In its recent judgment, the Supreme Court considered whether two directors were personally liable under English law as accessories in the infringement of trade marks contrary to the Trade Marks Act 1994.

At first instance and before the Court of Appeal, Lifestyle successfully argued that Hornby Street Ltd (the company) and two of its directors were jointly liable for infringing upon its trade marks. The company had since been dissolved with the directors being ordered to account for profits made by them in connection with the company's infringements.

The Supreme Court unanimously allowed the appeal of the two directors, finding that the two directors were not liable as accessories to the company's infringement of Lifestyle's trade marks.

When considering accessory liability, the Court stated there was no requirement that the knowledge or other mental state required should be the same as that required for the primary liability. In this particular case it did not follow that because liability for the infringement of a trade mark is strict, that the law also imposed strict liability on those alleged to have been an accessory to the infringement.

In order to find that a person is liable as an accessory to a wrongful act, it must be established that the person had knowledge of the essential facts which makes the act done wrongful.

There had been no finding of fact that the two directors knew, or ought to have known, that there was a likelihood of confusion or that there was an infringement of the trade marks held by Lifestyle.

As neither director had possessed the knowledge of the essential facts that the company's actions amounted to a wrongful act of trade mark infringement, the Court found the two directors could not be held jointly liable for the infringements carried out by the company.

Interestingly, the Supreme Court rejected a submission put forward on the directors' behalf that a company director could avoid personal liability in circumstances where they act in good faith and with reasonable care in discharging their duties to the company, and without actual or constructive knowledge that their acts will cause an infringement.

The Court was clear that under English law there is no exemption for a director from the ordinary principles of liability for civil wrongs and there was nothing in company law which contradicted that position.

In its judgment, the Supreme Court also considered whether the directors would have been liable to account for the profits of the company had there been a finding against them. It found that the directors could only have been liable for the profits they themselves made (and not the company), as otherwise this would amount to a penalty which was not the purpose of the remedy. As the facts did not support the conclusion that the directors had personally profited from the infringements, the order for an account of profits had been wrongly made.

Commentary

The case of Lifestyle Equities CV is concerned with the English law of accessory liability and it is now sufficiently clear that there will be no finding of joint liability where a director does not have the requisite knowledge of the essential facts which makes the act done by another wrongful.

There is some authority in Scots law that a person could be found liable as an accessory to a wrongful act committed by another where that person had knowledge of the wrongful act and participated in or acceded to it (Frank Houlgate Investment Co Ltd v. Biggart Baillie LLP [2014] CSIH 79), although the case law is far from definitive in this area. It therefore remains to be seen whether the Scottish Courts will look to adopt the Supreme Court's reasoning or to take a different approach in similar cases.

What is apparent is that the question of accessory liability is often very fact specific and will require careful consideration of the particular facts and circumstances in every case.