The Appeal - Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd

 

Jane Lambert

Court of Appeal (Lady Justice King, Lord Justice Arnold and Lord Justice Stuart-Smith) Yours Naturally Naturally Yours Ltd v Kate McVier Skin Ltd and another [2023] EWCA Civ 1493 (19 Dec 2023)

This was an appeal by the defendants, Kate McIver Skin Limited ("KMS") and Christopher McIver (the personal representative and widower of Kate McIver ("Mrs McIver") the founder of KMS), against the order of His Honour Judge Hacon granting relief to the claimant Yours Naturally Naturally Yours Limited ("YNNY") for passing off and copyright infringement.   His Honour set out his reasons in his judgment in Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd and another [2023] EWHC 890 (IPEC) (20 April 2023) which I discussed in Passing off and Malicious Falsehood - Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd on 7 May 2023.  The appeal came on before Lady Justice King and Lord Justices Arnold and Stuart-Smith on 30 Nov 2023.  By their judgment in Yours Naturally Naturally Yours Ltd v Kate McVier Skin Ltd and another [2023] EWCA Civ 1493 of 19 Dec 2023, they dismissed the appeal.

The Facts

Lord Justice Arnold who delivered the lead judgment took the facts largely verbatim from Judge Hacon's judgment which I summarized in my previous case note.   Helpfully he added the following photographs which trace the development of the defendants' brand.   

Lord Justice Arnold's starting point was YNNY's original label which appears in the above photo.   That was the label that appeared on the first 5 bottles that YNNY's founder, Georgina Tang ("Mrs Tang") supplied to Mrs McIver in 2017.  The next photo shows the label that Mrs Tang allowed Mrs McIver to use in March 2018.

   

From June 2018, Mrs McIver ceased to refer to Mrs Tang's product as the "Elixir" and called it the "Secret Weapon" instead:

The product that Mrs McIver's company KMS purchased from a third party after December 2018 was supplied in the following packaging:

From March 2019 that product was sold in the following get-up:

 

The Law

Lord Justice Arnold said at para [38] of his judgment that the fundamental principle underlying the law of passing off may be simply stated as follows:

"no person may misrepresent their goods or services to be those of another person."

He added that defining the tort more precisely has proved difficult.  A number of eminent judges had attempted to formulate statements of its essential ingredients, but no test was universally applicable. He described Lord Diplock's statement in his speech in  Erven Warnink BV v J. Townend & Sons (Hull) Ltd [1979] AC 731 at 742 as the most comprehensive:

"My Lords, A. G. Spalding & Bros. v. A. W. Gamage Ltd., 84 L.J.Ch. 449 and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off: (1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so."

But Lord Justice Arnold noted that Lord Dipkock had warned:

"In seeking to formulate general propositions of English law, however, one must be particularly careful to beware of the logical fallacy of the undistributed middle. It does not follow that because all passing off actions can be shown to present these characteristics, all factual situations which present these characteristics give rise to a cause of action for passing off."

Lord Justice Arnold also referred to Lord Oliver's speech in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 All ER 873, [1990] 1 WLR 491, [1990] WLR 491, [1990] RPC 341, [1990] UKHL 12:

"Although your Lordships were referred in the course of the argument to a large number of reported cases, this is not a branch of the law in which reference to other cases is of any real assistance except analogically. It has been observed more than once that the questions which arise are, in general, questions of fact. Neither the appellants nor the respondents contend that the principles of law are in any doubt. The law of passing off can be summarised in one short general proposition — no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying 'get-up' (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff's identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. For example, if the public is accustomed to rely upon a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name. Thirdly, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or services is the same as the source of those offered by the plaintiff."

Lord Justice Arnold remarked that Lord Oliver had referred to "goodwill or reputation" in the above passage but it was clear from the Supreme Court's judgment in Starbucks (UK) Ltd v British Sky Broadcasting Group plc  [2015] ETMR 31, [2015] FSR 29, [2015] 1 WLR 2628, [2015] WLR 2628, [2015] 3 All ER 469, [2015] UKSC 31, [2015] ECC 19, [2015] WLR(D) 229 that goodwill is required and that mere reputation does not suffice.   He reformulated the three core ingredients of the tort of passing off as "(i) goodwill owned by the claimant, (ii) a misrepresentation by the defendant and (iii) consequent damage to the claimant."

He mentioned the Court of Appeal's judgments in Samuelson v Producers Distributing Co Ltd (1931) 48 RPC 580, Plomien Fuel Economiser Co Ltd v National School of Salesmanship Ltd (1943) 60 RPC 209 and Bristol Conservatories Ltd v Conservatories Custom Built Ltd [1989] RPC 455 as examples of "cases of passing off which do not fit easily within Lord Oliver's formulation although they do fit within Lord Diplock's". Finally, he quoted from Mr Justice Patten's judgment in ScanSafe Ltd v MessageLabs Ltd [2006] EWHC 2015 (Pat) where the defendant had claimed wrongly that his internet service security system came from the same source as the claimant's:

"[83] A permission to brand goods as one's own entitles the licensee to use the commercial reputation of the goods or services to make sales of that product in its own name. To that extent, it permits the licensee to accrue goodwill generated by the product for its own benefit. But it does not, without more, carry with it the right to trade on the reputation of those goods in order to market a similar product which does not originate from the same source as if it does. Such conduct would be a misrepresentation by that defendant and one not authorised by the Agreement.
[84] The difficult question is whether the misrepresentation is actionable by the claimant as passing off when, by virtue of the White Label arrangements, it has allowed any goodwill and reputation to be enjoyed by the defendant. It seems to me at least arguable that under the Reseller Agreement, the goodwill in the existing service can be used by ML to boost its trade in that product, but cannot be used to market a product which has a quite different technical origin. The law will notionally attribute to the claimant the reputation built up in the product for the purpose of protecting it from misuse in relation to other products. This is difficult law and it may be that the correct answer is that this is not passing off at all, but a species of injurious falsehood actionable on slightly different principles."

Grounds of Appeal

With the permission of Lord Justice Arnold, YNNY and Mr McIver appealed on the following grounds:

1. The judge had been wrong to find at [56] that YNNY owned goodwill "associated in the public mind with the trade name 'Elixir'" because no such case had been pleaded;
2. He had been wrong to find that Ms McIver and KMS had made the misrepresentations set out in the judgment
3. The judge had been wrong to find that the misrepresentations were damaging to YNNY's goodwill. 
4. The judge should not have granted relief from copyright infringement without making a finding of infringement.

Ground 1:  The judge had been wrong to find at [56] that YNNY owned Goodwill "associated in the Public Mind with the Trade Name 'Elixir'" because no such Case had been pleaded

Lord Justice Arnold set out in full the paragraph of the Particulars of Claim in which goodwill had been pleaded.  In that statement of case, Mrs McIver was referred to as "Mrs Dyment".

"(i) By reference to the foregoing, the Claimant is the owner of valuable goodwill in the Elixir Serum by reference to the unregistered trade marks 'Kate McIver' and 'Secret Weapon' and the First Label and the Second Label;
(ii) Further or in the alternative, by reference to the foregoing, the Claimant is the owner of valuable goodwill as the originator of the Elixir Serum supplied to the First Defendant and Ms Dyment under the unregistered trade marks 'Kate McIver' and 'Secret Weapon' and the First Label and the Second Label;
(iii) For the avoidance of doubt, the Claimant does not aver … that the Claimant's goodwill is held in the unregistered trademarks per se, but that … the Elixir Serum became associated in the unregistered trade marks, such that there arose goodwill separately to the First Defendants' goodwill (in that respect, the Claimant will rely upon the decisions in Bristol Conservatories Custom Built Ltd [sic] … and ScanSafe Ltd v MessageLabs Ltd …;
…
(iv) The First Defendant and Ms Dyment have misrepresented that Ms Dyment rather than Ms Tang was the originator of the Elixir Serum as follows:

(a) The First Defendant and Ms Dyment have falsely stated via the website www.katemciverskin.co.uk and the Instagram and Facebook accounts @katemciverskin that Ms Dyment created the Elixir Serum …
(b) The First Defendant and Ms Dyment have falsely stated to the press that Ms Dyment created the Elixir Serum …

(v) The First Defendant and Ms Dyment have by utilising the same/or similar unregistered trade marks mispresented that the origin of the First Imitation and the Second Imitation is the same as the Elixir Serum, namely the Claimant and/or Ms Tang;
(vi) The First Defendant and Ms Dyment by referring to the Second Imitation as 'Secret Weapon Original' have misrepresented that the Second Imitation is the Elixir Serum;
(vii) The misrepresentations of [the] First Defendant and Ms Dyment have caused damage to the Claimant's goodwill as follows:

…

(b) The First Defendant has been purchasing the First Imitation and the Second Imitation from a third party whilst marketing them so as to indicate the same origin as the Elixir Serum, in circumstances where the Claimant could have supplied the Elixir Serum to the First Defendant;
(c) The First Defendant's customers have been purchasing the First Imitation and the Second Imitation thinking it is the same as the Elixir Serum or thinking that it has the same origin as the Elixir Serum, in circumstances where the Claimant markets the Elixir Serum for sale and could supply to those customers directly;
(d) The change in ingredients and deterioration in quality of (at least) the First Imitation and (potentially) the Second Imitation and the acne and skin problems suffered by The First Defendant's customers are such as to create a negative impression in the mind of the public as regards the originator of the Elixir Serum, namely the Claimant and/or Ms Tang;
(e) The misrepresentations in and of themselves damage the Claimant's goodwill because they create a false impression in the mind of the public that Ms Dyment created the Elixir Serum and that the First Imitation and/or the Second Imitation are the same as the Elixir Serum and/or originate from the Claimant and/or Ms Tang."

The learned Lord Justice accepted that YNNY had not pleaded that it owned goodwill "associated in the public mind with the trade name 'Elixir'".  However, YNNY had contended in a respondent's notice that Judge Hacon ought to have found that goodwill was associated with YNNY's product and with YNNY (as successor to Ms Tang) as the originator of that product which his lordship also accepted.  Indeed, he believed that such a  finding was implicit in the judge's reasoning.

Ground 2: The Judge had been wrong to find that Ms McIver and KMS had made the Misrepresentations set out in the Judgment

The argument that the claimant had not pleaded that it owned goodwill in relation to the trade name "Elixir" had already been considered and disposed of under the previous ground of appeal.

The defendants' next point was that they took issue with para [58] of Judge Hacon's judgment:

"Ms McIver's statement on 6 June 2018 that she had put her life and soul into researching and creating the 'Kate McIver' serum, can only have been taken as meaning that she had created the Elixir serum she was selling. No alternative was suggested. Thus, Ms McIver's express representation was that she was the creator of the Elixir serum. By inevitable implication, she also made the further representation that she was the creator of the Elixir serum sold by anyone else, including Ms Tang. Both the express and the implied representation were false. Ms McIver repeated these representations on 8 June and 1 October 2018. It was repeated by her again in her quoted comments in the Liverpool Echo on 1 December 2018 and in her radio interview the next day."

In particular, they objected to the judge's finding that "no alternative" interpretation of Ms McIver's statement of 6 June 2018  had been suggested by them.   In that statement, Mr McIver had described her wedding and the difficulties she had since suffered from her cancer and from her chemotherapy. She continued:

"To get through this I needed to have a focus, something I loved, something I was obsessed with to take my mind from the pain ... Kate McIver skin was born and I literally put my life and soul it too [sic] researching and training, creating bespoke treatment and tailor making the ingredients for each session meaning treatments that I could be remembered for. …
The Kate McIver serum was designed to turn my skin around to help my cells recover and rejuvenate, it also healed all my scars. Fast forward 7 months and I'm in remission, my skin and hair is healthy and glowing and it's safe to say the business is thriving."

The defendants argued that they had advanced an alternative interpretation to Judge Hacon at trial, namely that Mrs McIver was claiming to have created a treatment using the serum rather than the serum itself. The claimant confirmed that the defendants had made that submission but added that the judge did not think much of it.   Lord Justice Arnold appears to have agreed and added that the same answer could have beeb made to any and all similar objections.

Another complaint of the defendants was that the judge had misinterpreted Mrs McIver's statement of 6 June 2018 and similar statements because he had failed to interpret them from the perspective of the relevant consumer.  Lord Justice Arnold rejected that contention on several grounds.  First, Judge Hacon was a specialist in IP law and would have been aware of the need to view matters from the perspective of the average consumer.   Furthermore, he had referred to the relevant section of the public for both malicious falsehood and passing off at para [69] of his judgment.  Secondly, his lordship accepted the claimant's submission that there was no evidence that the average consumer would have interpreted Mrs McIver's statement differently from Judge Hacon. Thirdly, the learned Lord Justice recalled that Lord Oliver had said that misrepresentation was a question of fact and it was sufficient that a substantial number of customers would be misled.  For all those reasons, Judge Hacon had been entitled to find that Ms McIver had misrepresented that she was the creator of the serum. 

Even if the trial judge had been wrong in his interpretation of Mrs McIver's statement of 6 June 2018 she had made many other misrepresentations.   Perhaps most importantly, she had said that the serum that she had purchased from a third party was the same as the serum that had been supplied by Mrs Tang.

The defendants' last point was that even if the statements complained of were untrue, the misrepresentations were immaterial because they did not give rise to any deception of consumers.  Lord Justice Arnold disposed of that argument shortly.  Quite apart from the misrepresentation that Ms McIver had been the creator of the serum, the assertion that the product that had been purchased from a third party was the same as the serum that had been supplied by Mrs Tang led KMS's customers into thinking that they were getting the same product as before when in fact they were getting a different product. That misrepresentation fell squarely within the Samuelson/Plomien/Bristol Conservatories line of authority,

Ground 3: The Judge had been wrong to find that the Misrepresentations were damaging to YNNY's Goodwill

The defendants repeated their argument that the claimant had not claimed goodwill in the trade name "Elixir" and contended that the judge had been wrong to find that there was a risk of damage to the reputation of the "Elixir" product, and hence to the claimant's goodwill.  Lord Justice Arnold accepted the first part of their argument but not the second.   There was at least one customer who had found the product that had been supplied by a third party to be unsatisfactory and the claimant had alleged that there were several more.  Consumers who had been deceived into thinking that KMS's product was the same as YNNY's were likely to regard YNNY's product with the same dissatisfaction.

Ground 4: The Judge should not have granted Relief from Copyright Infringement without making a Finding of Infringement

The claimant had pleaded that the defendants had infringed its copyrights in three ways: 

(i) copying works in which copyright subsisted contrary to s.17 of the Copyright, Designs and Patents Act 1988; 

(ii) issuing copies of the works to the public contrary to s.18 of the 1988 Act; and 

(iii) possessing and/or exhibiting in public and/or distributing copies of the works contrary to s.23 of the 1988 Act.

Lord Justice Arnold observed that the second plea was inapposite because the acts complained of all concerned online use and did not involve tangible copies. Despite this, paragraph 40 of the Defence admitted that "the First Defendant and Ms Dyment have issued copies of certain of the materials … to the public and made copies of such materials, where such materials appear on the Kate McIver website or on Kate McIver social media accounts". No point was taken either in the Defence or at trial that the acts in question were only actionable under s.20 of the Act and not s.18.   His lordship also noted that the third plea was defective on its face and could have been struck out because no knowledge or reason for belief had been pleaded.

The only defence to the infringement claim was that "for the period in which Ms Dyment was retailing the serum manufactured by Ms Tang she had an implied licence to use the marketing descriptions used by Ms Tang, including a licence to market the goods using any parts of that material in which Ms Tang owned the copyright"  Judge Hacon had found that that licence came to an end when KMS ceased to distribute YNNY's serum.   The defendants' point was that the judge did not make any express finding of infringement after that licence had lapsed although he could have done as there were infringing copies of the claimant's copyright works on the KMS's social media accounts up to the date of the trial.   

The defendants argued that these were not continuing infringements.  Lord Justice Arnold dismissed that argument peremptorily at para [73]:

"In my judgment this contention is not open to the Defendants given (i) the admission in paragraph 40 of the Defence, (ii) the Defendants' failure to take the point that the acts were only actionable under section 20, not section 18, and (iii) the Defendants' reliance upon implied licence as their sole defence. If the claim had been framed as one of communication to the public contrary to section 20, the availability of the posts after 30 November 2018 would clearly have constituted a continuing infringement."

Conclusion

For all those reasons his lordship dismissed the appeal.  Lady Justice King and Lord Justice Stuart-Smith agreed with him.

Comment

In para [1] of his judgment, Lord Justice Arnold said that he had granted permission to appeal, but recommended mediation.  He regretted that the parties had not been able to resolve their dispute because it was likely that the costs of the appeal would have exceeded what was at stake.  Few would have disagreed with his lordship's recommendation or expression of regret.   However, given the ease with which he disposed of all the grounds of appeal, it has to be asked why Lord Justice Arnold granted permission when the trial judge had not.   The only reason that occurs to me is that his lordship believed that the claimant's failure to plead goodwill in the trade name "Elixir", infringement under s.20 of the Copyright Designs and Patents Act 1988 rather than s.18 and knowledge of or reason for belief in the allegation of secondary infringement in its Particulars of Claim offered a realistic prospect of a successful appeal.  If that was the case it is a sobering reminder of the need for accuracy in pleadings.

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