Lifestyle Equities CV and another v Ahmed and another

This Supreme Court case looked at two linked questions in a trade mark dispute. First, when can directors be personally liable for a company’s infringement? Second, if they are liable, what profits can be claimed from them?

The court drew a clear distinction between the company’s position and the directors’ position. The company’s infringement was a strict liability wrong. But personal accessory liability was not automatic. The claimant had to show knowledge of, or turning a blind eye to, the facts that made the company’s conduct infringing.

The court also confirmed that an account of profits is not a shortcut to the company’s money. That remedy works defendant by defendant. On the facts here, the directors could not be made to account for the company’s profits, and their salaries and a company loan were not treated as personal profits from infringement.

Lifestyle Equities sued over clothing, footwear and related goods sold under the name “Santa Monica Polo Club” with polo-themed imagery. Lifestyle said those signs were too close to its “Beverly Hills Polo Club” trade marks and amounted to trade mark infringement and passing off.

The defendants included two family-owned companies trading as Juice Corporation and two individuals, Mr Kashif Ahmed and Ms Bushra Ahmed. Juice Corporation was a wholesale business arranging manufacture of goods and selling them mainly to UK retailers.

Mr Ahmed’s role included managing the companies’ intellectual property rights. The judge found that he was the managing director and ultimate decision-maker, that he instructed the design director to oversee the Santa Monica Polo Club logo, and that he selected the factory and agreed prices for manufacture.

Ms Ahmed was head of sales for Hornby Street’s “House of Brands” division. The judge found that she managed the day-to-day running of that division, had a showroom stocking Santa Monica Polo Club goods, decided to display those goods and sold them to customers.

The case was split into two trials. At the first trial, Hornby Street was found liable for trade mark infringement under sections 10(2) and 10(3) of the Trade Marks Act 1994 and also for passing off. There was no appeal from that finding. Hornby Street later went into administration and was dissolved.

The second trial dealt with the remaining defendants, including the Ahmeds. The judge held that Mr Ahmed was jointly and severally liable with the two Juice Corporation companies for infringement. Ms Ahmed was held jointly and severally liable with Hornby Street for infringement linked to the House of Brands division, which the judge found represented 10% of Hornby Street’s business.

Importantly, the judge made no finding that either Ahmed knew or ought to have known that the company’s use of the signs created a likelihood of confusion or otherwise infringed Lifestyle’s trade marks. The judge treated those matters as legally irrelevant.

Lifestyle chose an account of profits rather than damages. The judge refused to make the Ahmeds account for Hornby Street’s profits, but ordered them to account for profits they had personally made, including 10% of their salaries and, in Mr Ahmed’s case, a loan from the company. The Court of Appeal largely upheld that approach, except that it removed the loan and deducted income tax from the salary figures. Both sides then appealed to the Supreme Court.

The first issue was about personal accessory liability. The company’s own trade mark infringement was accepted to be a strict liability wrong. So the court had to decide whether a director who causes the company to do the relevant acts is also personally liable without any mental element, or whether knowledge is required.

The second issue was about remedies. If a director is personally liable, can the claimant recover profits made by the company from that director? Or is the remedy limited to profits the director personally received?

The court also had to deal with two specific items that had been treated as personal profits below: part of the Ahmeds’ salaries and a loan made by Hornby Street to Mr Ahmed.

These issues matter in real trading businesses because branding, sourcing, design approval and sales decisions are often made by directors or founders through a limited company. The case tests how far company wrongdoing can be carried across to the people making those decisions.

The Supreme Court allowed the Ahmeds’ appeal and dismissed Lifestyle’s appeal. It held that Lifestyle had not established the case for personal accessory liability.

The court said that, to make the Ahmeds jointly liable with Hornby Street for procuring infringement or participating in a common design, it was necessary to show that they had knowledge of, or turned a blind eye to, the facts that made Hornby Street’s use of the Santa Monica Polo Club signs infringing. No such case had been advanced and the trial judge had made no such finding.

The court rejected the idea that accessory liability simply mirrors the strict nature of the company’s own trade mark liability. The company could be liable without proof of fault, but that did not mean the directors were automatically liable as accessories whenever they intended the company to do the acts in question.

The court also considered whether the Ahmeds had themselves infringed the trade marks by their own acts. In relation to Ms Ahmed, the court rejected the argument that an employee who displays and sells goods on behalf of an employer necessarily “uses” the sign in the course of trade for the purposes of section 10. The court considered the more natural reading to be that the section refers to acts done on a person’s own account, not as an employee or agent for someone else.

On remedy, the Supreme Court confirmed that an account of profits operates separately against each defendant. It requires that defendant to disgorge profits they personally derived from the infringement. It does not automatically transfer the company’s profits to an individual director.

On the facts found, the court said the Ahmeds had not personally made relevant profits. A loan is not a profit simply because money is borrowed. The position might be different if the loan were really a disguised dividend, but there was no evidence or finding of that kind here.

The court also rejected the salary analysis. There was no allegation, evidence or finding that the salaries were anything other than ordinary remuneration for services. The judge had expressly accepted that the salary payments were for work done, not dividends. An employee paid no more than the fair market value of their services does not make a profit merely because the employer’s business included infringing sales.

This case is not a free pass for casual branding decisions. The company in this dispute had already been found liable for trade mark infringement and passing off. The Supreme Court repeated that infringement under the relevant trade mark provisions was strict liability. In practical terms, your company can be liable even if nobody intended to copy another brand and even if the team believed the branding was acceptable.

What the case does do is stop an automatic jump from company liability to personal liability. A director is not personally liable just because they were the ultimate decision-maker, approved a logo, selected a supplier or supervised sales. The claimant must prove the mental element required for accessory liability.

That means internal records can matter. In a later dispute, the court may look closely at who approved the brand, what facts they knew, what checks were done, what concerns were raised and whether anyone ignored obvious warning signs.

The judgment is especially relevant for businesses that use private labels, launch sub-brands, import goods from overseas factories or rely on in-house design teams. Those businesses often have directors closely involved in naming, artwork, sourcing and retailer presentations.

The case should also be read carefully on remedies. Even if personal liability is established, the financial remedy against an individual still depends on what that person actually gained. The court rejected any assumption that a director simply stands in the company’s shoes for profit recovery.

The decision gives a clear answer on some points, but it should not be stretched beyond them.

It does decide that directors are not automatically personally liable as accessories for a company’s trade mark infringement. It also decides that an account of profits against an individual is limited to that individual’s own profits, and that on these facts ordinary salary and a company loan were not such profits.

It does not say that directors can never be personally liable in trade mark cases. The court expressly accepted that accessory liability can arise where the required knowledge is proved.

It also does not change the strict liability position for the company itself under the relevant trade mark provisions. A business can still infringe without bad faith or deliberate copying.

The judgment should therefore be read as a case about the limits of personal accessory liability and the limits of profit-based remedies against company decision-makers in trade mark and passing off litigation.

The judgment shows how closely courts can examine the commercial chain behind a brand launch. In similar disputes, the important evidence is often not just the final logo or product, but the steps that led to it.

That can include design instructions, supplier communications, showroom decisions, sales materials, internal approval messages and records showing who managed the business’s intellectual property rights. In this case, the findings about Mr Ahmed’s role in managing intellectual property, instructing design work and selecting factories, and Ms Ahmed’s role in displaying and selling goods, were central to the argument about personal liability.

For business owners, the practical point is straightforward. If branding decisions are made through a company, the company should still be able to show how those decisions were made and who knew what at the time.

The Supreme Court judgment in Lifestyle Equities CV and another v Ahmed and another was given on 15 May 2024. It was heard on 20 and 21 February 2023 and came on appeal from the Court of Appeal decision at [2021] EWCA Civ 675.

The judgment is a current Supreme Court authority on personal accessory liability for a company’s trade mark infringement and on the scope of an account of profits against individuals in that context.