Practice - Wise Payments Ltd v With Wise Ltd. and others

Jane Lambert

Intellectual Property Enterprise Court (Ms. Pat Treacy) Wise Payments Ltd v With Wise Ltd and others [2024] EWHC 234 (IPEC) (9 Feb 2024)

This was a case management conference before Ms Pat Treacy sitting as a deputy Enterprise Judge in an action for trade mark infringement and passing off and a counterclaim by the first defendant for passing off.  One of the issues to be decided in the CMC was whether Kristo Käärmann, Taavet Hinrikus and Dean Nash should be joined as defendants to the first defendant's counterclaim. Mr  Käärmann and Mr Hinrikus had founded the claimant company.  Mr Käärmann was the chief executive officer and a director of the claimant.  Mr Hinrikus had been the claimant's chairman and a director.  Mr Nash had been its secretary and general counsel.

The first defendant brought its application to join Messrs Käärmann, Hinrikus and Nash under CPR20.5, It also applied for permission to amend its defence and counterclaim under CPR 17.1 (2) (b). All three respondents opposed the application on the grounds that the costs of joining them would outweigh any benefits. Mt Nash also opposed the application on the additional grounds that the counterclaim had no reasonable prospect of success and was not based on sufficient evidential material to establish a good arguable case of joint tortfeasance. 

Ms Treacy noted at para [29] of her judgment that CPR 20.5 involves the exercise of a discretion similar to the requirements of CPR 19.2 (2).  It was common ground that the correct approach to an application to add a party under CPR 19.2 (2) and therefore under CPR 20.5 is to consider the analogous requirements under CPR 3.4 (2) (a) and (b) and CPR 24.2 (a).  In PeCe Beeher BV v Alevere Ltd [2016] EWHC 434 (IPEC) His Honour Judge Hacon had observed at para [37] of his judgment that there is a significant degree of overlap between those tests, but they are not identical.  The respondents relied on para [18]CPR24, of Lord Justice Popplewell's judgment in Kawazaki Kisen Kaisha Ltd v James Kemball Limited [[2021] EWCA Civ 33, [2021] 3 All ER 978, [2021] 2 All ER (Comm) 1102WCA Civ 33 where the issue was whether the test for permission to serve a claim out of the jurisdiction was the same as the test for summary judgment:

“In both these contexts:

(1) It is not enough that the claim is merely arguable; it must carry some degree of conviction: ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at paragraph 8; Global Asset Capital Inc. v Aabar Block SARL [2017] 4 WLR 164 at paragraph 27 (1).
(2) The pleading must be coherent and properly particularised: Elite Property Holdings Ltd v Barclays Bank Plc [2019] EWCA Civ 204 at paragraph 42.
(3) The pleading must be supported by evidence which establishes a factual basis which meets the merits test; it is not sufficient simply to plead allegations which if true would establish a claim; there must be evidential material which establishes a sufficiently arguable case that the allegations are correct: Elite Property at paragraph 41.”

As for the application to amend under CPR 17.1 (2) (b), the learned deputy judge referred to para [25] of the judgment of His Honour Judge Birss QC in Temple Island v New English Teas [2011] EWPCC 19

“Whether or not to allow an amendment to a statement of case is an exercise of discretion, exercised having regard to the overriding objective to deal with cases justly. In my judgment the general approach to the consideration of amendments of statement of case in the Patents County Court is no different from the approach taken in the High Court. However, the discretion in this court will be conditioned by the particular nature and circumstances of the Patents County Court procedure. In my judgment stated generally as they are, the words of Peter Gibson LJ are as applicable in the Patents County Court as elsewhere. Amendments will generally be allowed so that the real dispute between the parties can be adjudicated upon but subject to the proviso that any prejudice can be compensated for in costs and subject to the public interest in the administration of justice. Cases should be dealt with expeditiously but also fairly and that consideration tends to weigh in favour of allowing amendments.” 

Ms Treacy directed herself that it is always necessary to balance a request to permit an (otherwise allowable) application against the prejudice that allowing the application may cause. That is particularly the case in IPEC. Judge Birss concluded at para [33] of Temple Island:

“When considering an application to amend the statements of case in the Patents County Court in a regime with capped costs, that balancing exercise will include an assessment of whether the likely benefit of the amendment appears likely to justify the cost of taking and dealing with it.” 

In Vimage v Data Candy [2022] EWHC 606 (IPEC) Mr John Kinmbell KC referred to para [60] of the judgment of Sir Terence Etherton in Re Pablo Star Ltd Price v Registrar of Companies [2018] 1 WLR 738: 

“In considering whether or not it is desirable to add a new party pursuant to CPR r 19.2 (2) the lodestars are the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case and the overriding objective in CPR Pt 1” 

He added:

“In this court, any application to amend must also meet the cost-benefit test described in Temple Island v New English Teas [2011] EWPCC 19 at [25]-[33] and in Fox Intellectual Property Enterprise Court, Practice and Procedure (3rd edition 2021) at para 4-119” [22]."

Ms Treacy concluded at [37]:

"In the light of the above, the exercise of my discretion involves two considerations:
(i) does the case against the party to be joined have a real, as opposed to fanciful, prospect of success. This is to be assessed by testing: (i) whether the pleaded case carries a degree of conviction; (ii) whether it is coherent and properly particularised; and (iii) whether there is evidential material which establishes a sufficiently arguable case against the party in question; and
(ii) does the likely benefit of granting the application to join another party and the inevitable related application to permit consequential amendments satisfy the IPEC costs benefit test as well as the requirements of the relevant parts of the CPR."

She noted at para [38] that the first question arose only in respect of Mr Nash whereas the second applied to all three prospective new parties.

The alleged cause of action against the respondents is that they caused the claimant to re-brand to include the word "Wise" in its corporate name and trading style.   Ms Treacy considered the authorities on joint liability based on procurement or common design.  She started with para [21] of Lord Toulson's judgment in Sea Shepherd, Fish & Fish Ltd v Sea Shepherd UK [2015] AC 1229, [2015] 2 All ER (Comm) 867, [2015] UKSC 10, [2015] 4 All ER 247, [2015] 1 AC 1229, [2015] 2 WLR 694, [2015] WLR(D) 102, [2015] 1 Lloyd's Rep 593:

“To establish accessory liability in tort it is not enough to show that D did acts which facilitated P’s commission of the tort. D will be jointly liable with P if they combined to do or secure the doing of acts which constituted a tort. This requires proof of two elements. D must have acted in a way which furthered the commission of the tort by P, and D must have done so in pursuance of a common design to do or secure the doing of the acts which constituted the tort.” 

She referred to para [152] of Judge Hacon's judgment in Urbanbubble Ltd v Urban Evolution Property Management Ltd [2022] EWHC 134 (IPEC):

“In Lifestyle Equities CV v Ahmed [2021] EWCA Civ 675 Birss LJ, with whom Moylan and Nugee LJJ agreed, considered several authorities including the judgment of the Supreme Court in Fish & Fish v Sea Shepherd [2015] UKSC 10, Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 D.L.R. (3d) 195 and in particular that of the Court of Appeal in MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441:

']31] Turning to MCA v Charly Chadwick LJ noted (in [47]) that in Mentmore the question of whether and in what circumstances a director should be liable with the company was described as a difficult question of policy and that in the end a balance has to be struck between two considerations. The first consideration is the distinction between a company as a distinct legal person and its shareholders, directors and officers. The second is that everyone should be answerable for their tortious acts. The judge then made the point that because there was a balance to be struck in each case it was dangerous for an appellate court to attempt a formulation of the principles since it may come to be regarded as prescriptive ([48]). Nevertheless Chadwick LJ did feel able to formulate four principles which he then set out.
…
[36] … If the individual’s conduct does not make them liable as an accessory, then the fact they are a director in and of itself cannot make them liable when they would not be otherwise. That was also made clear by Chadwick LJ in [37] of the same judgment in which he held that it was a correct statement of the law that a director or other officer of a company may in certain circumstances be personally liable for the company’s torts, although they will not be liable merely because they are an officer: they must be personally involved in the commission of the tort to an extent sufficient to render them liable as a joint tortfeasor. Whether they are sufficiently involved is a question of fact, requiring an examination of the particular role played by them in the commission of the tort.'"

Ms Treacy summarized the principle as follows at paras [41] and [42] of her judgment:

"[41] ......... a director, officer or shareholder of a company may be a joint tortfeasor in respect of a tort committed by that company. For that to be the case, that individual must be personally involved in the commission of the tort, and that involvement must be sufficient to render them liable. The fact of being an officer, director or shareholder is not in itself enough. MCA Records Inc. v. Charly [2002] FSR 26, as summarised in Lifestyle Equities CV v Ahmed [2021] EWCA Civ 675 [32] (‘Lifestyle Equities’) establishes that for a director or officer merely to carry out the constitutional role ascribed to them will not suffice; but the exception is a narrow one.
[42]. When it comes to what is required to establish joint tortfeasance, whether by directors or anyone else, Fish & Fish v Sea Shepherd, is clear that mere facilitation is not enough. As explained in Lifestyle Equities, citing C.B.S. Songs Ltd v. Amstrad Consumer Electronics Plc [1988] AC 1013 and Unilever Plc v. Gillette (U.K.) Limited [1989] RPC 583, liability may arise where the director or officer 'intends and procures and shares a common design that the infringement takes place.'”

The deputy judge said at para [65] that the case against Mr Käärmann and Mr Hinrikus gave rise only to case management, cost-benefit and proportionality considerations.  She added at [66]:

"Any greater costs and complexity involved in the addition of further parties must be balanced against the First Defendant’s identification of them as individuals who had a direct and personal involvement in the commission of the alleged tort. It is necessary to assess whether the cost-benefit disadvantages are sufficient to outweigh the First Defendant’s wish to have its case against those individuals heard."

After weighing those factors, Ms Treacy concluded that the application to join Mr Hinrikus and Mr Käärmann should succeed. There was no substantive argument against their inclusion. The IPEC cost-benefit test was an important aspect but the interest of the first defendant in having its case heard against these parties could be accommodated in a way that would satisfy fairness and the IPEC cost-benefit requirements as well as the overriding objective. However, she dismissed the application to join Mr Nash, The cost-benefit considerations were not in favour of joining him as a defendant to the counterclaim and the merits of the case against him were not strong.

This judgment contains a useful review of the authorities on directors and officers' liability for the wrongdoing of their companies as well as those on joining additional parties to litigation, permission to amend a statement of case and the IPEC cost-benefit test.   As such, it should interest all lawyers and not just those specializing in IP.   Anyone wishing to discuss this case may call me on 020 7404 5252  or send me a message through my contact page.