Facts:
LLP was formed in 2007 as part of a reorganisation. Old Quad had been established some years earlier by a group of people who had worked at PricewaterhouseCoopers. Mr Coombes was the single largest shareholder and the Managing Director. Quantum Financial Consulting (QFC) Ltd. was set up soon afterwards to provide regulated financial services associated with the work of Old Quad. Mr Coombes was the majority shareholder, but there was an understanding that his shares were held in trust for Old Quad. RPS was formed in 2004 for the purposes of a joint venture between Old Quad and a team led by former colleagues at Bacon & Woodrow. The principal shareholders were Old Quad and Mr Davies.
As the buy-out of Mr Coombes' interest in Old Quad was financially impossible, an alternative approach was taken by the creation of LLP. From April 2007, LLP provided services on behalf of Old Quad which received 57% of the revenues. The arrangement was formalised by an agreement dated the 1st of November 2007 between Old Quad and LLP ("the Services Agreement"). Soon after, the assets and business of Old Quad were transferred to Quad. They also all traded under the mark. Between 2018 and 2019, LLP registered the trade mark. However, in 2020, they alleged that Quad was no longer entitled to use the four marks.
Decision:
The Court of Appeal upheld the High Court decision ruling that a fiduciary relationship did arise from the contract between the parties.
Quad was also successful regarding the trade mark aspects. The Court of Appeal found that Quad was entitled to rectification of the register of trade marks in equity in respect of the one mark for which it did not obtain rectification in the first instance. The Court ruled that there was a fiduciary relationship between the two entities and that LLP was an agent. The Court ruled that “A fiduciary can, and often will, owe duties of care and skill as well as loyalty”.
The Judge analyses the operation of the 10B Trade Marks Act and the role of equity in determining who is the “proprietor” of an unregistered trade marker. The Court reiterated that “the test of what is sufficient similarity for the purposes of invoking Section 10B is better tested by asking whether the mark registered by the agent is sufficiently close to an earlier mark of which the principal is the proprietor for it to benefit improperly from the effort or investment which the principal has put into the earlier mark.” For Section 10B to operate, there are five requirements to apply: “1) one must be the agent or representative of another company; 2) the latter must be the proprietor of the trade mark which is identical with or similar to the registered trade mark and subsisted in goods or services identical or similar to those for which the registered trade mark was registered; 3) the first company must have applied for registration of the trade mark in its own name; 4) it must have applied for registration without the consent of the other company; and, 5) the action for registration of trade mark must be justified. All those requirements were applicable and Quad was entitled to relief under Section 10B.
The Court of Appeal refused to interfere with the conclusion of the First Instance Court that the mark could be used based on the service agreement. Before the reorganisation in 2007, Old Quad owned the goodwill associated with the mark and Quad inherited that goodwill. The right to use the mark was limited by the service agreement and would end with the agreement.
Implications:
This judgement offers a valuable analysis of the circumstances in which fiduciary duties arise in commercial relations. The judgement also provides an extensive analysis of the operation of 10B Trade Marks Act and the role of equity in determining who is the “proprietor” of an unregistered trade marker.