Date 30 June 2009
Welcome to the June issue of Stay Alert.
In this edition, we bring you up to date on recent developments in Commercial litigation and cover the following articles:
- Proceedings brought by a bankrupt with no title to sue were an abuse of process
The case of Pickthall v Hill Dickinson and another [2009] EWCA Civ 543, which considered whether it was an abuse of process for a bankrupt to commence proceedings at a time when he had no title to the relevant cause of action.
- First corporate manslaughter case committed to Crown Court
An update on the first corporate manslaughter case to be charged under the Corporate Manslaughter and Corporate Homicide Act 2007 has been committed to the Bristol Crown Court
- Examination of bankrupt did not breach his right to a fair trial
The case of Rottmann v Brittain [2009] EWCA Civ 473, in which the Court of Appeal considered a bankrupt's appeal against an order (made under sections 290 and 366 of the Insolvency Act 1986) adjourning a public examination but requiring him to attend a private examination.
- Liability of internet service providers (ISPs) for trade mark infringement by users
The High Court has ruled that eBay was not jointly liable for trade mark infringement with several individual defendants who placed counterfeit goods for sale on the auction site.
- Is keyword advertising trade mark infringement?
The High Court has decided to adjourn trade mark infringement proceedings taken by Interflora against M&S, arising from the purchase by M&S of variations of Interflora’s brand name as sponsored links under the Google AdWords scheme. Arnold J has decided to refer the case to the ECJ for a preliminary ruling on the basis that a number of similar questions were already before the ECJ in other pending references (including the L’Oréal decision above).
We hope that you find this edition of Stay Alert useful and interesting. We value your opinions and always welcome any comments you may have. If you have any feedback on this edition or any suggestions on what you would like us to cover in future, please email robert.ryall@salaw.com. We look forward to hearing from you.
1. Proceedings brought by a bankrupt with no title to sue were an abuse of process
Background
In 2001, the claimant agreed to sell his shareholding in a company. Shortly after the share sale agreement completed, the company went into administration. The administrators brought a claim against the claimant on various matters arising out of the sale and was awarded all standard damages leading to the claimant’s bankruptcy in October 2001.
In February 2007, the claimant issued proceedings against his solicitors’, alleging that they had given him negligent advice in relation to the share sale agreement. However, at this time the claim still vested in the Official Receiver, as the claimant’s trustee in bankruptcy, and was not assigned until 20 June 2007
At a trial of preliminary issues, the judge at first instance decided that, as at 20 June 2007, the claim had been time-barred. However, he held that the claim should not be struck out as an abuse of process, stating that the claim form needed to be amended to plead the fact of the assignment and he also exercised his discretion to allow that amendment. The solicitors’ appealed the decision.
Court of Appeal Decision
The Court of Appeal(CA) reversed the first instance court’s decision, finding that the proceedings were an abuse of process and should be struck out and further, that permission to amend the claim form should not have been given.
The decision was based on applying established principles to a relatively simple set of facts. The CA stated that the claimant had known when he started the proceedings that the relevant cause of action was not vested in him, and added that where someone started proceedings knowing that the cause of action was vested in someone else, it was hard to see why those proceedings were not an abuse.
The CA held that the judge at first instance had erred in finding that there was no abuse of process. The CA exercised its discretion afresh on the amendment issue. It held that it would be wrong to grant permission to amend the claim form, as that would be a reward for the abuse of process.
Comment
Proceedings issued by a claimant who knows that he does not have title to sue will be deemed to be an abuse of process and, as such, vulnerable to strike out. A bankrupt could be precluded from bringing a claim if his trustee in bankruptcy decides not to pursue the claim or assign it, and the limitation period expires.
2. First corporate manslaughter case committed to Crown Court
On 17 June 2009, the country’s first corporate manslaughter case was committed to crown court. Stroud Magistrates’ Court committed the cases of Cotswold Geotechnical Holdings (the firm) and its director, Peter Eaton, to trial in Bristol Crown Court.
Cotswold Geotechnical Holdings, and its director Peter Eaton, faced prosecution for gross negligence manslaughter over the death of a young geologist in Gloucestershire last September. This is the first time a company has been charged under the Corporate Manslaughter and Corporate Homicide Act 2007.
Background
Alexander Wright was taking soil samples from a development site near Stroud when the pit he was working in collapsed, killing him.
The landmark charge was recorded against the company, the court heard, “because of the way in which the organisation’s activities were managed or organised, caused the death of a person, namely Alexander James Wright by gross negligence, which amounted to a gross breach of a relevant duty of care owed to the deceased, contrary to section 1 of the Corporate Manslaughter and Corporate Homicide Act 2007”.
The company faces an unlimited fine and Mr Eaton, who is charged with gross negligence manslaughter under common law, faces a maximum sentence of life imprisonment.
The prosecution is the first brought under the Corporate Manslaughter Act 2007 which aimed to made it easier for firms to be brought to justice over the death of their employees.
The Law
The Corporate Manslaughter and Corporate Homicide Act 2007 is a landmark in law. For the first time, companies and organisations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care.
The Act, which came into force on 6 April 2008, clarifies the criminal liabilities of companies including large organisations where serious failures in the management of health and safety result in a fatality. Although the new offence is not part of health and safety law, it will introduce an important new element in the corporate management of health and safety.
Prosecutions will be of the corporate body and not individuals, but the liability of directors, board members or other individuals under health and safety law or general criminal law, will be unaffected. And the corporate body itself and individuals can still be prosecuted for separate health and safety offences.
Comment
The Act provides a number of specific exemptions that cover public policy decisions and the exercise of core public functions. Companies and organisations should keep their health and safety management systems under review, in particular, the way in which their activities are managed and organised by senior management.
For more information on the new Act please click here.
3. Examination of bankrupt did not breach his right to a fair trial
Background
Mr. Michael Rottman’s trustee in bankruptcy, asked the Official Receiver to apply for a public examination of him. Mr. Rottman claimed to have no assets and had come to England to avoid criminal charges in Germany for fraud. Mr. Rottman sought to adjourn his public examination, on the grounds that a public examination would force him to reveal matters that may provide German prosecutors with evidence against him that they could not otherwise obtain. This would, he claimed, prejudice his prospects of a fair trial. At first instance, the judge adjourned the public examination, but ordered Mr. Rottman to face a private examination instead.
Mr. Rottman appealed, arguing that, as the record of any private examination might come into the hands of the German prosecutors, that too infringed his human rights. He argued that to allow the private examination to take place would infringe his rights under article 6 of the European Convention on Human Rights.
Court of Appeal Decision
Mr. Rottman’s appeal was dismissed by the Court of Appeal. The issue turned on the use of the information obtained by the examination process, rather than the nature of the examination process itself. However, the CA did acknowledge that the examination process(both public and private) may assist German prosecutors.
The CA, when considering the request for an order convening a private examination, balanced the right of the bankrupt to a fair trial against the interests of the creditors in the trustee in bankruptcy in obtaining the information required to assist in recovering the assets. The CA held that the original judge had correctly balanced these interests.
Comment
This case demonstrates that, as far as the English courts are concerned, the rights of a trustee in bankruptcy carry similar weight to the right of the bankrupt to a fair trial elsewhere. Further, this decision is an indication of the strength of the investigatory powers of an insolvency practitioner in this area.
4. Liability of internet service providers (ISPs) for trade mark infringement by users
The High Court has ruled that eBay was not jointly liable for trade mark infringement with several individual defendants who placed counterfeit goods for sale on the auction site. eBay is being sued across Europe by the world's biggest cosmetics firm for not trying hard enough to battle counterfeiting. The cosmetics giant claims that eBay is profiting from the sale of counterfeit goods and is not doing enough to combat fakes. eBay has argued in the past that it always acts swiftly in such cases when notified of the sale of counterfeits.
The judge commented that “eBay could and should do more to restrain future infringements and deal with the problem of trade mark infringement”, but it was under “no legal duty to prevent infringement” because of the defences afforded to ISPs under Article 14 and Article 15 of the E-Commerce Directive (2000/31/EC), on the basis that it acted as a mere host of information (Article 14), and was under no obligation to monitor the information it transmitted or stored or to investigate any circumstances indicating illegal activity (Article 15).
However, despite a lengthy and detailed judgment, it does seem that the crucial questions remain open, pending the result of a reference to the European Court of Justice. Judge Arnold referred the following questions to the ECJ for guidance on the basis that they are “unclear”:
(1) whether eBay’s own unauthorised use of L’Oréal’s trade marks as sponsored links to listings for infringing goods meant that eBay was primarily liable for trade mark infringement;
(2) whether eBay should be entitled to a defence under Article 14 and Article 15; and
(3) whether the court should grant an injunction against eBay under Article 11 of the Directive on the Enforcement of Intellectual Property Rights (2004/48/EC), since eBay’s services were being used by the defendants to infringe L’Oréal’s intellectual property rights.
There have been mixed decisions on these points in various jurisdictions in the EU (for example, in France, eBay was ordered to pay damages; L'Oreal succeeded against eBay in Germany; and Tiffany failed to establish a trade mark infringement case against eBay in the United States), so the guidance that this referral will bring will be much welcomed. Until that time, there will continue to be uncertainty in this area.
L’Oréal SA and others v eBay International AG and others [2009] EWHC 1094 (Ch), 22 May 2009
5. Is keyword advertising trade mark infringement?
The High Court has referred trade mark infringement proceedings taken by Interflora against Marks & Spencer (M&S) to the ECJ for a preliminary ruling. The decision to refer has been taken on the basis that a number of similar questions were already before the ECJ from other European jurisdictions.
The world's largest flower delivery firm sued Marks and Spencer for sponsoring the word 'Interflora' as a search engine keyword. The case could be an important test of how UK trade mark laws apply to keyword advertising.
M&S are accused of bidding for the words 'Interflora' and misspellings such as 'Intaflora' and 'Inter-flora' in Google's AdWords programme. When users searched for these terms, adverts for M&S and Flowers Direct appeared as 'sponsored links'.
Interflora say that the use of its marks enables M&S and Flowers Direct "to free-ride upon the fame of the Trade Marks, thus conferring upon themselves and/or their goods or services an unfair advantage over the Claimants and/or other traders, and/or members of the public."
The court is so unsure of the outcome at this stage that it has also refused to grant an interim injunction to prevent M&S from continuing to bid for Interflora signs as keywords – and a search of www.google.co.uk shows that M&S are indeed continuing this practice.
M&S denies that its actions were either: (1) use in the course of trade, of a sign, identical to Interflora’s trade marks and the goods and services for which those marks were registered (contrary to Article 9(1)(a) of the Community Trade Mark Regulations (40/94/EEC) (CTMRs) and Section 10(1) of the Trade Marks Act 1994 (TMA)); or (2) use in the course of trade, of a sign, identical with, or similar to Interflora’s trade marks for goods or services dissimilar to those for which Interflora’s marks are registered but is being used without due course, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark contrary to Article 9(1)(c) CTMRs and Section 10(3) TMA.
The questions to be referred to the ECJ in this case are not yet settled. However, the extent of the matters which will need to be addressed by the ECJ is broad as there are significant differences between this case and those referred to the ECJ from courts in Germany, France and the Netherlands. For example, none of the pending references from other jurisdictions involve a claim against an advertiser (rather than an Internet Service Provider), nor do they consider the presentation of keywords in the search bars and in the summary of the search results in addition to sponsored links or the risk of dilution of a brand owner's trade marks.
Although it is probably a long way off, as referrals to the ECJ are notoriously long drawn out processes, it is hoped that these referrals will result in much more certainty on how to approach this important area.
Interflora, Inc., Interflora British Unit v Marks and Spencer Plc, Flowers Direct Online Limited [2009] EWHC 1095 (Ch) 22nd May 2009
If you have any questions or require further information please contact Robert Ryall by email at robert.ryall@salaw.com or on 01727 798000.
© SA Law 2009
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.