Passing off

This is a very important case for a number of reasons.   In the first place, it illustrates the difference between confusion and passing off.

"No one is entitled to be protected against confusion as such,"

said Lord Greene MR in Marengo v Daily Sketch [1992] FSR 1,

"confusion may result from the collision of two independent rights or liberties, and where that is the case neither party can complain."  

What is actionable is passing off and that, as the Master of the Rolls went on to say in the same case, is quite different from confusion even though confusion and passing-off are related.  Secondly, it interprets the first of the three probanda of an action for passing-off, goodwill or reputation, as "brand recognition."   Thirdly, it explores the interrelation between the first and second of the so-called classic trinity, namely brand recognition and misrepresentation. 

The Facts

In 1992 the Hong Kong and Shanghai Bank Corporation ("HSBC") acquired Midland Bank Plc ("Midland"). Initially, the connection between the HSBC and Midland was understated, the only reference being the words "Member of the HSBC Group" in Midland's literature. In 1998 HBSC decided to re-brand all its subsidiaries throughout the world under the HSBC name and hexagon. A formal change of corporate name for Midland was planned for the end of September 1999. In preparation for this re-branding, the fascia of every Midland branch was altered to HSBC and there was a massive advertising campaign.  This change alarmed a much smaller financial institution, the HFC Bank Plc ("HFC") which specializes in consumer credit. As soon as HSBC announced its re-branding, HFC complained to HSBC set out to collect examples of confusion.   It sent 100 examples of confusion to HSBC early in February and asked it to change its mind. HSBC refused to budge and HFC issued proceedings on the 12 March 1999.  On the 20 May 1999 Laddie J ordered a speedy trial which took place on the 19 July 1999. 

Judgment

Lloyd J dismissed the action.   He began his judgment by restating that HFC had to prove that:

	·       it was the owner of goodwill in the United Kingdom in the name HFC used in connection with its business;
	·       there had been a misrepresentation by Midland that its branches and services were those of HFC, connected or associated in the course of trade with HFC or that HFC’s bank, branches and services were connected or associated in the course of trade with Midland, and
	·       such misrepresentation had damaged its goodwill or was likely to damage it in a serious way.

In applying these principles the judge considered not just whether HFC had some goodwill in general terms but whether it had goodwill as regards a particular person at a particular time. The reason for this approach was to consider whether Midland’s use of the HSBC appellation involved a relevant (or indeed any) misrepresentation. The judge accepted Midland's submission that mere confusion by someone who had barely heard of HFC would not assist its case, even if such confusion was the result of misrepresentation. The reason for that approach is that it HFC would have no goodwill if it none of the people who had been misled had previously heard of HFC.  HFC therefore had to show that it had achieved some brand name recognition to clear the first hurdle.