The Military Mutual Ltd v Police Mutual Assurance Society Ltd & Ors

Lord Diplock described passing off as the “most protean” of the wrongs actionable in English law at the suit of traders who suffer loss of business or goodwill through unfair trading by others (Erven Warnink Besloten Vennootschap v J. Townend & Sons (Hull) Ltd [1979] A.C. 731, at 740). Since judgments of Danckwerts J in 1959 and 1960 the flexible boundaries of the tort have come to embrace what is sometimes called ‘extended passing off’. Those judgments were J. Bollinger v Costa Brava Wine Co Ltd [1960] 1 Ch. 262, in which preliminary points of law were decided, and J. Bollinger v Costa Brava Wine Co Ltd (No. 2) [1961] 1 W.L.R. 277, the substantive trial.

Warnink remains the most authoritative ruling on extended passing off and is the source of that name, see p.739.

In the present action the claimant (“MML”) seeks to push the boundaries a little further. It was argued on behalf of MML that the limits of passing off contain a form which, to date, the courts have not had occasion to recognise explicitly.

Michael Silverleaf QC and Jacqueline Reid appeared for MML, Simon Malynicz QC and Tim Austen for the defendants.

MML arranges the provision of insurance services to existing and past members of the armed forces and their families. For brevity I will use the term ‘armed forces’ to cover all such individuals. To some degree MML also provides discretionary risk cover to the armed forces. MML was set up by Major General Sir Sebastian Roberts (ret’d) and started business in April 2015. Sir Sebastian had taken the view that insurance companies failed to cater adequately for the insurance needs of the armed forces. MML’s purpose is to fulfil such needs.

MML has neither share capital nor, therefore, shareholders. Membership of the company is conferred upon application and approval of the board, although in practice the purchase of a financial product through MML can qualify the customer to become a member and thereby acquire a share in the control of the company.

MML has no employees, just seven directors including Sir Sebastian. Almost every aspect of MML’s business is conducted by Regis Mutual Management Limited (“Regis”), part of an international group which for a fee operates mutual insurance companies.

The first defendant (“PMAS”) is the successor company to an association set up in 1866 to provide financial and welfare support to police officers, police staff and their respective families, which I will hereafter collectively call ‘the police force’. Since the enactment of the Friendly Societies Act 1921 and its successors up to the current Friendly Societies Act 1992 (“the 1992 Act”), PMAS has operated as a friendly society within the meaning of those statutes. Those among the police force who purchase PMAS’s products become members of PMAS and thereby share in its ownership and control. MML accepted that PMAS’s activities in relation to the police force qualified it as a mutual within MML’s definition.

It emerged during the trial that PMAS’s direct dealings are still with the police force only. I understand there to be no objection to PMAS’s use of a trading name which includes ‘mutual’ for its direct trading activities.

Under the 1992 Act a friendly society is permitted to incorporate or acquire subsidiaries to conduct aspects of its business. The second to fourth defendants are subsidiaries of PMAS. The fifth defendant is a former subsidiary of PMAS which was sold in December 2016. In April 2016 the website www.forcesmutual.org was set up, offering insurance services under the trading name ‘Forces Mutual’. The website appears to be operated by the second and fourth defendants, although it also states that ‘Forces Mutual’ is the registered trade mark of PMAS and that it is the trading name of the PMAS, the second to fourth defendants and PM Advisory Limited. Business under that name is conducted by the second to fourth defendants and by PM Advisory Limited. I will hereafter refer to the second to fourth defendants collectively as ‘Forces Mutual’.

The financial services offered by Forces Mutual are aimed at the armed forces. They include insurance for military kit, life insurance, dental and health insurance, plus other financial products such as mortgages and savings products.

These proceedings concern the use of the word ‘mutual’ in Forces Mutual’s trading name. MML alleges that because of the way they trade, Forces Mutual are not mutual entities. This is because they do not allow those customers who are members of the armed forces to become members and part owners either of Forces Mutual or of the company which controls them, PMAS.

MML’s case is that its status as a mutual gives it a cause of action for passing off against Forces Mutual. To underline the point, MML has said that it would have no objection were Forces Mutual either to trade under name excluding the term ‘mutual’ or alternatively to amend their trading practices to become a mutual in the sense recognised by MML.

In a classic passing off case a trader claims that a trading name or a get-up is distinctive of his goods or services. Extended passing off cases have differed in that the name in issue was alleged to be associated with a type of product, as opposed to a single trader or corporate group. Champagne was the first product to be awarded protection by restraining the defendant’s use of that name. There have been further champagne cases and successful claims in relation to sherry, advocaat, whisky, vodka and going beyond the names of alcoholic drinks, Swiss chocolate and Greek yogurt.

Usually claimants have been the makers of the relevant product. In the champagne cases the claimants were champagne houses (see for example Bollinger and Taittinger SA v Allbev Ltd [1993] F.S.R. 641). In Warnink the claimant was a producer of advocaat, an egg and spirit liqueur. In Chocosuisse Union des Fabricants Suisse de Chocolat v Cadbury Ltd [1999] R.P.C. 826 (CA) the claimants that mattered were Swiss chocolate manufacturers – and so on. A cause of action is not confined to manufacturers though. In John Walker & Sons Ltd v Henry Ost and Company Limited [1970] F.S.R. 63 the plaintiffs were all blenders and exporters of Scotch whisky, not distillers. Foster J rejected an argument that only makers of a product had a cause of action (at p.79). The availability of a cause of action is likely to depend on whether the claimants (or the traders of whom the claimant is one) are collectively responsible for the quality of the product.

In Warnink Lords Diplock and Fraser each defined the elements of passing off generally, although with an eye to extended passing off. Lord Diplock’s were these (at p.742):

“My Lords, A. G. Spalding & Bros. v. A. W. Gamage Ltd., 84 L.J.Ch. 449 and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off: (1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.”

Lord Fraser identified the elements this way (at pp.755-6):

“It is essential for the plaintiff in a passing off action to show at least the following facts:- (1) that his business consists of, or includes, selling in England a class of goods to which the particular trade name applies; (2) that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods; (3) that because of the reputation of the goods, there is goodwill attached to the name; (4) that he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value; (5) that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached.”

Lord Diplock qualified his five elements by saying (at p.742) that although all passing off actions would have those elements, not all factual situations which present those characteristics would give rise to a cause of action for passing off.

The House of Lords subsequently reasserted the three key elements of classic passing off in Reckitt & Colman Products Ltd v Borden Inc [1990] R.P.C. 341, at 406, namely goodwill, misrepresentation and damage. Since then extended passing off cases have often been analysed by reference to those three elements.

The law was reviewed more recently in some detail by the Court of Appeal in Diageo North America Inc v Intercontinental Brands (ICB) Ltd [2010] EWCA Civ 920; [2011] R.P.C. 2 and again in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5; [2014] E.T.M.R. 26.

In Diageo Patten LJ made the point that a claim of extended passing off must conform with general characteristics of all passing off actions:

“[23] The view expressed by the editors of Kerly's Law of Trade Marks and Trade Names (14th edition) is that the classic and extended forms of passing-off are not different torts but are simply convenient labels to describe the two most obvious situations in which the law will intervene to render actionable the misappropriation of established goodwill by a seller based on a misrepresentation by him as to the nature and provenance of his own goods. The question whether this is the correct juristic analysis is probably not critical to the outcome of this appeal. Our task is to apply the law in the form it has now reached rather than to worry about its historical antecedents. But the value of this analysis (which I endorse) is that it confirms what is the essence of the tort of passing-off in all its forms: namely that it is there to protect the goodwill created by the product (whether in conjunction with the claimant's mark or alone) and is not there simply to prevent the misdescription of the goods or the unauthorised use of the claimant's name.”

In classic passing off the claimant must show that he owns goodwill in his business, which goodwill is associated with a trade name or get-up that distinguishes his goods or services from those of other traders. In extended passing off the claimants must establish that there is goodwill in the collective business in a type of product (all cases to date have concerned products) and that the name (so far get-up has not been central) is distinctive of that type of product among a significant proportion of the public. There is joint ownership of the goodwill, so any one or more of the class of relevant traders has a cause of action.

The type of product in issue must be susceptible of clear definition and the class of traders who supply that type of product must be sufficiently clear. The two are necessarily related.

Lord Fraser emphasised adequate definition of the type of goods in the second of his five elements:

“(2)

that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods;”

Lord Diplock said (at p.747):

“Of course it is necessary to be able to identify with reasonable precision the members of the class of traders of whose products a particular word or name has become so distinctive as to make their right to use it truthfully as descriptive of their product a valuable part of the goodwill of each of them; but it is the reputation that that type of product itself has gained in the market by reason of its recognisable and distinctive qualities that has generated the relevant goodwill. So if one can define with reasonable precision the type of product that has acquired the reputation, one can identify the members of the class entitled to share in the goodwill as being all those traders who have supplied and still supply to the English market a product which possesses those recognisable and distinctive qualities.”

The point is that use of the name in question cannot be the exclusive preserve of a class of traders if it is hard to tell who falls within the class and who does not, and thus who is entitled to use the name and who not. Even if it can be shown that the defendant plainly does not fall within the class, a vague definition of the relevant class of traders is liable to undermine the claim to goodwill. A trade name cannot be said to be exclusively associated with the goods of a class of traders if it is hard to know who forms part of that class.

A claimant may define the type of product as he pleases and thereby choose his class of traders. But success in establishing goodwill depends on getting this right. First, if his chosen class is too imprecise his case will fail from the start. Secondly, even if his type of product and class of traders are defined with precision, the product type must be recognised by the public. Should the product chosen not be recognised as a distinct type by the public the name in issue cannot be distinctive of that product. Thirdly, even if the product chosen is recognised as a distinct type, the claimant must still show that the name in issue denotes that type of product. Unless these criteria are satisfied there cannot be shared goodwill associated with that name.

In Fage Lewison LJ said this:

“[123] … It seems to me that the reason why it is necessary for the protected class of goods to be clearly defined, or defined with reasonable precision, is because the goodwill that the tort seeks to protect is a species of property. In some intellectual property cases there is too much ‘intellectual’ and not enough ‘property’. The essence of a right of property is that it distinguishes between what is mine and what is not mine. So there needs to be a boundary. Thus the debate about the definition of the class is essentially an intellectual property boundary dispute. The boundaries are needed in order to delineate both what is protected and also who shares in the ownership of the protected subject matter. The action in passing off is directed against those who cross the boundary.”

One way of defining a type of product with sufficient precision – and thereby also adequately defining the relevant class of traders – is by reference to regulations. Even if the relevant regulations carry no force in England, public perception in England of the product is likely to become aligned with the characteristics required in law since over time their experience of the product will inevitably conform to those characteristics.

By way of example, at the time of the champagne cases (and presumably still) the laws of France required that the name ‘champagne’ may be used only in relation to wine made by the méthode champenoise, which involves a second fermentation in the bottle, from grapes grown in a strictly delimited part of the Champagne region of north eastern France. Champagne could be defined according to the geographical source of the grapes. By extension the class of traders entitled to call their product ‘champagne’ could be unambiguously identified as those that make their wine from such grapes – the champagne houses.

It is not essential to rely on legislation. In Warnink there was reference to Dutch regulations governing the way that advocaat was made, but Lord Diplock described this as merely coincidental (at p.748). There the product was defined by the ingredients which gave the drink its recognisable qualities (and which coincided with the requirements of the Dutch regulations).

Assuming the class of traders is sufficiently clearly defined, it need not be and generally will not be a closed class. A trader who newly makes and/or supplies the product as defined qualifies for a share of the goodwill and with it the right to restrain non-qualifying traders from using the name. Other parties may cease to make or supply the product and fall out of the class. See for example Warnink at p.754.

Since the name in question denotes a type of product, it will to that extent be descriptive of the product. In some instances, such as the champagne cases, it may also be descriptive of the geographical source of the product. However, the difference from classic passing off is less than at first appears. The name must be associated exclusively with the type of product in question. It must in this sense be distinctive. Where the name started life as purely descriptive, such as being no more than an indication of the geographical source of the product, it must have acquired a secondary meaning so that it is now recognised by the public as denoting a particular type of product.

Provided the name is distinctive in this sense the collective goodwill in the business of traders who supply the product will be associated with the name, see Diageo at [24]-[27] and Fage at [62].

More than just distinctiveness is required of the name. It must contribute to the essential function of goodwill as “the attractive force which brings in custom”, see the dictum of Lord Macnaghten in Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] A.C. 217, at 223. In Fage Kitchin LJ put it this way (at [68]): for a claimant to succeed in an extended passing off case

“… he must show that the name has come to denote a particular kind of product which has recognisable characteristics which distinguish it from other products, and that the public are motivated to buy the product by reason of those characteristics.”

Laddie J gave two comparative examples in Chocosuisse at first instance ([1998] R.P.C. 117, at p.129), namely ‘French ball bearings’ and ‘Italian pencils’ (approved by the Court of Appeal in Fage at [70]). Both terms could be regarded as clear enough such that their producers are each a class of traders sufficiently well defined. However, on the reasonable assumption that the public in England would not be more drawn to ball bearings because they come from France or to pencils because they come from Italy, there would be no goodwill associated with those terms on which the producers could rely. By contrast, in Chocosuisse, for instance, it was found that the chocolate from Switzerland was perceived by a significant part of the public to be a premium product, which perception encouraged sales. In Fage the court found that a substantial proportion of the relevant public not only thought Greek yogurt comes from Greece, they also believed it to be special by reason of its thick and creamy texture.

The special quality of the product which attracts customers may take the form of a cachet, an image of prestige associated with the name. But this need not be the case. Even if the special quality carries little glamour and could not accurately be described as imparting prestige, provided it attracts custom that is enough, see Diageo at [49]-[55].

Nor is it necessary that the relevant public should know why the product is special. For example, those who are attracted to buy Greek yogurt because it is rich and creamy need not be aware that the texture has been achieved through the removal of whey by straining, see Fage at [66].

There is a final point on goodwill. It was argued in the present case that MML had not traded enough by the relevant date to claim a share in the goodwill. Reference was made to Lord Diplock’s speech in Warnink at p.744 E-F:

“…the new entrant must have himself used the descriptive term long enough on the market in connection with his own goods and have traded successfully enough to have built up a goodwill for his business.”

In Chocosuisse at first instance Laddie J took issue with what Lord Diplock had said (at p.125-6):

“The difference in this respect between the proprietor’s rights in marks protectable by classic passing off proceedings and his rights in famous generic terms protectable by the extended form of passing off inevitably has impact on other parts of the action. In Advocaat it was said that mere entry into the market by a new trader who uses the term accurately on his products would not give him any right of action for passing off. Lord Diplock said, although it was not strictly in issue in the Advocaat case, that the new entrant must have himself used the descriptive term long enough on the market in connection with its own goods and have traded successfully enough to have built up a goodwill for his business before he could sue. In this respect the House of Lords was carrying over one of the factors which a plaintiff needed to prove in a classic passing off action. However the reality is somewhat different. Once a trader becomes a legitimate member of the trade using a protected descriptive term, he cannot be sued for passing off by other members of the trade and, if he joins in a passing off action to protect the term, the courts have not inquired too deeply into how extensive his own trade has been.”

Lord Diplock’s observation was obiter. I must take a view and I respectfully agree with Laddie J. In a classic passing off case goodwill must have been generated by the time the defendant begins his acts complained of. By contrast, when considering whether a new entrant has a cause of action for extended passing off there is no question whether goodwill has been generated – ex hypothesi it has. The point at issue is whether the claimant is entitled to share in that goodwill. Provided he has traded in the relevant type of product to an extent above de minimis I see no reason why he should not share the goodwill and in consequence be entitled to a cause of action.

In some of the previous extended passing off cases the misrepresentation has been conceptually easy. For example, in Chocosuisse Cadbury’s use of the words ‘Swiss Chalet’ in its packaging for chocolate confused a significant proportion of the public into believing that it was made in Switzerland. The finding that this was an actionable misrepresentation was made possible by the premise, also found by the court, that ‘Swiss chocolate’ meant chocolate made in Switzerland to a significant proportion of the public. In Fage there was a belief among the public that the words ‘Greek yogurt’ on a yogurt pot meant that it was made in Greece, so there was a misrepresentation if it was not.

In other cases the nature of the misrepresentation is not so immediately apparent. Danckwerts J concluded in Bollinger that a proportion of the public did not know that champagne came from France. (Others, including those in court where “the case is tried in an atmosphere of educated persons” (at p.282), knew that champagne came from France but those persons were not relevant to the finding of a misrepresentation). The judge found that when members of the public unaware of the geographic origin of champagne were sold ‘Spanish Champagne’ they were confused into thinking that they were getting the wine with the great reputation of which they had heard because for them ‘Spanish’ provided no warning to the contrary (at p.291). It is not clear from the judgment whether the defendants’ wine was made according to the méthode champenoise, but it didn’t matter because the discussion about misrepresentation centred only on geographic origin.

This seems to create a difficulty. The relevant section of the public neither knew nor cared from which country champagne came. They were told that the defendants’ wine came from Spain, which was true. Where was the misrepresentation?

In Warnink Lord Fraser identified it in this way (at p.753):

“The misrepresentation was not that the defendants’ product was the product of the plaintiffs, or even that it came from France. The misrepresentation was that ‘Spanish Champagne’ was wine of the kind that enjoyed the reputation and goodwill which attached to genuine champagne, and in which the plaintiffs had a property right.”

In Fage Kitchin LJ indicated (at [66]) that in Vine Products Ltd v Mackenzie and Company Ltd [1969] R.P.C. 1, Cross J had (at p.23) correctly identified the misrepresentation in Bollinger,namely that consumers might well think that a bottle labelled ‘Spanish Champagne’ was the genuine article. Kitchin LJ earlier quoted the relevant passage from Cross J’s judgment:

“A man who does not know where Champagne comes from can have not the slightest reason for thinking that a bottle labelled ‘Spanish Champagne’ contains a wine produced in France. But what he may very well think is that he is buying the genuine article – real Champagne, and that, I have no doubt, was the sort of deception which the judge had in mind. He thought, as I read his judgment, that if people were allowed to call sparkling wine not produced in Champagne ‘Champagne’, even though proceeded by an adjective denoting the country of origin, the distinction between genuine Champagne and ‘champagne type’ wines produced elsewhere would become blurred; that the word ‘Champagne’ could come gradually to mean no more than ‘sparkling wine’; and that the part of the plaintiffs' goodwill which consisted in the name would be diluted and gradually destroyed. If I may say so without impertinence I agree entirely with the decision in the Spanish Champagne case – but as I see it it uncovered a piece of common law or equity which had till then escaped notice – for in such a case there is not, in any ordinary sense, any representation that the goods of the defendant are the goods of the plaintiffs, and evidence that no one has been confused or deceived in that way is quite beside the mark. In truth the decision went beyond the well trodden paths of passing off into the unmapped area of ‘unfair trading’ or ‘unlawful competition’.”

Taking the three reasons given by Cross J in reverse order, the last has been overtaken by emphatic rulings from the Court of Appeal that English law has not been extended by means of creating a tort of unfair competition, see L’Oréal SA v Bellure NV [2007] EWCA Civ 968; [2008] R.P.C. 9, at [135]-[161] and Fage at [24]. Cross J’s second reason addresses damage by blurring, not whether there was a misrepresentation in the first place. Passing off requires a misrepresentation. It is the first reason that matters: the public thought that they were buying the genuine article and they were not.

The concept of genuineness was also at the centre of the misrepresentation found in Warnink itself. Lord Fraser said (at p.754):

“…the misrepresentation was that the respondents’ ‘Old English Advocaat’ was a liqueur of the kind that enjoyed the reputation attached to genuine advocaat in England.”

This notion of genuineness can seem elusive. Superficially, it appears to be objective. Genuine champagne comes from the Champagne region of France. If wine from elsewhere is sold as champagne there is a misrepresentation because, objectively, it is not genuine. Likewise, ‘advocaat’ is objectively defined by reference to its recipe and if a drink made by another method is called ‘advocaat’ it is not the genuine article – there is a misrepresentation.

However, if genuineness were to be assessed objectively without reference to the perception of the public, it would not have mattered if over the years the name ‘champagne’ had been used for sparkling wine made anywhere, such that the public universally believed that ‘champagne’ merely meant any sparkling wine. The champagne houses would still have succeeded because, objectively, wine from Spain can never be champagne. Similarly, had the facts in Warnink been that there was a universal public belief that ‘advocaat’ means an alcoholic drink made to any sort of recipe using eggs and alcohol, this would not have hindered the plaintiffs’ case.

If extended passing off were really made possible by an objective misrepresentation, it would follow that the relevant public need not be misled about anything. I do not believe that this is what either the House of Lords or Danckwerts J can have had in mind.

The law of passing off has long recognised that a representation can be both objectively true and misleading. What matters is whether the relevant public are misled by the statement. In John Brinsmead & Sons Ltd v Edward George Stanley Brinsmead (1913) 30 R.P.C. 493, Buckley LJ (with whom Hamilton LJ agreed) began his judgment in this way (at p.506):

“Before dealing with the facts of this case I must say something as to the law which the Court has to apply. The law, as I understand it, is this: – if a man makes a statement which is true, but which carries with it a false representation and induces the belief that his goods are the plaintiffs’ goods, he will be restrained by injunction. He cannot rely on the fact that his statement is literally and accurately true, if, notwithstanding its truth, it carries with it a false representation. Instances of that proposition are found in the ‘Glenfield Starch’ case, the ‘Camel-Hair Belting’ case, and the ‘Stone Ale’ case; and many other instances might be adduced.”

The converse would seem to apply: if the representation is objectively untrue in the sense, for instance, that it not consistent with regulations governing the origin of the product, but it induces no false belief in the mind of the relevant public, there is no passing off. The misrepresentation would not be operative.

In Consorzio del Prosciutto di Parma v Marks & Spencer plc [1991] R.P.C. 351 Italian law required that ham could be sold as ‘Parma ham’ only if sold either (a) as a leg on or off the bone bearing the mark of authenticity or (b) in slices cut off from such a leg in the presence of the consumer, taken to be at the point of retail sale. Marks & Spencer imported hams from Parma bearing the mark of authenticity, then sliced and packaged the ham for sale in their stores. At first instance the court refused to strike out the claim for passing off. The claim was based on the argument that Marks & Spencer’s product could not be lawfully marketed as ‘Parma ham’ because of the Italian regulations and because the ham was not sliced in front of consumers. The Court of Appeal allowed the appeal, striking out the claim.

Nourse LJ, with whom Balcombe and Leggatt LJJ agreed, cited the three elements of passing off and continued (at p.370):

“As to reputation, the producers will face the obvious difficulty that many people's normal, perhaps their only, experience of Parma ham in this country comes from consuming it in restaurants, where it is very rarely, if ever, sliced off the leg in their presence. However, the judge accepted that the evidence certainly disclosed that to some people in England Parma ham was synonymous with a whole ham bearing the crown sliced in the presence of the ultimate purchaser. That evidence came from people in the wholesale and retail food trades, restaurateurs and publishers and writers of books on food. I am not quite sure whether the judge was of the view that it established a serious question to be tried as to the existence of the alleged reputation amongst a section of the public, but for my part I am prepared to assume that it does.

Where then is the misrepresentation leading to confusion? There must be both. Let us assume, first, that there is a misrepresentation. It will not confuse the section of the public to whom the reputation is known. They will know that Marks & Spencer's ham cannot be the real thing and may decide to buy it or not as they choose.”

The section of the public who knew about the Italian regulations would know that labelling Marks & Spencer’s ham as ‘Parma ham’ did not comply with the Italian laws and that the product was not ‘genuine’. There was in that sense a misrepresentation, but it was not an operative misrepresentation because this section of the public was in no way misled by it. Nourse LJ went on to consider members of the public who knew nothing about the Italian regulations. They would not be misled either. They would expect only that Parma ham must be the authentic product from Parma, and Marks & Spencer’s ham was certainly that.

Thus, Nourse LJ indicated that to establish passing off the misrepresentation must mislead the relevant public. Specifically, if the relevant public are not aware of rules limiting the use of the name of a product – in casu that for sliced ham to be given the name ‘Parma’ it must be sliced in front of the consumer – then breach of such rules will not lead to an operative misrepresentation. The judgment of the Court of Appeal in Consorzio del Proscuitto di Parma underlines that the misrepresentation cannot be merely assessed objectively, such as by reference to laws protecting the origin of products. As Nourse LJ put it, there must be both a misrepresentation and confusion.

That being so, where in Warnink there was reference to a misrepresentation that the defendant’s product was genuine, the House of Lords had something mind other than an objective concept of genuineness.

In Chocosuisse Chadwick LJ said (at p.837):

“Misrepresentation is an essential element in the tort of passing-off. But misrepresentation, in this context, lies in marketing goods in a way which will lead a significant section of the public to think that those goods have some attribute or attributes which they do not truly possess. That arises where there is confusion, or the likelihood of confusion, in the minds of the public between the goods of the defendant and other goods which do possess that attribute or those attributes.”

The public must be led by the misrepresentation to think that the defendant’s goods have attributes or characteristics that they do not truly possess. Warnink indicates that this does not depend on the public knowing anything about such attributes or characteristics. A misrepresentation may take the form of a false suggestion, created by the defendant’s use of the distinctive name in issue, that his product has the same characteristics as the product known by that name, whatever those characteristics may be – and is in that sense genuine.

Here a distinction must be drawn. In order for the product in issue to acquire a reputation and thus generate goodwill in the business in that product, it must necessarily have qualities recognised and appreciated by the public. However, the product may have further characteristics not known to the public and the alleged misrepresentation may turn on these. In Bollinger the relevant section of the public did not know that champagne comes from France. In Warnink: the relevant public did not know about the Dutch recipe from which advocaat had been made, the key feature of which was that the ingredients consisted of spirit and eggs but not wine. Danckwerts J took the view that champagne was not genuine unless made from grapes grown in the Champagne region of France; the House of Lords were of the opinion that advocaat was not genuine unless made from spirit and eggs and, importantly, contained no wine. Attention focussed on those essential characteristics because they were seen to be signifiers of what was ‘genuine’.

The misrepresentations in Bollinger and Warnink were operative even though the relevant public had no notion of the essential characteristics of champagne or advocaat, or what, in that sense, made the product genuine. The finding of a misrepresentation was based on the relevant public believing that a drink marked with the distinctive name had all the essential characteristics of the product with that name. Such a belief seems to have been assumed in both Bollinger and Warnink. The defendant used the distinctive name in question for its product and thereby falsely represented that its product had all the essential characteristics of the drink with the famous name, which characteristics consisted of or included those identified by the court. In fact the defendant’s drink did not have those characteristics. The public were in that way misled.

It may be that in some circumstances there could be an issue regarding the correct identification of the essential characteristics of a product. Resolving that issue might threaten to come close to an objective determination of genuineness depending on how the resolution is approached, particularly from an evidential perspective. That is not something I need pursue. I would add that it will always be safer for a claimant in an extended passing off claim to base his allegation of misrepresentation on the premise, proved on the evidence, that the relevant public not only believe the name in question to be distinctive of a product with known characteristics, but also believe that the name implies possession of the characteristic(s) relied on to establish the misrepresentation. For example, in the case of ‘Greek yogurt’ that the yogurt comes from Greece.

As with classic passing off, the misrepresentation need only be operative in relation to a significant proportion of the public in England and Wales. In Fage Kitchin LJ referred (at [64]) to the discussion of this topic by Morritt LJ in Neutrogena Corporation v Golden Ltd [1996] R.P.C. 473, at 493. I considered Neutrogena in Moroccanoil Israel Ltd v Aldi Stores Ltd [2014] EWHC 1686 (IPEC); [2015] F.S.R. 4 at [13]-[16], taking into account what had been said by the Court of Appeal in Interflora Inc v Marks and Spencer plc [2012] EWCA Civ 1501; [2013] F.S.R. 21 at [30]. I concluded that a significant proportion of the public could be less than half, possibly quite a lot less:

“Morritt LJ implied that starting with the relevant minimum proportion of the public is the wrong way around. I think the better approach is instead to … assess whether it is likely that sufficient individuals have made or will make the false assumption such as to cause material damage to the goodwill of the claimant.”

If goodwill and an operative misrepresentation are established, damage is almost certain to follow. It may include lost sales and will almost certainly include dilution of the collective goodwill, as identified by Cross J in Vine Products in the passage cited above. See also Fage at [67].

The relevant date for assessing whether the defendant’s conduct constitutes passing off is the date on which the conduct complained of began, in conformity with the rule for classic passing off, see Starbucks (HK) Ltd v British Sky Broadcasting Group plc [2015] UKSC 31; [2015] F.S.R. 29 at [16] and Chocosuisse at p.836.

All cases to date have concerned the name of a product. In principle, I see no reason why the law of passing off should not similarly protect goodwill associated with the name of a type of service. In fact, MML sought to take things a step further and to protect goodwill associated with a name given to a type of organisation. Again, I see no objection to this in principle. None was raised.

I begin with the definition of ‘mutual’ in MML’s pleaded case. Mr Malynicz complained that Forces Mutual had prepared its evidence on the case pleaded by MML and was then obliged to deal with something different at trial. Aside from that, it was an important part of MML’s argument that ‘mutual’ unambiguously meant a stated type of organisation. An argument of this sort is more convincing if the type in question is clearly defined in the pleadings and the definition remains consistent through to the end of the trial.

Paragraph 16 of the Re-Amended Particulars of Claim stated:

“16.

In the premises of the foregoing, consumers recognised the term ‘Mutual’ as designating an organisation with the characteristics identified in paragraph 10-15 above and that the benefits of being a member of the mutual company will be available in relation to products and services owned by that company.”

The problem was that paragraphs 10 to 15 offered various definitions of ‘mutual’ without these being pulled together in paragraph 16 or anywhere else to provide a single definition on which MML pinned its case, including all characteristics said to be essential and, just as importantly, excluding all those said to be inessential.

The Re-Amended Particulars of Claim quoted from two independent sources, in paragraphs 11 and 13:

“11.

The Oxford English Dictionary contains the following definition of ‘mutual’:

‘Designating or relating to a financial institution (as a building society, insurance company, etc) without capital stock, that is owned by its members who subscribe to a common fund from which claims, loans etc., are paid, profits after deductions being shared between them. Freq. in mutual company, mutual society.’

…

13.

The Department for Business Innovation & Skills’ Guide to Mutual Ownership states:

‘The distinguishing characteristic of a mutual is that the organisation is owned by, and run for the benefit of its members, who are actively and directly involved in the business – whether its employees, suppliers, or the community or consumers it serves, rather than being owned and controlled by outside investors.’ ”

The OED definition required payment of claims from a common fund, not payment by the third party insurers which for the most part is MML’s model. According to the Department for Business Innovation & Skills, the characteristics of a mutual embrace the possibility that the members of a mutual need not be its customers; they may be its employers or suppliers or the community in general served by the mutual. This raised a particular point: was MML defining ‘mutual’ widely to include those in which the members could be employees, suppliers or other stakeholders, or more narrowly than that?

Another possibility was that MML was relying on a perception of ‘mutual’ solely in the context of financial institutions. The OED definition quoted in the Re-Amended Particulars of Claim supported such an argument. However, it was not made explicit that ‘mutual’ means one thing in a broad context but has a narrower meaning in the context of financial institutions.

In his opening speech at the trial Mr Silverleaf was candid about the meaning given to ‘mutual’:

“There is no doubt – I’m not going to shy away from this – the term ‘mutual’ has what my learned friend describes as an amorphous and malleable technical meaning, and it’s become particularly malleable since the passing of [the Cooperative and Community Benefit Societies Act 2014].”

Mr Silverleaf also at this stage provided definitions of ‘mutual’ on which MML based its case, but it is fair to say that the case was still not quite fixed. The evidence followed.

In MML’s closing written submissions the definition of mutual and MML’s final position was this (leaving out the references to supporting evidence):

“The term ‘mutual’ defines and describes a business which is owned and controlled by its members working for their mutual benefit. It does not have external shareholders but it may have customers who are not members. This form of mutual is universal in financial mutuals with which this case is concerned.”

On MML’s behalf oral evidence was given by three witnesses. Florence Everett is an employee of Regis who is responsible for MML’s marketing and business development. Her evidence was primarily evidence of alleged confusion but it appeared to have been directed at a case of classic passing off originally pleaded by MML – that ‘Forces Mutual’ is confusingly similar to ‘Military Mutual’. That part of the claim was subsequently dropped. Mr Silverleaf made no mention of Ms Everett’s evidence in closing.

Otherwise for MML there was oral evidence from Paul Koronka, who is the Chief Executive of Regis and Martin Shaw, who is the Chief Executive of the Association of Financial Mutuals (“the AFM”) which, as its name implies, promotes the interests of those organisations. Sir Sebastian Roberts was proffered for cross-examination because he had signed the statement of truth in MML’s pleadings, but he was not cross-examined.

On behalf of Forces Mutual oral evidence was given by John Gilbert, who is a member of the AFM’s Regulation and Governance Committee, by Stephen Mann who is Chief Executive of the defendant group of companies and by Colonel Thomas Vallings who is a member of the advisory board of The Military Foundation, a foundation set up by Forces Mutual to promote the education and wellbeing of members of the armed forces.

I took the view that all the witnesses were doing their best to provide an accurate account of the facts as they saw them. Their witness statements sometimes gave the impression of being partisan but honest concessions were made in cross-examination where it mattered.

Passing off was to be assessed as of the date on which Forces Mutual began trading. It was common ground that this was on 20 April 2016.

MML argued that in April 2016 the relevant public recognised the term ‘mutual’, when used in the context of financial organisations, both to be distinctive and to denote a type of financial organisation, namely one solely owned by at least some of its customers. The status of being a mutual was perceived to confer advantages for its customers when compared to non-mutual organisations. Therefore there existed goodwill in the businesses of financial mutuals, shared by the organisations running those businesses, which goodwill was associated with the term ‘mutual’.

By April 2016 MML had been trading for year and had advertised its business among the armed forces on a substantial scale. It was owned and controlled by its customers and was therefore a mutual within the meaning recognised by the relevant public. It promoted itself as such. By that date it shared in the goodwill of financial organisations associated with ‘mutual’.

The misrepresentation relied on was generated by Forces Mutual’s use of the term ‘mutual’ in their trading name. MML argued that Forces Mutual are not mutuals as that term was recognised by the relevant public in April 2016. The reason was that although PMAS itself is a mutual, its subsidiaries trading as Forces Mutual are not. They do not offer products which confer on the purchaser membership and part ownership of PMAS or any other organisation. They are not owned and controlled by their customers for the benefit of their customers. By trading as a mutual Forces Mutual make a false representation.

Forces Mutual’s misrepresentation has gained them business at the expense of MML. Styling themselves a mutual has also diluted and therefore damaged the collective goodwill associated with ‘mutual’.

It was common ground that ‘mutual’ has at least one meaning, a broad meaning recognised by the relevant public. That meaning includes some understanding, to a degree I need not explore, that a mutual has no shareholders and is owned by stakeholders, who may be employees, customers or individuals of other kinds. There are many examples of organisations described as mutuals which are not owned solely or at all by their customers, the John Lewis Partnership being prominent among them.

MML’s case rested on there also being a second, distinct and narrower meaning of ‘mutual’. This second meaning was invariably understood in the context of financial mutuals. It contained the additional and well understood feature that an organisation so described is owned solely by some or all of its customers.

Forces Mutual’s principal argument was there was only the one broad meaning of ‘mutual’. If there existed any goodwill it was therefore shared by all mutuals within that broad meaning. Forces Mutual fell within the single definition of a mutual, so there can have been no misrepresentation when they started to trade in April 2016. Besides, at that point they became joint owners of the goodwill.

Mr Silverleaf and Mr Malynicz both submitted that accordingly the main issue to be resolved was whether in April 2016 ‘mutual’ had the second, context-dependent meaning among a significant proportion of the relevant public.

There were other arguments on each side which I will come back to after dealing with the main issue.

The identity of the relevant public was not discussed but I should say something about it. It seems to me to have included anyone interested in a financial product. Damage would only be caused by the redirection of sales among members of the armed forces or the dilution of goodwill in their minds. So I will take the relevant public to be members of the armed forces, all of whom were probably interested in one financial product or another, if only military kit insurance.

Another matter not much explored was how those in the armed forces in April 2016 would have learned what a mutual is, to the extent that they did. I will assume those who were sufficiently interested became informed by activities such as reading documents provided by a mutual to which they belonged, seeing and hearing items on the broadcast media and on the internet, reading articles in the print media, or speaking to others who have done such things.

There was a point of evidence which in my view had to be kept firmly in mind. Even if MML were able to show that financial mutuals were invariably owned by some or all of their customers, that would not have been enough to establish their case on the meaning of ‘mutual’. It would be still have been consistent with there having been only a single broad meaning together with a further understanding on the part of the relevant section of the public that to date financial mutuals had always been owned by their customers. MML had to show something more: the existence of the second narrower meaning. MML bore the evidential burden of showing that Forces Mutual would not merely have been recognised as an exception to the usual pattern that financial mutuals tend to be customer-owned.

A starting point is to consider is whether it would be lawful for a financial organisation to style itself a ‘mutual’ where it is not wholly or partly owned by its customers.

The Financial Conduct Authority (“FCA”) regulates all financial organisations in the UK. The FCA maintains a public register of mutuals. Its website at www.fca.org.uk states:

“The Mutuals Public Register is the public record of registered mutual societies:

•

building societies

•

credit unions

•

friendly societies

•

registered societies”

The website refers to the entry into force on 1 August 2014 of the Cooperative and Community Benefit Societies Act 2014. This is on a page which explains what a registered society is:

“ ‘Registered societies’ include:

•

co-operative societies – businesses that are run for the benefit of their members, distributing profits between their members

•

community benefit societies – businesses that are run for the benefit of the wider community, re-investing profits in the community

•

‘pre-commencement societies’ (industrial and provident societies, registered before 1 August 2014)”

As appears from the website, community benefit societies are financial mutuals which are not run for the benefit of customers, but for the benefit of the wider community. So far as I was shown, the website is silent as to the structure of ownership of building societies, credit unions and friendly societies. But it is in any event clear that the regulatory structure in this country does not require a financial mutual to conform to MML’s narrow definition of that term.

MML relied on several dictionary definitions:

There is a consistent message that emerges from these dictionaries: an insurance company with mutual status is owned by its customers. However, they imply that a mutual insurance organisation is owned by all its customers. The Macmillan Dictionary is explicit about this and that I think that it is the impression that would have been conveyed to a casual reader of the other dictionaries. That interpretation of a financial mutual is not the same as MML’s definition, but a subset of it.

That said, it was not clear that the relevant public would have been much guided by dictionaries and other evidence suggested that they would have considered the possibility of variations on the dictionaries’ definitions.

The evidence on what variations and exceptions might have been contemplated came mostly from Mr Shaw. He is the Chief Executive of the AFM. He discussed the ownership models adopted by financial mutuals in this country. Mr Shaw was unequivocal in his witness statement (paras. 10-12):

“Mutual organisations are owned by their customers. In the UK this includes mutual insurers, friendly societies, building societies, credit unions and co-operatives. Mutuals may have their own unique structural form, established by statute, such as the Friendly Societies Act 1992.

…

Customer ownership is the key factor in mutuality. The owners (‘Members’) are the reason the mutual exists and are its primary concern.”

In cross-examination Mr Shaw was less dogmatic, or possibly he had been using language more loosely in his witness statement than at first might appear.

Mr Shaw accepted that his evidence was based on organisations belonging to his association, the AFM. He also conceded that this excluded credit unions, building societies, community benefit societies and cooperatives. In fact, about three-quarters of the organisations which Mr Shaw identified as financial mutuals are not members of the AFM.

Mr Shaw said that financial mutuals are generally, so not invariably, owned by their customers. He identified several mutual health insurers which are not owned by any of their customers. It emerged that even among the membership of the AFM there are organisations which call themselves mutuals and which are not owned by their customers.

The AFM has a website. Mr Silverleaf referred me to the first page:

“Mutual organisations are owned by members – usually their customers.”

I think the word ‘usually’ would convey to any reasonable reader of that page that mutuals might not be owned by their customers. Later the website explains in more detail:

“What is a mutual?

Mutual insurers, friendly societies and building societies – they are all owned by you!

These days the mutual sector is very diverse and includes:

• Housing Associations

• Clubs

• Credit Unions

• Employee owned bodies

• Specialist bodies: such as football supporter trusts and community mutuals

There are also lots of new mutuals in the public sector such as:

• NHS Foundation Trusts

• Leisure Trusts

• Co-operative Schools

• Community Housing Schemes

The mutual philosophy is built on a sense of ownership, ‘belonging to an organisation’ and trust. As mutuals are owned by you, their customers (members) and have no obligation to shareholders they are free to focus entirely upon their customers’ needs.”

Where the AFM website states in that last paragraph that mutuals are owned by ‘customers (members)’, this is clearly being given a loose meaning. Apparently the term ‘customers’ embraces members of clubs, employees, football supporters, taxpayers who have a stake in NHS Foundation Trusts, parents of children who attend co-operative schools and the children themselves, those who live in community housing schemes and no doubt many other categories of ‘customer’. This raises the possibility people closely involved with mutuals, such as Mr Shaw, tend to use the word ‘customer’ loosely.

The only unifying theme in AFM’s definition of a mutual is that it has no shareholders. A mutual is instead owned by stakeholders of various kinds with an interest in or some connection with the trust, who are described as ‘customers’ or alternatively ‘members’ of the trust. The meaning of ‘mutual’ adopted by the AFM, an organisation which is all about financial mutuals, is in fact the single broad meaning given to mutuals generally. I was not shown any part of the AFM’s website which suggests any second, narrower meaning.

There was in evidence a paper by Dr Ruth Yeoman and Dr Daniel Tischer called Reframing Building Societies and Mutual Insurers: Collaboration as a source of competitive advantage, published under the auspices of Kellogg College Oxford. Mr Silverleaf had earlier relied on the introduction, which described the benefits of mutual financial services and said that the competition they contribute

“…through their different, customer-owned form adds to the financial stability of the market as a whole…”

Mr Shaw was taken to other parts of the paper. It said this about the interview which the authors had conducted among those who work in building societies and mutual insurers (at p.63):

“While the term mutuality is widely used within the sector, there is no generally accepted definition of the term, therefore interviewees were asked to articulate what mutuality meant to them.

…

• It was clear from the interviews that the meanings and practices of mutuality, and how these apply to financial mutuals, is the subject of ongoing inquiry and debate in the financial mutuals sector.”

Mr Shaw agreed with statement in the bullet point.

Mr Shaw was also referred to a survey conducted by BDRC Continental on behalf of the AFM using a nationally representative sample of 2000 respondents. 22% of the sample had no idea at all what a mutual is. The other 78% had various ideas. The survey did not suggest any detailed consistent understanding.

Significantly, Mr Shaw said that customers buy products from a financial mutual because it is the best on the market or suits their circumstances best and that they retain their membership because of tangible benefits such as consistent pricing and getting something back. The ownership structure of the mutual is apparently of little if any concern.

Mr Gilbert gave several examples of financial companies that have traded under a name including ‘mutual’ and which are not owned by their customers, such as the Old Mutual Group. All the companies in that group are public limited companies owned by shareholders. Mr Gilbert and Mr Mann both said in cross-examination that generally, so not invariably, a financial mutual is owned by some or all of its customers. Mr Gilbert agreed that a key characteristic of a mutual is that it has no shareholders.

In my view the evidence as a whole showed that in April 2016 most of the relevant public had some notion of what a mutual is, though not the same notion in every case. The term conveyed something positive to them. It is likely that some believed that a mutual has no shareholders, though it is hard to say what proportion.

The evidence did not support a belief that financial mutuals are invariably owned by some or all of their customers. Indeed, that is not always the case. It did not support the suggestion that the relevant public have two distinct understandings of the term ‘mutual’. ‘Mutual’ was given only the one broad meaning. If there were members of the armed forces who in April 2016 thought that financial mutuals are always owned by some or all of their customers, this would have been seen as nothing more than a general pattern thus far among mutuals. It would not have influenced their understanding of the term ‘mutual’.

Moreover, to the extent that when used in the context of a financial organisation ‘mutual’ implied anything about its ownership, the understanding would have been hazy because it would not have mattered much to the relevant public.

MML faced a dilemma in choosing its definition of financial ‘mutual’. The fact that there were several possibilities to choose from was already a difficulty. MML could not simply go for a financial organisation without shareholders because that would have covered Forces Mutual. The next most straightforward option would have been a financial organisation owned by all its customers. This would have been in close conformity with the dictionary definitions. But too many organisations calling themselves mutuals – and which MML’s witnesses acknowledged to be mutuals – fell outside that definition. These included Royal London which, as Mr Shaw confirmed, alone accounts for about 75% of the assets in the mutual insurance sector. It has 8.8 million policyholders, of whom only 1.2 million are members. At the trial MML chose as its class financial organisations solely owned and controlled by some or all of its customers.

The evidence does not support MML’s claim to collective goodwill held by that class because the public did not in April 2016 recognise any such class as being distinct. The term ‘mutual’ had not acquired a narrow meaning used to define the ownership structure of that class. I do not accept that any significant part of the public held the belief that that in the context of financial organisations ‘mutual’ meant that it must be owned solely by all or some of its customers.

In my view the shared goodwill asserted by MML did not exist.

Mr Silverleaf submitted that Forces Mutual was nothing more than a brand name and therefore could not be a mutual. I find this hard to follow. Forces Mutual is a trading name used by several companies. It is not a name in the ether unattached to any trading entity.

Forces Mutual argued that by April 2016 MML had not traded sufficiently to acquire a share in the goodwill, had it existed. I disagree. For the reasons discussed above, I think that any relevant trading above a de minimis level would have been sufficient. Even if the bar were set higher, there was evidence that between April 2015 and April 2016 MML had advertised its services on a significant scale.

There was also an argument from Mr Malynicz that MML could not share in any goodwill because it did not subscribe to the true mutual ethos. He said that MML is in practice run by Regis and its true pattern of trading was not made clear to its members. I take this to be based on the proposition that irrespective of what the public may think, MML is not a ‘genuine’ mutual.

Mr Koronka was rigorously cross-examined on this topic which formed a significant part of Forces Mutual’s argument in closing. I do not have the information to decide whether or not the trading relationship between MML and Regis is as it should be. This is a matter of financial regulation which would have to be explored more deeply than was possible or appropriate at this trial. It was not in any event established that MML’s relationship with Regis deprived it of its status as a mutual and therefore a share in the goodwill, had there been any.

Forces Mutual submitted that they were part of a group which offered qualifying products to some customers, allowing them to become part owners of PMAS. On MML’s definition they qualified as a mutual. On any view, therefore, there could be no misrepresentation.

It seems to me realistic to treat Forces Mutual as part and parcel of the group owned and controlled by PMAS with Forces Mutual providing an outlet for some of the group’s products. Mr Silverleaf did not argue to the contrary. It was not in dispute that PMAS is a friendly society complying with the 1992 Act, or that it is therefore a mutual. It was common ground that the 1992 Act permitted PMAS to conduct part of its business through subsidiaries without losing its friendly society status. It was also common ground that a mutual need not offer qualifying products to all its customers. Even on MML’s narrow definition Forces Mutual are part of a mutual group and, in my view, are thus mutuals. There could never have been a misrepresentation.

In opening Mr Silverleaf made a submission which I think recognised the problem with this part of MML’s case. He said that an entity cannot be a genuine mutual if it offers ownership to some customers but discriminates between customers on grounds of employment, specifically offering qualifying products to the armed forces but not to the police force. This was not pursued in closing, formed no part of the final definition of a ‘mutual’ advanced on behalf of MML and had no evidential basis.

Mr Malynicz argued that even if MML’s goodwill existed and there had been a misrepresentation and confusion arising from Forces Mutual styling itself a mutual, there would have been no damage. It had been shown that there were companies trading in April 2016 which were recognised as financial mutuals but were not owned by their customers. Therefore, the argument continued, the addition of other similar entities, Forces Mutual, could not have damaged the goodwill.

Mr Silverleaf did not point to any evidence of MML losing sales due to Forces Mutual using a name including ‘mutual’. That left dilution of goodwill. The burden of proving dilution would not have been heavy had there been goodwill and a misrepresentation. On the present facts there is substance to Mr Malynicz’s argument, but the lack of damage is closely related to the lack of goodwill.

MML’s claim against Forces Mutual for passing off is dismissed.