Passing off and Malicious Falsehood - Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd
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Intellectual Property Enterprise Court (HH Judge Hacon) Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd and another [2023] EWHC 890 (IPEC) (20 April 2023)
This was an action for passing off, unlawful interference with the claimant's business, malicious falsehood and copyright infringement. The claimant, Yours Naturally Naturally Yours Ltd, supplied an anti-age skin serum called "Elixir" which had been formulated by its founder, director and shareholder, Georgina Tang. It complained that its distributor Kate McIver and the company that she founded Kare McIver Skin Ltd. had claimed to be the creators of the serum. It also alleged that the defendants continued to use the marketing materials that had been supplied for the purpose of distributing Elixir after the first defendant had ceased to resell that product.
The Facts
Ms Tang formulated Elixir in 2015 and began to market the product to the public. Later she incorporated the claimant to take over her business, Mrs McIver bought some Elixir in May 2017 and found that it soothed a skin irritation which resulted from chemotherapy treatment. She offered to resell the product under a sign that included the words "Kate McIver Skin Specialist". Ms Tang did not agree to Mrs McIver's proposed labelling but supplied 5 bottles of the product under her own branding. Mrs McIver successfully resold those bottles and ordered more.
In March 2018 Mrs McIver repeated her request to resell the product under her own label. This time Ms Tang replied:
"…its easier, if you have a range so you can say, you now have your own skin care range for your treatment. Promote it on Facebook and your website too…".
"Possibly say it's your own label made by an ethical, cruelty free, local company in Liverpool, what do you think? Don't mention about being exclusive because I am the creator, so copy right stays with me."
On 6 June 2018, Mrs McIver posted a statement on her Instagram account describing her wedding, cancer diagnosis, chemotherapy treatment and the following untruth:
"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 [original ellipsis] 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. …
"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 [original ellipsis] 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."
Over the next few months, Mrs McIver made further similar claims on social media in the press and on local radio. She started to sell the product under another label bearing her name and the description "Secret Weapon" rather than "Elixir". She incorporated the Kate McIver Skin Ltd. to take over her business in August 2018. In September 2018 she supplied a sample of Elixir to a third-party manufacturer and asked it to analyse and reformulate the product with a few extra ingredients In October 2018 she launched the reformulated product as the "New Secret Weapon Serum". On 30 Nov 2018, a friend and colleague of Mrs McIver told Ms Tang that her company would no longer distribute the Elixir.
The Proceedings
The action came on for trial before His Honour Judge Hacon on 28 Feb and 1 March 2023 and judgment was handed down on 20 April 2023 (see Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd and another [2023] EWHC 890 (IPEC) (20 April 2023)). The transcript of the judgment does not state when the claim was issued, whether there was any pre-action correspondence, the list of issues that would have been ordered to be tried or the other directions that would have been given at the case management conference. It states at para [43] that Mrs McIver died on 24 March 2019. She would have been sued for wrongdoing before her company's incorporation and also as a joint tortfeasor with the company after its incorporation. Her widower, Christopher John McIver, was joined to the action as Mrs McIver's personal representative.
Passing off
The judge's starting point was the following passage from Lord Oliver's speech 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:
"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."
"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."
He observed that Lord Neuberger had qualified Lord Oliver's formulation in Starbucks (HK) Ltd v British Sky Broadcasting Group plc [2015] WLR 2628, [2015] WLR(D) 229, [2015] ECC 19, [2015] UKSC 31, [2015] 3 All ER 469, [2015] ETMR 31, [2015] FSR 29, [2015] 1 WLR 2628:
"[52] As to what amounts to a sufficient business to amount to goodwill, it seems clear that mere reputation is not enough… . The claimant must show that it has a significant goodwill, in the form of customers, in the jurisdiction…"
…
[62] If it was enough for a claimant merely to establish reputation within the jurisdiction to maintain a passing off action, it appears to me that it would tip the balance too much in favour of protection. It would mean that, without having any business or any customers for its product or service in this jurisdiction, a claimant could prevent another person from using a mark, such as an ordinary English word …"
"A passing-off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing-off one person's goods as the goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached."
Judge Hacon also quoted Lord Diplock's speech in Erven Warnink Besloten Vennootschap v J. Townend & Sons (Hull) [1979] AC 731, at 742:
"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."
"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."
The judge discussed Bristol Conservatories Ltd v Conservatories Custom Built Ltd [1989] RPC 455 and Plomien Fuel Economiser Company, Limited v National Marketing Company [1941] Ch 248 and concluded at para [52]:
"Both Lord Greene and Ralph Gibson LJ pointed out that the wrong restrained in Bristol Conservatories and Plomien was the same as that restrained in a more typical passing off action. Customers of the defendant wanted to obtain goods or services from source A and they were misled by the defendant's false representation into getting them from source B, the defendant. In a typical passing off action this is achieved by the defendant's use of a trade name or get-up confusingly similar to that of the claimant. In Bristol Conservatories it was done by supplying customers who wanted conservatories made by the entity which made those in the photographs with its own conservatories instead. In Plomien the customers wanted economisers from the source which had fitted its economisers for earlier named customers and which had satisfied certain tests, but they were supplied instead with the defendant's products. There was little significantly "reverse" about the passing off in either case, as Ralph Gibson LJ appeared to note although he declined in an interim hearing to make any firm ruling one way or the other about the existence of reverse passing off as a separate tort (at 464). The facts of both Bristol Conservatories and Plomien fit comfortably into Lord Diplock's five requirements in Warnink."
"Both Lord Greene and Ralph Gibson LJ pointed out that the wrong restrained in Bristol Conservatories and Plomien was the same as that restrained in a more typical passing off action. Customers of the defendant wanted to obtain goods or services from source A and they were misled by the defendant's false representation into getting them from source B, the defendant. In a typical passing off action this is achieved by the defendant's use of a trade name or get-up confusingly similar to that of the claimant. In Bristol Conservatories it was done by supplying customers who wanted conservatories made by the entity which made those in the photographs with its own conservatories instead. In Plomien the customers wanted economisers from the source which had fitted its economisers for earlier named customers and which had satisfied certain tests, but they were supplied instead with the defendant's products. There was little significantly "reverse" about the passing off in either case, as Ralph Gibson LJ appeared to note although he declined in an interim hearing to make any firm ruling one way or the other about the existence of reverse passing off as a separate tort (at 464). The facts of both Bristol Conservatories and Plomien fit comfortably into Lord Diplock's five requirements in Warnink."
Finally, the judge mentioned Dawnay Day & Co. Ltd v Cantor Fitzgerald International [2000] RPC 669.
Judge Hacon said that as the first misrepresentation was made on 6 June 2018 the claimant had to show that Ms Tang had acquired goodwill by that date. As her business started in June 2015 and had continued without interruption until 2018 the judge was satisfied that her business had acquired goodwill in that period. He also held that such goodwill was assigned to the claimant on the incorporation of the claimant company. He was not persuaded that there had been any loss of sales but found that there was a risk of loss of distinctiveness of the Elixir brand. It followed that all the elements identified in Lord Oliver's speech in Reckitt & Colman and all five in Lord Diplock's speech in Erven Warnink BV were present.
The defendants alleged that Ms Tang had agreed to Mrs McIver representing herself as the creator of Elixir. The judge held that that would have been inconsistent with Ms Tang's assertion"I am the creator, so copy right stays with me." He, therefore, found for the claimant on passing off.
The defendants alleged that Ms Tang had agreed to Mrs McIver representing herself as the creator of Elixir. The judge held that that would have been inconsistent with Ms Tang's assertion"I am the creator, so copy right stays with me." He, therefore, found for the claimant on passing off.
Malicious Falsehood
Judge Hacon referred to Lord Justice Glidewell's judgment in Kaye v Robertson [1991] FSR 62, [1990] EWCA Civ 21:
"The essentials of this tort are that the defendant has published about the plaintiff words which are false, that they were published maliciously, and that special damage has followed as the direct and natural result of their publication. As to special damage, the effect of section 3 (1) of the Defamation Act 1952 is that it is sufficient if the words published in writing are calculated to cause pecuniary damage to the plaintiff. Malice will be inferred if it be proved that the words were calculated to produce damage and that the defendant knew when he published the words that they were false or was reckless as to whether they were false or not."
As he was not satisfied that the claimant had suffered any pecuniary loss, he dismissed the claim for malicious falsehood.
Causing Loss by Unlawful Means
For the elements of the tort, Judge Hacon referred to the following paragraphs of Lord Hoffmann's judgment in Secretary of State for Health v Servier Laboratories Ltd 2022] AC 959, [2022] 1 All ER 1, [2021] UKSC 24, [2021] 3 WLR 370
"[47] The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant. …
…
[49] In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. …
…
[51] Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant."
"[47] The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant. …
…
[49] In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. …
…
[51] Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant."
He also discussed the meaning of intention to cause loss at [62]:
In His Honour's view, the claimant had not established the requisite intention on the part of Mts McIver in the present case. She intended to promote her own business and may have realised that it was foreseeable that this could lead to a loss on the part of Ms Tang and/or the claimant. Even if that were the case, the loss was not the end intended within the meaning explained by Lord Hoffmann. He, therefore, dismissed the claim for causing loss by unlawful means.
Copyright Infringement
The works in which copyright was alleged to subsist were marketing materials that Ms Tang had supplied to Mrs McIver on 7 and 12 June 2018. There does not appear to have been any dispute that copyright subsisted in those materials as original literary works pursuant to s.1 (1) (a) of the Copyright, Design and Copyrights Act 1988, that Ms Tang was the first owner of those copyrights and that they passed to the claimant company when it acquired Ms Tang's business. The judge found that Ms Tang had granted Mrs McIver a bare licence to use those materials to promote Elixir and that licence had come to an end when her company ceased to distribute that product. He therefore found for the claimant on the copyright claim.
Comment
The most useful part of the judgment is Judge Hacon's integration of reverse passing off in such cases as Bristol Conservatories and Plomien into Lord Oliver's trinity as modified by Starbucks and Lord Diplock's formulation of the tort in Erven Warnink BV. The essentials are the same in reverse passing off as they are in any other form - namely, there must be goodwill in a business, misrepresentation ad damage - but they need not be in that order. The judge has also identified the ingredients of the torts of malicious falsehood and causing loss by unlawful means.
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