When can directors be held jointly liable for the wrong committed by the company?

The Supreme Court also considered whether the directors should be ordered to account for profits and if so, whose: those of the company or the directors.  


In this case, Lifestyle Equities CV (Lifestyle) brought proceedings against various defendants alleging trade mark infringement and passing off. Mr Kashif Ahmed and his sister, Ms Bushra Ahmed, were joined as defendants in the proceedings. Mr Ahmed was the sole director of Continental Shelf 128 Ltd and was a co-director, together with Ms Ahmed, of Hornby Street Ltd.  

The companies operated by the Ahmeds have been offering for sale various items of clothing and footwear which were said to infringe Lifestyle’s registered trade marks and/or amount to passing off. In the course of the proceedings, it was alleged by Lifestyle that the Ahmeds authorised or procured the companies to do the acts complained of and, therefore, should be jointly liable to Lifestyle to account for the profits made.  


The Supreme Court did not consider whether the acts committed by the companies amounted to trade mark infringement and/or passing off. The Supreme Court’s judgment focused on the liability of the Ahmeds arising out of acts committed by the companies.  

The Supreme Court summarised that a person will be jointly liable with the other who committed the wrong if they knowingly procure another to commit the wrong. Separately, a person will be liable if they assist another to commit the wrong in circumstances where the assistance is more than trivial and is given pursuant to a common design between the parties.  

However, the Supreme Court emphasised that it must be shown that the person had the relevant knowledge that another (in these circumstances, the companies operated by the Ahmeds) engaged in infringing activities. In absence of such knowledge, the person will not be liable. There is a line drawn here between what is required when pursuing the primary infringer (for example, a company) and the accessory to that primary infringement. In the case of IP infringements, (in most cases) knowledge of the infringement is not required. However, here it’s clear that strict liability is not sufficient when pursuing a party for accessory liability.  

In this case, whilst the Ahmeds were found to have caused (or directed) the company to do the acts which amounted to the infringements, the Ahmeds were found not to have the knowledge that the acts themselves would amount to an infringement, which is required to make them jointly liable with the companies.  The Supreme Court found that there was room for argument and an honest difference of opinion about whether the extent of the similarity between the signs used by one of the companies gave rise to a likelihood of confusion (which is what is required under one of the claims for trade mark infringement in accordance with the Trade Mark Act 1994). Further, in relation to the other claim for trade mark infringement (again in accordance with the same Act), the Court found that there was no evidence to suggest that the Ahmeds deliberately intended to take advantage of the distinctive character or repute of Lifestyle’s trade marks.  

On that basis alone, the Supreme Court was satisfied that the Ahmeds were not jointly liable to account for the profits made.  

However, the Supreme Court, usefully, went on to consider what, if any, profits the Ahmeds would have made should they have been found to be liable and for which they would have to account.  It also concluded (as did the Court of Appeal) that a person may only be held liable to account for profits which they have made, and not profits made by others (i.e., the companies of which they are the ultimate owners).  

The Supreme Court also considered what is ‘profit’ in circumstances such as these. When there is no evidence to suggest that salaries paid are anything more than simply that – remuneration for services rendered – a salary is not ‘profit’ for the purpose of an account.  


This decision will be a relief to Directors who are at risk of being sued as joint tortfeasors in both intellectual property claims as well as other tortious non-IP claims. Quite often, IP lawyers see Directors being threatened with claims to put pressure on the company that is the primary infringer to settle a claim. Claimants will have to think carefully before doing that in the future (and indeed issuing these claims).  

What’s clear from the judgment is that, if a Claimant does intend to bring this type of claim, it will have to be careful to ensure that defendants are cross examined thoroughly about their knowledge of the infringing acts for a finding of fact to be made that reaches the right threshold to establish knowledge.  

Overall, the judgment of the Supreme Court provides legal teams with excellent guidance on when it is appropriate to bring a Director into proceedings, and what liability they may face when that happens.  

If you are concerned about intellectual property issues related to your business, why not speak to our IP team, who can give you guidance, explain the legal complexities and help you find the solution that works for you.