Close Enough! Liability for Passing-off by an Implied Representation

Arecent UK casedeals with a claim for passing-off that was advanced by a trade association.

The Facts

TheNational Guild of Removers and Storers Limited (the “Plaintiff”) is a tradeassociation which represents members of the moving and storage industry.  The defendant was a company which carries onthe business of the provision of moving and storage services.

ThePlaintiff alleged that it was the owner of a substantial and valuable goodwillin the names THE NATIONAL GUILD OF REMOVERS AND STORERS, the GUILD and NGRS foruse in association with moving and storage services.  The Plaintiff alleged that various advertisementsrelating to the defendants moving and storage services amounted to passing-off.

Asthe action proceeded the defendant admitted that the Plaintiff had establishedsubstantial goodwill in the names noted above when used in connection with atrade organization operating in the moving and storage industry.

Passing-off

Therelevant principles relating to passing-off are well established and can besummarized as follows:

1. In order to succeed the plaintiff has toprove goodwill or reputation, misrepresentation and damage;

2. Trade associations can bring an actionfor passing-off;

3. The question of whether there is alikelihood of deception or confusion is a matter for the court;

4. The court must assess whether a“substantial number” of the Plaintiff’s customers or potential customers aredeceived or confused but it is not necessary to show that all or even most ofthem are deceived or confused;

5. The misrepresentation must be more thantransitory.

   Inaddition, passing-off may also occur when a defendant knowingly exploits acustomer’s mistake or misconception, even if the defendant was not responsiblefor the customer making the mistake in the first place.  In a case of this nature, the defendant canavoid liability if it corrects the mistaken belief but if it does nothing itmay be liable.

   Thedefendant argued that there was a distinction in passing-off cases betweensituations where “mere confusion” took place and those in which confusion ordeception occurred.  It can be difficultto distinguish the two situations.  Generally,mere confusion has no causative effect and deception or confusion occurs insituations where its effect is really likely to damage the plaintiff’s goodwillor divert trade from the plaintiff.

   TheFirst Advertisement

   Thisadvertisement consisted of a webpage that had been placed by the defendant onthe website of a third party.  Theadvertisement contained general information about moving and contained a movingchecklist that consisted of six bulleted items. The second bullet said “using (a moving) company who is a member of TheNational Guild of Removers and Storers”. While the defendant had been a member of the Guild in the past when theadvertisement was placed it was not a member.

   Thejudge concluded that the second bullet point was not just general advice butimplied that the defendant was a member of the Guild.  The implied representation was damaging tothe Guild’s business and goodwill.  Itwas not a case of “mere confusion” and the defendant took no steps to dispelthe misleading impression that the bullet point conveyed.  As a result, the defendant was liable forpassing-off in relation to this advertisement.

   TheSecond Advertisement

   Thisadvertisement also consisted of a webpage located on a third party websitewhich was popular for those involved in house moving.  Some of the advertisements for the defendantconcluded with the words “member of NGRS”. At the time the advertisements were placed this statement was true.

   Thedefendant said that it was unaware of the existence of this representation untilbeing advised of its existence by the Plaintiff.  As soon as notice was received, it arrangedfor its prompt removal.  It seems thatthere was an issue with the website which had caused the third party’s systemto crash and then replicate itself from a previous out of date version of thewebsite.

   Thejudge found that the defendant was not responsible for acts done by anindependent third party since the defendant did not know of such acts nor didthey intend them and no question of agency, authorization or procuring waspleaded.

   Comment

   Thiscase illustrates the fluid nature of the doctrine of passing-off.  The doctrine has arisen and been developedsolely on the basis of the common law. Its application can be relatively open-ended so long as the key elementsof goodwill, misrepresentation and damage are established.

   John McKeown

   Goldman SloanNash & Haber LLP

   480University Avenue, Suite 1600

   Toronto,Ontario M5G 1V2

   Direct Line:(416) 597-3371

   Fax: (416)597-3370

   Email: mckeown@gsnh.com