Passing off - GFS Flex Ltd v Brymec Ltd
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Jane Lambert
Chancery Division (Mr Justice Nugee) GFS Flex Ltd v Brymec Ltd [2020] EWHC 1907 (Ch) (17 July 2020)
This was an application for an interim injunction in an action for passing-off. The claimant and applicant, GFS Flex Ltd ("GFS"), imports corrugated stainless steel tubing ("CSST") gas pipes and fittings that are manufactured by the Turkish company Bes Yapi Ürünleri Sanayi ve Ticaret Limited Sirkayi and distributes them in the UK. Those pipes and fittings have a yellow plastic clip. GFS alleges that that clip distinguishes the pipes and fittings that it supplies from the pipes and fittings of all other suppliers. The defendant and respondent, Brymec Ltd ("Brymec") has begun to sell CSST gas fittings made by another Turkish company Paktermo Olcu Aletleri ve Boru San ve Tic. A.S. with a similar yellow clip. GFS complains that those pipes and fittings are likely to deceive buyers of gas pipes and fittings into thinking that there is a commercial connection between the parties' products or businesses. The judge who heard the application by order observed at paragraph [5] of his judgment that "GFS does not seek to prevent Brymec from selling its fittings, or from selling them with a plastic clip of a different colour, but only to prevent them selling them with the yellow plastic clip."
Interim Injunctions
The High Court has power under s.37 (1) of the Senior Courts Act 1981 to grant interim or final injunctions in all cases where it appears to the court to be just and convenient to do so. The court exercises that power in accordance with Part 25. I of the Civil Procedure Rules and the Part 25A Practice Direction. An interim injunction is intended to protect the applicant (usually the claimant but sometimes a defendant with a counterclaim or some other party with a Part 20 claim) from any harm that might be done to him or her by the respondent between the start of proceedings and judgment. The remedy is available in most civil proceedings but it is particularly important in passing off. That is because the unsuccessful party is often forced to rebrand after which the unsuccessful party tends to lose interest in continuing the proceedings. For that reason, interim injunction proceedings are often dispositive of passing off actions.
American Cyanamid
Because the consequences of disobeying an injunction can be very serious as I explained in Contempt of Court - Centek Holdings v Giles on 7 July 2020, judges are supposed to take great care when deciding whether or not to grant such relief. They have to make such decisions at a very early stage of the proceedings on documentary evidence only much of which may be contested. Since Wakefield v. Duke of Buccleugh [1865] 12 L.T. n.s. 628 at 629, judges have required successful applicants to promise to compensate respondents for any loss or damage that may be occasioned by the injunction should it transpire that the injunction should never have been granted. Requiring such cross-undertakings has reduced but not eliminated the risk of injustice, In American Cyanamid Co v Ethicon Corporation [1975] AC 396, [1975] UKHL 1, [1975] 2 WLR 316, [1975] 1 All ER 504, [1977] FSR 593, the House of Lords provided guidance as to how that risk can be minimized.
Procedural History
GFS issued proceedings and applied for interim injunctive relief on 9 April 2020. The application was heard by Mr Justice Birss. Although an application for an interim injunction can be made without notice at any time, it is usual for applicants to give intended respondents at least 3 days written notice of their application. As the cost of resisting an application can be many thousands of pounds, prudent respondents use that time to consider whether to fight, accept or negotiate variations to the terms of the injunction. In this case, Brymec decided to fight the application though it offered undertakings until the hearing which were acceptable to GFS, and more limited undertakings for the disposal of the application generally which were not. The application came on before Mr Justice Birss on 23 April 2020. He gave directions for the parties to file further evidence and for the application to be heard on another day as an "application by order" in accordance with paragraph 16.23 of the Chancery Guide. Mr Justice Nugee heard the parties on 30 June 2020. He handed down his judgment in GFS Flex Ltd v Brymec Ltd [2020] EWHC 1907 (Ch) on 17 July 2020.
The Decision
The issue before Mr Justice Nugee was whether to restrain Brymec from distributing gas fittings with a yellow clip or to accept the limited undertakings that Brymec had offered, After hearing the parties' arguments and considering the evidence, he accepted Brymec's undertakings and refused to grant the injunction. With the consent of the parties, he transferred the action to the Intellectual Property Enterprise Court.
Whether there was a Serious Issue to be tried
GFS argued there was considerable evidence of goodwill, misrepresentation and damage. That evidence included indications from customers who had seen Brymec's pipes and fittings and wondered whether there was a connection with GFS. GFS contended that its case was strong and that the strength of its case should be taken into account.
In American Cyanamid, Lord Diplock had warned:
"It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial."
Lord Diplock continued:
"So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for
a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought."
In this case, Brymec argued that there was no serious issue to be tried. Relying on Glaxo Wellcome UK Ltd and another v Sandoz Ltd and others [2019] EWHC 2545 (Ch) (4 Oct 2019) and Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1995] FSR 169, Brymec submitted that it is not enough for a claimant to prove that the public recognizes the shape or colour of the claimant's product and associates it with that product, particularly where it is the only product of its kind. This is because there is a rather elusive distinction between such recognition and association on the one hand and the perception that the get-up can be relied on as a badge of origin such that the public would rely upon it alone to identify the product as coming from a particular source. It also submitted that there was no real evidence of deception:
"there was nothing more than evidence of GFS's customers seeing Brymec's products and being caused to wonder whether they might be from the same origin. All the e-mails were simply asking questions. Mere confusion is not enough to establish deception."
In short, the suggestion that the yellow clip was regarded as an indicium of origin that people would rely on to buy was one that should be approached with considerable scepticism and the evidence that had been adduced was insufficient.
In short, the suggestion that the yellow clip was regarded as an indicium of origin that people would rely on to buy was one that should be approached with considerable scepticism and the evidence that had been adduced was insufficient.
Brymec's contentions appear to have impressed Mr Justice Nugee because he said at paragraph [45] of his judgment:
"I have not had recourse to an assessment of the merits, but I will just briefly say that the points made by [Brymec's counsel] were cogent, and to my mind give rise to a real doubt whether GFS will ultimately succeed. But it is unnecessary to explore this further."
"I have not had recourse to an assessment of the merits, but I will just briefly say that the points made by [Brymec's counsel] were cogent, and to my mind give rise to a real doubt whether GFS will ultimately succeed. But it is unnecessary to explore this further."
Damage to the Claimant
In American Cyanamid, Lord Diplock had said:
"the governing principle is that the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage."
Mr Justice Nugee correctly directed himself at [30] that the next American Cyanamid question was whether the claimant would be adequately compensated by an award of damages if the defendant is permitted to continue his activities pending trial but the claimant succeeds at trial.
GFS submitted that its damages would be loss of sales and damage to reputation. It would be difficult to quantify the loss of sales attributable to misrepresentation and assessing damages for tarnished reputation would be difficult and arbitrary. The judge concluded at [35] that it has not been shown that damages would be an adequate remedy for GFS, but that the actual damage to GFS from any misrepresentation was unlikely to be extensive.
"the governing principle is that the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage."
Mr Justice Nugee correctly directed himself at [30] that the next American Cyanamid question was whether the claimant would be adequately compensated by an award of damages if the defendant is permitted to continue his activities pending trial but the claimant succeeds at trial.
GFS submitted that its damages would be loss of sales and damage to reputation. It would be difficult to quantify the loss of sales attributable to misrepresentation and assessing damages for tarnished reputation would be difficult and arbitrary. The judge concluded at [35] that it has not been shown that damages would be an adequate remedy for GFS, but that the actual damage to GFS from any misrepresentation was unlikely to be extensive.
Damage to the Defendant
Lord Diplock said in American Cyanamid:
"If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be
enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay
them, there would be no reason upon this ground to refuse an interlocutory injunction."
Mr Justice Nugee directed himself at [36] that the next question was whether damages under the cross-undertaking would be an adequate remedy for Brymec were an injunction to be granted but GFS fail to establish its entitlement to one at trial.
The evidence from Brymec was that it would not be willing to supply fittings without a clip because of the functional advantages of having one and that there would be practical disadvantages in supplying it with a clip of a different colour. Brymec did not itself have the staff and facilities to substitute a different colour clip and then put the products through quality control again. If its supplier were to supply a different colour clip it would have to do a separate run which might create supply problems. Moreover, selling the fittings with a different colour clip in the UK would create confusion in the marketplace because yellow is the colour associated with gas and would also put the supplier and Brymec to considerable expense.
The judge accepted that evidence and concluded at [40] "that a right to recover damages under the cross-undertaking would not adequately protect Brymec against the disadvantages of having to stop supplying the fittings with the yellow clip pending trial."
The judge accepted that evidence and concluded at [40] "that a right to recover damages under the cross-undertaking would not adequately protect Brymec against the disadvantages of having to stop supplying the fittings with the yellow clip pending trial."
Balance of Convenience
In American Cyanamid, Lord Diplock said:
"It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case."
"It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case."
Mr Justice Nugee said at paragraph [41]:
"The final stage of the American Cyanamid analysis is to assess where the so-called balance of convenience lies, or, as it is perhaps better expressed, the balance of the risk of uncompensatable disadvantage (see American Cyanamid at 409A). Here many factors fall to be taken into account. The principles by which the Court should act are perhaps best summarised by Lord Hoffmann in National Bank Jamaica v Olint Corp [2009] UKPC 16 at [16]-[17] where he referred to the Court assessing whether granting or withholding the injunction would be more likely to produce a just result, the basic principle being that the Court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. It is not appropriate to take into account the apparent merits unless it is apparent on facts as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other: American Cyanamid v Ethicon at 409B."
"The final stage of the American Cyanamid analysis is to assess where the so-called balance of convenience lies, or, as it is perhaps better expressed, the balance of the risk of uncompensatable disadvantage (see American Cyanamid at 409A). Here many factors fall to be taken into account. The principles by which the Court should act are perhaps best summarised by Lord Hoffmann in National Bank Jamaica v Olint Corp [2009] UKPC 16 at [16]-[17] where he referred to the Court assessing whether granting or withholding the injunction would be more likely to produce a just result, the basic principle being that the Court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. It is not appropriate to take into account the apparent merits unless it is apparent on facts as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other: American Cyanamid v Ethicon at 409B."
The factors that the judge appears to have taken into account in deciding where the balance of convenience lay were the undertakings offered by Brymec and that the decision to buy gas pipes and fittings would be taken by gas engineers who were knowledgeable and interested in the technical specifications and details of the relevant products rather than the colour of the clips. Two of Brymec's undertakings were as follows:
"(a) any written quotes [Brymec] has provided as at 21 April 2020 in relation to CSST assemblies, which become orders from Brymec, shall be displayed with a prominently displayed sticker in legible font applied to the product box stating "This Brymec product is not manufactured by and has no connection with GFS Flex";
…
(c) [Brymec] will add a notice on its website on or before 30 April 2020 stating that the CSST assemblies are not manufactured by and have no connection with GFS Flex, such notice to be displayed next to the images of the CSST assemblies…."
"(a) any written quotes [Brymec] has provided as at 21 April 2020 in relation to CSST assemblies, which become orders from Brymec, shall be displayed with a prominently displayed sticker in legible font applied to the product box stating "This Brymec product is not manufactured by and has no connection with GFS Flex";
…
(c) [Brymec] will add a notice on its website on or before 30 April 2020 stating that the CSST assemblies are not manufactured by and have no connection with GFS Flex, such notice to be displayed next to the images of the CSST assemblies…."
Although GFS had criticized those undertakings as offering too little too late the judge thought they had some merit and were likely, if not to eliminate, at least significantly to reduce the risk of the public being deceived. In the judge's view, the purchase of a pipe or fitting by a professional gas engineer was likely to be a rather different type of process from a shopper in a supermarket, in something of a hurry, picking up a lemon-shaped container without reading the label, as was the case in the Jif case. The labelling suggested by Brymec on its marketing and products seemed to his lordship to be likely to go a long way towards making the position clear. He concluded at [44]:
"In those circumstances I assess the balance of uncompensatable disadvantage to come down firmly on the side of withholding the injunction. If GFS is right, there may be some lost sales and damage to their goodwill, but I think the risk is slight, and the likely damage small. By contrast if the injunction is granted, there is to my mind little doubt that it will potentially have a significant effect on further muddying the launch of Brymec's new CSST range. There is also the added advantage that if an injunction is not granted, the experience of the 9 months or so between now and trial will both provide firm evidence of Brymec's actual sales, and enable the parties (and the Court) to see to what extent parallel marketing and sales do appear to cause extensive confusion or whether, as appears to have been the experience in other countries, purchasers are able readily to distinguish between the products."
"In those circumstances I assess the balance of uncompensatable disadvantage to come down firmly on the side of withholding the injunction. If GFS is right, there may be some lost sales and damage to their goodwill, but I think the risk is slight, and the likely damage small. By contrast if the injunction is granted, there is to my mind little doubt that it will potentially have a significant effect on further muddying the launch of Brymec's new CSST range. There is also the added advantage that if an injunction is not granted, the experience of the 9 months or so between now and trial will both provide firm evidence of Brymec's actual sales, and enable the parties (and the Court) to see to what extent parallel marketing and sales do appear to cause extensive confusion or whether, as appears to have been the experience in other countries, purchasers are able readily to distinguish between the products."
Further Information
Anyone wishing to discuss this case, the law of passing off or interim injunctions generally can contact me by calling my clerk, Stephen, on 07986 948267 or by sending me a message through my contact page.
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