Passing Off: Au Vodka v NE10 Vodka

 

Jane Lambertirst 

Chancery Division (Mr Justice Mellor) AU Vodka Ltd v NE10 Vodka Ltd and another [2022] EWHC 2371 (Ch) (21 Sept 2022)

The claimant in these proceedings distilled and distributed the vodka on the left.  The first defendant the vodka on the right.  The claimant applied for an interim injunction to retrain the first defendant and its sole director and shareholder (the second defendant) from marketing and selling the vodka on the right until trial or further order.   The defendants applied to strike out the claim against the second defendant and sought an expedited trial.  

The application and cross-applications came on before Mr Justice Mellor as applications by order on 16 Aug 2022.  At the end of the hearing, his lordship refused the application for an injunction and the cross-application for a strikeout but granted a speedy trial.   He set out his reasons in AU Vodka Ltd v NE10 Vodka Ltd and another [2022] EWHC 2371 (Ch) which he handed down on 21 Sept 2022.

S.37 (1) of the Senior Courts Act 1981 enables the High Court to grant interlocutory or final injunctions in all cases in which it appears to the court to be just and convenient to do so. Subsection (2) adds that any such order may be made either unconditionally or on such terms and conditions as the court thinks just.  The circumstances in which a court should grant an interim injunction were considered by the House of Lords in American Cyanamid Co (No 1) v Ethicon Ltd [1975] UKHL 1, [1975] AC 396, [1975] 2 WLR 316, [1975] 1 All ER 504, [1977] FSR 593.  In that appeal, Lord Diplock observed:

"The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The Court must weigh one need against another and determine where 'the balance of convenience' lies."

Later in his speech, Lord Diplock gave the following guidance:

"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. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that 'it aided the court in doing that' which was its great object, viz. abstaining from expressing any opinion upon 'the merits of the case until the hearing' (Wakefield v. Duke of Buccleugh [1865] 12 L.T. n.s. 628 at 629). 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.

As to that, 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. 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 under- taking 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.

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.

Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo."

In National Commercial Bank Jamaica Ltd v. Olint Corp Ltd. [2009] 1 CLC 637, [2009] WLR 1405, [2009] UKPC 16, [2009] 1 WLR 1405, [2009] Bus LR 1110, the Privy Council said that the court's task is to adopt whichever course seems likely to cause the least irremediable prejudice to one party or the other.  In that regard, Mr Justice Mellor noted that the outcome of an application for interim relief will decide the whole action in some cases.   If, for example, a defendant is forced to rebrand until trial it is unlikely to revert to the original brand even if it eventually wins the action.   There is nothing to be gained by proceeding to trial.    

He also quoted the following passage on the American Cyanamid criteria from Wadlow on the Law of Passing Off (6th Edition, 2021):

“(1) Applications for interim injunctions should be decided primarily on the balance of convenience, in the wider sense of that phrase, rather than on the relative strength of the parties’ substantive cases as they may then appear.
(2) There is no rule of law that the court may consider the balance of convenience only if satisfied that the claimant has made out a prima facie case.
(3) The court must, however, satisfy itself that there is a serious question to be tried.
(4) An interim injunction should be refused if damages awarded at trial would adequately compensate the claimant and the defendant will be able to pay.
(5) An interim injunction should be granted if the claimant’s cross-undertaking in damages would adequately compensate the defendant if successful at trial, and the claimant would be able to pay.
(6) If, as will normally be the case, damages would not fully compensate either party, then the issue depends on the balance of convenience.
(7) If other factors are finely balanced, the status quo should be maintained.

(8) If the balance of convenience favours neither party, then the relative strengths of the parties’ respective cases on the merits may be taken into account if one case is disproportionately stronger.”

After reviewing the law of passing off (para [28] to [50]) and the evidence (para [51] to [79], Mr Justice Mellor said at para [80] that there was plainly a serious issue to be tried on passing off.  However, the case was finely balanced and the evidence which would emerge between the date of judgment and trial could swing the case either way.  As to whether damages would be an adequate remedy for the claimant if no injunction were granted pending trial, his lordship said at [86] that if the claimant were to win at trial, any damage it might suffer pending trial would be largely compensated by a final injunction and an award of damages. Turning to whether damages would be an adequate remedy for the defendants if an injunction were granted, the learned judge concluded that damages would not be an adequate remedy for the defendants.  Addressing finally the balance of convenience which he preferred to call "the balance of the risk of injustice", the judge held that it lay in favour of the defendants because the first defendant's goods were already on the market and the claimant's evidence of confusion was inconclusive.

The claimant had alleged that the second defendant was personally liable for his own acts and jointly and severally with the first defendant for that company's acts.  The defendants asked for both allegations to be struck out.  His lordship held that the first was unsustainable but not the second.   

The judge directed a two-day trial on the first available date in January 2023.   The brevity of the interval between the hearing of the application by order and trial appears to have been one of the factors that his lordship took into account when deciding the balance of convenience.

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