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A brother's feud: partnership ownership of goodwill

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United Kingdom

It is only when members of a band fall out that cracks can start to appear over who owns the right to the name as a very recent decision about the band originally known as LOVE INJECTION or LUV INJECTION, illustrates.

In this case, Thomas v Luv One Luv All  [2021] EWCA Civ 732, the Court of Appeal overturned the order of HHJ Clark sitting in the IPEC who had struck out parts of a defence on grounds of issue estoppel.  The case concerned findings of the UKIPO's Hearing Officer which were later challenged in court proceedings for passing off.  The Court of Appeal found that the Hearing Officer had not appreciated the legal distinction between a partnership and an unincorporated association when it came to the ownership of goodwill in a band's name.

Background

Between 1986 and 2016, half-brothers, Ian Thomas and Winston Thomas were members of a band called LOVE INJECTION or LUV INJECTION.  After the band split, Ian started to perform with others under the name LOVE INJECTION or LUV INJECTION and Winston started to perform with some original band members and others under the name LUV INJECTION SOUND.  Both claimed they were performing as the original group, giving rise to a dispute as to who owned the goodwill in the name and the right to continuing using it.

In 2017, Winston applied to the UKIPO to register LOVE INJECTION SOUND and LUV INJECTION SOUND, the first of which was granted.  Ian brought invalidation and opposition proceedings on the grounds of passing off and bad faith.  The UKIPO Hearing Officer held that the goodwill in the group’s name did not belong to Winston alone and so Ian's opposition succeeded on the grounds of passing off. The Hearing Officer also found that the applications had been made in bad faith.

In 2019, Ian issued proceedings against Winston and his company for passing himself off as the band.  In a counterclaim, Winston alleged that he owned the goodwill in the name as a sole trader and that Ian was liable for passing off.  Ian asserted that Winston was precluded from making that counterclaim on the basis of cause of action and issue estoppel.  Following an application from Ian, HHJ Clark held that Winston was estopped from denying the Hearing Officer's findings in relation to ownership of the goodwill and struck out parts of his defence.  Winston appealed that order. (HHJ Clark had rejected the allegation of cause of action estoppel as that doctrine did not apply to earlier opposition proceedings.)

Court of Appeal's ruling

In his leading speech, Lord Justice Lewison held that, because there was no separate route of appeal against the Hearing Officer’s decision that weighed in favour of there being no issue estoppel.  This was because an inability to appeal may be a special reason for a court to permit a challenge to the ratio of the judgment where it transpires that the decision was wrong.

On the facts, the goodwill in the band's name was partnership property.  On dissolution of the partnership each of the partners were entitled to ask for the partnership assets to be realised and divided amongst them under the Partnership Act 1890.  Although the Hearing Officer made a finding that Winston alone did not own the goodwill after the split, he did not make a finding about who actually did own the goodwill.

In the circumstances, Lewison LJ reasoned that it was doubtful that the Hearing Officer’s decision created an issue estoppel.  Even if it did, there were special circumstances to allow Winston to challenge Ian’s standing to bring a passing off claim otherwise than for the benefit of the partnership.  This was because Winston could not appeal the Hearing Officer's decision, which had failed to appreciate the distinction between partnerships and unincorporated associations and their regulation on dissolution.  Winston ought to be able to defend the proceedings and consequently the order of HHJ Clark was overturned.

Comment

The legal distinction between partnerships, unincorporated associations and sole traders is rarely something that is appreciated when a band is formed. The importance of identifying the correct status for determining certain issues of ownership of band assets is often only recognised when a dispute arises.  It will be interesting to see how the case proceeds in the IPEC now that the defence has been allowed.
 

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