Court clarifies mechanism for challenging company names

The High Court has clarified the grounds on which one company can challenge the name under which another company is registered in the UK.

What happened?

Botanica Agriculture and Extraction Ltd v Botanica Ltd [2022] EWHC 2957 (Ch) concerned two UK companies with registered names containing the word “Botanica”.

Botanica Agriculture and Extraction Ltd (“BAEL”) was established under that name in November 2019 (having been incorporated a month earlier under a different name). Botanica Ltd was incorporated in April 2020.

Under section 69 of the Companies Act 2006, a person (an “applicant”) can object to the name under which a UK company (the “respondent”) is registered if they can show that:

  • the company’s registered name is the same as a name associated with the applicant in which the applicant has goodwill; or
  • it is sufficiently similar to such a name that its use in the UK would be likely to mislead by suggesting a connection between the company and the applicant.

Under this procedure, the applicant need only demonstrate that they have goodwill in the name in question. Once they have established this, it is up to the respondent to prove that they registered their name before the applicant generated that goodwill. In other words, the applicant needs to demonstrate the existence of goodwill and the respondent needs to demonstrate the relative timing.

BAEL objected to Botanica Ltd’s name on the basis it was the same as, or substantially similar to, BAEL’s name and that BAEL had acquired goodwill in the name “Botanica”. In September 2020, it applied to the Company Names Tribunal for an order requiring Botanica Ltd to change its name.

The Tribunal rejected BAEL’s application on the basis that BAEL had not generated goodwill in the name “Botanica”. It said that the relevant point in time for determining whether goodwill existed was the point at which Botanica Ltd was incorporated, namely April 2020.

However, there was insufficient evidence to demonstrate that BAEL had acquired goodwill in the name “Botanica” by this point. At the time of BAEL’s application, neither party had registered any trade marks containing the word “Botanica” (although, shortly after the application, two trade marks were granted to a company associated with BAEL).

BAEL appealed the Tribunal’s decision to the High Court.

What did the High Court say?

The High Court nullified the Tribunal’s decision. It noted that the correct time for determining whether an applicant had acquired goodwill is when they apply to the Company Names Tribunal to challenge the name, not (as in this case) when the respondent is incorporated.

This is important. There can be a potentially large interval between another company adopting a similar name and the aggrieved company applying to challenge it. In this case, the gap was five months. However, depending on when the applicant discovers the similar name, it could be much longer.

The High Court did not reverse the Tribunal’s decision, nor decide whether BAEL had in fact generated goodwill in its name. It merely found that the Tribunal had not properly considered the position and, had it done so, might not have come to the same conclusion.

It therefore ordered the Tribunal to consider the matter again. There is therefore no guarantee that BAEL will be successful in its second attempt, although the greater gap, as well as the fact that it can now rely on registered trade marks as evidence of goodwill, will favour it, rather than Botanica Ltd.

What does this mean for me?

In many ways, the decision itself is unsurprising. The Tribunal had previously held in other instances that the correct date of assessment is when the application is made. In this case, it had failed to follow its previous decisions.

However, it does emphasise an important point. If it is likely that a company may want to challenge another company’s name – or, indeed, if a company feels that its own name may be subject to challenge – it is critical to amass robust evidence that the company had goodwill in its name.

This is particularly important where both companies have generated goodwill in their name as at the date of a challenge, as the Tribunal will need to understand how to evaluate the relative strength of goodwill in each name (and, indeed, whether to make an order).

Goodwill is a relatively abstract concept in UK common law, although it is generally described as “the benefit and advantage of the good name, reputation and connection of a business” and “the attractive force which brings in custom”.

There is no established test for identifying goodwill in a name. Rather, the court will decide whether goodwill exists by assessing the facts in each case.

The key is to show that there has been trading under the name. This might be demonstrated through sales and revenue data and operating an active website. It will also help to show that customers are generally aware of the name, including (for example) through social media and advertising.

It is also important to remember that generating goodwill in a name is not sufficient to challenge a company’s registered name. Unless the names are considered “the same” (which does not, in this context, mean identical), the person bringing a challenge will also need to show that the similarity between the names in the UK would be likely to confuse the public.

In this context, the Company Names Tribunal will borrow heavily from established decisions in trademark infringement and passing-off cases, where the courts will consider the perspective of the reasonably well-informed, average consumer.

The courts will find confusion if the average consumer would wrongly believe that the goods and services of the two companies come from the same proprietor. Where both companies have generated goodwill and operate in different sectors, therefore, it is likely to be more difficult to show confusion.

Looking to the future

Currently, to challenge a name under section 69 on the basis that it is similar to the applicant’s name, the applicant must show that the continued use of the challenged name in the United Kingdom would be likely to mislead.

This effectively limits challenges to name based on use within the UK.

The Economic Crime and Corporate Transparency Bill, which is currently making its way through Parliament, would change this. Under proposed amendments, an applicant would be able to challenge a similar name if its use “in the United Kingdom or elsewhere” would be likely to mislead members of the public “in the United Kingdom or elsewhere”.

In other words, the Bill would extend the ability to challenge a UK company’s registered name anywhere in the world, provided the name gives rise to confusion.

In many ways, this makes sense, given the increasingly global nature of business and trading, but it opens the door to many more challenges in the future. This would no doubt enrich case law and precedent on company name challenges, allow the Company Names Tribunal to build on its existing experience and provide useful protection for UK companies that operate in international markets.

To understand more about the Economic Crime and Corporate Transparency Bill, you can read our previous Corporate Law Update.