PeCe Beheer BV & Anor v Alevere Ltd & Ors

This is an action against 17 defendants for infringement of trade marks and copyrights and for passing off. All but two of the defendants (‘the Claiming Defendants’) have brought a counterclaim against the claimants for negligence. They now seek to add a third party, Dr Claudia van der Lugt, as a defendant to their counterclaim pursuant to CPR 19.2(2) and 19(4).

In 2001 Dr van der Lugt set up the second claimant (‘Alizonne BV’) as the corporate vehicle to run clinics in the Netherlands. The clinics offer a treatment developed by Dr van der Lugt called the ‘Alizonne Therapy’ which aims to reduce clients’ weight, improve their contours and optimise their health in general. Alizonne BV has two clinics in the Netherlands.

Alizonne BV has licensed the use of the Alizonne Therapy in Germany, the UK, Norway and Spain. The party initially licensed in the UK was Mark Palmer, a physician with a clinic in Leeds. He set up a company called The Cosmetic Medical Clinic Limited to operate the business, which in May 2007 changed its name to Alizonne (UK) Limited (hereafter the company is always referred to as ‘Alizonne UK’). Alizonne UK granted a number of sub-licences to clinics in this country. 22 UK clinics were signed up (‘Alizonne UK’s clinics’), including the second, third and fifth to seventeenth defendants in this action.

Among the agreements between Alizonne BV and Alizonne UK was a licence agreement dated 5 October 2007. Under its terms all products forming part of the Alizonne Therapy were to be supplied to Alizonne UK and its clinics exclusively by Alizonne BV or contract suppliers appointed by Alizonne BV. The agreement also required Alizonne UK and its clinics to use only devices, products and instruments prescribed by Alizonne BV.

One of these devices was an ultrasound machine used on clients as part of the weight loss treatment. It was originally manufactured in France by Utrilog International J. & Co SARL, though later the manufacture was transferred to an Utrilog company in Switzerland.

The Claiming Defendants allege that from about January 2013 problems with the ultrasound machine were reported by Alizonne UK’s clinics. Machines are variously said to have started firing and smoking when applied to a client, to have caused burn marks in one instance and mental distress in another. A further client is reported to have brought a personal injury claim for smoke inhalation.

On 14 October 2015 solicitors representing 19 of the 22 companies which operated the sub-licensed clinics wrote to Alizonne BV stating that they wanted the ultrasound machine to be replaced by one not manufactured by Utrilog which also complied with relevant regulations, in particular Directive 93/42/EEC. There were further exchanges. Then in a letter dated 6 February 2015 Alizonne UK and Mr Palmer stated that they were terminating the agreements with Alizonne BV. Termination was not accepted and this has led to litigation in the Netherlands.

The first defendant (‘Alevere’) either stepped into the breach or, as the claimants put it, exploited the dispute between the clinics and Alizonne BV. Alevere offered a rival therapy marketed under the name ‘Alevere’. In the claimants’ view this a copycat therapy provided unlawfully. That view notwithstanding, 15 of the UK clinics, namely the second, third and fifth to seventeenth defendants in these proceedings, terminated their use of the Alizonne Therapy and took up Alevere’s offer to transfer allegiance to the latter’s therapy.

The rights relied on by the claimants in this action are goodwill, an international trade mark registration designating both the European Union and the UK, and copyrights in documents used in carrying out the Alizonne Therapy. The first claimant (‘PeCe Beheer’) is the company which owns the trade mark and copyrights. Both claimants are said to own the goodwill in the claimants’ business. The claimants allege that the trade mark and copyrights have been infringed by reason of the defendants’ conduct of their Alevere therapy businesses and that by such conduct the defendants have passed themselves off as being licensed or otherwise associated with the claimants.

Particulars of Claim were served on 7 August 2015. The defendants served a Defence and Counterclaim on 25 September 2015. As I have said, the counterclaim was brought by the Claiming Defendants, i.e. all the clinic defendants except one, the fourth defendant. They sought damages on the ground that the claimants and Dr van der Lugt had been negligent, both in their selection of the Utrilog ultrasound machine as a mandatory device for the administration of the Alizonne Therapy and in their insistence on continued use of the machine after the alleged problems with it emerged. Thus, allegations were pleaded against Dr van der Lugt as well as the claimants.

On 7 October 2015 the claimants’ solicitors wrote Dr van der Lugt enclosing a copy of the Defence and Counterclaim and seeking her consent to be added as a defendant to the counterclaim. In an email dated 9 October 2015 Dr van der Lugt declined to be joined.

There was a hearing before me on 13 October 2015. A number of matters were dealt with, partly arising out of an application by the claimants for an interim injunction which had not been pursued. I gave permission to the claimants to amend their Particulars of Claim and to the defendants to make consequential amendments to the Defence and Counterclaim. No permission was sought to add Dr van der Lugt at this point. I also gave some directions for the further conduct of the proceedings but it is common ground that this was not a final case management conference since the pleadings were not closed; the parties contemplated the likely need for a further CMC in due course. This matters because it follows, as both sides accepted, that CPR 63.23(2) was not engaged in the present application.

The Application Notice to join Dr van der Lugt as a defendant to the counterclaim was issued on 2 November 2015.

Mr Cuddigan QC, who appeared for the Claiming Defendants, confirmed that the proposed case against Dr van der Lugt is one of negligent misstatement according to the principles set out in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465 and subsequent cases.

The Amended Counterclaim in its present form sets out the contractual relationship between Alizonne BV and Alizonne UK and the sub-licences granted by Alizonne UK to the Claiming Defendants. It goes on:

There was at all material times a special relationship between the Claimants and Dr van der Lugt on the one hand and the Claiming Defendants on the other wherein latter required information and advice from the former, and trusted the former to exercise care in the provision of that information and advice, and wherein the former knew or ought to have known that such information and advice would be relied upon in the provision of the Alizonne Therapy by those Defendants.

The claimants and Dr van der Lugt assumed responsibility for the careful selection of the equipment that the Claiming Defendants were mandated to deploy in the administration of the Alizonne Therapy.

It was foreseeable that the Claiming Defendants would suffer damage if the Claimants’ and Dr van der Lugt’s selection of the equipment that those Defendants were required to deploy in the administration of the Alizonne Therapy

It was foreseeable that the Claiming Defendants would suffer damage if the Claimants and Dr van der Lugt unreasonably maintained an insistence on the use by those Defendants of equipment that was unsafe or non-compliant with applicable legislation or regulations in their administration of the Alizonne Therapy.

There was in all the circumstances set out above a sufficiently proximate relationship between the Claimants and Dr van der Lugt on the one hand and the Claiming Defendants on the other hand that it is just and reasonable to impose liability upon the Claimants and/or Dr van der Lugt for the negligent selection of the mandatory equipment.

There was in all the circumstances set out above a sufficiently proximate relationship between the Claimants and Dr van der Lugt on the one hand and the Claiming Defendants on the other hand that it is just and reasonable to impose liability upon the Claimants and/or Dr van der Lugt for their negligent insistence on the use by the Claiming Defendants of equipment that was unsafe or non-compliant with applicable legislation or regulations in the administration of the Alizonne Therapy.

In the premises, the Claimants and/or Dr van der Lugt owed a duty of care to the Claiming Defendants in the selection of the equipment that was mandated for use as part of the Alizonne Therapy.”

The Amended Defence and Counterclaim recites the history of the use of the Utrilog machine by the Claiming Defendants and the problems said to have emerged from its use, and then says this:

The Claimants and Dr van der Lugt nonetheless unreasonably maintained their insistence that the Claiming Defendants continue to deploy the Utrilog Osmolipocel devices as part of the Alizonne Therapy.

In the premises:

The Claimants and Dr van der Lugt were negligent in their selection of the Utrilog Osmolipocel as a mandatory device for the administration of the Alizonne Therapy.

The continued insistence by the Claimants and Dr van der Lugt that the Claiming Defendants deploy the Utrilog Osmolipocel as part of the Alizonne Therapy after they had been notified of the safety issues was negligent and in breach of their duty of care to those Defendants. As to that insistence, the Claiming Defendants will refer generally to the course of correspondence between themselves and the Claimants in 2014.

The Claiming Defendants suffered loss as a result of the acts of negligence set out above in the following forms:

Their exposure to claims for personal injury by patients/clients resulting from those persons’ treatment using the Utrilog Osmolipocel.

Their exposure to claims for personal injury by patients/clients resulting from those persons’ treatment using the Utrilog Osmolipocel, for which claims they would have no insurance cover.

Their exposure to claims for personal injury by staff resulting from their administering treatment using the Utrilog Osmolipocel.

Their exposure to claims for personal injury by staff resulting from their administering treatment using the Utrilog Osmolipocel, for which claims they would have no insurance cover.

Their exposure to professional censure and disciplinary action by the General Medical Council as a result of their uninsured use of a medical device.

Reputational damage relating to all the above.

The losses set out under paragraph 30 above were objectively foreseeable. Further, the Claimants were expressly forewarned of such losses in correspondence with the Claiming Defendants’ solicitors.”

The current pleading states that the Claiming Defendants sought to mitigate their losses and identifies further losses alleged to have been foreseeable.

During the hearing Mr Cuddigan indicated that he wished to re-amend his pleading and provided a draft of proposed re-amendments to the Defence and Counterclaim. This may have been prompted by Miss Reid’s skeleton argument in which she submitted that Dr van der Lugt could not be liable for negligent misstatement because the Claiming Defendants had not pleaded that she had made any statements to them at all, negligent or otherwise.

Unfortunately the draft re-amendments from Mr Cuddigan had not been provided to Miss Reid in advance. I allowed a short adjournment for Miss Reid and her instructing solicitors to read the new draft.

The new draft supplements paragraph 13 (see above) and states:

After the adjournment Miss Reid pointed out that the Defence and Counterclaim, even as proposed to be re-amended, did not allege that the Claiming Defendants had relied on the advice said to have been given to them by Dr van der Lugt. It seems to me that this is implied. The Claiming Defendants plead that Dr van der Lugt’s negligent misstatements caused them loss, which I think could only have happened (if it did) if the Claiming Defendants relied on those statements. In my view the outcome of this application should not turn on that sort of pleading point, so I indicated that the hearing should go forward on the assumption that Mr Cuddigan was going to spell out reliance on Dr van der Lugt’s statements in his proposed amendment.

As proposed to be amended, the Defence and Counterclaim would in summary allege:

Dr van der Lugt owed a duty of care to the Claiming Defendants, arising from by a special relationship between Dr van der Lugt and each of the Claiming Defendants;

the special relationship was created by her apparent assumption of personal responsibility for the specification of the Utrilog machine, evidenced by the communications exhibited at pages 268 to 319 of exhibit MNA2 to the second witness statement of Maire Ni Aodha, dated 2 November 2015;

Dr van der Lugt was in breach of her duty of care by making negligent statements to the Claiming Defendants: initially she insisted that they deploy the Utrilog machine as part of the Alizonne Therapy and later maintained that insistence after being notified of safety issues regarding the machine;

the Claiming Defendants suffered financial loss caused by Dr van der Lugt’s negligent statements.

I think there were two strands to Miss Reid’s principal argument in opposition to the joinder of Dr van der Lugt, though they became blurred by both sides. The first was that there were no statements made by Dr van der Lugt to the Claiming Defendants which could even arguably give rise to an assumption of personal responsibility on the part of Dr van der Lugt and therefore the Claiming Defendants had no prospect of establishing a special relationship between them and Dr van der Lugt. The second was that no statements were made by Dr van der Lugt that were even arguably negligent.

Miss Reid’s skeleton argument also contained submissions that there was no foundation for the Claiming Defendants’ allegations that (a) the Utrilog machines were dangerous or (b) that the Claiming Defendants suffered damage. I think rightly Miss Reid did not pursue these arguments at the hearing. What happened to the Utrilog machines when they were used in UK clinics, with distressing fire and smoke or not, must be a matter for evidence at trial. Equally it is at least arguable that if the machine failures happened and if the Claiming Defendants were induced to use the machines by reliance on the expertise and advice of Dr van der Lugt, their businesses suffered damage as a consequence of the advice.

Miss Reid also advanced an argument of delay by the Claiming Defendants in bringing this application. I have set out above the main events leading to the application and I do not take the view that there was blameworthy delay.

In response to Miss Reid’s principal arguments, Mr Cuddigan took me to the communications exhibited by Ms Ni Aodha and relied on in his draft re-amendment to the Defence and Counterclaim. Save for one further matter, argument came down to this: did those communications sufficiently establish a case that there had been statements by Dr van der Lugt to the Claiming Defendants in respect of which there was an assumption of personal responsibility on her part and that the statements were negligent? I turn shortly to what constitutes sufficiently establishing a case.

Before that, I will deal immediately with the further matter I have just mentioned. Miss Reid referred to the sub-licences between Alizonne UK and the Claiming Defendant clinics. The example in the bundle was between Alizonne UK and Temple Aesthetics UK, now Temple Medical Limited, the twelfth defendant. It was not disputed that the terms I was shown were representative. Miss Reid relied on clause 14.2 which is as follows:

Miss Reid argued that the Claiming Defendants had, by the operation of clause 14.2, contractually excluded themselves from any right to a remedy pursuant to a negligent statement by any person. Any person includes Dr van der Lugt.

I do not accept this construction of the clause. It is under a heading for the whole of clause 14: “ENTIRE AGREEMENT”. Under the usual rules of construction the heading cannot alter the meaning of the clause but it gives a clue. Clause 14.2 prevented the contracting parties from arguing that they had entered into the agreement in reliance on any extraneous statements, representations, warranties or understandings provided by any person. The effect of the agreement was to be drawn from the terms of the agreement itself, nothing else. This has nothing to do with whether a third party such as Dr van der Lugt is alleged to have made negligent misstatements to one or more of the Claiming Defendants. The latter potentially raises a claim in tort independent of and unaffected by the contractual obligations and restrictions under the Claiming Defendants’ agreements with Alizonne UK.

CPR 19.2(2) provides:

The Claiming Defendants relied on rule 19.2(2)(b). CPR 19.4 sets out the procedure for adding a new party, stating in rule 19.4(1) that the court’s permission is required to add a party once the claim form has been served.

The court will not give permission where the application is to join a person as a defendant and no sufficiently arguable (and connected) cause of action has been pleaded against that person. In Allergan Inc v Sauflon Pharmaceuticals Ltd (2000) 23(4) I.P.D. 23030, Pumfrey J refused to join a party to proceedings for infringement of three patents. He said

Miss Reid took me to Mead Corporation and basing herself on that judgment emphasised that “a good arguable case” against Dr van der Lugt had to be established on the proposed pleaded case before she could be joined. Miss Reid submitted that this was a higher hurdle than would be applied in an application to strike out an existing case pleaded against a party.

Mr Cuddigan submitted Dr van der Lugt’s objection to being joined was, in effect, an assertion that the claim against her, if pleaded, could be dismissed by summary judgment and that I should apply the well-established criteria appropriate for summary judgment.

When Pumfrey J and Laddie J each used the term “good arguable case”, I do not believe that either was intending to lay down a precise criterion for assessing whether a party could be joined to proceedings. In fact although that was the term employed in one part of Mead (at p.490), earlier Laddie J identified the issue before him to be whether the plaintiff had made out “an arguable case” that the proposed defendants were joint tortfeasors (at p.486).

I take the view that in the normal course the correct test to be applied in relation to CPR 19.2(2)(b) is that which would be applied in an application to strike out a claim against a defendant had the claim already been pleaded, i.e. in an application made pursuant to CPR 3.4(2)(a) or (b). Other things being equal, I think it would make little sense if the question whether a person should be a defendant in proceedings depends on whether that person were a defendant from the start of the action or is to be joined at a later stage. Sometimes the facts on which to base a claim against a party may not emerge until after the Particulars of Claim have been served.

There is a high degree of overlap between an application to strike out a claim pursuant to CPR 3.4(2)(a) or (b) and an application for summary judgment dismissing a claim pursuant to CPR 24(2)(a), but they are not identical. One difference is that in an application under CPR 3.4(2)(a) or (b) the focus will be on the pleading against the defendant concerned. The test is whether, on the hypothesis that the claimant will be able to establish the facts pleaded, the statement of case discloses reasonable grounds for bringing the claim against that defendant. Whereas in a summary judgment application there may be additional facts on which a party seeks to rely in order to determine whether the claimant has no real prospect of succeeding on the claim against that defendant, such facts being presented in one or more witness statements, see Independents' Advantage Insurance Company Ltd v Cook [2004] PNLR 44, at page 49 and Moroney v Anglo-European College of Chiropractice [2009] EWCA Civ 1560, at [18]-[22].

There was evidence adduced on both sides in the present application, to which no objection was taken. For that reason I think it is both legitimate and better to approach this application in a way analogous to that which would be taken in an application for summary judgment dismissing the claim against Dr van der Lugt, had she already been a party, see Moroney.

The issue before me is whether the Claiming Defendants have no real prospect of succeeding in their claim against Dr van der Lugt for negligent misstatement. More specifically it is whether, on the evidence I have been shown, the Claiming Defendants have no real prospect of showing that (a) Dr van der Lugt made statements by way of advice which in all the circumstances were such as to create an assumption of personal responsibility for the advice and (b) the advice was negligent.

The emails exhibited by Ms Ni Aodha showed conclusively that Dr van der Lugt corresponded directly with the Claiming Defendants. Statements were made regarding the appropriate way to carry out the Alizonne Therapy and related matters. It was accepted by Miss Reid that all references to an ultrasound machine in the emails were to one of the Utrilog machines. The emails included the following:

Email dated 12 May 2013 from Dr van der Lugt to Rekha Tailor of the Eighth Defendant.

Email dated 31 May 2013 from Dr van der Lugt to Jackie Partridge of the Sixth Defendant

Email dated 12 March 2014 from Dr van der Lugt to Anne Welford of Alizonne UK

Email dated 4 May 2014 from Dr van der Lugt to Amanda Elbourn of the Fifth Defendant

Email dated 20 September 2014 from Dr van der Lugt to Ms Siczkowski of the Third Defendant

I am satisfied that that these and the other emails I saw demonstrate that Dr van der Lugt took it upon herself to communicate directly with at least some of the Claiming Defendants about the Utrilog machine, giving advice which included technical advice in relation to its use and repair.

Miss Reid argued that in all instances the Claiming Defendants will have understood that Dr van der Lugt was advising on behalf of Alizonne BV and not in her personal capacity.

The Claiming Defendants’ contractual relationship was with Alizonne UK, not Alizonne BV. The emails chains from which I have quoted show that first port of call for the Third and Fifth Defendants in relation to problems with the ultrasound machine was Alizonne UK. The Eighth Defendant first contacted Utrilog. Yet in each case Dr van der Lugt intervened to give direct advice to the clinic concerned.

It will be a matter for further evidence and argument at trial whether, viewed objectively, Dr van der Lugt assumed personal responsibility for the advice she gave to the Claiming Defendants in relation to the Utrilog machines and if so, whether the advice was negligent. On the evidence I have seen, I cannot say that the Claiming Defendants have no real prospect of establishing those allegations.

I give the Claiming Defendants permission to join Dr van der Lugt as a defendant to their counterclaim.