Case Note: Bhayani v Taylor Bracewell LLP - Goodwill generated by a Partner or Employee

Jane Lambert

Bhayani and Another v Taylor Bracewell LLP [2016] EWHC 3360 (IPEC) (22 Dec 2016)

In Reckitt and Colman Products Ltd v Borden Inc, and Others, [1990] 1 WLR 491, [1990] RPC 341, [1990] 1 All ER 873, [1990] WLR 491, [1990] UKHL 12 discussed the elements of an action for passing off. The first of those elements was

 "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."

His Honour Judge Hacon considered that element in the above-mentioned case. 

This was an application by Taylor Bracewell LLP for summary judgment in, or, alternatively, the striking out of, a passing off action that had been brought against it by its former fee earner, Jay Bhayani, and her law firm, Bhayani Law Limited.

Ms Bhayani is a solicitor specializing in employment law. The judge observed that it was common ground that she was "an employment lawyer of some note in Sheffield." Taylor Bracewell wanted to open an office in Sheffield with an employment law department. In 2011 it offered to employ Ms Bhayani as a salaried partner in charge of an office in Sheffield from where the firm was to carry on business in the name or style of 'Bhayani Bracewell'.

On 14 Feb 2014 Taylor Bracewell applied to register

as a British trade mark for a wide range of services in classes 35 and 45 under registration number UK3042588.

The parties fell out and Ms, Bhayani left Taylor Bracewell on 17 Oct 2014. For a while, it continued to practise from Sheffield in the name or style of 'Bhayani Bracewell'. Ms Bhayani sued Taylor Bracewell alleging:

"that by use of the 'Bhayani Bracewell' name Taylor Bracewell has falsely represented that Ms Bhayani is still involved with their business and has thus passed off its services, particularly its employment law services, as being those of Ms Bhayani. The claimants allege further and more specific acts of passing off: that Taylor Bracewell has (i) stated that Ms Bhayani is still a team member on pages of the Website and on the website hosted at www.taylorbracewell.co.uk, (ii) kept a voicemail message recorded by Ms Bhayani which clients are liable to access out of hours, (iii) told a Mr Greaves of AAG Systems Ltd that Ms Bhayani was still carrying out work for Taylor Bracewell, (iv) maintained a Google business account in relation to 'Bhayani Bracewell', (v) used the Domain Name and refused to surrender it and (vi) used the Trade Mark and refused to surrender it."

Ms Bhayani also claimed revocation of the trade mark under s.46 (1) (d) of the Trade Marks Act 1994.

Taylor Bracewell applied for summary judgment or a striking out on the following grounds:

"[20] First, Taylor Bracewell says that in law Ms Bhayani does not own goodwill to found a case in passing off. It is common ground that Ms Bhayani has never practised as a sole practitioner. Before she joined Taylor Bracewell she worked at a firm called Watson Esam, initially as an employee and then as an equity partner from 1996 to 2011. Mr Moss argued that any goodwill generated by her activities as a solicitor before October 2014 can only have vested in Watson Esam and subsequently in Taylor Bracewell. In each case the goodwill was associated only with those firms' respective trading names. Ms Bhayani has never owned any relevant goodwill herself.
[21] Secondly, on a correct construction of the 2014 Partnership Agreement Taylor Bracewell is entitled to use the trading name 'Bhayani Bracewell'.
[22] Thirdly, the contractual right to use that name means that the Trade Mark cannot be invalid pursuant to s.46(1)(d)."

In her reply, Ms Bhayani argued that

"[23] ...... the goodwill she generated while she worked at Watson Esam and Taylor Bracewell was associated with her own name and was at all times owned by her. Mr Keay submitted that in law it is not necessarily the case that goodwill generated by an employee or partner is vested in the employer or partnership, as the case may be. It will depend on the facts. Those facts have to be explored at trial.
[24] On a correct construction of the partnership agreements, Ms Bhayani's consent to use 'Bhayani Bracewell' terminated once she had left. To the extent that there was any doubt about that, the agreements have to be construed in the light of the relevant factual matrix, which should be left until trial.
[25] Finally, even if Taylor Bracewell were to own the relevant goodwill, its use of the 'Bhayani Bracewell' name and other representations that Ms Bhayani was still part of the firm rendered the Trade Mark liable to deceive the public."

The case thus turned on whether Ms, Bhayani or her former employer owned such goodwill as may have been generated by her activities as a solicitor in relation to the "Bhayani Bracewell" name. The judge first drew a distinction between reputation and goodwillH:

"[26] During the course of her career at Watson Esam Ms Bhayani acquired a significant reputation, particularly in the Yorkshire area, as a solicitor with a high level of expertise in the field of employment law. It is not in dispute that reputation by itself does not found an action in passing off. The question is whether Ms Bhayani also acquired goodwill.
[27] Goodwill cannot in law subsist as a thing alone – it is indivisible from the business with which it is associated, see Star Industrial Co Ltd v Yap Kwee Kor [1976] FSR 256, at 259, recently endorsed by the Supreme Court in Starbucks (HK) Ltd v British Sky Broadcasting Group plc [2015] UKSC 31; [2015] FSR 29, at [23] and [51]-[52].
[27] This is to be distinguished from reputation which exists by itself. A solicitor celebrated for his or her expertise may enjoy the highest possible reputation and this will be personal, attaching only to that individual. But reputation alone cannot form the basis of an action for passing off, no matter how high the wattage of celebrity."

He then turned to whether Ms Bhayani, as opposed to her employer or partners, had acquired any goodwill by virtue of her activities.

Judge Hacon observed at para [29]:

"In the general run, goodwill generated by the acts of an employee will be vested in the employer, see Asprey & Garrard v WRA (Guns) [2002] FSR 31, at [36]; Kingston, Miller & Co. Ltd. v Thomas Kingston & Co. Ltd. (1912) 29 R.P.C. 289, at 295. Similarly, where an individual works in a partnership the goodwill generated by his acts will in the normal course vest in the partnership, see Leather Cloth Co. v American Leather Cloth Co. [1865] 11 H.L.C. 523."

However, there were exceptions. Ms Bhayani's counsel had argued that any person who acquires a reputation by carrying out acts under their own name, real or otherwise, generates actionable goodwill on which they can personally rely. It makes no difference whether the person is employed or works for a partnership.  The judge rejected that contention as contradicting well-established authority. He accepted Taylor Bracewell's contention that an employee or partner acquires goodwill only in respect of actvities outside the scope of the employer's or the partnership business and relied on Edmund Irvine Tidswell Ltd. v Talksport Ltd. [2002] FSR 60, [2002] EWHC 367 (Ch), [2002] 2 All ER 414, [2002] EMLR 32, (2002) 25(6) IPD 25039, [2002] 1 WLR 2355, [2002] WLR 2355, [2002] EWHC 367 for support. He said at para [38]:

"Mr Irvine was under contract with Ferrari. The terms of the contract were apparently not relevant and so not made clear, but even if it had been a contract of employment, it was unlikely that his duties were stated to include the endorsement of products under his own name. The business conducted by Mr Irvine in the field of endorsement was quite separate from his business as a racing driver. It generated a distinct goodwill which was his and on which he could found an action for passing off."

The judge concluded at paras [42] and [43] that as there were no special facts any goodwill in the  "Bhayani Bracewell" name accrued to the firm and not to Ms Bhayani. Moreover, even if he was wrong on the passing off point, the partnership agreements were sufficient to transfer the goodwill in the "Bhayani Bracewell" name to Taylor Bracewell.

Taylor Bracewell had argued that the same partnership agreements afforded a cast iron defence to a claim for revocation under s,46 (1) (d). His Honour was not persuaded and allowed that portion of the claim to go to trial.

Accordingly, he allowed the application in respect of the claim for passing off but not for revocation of the trade mark.

Should anyone wish to discuss this case, or passing off or trade mark law in general, he or she should call me on +44  (0)20 7404 5252 during office hours or send me a message through my contact form.