Neutral Citation no.  [1999] 1935

Ref:    

GIRA2693

 

 

 

Judgment: approved by the Court for handing down

Delivered:

27/05/99

(subject to editorial corrections)

 

 

 

                                                                1999  No. 875

                       IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND

                                                       CHANCERY DIVISION

                                                                      -------

BETWEEN:

                                               ROADSIDE (GARAGES) LIMITED

                                                                                                                                           Plaintiff;

                                                                         and

                                    ROADSIDE MOTORS (COLERAINE) LIMITED

                                                                                                                                      Defendant.

                                                                       ------

GIRVAN J

JUDGMENT

INTRODUCTION

            This matter originally came before the court by way of an application by the plaintiff Roadside (Garages) Limited ("Roadside Garages") for an interlocutory injunction against the defendant Roadside Motors (Coleraine) Limited ("Roadside Motors") to restrain Roadside Motors from passing off its business as and for the business of Roadside Garages by the use in connection with the defendant's said business of the trading style "Roadside" within a twenty mile radius of the town of Coleraine in County Londonderry.  By consent the parties agreed that the motion should be treated as the trial of the action and further agreed that the matter should be decided on the affidavit evidence filed in support of the motion and in response thereto. 

            On the hearing of the trial on 13 May 1999 Mr Humphreys appeared on behalf of Roadside Garages and Mr Hopley appeared on behalf of Roadside Motors. 

FACTUAL BACKGROUND

            Roadside Garages is a limited company which trades from 1 Newmills Road, Coleraine, County Londonderry selling motor cars.  It holds a franchise to sell Fiat and Alfa Romeo cars.  As part of its business it allows purchasers to trade in their old cars and it thus has a trade in second hand cars as well as selling new Fiat and Alfa Romeo cars.  It services cars, mainly the Fiat and Alfa Romeo cars which it sells under its franchise but it is prepared to service other cars if requested.  The company was incorporated in 1986 and originally carried on business in Limavady. 

            Sam Copeland, the father of one of the current directors of Roadside Garages and Jim Parkinson originally set up a motor business in Dollingstown, Lurgan, County Armagh under the style Agricultural Vehicle Sales Limited.  That name was subsequently changed to Roadside Motors Limited.  That company established a business in Limavady in addition to that carried on at Dollingstown but in 1986 the directors Sam Copeland and Jim Parkinson split.  Jim Parkinson continued to trade in Lurgan and Sam Copeland formed Roadside (Garages) Limited.  There is nothing to suggest that Mr Parkinson objected to this. 

            Roadside Garages purchased premises at Newmills Road, Coleraine in 1989 and began trading there and the Limavady business was discontinued. 

            In the meantime Roadside Motors built up a substantial trade in Lurgan and a number of associated or subsidiary companies were formed.  Thus Roadside Accident Repair Centre operating from 1 Dromore Road, Lurgan carries on repairs for insurance companies on a Northern Ireland wide basis.  Roadside Motors (Lurgan) Limited originally formed as Brook Merchants Limited was incorporated in 1991 and has a Nissan franchise and a Northern Ireland wide franchise for Foden-Dennis vehicles.  Roadside Motors (Armagh) Limited incorporated in January 1991 has a Peugeot franchise as has Roadside Motors (Moneymore) Limited.  Edwin May Limited of Bridge Street, Portadown was purchased by the Roadside Group in 1982 and holds a Volkswagen franchise.  Edwin May (Ballymena) Limited trades from Pennybridge Industrial Estate in Ballymena and was acquired by the group in 1997.  It has a Volkswagen franchise.  Brook Garage (Coleraine) Limited was acquired by the group in 1997 and it holds an Audi and Volkswagen franchise.  The defendant company was itself incorporated in August 1985 as Roadside Motors (Banbridge) Limited and changed to its present name on 25 January 1999. 

            The shares in Roadside Motors Limited are all held by Ian and Gary Hutchinson and the shares in all the other companies are owned by them and Roadside Motors Limited. 

            Brian Hutchinson in his affidavit on behalf of Roadside Motors asserted that "the company name" (presumably a reference to Roadside Motors) is used consistently throughout Northern Ireland and that the same advertising logo and design are used stressing the word "Roadside" with the letter "O" being written with a slash through it.  The group was approached by Renault when Renault's dealership in Coleraine terminated in 1985.  Renault, it was claimed, wanted to engage a group with sufficient financial resources to build new premises and insisted on the setting up of temporary premises in the meantime. 

            It is not correct to say that the company name is used consistently throughout Northern Ireland nor is it correct that the word "Roadside" is consistently used with the letter "O" in a unique form.  The group includes three companies which do not use the word "Roadside" as part of the title.  Various examples of advertisements published by members of the group show the word "Roadside" with an ordinary "O".  Nor is it correct to suggest or imply that Renault in some way wanted the defendant company to operate in Coleraine incorporating the name Roadside.  Although initially it was argued on behalf of the defendant that it was Renault which wanted the name used, Mr Hopley conceded that that was not so.  It appears clear that the decision to adopt the defendant's current name was made by the Hutchinsons who, it was accepted, were aware of the fact that the plaintiff company was operating in Coleraine under the name Roadside (Garages) Limited. 

            Common sense would suggest that confusion between the new names was liable to arise and it must be inferred that the Hutchinsons were aware of that likelihood but were prepared to accept it.  The decision to adopt the name in the light of that likelihood of confusion may have been made in the belief that they were entitled to use the name, that the confusion would be short lived and that it was a commercial risk worth taking because of the longer term benefits to the defendant's business in adopting the name.  Alternatively it may have been in the belief that the confusion would probably benefit rather than disadvantage the defendant in the longer term.  A deliberate decision to adopt a name apt to cause confusion which might redound to the benefit of the defendant would smack of bad faith.  I would be slow to make such a finding on inferences to be drawn from the affidavit evidence of a deponent whom the plaintiff has not sought to cross-examine.  In the circumstances I would be slow to infer bad faith on the part of the defendant.

            It is clear that confusion has arisen amongst those dealing with the parties.  Some customers believe that the Roadside Garages has taken on a Renault franchise, some thinking that it was instead of and others that it was in addition to the Fiat franchise.  There are examples of misdelivered goods and mail.  On one occasion a customer called thinking that the plaintiff was a Renault dealer and ended up buying a new Fiat Punto.  If these episodes of confusion have occurred with the plaintiff one could infer the likelihood that similar episodes of confusion would be likely to occur with the defendant.  Though Roadside Motors through Counsel denies that they ever saw any examples of confusion.  Mr Hutchinson in his affidavit stated that at no point in time has Roadside Motors ever sold a Renault car to an existing Fiat customer and it has never accepted a Fiat vehicle as a trade in.  He asserted that the two garages operate different franchises and that "Renault customers do not buy Fiat cars and Fiat customers do not buy Renault cars", a proposition which the plaintiff rejects pointing to the obvious fact that the cars are in direct competition and that Renault and Fiat would wish to increase their respective market shares.  The plaintiff has been successful in achieving a 6-10% penetration of the local market with Fiat and Alfa Romeo cars as compared to a nationwide average of 4%. 

INGREDIENTS OF THE TORT OF PASSING OFF

            In Reckitt & Coleman Products Limited v Borden Incorporated [1990] 1 All ER 873 the House of Lords stated the threefold elements of the action for passing off (neatly described as the "classical trinity" by Nourse LJ in Consorzio del Prosciutto di Parma v Marks and Spencer Plc [1991] RPC 351).  The ingredients are:-

1.         that the plaintiff's goods or services have acquired a goodwill or reputation on the market and are known by some distinguishing feature;

2.         that there is a misrepresentation by the defendant whether or not intentional leading or likely to lead the public to believe that goods or services offered by the defendant are goods or services of the plaintiff;

3.         that the plaintiff has suffered or is likely to suffer damage as a result of the erroneous belief engendered by the defendant's representation.

            Although in its original form the action for passing off sounded in deceit and equity following the common law required proof of a fraudulent intent, it was later accepted that an injunction could be granted in equity in the absence of an intention to deceive if the defendant's actions would in fact result in deception.

            The existence of a misrepresentation is an essential element of the action for passing off and the misrepresentation must be material in the sense of being likely to influence the actions of the persons to whom it is made.  The adoption of a trading name similar to that of the plaintiff can be such a misrepresentation and Mr Hopley on behalf of the defendant accepted that if a third party having no previous connection with the word "Roadside" had come into Coleraine and adopted the Roadside name this could lay the basis for a claim in passing off if the businesses were in the same market. 

            In resisting the plaintiff's claim for an injunction Mr Hopley argued that Roadside Motors was entitled to rely on the defence of honest concurrent use of the word "Roadside" and that the businesses of the plaintiff and the defendant were so distinct that if there was any confusion it was not a confusion which led to the risk of the diversion of any trade away from the plaintiff to the defendant. 

            The concept of concurrent use in the context of the tort of passing off can apply in a narrower and in a wider way.  In its narrow sense it was a well established principle that a person might carry on a rival business in his own name notwithstanding that the use of it is calculated to cause confusion between his own business and that of his competitor.  The original justification for this lay in the old common law principle that a fraudulent intent was a necessary ingredient of the cause of action.  With the disappearance of the requirement to prove a fraudulent intent that rationale disappeared and was replaced by the equitable principle that there was no equity to restrain a party from making an honest statement of fact namely that the business was carried on by a person in his own name.  A somewhat more restricted approach is now being adopted by the courts.  Thus, for example, in Parker Knoll v Knoll International Limited [1962] RPC 265 the House of Lords adopted the test that if the plaintiff's name or mark is proved to have acquired a secondary meaning so as to denote goods or services made or supplied by a particular person and not goods or services made by any other person even though such other person may have the same name then a person may, even by using his own name innocently be making a representation which is untrue and this may be restrained by an action for passing off.

            Just as an individual may normally use his own name in running a competing business, so an established company has such a right even where it moves into a market in which it has not previously traded.  Thus in Saunders v Sun Life Assurance Corporation of Canada [1984] 1 Ch 537 the defendant was incorporated in Canada as "The Sun Life Assurance Company of Canada" and traded under that title for ten years.  It opened an office in London and claimed a right to carry on business in this country.  An English company had carried on its business for eighty years under the name of "The Sun Life Assurance Society".  The court held that in the absence of fraud or dishonesty the use by the defendant of its own corporate name without abbreviation, addition or modification involved no mis-statement of fact and could not be restrained but the defendant could not extend the use of the name to "The Sun" or "The Sun Life" without the addition of the words "of Canada". 

            In the present case Roadside Motors Limited had not itself extended its operation to Coleraine.  Had it done so it may be that it could not have been restrained from using its name in the Coleraine area.  The defendant is, however, a separate company and indeed formerly operated under the style Roadside Motors (Banbridge) Limited, changing its name to underline a Coleraine connection.  In Fine Cotton Spinners and Doublers Association v Howard Cash and Co [1907] 2 Ch 190 Joyce J said:-

                        "I consider, as the law stands at present, that a new company with a title of which the name "A", for instance, forms part has not the natural rights that an individual born with the name of "A" would have.  I think also that such a company merely by registration does not acquire and incorporate the individual rights which its promoters may respectively have had to carry on business in their own names; and further, I think that a person of the name of "A" without transferring a business and goodwill cannot, by merely authorising the promoters of the company to use his name as part of the title, confer upon such company a right to do so as against other people who would be damaged thereby."

            Applying those principles to the circumstances of the present case the present case does not fall within that narrower concept of concurrent use. 

            The concept has a wider significance as stated in Halsbury Laws of England (1995 reissue) volume 48 paragraph 200:

                        "Concurrent rights to use proprietary as opposed to descriptive, names or marks can arise by division between different persons of the goodwill of a business which was initially a single business, the attainment of independence from its group by a subsidiary or associated company, by natural expansion of business using marks of independent origin into areas in which they come into conflict, or by continuing use by small local users in good faith after a mark has become generally identified with the products of a particular large manufacturer."

            The historical background to the formation of the plaintiff and the defendant's group of companies does not establish that there was ever a common business incorporating Roadside in its name.  The two businesses developed separately and in different areas.  Roadside Motors Group built up its own connection in Lurgan and developed piecemeal in different areas thereafter.  The plaintiff's business operated separately in the Coleraine area and has built up a goodwill there in its own right.  The nature of garage businesses is that they have largely local clientele although on occasions people from outside the area may resort to them.  The very fact that Renault wanted Roadside Motors to operate in Coleraine to replace the outgoing franchisee indicated the importance of the local market.  It has not been established that the Roadside Motors group ever had a goodwill in the Coleraine area as such.  The establishment of a garage business by Roadside Motors group in Coleraine was the establishment of a garage business in competition with the plaintiff.  While the connection of past Renault customers was no doubt of value as part of the goodwill the business would clearly have the intention of aiming to compete with the plaintiff and draw business from the plaintiff's clientele. 

            I conclude that the present case does not fall within the concept of honest concurrent use of a trade name.

            Mr Hopley's further argument that there is no likelihood of any confusion leading to interference with the plaintiff's trade or business must now be considered.  Mr Hopley rightly reminded the court of Lord Greene's dicta in Marengo v Daily Sketch and Daily Graphic Limited [1992] FSR 1 at 2:

                        "No one is entitled to be protected against confusion as such.  Confusion may result from the collision of two independent rights or liberties and where that is the case neither party can complain; they must put up with the result of the confusion as one of the misfortunes which occur in life.  The protection to which a man is entitled is protection against passing off, which is a quite different thing from mere confusion."

            As pointed out above there is evidence of confusion amongst customers of the plaintiff as to whether the defendant's business is that of the plaintiff and it would be surprising if this were not so.  Although the plaintiff operated a Fiat and Alfa Romeo franchise and the defendant a Renault franchise both operate in the motor trade.  It is unrealistic to suggest as the defendant has that the trades were so different and distinct that the confusion is not likely to lead to any loss on the part of the plaintiff.  Although many car purchasers may see themselves as Fiat or Alfa Romeo drivers (and will thus continue to frequent the plaintiff) this is not inevitably so.  Some car purchasers are flexible in their choice of vehicle and may opt for a change of car if the Renault prices or designs or both are attractive.  Other potential car purchasers in the market who have not had direct dealings with the plaintiff in the past but who rely on its reputation may erroneously assume that the defendant is carrying on the plaintiff's business and deal with it on that basis.  I am satisfied that there is a sufficient likelihood of the confusion leading to potential loss of business on the part of the plaintiff to justify the granting of an injunction.  I remind myself that customers have to be taken as they are found and there is no principle of law that they must always be assumed to be literate and careful customers (see for example Lord Oliver in Reckitt and Coleman Products v Borden Incorporated [1990] 1 All ER 73). 

            Accordingly I hold in favour of the plaintiff and I shall hear Counsel on the geographical extent of the injunction to be issued. 


                                                                1999  No. 875

                       IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND

                                                       CHANCERY DIVISION

                                                                      -------

BETWEEN:

                                               ROADSIDE (GARAGES) LIMITED

                                                                                                                                           Plaintiff;

                                                                         and

                                    ROADSIDE MOTORS (COLERAINE) LIMITED

                                                                                                                                      Defendant.

                                                                       ------

 

                                                              J U D G M E N T

 

 

                                                                          of

 

 

                                                                   GIRVAN J

 

 

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