TC09562 - [2025] UKFTT 00762 (TC)

I agree with Mr Gammie that, in Kurobuta, the appointed person upheld the validity of an assignment of goodwill, in the form of unregistered trade marks, even though that assignment had not been accompanied by the transfer of the business to which the goodwill related. However, notwithstanding the conclusion reached by the appointed person in Kurobuta, I do not agree that it is possible to effect a valid assignment of goodwill where the assignment is not accompanied by a transfer of the business to which the goodwill relates.

It is clear from Wadlow and the summary of the law in this area by Lord Nicholls in Scandecor that the rule prohibiting assignments “in gross” has historically required that, in order to be effective, an assignment of goodwill needs to be accompanied by a transfer of the business to which the goodwill relates. The fact that goodwill cannot be transferred separately from the business to which it relates and is simply a facet of that business is the subject of the very highest authority. It was made clear in a number of the judgments in Muller – see, in particular, Lord Macnaghten at page 224, Lord Davey at pages 226 and 227 and Lord Lindley at page 235. Consistent with that, Halsbury’s Laws of England (Personal Property (Volume 80 (2020)) at 809) starts by saying that “[goodwill] is not a thing which can be separated and dealt with apart from the business out of which it arises” and cites numerous authorities to that effect. It is also implicit in the terms of Section 275(1)(g) of the TCGA 1992 – which specifies that, for the purposes of the chargeable gains legislation, goodwill is to be treated as situated where the business to which it relates is carried on.

Accordingly, unless there is something in the three decisions set out above to compel the contrary conclusion, an assignment of goodwill which is not accompanied by a transfer of the business to which the goodwill relates is an assignment “in gross” and is invalid.

Turning then to the three decisions on which Mr Gammie relied, Star Industrial was a decision of the Privy Council. It is therefore technically not binding on me although it is of course persuasive. Star Industrial does not support the proposition that an assignment of goodwill made without a related transfer of the business to which the goodwill relates can still be valid. Indeed, Lord Jauncey, in describing the precise rights which were entitled to be protected by a passing off action in Reckitt & Colman Products Limited v Borden Inc and others [1990] RPC 341 at page 417, observed that such an action was a remedy for the invasion of a right of property in the business or goodwill likely to be injured by the misrepresentation and then cited Lord Diplock’s statement in Star Industrial to the effect that “[goodwill], as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached”.

The ratio of the decision in Star Industrial is that a company which has ceased to carry on business in a particular jurisdiction no longer has protectable goodwill in that jurisdiction and therefore cannot succeed in a passing off action against a person carrying on a business in that jurisdiction which is similar to the original business. The only relevance of the decision in the present context is that, as noted in paragraph 72 above, Lord Diplock then briefly addressed the question of whether the Singapore joint venture company which had succeeded to the business of the Hong Kong company might have been able to succeed in a passing off action against the third party and did not rule out that possibility. Although the appointed person in Kurobuta concluded from this that Lord Diplock was contemplating the possibility that an assignment of goodwill in isolation from the business to which it related might still be valid – see Kurobuta at paragraphs [63] to [65] – my reading of the relevant part of the decision is that Lord Diplock expressly declined to answer that question. What he actually said was that “their Lordships express no view as to what rights, if any, [the Singapore joint venture company] would have been entitled to enforce against the respondent…”.

Moreover, the circumstances which Lord Diplock was addressing in Star Industrial were that, although the business to which the goodwill related had ceased, the Hong Kong company might have retained a residue of goodwill which could have revived in the Singapore joint venture company as the successor to the Hong Kong company’s business. It is a long way from a situation where a business is being carried on both before and after an assignment of goodwill is made and the business is not transferred to the assignee but is instead left behind in the assignor. It seems to me that the possibility of deception in the latter case is much greater than on the facts of Star Industrial.

Scandecor was a decision of the House of Lords and is therefore binding on me. However, I can see nothing in that decision to support the conclusion that goodwill can be assigned without a transfer of the business to which the goodwill relates. Scandecor was a case dealing with the transferability of registered trade marks, which are the subject of a statutory regime. It describes the development of the statutory regime which allows for registered trade marks to be assigned without a simultaneous transfer of the goodwill in the business to which they related. As such, it says nothing about the transferability of goodwill in isolation from the business to which it relates. The appointed person in Kurobuta was in my view wrong when he said at paragraph [55] that the fact that there was a statutory regime allowing for the assignment of registered trade marks in isolation from the business to which they related meant that the same should be true of unregistered trademarks and, by extension, goodwill.

As for the decision in Kurobuta itself, that is not binding on me as it is a decision of the appointed person in a trade mark dispute and not a decision by a court. In any event, I have outlined in paragraphs 81 to 84 above why I think that the conclusions reached by the appointed person on the basis of Star Industrial and Scandecor were wrong.

I would add that, crucially, in my view, the decision in Kurobuta was highly dependent on its particular facts and those facts are very different from the present facts. In Kurobuta, it was unclear how the business to which the goodwill related had been conducted in the period immediately prior to the assignment in question. Moreover, following the assignment, the assignors had retained no interest in controlling the exploitation of the attractive force which brought custom to the business and it was up to the assignee to decide what to do with the business going forward. Consequently, there was no basis for believing that the public might be deceived by giving validity to the assignment – see Kurobuta at paragraphs [66] to [69] and [76] to [78].

In contrast, in this case, it is perfectly clear how the Businesses were being conducted in the period prior to the execution of the Agreements and, far from CPW’s retaining no interest in controlling the Businesses after the Agreements became effective, that control remained in CPW under the terms of MSA. In addition, it was CPW which was held out to the public, including its own employees and the networks, as carrying on the Businesses. In my view, to treat the assignment of the Goodwill in this case as being valid in the absence of a transfer of the Businesses would be contrary to the public policy that led to the establishment of the rule in the first place.

For the reasons set out above, I believe that, in order for the sale of the Goodwill in this case to have been valid, it needed to have been accompanied by a transfer of the Businesses to which it related and it is not sufficient for BBUK to have acquired some lesser interest in the Businesses or the assets of the Businesses, such as the ability to turn the Goodwill to account.

That is not to say that all of the assets of the Businesses needed to have been transferred with the Goodwill. I accept that an assignment of goodwill accompanied by a transfer of the business to which it relates can remain valid even if certain assets of the business are excluded from the transfer of the business because the person acquiring the goodwill and the business might well use different assets in carrying on the business from those used by the disponor. This was something recognised by Lord Brampton in Muller at page 231 when he referred to excluding from the sale of goodwill the premises from which the business has been carried on. However, in my view, it is not possible for goodwill to be validly assigned without a simultaneous transfer to the assignee of the business to which the goodwill relates.

Having said that, the conclusion which I have reached in dealing with Issue Three – see paragraphs 91 to 162 below – means that my conclusion in relation to Issue Two is ultimately only of academic interest. Even if I am wrong to say that an assignment of goodwill cannot be valid if it is not accompanied by a transfer of the business to which the goodwill relates, and all that is required in order for an assignment of goodwill to be valid is that, following the assignment, the assignee must be the person for whose benefit the business is carried on, it will be seen from my conclusion in relation to Issue Three that, in my view, on a realistic view of the facts in this case, BBUK was not the person for whose benefit the Businesses were carried on after the Agreements became effective. Instead, after that time, the Businesses continued to be carried on for the benefit of CPW.