Family's Separate Ways Lead to Passing Off

The fact that a business name includes one's own family name is not necessarily a defence to passing off. So confirmed the Scottish courts recently, in Wise Property Care Ltd. v White Thomson Preservation Ltd. and Ors. [2008] CSOH 46. As a result, brothers who went their separate ways in business have met with quite different outcomes concerning their freedom to trade under business names incorporating their surname.

All in the Family

The three brothers in question came from a family with a long history in the building preservation business.

Their father, Thomas White, began trading in 1976 under the name White Thomson Preservation (Northern) Ltd., in partnership with Mr Thomson. Initially Thomas White's three sons traded with him, but in 2002 they left to set up their own business, called White Preservation Ltd., which traded in competition with their father's company, White Thomson Preservation (Northern) Ltd.

In 2004, one of the sons, Ewan White, sold his shares in White Preservation Ltd. to his two brothers. In 2005, the elder Mr White retired and White Thomson Preservation (Northern) Ltd. was dissolved. The two brothers continued to trade as White Preservation Ltd.in Dunfermline, Kirkcaldy, St Andrews and Angus, with a business address at 22 Viewfield Terrace, Dunfermline.

Ewan White did not leave the building preservation trade for long. In 2007 and early 2008, he incorporated new companies under the names White Thomson Preservation Ltd. and White Thomson (Northern) Preservation Ltd. In January 2008, he began trading.

Sibling Rivalry in Court

The two brothers still trading as White Preservation Ltd. sued for passing off and secured an interim injunction. Ewan White appealed.
The Scottish Outer House, Court of Session weighed the matter last spring. It noted that whatever the position may have been before 2005, since then the two brothers had traded and built up exclusive goodwill in the business name White Preservation Ltd., some three years before Ewan White began trading as White Thomson Preservation Ltd. and White Thomson (Northern) Preservation Ltd.  
The court noted that Ewan White was trading in the same market and in the same geographical area as his brothers. Moreover, Ewan White's newly-incorporated companies had a business address at 14 Viewfield Terrace, Dunfermline, just doors down from the White Preservation Ltd. office at 22 Viewfield Terrace. The potential for confusion was, in the court's view, abundantly clear, and was demonstrated by a transcript of an investigator's call to Ewan White, in which the latter had appeared to set himself out to be the same company as that operating from 22 Viewfield Terrace, which he described as simply a "maildrop" address.

The court held that by using the company names White Thomson Preservation Ltd. and White Thomson (Northern) Preservation Ltd., Ewan White was passing himself off as White Preservation Ltd., or as in some way connected with it.

The judge recognised that "White" was Ewan White's own surname, but there was ample authority for the proposition that use of one's own name was no defence to passing off where it was liable to deceive (see inter alia Marengo v Daily Sketch & Sunday Graphic Ltd. (1948) 65 RPC 242, 251). In this case, the company names in question were not simply the third defendant's own personal name, but included other elements, not least "Thomson." Moreover, the third defendant's responses during the telephone call from the investigator indicated that Ewan White was not acting honestly, but was instead holding his business out, or knowingly allowing it to be perceived, as that of his brothers.  

The judge upheld the interim injunction but clarified that Ewan White was not prevented from trading as and answering the phone in his own personal nameas an individual.

Comment

When families go separate ways in business, there is often a potential for confusion, particularly as new businesses are likely to be in the same field as, and often in the same geographical area as, the original family business.

This was the case here, and the fact that the companies had such similar names, activities and addresses demonstrates that confusion was probably always going to arise. Consequently, upholding the interim injunction was the right decision taking account of the need to protect the goodwill generated by the other brothers through three years of trading.

If the court had had no evidence of impropriety on Ewan White's part, the inherent likelihood of deception in this case would probably have led to the same result. The fact that Ewan White was caught apparently holding his company out as that of his brothers made the outcome virtually certain, however.

Nevertheless, the judge did leave a question open as to whether the situation would have been different had Ewan White carried on his father's business seamlessly, rather than starting separately three years after his father had retired and dissolved his company. In that case, Ewan White might have acquired goodwill in his father's business as a going concern, and goodwill in business names including "White" in the Dunfermline region for building preservation services might have been effectively shared. In that case, the fact that the companies had coexisted in business and competed for several years already might have carried some weight in persuading a court that each should be allowed to continue. In this case, though, the facts were rather different, and Ewan White was not allowed to step into his father's shoes three years after the business had been dissolved with no intention to resume trade.

The amending of the injunction to allow the defendant to trade in his own personal name is an indication that the court saw little risk of confusion arising from that, despite the similar business addresses, identical trade and shared territory. If in fact confusion were to arise, it is possible that the successful brothers might have a further claim. Nonetheless, trade as an individual is not as attractive as trade under a corporate umbrella, and one would expect the defendant simply to have adopted a different company name. The court considered this outcome likely, as well.

Such limits on freedom to trade under company names including personal names make sense, but could have commercial implications where a family has a history in a line of business that could be profitable to tap. Each case is likely to be highly fact-dependent, but if there is a risk that one family member's later business might be perceived as that of, or related to, another's earlier one, then blazing one's own trail with a brand-new name may be the safest option.