Accessory Liability for Tortious Acts Involving Breach of Intellectual Property Rights after Lifestyle Equities CV v Ahmed : a New Zealand Perspective

In 2010 I was involved in a case in the Auckland High Court (Inverness Medical Innovations, Inc v MDS Diagnostics Ltd)[1] (“Inverness”) which centred on the question of whether pregnancy testing devices which were procured by MDS overseas and sold in New Zealand breached certain copyright rights held by Inverness. From recollection the catalyst for the litigation was MDS having secured the contract for the supply of those tests to PHARMAC[2] at Inverness’ expense.

Inverness asserted that one of the directors of MDS, a Dr Appanna, should be personally liable. The pleading against Dr Appanna was that he had “authorised, directed, counselled and procured” the infringing acts of MDS or, in the alternative, that he had “fronted and/or adopted and made his own” the acts of MDS. This pleading aped the two prevailing tests to establish directorial liability in tort at the time: the “procured or directed” test, and the “making the tortious act his/her own” test.

Before examining those tests, it may be useful to explain that a tort is any civil wrong which gives rise to compensation, normally in the form of unliquidated damages. It’s not based on a breach of contract or trust, but rather on a breach of a duty imposed by law, which duty may arise under statute. That is why all infringements of intellectual property rights are tortious even though most of them are also underpinned by legislation and are also statutory breaches.

The “procured or directed” test

The test, associated with Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd[3] (“Performing Right Society”) is that the director must have expressly or impliedly “procured or directed” the tortious conduct for which the company is liable. The test therefore focuses attention on the relationship between the director’s intention and the tortious conduct. What seems to underlie the test is the notion that companies can engage in tortious conduct only through human beings, and where a particular human is involved and responsible to an appropriate extent, he or she should, as a matter of policy, be liable.

The “procured or directed” test has been applied in Australia in Australasian Performing Right Assoc Ltd v Valamo Pty Ltd [4], Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd[5], Martin Engineering Co v Nicaro Holdings Pty Ltd [6] and Microsoft Corp v Auschina Polaris Pty Ltd.[7]

The English Court of Appeal in C Evans & Sons Ltd v Spritebrand Ltd[8] refused to strike out a pleading that a director had “authorised, directed and procured” a breach of copyright subject to two qualifications: first, it acknowledged Aitkin LJ’s statement in Performing Right Society could not be regarded as “a precise and unqualified statement of the principles governing a director’s personal liability for his company’s torts”[9] and, secondly, the Court of Appeal considered that, where a particular state of mind or knowledge on the part of a defendant is a necessary element of the alleged wrong, the state of mind or knowledge of the director who authorised, directed or procured the conduct must also be relevant.

The “making the tortious act his own” test

This test was first laid down by the Canadian Federal Court of Appeal in Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc[10] (“Mentmore”) and was cited with approval by Nourse J of the English High Court of Justice in White Horse Distillers Ltd v Gregson Associates Ltd [11] and Beazley J of the Federal Court of Australia in King v Milpurrurru.[12]

Mentmore concerned the question of whether two directors who had caused their company to infringe a patent but who had acted recklessly or without an intention to infringe should be held liable for the patent infringement. The Federal Court of Appeal of Canada held that the directors were not liable. Le Dain J, who delivered the judgment of the Court, approached the matter on the basis that:

What is involved here is a very difficult question of policy. On the one hand, there is the principle that an incorporated company is separate and distinct in law from its shareholders, directors and officers, and it is in the interests of the commercial purposes served by the incorporated enterprise that they should as a general rule enjoy the benefit of the limited liability afforded by incorporation. On the other hand, there is the principle that everyone should answer for his tortious acts. The balancing of these two considerations in the field of patent infringement is particularly difficult.[13]

Le Dain J described the kind of participation in the acts of the company that should give rise to personal liability as “an elusive question”[14] but suggested that what is required is “that degree and kind of personal involvement by which the director or officer makes the tortious act his own.” While this is “obviously a question of fact to be decided on the circumstances of each case” he said:

… in my opinion there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of the manufacturing and selling activity of the company in the ordinary course of his relationship to it but the deliberate, willful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it.[15]

Le Dain J added that the “precise formulation of the appropriate test is obviously a difficult one” and that “[r]oom must be left for a broad appreciation of the circumstances of each case to determine whether as a matter of policy they call for personal liability.”[16]

In White Horse Distillers Ltd v Gregson Associates Ltd (“White Horse”) Nourse J carefully considered the decision in Mentmore which he regarded as authority for the following principle:

Before a director can be held personally liable for a tort committed by his company he must not only commit or direct the tortious act or conduct but he must do so deliberately or recklessly and so as to make it his own, as distinct from the act or conduct of the company.[17]

Nourse J expressed the view that this test “correctly represents the law of England.”[18]

The test for liability applied in White Horse was in turn summarised by Beazley J in King v Milpurrurru as follows:

A director will be liable if, having the requisite mental element prescribed by s 37, he commits or directs the commission of a tort, deliberately or recklessly, so as to make the tortious conduct his own.[19]

The test, particularly as expressed by Nourse J in White Horse, raises difficulties. Following the passage cited above his Honour added:

It is unnecessary for him to know, or have the means of knowing, that the act or conduct is tortious. It is enough if he knows or ought to know that it is likely to be tortious. The facts of each case must be broadly considered in order to see whether, as a matter of policy requiring the balancing of two principles of limited liability and answerability for tortious acts or conduct, they call for the director to be held personally liable.[20]

The reference to subjective concepts such as acting deliberately and recklessness is troublesome in light of the fact that the director need not have known that the conduct was tortious. Thus, although the test has been consistently followed in Canada, it has not received universal support in England, Australia or New Zealand. For example, in England, White Horse was criticised by the Court of Appeal in C Evans & Sons Ltd v Spritebrand Ltd as being insufficiently qualified.[21] The test was also criticised by the Hong Kong Court of Appeal[22] and the Federal Court of Australia.[23]

In Green Cartridge Co (Hong Kong) Ltd v Canon Kabushiki Kaisha Litton VP suggested that Nourse J may have put the threshold for liability too high and that the words “deliberately or recklessly” should be omitted from Nourse J’s formulation, but added that there must be something more than that the director gave instructions for an act that turned out to be tortious, such as that “he knew that [the act was] likely to be tortious, and nevertheless directed the infringing acts to be performed, making it his own.”[24] In the same decision Mayo JA referred to the test in C Evans & Sons Ltd v Spritebrand Ltd as follows:

From these passages it would appear that a director can be held responsible for the acts of the company by virtue of his or her close involvement in a tortious activity. However, where it can be established that there is a reckless element in the acts, it is far more likely that the director will be held liable.[25]

In Microsoft Corp v Auschina Polaris Pty Ltd (“Microsoft Corp”) Lindgren J of the Federal Court of Australia preferred the “authorised, procured or directed” test as being supported by Australian authority. He set out the following “uncontroversial” propositions concerning the liability of company directors for corporate breaches of copyright:

(1) An infringement of copyright is treated as tortious.

(2) Where copyright is infringed by a corporation, the question of the nature and extent of involvement on the part of a director necessary for him or her to be personally liable in respect of the infringement is not answered by principles dealing with joint tortfeasors, or by the notion of ‘authorisation’ as it is used in the copyright statutes.

(3) The principles governing vicarious liability of an employer for the torts of its employee also do not govern the question.

(4) The holding of an office in a company, such as that of director or even managing director, does not itself suffice to render the office-holder liable.

(5) It is not necessary that the director know that the conduct in question is tortious.

(6) In any particular case it is necessary to assess closely the director’s conduct and its relationship with the tortious conduct for which the company is liable.[26]

I will return to these propositions later in this article.

Inverness

Both parties in Inverness relied upon Microsoft Corp to approach the question of Dr Appanna’s liability on what Woodhouse J described in Inverness as:

…an unstated proposition of law…that, where a corporation has civil liability (in this case for what is effectively a statutory tort), questions whether a director of that corporation is also liable must be decided in accordance with special rules which govern the liability of directors in such cases, but which do not apply to people who are not directors.[27]

Although preferring the “procured or directed” test over the “making the tortious act his own” test, in a surprise to the parties Woodhouse J held that the question of liability of Dr Appanna could be determined simply by applying the provisions of the Copyright Act 1994 (NZ) (“Copyright Act”). Having already concluded that the company, MDS, infringed copyright by importing products and issuing them to the public, his Honour deemed that the liability of Dr Appanna for the actions of the company was best resolved by determining whether he was liable for a separate statutory wrong of infringement by authorising another (i.e. MDS) to issue infringing copies to the public.[28]

His Honour held that because the Copyright Act applies to a corporation, MDS’ act of issuing infringing products to the public could only have occurred as a consequence of authority being given to it by another corporation or by a human. As the Copyright Act did not exclude directors or corporations from liability for authorising another act of infringement by a corporation, Dr Appanna could be held liable. In so finding, his Honour noted that directors of corporations are the humans most likely to give the requisite authorisation.[29]

His Honour queried whether, as a matter of statutory interpretation, a person who is a director should be put in a special category requiring a separate test (i.e. the “procured and directed” or “making the tortious act his own” test) in order to determine authorisation. He concluded that the separate test approach was likely to be contrary to binding principle.[30] The question then was simply whether Dr Appanna had authorised MDS to issue the infringing products to the public and, on the facts of the case, his Honour found tin the affirmative.

Body Corporate 202254 v Taylor

Body Corporate 202254 v Taylor[31] (“Taylor”) was a strike out application against claims in negligence and under the Fair Trading Act 1986 (NZ). The claims were made against Mr Taylor, the director of a building development company which had constructed a 37 unit residential development that later suffered from water leaks. The negligence claim against Mr Taylor was that he was “negligent in his conduct and management of the Sienna Villas development”. While the Court agreed that the negligence claim should not be struck out, it split 4:1 on the question of how liability might arise.

William Young P delivered a joint judgment with Arnold J with which Glazebrook and Ellen France JJ concurred. The staring point was Trevor Ivory v Anderson[32] (“Trevor Ivory”). That was a case involving a raspberry grower who contracted with one-man company Trevor Ivory Limited to advise on removal of weeds from raspberry plants. Mr Ivory recommended “Roundup” – which killed the weeds but also the raspberry plants. With the company in liquidation the grower sued Mr Ivory for giving negligent advice. The Court of Appeal unanimously rejected the claim, primarily on the basis of “disattribution” i.e. if the director’s act can be attributed to the company then it is not the act of the director.

In Trevor Ivory Cooke P saw the claim as an attempt to avoid the principles of limited liability holding:

 …when he formed his company, Mr Ivory made it plain to all the world that limited liability was intended… It seems to me that something special is required to justify [a director assuming personal liability].[33]

While in the same case Hardie Boys J held:

What does run counter to the purposes and effect of incorporation is a failure to recognise the two capacities in which directors may act; that in appropriate circumstances they are to be identified with the company itself, so that their acts are in truth the company’s acts. Indeed I consider that the nature of corporate personality requires that this identification normally be the basic premise and that clear evidence be needed to displace it with a finding that a director is acting not as the company but as the company’s agent or servant in a way that renders him personally liable. …

Essentially, I think the test is, or at least includes, whether there has been an assumption of responsibility, actual or imputed.[34]

The majority in Taylor next referred to a decision of the House of Lords in Williams v Natural Life Foods Limited[35] (“Williams”) in which the House of Lords held a director not to be personally liable for failed franchises.

The majority in Taylor saw four overlapping rationales for the approaches in Trevor Ivory and Williams:

1. the idea of disattribution;
2. the concern that allowing a claim would be erosive of limited liability;
3. a sense that allowing a claim in tort would be inconsistent with the contractual relationship between parties; and
4. an “elements of tort” approach which requires, as a pre-condition of liability, a conclusion that the employee assumed personal responsibility for the relevant conduct with a presumption against that assumption of responsibility where the employee is simply acting on behalf of the company (e.g. the need for “something special”).[36]

The idea of disattribution was dismissed by the majority in Taylor as unconvincing – the majority noting that attribution provides a basis for imposing liability on a company, not conferring immunity on an individual.[37] Moreover, according to the majority, the approach would only apply to directors and senior employees (e.g. those with the power to bind the company) and lead to the perverse result that junior employees might be liable in circumstances where senior employees were not. And, as the majority noted, the House of Lords had firmly laid disattribution to rest in Standard Chartered Bank v Pakistan National Shipping Corporation.[38]

Secondly, the majority in Taylor held that while the concept of limited liability was relevant, it is not decisive, since it serves to limit the financial risk to shareholders to the capital they introduce into the company, not to provide general immunity from tortious liability. According to the majority:

 The critical feature in both Trevor Ivory and Williams is not that companies were involved but rather that the advice (in Trevor Ivory) and the representations (in Williams) were provided on behalf of a principal.[39]

Thirdly, the majority in Taylor held that the fact a tort is committed in performing contractual duties does not mean that the employee does not owe a duty of care. The majority referred to examples in which tort “has to fulfill a gap filling role”[40] when activities are potentially dangerous to life or damaging to property. However the tortfeasor may be able to take advantage of any limitation of liability provisions in the contract between their employer and the plaintiff.

Fourthly, the majority in Taylor held that:

In a situation where assumption of responsibility is an element of tortious liability, an employee who is acting on behalf of a principal can only be liable if there is a personal assumption of responsibility by that employee. Further, picking up points already made, to preserve the existing framework of the law of contracts and the idea that a corporation has a legal identity which is separate from those of the individuals involved in it, considerable caution is required before concluding that an employee has assumed personal responsibility.[41]

The majority cautioned however that Trevor Ivory and Williams have “no application at all to cases in which assumption of responsibility is not an element of the tort, as Standard Chartered Bank demonstrates”.[42]

The majority in Taylor finally set out the most plausible basis on which a claim in negligence might be brought against Mr Taylor:

(a) Mr Taylor’s promotion of himself and his professionalism implied an assumption of responsibility to supervise the development; and

(b) errors in the way in which the project had proceeded would not have occurred had there been (competent) supervision and are evidence of negligence.[43]

Notably, each focuses on ways in which Mr Taylor may have assumed responsibility for the negligent building work. However, as Chambers J noted in his minority judgment in Taylor, assumption of responsibility does not form a part of test for negligence.  This passage unfortunately therefore muddies the otherwise clear statement of the majority in Taylor that Trevor Ivory and Williams have “no application at all to cases in which assumption of responsibility is not an element of the tort”.[44]

In a much simpler minority judgment in Taylor, Chambers J held  “the long and the short of it”[45] was that the damage the appellants had suffered is damage of the kind for which the law of negligence will provide compensation and it makes no difference whether Mr Taylor was employed at the time he allegedly did the careless things giving rise to the cause of action, save that an employer might be vicariously liable for his torts committed in the course of employment.

In an approach that resonated some 16 years later in Lifestyle Equities CV v Ahmed (“Lifestyle Equities”)[46] Chambers J drew a clear distinction between the functions of contact law (in which parties bargain for risk allocation) and tort (in which they do not). According to Chambers J’s decision, when an individual (A) contracts with a company (B), only the company (B) is a party to the contract and only the company is liable. If (A) wants a director (C) to be personally liable, he or she can raise that possibility with the company. If the company (B) or director (C) does not agree, then there is no contract. Alternatively, the director (C) may agree to guarantee the company’s (B’s) performance. Whatever is arranged, it is consensual and everyone knows who is making the promises which form the contract.

Tort however focuses on the natural person who causes the harm. Often the plaintiff does not know the identity of that person. Once they discover who caused the harm they can sue. However confusion may arise where the natural person is an employee. This is because plaintiffs will frequently sue only the employer for vicarious liability because the employer has deeper pockets, is insured, because multiple employees are involved in the loss, or because the plaintiff doesn’t know which employee caused the loss. So, the question of who precisely owed the duty of care is glossed over, even though it will always be the employee’s tort on which the plaintiff sues.

Understanding this, it becomes clear that Taylor, as approached by Chambers J, is not a case involving transferring responsibility from Mr Taylor to the company, but a question of whether there are means by which Mr Taylor can not only share liability with his company, but perhaps also avoid liability altogether. Trevor Ivory has no relevance.[47] Since, according to his Honour’s analysis, the acts of Mr Taylor’s negligence were not performed pursuant to a contract for sale and purchase, or if they were there was no clause excluding Mr Taylor’s negligence, the correct approach was to consider the matter as a simple claim in negligence against Mr Taylor and the cause of action should not be struck out.

While the majority and Chambers J declined to strike out the negligence claim for differing reasons, Taylor clearly serves as clear and binding authority that employees of companies can be personally liable for their tortious acts committed in pursuance of company aims during the course of employment and, according to Chambers J, are the primary tortfeasor being the natural person whose acts or omissions led to the harm in question.[48]

Lifestyle Equities

Some 14 years later, the questioning of whether directors should be put in a special category for intellectual property torts has found support in the UK Supreme Court decision of Lifestyle Equities.[49] Lifestyle Equities involved a clam of trade mark infringement against certain companies and their directors (primarily a Mr Ahmed).

At first instance the companies were found to have infringed the registered trade marks of Lifestyle. Mr Ahmed was found jointly and severally liable for the companies’ acts of infringement – the judge finding it unnecessary to decide whether Mr Ahmed had an improper motive or intention to infringe.[50] Mr Ahmed unsuccessfully appealed to the Court of Appeal[51] and then appealed to the Supreme Court on the basis that the courts below were both wrong to find liability in the absence of any finding that he knew or ought to have known that the companies’ use of the marks infringed Lifestyle’s registered trade marks.

On the question of primary liability, Lord Leggatt, delivering the judgment of the Court, established the following propositions as regards tortious acts committed personally by company employees:

1. Primary liability: There is no general principle of English law – whether of company law, the law of agency, or the law of tort – which exempts a director, acting in that capacity, from ordinary principles of tort liability. Had Mr Ahmed been found to have personally infringed Lifestyle’s trade marks, the fact that he did so in discharging his responsibilities as director (or, for that matter, as employee or agent) of the companies would not have shielded him from liability.[52]
2. Attribution: The rules of corporate attribution do not operate in reverse to cause acts attributed to the company to be treated as if they were not acts of the individual who actually did those acts. It does not follow that, because an act done by a director or other individual is treated as the company’s act for which the company can be held liable, the director is immunised from liability.[53]
3. Company law arguments rejected: Company law does not provide any support for shielding directors from personal liability in tort. The fact that a company is regarded as a separate person does not justify treating a director whose act is attributed to the company as free from personal liability for that act. Rather, the opposite is true. To suggest that directors cannot be personally liable for acts which are regarded in law as acts of the company fails to respect the separate personality of the company.[54]
4. The principle in Said v Butt[55] (“if a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employer and a third person, he does not thereby become liable to an action of tort at the suit of the [third person]”) does not extend to claims against a director or employee for procuring their principal to commit a tort. The reason for the distinction is that, where participants have chosen to cooperate with each other on the basis of a risk allocation expressed in a particular contractual structure, the law of tort will not impose obligations which would circumvent this allocation of risk. The rule in Said v Butt therefore does not apply to civil wrongs which do not depend on any contract or voluntary arrangement between the parties and where liability arises even if they are complete strangers to one another.[56]

Lord Legatt’s rejection of disattribution, his affirmation that employees of companies can and should be personally liable for tortious acts committed in the course of their employment, and distinction between contract (in which parties bargain for risk allocation) and tort (in which they do not) stands on all fours with both the majority and minority in Taylor.

It logically follows that Woodhouse J was correct in Inverness to hold Dr Appanna liable in circumstances where a statue creates an “indirect” form of primary liability such as authorising a breach.[57] This was expressly acknowledged in Lifestyle Equities when addressing the question of whether the standard of knowledge of the primary infringement should apply to all secondary infringements. Lord Legatt held[58] that applying the same standard of knowledge to both parties would be a logical approach if procuring or inducing someone to commit a tort, or participating in a common design to do so, were simply another way of committing a tort. While the characterisation of the parties as joint tortfeasors may encourage such a view – it is not correct. The procurer or participant is not liable because all the elements of the tort are established in relation to them. They are liable even though they do not satisfy all the elements of the tort. Their liability is secondary or accessory because it arises from an act which is connected in some relevant way with the commission of a tort by someone else. There is no logical requirement that any mental element necessary to make them liable should be the same as any mental element required to commit the tort.

The distinction is particularly clear in the case of statutory torts such as patent, copyright or trade mark infringement because the elements of those torts are specified in legislation. There are provisions in some statutes protecting intellectual property rights which create “indirect” forms of infringement.[59] In the hypothetical case of an employee who personally does acts restricted by copyright under the personal supervision and direction of a director of the company, the director would also infringe the copyright by authorising the employee to do those acts. However, where (as in Lifestyle Equities) the statute does not make authorising a restricted act an infringement, a claim against a director who instructs an employee to do such an act must be based on the common law and not on the legislation. It cannot be assumed that because knowledge or its absence is irrelevant to whether an act amounts to a statutory infringement, it is also irrelevant to whether liability as an accessory will arise under the common law. There is no necessary connection between the two.

Accessory liability

In Lifestyle Equities there could be no finding of primary liability against Mr Ahmed, since (as in New Zealand)[60] the statute did not make authorising another to use a registered trade mark an infringement. If Mr Ahmed was to be liable then it could only be on a finding of accessory liability. Lord Legatt engaged in an extensive analysis of accessory liability which included an analysis of many of the authorities cited above from which the following further propositions can be discerned:

5. Case law on liability of directors for company torts: cases such as Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc[61] and MCA Records Inc v Charly Records Ltd[62] which apply an amorphous test based on the “degree and kind of personal involvement” of the director with the acts attributed to the company are not helpful or principled. It is unclear by what criteria the degree and kind of personal involvement are supposed to be judged or how such criteria are to be derived. To say that the involvement must be such that the director “makes the tortious act his own” is ultimately circular: see Fish & Fish Ltd v Sea Shepherd UK.[63] Liability should be decided by applying ordinary principles of the law of tort. However, it is unjust that anyone whose act causes another person to commit a tort should be held jointly liable for the tort as an accessory if the individual was acting in good faith and without knowledge of facts which made the act of the other person tortious.[64]
6. Mental element: As above, a rule that the mental element required for liability as an accessory must mirror that required for primary liability is not “entirely logical.” The procurer or participant is not liable because all the elements of the tort are established in relation to them. They are liable even though they do not satisfy all the elements of the tort. Their liability is secondary or accessory in the  sense that it arises from an act which is connected in some relevant way with the commission of a tort by someone else. There is no logical requirement that any mental element necessary to make them liable should be the same as any mental element which is a constituent of the tort.[65]
7. Procuring a tort: In Lumley v Gye[66] the House of Lords held that liability for inducing a breach of contract is a form of accessory liability, where the primary wrong is breach of contract. There is a subsequent unbroken line of authority recognising that the principle for which Lumley v Gye is authority reaches beyond inducing a breach of contract. However, whether the actionable wrong which the defendant procured is a breach of contract or a tort, what is required is that the defendant acted in a way that was intended to cause another party (the primary wrongdoer) to do an act which the defendant knew was a wrongful act (turning a blind eye being sufficient for this purpose). Further, in accordance with the principle that ignorance of the law is no excuse, liability cannot depend on whether the defendant knows that the act done by the primary wrongdoer is against the law. When courts refer to a requirement of knowledge that an act is wrongful, they must be taken to mean that the defendant must know the essential facts which make the act unlawful. The same applies to references to intention.[67]
8. Common design: In The Koursk[68] all three members of the English Court of Appeal approved the statement in Clerk and Lindsell on Torts, that:

Persons are said to be joint tortfeasors when their respective shares in the commission of the tort are done in furtherance of a common design. … But mere similarity of design on the part of independent actors, causing independent damage, is not enough; there must be concerted action towards a common end.[69]

In Brooke v Bool[70] a Divisional Court applied the principle to extend liability to someone who had not himself committed a tort and in CBS Songs Ltd v Amstrad Consumer Electronics plc[71] the copyright owners sought to rely on this principle by advancing an argument that Amstrad was jointly liable on the basis of a common design for infringements of copyright committed by members of the public who used Amstrad tape recorders to copy sound recordings unlawfully. In rejecting this argument, Lord Templeman cited The Koursk and said:

My Lords, joint infringers are two or more persons who act in concert with one another pursuant to a common design in the infringement. In the present case there was no common design.[72]

There was no common design because Amstrad did not act in concert with the purchasers or users of its tape recorders, who decided independently what use they chose to make of the machine and whether to use it for lawful or unlawful purposes.

The doctrine of common design was considered by the Supreme Court in Fish &

Fish Ltd v Sea Shepherd UK.[73] In the decision of the Supreme Court three members of the court – Lord Toulson, Lord Sumption (who was one of the dissenters) and Lord Neuberger – each made observations about joint liability in tort based on a common design. There is no substantive difference between their formulations. To establish that a person (A) is liable as an accessory on this principle, three conditions must be satisfied: first, another person (B) must commit a tort; second, A must have done an act which assisted B to commit the tort; and, third, A’s act must have been done pursuant to a common design between A and B to do the act which constitutes the tort.[74]

9. Procurement v common design: procuring an infringement and participating in a common design are two separate principles of accessory liability on which a person may be held jointly liable with the infringer for damage caused by the infringing acts. A person may procure a tort, such as an infringement of intellectual property rights, by simply, for example, issuing instructions on which others subsequently act, without acting in concert to a common end. As well as being insufficient, procuring the commission of a tort is also unnecessary to found liability based on a common design. A lesser causal contribution will suffice. As was held in Fish & Fish,[75] relatively minor assistance is sufficient provided it is more than minimal or trivial.[76]
10. What knowledge is required?: to be liable as an accessory for procuring a tort, a person must know the essential facts which make the act done wrongful, even if the tort is one of strict liability. Only if all the features of the act done which make it, for example, an infringement of a patent or copyright or trade mark are known to a defendant whose conduct has procured the infringement, will the defendant be jointly liable with the actual infringer.[77]
11. Summary:[78]
    1. There is a general principle of the common law that a person who knowingly procures another person to commit an actionable wrong will be jointly liable with that other person for the wrong committed. The liability of the procurer is an accessory liability. Where the primary wrong is a breach of contract, this accessory liability takes the form of a distinct tort. Where the primary wrong is a tort, however, there is no need to posit a separate tort of procuring another person to commit a tort. Where the general principle applies, the procurer is made jointly liable for the tort committed by the primary wrongdoer.
    2. There is a further, distinct principle of accessory liability by which a person who assists another to commit a tort is made jointly liable for the tort committed by that person if the assistance is more than trivial and is given pursuant to a common design between the parties. On the facts of a particular case both principles may be engaged. But on the present state of the law, assistance which falls short of procuring the primary wrongdoer to commit the tort cannot lead to liability unless it is given pursuant to a common design.
    3. Although procuring a tort and assisting another to commit a tort pursuant to a common design are distinct bases for imposing accessory liability, they must operate consistently with each other and such that the law of accessory liability in tort is coherent. Considerations of principle, authority and analogy with principles of accessory liability in other areas of private law all support the conclusion that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. This is so even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge.

Returning to the facts of the case, his Lordship was able to resolve the appeal relatively quickly. His Lordship held[79] that to establish infringement under s.10(3) the following facts would need to be proved:

• that the claimant’s mark has a reputation in the United Kingdom,
• that the use of the sign complained of:
  • (a) gives rise to a link between the sign and the claimant’s mark in the mind of the average consumer; and
  • (b) gives rise to one of the three types of injury specified in the section; and
  • (c) is without due cause.

Since it was not put to Mr Ahmed in cross-examination that he or his companies deliberately intended to take advantage of the distinctive character or repute of Lifestyle’s trade marks, since there was no finding to the effect that Mr Ahmed knew, or ought to have known, that Lifestyle’s reputation would be adversely affected by the use of the offending signs, and since there was no finding that Mr Ahmed realised (or should have realised) that the companies’ use of the offending sign was without due cause, Mr Ahmed was not found to have the necessary knowledge required to make him jointly liable for the infringements on either principal or accessory liability, and the appeal was successful.[80]

Where to with Microsoft Corp?

As set out above, in Microsoft Corp Lindgren J set out several “uncontroversial” propositions concerning the liability of company directors for corporate breaches of copyright. It is debatable that these remain uncontroversial in light of Lifestyle Equities. Proposition (2)[81] is clearly wrong. Lord Leggatt expressly confirmed (as did the New Zealand Court of Appeal in Taylor) that where the statute provides for “indirect” primary liability as in, for example, “authorising” a breach of copyright, a director cannot claim safe harbour because his or her actions were on behalf of the company. Similarly, his Lordship expressly confirmed that both primary and accessory liability should be determined according to ordinary principles – there being no special category for company directors.

Some caution should also be exercised with respect to proposition (3)[82] since, although the principles of vicarious liability do not govern the question of liability, they are relevant to show that there is not a disattribution to the employee/director where his or her acts create a vicarious liability in the employer[83]

The suggested focus (at proposition (6))[84] on the conduct of the director is very similar to both the “procured or directed” test and the approach of Woodhouse J to director liability in Inverness. However, in light of Lifestyle Equities, the conduct of the director is only relevant to establish his or her actual (or, on the balance of probabilities, likely) knowledge of the essential features of the tort – a point implicitly supported by proposition (5)[85] which correctly confirms that a secondary infringer need not have knowledge of the law to be found liable.

This need not to show legal knowledge was explicitly confirmed by Lord Legatt in Lifestyle Equities.[86] His Honour held that when Lord Sumption and Lord Neuberger referred in Fish & Fish to a common design “to commit a tort” or knowledge of an intention “to commit tortious acts” there are three basic possibilities:

1. One is that the assistant (A) must know that the act intended to be done by the primary actor (B) is unlawful under the law of tort.
2. A second possibility is that it is sufficient that A knows the essential facts which make B’s act tortious.
3. The third possibility is that all that A needs know is that B intends to do an act which is in fact a tort, and that knowledge of the essential facts which make B’s act tortious is not required.

The first of these approaches was held to be unsound by Lord Legatt because a person cannot be allowed to escape liability by relying on ignorance of the law. His Honour found support for that conclusion in statements of Lords Neuberger and Sumption in Fish & Fish that a defendant will be liable as a joint tortfeasor if he has assisted another person, pursuant to a common design “to do an act which is, or turns out to be, tortious”[87] and:

… it is unnecessary for a claimant to show that the defendant appreciated that the act which he assisted pursuant to a common design constituted, or gave rise to, a tort or that he intended that the claimant be harmed.[88]

According to his Honour Lord Legatt, Lord Neuberger was also making the further point that it is not necessary to show an intention to injure the claimant. Lord Neuberger in Fish & Fish said that the fact that the parties’ acts were not targeted at a person identified in advance would not assist the defendant; “[n]or would the fact (if it were a fact) that the defendant did not appreciate that the acts in question would be tortious.”[89]

Commentary

In Lifestyle Equites Lord Leggatt rejected the Mentmore test as being unhelpful, unprincipled and circular because it focusses on an:

amorphous test based on the “degree and kind of personal involvement” of the director with the acts attributed to the company. It is unclear by what criteria the degree and kind of personal involvement are supposed to be judged or how such criteria are to be derived.[90]

Presumably for similar reasons, his Lordship found the “procured and directed” test unsatisfactory, citing with apparent approval[91] JR Consulting & Drafting Pty Ltd v Cummings[92] which sought to reconcile the Mentmore test with a line of Australian authority derived from the judgment of Atkin LJ in Performing Right Society which asks whether the director has “directed or procured” the infringing acts of the company. In JR Consulting the Court held:

We suspect that there is ultimately not a great deal of difference between these lines of authority as the director must be shown to have directed or procured the tort and the conduct must, clearly enough, go beyond causing the company to take a commercial or business course of action or directing the company’s decision-making where both steps are the good faith and reasonable expression of the discharge of the duties and obligations of the director, as a director. The additional component required is a ‘close personal involvement’ in the infringing conduct of the company and inevitably the quality or degree of that closeness will require careful examination on a case by case basis.[93]

Lord Leggatt’s proposed resolution is to formulate a test which focuses on the defendant’s proven knowledge of the “essential features” of the tort.

The application of that test in a trade mark context is seen in his Lordship’s conclusion that Mr Ahmed’s appeal should succeed because it had not been established he was aware of the material facts necessary to make out a claim for trade mark infringement under the United Kingdom legislation. Further insight as to how the test might be applied in a copyright infringement case is provided in a discussion of what earlier authorities mean by “intent” and “knowledge” for the purposes of proving that a party had procured an infringement. In relation to CBS Songs Ltd v Amstrad Consumer Electronics plc Lord Leggatt held:

When courts refer to a requirement of knowledge that an act is wrongful, they must generally be taken to mean, not that knowledge of the law is required, but that the defendant must know the essential facts which make the act unlawful. The same applies to references to intention. Lord Templeman’s reference to a defendant who “intends and procures … that infringement shall take place” should be understood in this sense. Lord Templeman should not be taken to mean that the defendant must have a sufficient knowledge of copyright law to know that the act which he intends to bring about will be a breach of copyright; only that the defendant must know the facts which make that act a breach of copyright. (Emphasis added )[94]

Further, according to Lord Leggatt, when Chadwick LJ adopted and relied on Lord Templeman’s statement of principle in MCA Records, he can be taken to have assumed that it was sufficient to make Mr Young liable for procuring infringements of copyright because “it was Mr Young’s purpose and intent, in doing what he did, that the Chess recordings should be copied and marketed through [the company]”.[95] That reasoning, according to Lord Leggatt, was incorrect: [96]

Applying the principle of accessory liability stated by Erle J in Lumley v Gye, it was not enough that Mr Young knew and intended that the relevant recordings should be copied and issued to the public. It was also necessary to establish that Mr Young knew (or deliberately turned a blind eye to) all the essential facts which made copying and marketing the recordings a breach of copyright. Those facts included the fact that the company controlled by Mr Young did not either own[97] the copyright or have a licence from the owner to copy and issue copies to the public of the relevant recordings.

On the facts of MCA Records, this requirement was satisfied for most of the relevant period during which the infringements took place. The judge was, however, prepared to accept that for the first two years of this period Mr Young believed that the company which he controlled had the right to exploit the recordings. However, once a court in California had given a judgment making it clear that the company had no such right, Mr Young’s conduct regarding the exploitation of the recordings was deemed “about as flagrant as it could be”. Of this, Lord Leggatt observed:[98]

Had the point been taken in MCA Records, the proper conclusion on these findings was therefore that, for the initial two-year period, Mr Young lacked the necessary state of mind to be liable for procuring infringements of the claimant’s copyright.

Importantly, in neither enquiry is knowledge of the existence of the right which is alleged to have been infringed stated as one of the requirements for accessory liability – although in each case it can perhaps be inferred since Mr Ahmed was found to be on notice of Lifestyle’s trade mark registration from at least 2014[99] and in MCA Records it is implicit from Mr Young’s belief that for the first two years he had the right to exploit the recordings that there were underlying rights which were exercised to grant him that right (e.g. copyright which could be licensed).

More problematic is the application of the test to cases where the infringement is more nuanced than presented in the two examples. For example, in MCA Records there was no question that the recordings were copies and no evaluative judgment was required to determine that fact. But what of the case in which the considerations are more finely balanced? Is it sufficient that a party appreciates a risk of an item being a copy, or can infringement be merely a possibility? And, if the latter, how slim a possibility before a finding of accessory liability becomes unreasonable?

Moreover, it is unclear how the test will be applied in the case of accessory liability for patent infringement (e.g. circumstances which fall outside indirect liability for authorising an infringement but which meet the threshold for procurement or common design)[100] for which knowledge of the existence of the patent is not an element of infringement – as opposed to copyright for which there must be a finding of actual copying via a causal connection. While it is clear that proving the requisite knowledge of the “essential facts” which make the conduct tortious in a patent infringement case will still be needed to rest accessory liability, to what extent does the scope of monopoly under the patent inform that assessment? Putting it another way, is mere knowledge of the existence of a patent combined with steps to put competing products in the market sufficient? Or should the consideration also require an understanding of the level of risk – bearing in mind that the assessment of risk necessarily involves questions of law for which ignorance was held by his Lordship not to provide a defence.

Finally, by omitting any enquiry into the genuineness of the party’s actions / motivations, the test seems to overlook what Lord Leggatt had earlier described (with approval) as the underlying sentiment of cases like Mentmore that:[101]

It seems unjust that anyone whose act causes another person to commit a tort should be held jointly liable for the tort as an accessory if the individual was acting in good faith and without knowledge of facts which made the act of the other person tortious. (Emphasis added).

While Lifestyle Equities apparently provides greater clarity in this area, in practice one suspects that the factors relied upon by the Court to establish knowledge of the “essential facts” of the tort will be the same factors previously relied upon to rest liability under the Mentmore and “procured and directed” tests. At the end of the day, it is difficult to resist the proposition that the following passage in Spritebrand[102] remains apposite:

[A]t least in some cases, broad considerations of policy may be material in deciding on which side of the line [the director’s] participation fell. If there has been no ‘knowing, deliberate, willful quality’ in his participation, the court may naturally be more reluctant to hold the director personally liable.

Such an approach appeals to notions of good faith which Lord Leggat expressly confirmed should form part of the enquiry, but of which he then then seemed to lose sight.

Conclusion

Of course, this is precisely how Woodhouse J approached the matter in Inverness, his Honour relying upon the same finding of facts to establish statutory authorisation[103] and to establish that Dr Appanna procured and directed the infringing acts of MDS.[104]. Even though Inverness was 15 years ago, the approach of the Court was entirely consistent with Lord Leggat’s conclusions in Lifestyle Equities, both on the issue of whether a director’s liability can be assessed on an orthodox enquiry of whether he or she authorised the copyright infringement, or in assessing whether the director was aware of the “essential features” of the tort for the purposes of accessory liability. At least in New Zealand, Lifestyle Equities does not really change the destination, but it does provide further certainty as to the road that needs to be travelled to reach it.

[1] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14.

[2] PHARMAC administers the Pharmaceutical Schedule in New Zealand. This lists all the pharmaceuticals that are publicly funded in New Zealand. PHARMAC therefore ensures the supply of pharmaceuticals in New Zealand by being the predominant purchaser. It purchases pharmaceuticals for supply across New Zealand and allocates them to the various District Health Boards (“DHBs”) and pharmacies. In order to provide a supply of pharmaceuticals within its budget, PHARMAC negotiates to secure favourable pricing. It promotes competition amongst pharmaceutical companies. When a pharmaceutical product is covered by a patent, PHARMAC engages in negotiation with the entity that owns the patent. Once a pharmaceutical is no longer protected by a patent, PHARMAC seeks tenders for generic versions of the product.

[3] Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1,13–15 (Aitkin LJ).

[4] Australasian Performing Right Assoc Ltd v Valamo Pty Ltd (1990) 18 IPR 216.

[5] Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 5 IPR 213, 240–241.

[6] Martin Engineering Co v Nicaro Holdings Pty Ltd (1991) 100 ALR 358.

[7] Microsoft Corp v Auschina Polaris Pty Ltd (1996) 71 FCR 231.

[8] C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317.

[9] C Evans & Sons Ltd v Spritebrand Ltd [1985[ 1 WLR 317, 329.

[10] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195.

[11] White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61.

[12] King v Milpurrurru (1996) 66 FCR 474; [1996] FCA 1381.

[13] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195, 202.

[14] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 19, 203.

[15] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195, 204 205.

[16] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195, 205.

[17] White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61,91.

[18] White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 6, 92.

[19] King v Milpurrurru [1996] FCA 1381 at [54].

[20] White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61, 91.

[21]  C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317.

[22] Green Cartridge Co (Hong Kong) Ltd v Canon Kabushiki Kaisha (1996) 34 IPR 614.

[23] Microsoft Corp v Auschina Polaris Pty Ltd (1996) 71 FCR 231.

[24] Green Cartridge Co (Hong Kong) Ltd v Canon Kabushiki Kaisha (1996) 34 IPR 614, [82].

[25] Green Cartridge Co (Hong Kong) Ltd v Canon Kabushiki Kaisha (1996) 34 IPR 614, [203].

[26] Microsoft Corp v Auschina Polaris Pty Ltd (1996) 71 FCR 231,283, citing in part WEA International Inc v Hanimex Corp Ltd (1987) 17 FCR 274.

[27] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 at [283].

[28] Section 16 Copyright Act 1994 (NZ) provides:

 (1) The owner of the copyright in a work has the exclusive right to do, in accordance with sections 30 to 34, the following acts in New Zealand:

(a) to copy the work:

(b) to issue copies of the work to the public, whether by sale or otherwise:

(c) to perform the work in public:

(d) to play the work in public:

(e) to show the work in public:

(f) to communicate the work to the public:

(g) to make an adaptation of the work:

(h) to do any of the acts referred to in any of paragraphs (a) to (f) in relation to an adaptation of the work:

(i) to authorise another person to do any of the acts referred to in any of paragraphs (a) to (h).

 [29] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14, [288].

[30] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14, [290] citing Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 (CA); Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830; and Standard Chartered Bank v Pakistan Shipping Corp (Nos 2 & 4) [2002] UKHL 43, [2003] 1 AC 959.

[31] Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 (CA).

[32] Trevor Ivory v Anderson [1992] 2 NZLR 517.

[33] Trevor Ivory v Anderson [1992] 2 NZLR 517, 524.

[34] Trevor Ivory v Anderson [1992] 2 NZLR 517, 526-527.

[35] Williams v Natural Life Foods Limited [1998] 1 WLR 83.

[36] Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 (CA), [29].

[37] Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 (CA), [30].

[38] Standard Chartered Bank v Pakistan National Shipping Corporation [2002] UKHL 43; [2003] 1 AC 959.

[39] Body Corporate 202254 v Taylor [2008] NZCA 317, [31].

[40] Body Corporate 202254 v Taylor [2008] NZCA 317, [32].

[41] Body Corporate 202254 v Taylor [2008] NZCA 317, [33].

[42] Body Corporate 202254 v Taylor [2008] NZCA 317, [34(b)].

[43] Body Corporate 202254 v Taylor [2008] NZCA 317, [43].

[44] Body Corporate 202254 v Taylor [2008] NZCA 317, [34(b)].

[45] Body Corporate 202254 v Taylor [2008] NZCA 317, [125].

[46] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297.

[47] Body Corporate 202254 v Taylor [2008] NZCA 317, [136].

[48] Body Corporate 202254 v Taylor [2008] NZCA 317, [132].

[49] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297.

[50] As those matters were not relevant to the strict liability under the relevant section of the Act.

[51] [2021] EWCA Civ 675.

[52] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [33].

[53] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [34].

[54] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [37]-[40].

[55] Said v Butt [1920] 3 KB 497.

[56] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [45]-[63].

[57] Which in New Zealand is a feature of both the Copyright Act (see ss.16(1)(i) and 29) and Patents Act 2013 (NZ) (see ss.18(1) and 140).

[58] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [92]-[95].

[59] For example, under section 16(2) of the Copyright, Designs and Patents Act 1988 (UK) copyright in a work is infringed by “a person who without the licence of the copyright owner does, or authorises another to do, any of the acts restricted by the copyright” (emphasis added). The acts restricted by copyright are specified in section 16(1).

[60] Although s.10(1)(b) Trade Marks Act 2002 (NZ) confers on a registered proprietor the right to authorise others to use the registered mark, the scheme of the infringement provisions of the Act is such that authorisation does not give rise to primary liability.

[61] Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195.

[62] MCA Records Inc v Charly Records Ltd [2002] FSR 26.

[63] Fish & Fish Ltd v Sea Shepherd UK [2015] UKSC 10; [2015] AC 1229, [59] (Lord Neuberger of Abbotsbury).

[64] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [64]-[85].

[65] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [86]-[95].

[66] Lumley v Gye (1853) 2 E & B 216; 118 ER 749.

[67] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [100]-[108].

[68] The Koursk [1924] P 140.

[69] W Wyatt-Paine, Clerk and Lindsell on Torts, (Sweet & Maxwell, 7th ed, 1921) 59-60.

[70] Brooke v Bool [1928] 2 KB 578.

[71] CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] AC 1013.

[72] CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] AC 1013,1057.

[73] Fish & Fish Ltd v Sea Shepherd UK [2015] UKHL 10; [2015] AC 1229.

[74] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297,  [21] (Lord Toulson), [37] (Lord Sumption), [35] (Lord Neuberger).

[75] See Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [ 57] (Lord Neuberger).

[76] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [120] and [122].

[77] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [126]-[134].

[78] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [135]-[137].

[79] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [140].

[80] Albeit not for the reasons advocated by Mr Ahmed’s counsel.

[81] “(2) Where copyright is infringed by a corporation, the question of the nature and extent of involvement on the part of a director necessary for him or her to be personally liable in respect of the infringement is not answered by principles dealing with joint tortfeasors, or by the notion of ‘authorisation’ as it is used in the copyright statutes.”

[82] “(3) The principles governing vicarious liability of an employer for the torts of its employee also do not govern the question.”

[83] On this point see the discussion in Chambers J’s dissenting judgment in Taylor and Lifestyle Equites at [34]-[36] as follows:

34. In the terminology coined by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, the rules of law that determine which acts of individuals are attributed to a company are known as “rules of attribution”. These rules comprise what Lord Hoffmann called the company’s “primary” rules of attribution contained in its constitution and implied by company law, as well as “general” rules of attribution which apply equally to living persons: in particular, general principles of agency and vicarious liability. In some contexts, “special” rules of attribution apply: see pp 506-507.
35. These rules of attribution do not, however, operate in reverse to cause acts attributed to the company to be treated as if they were not acts of the individual who actually did those acts. It does not follow that, because an act done by a director or other individual is treated as the company’s act for which the company can be held liable, the director is immunised from liability. As numerous commentators have pointed out, such reasoning is fallacious: see Peter Watts, “The Company’s Alter Ego – An Impostor in Private Law” (2000) 116 LQR 525; Robert Flannigan, “The Personal Tort Liability of Directors” (2002) 81 Canadian Bar Review 247; Neil Campbell and John Armour, “Demystifying the Civil Liability of Corporate Agents” (2003) 62 CLJ 290; Stefan Lo, “Liability of Directors as Joint Tortfeasors” [2009] JBL 109; Stefan Lo, “DisAttribution Fallacy and Directors’ Tort Liabilities” (2016) 30 Australian Journal of Corporate Law 215. In some of these articles the fallacy has been called the “disattribution fallacy”
36. Employees who commit torts in the course of their employment for which their employer is vicariously liable are not thereby freed from personal liability. Indeed, the employer in such a case can claim an indemnity from the employee: Lister v Romford Ice & Cold Storage Co [1957] AC 555. Similarly, agents are in general personally liable for torts and other civil wrongs committed while acting on behalf of their principal, whether or not they were acting within the scope of their authority: see Bowstead & Reynolds on Agency, 23rd ed (2024), para 9-115 et seq, article 113 (and cases cited). It is not obvious why directors should enjoy privileged treatment not accorded to other agents or employees of a company.

[84] “(6) In any particular case it is necessary to assess closely the director’s conduct and its relationship with the tortious conduct for which the company is liable.”

[85] “(5) It is not necessary that the director know that the conduct in question is tortious.”

[86] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [126]-[129].

[87] Fish & Fish Ltd v Sea Shepherd UK [2015] UKHL 10; [2015] AC 1229, [37].

[88] Fish & Fish Ltd v Sea Shepherd UK [2015] UKHL 10; [2015] AC 1229, [60].

[89] Fish & Fish Ltd v Sea Shepherd UK [2015] UKHL 10; [2015] AC 1229, [66].

[90] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [82].

[91] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [72].

[92] JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20, 329 ALR 625, 116 IPR 440.

[93] JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20 [350] , 329 ALR 625, 116 IPR 440.

[94] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [108].

[95] MCA Records Inc v Charly Records Ltd [2002] FSR 26, [36] (see also [61]).

[96] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [109]

[97] MCA Records Inc v Charly Records Ltd [2002] FSR 26, [23].

[98] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [110].

[99] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [141].

[100] As was held in Fish & Fish Ltd v Sea Shepherd UK [2015] UKHL 10; [2015] AC 1229 relatively minor assistance may be sufficient provided it is more than minimal or trivial.

[101] Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2024] 2 WLR 1297, [85].

[102] C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317, 331.

[103] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14, [292].

[104] Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14, [298]-[300].

*This article was originally published in Issue 141 Intellectual Property Forum The Journal of the Intellectual Property Society of Australia and New Zealand*

About the author:

Ian Finch is a partner in the litigation and commercial team of James & Wells. Ian is recognised as one of New Zealand’s most influential leaders in intellectual property. He has extensive experience advising clients in the filing, prosecution, and enforcement of their innovation at all levels and across a range of industries, particularly in construction, manufacturing, electrical engineering, animal health, and medical devices. With an extensive practice in a broad range of IP, Ian has been recognised as a leader by many influential publications and has received accolades for expertise in enforcement and litigation by: Intellectual Asset Management (IAM) Top 1000 Patent Attorneys (Gold ranking) (2017-2023), IAM’s Global Leaders (2021-2023), Best Lawyers 2024, World Trade Mark Review 1000, Legal 500 (Tier 1), Managing IP Stars (2018-2024).