Leicestershire Law Society Firm of the Year 2018


Call Now: 0116 255 18 11

Financial Services – What Exactly Is Meant by a ‘Mutual’ Organisation?

Since the early days of the financial services industry there have been organisations that describe themselves as ‘mutual’ – but what exactly does that mean? The High Court considered that issue in the context of a passing off dispute.

The case concerned an insurance company that specialised in providing financial products to members of the armed forces and had the word ‘mutual’ in its name. It had no share capital or shareholders, and its membership was made up of customers who, by purchasing the company’s products, acquired an element of control over its affairs.

The company objected after another insurer, which was incorporated as a friendly society, began operating a website through subsidiaries. The website, which traded under a name that included the word ‘mutual’, was also targeted at clients in the armed forces and had drawn away business from the company. The company launched proceedings, arguing that the use of ‘mutual’ in the website’s title amounted to a misrepresentation and passing off.

The company argued that members of the public would understand that, at least in the context of financial services, organisations that describe themselves as ‘mutual’ must be owned solely by some or all of their customers. The website did not fit that description and was thus not entitled to exploit the goodwill associated with mutual organisations.

In dismissing the company’s claim, however, the Court noted that the evidence showed that the general public has only a hazy knowledge of what constitutes a mutual organisation. The definition contended for by the company was too narrow in that there are many examples of organisations that describe themselves as mutuals, but which are owned by their employees, suppliers or other stakeholders, rather than by their customers.

The Court also noted that, by operation of the Friendly Societies Act 1992, the website’s mother company is permitted to conduct business through subsidiaries without sacrificing its mutual status. The subsidiaries that ran the website were thus accurately described as mutuals, in that they were part of a mutual group. Even on the basis of the company’s narrow definition of ‘mutual’, the use of that word in the website’s title could not amount to a misrepresentation.