Canada: Close Enough! Liability For Passing-Off By An Implied Representation

Last Updated: January 24 2017
Article by John McKeown

A recent UK case deals with a claim for passing-off that was advanced by a trade association.

The Facts

The National Guild of Removers and Storers Limited (the "Plaintiff") is a trade association which represents members of the moving and storage industry. The defendant was a company which carries on the business of the provision of moving and storage services.

The Plaintiff alleged that it was the owner of a substantial and valuable goodwill in the names THE NATIONAL GUILD OF REMOVERS AND STORERS, the GUILD and NGRS for use in association with moving and storage services. The Plaintiff alleged that various advertisements relating to the defendants moving and storage services amounted to passing-off.

As the action proceeded the defendant admitted that the Plaintiff had established substantial goodwill in the names noted above when used in connection with a trade organization operating in the moving and storage industry.

Passing-off

The relevant principles relating to passing-off are well established and can be summarized as follows:

  1. In order to succeed the plaintiff has to prove goodwill or reputation, misrepresentation and damage;
  2. Trade associations can bring an action for passing-off;
  3. The question of whether there is a likelihood of deception or confusion is a matter for the court;
  4. The court must assess whether a "substantial number" of the Plaintiff's customers or potential customers are deceived or confused but it is not necessary to show that all or even most of them are deceived or confused;
  5. The misrepresentation must be more than transitory.

In addition, passing-off may also occur when a defendant knowingly exploits a customer's mistake or misconception, even if the defendant was not responsible for the customer making the mistake in the first place. In a case of this nature, the defendant can avoid liability if it corrects the mistaken belief, but if it does nothing it may be liable.

The defendant argued that there was a distinction in passing-off cases between situations where "mere confusion" took place and those in which confusion or deception occurred. It can be difficult to distinguish the two situations. Generally, mere confusion has no causative effect and deception or confusion occurs in situations where its effect is really likely to damage the plaintiff's goodwill or divert trade from the plaintiff.

The First Advertisement

This advertisement consisted of a webpage that had been placed by the defendant on the website of a third party. The advertisement contained general information about moving and contained a moving checklist that consisted of six bulleted items. The second bullet said "using (a moving) company who is a member of The National Guild of Removers and Storers". While the defendant had been a member of the Guild in the past when the advertisement was placed it was not a member.

The judge concluded that the second bullet point was not just general advice but implied that the defendant was a member of the Guild. The implied representation was damaging to the Guild's business and goodwill. It was not a case of "mere confusion" and the defendant took no steps to dispel the misleading impression that the bullet point conveyed. As a result, the defendant was liable for passing-off in relation to this advertisement.

The Second Advertisement

This advertisement also consisted of a webpage located on a third party website which was popular for those involved in house moving. Some of the advertisements for the defendant concluded with the words "member of NGRS". At the time the advertisements were placed this statement was true.

The defendant said that it was unaware of the existence of this representation until being advised of its existence by the Plaintiff. As soon as notice was received, it arranged for its prompt removal. It seems that there was an issue with the website which had caused the third party's system to crash and then replicate itself from a previous out of date version of the website.

The judge found that the defendant was not responsible for acts done by an independent third party since the defendant did not know of such acts nor did they intend them and no question of agency, authorization or procuring was pleaded.

Comment

This case illustrates the fluid nature of the doctrine of passing-off. The doctrine has arisen and been developed solely on the basis of the common law. Its application can be relatively open-ended so long as the key elements of goodwill, misrepresentation and damage are established.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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