Trade mark trouble again: Tartan Army frustrated as director gets off Scot free

This item, the second guest Katpost in succession to emanate from North of the Border, might as well have been entitled "From Glen to Glennie". Coincidentally, it's also the second Scottish post in a row that this Kat erroneously assumed was about Scotch whisky -- this being because its author is the excellent Lindesay Low, who is Senior Legal Counsel to the Scotch Whisky Association.  Be that as it may, the post is instructive for anyone who is contemplating suing both a corporate infringer and its directors.  The episode that attracted Lindesay's attention reads like this:

Although sadly absent from the finals of international football tournaments for more years than I care to mention, Scotland’s travelling fans, or the Tartan Army, remain a force to be reckoned with. Therefore, my attention was grabbed by the opinion of Lord Glennie sitting in the Outer House of the Court of Session in The Tartan Army Limited v Sett Gmbh, Oliver Reifler, Iain Emerson and Alba Football Fans Limited [2015] CSOH141, a trade mark infringement case. As well as giving a helpful exposition on their history, this decision contains an interesting discussion on when a director can be liable for the actions of his company.

Tartan Army Limited are the owners of several “Tartan Army” trade marks in different classes, both in the UK and elsewhere, and have used them on such things as clothing and travel services for Scottish fans. It brought infringement proceedings against two companies and two individuals which it claimed had been infringing its marks by, among other things, publishing “The Famous Tartan Army Magazine” or “the magazine”. By the time that the case was heard by Lord Glennie, settlement had been reached with two of the defenders [Katnote: this term does not here denote their position on the football field but is the Scottish term for "defendants"] but the proceedings remained live against Mr Iain Emerson and Alba Football Fans Ltd. It was accepted by all that Alba were the publishers of the magazine and although they had advanced a number of substantive defences, the court was concerned about whether any liability for Alba’s actions attached to Mr Emerson.

For the purpose of the hearing, a number of things were accepted:

• In 2005, along with a business partner, Mr Emerson had incorporated an earlier company, SFM, to publish the magazine
• In 2008, to continue publication, he had incorporated Alba, with the specific purpose of purchasing SFM’s business from liquidation
• Mr Emerson was Alba’s sole director and shareholder
• Alba had no employees, and it was unlikely to have any in future
• Mr Emerson took the day to day decisions about running the company
• There was an overlap between Emerson and Alba’s defences: Emerson relied on the Tartan Army’s acquiescence to the publication of the magazine
• Mr Emerson had devoted his own time, money and effort into building the business and had given up employment to work on it.
• A wide group of people contributed to the magazine, and
• While Mr Emerson provided editorial content, Alba had the final say on the magazine’s content and layout.

The Tartan Army Limited argued that against this background it was clear that Alba was a mere vehicle or agent for Mr Emerson’s activities. Alternatively, Alba was a corporate shell which he had created and they were joint tortfeasors (an English concept which nevertheless seems to have been understood and accepted).

In response, Mr Emerson, argued simply that he had decided to incorporate Alba so that his business could benefit from limited liability. The mere fact that he was its director and shareholder did not make him personally liable for its actions.

Lord Glennie noted that both parties accepted that a company is a distinct legal entity. Referring to Lord Sumption’s opinion in Prest v Petrodel Resources Ltd [2013] UKSC 34, para 8) he observed that there is nothing wrong in principle with a sole director and shareholder causing a company to incur a liability and maintain that that liability is exclusively that of the company, not the individual. 

Again referring to Prest, Lord Glennie, noted that in certain circumstances one could “pierce the corporate veil” or at least push it to one side. One scenario is what is referred to as the “concealment principle” where the company is really just an agent, trustee or nominee of the individual. Another is what was described as the “evasion principle” where an individual attempts to escape a personal liability by interposing a limited company into his affairs.  Other scenarios were possible but rare. Lord Glennie did not consider that anything which had been pleaded in the present case created any sort of special circumstance where the director would be found personally liable for the company.

He also considered the argument that Mr Emerson was jointly liable with Alba as tortfeasor because he either procured or assisted it in its wrongdoing (CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] UKHL 15, Fish & Fish Ltd v Sea Shepherd UK [2015] UKSC10). However, on reviewing Tartan Army’s case, it amounted to no more than saying that Mr Emerson carried out various acts in his capacity as director and shareholder. Lord Glennie referred with approval to Chadwick LJ’s opinion in MCA Records v Charly Records Ltd [2001] EWCA Civ 1441 that

a director will not be treated as liable with the company as a joint tortfeasor if he does no more than carry out his constitutional role in the governance of the company.

The fact that Mr Emerson carried out his duties informally, e.g the absence of properly minuted board meetings, did not change matters: Re Horsely and Weight [1982] Ch 442.

While there may be some divergence between the laws of Scotland and those of England and Wales relating to accessory or joint liability, the judge was satisfied that the principles referred to above applied on both sides of the border. Consequently, Lord Glennie decided that the case made out against Mr Emerson was irrelevant and should be dismissed.

If my experience is typical, it seems that many cases concerning IP infringement involve what are known as “paper” or “shell” companies with few assets and the natural inclination is to go after the “controlling mind” behind them. At para 27 of his judgment, when referring to the concept of separate corporate personality, Lord Glennie says:

All of that is trite, though it is often overlooked by those seeking to hold a person personally liable for the acts or omissions of a company owned and controlled by him or to hold a parent company liable for the acts or omissions of a wholly owned subsidiary.

This decision is perhaps a wake-up call to remind us that doing so is not as straightforward as may appear.

Thanks, Lindesay, for the wake-up call!

Listen to the Tartan Army here
Ally's Tartan Army here
Tart and Army here