The Flip Side of the Coin

Joshua Teoh explains the principles of reverse passing off

 

WHAT IS REVERSE PASSING OFF?

Passing off is a cause of action founded in tort under the common law against the misrepresentation in trade by a trader which causes, or is likely to cause, damage to another trader’s business, goodwill and reputation.

The conventional or classic form of passing off occurs when trader A represents his goods or services to the market as though his goods or services originated from trader B, who usually has a better reputation and goodwill in his goods or services than trader A, and as a result of such misrepresentation, consumers are confused or deceived into believing that the goods or services of trader A are associated with trader B.

On the other hand, reverse passing off (also known as inverse passing off) describes a situation where trader A represents the goods or services of trader B as though they are those of trader A, thereby denying trader B of the recognition and credit due to his goods or services and causing consumers to be confused as to the producer or origin of those goods or services.

The questions often asked in relation to reverse passing off are: What is the harm in such a method of doing business? Why would trader B be bothered about his goods after he sold them to trader A? Should not trader A be free to buy trader B’s goods and do as he pleases with them?

One possible answer to the above questions is that trader B may be interested in more than just making present sales. Perhaps he is more interested in building a lasting reputation and goodwill for his goods and business. For trader B to do so, customers must know that the goods originated from him and are not misled that the goods originated from trader A or that trader A is affiliated with trader B.

 

REVERSE PASSING OFF AS AN ACTIONABLE TORT

Although reverse passing off is not a nominate tort on its own, the common law has treated it as a further example of an actionable misrepresentation to which the normal principles of passing off apply. The essential features that can be found in cases of both conventional passing off and reverse passing off are the element of misrepresentation and the reasonably foreseeable consequence of a trader’s business, reputation and goodwill being damaged by the conduct of another trader.

The leading case in the English common law for recognising reverse passing off is the Court of Appeal’s decision of Bristol Conservatories Ltd v Conservatories Custom Built Ltd [1989] RPC 455. In this case, one of the defendants was employed by the plaintiffs as a salesman. During his employment with the plaintiffs, he had kept a book of photographs that showed conservatories designed and built by the plaintiffs. After he joined the defendants, he and other salesmen showed the same photographs to prospective customers as examples of conservatories which the defendants had purportedly supplied.

The Court of Appeal found that if a customer had ordered a conservatory from the defendants in response to the photographs, he would have been supplied with a conservatory of the defendants’ manufacture instead of the represented commercial source, which was of the plaintiffs’ manufacture. Therefore, there was a misrepresentation of the plaintiffs’ goods through the photographs utilised by the defendants and this would have caused damage to the plaintiffs in the form of lost sales, considering that the prospective customers of the defendants could have been customers of the plaintiffs had not the misrepresentation been made.

Bristol Conservatories Ltd is also noteworthy in two other respects. Firstly, it was not the first case of reverse passing off. Secondly, the Court of Appeal declined to decide whether there is a form of tort known as reverse passing off. Instead, it had preferred to find the facts of the case to be within the tort of passing off. Notwithstanding the foregoing, this decision has become the main reference point in subsequent cases of reverse passing off.

  1. The Singapore case of Tessensohn t/a Clea Professional Image Consultants v John Robert Powers School Inc & Ors [1994] 3 SLR 308 has also recognized that reverse passing off is actionable. In this case, the appellant had operated a school that ran social development courses under a franchise from the respondent.

 

After the franchise was terminated, the appellant started her own school that offered similar courses and circulated to her students the respondent's lecture notes without any acknowledgement as to their source. The Court of Appeal held that the appellant had misrepresented to her students that the respondent's lecture notes were the product of the appellant's own effort and issued an injunction to restrain her from passing off the respondent's notes as her own.

In Malaysia, the only reported decision where the court had considered the issue of reverse passing off is the High Court case of Ming Kee Manufactory Limited v Kee Hin Industries Sdn Bhd & 3 Ors [2008] 1 LNS 777. In this case, the plaintiff had invited the court to consider whether there was a case of reverse passing off by virtue of the defendants’ sale of a product (plugs) which had a component (fuses) in it that originated from the plaintiff.

The High Court found that there was no reverse passing off as the defendants did not hold out the plaintiff’s component as a product of theirs. In fact, the component had been sold with the plaintiff’s brand still intact on it even though the brand could not be seen from the outside. Accordingly, the court held that there was no misrepresentation by the defendants.

Recently, there was a case in the United Kingdom which shared a similar set of facts with Bristol Conservatories Ltd. In Pendle Metalwares Ltd (trading as Thomas Barker & Son) v Walter Page (Safeway’s) Ltd and another company [2012] Lexis Citation 59, the High Court followed Bristol Conservatories Ltd and held that the defendants’ use of photographs that showed the plaintiff’s product (cigarettes bin) amounted to reverse passing off.

INSTANCES OF REVERSE PASSING OFF

The clearest case of reverse passing off is where a trader sells the goods of another trader as though they originated from him, by removing the original labelling of the goods or by re-labelling the goods as his own without prior authorisation from the producer or originator of the goods. However, a trader who sells a product which contains a component that is produced by another trader will not be liable for reverse passing off so long as the first-mentioned trader does not hold himself out to be the producer of the other trader’s component, like the case of Ming Kee Manufactory Limited.  

Reverse passing off may also arise in situations which do not involve the sale of goods or services of another trader.

 

Falsely advertising achievements of another as one’s own

There have been decisions, such as Samuelson v Producers Distributing Co (1931) 48 RPC 580 and Plomien Fuel Economiser Coy Ltd v National School of Salesmanship Ltd (1946) 60 RPC 209, where the courts found a case of reverse passing off when a trader had, for the purpose of promoting and advertising his goods or services, adopted and used the achievements and credits of another trader.

Examples of such a situation include one where a trader uses or adopts the reviews and comments made in relation to goods or services of another trader to boost the sales of his own goods or services, or where a trader claims for his goods or services, credits that belong to another trader.

Although the situations depicted above do not involve the sale of any goods or services of another trader, there are nevertheless misrepresentations in that a trader has wrongfully claimed as his own, the achievements and credits that belong to the other trader.

 

Holding out goods or service of another as one’s own

An example of such a situation would be the facts in Bristol Conservatories Ltd discussed above, where the photographs of the plaintiffs’ goods were used by the defendants to promote the sale of the latter’s goods.

Although there were no actual sales of the goods or services belonging to another trader, the misrepresentation was committed by the trader who held out the goods or services of another trader as samples of his own. As a consequence of such holding out, customers or potential customers may be induced to believe the trader who did the holding out was capable of providing the same goods or services, in terms of reputation, standard and quality, as the goods or services of the other trader.

 

CONCLUSION

Every trader is entitled to be given due recognition and credit as the producer and originator of his goods or services and not to let others dishonestly deprive him of what that is rightfully his. Similarly, unscrupulous traders should not be allowed to deceive consumers as to the producer or originator of goods or services that are sold in the market. The cause of action against reverse passing off would enable both of these objectives to be achieved.

 

Writer’s e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 
ACCOLADES & AWARDS

Skrine Retains Who’s Who Legal Accolade for Malaysia

On 15th May 2017, the Who’s Who Global Awards was held in London, United Kingdom and Skrine was conferred the Award:

Malaysia Law Firm of the Year 2017

Skrine previously received this Award in 2013, 2014, 2015 and 2016.

>> READ MORE

SKRINE Clinches Top Honours at ALB Malaysia Law Awards 2017

On 6th April 2017, the Asian Legal Business Malaysia Law Awards was held and SKRINE was named

Malaysia Law Firm of the Year 2017

SKRINE also bagged 5 other awards

>> READ MORE

Asialaw Profiles 2017

The Asialaw Profiles has ranked Skrine as Outstanding Firm and particularly highlighting the following practice areas:

Outstanding Firm

  • Competition & Antitrust
  • Corporate/M&A
  • Dispute Resolution
  • Energy & Natural Resources
  • Intellectual Property
  • IT, Telco & Media
  • Project & Infrastructure

>> READ MORE

PDPA NOTICE

English | Bahasa Malaysia