associated with me.'

In so saying, he was not limiting the kinds of potential damage to those listed by him. Rather, he was indicating that the subtleties of the effect of passing off extend into effects that are more subtle than merely sales lost to a passing off competitor."

[46] On this matter, taking into account the parties' averments, submissions, and productions (including the transcript of the telephone call of 12 February 2008), the Lord Ordinary was in my view entitled to reach the view that the pursuers were likely to suffer damage by reason of the erroneous belief engendered by the defenders' misrepresentation (whether intentional or unintentional).

Strength of the prima facie case

[47] The Lord Ordinary in paras. [203] and [204] of his judgment in effect reached the view that the prima facie case made out by the pursuers was one of reasonable strength. On the material before him, he was entitled to do so.

Balance of convenience

[48] Having found the prima facie case to be one of reasonable strength, the Lord Ordinary weighed the various factors affecting balance of convenience, including the following:

(a) Ewan White's new company Thomson Preservation Ltd began trading in late 2007 and was in effect a newcomer or interloper in the field in the sense described in Chill Foods (Scotland) Limited v Cool Foods Limited, 1977 S.L.T. 38, at page 41 (cf Lord Macnaughton at page 223 of Inland Revenue Commissioners v Muller & Co's Margarine Ltd [1901] AC 217), even although the company sought to present itself as the successor to Mr White senior's former company. As is pointed out in Chill Foods, the established business is in general entitled to protection against the interloper.

(b) Ewan White claimed to be well known in the property preservation business in Fife and Kinross, and would therefore have little difficulty making contacts and continuing to work in the property preservation business.

(c) Ewan White's new company, which had only just started trading, would be able to re-brand albeit at some cost and inconvenience. Such a re-branding exercise would not prevent Ewan White or his company from trading (including, it should perhaps be added, undertaking to honour guarantees given by his father's company).

(d) If the interim interdict were to be recalled, there would be difficulty quantifying any loss suffered by the pursuers.

In all the circumstances of the case, with these factors particularly in mind, the conclusion reached by the Lord Ordinary on balance of convenience cannot in my view be criticised.

The precise terms of the interim interdict

[49] It was not suggested to the Lord Ordinary that the terms of the interim interdict were too wide. Nevertheless that matter was raised in the Inner House. Senior counsel for the defenders confirmed that the defenders did not wish to use the titles "White Preservation", or "White Preservation Ltd". The remaining titles specified in the interim interdict are in my opinion ones which the Lord Ordinary was entitled to conclude would give rise to confusion between the pursuers and the defenders. In the circumstances I do not accept that the terms of the interim interdict are too wide.

Decision

[50] For the reasons given above, I am not persuaded that the Lord Ordinary erred. I would refuse the reclaiming motion.

[51] It should be noted that the defenders and reclaimers included certain productions in the Appendix which were not before the Lord Ordinary, namely pages 188 to 202, being copies of the Yellow Pages advertising books. The defenders also sought to add the following sentence to Ground of Appeal 2(c):

"The pursuers and respondents have no right or title to the goodwill (if any) attached to "White Thomson Preservation" and have no right to prevent the defenders from seeking to utilise such goodwill."

[52] At the commencement of the reclaiming motion, counsel for the pursuers and respondents reserved his position on those two matters. The debate then proceeded, including references to the additional productions and the additional sentence noted above. In his final submissions, counsel for the pursuers did not formally object to the two matters being taken into consideration by the court. The court accordingly proceeded on the basis that both matters were properly before the court.

EXTRA DIVISION , INNER HOUSE, COURT OF SESSION

Lady Paton

Lady Smith

Lady Dorrian

[2008] CSIH 44

A123/08

OPINION OF LADY SMITH

RECLAIMING MOTION

in the cause

WISE PROPERTY CARE LIMITED

Pursuers and Respondents;

against

WHITE THOMSON PRESERVATION LIMITED and OTHERS

Defenders and Reclaimers

_______

Pursuers and Respondents: Currie Q.C., Delibegovic-Broome; Maclay Murray & Spens

Defenders and Reclaimers: Martin Q.C., Logan; Drummond Miller LLP

16 July 2008

[53] I agree that the reclaiming motion cannot succeed. Nevertheless, it is my view that the Lord Ordinary placed too much weight on the telephone call of 12 February 2008. There may be difficulties with the recording of the call, the "transcript" of it was not agreed and the third defender states that he assumed that the caller was not genuine and framed his responses accordingly. Further, contrary to what the Lord Ordinary suggests, the pursuers do not aver dishonest intention on his part. In these circumstances, I consider that the defenders' criticism that the Lord Ordinary placed too much weight on the telephone call is well founded. That, however, is not an end of the matter. The position remains that the third defender had, in circumstances where he did not know that the caller was other than a bona fide member of the public, said things which indicated that the two businesses were one and the same; it was not suggested that there was any problem with the recording or "transcript" so far as that part of it was concerned. That does not necessarily indicate dishonest intention but it is, at the very least, indicative of a careless approach. Accordingly, the Lord Ordinary was, on that basis, entitled to regard the matter of the investigator's telephone call as relevant and indicative of a risk of the third defender making such a representation again.

[54] Separately, as regards the defenders' submission that the Lord Ordinary failed to identify what the goodwill was for which the pursuers sought protection, they can point to the fact that he does not do so expressly. However, it can only, in the circumstances, be the goodwill that was attached to the name "White Preservation". Whilst the defenders are entitled to point to the fact that the pursuers possession of that goodwill has subsisted only since the beginning of 2006 it also has to be recognised that that goodwill flowed from the formation of the company 'White Preservation Ltd', in 2002. On any view, a significant period had passed during which goodwill in the name "White Preservation" was said to have been actively built up .

[55] Finally, as regards balance of convenience, I accept that it may not be entirely accurate to describe the defenders as interlopers. As a revival of the old family business, it is perhaps more appropriate to regard their recent arrival in the marketplace as their re-entry rather than their debut. However, the principle whereby an established business is in general entitled to protection from the interloper, as pointed out in Chill Foods, applies nonetheless, in my view.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lady Paton

Lady Smith

Lady Dorrian

[2008] CSIH 44

A123/08

OPINION OF LADY DORRIAN

RECLAIMING MOTION

in the cause

WISE PROPERTY CARE LIMITED

Pursuers and Respondents;

against

WHITE THOMSON PRESERVATION LIMITED and OTHERS

Defenders and Reclaimers

_______

Pursuers and Respondents: Currie Q.C., Delibegovic-Broome; Maclay Murray & Spens

Defenders and Reclaimers: Martin Q.C., Logan; Drummond Miller LLP

16 July 2008

[56] I entirely agree with your Ladyship in the chair and have nothing useful to add.