‘Tartan Army’ trade mark infringement claim to proceed against company after judge rules sole director was not personally liable

A judge in the Court of Session dismissed an action by The Tartan Army Ltd against Iain Emerson, sole director and shareholder of Alba Football Fans Ltd, as “irrelevant”, while allowing the claim to go ahead against Alba, after ruling that there was “no basis” for finding that he was jointly liable with the company for any alleged infringement.

Lord Glennie heard that since 2006 the pursuer has owned a number of trademarks for the “Tartan Army” mark, which have been filed and registered in the UK and a number of other countries and provide protection in classes which include textile goods, clothing, footwear, headgear and football strips, as well as a European Community trade mark which provides protection in printed matter and magazines, travel agency services, travel and ticket reservation services and travel information services for supporters of the Scottish national football team.

The pursuer claims that from about 2007 or 2008 the defenders have infringed its rights in the “Tartan Army” trade mark by publishing a magazine known as “The Famous Tartan Army magazine” and offering other services using the “Tartan Army” mark.

It was submitted that Mr Emerson (the third defender), as the sole director and shareholder of Alba (the fourth defender), was the “controlling mind” and “personification” of the company and therefore he had “directed or procured the commission of the wrongful act complained of”.

It was argued that Mr Emerson “fell squarely into the category of an individual who had made the infringing act his own”.

In his defences Mr Emerson denied that he had directed or procured the actions of Alba, that he was “acting in concert” with Alba, or that he was in any way liable personally for any of the acts about which the pursuer complained.

Lord Glennie observed that there were “a limited number of situations where the court may look behind, beyond or through the corporate structure to hold an individual liable for acts or omissions ostensibly done by a company under his control”.

“But,” he added, “the court will only allow the veil to be pierced to prevent abuse of the corporate legal personality and where no other remedy is available to prevent that abuse; it will not allow the veil to be pierced to unravel situations, short of abuse, where incorporation of a company with a separate legal personality is used to cause a legal liability to be incurred by the company rather than by the individual and is relied on to assert, if it be true, that the liability is that of the company rather than that of the individual”.

The judge held that “even on the most charitable reading of the averments made by the pursuer, its case against Mr Emerson personally is bound to fail”.

In a written opinion, Lord Glennie said: “I accept that the relationship between Mr Emerson and Alba…is undoubtedly close. Alba is, to all intents and purposes, ‘his; company. He makes all the decisions. He is its directing or controlling mind.

“But that relationship is no different in principle from the relationship between individual and company to be found in every case of a one man company set up for the purpose of enabling the individual to carry on a business with the benefits of incorporation. The fact that Alba can properly be described as a ‘one man company’ does not of itself give any substance to the pursuer’s case.

“Every company is set up for a purpose, usually informed by past experience, hopes and ambitions, but that purpose, short of fraud or concealment or evasion of some legal liability, is irrelevant to the question of whether the rights and liabilities arising out of acts or omissions of the company are rights and liabilities belonging to the company or the individual.

“There is no averment in the pursuer’s pleadings which might open up a case that Mr Emerson set up Alba for any improper purpose, whether to conceal his involvement in publishing the Magazine and offering the goods and services or to evade legal liabilities or obligations placed on him personally.”

The main thrust of the pursuer’s case was that Mr Emerson was jointly liable with Alba for the acts of infringement, but the judge observed that there was no averment that Mr Emerson procured any of the acts of infringement carried out by Alba; there was no averment that Mr Emerson specifically assisted in the commission of any particular act of infringement; or that he did so pursuant to any common design.

He continued: “The pursuer’s case rests entirely upon the fact that Alba is a one man company, owned and controlled by Mr Emerson. The inference, presumably, is that Mr Emerson took the decisions to publish and offer goods and services. That is obviously right, but to my mind it takes the pursuer nowhere. On that basis every owner or director of a one man company would be liable without more for the acts of the company.

“In every case the rule in Salomon, re-emphasised in Prest, could simply be side-stepped by an averment that the director was jointly liable with the company in the commission of the tort or delict. The ‘corporate veil’ would not only be pierced; it would be left in tatters.”

He added: “There are no specific averments that Mr Emerson did anything specific to assist in or become an accessory to any alleged infringing acts other than taking decisions as sole shareholder and director, and the mere fact that he took such decisions as sole shareholder and director does not make him personally liable for the acts of the company.”