20 January 2017

Who owns Goodwill generated by an Employee or Partner?

  1. City of Sheffield
  2. Rotherham
  3. Doncaster
  4. Barnsley

Jane Lambert

Jay Bhayani is a well-known employment lawyer in Sheffield. When the Doncaster law firm Taylor Bracewell LLP wanted to set up an employment law department with an office in Sheffield they turned to Ms Bhayani to set one up. They agreed to make her a salaried partner and to practise from Sheffield in the name or style of "Bhayani Bracewell."

Ms Bhayani worked for the firm from 2011 until 2014 but then fell out with them. For a little while after she had left the firm they continued to practise from Sheffield in the Bhayani Bracewell name.  She sued them for passing off alleging that their continued use of the Bhayani Bracewell business name and certain other acts might lead people to believe that she was still working there. Taylor Bracewell replied that any goodwill that accrued to the Bhayani Bracewell name belonged to them and not to her.  They applied for judgment on the ground without a trial on the ground that Ms Bhayani had no real prospect of succeeding in her claim and there was no other compelling reason why the case should go to trial.

Taylor Bracewell's application came on before Judge Hacon in the Intellectual Property Enterprise Court ("IPEC") and his judgment is reported at Bhayani and Another v Taylor Bracewell LLP [2016] EWHC 3360 (IPEC) (22 Dec 2016). For anyone who is interested, I analysed the arguments and judgment in Case Note: Bhayani v Taylor Bracewell LLP - Goodwill generated by a Partner or Employee 19 Jan 2016.

Judge Hacon decided the point in favour of Taylor Bracewell.  After reviewing the case law he concluded that "in the general run, goodwill generated by the acts of an employee will be vested in the employer" and, similarly, "where an individual works in a partnership the goodwill generated by his acts will in the normal course vest in the partnership." However, he acknowledged that there were exceptions and considered what they might be and how they might arise. He concluded that an employee or partner acquires goodwill only in respect of activities outside the scope of the employer's or the partnership business. Applying that rule to the facts of the case before him. His Honour could find no reason why the general rules should not apply,

There were other issues in this case. The judge reviewed the principles by which the court can decide a case without a trial, the difference between reputation and goodwill for the purpose of an action for passing off and whether there was any scope for arguing that Taylor Bracewell's registration of the Bhayani Bracewell trade mark should be revoked on the ground that it was likely to mislead the public. Should anyone wish to consult me on any of those points, call me on 01484 599099 during office hours or send me a message through my contact form.