The Lidl v Tesco Appeal: Lord Justice Arnold on Passing off

Author: Paul Hurst Licence CC BY-SA 2.5 Deed Source Wikimedia Commons

Jane Lambert

Court of Appeal (Lord Justices Lewison, Arnold and Birss) Lidl Great Britain Ltd and Another v Tesco Stores Ltd and Another (Rev1) [2024] EWCA Civ 262 (19 March 2024)

This is the second of my supplementary articles on Lord Justice Jackson's judgment in Lidl Great Britain Ltd and Another v Tesco Stores Ltd and Another (Rev1) [2024] EWCA Civ 262 (19 March 2024). I explained the reasons for these supplementary articles in the second paragraph of Lord Justice Arnold's Guidance on Trade Mark Law in the Lidl v Tesco Appeal yesterday.  In this article, I shall discuss Lord Justice Arnold's guidance on passing off which he set out in paras [27] to [35] of his judgment.

The learned Lord Justice said in para [28] that the fundamental principle underlying the law of passing off may be simply stated in contemporary language as "no person may misrepresent their goods or services to be those of another person." A more precise definition of the tort has proved difficult. He observed that several eminent judges had attempted to formulate statements of its essential ingredients, but there was no universally applicable test.

In his lordship's view, the most comprehensive is to be found in Lord Diplock's in  Erven Warnink BV v J. Townend & Sons (Hull) Ltd [1979] AC 731:

"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."

However, Lord Diplock warned that not all cases presenting those characteristics will give rise to an action for passing off.   

Lord Justice Arnold also quoted Lord Oliver's speech in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491 (the Jif Lemon case) at 499:

"Although your Lordships were referred in the course of the argument to a large number of reported cases, this is not a branch of the law in which reference to other cases is of any real assistance except analogically. It has been observed more than once that the questions which arise are, in general, questions of fact. Neither the appellants nor the respondents contend that the principles of law are in any doubt. 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."

In Starbucks (UK) Ltd v British Sky Broadcasting Group plc [2015] UKSC 31, [2015] 1 WLR 2628 the Supreme Court ruled that having a reputation was insufficient.  The three core ingredients of the tort are
(i) goodwill owned by the claimant,
(ii) a misrepresentation by the defendant, and
(iii) consequent damage to the claimant.

Lord Justice Arnold observed that there are some cases of passing off which do not fit easily within Lord Oliver's formulation although they do fit within Lord Diplock's. A misrepresentation that the defendant's product is equivalent to the claimant's is actionable if it is likely to damage the claimant's goodwill as his lordship explained in Glaxo Wellcome UK Ltd v Sandoz Ltd [2019] EWHC 2545 (Ch), [2019] RPC 27 between paras [174] and [181].

His lordship said that misrepresentation is always a question of fact and there is no rule that a minimum number of consumers have to be misled in order to give rise to an action.

There is no equivalent to the "average consumer" in passing off law though Lord Cranworth LC did refer to "ordinary purchasers, purchasing with ordinary caution" in Seixo v Provezende 1 LRCh App 192 at 196 and Mr Justice Foster disparagingly to morons in a hurry in Morning Star Co-Operative Society Ltd v Express Newspapers Ltd [1979] FSR 113 at 117.  Lord Justice Romer said in Payton & Co Ltd v Snelling, Lampard & Co. Ltd (1900) 17 RPC 48 at 57.

"[t]he kind of customer that the courts ought to think of in these cases is the customer who knows the distinguishing characteristics of the plaintiff's goods, those characteristics which distinguish his goods from other goods on the market so far as relates to general characteristics. The customer must be one who, knowing what is fairly common to the trade, knows of the plaintiff's goods by reason of these distinguishing characteristics."

At the end of para [35] Lord Justice Arnold said:

"Thus passing off law requires the court to consider whether ordinary consumers who purchase with ordinary caution and who know what is fairly common to the trade are likely to be misled."

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