Can you hold a director personally liable for the wrongdoings of a company?
This was a question which the Supreme Court in London recently considered.
Background
The Defendants are a brother and sister who were directors of a company which supplied clothing, footwear, and headgear under the “Santa Monica Polo Club” brand.
The Claimant owns trade marks relating to “Beverley Hills Polo Club”, with branding not dissimilar to that sold by the Defendants’ company, which has since been dissolved. The Claimant sued the Defendants personally for an account of the profits.
Judgment
The Supreme Court (UKSC) unanimously dismissed the claim. The Defendants could not be liable if they did not know that their company had infringed a trade mark. Further, they had not themselves made any profits from any such infringement.
Accessory Liability
Trade mark infringement is a matter of strict liability. The level of proof doesn’t require knowledge or blame: it is simply a matter of showing use identical or similar to the trade mark. In this case, the Defendants did not themselves infringe the trade mark. The allegation was that they were accessory to it. This led to the question of whether the liability of an accessory, rather than a principal, was also strict.
“…there is no question of holding directors liable just because they are directors for acts attributed to the company… The question is whether the fact that they are directors should relieve them of liability for their own tortious acts. There is no reason why it should.”
Account of Profits
As an equitable remedy, an account of profits can be ordered against anyone liable for infringing a trade mark, regardless of their knowledge. In this case, however, there was no evidence that the Defendants had personally profited.
“…the only profits for which the [Defendants] could in any event be liable to account were profits which they themselves (rather than the company) had made as a result of the company’s infringements of [the Claimant’s] trade marks; and the facts found by the judge did not justify the conclusion that the[y] personally made any profits from those infringements. For this reason too, the orders for an account of profits were wrongly made.”
Comment
On the facts of this case, even if the Defendants had been liable, the claim against them would have failed on the profits that weren’t made. A loan from the company to one of the Defendants was not profit, nor was the payment of a salary.
For more information about this article or any other aspect of commercial law, contact your Napthens Solicitors in Preston, Liverpool, Kendal, and across the North West today.
