Nanjing Automobile (Group) Corporation & Ors v MG Sports and Racing Europe Ltd & Anor [2010] EWHC 270 (Ch)

Case No HC08C02541[2010] EWHC 270 (Ch)IN THE HIGH COURT OF JUSTICECHANCERY DIVISION(INTELLECTUAL PROPERTY)Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 19 February 2010
Before
SIR WILLIAM BLACKBURNE(Sitting as a Judge of the High Court)
Between
(1) NANJING AUTOMOBILE (GROUP) CORPORATIONClaimants(2) NANJING AUTOMOBILE CORPORATION (UK) LIMITEDClaimant(3) MG MOTOR UK LIMITEDClaimant(1) MG SPORTS AND RACING EUROPE LIMITEDDefendants(2) WILLIAM JAMES RILEYDefendant
Ian Purvis QC (instructed by Pinsent Masons) for ClaimantsMark Engelman (instructed by Norton Rose) for First Defendant (and by Robert Brand & Co) for the Second DefendantHearing Hearing dates: 8 to 11 December 2009
JudgmentSir William Blackburne :Introduction
[1]This is the trial of an action brought to restrain trade mark infringement and passing off. It concerns the very well known MG mark.[2]The first claimant (“NAC China”) is a Chinese company. By an agreement dated 22 July 2005 (“the 2005 Agreement”) made with MG Rover Group Limited and Powertrain Limited and their respective administrators, NAC China acquired, together with other items, most of the assets of the business of vehicle development, manufacture, sale and distribution then carried on by MG Rover Group. Among the assets so acquired were all the rights to a very large quantity of trade marks used in connection with MG Rover Group’s business. They included various letter marks and device marks (or logos) associated with the famous MG sports car in the UK. The letter marks are of the letters MG. The logo marks with which these proceedings are concerned consist of an octagonal-shaped border within which are the letters MG. There are a number of registrations both of the letter mark and of the octagonal-shaped logo. Except to note that there were (and continue to be) both UK and Community Trade Mark (“CTM”) registrations of both and that the classes and matters in respect of which the registrations subsist include cars and parts and fittings for cars (and for services connected with them), it is not necessary to distinguish between the various registrations. A very substantial goodwill and reputation subsists in the marks in question. There is no issue about that: it is admitted in the defence. NAC China is registered as the proprietor of the marks. Its entitlement to be registered as such is very much in issue in this action.[3]The second claimant is a subsidiary of NAC China. The third claimant is a subsidiary of the second claimant. The second and third claimants are licensees of NAC China under the MG marks. Except as mentioned in this judgment it is not necessary to distinguish between the three claimants. For convenience I shall refer to them collectively as NAC.[4]The first defendant, MG Sports & Racing Europe Limited (“SREL”), was incorporated in this country in January 2007. It carries on business as a manufacturer and supplier of cars. The beneficial ownership of its modest issued share capital and the make-up of its board of directors are far from clear. It is not in dispute, however, that its moving spirit, managing director and majority shareholder is the second defendant, a great-grandson of the William Riley who founded the Riley Cycle Company which later became the Riley Motor Company. Like his forebear Mr Riley is a sports car enthusiast. He has had very many years of experience in the car industry, initially as a design engineer and later in various capacities on the automotive engineering side.[5]This dispute is over the activities of SREL in making and selling cars using signs depicting the letters MG and MG X POWER and the octagonal-shaped MG logo. It is not in dispute that SREL is doing so and intends, unless restrained, to continue to do so. SREL claims to be entitled to do so. It bases its entitlement on its purchase of certain assets from MG Rover Group (by then in liquidation) and MG Sport and Racing Limited (“SRL”), a company (also in liquidation) in the same group as MG Rover Group, under an agreement dated 27 June 2007 (“the 2007 Agreement”) to which the respective liquidators were also parties. It is to be noted that SREL’s name is prefixed with the letters MG. Among the relief claimed by NAC is an order that SREL change its name at Companies House to one which does not include the MG mark. By amendment there is a further head of relief, namely that SREL and Mr Riley remove all references to MG on their website and take all necessary steps to transfer into the name of NAC China the domain name <mg-x-power.com> and any other domain name which includes the letters MG.[6]The principal relief claimed by NAC in these proceedings, which were issued on 3 September 2008, is an injunction to restrain the two defendants from passing off any motor vehicles or articles associated with motor vehicles or any business trading in the field of such vehicles or articles as and for NAC’s goods or business or from infringing the UK and Community trade marks identified in the schedule to the particulars of claim, in each case by using the mark MG whether on its own or in conjunction with X POWER or the MG logo or any other mark confusingly similar to the MG letter mark or the MG logo. Orders for delivery up of infringing materials (or, in the case of vehicles to which any offending mark is applied, obliteration under oath of the mark or marks) and an inquiry as to damages, alternatively an account of profits, together with payment are also sought.[7]Mr Riley is joined as a co-defendant on the ground that he has procured SREL to carry on the activities of which NAC complains, indeed that SREL is no more than the means by which Mr Riley chooses to conduct such activities.[8]Not only do the defendants strongly defend NAC’s claims – and assert their entitlement to do what NAC complains that they should not – but they counterclaim for orders revoking thirty-one MG (or related) registrations in NAC’s name as listed in the schedule to the amended defence and counterclaim. They seek rectification of the UK and CTM Registers accordingly. They do so whether or not they are able to establish that the 2007 Agreement was effective to pass to SREL the right to use the MG X POWER trade mark (which they claim it did). The basis for this bold counter-attack is said to be the consequence of the use made by NAC of the marks so scheduled and of their use (as the defendants allege) at the same time by MG Rover Group and/or SRL (when in administration) in connection with the business and assets later sold to SREL by the 2007 Agreement. The allegation is that “in consequence of the use made of [them] in relation to the goods and services for which they have been registered, each and every one of them is likely to mislead the public”. Revocation is sought under section 46(1)(d) of the Trade Marks Act 1994 (“the Act”) in the case of the UK trade marks and under articles 50(1)(c) and 71(b) of Council Regulation 40/94 of 20 December 1993 (“the Regulation”) in the case of the CTMs. Excepted from the list are the UK and Community trade mark registrations of MG X POWER. As to these, the defendants counterclaim for an order rectifying the registers to remove NAC China’s name as the proprietor of them.[9]So much by way of introduction. Unless otherwise stated, references in this judgement to sections are to sections of the Act and references to articles are to articles of the Regulation.

History of the marks

[10]I can deal with this fairly shortly.[11]The letters MG originally stood for “Morris Garages”, the business established in Oxford by William Morris, later Viscount Nuffield, in the early years of the last century. By 1913 the business had taken on motor manufacturing when the first Morris car went into production at Cowley near Oxford. By 1924 or so, sports cars bearing the MG mark and the MG logo were being produced and sold in this country. In 1927 Morris Garages Limited was incorporated. It acquired all the assets, business and trade marks of the original Morris Garages. The business moved to Abingdon and at about the same time MG Car Company Limited was incorporated. In 1930 it acquired all the assets and goodwill of the business. By the mid-1930s the MG brand had become a celebrated sports car in this country and beyond. In 1953 the business, with all its goodwill, assets and trade marks, was acquired by the British Motor Corporation Limited. Thirty years later, after various vicissitudes in the fortunes of the MG sports car in particular and of the wider company generally, production of the MG sports car was taken up by Austin Rover Group Limited which acquired by assignment the trade marks, along with the goodwill, of the MG marks. In 1990 Austin Rover Group Limited assigned all the MG trade mark registrations, with goodwill, to Rover Group Limited. Four years later, the German company, Bayerische Motoren Werke AG (popularly known as BMW) acquired the shares in Rover Group Limited. The following year, a new sports car model, the MGF went into production and sold well. April 2002 saw the construction of the 1.5 millionth MG sports car since production of the MG brand had begun in 1924.[12]The year 2000 witnessed another major change in organisation. Techtronic (2000) Limited (“Techtronic”), a company owned by four businessmen (known popularly as the Phoenix Consortium), acquired the share capital of Rover Group Limited, including the various MG trade marks. Another company called Phoenix Venture Holdings Limited (“PVH”) became Techtronic’s holding company and Rover Group Limited changed its name to MG Rover Group Limited. At the same time, October 2000, a subsidiary of PVH was incorporated (company 04084371) to undertake motor sport and similar activities using the brand name MG X POWER. In January 2001 its name was changed to MG Sport and Racing Limited. In early 2001 another company within the Phoenix Group was incorporated (company 04155563) to acquire all the intellectual property rights used in the design, development, sale and marketing of a car called the Mangusta which was being developed in Italy and which it was considered could, with some restyling and engineering, be branded with the MG brand to become the new MG sports car. This resulted in the acquisition of these rights by the newly incorporated company in June 2001. Some days later, this company changed its name to MG X80 Limited. X80 was the code name given to the proposed new car and the production car was named MG SV.[13]On 10 April 2001 MG Rover Group, MG X80 Limited’s parent company, filed a CTM application for the MG X POWER mark. On 20 March 2002 it applied, inter alia, in the UK (No. 2296016) for registration of that mark. It became registered as owner of that mark with effect from that date. In April 2002 it made a WIPO application (under International Trade Mark No. 779396) based on the UK trade mark registration No. 2296016, designating Australia, China, Japan and Switzerland. Registrations in Australia, China and Switzerland followed. In Japan there was a refusal. These registrations, effected under the terms of the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks adopted in Madrid on 27 June 1989 (“the Madrid Protocol”), have been referred to before me simply as the “international registration”.[14]In 2003 there was a further reorganisation affecting the sports car business when all of the assets in MG Sport and Racing Limited (company 04084371) were transferred to MG X80 Limited (company 04155563). There was also a name swap, effected on 27 June 2003, when MG X80 Limited (company 04155563) took the name MG Sport and Racing Limited. Concurrently, MG Sport and Racing Limited (company 04084371) took the name MG X80 Limited. The former company is the SRL referred to earlier.[15]The business now in SRL was conducted from a shed at MG Rover Group’s Longbridge premises. SRL continued with the development and sale of the X80 vehicle, by now called the MG SV, until it and MG Rover Group went into administration in April 2005. This was followed by the 2005 Agreement, entered into on 22 July 2005, when MG Rover Group and Powertrain Limited, an associated company (also in administration), sold various assets to NAC China. One of the issues argued before me has been whether those assets included the MG X POWER trade mark. It is not in dispute that the sale to NAC China included the MG brand, including in particular the MG logo and the MG letter marks.[16]Since July 2005 NAC has carried on business at Longbridge, preparing for the relaunch of cars under the MG brand and trade marks. There has been significant publicity, here and abroad, in connection with this.

What the defendants have to establish

[17]The defendants have to establish two matters if their claim to be entitled to ownership of the MG X POWER mark can succeed. The first is that MG Rover Group did not sell and assign this mark to NAC China as part of the assets which were the subject of the 2005 Agreement. The second is that MG Rover Group sold this mark as part of the assets which were the subject of the 2007 Agreement. It is necessary to establish the first of these two matters because, even if under the 2007 Agreement MG Rover Group purported to sell the mark to SREL, this would and could be of no effect if MG Rover Group had already divested itself of any rights in the mark under the 2005 Agreement with NAC China. Nemo dat quod non habet.[18]I propose to consider the 2007 Agreement first, not least because I am of the clear view that it is impossible to construe that contract in the manner for which the defendants contend. In short, it was not effective to transfer (and did not seek to transfer) the disputed marks to SREL and the defendants have never had any credible basis for suggesting otherwise. The question is simply one of construction although, as will appear, the correspondence passing between the liquidators of MG Rover Group and the defendants (and their respective advisers) and between the liquidators and NAC China (and their respective advisers) lend no support whatever to any suggestion that it was intended that the disputed marks should pass to SREL. On the contrary, the correspondence makes it abundantly clear that no UK or Community trade marks were intended to pass to SREL and that this was fully accepted by the defendants and those advising them.[19]For good measure, however, I am also of the view, as I shall later explain, that the disputed marks passed to NAC China under the 2005 Agreement. What is not in dispute, whatever the merits may be of that dispute, is that by the time of the 2007 Agreement NAC China was registered, without objection from MG Rover Group (acting by its liquidators), as owner of the disputed mark in the UK and of the corresponding CTM. So it is not necessary for NAC China to succeed in establishing that the 2005 Agreement was effective to transfer to it the right to the disputed marks.

The 2007 Agreement

[20]As I have mentioned, this was an asset sale agreement between SRL (as “First Seller”) and MG Rover Group (as “Second Seller”), their respective liquidators (each company having moved from administration to liquidation in the spring of 2006) and SREL (as “the Buyer”).[21]By clause 2.1, SRL sold to SREL a variety of items comprising what were referred to as “the Transferred Assets”. Those assets included “the goodwill of the First Seller [i.e. SRL] in connection with the Business”. They were expressed to include what were referred to as “the Vehicles” and “the Type Approval” but to exclude so-called “Excluded Assets”. “Business” was defined, by clause 1.1, to mean “the business of designing, engineering, manufacturing, testing and selling MG SV sports cars, race cars and other vehicles (including but not limited to the MG SV), merchandise and accessories owned by the First Seller”. “Vehicles” were defined as meaning the chassis located at a particular address and certain motor vehicles.[22]I pause to say that in his oral evidence Mr Riley insisted that if he changed the name or even the badge on the vehicles he had acquired under the 2007 Agreement he would be required to go through the process of obtaining a new Type Approval for the manufacture of the vehicle in question. This contention was in support of a claim by Mr Riley that the Agreement must have been intended, whatever it might say, to include the right to use (at the very least) the disputed marks since among the assets sold to him was “the Type Approval”, namely (according to the definitions in clause 1.1), the particular Approval issued by the Vehicle Certification Agency for a vehicle described on the Certificate as “MG X Power” and identified as type “SV”, the certificate being an extension of an earlier certificate and stated to be in respect of the SVS model. According to Mr Riley, such an Approval would only have been sold to him if it carried with it the right under the certificate to use the marks on the model so approved.[23]Mr Purvis described the contention as a “complete red herring.” I agree. The delivery by the liquidators of the Type Approval for the SV model (or the SVS model) has nothing to say about any assignment of the right to use the MG or MG X POWER marks, or the MG logo. It certainly cannot prevail over the express wording elsewhere in the Agreement making it clear that no such right was being passed to SREL. In any event, as Mr Purvis submitted, the contention of Mr Riley that if the name or badge on the car was changed it would be necessary to obtain a fresh Type Approval or an extension of an existing Approval was without foundation, any more than that it would be necessary to do so if the colour of the car should be altered. At the very least I would have needed a great deal more material, for example, reference to the relevant regulations, before accepting so unlikely a contention. The contention at the end of the day was no more than assertion. It was scarcely mentioned in Mr Engelman’s closing submissions.[24]Yet another item among those listed in clause 2.1 was what was described as “Business Intellectual Property”. This was defined in clause 1.1 as “the Intellectual Property, to the extent owned by the First Seller, which is used in or relates to the Business immediately prior to Completion [i.e. of the sale and purchase of the Transferred Assets], other than (for the avoidance of doubt) Third Party Intellectual Property and including (without limitation) such right, title and interest (if any) in…” There then follow certain items not material to this dispute. “Intellectual Property” is defined by clause 1.1 to mean “patents, trade marks, service marks, domain names, inventions, design rights, trade names, copyrights…and know-how and all other similar rights, whether registered or unregistered, in any part of the world, including any registration of such rights and applications and rights to apply for such registrations”.[25]It will be seen that the broad definition of “Business Intellectual Property” expressly excludes “Third Party Intellectual Property”. This expression is likewise defined by clause 1.1. It is defined as “any Intellectual Property which is not owned by the Sellers or which either of the Sellers have already transferred or licensed, or agreed to transfer or license, to another party pursuant to separate arrangements entered into between a Seller and such other party prior to Completion, including without limitation, the MG trademark (word mark), the MG logo (device mark), the MG X Power trademark and any Intellectual Property sold, or agreed to be sold, by the Second Seller to Nanjing Automotive Corporation prior to the date of Completion.”[26]Leaving aside at this stage whether the MG X POWER word mark was the subject of the sale by MG Rover Group to NAC China under the 2005 Agreement, it is plain from that definition, operating as an exclusion from what was being sold to SREL, that among the exclusions were the items which are in contention in these proceedings, namely the MG word mark, the MG logo and the MG X POWER word mark. This is not least because, under arrangements entered into between MG Rover Group and NAC China prior to the 2007 Agreement (namely, the 2005 Agreement), the MG word mark and the MG logo were sold to NAC China. There is no dispute about that. Nor is it in dispute that prior to the 2007 Agreement and without demur from MG Rover Group (or its liquidators) NAC China had become registered as owners of the MG X POWER (word mark) as UK and Community trade marks.[27]Another item sold to SREL under clause 2.1 was what was described as “the goodwill of the First Seller [i.e. SRL] in connection with the Business”. Mr Engelman had an argument based upon this to which I will come later. At this point I would merely observe that “goodwill” is not defined by the 2007 Agreement. The inclusion of this item in the list of assets sold to SREL was therefore entirely general and intended no doubt to embrace anything connected with the business which could properly be described as its goodwill. But the width and generality of the inclusion of goodwill must obviously yield to any express exclusion from what was being sold such as the particular marks mentioned in the definition of “Third Party Intellectual Property”.[28]By clause 2.2 MG Rover Group, as Second Seller, agreed to sell to SREL MG Rover Group’s interest in what was described as “the Second Seller Intellectual Property”. This was defined by clause 1.1 as “all Intellectual Property owned by the Second Seller which relates solely and exclusively to the Business immediately prior to Completion, including such right, title and interest (if any) in…(c) the Intellectual Property listed in Schedule 6, excluding any right, title and interest which the Second Seller has previously agreed to sell or transfer to [NAC China] prior to Completion”. I will come later to this schedule. It is sufficient at this stage to note that it contains no reference to any UK or Community trade marks.[29]Clause 2.3, headed “Excluded Assets”, provided that the 2007 Agreement did not “transfer to the Buyer any interest in any asset or right of either Sellers, other than the Transferred Assets, including, for the avoidance of doubt:…(iv) the Third Party Intellectual Property…” As has been seen, “Third party Intellectual Property” had already been excluded from the assets transferred on account of its mention as an exclusion in the definition of “Business Intellectual Property”, being one of the items listed in clause 2.1 as the subject of the sale by SRL to SREL. Its inclusion as one of the “Excluded Assets” listed in clause 2.3 shows that its exclusion was not limited to the assets being sold by SRL to SREL: as already explained, the expression “Transferred Assets” appearing in that clause was defined by clause 1.1 to mean the assets referred to in clauses 2.1 and 2.2.[30]It is quite clear therefore that neither SRL nor MG Rover Group was selling to SREL the MG X POWER word mark, much less any title to or interest in any MG word or device marks.[31]Lest there be any doubt about the matter, clause 2.3.2 contained an acknowledgement by the parties that “no licence, express or implied, is being granted by either Sellers under this Agreement to use the words ‘MG’ or ‘Rover’ and therefore that the Buyer has no right under this Agreement to use those words in a business name, trademark or otherwise in the course of its business”. It hardly needs stating that this denial of the grant of any such licence is wholly inimical to the suggestion that, even ignoring other material clauses, the 2007 Agreement should be interpreted as having sold to SREL the right to the use of the MG X POWER trade mark.[32]What then was Mr Engelman’s answer to these provisions which, on their face, seem so at odds with his clients’ defence to these proceedings?[33]He sought to limit the scope of clause 2.3.2 by referring to the words “all other assets” appearing in clause 2.1.10 and submitting that the exclusion contained in clause 2.3.2 was confined to assets other than those listed in clause 2.1. He submitted that were clause 2.1 to have a wider application it would result in what he termed “a substantial derogation” from “the grant [to SREL] of the registered/unregistered right to MG X Power and/or…the right to carry on the business of [SRL] and/or…the rights conferred in the form of a UK registered design and a UK type approval”. He referred me to what was said on the topic of non-derogation from grant as a principle of construction in Stone and Another v Fleet Mobile Tyres Limited [2006] EWCA Civ 1209. He referred also to the contra proferentem principle of construction, arguing that because the 2007 Agreement had been drawn up by the solicitors retained by the liquidators of the two vendor companies it should be construed, where there was a doubt as to its true meaning, in a manner which favoured SREL. He submitted that if the wording of the 2007 Agreement, either as regards what was intended by the expression “international registration” (that it should be understood as referring to the UK registration of the MG X POWER mark) or as regards the meaning to be attributed to references to goodwill (so that it carried with it the rights in the MG X POWER marks) did not match the intention of the parties – presumably that SREL should be assigned the MG X POWER marks – the court had power by construction to correct the mistakes. He referred me to KPMG LLP v Network Rail Infrastructure Limited [2007] EWCA Civ 363. I hope that I have correctly understood the arguments addressed to me.[34]I am wholly unpersuaded that there is any force in these points. To a large extent they assume what they set out to establish. In particular, they fail adequately to grapple with what to my mind is the clear intention of the 2007 Agreement, shown in the various provisions to which I have drawn attention, that no right, title or interest in (among others) the MG letter marks, including in particular the MG X POWER mark, was being sold or otherwise made available to SREL. Indeed, with the exception of clause 2.3.2, Mr Engelman did not really seek in his oral or written closing submissions to explain away those provisions. The attempt to emasculate the clear meaning of clause 2.3.2 by reference to a phrase to be found in clause 2.1.10 was, with respect, quite hopeless.[35]The only point raised in argument to counter the plain meaning of the 2007 Agreement which calls for any detailed examination is Mr Engelman’s reliance on the so-called international registration. The intellectual property of the Second Seller (MG Rover Group) referred to in schedule 6 to the 2007 Agreement included MG Rover Group’s rights in an international registration numbered 779396. The defendants set much store by this inclusion. It was among the assets which, by clause 2.2, MG Rover Group sold to SREL but only to the extent “if any” that MG Rover Group should have any “right, title and interest” in them. The obvious intention of the schedule was to identify those trade marks (and designs) which were owned (if and to the extent that they were) by MG Rover Group and related exclusively to SRL’s business which MG Rover Group was selling to SREL. I deal with the international registration point, not so much because there is any particular merit in it (there is none), as because the circumstances in which schedule 6 came to be included and worded show clearly that the parties were under no misapprehension as to the position concerning the trade marks rights in the UK and the Community which related to the MG X POWER mark. They also raise real questions about Mr Riley’s good faith in this transaction. The position is as follows. I deal first with those circumstances and then with the meaning and effect of an international registration and the consequence in law of the inclusion of schedule 6 (insofar as it is relied on by the defendants).

Schedule 6

[36]Schedule 6 is in two parts. I am concerned only with the first part which is headed “Trade Marks”. This lists nine trade marks by reference to three columns (respectively, Country/Register, Mark/Number and Proprietor). Under the column headed Country/Register five of the entries relate to Taiwan, three to India and the other (the first in the list) to “International (Madrid)”. The reference to Madrid is to the fact that the so-called international registration takes effect under the Madrid Protocol of 1989 (as to which see later). Under the column headed Mark/Number is, in the case of the “International (Madrid)” entry, the number 779396. All the other entries under that heading (they relate to the Taiwan and India entries appearing in the first column) are shown as “X POWER” followed in the case of the Taiwan entries with a separate number and in the case of the India entries with differing class numbers (one for each entry). MG Rover Group alone appears in the third column, headed “Proprietor”. As I have already mentioned schedule 6 features in the definition of “Second Seller Intellectual Property”, namely all intellectual property owned by MG Rover Group insofar as it relates “solely and exclusively to the Business [i.e. SRL’s business of designing, engineering, testing and selling MG SV sports cars and other cars not limited to the MG SV] immediately prior to Completion”.[37]It is to be noted that the schedule makes no explicit reference to any “MG” mark. The reference is merely to “X POWER”. In the case of the “International (Madrid)” entry there is no indication of what it is that is registered, merely of the registration number. There is no reference to any UK or Community registration or mark.[38]Mr Riley was cross-examined about the circumstance in which that schedule came to be included in the 2007 transaction. He accepted that he was aware at the time the schedule was drawn up that there was an important difference between the mark X POWER and the mark MG X POWER. He also accepted that, at that time, he was aware that from April 2007 NAC China was recorded at the Community Trade Mark Office and at the UK Trade Mark Registry as the owner of the MG X POWER word mark.[39]It appears that on 18 April 2007 Mr Bilewycz (of Mr Riley’s trade mark agents) emailed Mr Riley to inform him that, as discussed with him, Mr Bilewycz would apply in Canada for the trade mark MG X POWER to be registered in SREL’s name and that an application would be made in the EU for the trade mark X POWER to be registered in SREL’s name and for separate applications to be made in each area for the trade mark RILEY to be registered in a separate company of Mr Riley. The email continued:
“The applications in the EU will confirm your claim in [sic] the RILEY and X POWER trade marks…they get your ‘foot in the door’…”
There was no question of applying in the EU in relation to MG X POWER.[40]On 30 May 2007 Mr Riley emailed Mr Bilewycz to say that he (Mr Riley) “would like to include as much of the attached list as acquired IP in the Purchase Agreement [i.e. the draft 2007 Agreement].” Attached was a list which referred to the various entries that were later to appear in schedule 6 together with a UK registration number and an EU registration number. It is to be noted that all referred simply to “X POWER”. There was no mention of MG X POWER. The reference in Mr Riley’s list to the EU number (misrecorded as 217298 8 which does not exist rather than to 217298 9 which does) was to the CTM registered in NAC China’s name for MG X POWER. Mr Riley described his omission of the MG from MG X POWER as “”an oversight”. His list also contained a reference to the Madrid Protocol international registration 7 19396 (again a likely misreference to 7 79396). The significance of the inclusion, however, is that it again referred simply to X POWER when the registration is of MG X POWER. The MG was again missing. Mr Riley attributed this to “an abbreviation…which should not have occurred. I am possibly at fault…”.[41]Mr Bilewycz was not misled by this abbreviated reference. In an email to Mr Riley later that same day, 30 May, he pointed out that “as far as I can ascertain, International Registration no. 779396 [he had the correct number] is still in MBR’s [i.e. MG Rover Group’s] name, covering MG X POWER in Australia, Switzerland and China” (emphasis added). It was made clear therefore, even if Mr Riley had been in any earlier doubt, that the international (Madrid Protocol) registration related to MG X POWER and not simply to X POWER. The email also pointed out that the registration covered the three countries mentioned. It did not refer to either the UK or the EU.[42]So far from amending his list so that it referred, correctly, to MG X POWER Mr Riley emailed the following day to Mr Bilewycz what he described as “our best list of everything that we just prepared....” The attached list is of particular interest because it has all the appearances of having been compiled by cutting and pasting passages from Mr Bilewycz’s email to Mr Riley except that for some reason which Mr Riley was quite unable to explain the letters MG have again been omitted from the all-important reference to the content of the international registration. Mr Riley claimed that owing to a neck injury many years previously he does not use computers and that the email had been typed by someone in his office at his dictation, in all likelihood, by cutting and pasting some of the material from Mr Bilewycz’s earlier email. That still left unexplained why MG should have been omitted from the description of the registration. The best he could come up with was that it was the result of the “in-house abbreviation that we were wrongly using.” I found this very unconvincing.[43]There was then a very significant email. It was from Mr Bilewycz to Mr Drukker (of Mr Riley’s solicitors, Robert Brand & Co) and was dated the next day, 31 May 2007. It was copied to Mr Riley. It attached what Mr Bilewycz described as “a schedule of IP rights (trade marks and designs)”. The schedule is for all practical purposes identical to what became schedule 6 to the 2007 Agreement. In his covering email Mr Bilewycz explained that “As you will see I have not identified the mark registered under International Registration 779396. I have omitted the UK and CTMs for MG X POWER for obvious reasons.” Mr Riley was unable to explain why the reference to the international registration was in this abbreviated form (i.e. with no indication of its content) whereas those concerned with Taiwan and India did specify the mark. He denied the suggestion put to him by Mr Purvis that the omission was deliberate and that this had happened because Mr Bilewycz knew that to refer to the registration simply as X POWER would have been incorrect and misleading and that to have spelled out that it related to MG X POWER would have been unacceptable to Mr Riley since that would (for reasons which will become abundantly apparent when I come to the communications between the parties and their advisers leading up to execution of the 2007 Agreement) have invited rejection by the vendors’ liquidators or their solicitors. Nor was Mr Riley able to explain why “for obvious reasons” Mr Bilewycz had omitted the references in Mr Riley’s original list to the UK and Community registrations of MG X POWER (referred to in that original list simply as X POWER). The most likely reason was that, as will later be seen and as the 2007 Agreement was to make clear, the vendors had no intention of assigning (even if they could) any right to a mark containing the letters MG.[44]The schedule in that form was then sent shortly after 9am on 1 June 2007 to Sarah Gosden of Linklaters, acting for the liquidators. The covering email stated that details of the Indian and Taiwanese trade marks were to be confirmed. Two hours later that same day Mr Bilewycz emailed Mr Drukker, with a copy to Mr Riley, to say that he (Mr Bilewycz) had “received a report from my Taiwanese associates – it looks like the marks we thought were X POWER are in fact MG X POWER.”[45]Did that discovery lead to any change in the wording of the schedule? It did not. The explanation is very probably to be found in an email sent a few minutes later from Mr Bilewycz to Mr Drukker. “Tim [Mr Drukker]”, it stated, “In spite of my recent info Will [Mr Riley] wants us to include the marks.” In other words, Mr Riley was insisting that the schedule stay as it was, with the references, where made, being to X POWER. At all events, there is nothing to indicate that Linklaters were made aware that the trade marks referred to in the schedule were to MG X POWER and not simply to X POWER. The international registration continued to refer simply to a number.[46]Mr Riley denied that Linklaters had been deceived. I heard no evidence from the liquidators or Linklaters as to what they knew or believed. There is no claim to rectify the 2007 Agreement; nor could there be at the instance of NAC, which was not a party to it. What is undeniable is that, for no good reason, MG Rover Group were, under the guise of the misleadingly worded schedule 6 (misleading, that is, to anyone unaware of the actual content of the registrations referred to), passing to SREL certain trade marks bearing the letters MG when the body of the 2007 Agreement made it abundantly plain that such rights were not to pass, including in particular any right to the MG X POWER mark.[47]What is equally clear is that, on 29 June 2007, a mere two days after the 2007 Agreement was entered into, Mr Riley emailed NAC’s general manager to say that he had completed the purchase of SRL’s assets and that “I [the personal pronoun is used; there is no mention of SREL] now find that I control many of your MG badge rights and you control at least one of mine.” “One of mine”, as Mr Riley explained, was a reference to the UK registration of the MG X POWER word mark. The email went on to state that Mr Riley believed that if NAC and he “could have a meeting again as we used to we can go back to being on the very best of friendly terms and work together for the benefit of both our company’s [sic] and China.” I return to this later and to the applications issued by SREL in the UK Trade Mark Office a few weeks afterwards, in August 2007, to revoke the registrations of the MG trade marks which NAC China had acquired from MG Rover Group.[48]The conclusion to be drawn for all of this is that it is, at the very least, highly questionable whether MG Rover Group had any awareness or intention of assigning to SREL any rights taking effect abroad, whether through the mechanism of an international registration or otherwise, in any mark consisting of or including the letters “MG”. The abbreviated manner in which these rights are referred to in schedule 6, coupled with Mr Riley’s apparent requirement that they be dealt with in this way, raise suspicions as to the honesty of his conduct in this matter.

The international registration

[49]But, in any event, even taking the schedule as it stands, the assignment does not have the effect for which, through Mr Engelman, the defendants contended. The contention was, as I followed it, that, notwithstanding that it makes no express reference to the UK and Community rights in the MG X POWER mark (which it surely would have done if these very important rights were intended to pass to SREL), the schedule was nevertheless to be understood as transferring to SREL the right to the MG X POWER word mark in this country as well as to the countries to which the international registration related (and to Taiwan and India). I do not accept the contention.[50]The aim of the Madrid Protocol, where an application (referred to in the Protocol as “the basic application”) for the registration of the mark in question has been filed with the office in charge of the register of marks in the particular country, being a contracting party to the Protocol, or where the mark has been registered (referred to in the Protocol as “the basic registration”) in the register maintained by the office of that country, is to enable the person in whose name the basic application has been made or in whose name the basic registration stands to obtain protection for the mark in several countries at once, all being contracting parties to the Protocol, by means of an application filed at the International Bureau of the World Intellectual Property Organisation (or “WIPO”) based in Geneva. The Protocol describes the office through which the international application is made (“the international application”) as “the Office of origin”. The international application is filed at the International Bureau through the Office of origin. The effect of the filing (in due form) of the international application is, by articles 2 and 3 of the Protocol, that the International Bureau registers the mark in question (so that it becomes thereby an “international registration”) and notifies the offices of the countries to which the international application relates. By article 3Bis of the Protocol “the protection resulting from the international registration shall extend to any Contracting Party only at the request of the person who files the international application or who is the holder of the international registration. However, no such request can be made with respect to the Contracting Party whose Office is the Office of origin.” It is clear therefore that the making of an international application has no effect in the country of the Office of origin. The success or failure of any registration of the mark in that country depends on the application for the registration of the mark in accordance with the procedures (and the applicable laws) of that country. The filing of the international application is irrelevant to that. In short, as Mr Purvis submitted, it is not possible to designate the country in which the Office of origin is located as a country to which the international registration is to extend. Article 4(1) of the Protocol provides that the effect of an international registration is to give the mark in question the same protection in a designated country as if the mark had been deposited direct with the office of that country. An international registration remains dependent upon the registration of the mark in the country of the Office of origin for five years. This means that if within that period the mark ceases to enjoy protection for any reason, for example it is revoked, this results automatically in the cancellation of the international registration for all of the designated countries. After the five years the international registration in each of the designated countries is no longer so subject. The validity of the registration is thereafter a matter of local law in the country in question. See article 6 of the Protocol.[51]In the present case the basic application in respect of the MG X POWER mark was UK application 2296016 made to the UK IPO (and taking effect from 20 March 2002) so that the Office of origin was in the UK. The designated countries in the international application (numbered 779396) which resulted in the international registration dated 3 April 2002 – the international registration on which the defendants rely - were Australia, China, Japan and Switzerland. (In the event Japan fell away as the local office refused registration under article 5 of the Protocol.) As a matter of the meaning of the Madrid Protocol and in the events that happened, therefore, the international registration did not have any effect in this country. Its assignment to SREL (assuming that the 2007 Agreement, in particular schedule 6, had that effect) could not and did not confer any rights on SREL in this country in respect of the MG X POWER mark. In any event it would not have affected the CTM registration of that mark.[52]In Mr Engelman’s written closing submissions it was suggested that article 21 (1)(a) of The Trade Marks (International Registration) Order 1996 provided the answer to the question whether the assignment of an international registration operates to “carry the basic registration with it”. That article simply states that its provisions apply where “the registered trade mark is also a protected international trade mark (UK).” Mr Engelman then referred to article 5 of the Order which provides that various sections of the 1994 Act “apply, with the necessary modifications, in relation to an international trade mark (UK) as in relation to a registered mark.”[53]In my judgment these articles do not assist. This is because, as Mr Purvis submitted in his written closing submissions, article 21 deals with the case of concurrent registrations where the proprietor in question has both a UK registration and “a protected international trade mark (UK)” for the same mark in respect of the same goods or services. In those circumstances, he submitted, the international mark is treated as registered as at the same date as the original UK registered trade mark as regards those goods or services. This, he correctly submitted, is irrelevant to the present case as the international registration is not a “protected international trade mark (UK)”. It could only be such a mark if the international application (and consequent international registration) had designated the UK. This is apparent from article 3(1) of the Order which in terms states that “[a]n international registration designating the United Kingdom shall be entitled to become protected …”. Article 2 of the Order defines “protected international trade mark (UK)” as having the meaning set out in article 12 of the Order. That article and others in the Order make abundantly clear that such a mark is one that acquires protection in the UK because it has been the subject of an international application (with the UK as a designated country). As the international registration in this case did not designate the UK articles 21 and 5 are not in point. As Mr Purvis submitted, this makes sense as the Order is only interested in international registrations which designate the UK and which therefore fall to be recognised and enforced in this country.[54]It follows that schedule 6, even if it was effective to assign to SREL the trade marks referred to in it, is irrelevant to whether SREL has any right or title to the MG X POWER mark in this country.

The 2005 Agreement

[55]This brings me to the 2005 Agreement. Some preliminary observations are appropriate before I come to that agreement.[56]Section 9(1) provides that the proprietor of a registered trade mark has exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent. It goes on to provide that the acts amounting to infringement, if done without the consent of the proprietor, are specified in section 10. Section 9(2) states that references in the Act to the infringement of a registered trade mark are to any such infringement of the rights of the proprietor. Section 10 states what the acts are which amount to infringement of a registered trade mark.[57]It is to be noted that the references in section 9 are to the proprietor of the mark in question. There is no doubt at all that from 18 April 2007 onwards NAC China has been recorded as, and is therefore fully entitled in these proceedings to be regarded as, the proprietor of the MG X POWER mark both with the UK Trade Marks Registry in respect of the UK trade mark and with the Trade Marks and Register Department of OHIM in respect of the CTM. The fact, if fact it is, that NAC China had no right to the marks under the 2005 Agreement and that it was only subsequently that NAC China procured the execution in its own favour of the necessary paperwork leading to those registrations is, given my conclusion that the 2007 Agreement did not in any event seek to pass to SREL any right to those marks, irrelevant to any defence that the defendants have sought to mount to NAC’s entitlement, through NAC China, as the registered proprietor of the marks and the other two claimants as NAC China’s licensees in respect of them, to sue the defendants for their infringement.[58]I do not therefore need to take up time going into the elaborate case sought to be made by the defendants to the effect that the 2005 Agreement did not pass to NAC China any rights in those marks. Instead, I shall simply outline, as briefly as I can, what the principal contentions were and why I am of the view that the 2005 Agreement did indeed pass to NAC China the right to the MG X POWER marks. This turns in my view on meaning and effect of clause 2.2.13 of that Agreement.[59]It appears that, although NAC China was interested in acquiring many of the assets owned by MG Rover Group and Powertrain which comprised the MG business, it had no wish to acquire the assets of SRL, in particular, the completed vehicles, chassis, spare parts and other assets concerned with the new sports car which had been launched in the UK as the MG SV X POWER and was also known as the MG SV or more simply as the SV. These were to be left with the sellers under the 2005 Agreement.[60]Clause 2.1 of that Agreement set out the assets that were being sold. They included what was described simply as “the Intellectual Property”. That expression was defined by clause 1.1 (the definitions clause) in the widest of terms, namely, “…any intellectual property or analogous rights in any jurisdiction including patents, inventions, know-how, trade secrets and other confidential information, registered designs, copyrights, data rights affording equivalent protection to copyright, database rights, design rights, semi-conductor topography rights, trade marks, service marks, business names, trade names, brand names (including MG, Austin, Wolseley, Morris, Vanden Plas and Austin Healey (subject to any third party rights in or to the use of the MG name or logo and the ownership and use of the name Austin Healey)), logos, website address, domain names, rights in the nature of unfair competition rights and in each case in any part of the world and whether or not registered or capable of registration (including those trade marks listed in Schedule 4), and including all applications to register and to apply for protection of the same, in so far only as the Sellers are beneficially entitled to the same at the Exchange Date [of the Agreement] but excluding any of the foregoing rights as may have been sold to any person prior to the date of the Administrators’ appointment”.[61]Schedule 4 listed a very large number of trade marks, most of them incorporating the letters MG.[62]Clause 2.2 listed those assets that were expressed to be “excluded from the sale”. Among those were, by clause 2.2.13, “(i) the business and assets (including intellectual property) relating solely and exclusively to the MG Sport and Racing business (which for the avoidance of doubt does not include the MG TF business which is to be sold to the Buyer hereunder) but including MGSV, MGXPower and MGX80 and (ii) all intellectual property rights (including design rights but excluding trade marks) to MGSV and its variants;”[63]It thus appears that, although the business and assets of SRL were excluded from the sale to NAC China, that exclusion, as sub-clause (i) makes clear, only extended to such assets so far as they related exclusively to SRL. The sub-clause explains that intellectual property was also within the exclusion (so far as it too related “solely and exclusively” to such assets). By sub-clause (ii), the intellectual property rights “to MGSV and its variants” were also excluded. That exclusion did not extend, however, to trade marks. They were left to pass to NAC China within the very wide definition of “Intellectual Property” as one of the assets that were to pass under clause 2.1.[64]The short question of construction was whether the trade marks identified by sub-clause (ii) extended to the MG X POWER trade marks. Mr Purvis submitted that the MG X POWER trade marks were not within the exclusion of assets identified by the clause for three reasons. First, the MG X POWER marks (which were registered in MG Rover Group’s name and had been since they were first registered) were not assets which related “solely and exclusively” to SRL in that there was evidence to indicate that MG Rover Group had used, or proposed to use, the mark in connection with “souped-up” versions of its own Rover 75 car (something which was quite separate from SRL) and, what is more, had licensed use of the mark to two third parties under separate agreements (which were in evidence) entered into in the third quarter of 2004 and had also allowed the mark to be used in connection with a race trophy (the “MG X POWER Trophy” race) run by an independent MG enthusiasts’ club called “The MG Car Club”. Second and in any event, the MG X POWER trade marks related to the MGSV and its variants referred to in sub-clause (ii). Those were the cars that were under development by SRL in the period immediately preceding the 2005 Agreement. Third, the only reference at all in clause 2.2.13 to trade mark rights is in sub-clause (ii) where they are excepted from the exclusion, suggesting that there was no intention to include any trade marks within the assets which were not to pass to NAC China. Mr Engelman submitted that the MG X POWER trade marks were not excepted (and did not therefore pass to NAC China) precisely because they were not set out in schedule 4 (which was a very lengthy list of trade marks that were to pass) and because the fact that the clause dealt separately (in sub-clause (ii)) with intellectual property rights (other than trade marks) “to MGSV and its variants” and not with the other specifically identified names referred to in sub-clause (i), namely “MGXPOWER and MGX80” indicated that what was intended by the exclusion of trade marks was something rather narrower than or different from the MG X POWER mark. He drew my attention to evidence indicating that a range of sports cars was in the course of development by SRL which was not within the MGSV range but to which, as I understood it, the MG X POWER mark was being applied.[65]The evidence as to what exactly was being developed by SRL up to the time of the 2005 Agreement was far from clear. What was clear, however, indeed I understood it to be common ground between the parties, was that the MGSV car project was carried out by SRL under the name MG X POWER and that the cars so branded included the MGSV and its variants (MGSVR and MGSVS). The reason, whatever it was, for including sub-clause (ii) and for confining it to “MGSV and its variants” cannot have been to differentiate it from MG X POWER: the two were practically synonymous.[66]Although this is far from clear, I consider that the better view of clause 2.2.13, given the use made of the MG X POWER mark, is that it was not within the assets excluded from sale to NAC China. This is both because it was not an item of intellectual property which related solely and exclusively to SRL but had the wider use to which the evidence referred, and also because it was a trade mark which related to MGSV and its variants. I cannot pretend, however, that the position is clear. Not only, as Mr Engelman was at pains to emphasise, was this significant mark (significant, that is, to SRL) not listed in schedule 4 but if the intention had been to pass to NAC China (and except from the excluded assets) all trade marks which included the letters MG (a point which underlay much of what Mr Purvis submitted) the Agreement could very easily have said so and done so moreover in sub-clause (i). Sub-clause (ii) remains an oddity. That said, I do not think it operated to exclude the MG X POWER mark from the trade marks to which it cryptically referred. Indeed, it is not at all apparent to which marks the exception from the exclusion referred if not to the MG X POWER mark.[67]It follows that, given the wide definition of Intellectual Property, the 2005 Agreement was effective to pass to NAC China the MG X POWER mark.

The actions of Natalie Atkins

[68]The uncertainty whether the Agreement did extend to the MG X POWER marks had surfaced long before the events which have led to this litigation. It gave rise to an episode which loomed large in Mr Riley’s evidence and in Mr Engelman’s submissions but which I regard as of no materiality to the true construction of the 2005 Agreement, much less to the 2007 Agreement or to Mr Riley’s conduct then and subsequently. The episode is concerned with certain doubts felt by Natalie Atkins, a solicitor who between September 2006 and December 2007 was a member of the second claimant’s in-house legal team, over whether the 2005 Agreement did operate to pass to NAC China the right to the MG X POWER marks and with the actions she took in the light of those doubts.[69]It appears from the evidence of Mrs Atkins, whom I accept as an entirely honest and reliable witness (she was cross-examined for the best part of a day), that she was concerned about the correctness of the action taken by NAC China to record NAC China as the proprietor of some of the MG marks following the signing of the 2005 Agreement. Mrs Atkins was no stranger to MG Rover Group’s affairs. Between September 1997 and December 2007 (subject to the periods I shall mention) she had worked as a member of the in-house legal team at MG Rover Group, her employment transferring to PVH after the latter had become MG Rover Group’s parent company in 2000. For three months, between June and August 2005 which was when the 2005 Agreement had been entered into, she had worked for Deloittes and between January and September 2006 she was on maternity leave. Her employment in the group had otherwise been continuous. She had therefore had a more or less continuous involvement over a ten year period with the legal affairs of the MG Rover business.[70]I take up the story in her own words (her references to NAC are to NAC China):
“19. Following signing of the 2005 Agreement, NAC instructed Pinsent Masons to record the assignment of all the UK and Community MG trade mark registrations in to NAC's name on the Trade Marks Registers. This was done and it included the MG X POWER marks. In or around October 2006, on reviewing the marks recorded in NAC's name, a concern arose in my mind regarding the change in ownership recorded for the MG X POWER marks. I was concerned that these marks were not referred to in the schedule to the 2005 Agreement (along with other marks) and until this was resolved with PricewaterhouseCoopers LLP, the recordal of these marks in NAC's name could undermine the relationship between PricewaterhouseCoopers LLP, NAC and me. That would have been difficult for NAC and uncomfortable professionally for me, particularly as at this time I was dealing with the Administrators, PricewaterhouseCoopers LLP on other trade marks that had not been included in the schedule to the 2005 Agreement but nonetheless we considered had still been acquired by NAC and we needed to retain a good relationship with PricewaterhouseCoopers LLP during this process. I therefore instructed Pinsent Masons to alter the record of ownership to the MG X POWER marks back into the name of MG Rover, until the issue could be dealt with, with PricewaterhouseCoopers LLP.”
[71]At the time, the application to have the registration rectified to restore MG Rover Group’s name to the proprietorship of the UK trade mark was supported by a witness statement by Rachel Jones of Pinsent Masons’ Trade Marks Team. The statement set out that, although the majority of the trade mark portfolio of MG Rover Group had been assigned to NAC China, the UK registration of the MG X POWER “…was not included because the trade mark registration was intended to be sold to the owners of MG Sport.” The statement continued:
“Due to the large number of registrations to be assigned, unfortunately, Registration No 2296016 was inadvertently included on the assignment recordal documents when recording the UK trade mark registrations as listed on the Asset Sale Agreement.”
The statement concluded with a statement of truth.[72]But, as Mrs Atkins’ evidence before me went on to explain, those within NAC, together with their advisers, had second thoughts about the matter. This had been prompted by the discovery in March 2007 that the liquidators of MG Rover Group were in discussions with Mr Riley and his advisers with a view to a sale of the SRL business. Mrs Atkins’ witness statement said this:
“20. When we learned that PricewaterhouseCoopers LLP were discussing the sale of the MG Sport and Racing business with another company, we made it clear to PricewaterhouseCoopers LLP (through our solicitors, Herbert Smith in letters dated 22 March and 27 March 2007) that we considered that the MG X POWER marks belonged to NAC. PricewaterhouseCoopers LLP very properly confirmed that they had informed all parties with whom they were in negotiation of the rights that NAC had asserted in respect of the MG X POWER marks, and that they would not, in the absence of confirmation from NAC that they had no interest in the MG X POWER marks, purport to sell the MG X POWER marks. NAC never provided such confirmation, of course because NAC rightly believed that it owned the MG X POWER marks. This is contrary to the assertion made by the Defendants in paragraph 10.2 of the Amended Defence and Counterclaim that NAC “never provided confirmation to the Liquidators of the First Claimant's interest in the MG X Power [marks]”
. Moreover, in an email dated 6 June 2007 to the Defendants' solicitors, Sarah Gosden of Linklaters, solicitors to the Liquidators, stated “My clients are prepared to transfer such right, title and interest they have in the X-Power trademarks listed in schedule 5. However, as you are aware, the liquidators have been put on notice that the X-Power trademarks referred to in schedule 5 were incorrectly transferred to [MG Rover Group]. Consequently, until confirmation is obtained from Nanjing that they do not in fact have title to the x-power trade marks we are unable to provide assignments. I understand you client is aware of this position and intends to resolve this directly with Nanjing.” 21. The assurances provided by PricewaterhouseCoopers LLP are one of the things that lead me to believe that the inclusion of the "X POWER" marks in the Schedule of trade marks in the Asset Sale Agreement dated 27 June 2007 between MGSREL and the Liquidators of MG Rover Group and MG Sport and Racing Limited ("2007 Agreement") was a mistake. I cannot believe that PricewaterhouseCoopers LLP, a world renowned firm of accountants, would have deliberately misled NAC by including the MG X POWER marks in the 2007 Agreement.”[73]This resulted in the re-recording of NAC China as proprietor of the MG X POWER marks with effect from 18 April 2007.[74]It will be seen that parts of this evidence raise the correctness of the inclusion of the X POWER marks in schedule 6 (as it became: in an earlier draft it had been schedule 5) to the 2007 Agreement and the liquidators’ reaction to NAC’s assertions in that regard. These are matters on which I have already commented.[75]The important point about this episode is that by April 2007 (if not before) any doubts as to whether the 2005 Agreement passed to NAC China the rights in the MG X POWER marks and whether those doubts were justified had been resolved in the sense that without objection from MG Rover Group or its liquidators (or for that matter from SRL or its liquidators) NAC China had become re-registered as the proprietor of the MG X POWER marks and, no less significantly, Mr Riley and SREL (and their advisers) were fully in the picture as regards NAC China’s claim to be entitled to those marks and the willingness of the liquidators of MG Rover Group (and of SREL) to concede that claim (or, at the least, not to make an issue of it) and, thus, to deal with the defendants accordingly.[76]I should add two footnotes to this aspect of the dispute. The first is the attempt by Mr Engelman to mount an argument based on the statement of Ms Jones of Pinsent Masons to the effect that it gave rise to an issue estoppel. This is that, having relied on it to return the registered ownership of the MG X POWER marks to MG Rover Group, NAC could not subsequently seek, contrary to what Ms Jones had said, to advance the case that under the 2005 Agreement, NAC China did after all become entitled to ownership of the marks and thus to obtain its re-registration as proprietor of them. I do not see why Ms Jones’s statement should give rise to such an estoppel: MG Rover Group, in whose favour the estoppel would arise, had no objection to the re-registration; why then it should be open to SREL – a stranger to the 2005 Agreement and to the process that led to the altered registrations – to insist on the point? The second footnote is that Mr Riley placed reliance on an email he had received from Mr Chris Pillar (of PWC) sent on behalf of Mr Pearson, one of SRL’s joint liquidators, in which Mr Pillar stated, in reference to the 2005 Agreement, that “it was the intention of the parties to exclude the X POWER name from the sale to Nanjing, as evidenced by the fact that this trademark was not in the list appended to the contract.” Aside from the question whether this email is admissible in construing the 2005 Agreement, it is to be noted that Mr Pillar’s email is dated 14 March 2007. The liquidators’ stance, as evidenced by that email (and assuming that it is to be understood as referring to MGX POWER), was soon overtaken by the exchanges to which I have referred above and by the action taken on NAC China’s behalf and without opposition from the liquidators (and, to Mr Riley’s knowledge) to have the MG X POWER trade marks re-registered in its name.

The wider background

[77]This brings me to the correspondence passing between NAC China (and its advisers), the liquidators of MG Rover Group and SRL (and their advisers) and the defendants (and their advisers), some of which is referred to in the passages from Mrs Atkins’ witness statement set out above. I do not refer to this correspondence as an aid to the interpretation of either the 2005 Agreement or the 2007 Agreement since I do not regard such material as admissible for that purpose and in any event I have stated my conclusions on those matters without recourse to it. I do so to highlight the complete lack of merit in the stance that the defendants have adopted to the claims in these proceedings and to make the point that some at least of the contentions that have been advanced by them are impossible to reconcile with their knowledge and actions in the weeks leading up to the making of the 2007 Agreement.[78]An assertion in Mr Riley’s evidence which he repeated again and again was his belief, when the 2007 Agreement was entered into, that the MG X POWER mark was among the items sold to SREL. He claimed not to have been told by the liquidators, or otherwise to have been aware, that the mark had been transferred to NAC. Another assertion, made in support of the first, is that the price paid by SREL under the 2007 Agreement reflected, indeed had been increased to reflect, the fact that the mark had been included in the assets sold. Thus, in paragraph 28 of his first witness statement he claimed that the price for the assets had been increased from £300,000 to £487,000 to reflect the mark’s inclusion. Those assertions are impossible to reconcile with the contemporary communications and are ones that I therefore have no hesitation in rejecting. The position was as follows.[79]In an email dated 16 March 2007 Mr Riley sent to Mr Bilewycz (his trade mark agent), Mr Drukker (his solicitor) and Mr Davis (a business associate) a copy of a revised asset purchase agreement (a very close forerunner of the 2007 Agreement which was entered into three months later) which he and Mr Davis had signed on behalf of SREL. Among the assets to be sold under it, as items of “Second Seller [ie MG Rover Group] Intellectual Property”, were “the ‘SV’, ‘MG X POWER’ and ‘X80’ trademarks”. The overall price for the assets was £1,650,000. Neither MG Rover Group, nor SRL, nor their respective liquidators signed the agreement because, as I shall explain, it was overtaken by a change of terms. In the meantime, NAC had got wind of the fact that SRL’s assets were to be sold. It was believed that the assets might include the MG X POWER trade mark to which, by now (as paragraph 20 of Mrs Atkins’s witness statement, in the passage set out earlier, makes clear), NAC was claiming to be entitled under the 2005 Agreement. This led to a letter dated 22 March from Herbert Smith, acting for NAC China, to one of the liquidators of SRL to assert NAC China’s claim to the trade mark and to request receipt of written confirmation by 26 March that the intending purchaser (the identity of whom was not then known to NAC) had been informed that NAC China owned the MG X POWER trade marks and that the liquidators would not attempt to sell them. (Similar letters seeking the same assurances were later sent by Herbert Smith to each of the liquidators of MG Rover Group.) The liquidators responded by the requested deadline to say that they had “already informed all parties with whom we are in negotiation of the rights that your client has asserted in respect of the MG X POWER trade marks.” The response further stated that the liquidators “will not, in the absence of confirmation from your client that they have no interest in the MG X POWER trade marks purport to sell [them].” A copy was sent to Sarah Gosden of Linklaters acting for the liquidators. Despite that assurance Mr Riley insisted that he was not informed that the MG X POWER marks was no longer to be included in the assets to be sold to SREL.[80]That insistence faced a difficulty: by the end of the first week of April, his trade mark attorney, Mr Bilewycz, was emailing his solicitor, Mr Drukker, to say that Mr Riley “has done a deal with PWC for the sale of the stock and parts (excluding the MG X POWER badge) for £487K, but with an undertaking to transfer to him any badge rights they might have if they can clean that issue up.” It was clear, according to that email, that to Mr Riley’s knowledge the MG X POWER mark was not to be included in the proposed sale and, what is more, that the price had been very considerably reduced. Mr Riley, when cross-examined about this email, considered that Mr Bilewycz must have misunderstood the position and that the reduction in price was reduced because certain finished vehicles were deleted from the sale. He said that there were 27 such vehicles. He continued to insist not only that the MG X POWER mark was included in the sale but also that, as his witness statement had indicated, the proposed price had gone up to reflect this inclusion. This continued insistence came up against the fact that on 17 April Ms Gosden of Linklaters (acting for the liquidators) emailed to Mr Drukker (with a copy to Mr Bilewycz) a revised copy of the draft sale agreement. The draft excluded any reference to the MG X POWER (and other) trade marks in the definition of “Second Seller Intellectual Property”. Correspondingly, the definition of “Third Party Intellectual Property” – being property that was not to be sold by the transaction - had been altered so that it included references to the MG X POWER trade mark. To any interested reader it was clear that these items were no longer included among the assets to be sold. Mr Riley was unable to explain how these alterations came to be made.[81]Ms Gosden’s email also asked for the correct name and details of the intended purchaser of the assets.[82]Mr Drukker’s response to Ms Gosden’s email came on 18 April. It stated that the writer had met his clients the previous day and that the assets were to be “acquired by MG Sports and Racing Europe Ltd…” The email also stated that “it is our understanding that the Sellers will attempt to determine the ownership of the MG X POWER Trade Mark and are prepared to undertake to my clients that if the same is not to be transferred to my client that it will only be transferred to [NAC China].” Thus, so far from the sale terms having been revised to include the MG X POWER mark (with an increase in price to reflect this fact), an assurance was being sought that if the mark was not to go to SREL it should be transferred to NAC China![83]Ms Gosden replied five days later, on 23 April. “I was surprised and somewhat concerned” her reply began “by the name of the vehicle that your clients intend to use to acquire the assets, particularly given the provision in the agreement (clause 2.3.2) in which the Buyer expressly acknowledges it has no right under the Agreement to use the words “MG” or “Rover” in a business name, trade mark or otherwise in the course of business.” She sought confirmation that the name would be changed or that a different company would be used for the agreement. Clause 2.3.2 was to remain in the Agreement. Indeed it is the clause on which NAC particularly rely, as explained earlier. On the specific matter of the MG X POWER trade mark, Ms Gosden’s reply could not have been clearer. I set it out in full. “I am informed that your client is aware of the correspondence we have received from Herbert Smith on behalf of [NAC China] asserting that the MG X POWER trademark was transferred to [NAC China] pursuant to the Asset Sale Agreement with MG Rover Group in 2005. The liquidators have no intention of taking this issue further and the reduced purchase price reflects that the trademark is no longer being transferred as part of this transaction. As far as the liquidators are concerned, the trademark…was transferred to [NAC China] by MG Rover Group in 2005.”[84]Mr Riley was unable to explain how this clear statement was to be reconciled with his dogged assertion that the MG X POWER mark was included in the sale to SREL and that, so far from being reduced, the price paid had been increased to reflect its inclusion. He did not suggest that Ms Gosden was misrepresenting matters. The best he could do was to rely on Ms Jones’ witness statement of October 2006 (set out earlier). But, even assuming Mr Riley had by then seen a copy of that statement, it is perfectly obvious that matters had moved on since she made it and that, as the correspondence made clear and as Mr Riley plainly understood, the liquidators were now accepting that NAC was entitled to the mark and were no longer willing to include it in the sale to his company.[85]That this was abundantly obvious to everyone involved emerges from the email sent in reply to Ms Gosden’s. Transmitted just under three hours after Ms Gosden’s reply had been sent to him, in his email back to her (a copy of which was sent to Mr Riley and Mr Bilewycz so that there can be no question of Mr Riley being in a state of ignorance of what was passing between the lawyers) Mr Drukker first explained that “if needs be the name of the company can be changed.” (I pause to say that it never was changed, despite a subsequent letters demanding that it should be: I return to this later.) Mr Drukker went on to say that:
“…I am well aware of the correspondence in this matter with Herbert Smith and others. The position is quite clear (a) the relevant marks were transferred to [NAC China] (b) on affidavit from Pinsents the trade marks were transferred back. What is the current state here? In whose name are they now registered? If they have been transferred back to [NAC China] then my clients will rest with that position.”
(emphasis added)[86]That Mr Riley not only received and saw Mr Drukker’s email to Ms Gosden but was able to answer the very question that Mr Drukker had posed is evident from the fact that six minutes later he emailed Mr Drukker with an attachment in the shape of an email he had been sent by Mr Pillar of PWC (the liquidators’ firm) four days earlier. The attachment showed that the MG X POWER trade mark had been registered in NAC China’s name on 4 April 2007. It was clear therefore (not least to Mr Riley) that the mark had come back into NAC China’s name. Mr Riley’s reaction to his own email, when confronted with it in cross-examination, was simply to remark that “registration does not prove ownership” and to add that he thought that there remained some doubt about the matter and that the doubt was later cleared up.[87]There was never any subsequent doubt about the matter. The draft agreement remained with the alterations removing the MG X POWER mark as an asset to be sold, the correspondence did not take up the matter again and the 2007 Agreement was entered into in the terms (relevant to this litigation) set out earlier. It is as plain as it could be that the MG X POWER mark was not included in the sale to SREL and that everyone involved in the transaction fully understood that this was so.[88]Mr Riley was asked about Mr Drukker’s statement that if the MG X POWER registrations had been “transferred back” (as they had been) the defendants “will rest with the position”. He was unable to explain why Mr Drukker had expressed himself in the terms of his letter to Ms Gosden. The obvious inference is that that is what Mr Riley was content that NAC should be told in the belief that it would allay their concerns.

The later history

[89]On 8 June 2007 - which was just three weeks before the 2007 Agreement was entered into - Herbert Smith faxed a letter to Robert Brand & Co acting for SREL. After referring to NAC’s recently publicised intentions to produce a new MG car (referred to in the letter as MGTF) and to NAC’s ownership of the goodwill in MG and its as proprietors of registered MG trade marks, the letter complained of SREL's inclusion of the letters MG in SREL's name. It drew attention to earlier letters of complaint by NAC about the matter and to various statements attributed to Mr Riley giving the impression that SREL intended to produce cars or provide services by reference to “MG”. It referred also to SREL’s intended purchase of SRL's assets and speculated that SREL might be doing so “in the mistaken belief that the MG X POWER or another MG trade mark or name forms part of those assets. This is emphatically not the case”. The letter concluded by requiring SREL “forthwith to change its corporate name to one not including ‘MG’ or anything confusingly similar thereto and to destroy all business stationery, brochures and other publications in its possession which include reference to ‘MG Sports and Racing Limited’. Confirmation by 15 June 2007 that the Company’s name had been changed was requested. No such confirmation was received.[90]The letter was circulated among the defendants’ advisers. Mr Bilewycz saw it (according to an e-mail later that same day, 8 June, to Mr Drukker and Mr Riley) as “a shot across the bows”. He emphasised the “need to talk to Nanjing direct (and as clearly as possible) about acquiring MG X POWER.”[91]There was then a delay before a reply was sent to Herbert Smith’s letter. It came on 25 June, just two days before the 2007 Agreement was entered into. In it, Robert Brand & Co stated two matters:
“1. Our client [SREL] is not trading under the name MG. 2 So far as we are aware our client is not in fact intending to manufacture any vehicles bearing the MG mark. ”
[92]When cross-examined about this response, coming so soon before the 2007 Agreement was concluded, Mr Riley sought to evade the clear import of the response by maintaining that his instructions to Mr Drukker of Robert Brand & Co had been that he had no intention of using what he referred to as “the historical MG mark” but that this did not include the MG X POWER badge which, as he put it, “I genuinely believed I had purchased… to build and produce a motorcar”. If that was indeed his instruction to Mr Drukker - it was not appropriate that such privileged matters be explored - it was one which Mr Drukker failed to make clear or in any way touch upon in his response to Herbert Smith.[93]In fact, at this very time, Mr Riley appears to have involved himself in a very different agenda. Although, as I have explained, the 2007 Agreement did not pass, or purport to pass, to SREL any rights in the MG X POWER marks and although, according to their e-mails with Herbert Smith and the liquidators (or their solicitors) the defendants confirmed in terms which do not permit of any real doubt that this was their understanding, Mr Riley persisted in his evidence before me in maintaining that, so far as he was concerned, the 2007 Agreement did indeed transfer to SREL the MG X POWER rights both in the UK and as a CTM. As he put it:
“if I had not been confident [that he was obtaining those rights] I would not have proceeded.”
[94]I regret to say that, even if Mr Riley has since convinced himself that this was so, this was certainly not his belief at the time that the 2007 Agreement was entered into.[95]On 29 June 2007, which was only two days after the 2007 Agreement had been entered into, Mr Riley sent an e-mail to NAC’s general manager in this country in which he stated that “I have now completed the purchase of assets of [SRL] … I now find that I control many of your MG Badgerights and you control at least one of mine”. I have already referred to this email. Once again the use of the personal pronoun is to be noted.[96]In his oral evidence Mr Riley accepted that the reference in that e-mail to “at least one” of the MG rights controlled by NAC was to the UK trade mark registration of MG X POWER. It is not clear what Mr Riley meant by stating that “I now find that I control many of your MG Badgerights …” (emphasis added). The email appears to have been a rather clumsy attempt to persuade NAC to co-operate with him in the development of a sports car. It appears that in 2006 there had been some talk of co-operation between NAC and two America entities, a Nevada company called Davis Capital LLC (run by Mr Michael Davis, already mentioned above) with which Mr Riley was associated and an Oklahoman company. A so-called “Framework Agreement on Joint Ventures” dated 18 August 2006 was entered into between NAC China and the two US companies. Nothing, however, came of the matter. On 10 January 2007 a Mr He Xiaoqing, a vice-president of NAC China and president of the second and third claimants, e-mailed Mr Riley to say that NAC had no interest in acquiring SRL and had no intention of manufacturing the sports vehicle then under development by SRL. This e-mail, sent in response to a suggestion by Mr Riley that he could usefully act as an intermediary in negotiations by NAC for the purchase of SRL (or its assets), marked the effective end of any co-operation between Mr Riley and NAC, the initiative and desire for which had come largely, if not wholly, from Mr Riley. Indeed on 20 April 2007, having heard of SREL’s existence, NAC China itself wrote to Mr Riley requesting a change of its name to one which did not include the MG letters, to refrain from infringing any of the MG trade marks and to cease any activity “that creates the impression that you are in any way associated or connected with NAC or any of its group companies”. The letter was ignored.[97]In the meantime, and despite his denials when cross-examined about it, it seems that Mr Riley was exploring the possibility of acquiring certain rights, including “badge rights” associated with MG Rover’s operations in mainland Europe. In this connection it appears that some of the rights were held by MG Rover Nederland (in administration). In an e-mail to Mr Bilewycz (with a copy to Mr Riley) dated 8 June 2007 Mr Davis - the same Mr Davis of Davis Capital LLC and, according to a company search, a director of SREL between November 2007 and January 2008 - wrote to say that:
“As William [ie Mr Riley] will confirm on Tuesday, we would now like to conduct due diligence, on the Dutch administrator’s MG IP including European marks, selling rights in various countries, etc. With a shrewd down payment on our purchase, we could begin to shut both Nanjing and Caterpillar [another entity] down with threatened injunctions - and secure good terms for buying Caterpillar Logistics business ($75m per year).”
[98]Mr Riley sought to distance himself from the stratagem outlined in this e-mail. But a fax dated 18 October 2007 from the lawyers acting for the Dutch administrator of MG Rover Nederland to NAC’s Dutch lawyers suggested that Mr Riley had purported to act on behalf of the parties to the so-called Framework Agreement (of August 2006) in acquiring the Dutch rights and that, after agreeing a price of £4 million for those rights, had since “disappeared in thin air”. Mr Riley denied that he had purported to represent NAC China in his negotiations with the Dutch administrator (about which NAC knew nothing at the time) or that he had subsequently disappeared. It is therefore a mystery how, if Mr Riley’s denial is to be accepted, the Dutch administrator could have come to think that Mr Riley had acted in this way. It is not a matter that I can (or need) resolve.[99]Nevertheless and making all due allowances for the incomplete state of the evidence, the strong impression conveyed by this and the other material before me is that having failed, as he knew at the time, to acquire for SREL from MG Rover Group the UK and Community trademark rights in MG X POWER, Mr Riley was intent on other ways of achieving this end or, at the least, on making life difficult for NAC.[100]This intent manifested itself in another action taken by Mr Riley at this time. This was when, on 3 August 2007 – just over a month after the 2007 Agreement had been entered into – SREL issued in the Trade Marks Registry thirty two applications under section 46(1)(d) of the Act, in each case to revoke a different MG trade mark registration in NAC China’s name. One of the applications related to the MG X POWER mark. The written grounds, when served on or about 17 December, in support all of the applications asserted that “all right, title and interest in and to” each of the registrations in question (including therefore that relating to MG X POWER) had been transferred by MG Rover Group to NAC China and that, as a result, the registrations had come to be owned by an entity (NAC China) which did not also own the business comprising the design etc of MG SV sports cars and matters associated therewith, including goodwill, all of which had formerly been owned by SRL but which had been sold by the 2007 Agreement to SREL. The applications asserted that, on assignment of the trade mark registrations, NAC China failed to make arrangements with MG Rover Group and SRL to ensure that the registrations would continue to be indicative exclusively of one source after the date of the assignments to NAC China with the result, the pleading continued, that the trade mark registrations “ceased to be distinctive and should not remain on the Trade mark Register” and that the use made of the registrations was to be of a nature as to mislead the public within the terms of section 46(1)(d) of the Act. This was the opening salvo in the contention – to which I come shortly – that registration of the various MG marks should be revoked as being deceptive.[101]In the meantime, the defendants launched their MG X POWER sports car. This is how the matter was put in paragraph 46 of Mr Riley’s witness statement:
“I…launched the MG X Power badged sports car onto the UK market at The Classic Car Motor Show on 9-11 November, using cars assembled from the parts and accessories …SREL purchased from the Liquidators and assembled at Eardiston, Worcestershire”
. He then referred to a plan to build a new factory “for the scaled production of MG X POWER sports cars” on six acres of land that he owns in the Eardiston area and how he had £250,000 worth of buildings on that site but then went on to state that “My initial plans to produce 1,800 cars by 2010 and employ up to 100 ex-TVR staff has [sic] been very much affected by the credit crunch…” He also referred to having suffered illness and how as a result of this and the difficult economic climate had “stifled my further attempts at expansion.” Cars bearing the MG mark were displayed at the Show in November 2007. It was clear therefore that any assurance given on the SREL’s behalf to NAC’s solicitors before the 2007 Agreement was made that the defendants had no intention of manufacturing any vehicles bearing the MG mark had been quickly replaced by an aggressive stance on the validity of the marks acquired by NAC China and by steps taken to do the very thing that NAC had been told that the defendants had no plan to do.[102]NAC came to hear of SREL’s presence at the Classic Car Motor Show and of other promotional activities by or on its behalf concerned with cars badged as MGs. It was thus made apparent to NAC that SREL was intent on using (and not simply of threatening to use) the MG badge in connection with its business of producing and selling sports cars. On 29 November and again on 21 February (this time through its solicitors) NAC China wrote to Robert Brand to assert its right to the MG brand. Complaint was once more made of the use of the letters in SREL’s name and, following the Classic Car Motor Show and SREL’s other promotional activities, of use of the brand in SREL’s business. Undertakings were sought, under threat of infringement proceedings, to stop these activities, make the necessary change to SREL’s name and terminate the revocation proceedings.[103]SREL replied through Robert Brand & Co. that it had no intention of complying with NAC’s requests. It failed therefore to give the undertakings sought. On the contrary, it warned of a court application for injunctive relief to prevent NAC from making “groundless threats” of infringement proceedings. Indeed, so far from bowing to NAC’s wishes, SREL applied to the Registry on 18 December 2007 to rectify the UK Trade Mark Register so as to have each of the thirty-two registrations in NAC China’s name (the very ones that were, at the same time, the subject of SREL’s multiple revocation proceedings!) vested in SREL’s name on the ground that SREL was the rightful owner all of them.[104]In due course NAC China took steps to file counterstatements and defences in the revocation and rectification proceedings which SREL had launched. At some stage - it is not clear quite when and does not matter – SREL appears to have amended its Registry applications so as to confine rectification to the vesting in its name merely of the MG X POWER registration and to limit revocation to the other thirty-one MG registrations.[105]On 5 September 2008, following unsuccessful discussions between NAC and Mr Riley in the previous May and June to see if matters could be resolved without recourse to litigation, NAC issued the present claim. At the same time it applied to the Registry for a stay of the revocation and rectification proceedings which stood listed for hearing at the end of that month. That application, which was opposed (SREL wishing the listed hearing to proceed), came before the IPO Hearing Officer who, in a written decision given on 12 November 2008 after evidence and argument, declined a stay but, instead, referred the revocation and rectification proceedings to this court. He made an order dealing with some of the wasted costs which had been run up in the proceedings before him. His order to transfer became unconditional on 10 December 2008. Thus, I am also concerned, at least formally, to deal with the relief sought in those proceedings as well.

Trade mark infringement and passing off

[106]I am satisfied that, in the events that happened and subject only to the particular defences and the counterclaim for revocation and rectification of the relevant registers to which I shall next come, NAC is entitled to relief against SREL for trade mark infringement concerned with the past and threatened future use by it of the MG and MG X POWER word marks and logo and for passing off. Having determined that SREL has no entitlement to the marks and the logo, or licence to use them, and that NAC China is rightfully the proprietor of them, I am satisfied that NAC is entitled to the injunctive and other relief that it seeks. I need say no more about trade mark infringement.[107]As to passing off the law is not in question: NAC must establish the threefold requirement of goodwill, a misrepresentation as to that goodwill leading to confusion among the public (or at any rate among those persons who are likely to make use of the relevant goods or services in relation to which the goodwill subsists) and damage or its likelihood. See Consorzio del Prosciutto di Parma v Marks & Spencer Plc [1991] RPC 351 (in particular the judgment of Nourse LJ). As to the first of those elements, NAC must show that there is substantial goodwill in the United Kingdom associated with the MG word mark and MG logo, in the field, inter alia, of motor vehicles and associated products and services, including the goods and services for which the UK and Community trade marks have been registered. As I have already explained this is admitted on the pleadings. NAC must show that it is the owner of that goodwill. This NAC successfully does. NAC must next show that the activities of SREL of which it complains are calculated to give rise and have given rise to the mistaken belief among members of the public (or, at any rate, those that are interested in sports cars) that SREL’s cars and associated products and services, including in particular the manufacture and supply of such cars and related products and services, are those of NAC or are connected or associated with NAC. This too is amply demonstrated. Indeed it is admitted. See paragraph 34 of the amended defence. Equally, the amended defence admits that SREL has represented and intends to continue to represent that it owns the MG word mark and logo. Although damage resulting from these matters is denied, it is obvious and the court requires no further proof that, given NAC’s ownership of goodwill and SREL’s activities, damage to NAC (or its likelihood if those activities are not restrained) is sufficiently established.[108]That leaves a number of particular defences which are raised, the counterclaim for revocation and rectification and the question of Mr Riley’s liability for SREL’s activities (if the various defences and the counterclaim all fail).

Sections 10(6) and 11(1) of the Act

[109]The defendants rely upon these provisions. Section 10(6) states that nothing in the preceding provisions of section 10 (concerned with what constitutes infringement of a registered trade mark) is to be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or as licensee. There is then a proviso to confine the operation of the subsection to “honest practices”. The defendants contend that the use of the MG and MG X POWER marks “has at all material times been for the purpose of identifying the goods and services as those of the registered proprietor, namely [SREL].”[110]Section 11(1) states, so far as material, that a registered trade mark is not infringed by the use of another trade mark in relation to goods or services for which the latter is registered. The provision then refers to section 47(6) of the Act. The defendants contend that the use by SREL of the MG and MG X POWER marks was “at all material times in relation to goods/services which were the subject of its International Registration and therefore United Kingdom trade mark number 2296016.”[111]SREL is not and never has been the registered proprietor of either the MG or the MG X POWER trade marks. It has established no right to be treated as such. Reliance on these two provisions is not therefore in point.

Goodwill and section 2(2) of the Act

[112]The defendants rely on a submission, by way of defence to NAC’s claims, founded upon section 2(2) of the Act and what Mr Engelman described as SREL’s common law position, that is its rights as owner of the business previously conducted by SRL. Section 2(2), states, inter alia, that “…nothing in this Act affects the law relating to passing off.” The particular submission was that the Act “defers to common law and therefore [to] unregistered trademark rights.” (I quote from Mr Engelman’s written closing submissions.) As I understood the submission, the point made was that if SRL, and now SREL (as SRL’s successor in relation to SRL’s business and assets), had an established reputation in the MG X POWER trade mark in connection with the cars it was making and selling under that mark, SREL was not to be deprived by NAC of its freedom to continue to do so merely because NAC China had acquired (if it had) the right to be registered (and had become registered) as proprietor of the MG X POWER mark, or had been allowed by MG Rover Group so to be registered.[113]Whatever else was comprised in the assets which passed to SREL under the 2007 Agreement, it did not include the MG X POWER marks. I have given my reasons for that conclusion. But, let it be assumed that goodwill was generated by the use of the MG X POWER brand so that a member of the public coming across someone trading in sports cars under or by reference to MG X POWER would associate the cars with the business that SRL had formerly conducted but which had since passed to SREL. Let it further be assumed that the goodwill passed to SREL on its purchase of the SRL business. In such circumstances SREL would be entitled to restrain that person from passing off his business as, or associated with, SREL’s. The fact that that person should be the proprietor of the MG X POWER trade mark would not give it a defence. But that is not this case. It is not suggested that NAC is carrying on business under the MG X POWER brand. The question rather is whether ownership of the MG X POWER marks confers on NAC (NAC China in particular) the right to restrain SREL, notwithstanding that it is SRL’s successor in respect of the MG X POWER-branded business, from infringing the MG X POWER registered marks. The answer, unhesitatingly, is that it would.[114]I was referred in the course of argument on this to Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] RPC 367 and to Inter Lotto (UK) Ltd v Camelot Group Plc [2003] EWHC 1256 (Ch); [2004] RPC 8; [2003] EWCA Civ 1132; [2004] RPC 9 where there was discussion of the problems that can arise at the interface between a registered trade mark (and the rights that ownership of the mark carries) and the rights acquired as a result of the generation of goodwill from the prior legitimate use of the mark by another. The position here is not affected by the matters that were debated in those cases. It would not be profitable for me to say anything about them. It is sufficient to say that any goodwill or reputation resulting from the use by SRL of the MG X POWER trade mark in the course of its business which passed to SREL under the 2007 Agreement does not provide it with a defence to NAC’s claim for trade mark infringement. I should say that Mr Purvis submitted that, in any event, insofar as there was some kind of goodwill associated with the use of the MG X POWER trade mark, this would have belonged to MG Rover Group, not SRL. In the circumstances, I do not need to explore this particular submission.

The invalidity attack

[115]The defendants contend that, whether or not the 2007 Agreement operated to pass to SREL the right to the MG X POWER marks, in the events that happened the registrations of the marks containing the letters MG (other than of MG X POWER) are liable to be revoked and should be revoked under section 46(1)(d) of the Act (in the case of the UK marks) and under article 50(1)(c) of the Regulation (in the case of the CTMs). This is the relief which the defendants seek by their counterclaim and also in the Registry revocation proceedings which have been referred to this court for determination.[116]Section 46(1)(d) provides that “(1) The registration of a trade mark may be revoked on any of the following grounds – … (d) that in consequence of the use made of it by the proprietor or with his consent in relation to goods or services for which it is registered, it is liable to mislead the public, particularly as to the nature, quality or geographical origin of those goods or services.” Article 50(1)(c) allows for revocation of a CTM on the same grounds. The issue raised is that of deception: the misleading of the public by reason of the use made of the trade mark by the proprietor or with his consent in relation to the goods for which the mark is registered. What is said by the defendants – as it was formulated by Mr Engelman in the course of his closing submissions – was that “the omission to purchase all of the trade marks prefixed MG by [NAC] and/or the assets associated with the ‘manufactory’ of the business of [SRL] (in administration) was an omission which rendered the trade marks prefixed MG deceptive in the UK marketplace.” The issue raised is that of deception: the misleading of the public by reason of the use made of the trade mark by the proprietor or with his consent in relation to the goods for which the mark is registered. What is said by the defendants – as it was formulated by Mr Engelman in the course of his closing submissions – was that “the omission to purchase all of the trade marks prefixed MG by [NAC] and/or the assets associated with the ‘manufactory’ of the business of [SRL] (in administration) was an omission which rendered the trade marks prefixed MG deceptive in the UK marketplace.”[117]The essence of the contention, according to paragraph 13 of the amended defence and counterclaim, as further explained in Mr Engelman’s written closing submissions, was as follows. First, execution of the 2005 Agreement led to a division of assets associated with or bearing the MG marks in that neither the SRL business and assets nor the rights to the MG X POWER marks passed to NAC but remained with MG Rover Group (or within its group). Second, prior to the 2007 Agreement, SRL had been making and selling cars bearing the MG X POWER mark, also loose equipment, jigs, panel moulds, spare parts and similar items and merchandise bearing the MG X POWER mark, and that following the 2007 Agreement SREL continued to do so. Third, as a result of these matters all of NAC’s registered and unregistered rights in the MG trade marks became deceptive. Fourth, this deceptiveness also existed if, which the defendants deny, NAC acquired the registered (or even merely the unregistered) rights in the MG X POWER marks under the 2005 Agreement since NAC continued after the 2005 Agreement to allow SRL to make and sell cars bearing a mark prefixed (or otherwise branded) MG, namely MG X POWER or some variant of it. This is because (as Mr Engelman put it) “the manufactory of MG X POWER cars remained with the liquidators of [SRL] but the registered and unregistered rights to MG prefix badged cars went to NAC.”[118]I hope I have correctly followed the submission.[119]It is a submission which I unable to accept. I am unable to do so for several reasons. I need mention only the following.[120]First, in so far as the submissions assume that NAC China did not acquire from MG Rover Group the right to the MG X POWER marks it fails since I have concluded that NAC China did acquire that right. It did so either under the 2005 Agreement or by tacit acceptance on the part of MG Rover Group’s liquidators.[121]Second and in any event, I accept Mr Purvis’s submission that the fact alone (assuming for the sake of argument that this is what happened) that the MG X POWER marks remained in the ownership of MG Rover Group did not amount to “use” of those marks (let alone of any of the other MG marks) within the meaning of section 46(1)(d) of the Act (referring to “…the use made of [the mark] by the proprietor or with his consent…”) or within the meaning of article 50(1)(c) of the Regulation. The fundamental point in this regard, as Mr Purvis correctly explained, is that ownership of a registered mark gives no right to use but simply the right to prevent others from using it. See section 9 of the Act. The evidence is clear that, except as mentioned in the next paragraph, NAC did not at any time as their proprietor consent to any use of the MG X POWER marks either by MG Rover Group or by any third party, let alone any use which might mislead the public in any way. As the correspondence referred to earlier shows, NAC, as soon as it got wind of the possibility, objected to any suggestion that the liquidators of MG Rover Group might sell to a third party the right to the use of the MG X POWER marks. Moreover, it made clear to SREL that it must not make any use of any mark which included the letters MG. It objected to the inclusion of the letters MG in SREL’s name. Indeed, as Mr Purvis pointed out, the only deceptive use which infringed NAC China’s registered right to the mark was by SREL. Such infringing use could not give rise to invalidity save in the exceptional case where it was passively observed by the proprietor over such a long period and on such a scale that it could be said to have occurred with his consent and in circumstances where the mark could no longer be said to operate as a guarantee of origin (which is what marks are all about). That was not the present case where there was neither passive observance by NAC nor use by the defendants on any sufficient scale.[122]Third, as regards dealings with finished cars bearing the MG X POWER (or related) marks, it was the case that at the time of the 2005 Agreement and subsequently a number of finished cars were sold which carried the MG X POWER (or related) trade mark. The evidence about the number of finished cars that were sold by (or on behalf of) the administrators of SRL was very slight: at most no more than a handful were sold; Mr Riley referred to a sales report at exhibit Q to his first witness statement but the cars listed there were all pre-2005 registrations and some are referred to as having considerable mileages on the clock. There was a similar paucity of evidence in relation to the spares and other items. The overall numbers involved were in all likelihood extremely small, and in the case of finished cars probably no more than a dozen or so. There was no evidence that the administrators of SRL carried on manufacturing new cars. In the case of trading by MG Rover Group, according to recital B to the 2005 Agreement, the administrators stated an intention to carry on business for no more than ten days. There is no reason to doubt that that happened and that any trading thereafter ceased. I was also given to understand by Mr Riley that some finished cars were sold by SREL after the 2007 Agreement was made. Significantly, however, the cars in question had been manufactured by SRL under licence (actual or to be implied) from MG Rover Group (SRL’s parent company). Clearly therefore SRL (or, to the extent that it sold any, SREL) was free to sell them. Their sale was neither deceptive nor capable of rendering deceptive the future use of the MG marks. The marks on the cars correctly identified them as genuine goods produced by or under licence from the MG brand owner, namely MG Rover Group. The fact that the ownership of the MG brand passed to NAC after the cars had been made is therefore of no materiality. Moreover, the actions of MG Rover Group or SRL (acting by their respective administrators or, later, by their liquidators) in subsequently selling any of the finished cars could not in law constitute use of any MG mark by NAC or with its consent: these were actions entirely outside NAC’s control. As regards any spare parts and other items bearing the MG X POWER (or related) marks which were sold by MG Rover Group (or SRL) after the 2005 Agreement or were sold to SREL under the 2007 Agreement and which SREL subsequently sold, no deception was involved. The spares and other items genuinely carried the mark in that they had come into being bearing the mark with the consent of MG Rover Group as proprietor at the time of the mark or marks in question. Moreover, as with the finished cars, their sale was not use of any mark by or with the consent of NAC.[123]The various authorities to which Mr Engelman referred in his written closing submissions on this aspect of the dispute do not bear on what is essentially a question of fact, namely whether use of the registered trade mark in question by the registered proprietor or with his consent in relation to the goods or services for which it was registered was “liable to mislead the public”. Authority is of little assistance. In any event, several of the authorities related to trade mark law as it was before the Trade Marks Act 1938 when, for example, the assignment of a trade mark was not possible without the assignment with it of the business with which the trade mark was associated. Full freedom to assign a trade mark separately from its associated business was only made possible by the 1994 Act.[124]It is sufficient to say that in both cases – finished cars and spares (and other items) – there was no evidence either of deceptiveness or of use by NAC or with its consent. Reliance on section 46(1)(d) of the Act or on article 50(1)(c) is simply not in point.

Exhaustion of rights

[125]It was not clear from Mr Engelman’s written closing submissions whether the defendants were seeking to run some sort of separate defence based upon the fact that, under the 2007 Agreement, the sale to SREL included a quantity of items (spares and tooling and the like) which carried the MG and MG X POWER marks. I deal with the topic nevertheless.[126]There is no doubt – and NAC does not seek to challenge – that SREL was entitled to deal with those parts and other items notwithstanding that they carried those marks. Section 12(1) of the Act provides that “A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent.” Here the items had been put on the market by or with the consent of MG Rover Group as the proprietor of the marks at the time that they were put on the market. But, as Mr Purvis submitted and I accept, the right to deal with spares, as for example by incorporating them into a new car, did not entitle the defendants to sell the car in question under the MG (or some derivative) brand; likewise, the purchase of tooling by SREL gave no right to make and sell new cars made as MG branded vehicles.[127]This case, as Mr Purvis further pointed out, is not about the sale and use of branded spares, tooling and other such items (although NAC’s particulars of claim did not make this wholly clear and the defendants could perhaps be forgiven for thinking that the claim did so extend until the position was put beyond any doubt by Mr Purvis in the course of his opening). It is about SREL’s claim to be entitled to make and sell new cars under the MG (or some derivative) brand, its threat and assertion of a right to carry on doing so in the future, and its other activities which falsely suggest a connection with MG, the rights to which (and associated goodwill) have since the 2005 Agreement have been owned by NAC.

The joint liability of Mr Riley

[128]The activities of which NAC complains have been carried out in SREL’s name. The question is whether Mr Riley is jointly liable for them. The mere fact – as I accept it to be – that he is and has at all material times been SREL’s controlling shareholder and principal director and is clearly SREL’s moving spirit does not without more make him jointly liable with SREL for the matters complained of. The circumstances in which an individual may be made liable as a joint tortfeasor along with a company were reviewed by the Court of Appeal in MCA RecordsInc v Charly Records Ltd [2001] EWCA Civ 1441 [2002] FSR 26 (at [29] to [52]). The claimant must show that, where an individual is a director or controlling shareholder of the company, his conduct has gone beyond the carrying out of his constitutional role in the governance of the company. He will attract liability if, in relation to the wrongful acts which are the subject of complaint, “his participation or involvement [has been] in ways which go beyond the exercise of constitutional control”. (See Chadwick LJ, giving what was effectively the judgment of the court, at [51]). “In particular,” said Chadwick LJ at [52] speaking of the field of intellectual property, “liability as a joint tortfeasor may arise where…the individual ‘intends and procures and shares a common design that the infringement takes place’.”[129]It is abundantly plain on the evidence that Mr Riley’s conduct in relation to SREL’s activities of which NAC complains went far beyond his purely constitutional role in the governance of SREL. SREL was no more than the means through which Mr Riley pursued his ambition to make and sell MG badged sports cars. It is noteworthy that he failed to distinguish between himself and SREL: he and SREL were in this regard effectively one and the same. I have quoted passages from Mr Riley’s evidence where, in referring to actions taken in SREL’s name, Mr Riley speaks in the first person. The fact that he had difficulty in explaining what the constitutional position was within SREL (for example, who from time to time were the directors and shareholders) and the absence of board minutes and the like are part and parcel of the same overall impression of a company whose every action material to this litigation was personally and directly procured and instigated by Mr Riley. Thus, during Mr Riley’s incapacity for several months in the course of 2009 Mr Drukker was unable, according to paragraph 3 of the latter’s witness statement of 23 November 2009, to obtain any instructions at all from SREL. In the course of his cross-examination Mr Riley accepted that the decision on how to brand the cars that SREL was selling and proposing to sell was his (Mr Riley’s) alone and not that of anyone else.[130]In his written closing submissions Mr Engelman referred to the involvement in SREL of Mr Michael Davis (who, as I have earlier mentioned, was for a few weeks a director of SREL) and, at a later time, of a Mr Brian Mitchell. Their roles within SREL were extremely unclear. Mr Davis’s role, as far as I am able to discern, was not directed to any decision to undertake any of the activities which amount to an infringement of NAC’s rights. It was not evident what Mr Mitchell did within the company in his position as a director and there was really no evidence, or certainly none that was identified, to show that he had any relevant involvement in the matters of which NAC complains. It is not sufficient for Mr Engelman to submit that NAC has “not made out any sufficient case which allows the Court a contextual analysis of [Mr Riley’s] position vis-a-vis any other director.” If the defendants let no light into the inner workings of SREL, they cannot complain if the court judges the position on the material before it. That material amply justifies the conclusion establishing Mr Riley’s joint liability.

Relief

[131]I shall grant the injunction to restrain passing off and trademark infringement as sought. I shall order SREL to change its name to one which does not include the letters MG. I shall also order delivery up and forfeiture in the terms sought, direct the defendants to remove all references to MG on their web-site and take all necessary steps to transfer into NAC China’s name the domain name mg-x-power.com and any other domain name which includes the mark “MG”. I shall also direct, if it is still sought, the inquiry as to damages or, at NAC’s option, an account of profits in the terms of paragraph (4) of the claim form together with an order for payment in the terms of paragraph (5). The counterclaim for revocation and rectification fails, as do the parallel Registry proceedings referred to this court by the Registry on 10 December 2008.[132]I will hear from counsel what precise form the order should take to reflect these matters and deal with costs.