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Wednesday, 16 April 2014

Locum lawyer loses company cognomen* costs complaint

This one is about the ever-useful Company Names Tribunal, and the cost consequences of ignoring pre-action correspondence and waiting for a party to bring an application against you before you give in and change your company’s name. The decision is here.
The company names in suit were BLUE SKY LAW LIMITED vs BLUE SKY LEGAL SERVICES LIMITED. Section 69(1) of the Companies Act 2006 provides:
“(1) A person (“the applicant”) may object to a company's registered name on the ground– (a) that it is the same as a name associated with the applicant in which he has goodwill, or (b) that it is sufficiently similar to such a name that its use in the United Kingdom would be likely to mislead by suggesting a connection between the company and the applicant.”
Section 69(4) provides a number of defences to such an objection, including that the name was adopted in good faith; that it was registered before the applicant acquired its goodwill; that the respondent is actually operating under the name; or that the interests of the applicant are not adversely affected to any significant extent. In this way, the section 69 jurisdiction focuses on the company name equivalent of cybersquatters – those who register company names with a view to extorting cash from the owner of the goodwill or preventing it from registering the name.
There was no evidence that the respondent here was a namesquatter – but rather a company set up for legitimate accounting purposes by an individual locum lawyer working in London. Nevertheless, the applicant was concerned to find a company operating in the legal services market with a name which only differed by using “legal services” rather than “law”. So it wrote to the respondent asking it to change its name. When no reply was received, the applicant’s trade mark agent wrote a further letter. The parties then entered brief email correspondence and the respondent promised a substantive reply. None was provided, and the applicant made “numerous” attempted phone calls to the respondent to chase. Having got nowhere, the applicant then commenced its application, and in doing so sought to join the respondent’s sole director (successfully, the sole director having then failed to object to this despite being invited to comment).
Pay it to the winning side, of course!
The respondent quickly relented and changed its name, becoming the quite different TOP NOTCH LEGAL SERVICES LIMITED. The Tribunal then moved to close the application, but the applicant asked for some costs. The Tribunal has discretion to award costs, using a set scale (see its Practice Direction).
That’s when the arguments really got going. The respondent’s sole director was quite upset by the applicant’s claim for costs, opposing it and asking for an award of costs in her own favour to reflect the work she had done in respect of the application. The Tribunal invited the respondent to apply to be heard in person on the matter (under Rule 5(3) of the Company Names Adjudicator Rules 2008), but this was not taken up.
The Tribunal reflected on its rules and Practice Direction, noting that where a company voluntarily changes its name after an application, costs could still be awarded where the company was given sufficient notice that an application would be made. In light of the attempts at pre-action correspondence above, the Adjudicator concluded:
“…I have absolutely no hesitation concluding that the applicant took all reasonable steps to settle this matter by agreement before it made its application to the Tribunal. As all these steps proved unsuccessful, the application to the Tribunal was, in my view, both reasonable and proportionate, and, as a consequence, the applicant is entitled to a contribution towards the costs it incurred in making its application.”
The Adjudicator awarded costs of £600; the £400 filing fee and £200 for the applicant’s statement of case. The award was made against the respondent company and its sole director on a joint and several basis.
Small costs, perhaps, when compared to what litigation can cost, but clearly a sum worth fighting over for the respondent and its director. In the circumstances, the decision seems a fair one – there appear to have been ample opportunities for the respondent to have reached a settlement prior to the application before it began, but for whatever reason these were ignored. There is an element of harshness – not least because there is no evidence the respondent adopted the BLUE SKY name in bad faith and so may have actually had a defence had it fought the application – but the decision demonstrates the importance of treating the pre-action process seriously. Wait until someone actually sues, and it might cost you. And if proceedings are issued in the court (perhaps here for passing-off?), it’ll be a lot more than £600.
Tip o’ the Kathat to Sally Cooper, who along with Barbara Cookson of Filemot, acted for the successful applicant.

*cognomen: name; especially: a distinguishing nickname or epithet

1 comment:

Anonymous said...

I wish Companies House would not let companies with such similar names to be registered in the first place. The volume of applications to the Company Names Tribunal need not be so high and it does no-one any good (apart from the coffers of the Company Names Tribunal). Such applications require a significant investment of time and effort on behalf of the existing, applicant companies, but also costs respondent companies, often low budget start-ups, in terms of needing to rebrand.

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