(1) The Trademark Licensing Company Ltd (Claimants and Part 20 Defendants Respondents) (2) Lonsdale Sports Ltd v Leofelis SA (Defendant and Part 20 Claimant Appellant) (1) Punch GmbH, and Others (Third Parties Respondents)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Lewison,Lord Justice Pill |
| Judgment Date | 23 July 2012 |
| Neutral Citation | [2012] EWCA Civ 985 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2012/0762 |
| Date | 23 July 2012 |
[2012] EWCA Civ 985
Lord Justice Pill
Lord Justice Lloyd
and
Lord Justice Lewison
Case No: A3/2012/0762
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE ROTH
Royal Courts of Justice
Strand, London, WC2A 2LL
John Baldwin Q.C. and Andrew Lykiardopoulos (instructed by Edwin Coe LLP) for the Appellants
George Leggatt Q.C. and Jasbir Dhillon (instructed by Reynolds Porter Chamberlain LLP) for the Respondent Claimants
Richard Hacon (instructed by Druces LLP) for the First, Fourth and Fifth Third Parties
Hearing date: 29 June 2012
This appeal is the latest episode in a long saga of litigation about the use of the Lonsdale trade mark in relation to clothes sold in some countries in Continental Europe. The appeal is from an order made by Roth J on 9 March 2012 giving summary judgment for the Claimants on an issue as to the scope of the potential damages claim arising on a counterclaim by the Defendant Leofelis SA in proceedings brought by the Claimants in 2009. His reserved judgment can be found under the neutral citation number [2012] EWHC 485 (Ch). I will refer to the Claimants as Lonsdale, since no distinction needs to be drawn for present purposes between them, and to the Defendant as Leofelis. As before the judge, Mr Baldwin Q.C. and Mr Lykiardopoulos represented Leofelis, Mr Leggatt Q.C. and Mr Dhillon represented Lonsdale and Mr Hacon represented three of the third parties, though he watched from the sidelines rather than taking part in the argument.
Lonsdale granted Leofelis a licence by an agreement dated 21 November 2002, to use a number of Lonsdale trade marks (and also some trade marks which did not feature the word Lonsdale, but they do not matter for now). I will call this the 2002 licence. The term of the licence was from 1 January 2003 to 31 December 2008. Under clause 11.4 Leofelis had an option to renew for another 6 years by notice given on or before 31 December 2007. The royalty started at €1.6 million for the first year and rose by stages to €3.5 million in the last year. If Leofelis had renewed it for another 6 years, the royalty would have been €3.5 million per year. The royalty was not affected by the quantity of sales (if any) under the licence. It was payable by equal quarterly instalments in advance on the first day of January, April, July and October in each year. The licence extended to a defined Territory, consisting of all Member States of the European Union as at the date of the agreement, except for the United Kingdom and Ireland, plus Hungary, Poland, the Czech Republic and Switzerland. The agreement granted to Leofelis the exclusive right to use the trade marks in the Territory in relation to defined goods (the details of which do not matter). Mr Baldwin submitted, and for present purposes I accept, that there were, in essence, only two continuing obligations in the agreement: on the part of Lonsdale not to derogate from its exclusive grant, and on Leofelis to pay the royalty in accordance with the agreement. Leofelis did not exploit its rights under the agreement itself, but granted sublicences, one of them to a company called Leeside. It was entitled to do this provided that it got Lonsdale's consent, not to be unreasonably withheld. Lonsdale gave consent to a sublicence to Leeside for Italy in December 2002. Later in December Leofelis seems to have extended the licence in favour of Leeside to Germany and to all other countries within the Territory and then within the European Union. In proceedings between Leofelis and Leeside on the one hand, and Lonsdale on the other, commenced in 2005 and coming to trial in 2006 (which I am going to call the 2005 proceedings) Evans-Lombe J held that this was done with Lonsdale's consent, but on appeal, in July 2008, the Court of Appeal (Waller and Keene LJJ and myself) disagreed with this and held that consent had not been given, so that the extended sublicence was not valid, though it had been valid for Italy: see [2007] EWHC 451 (Ch), and [2008] EWCA Civ 640. In June 2003 Leofelis granted a new sublicence to Punch GmbH (the first of the third parties in the present proceedings) for Germany, Benelux, Hungary and Poland. That sublicence was terminated by Leofelis in January 2006.
In October 2005 Leofelis and Leeside commenced the 2005 proceedings against Lonsdale which came to trial before Evans-Lombe J. They complained of breach of their exclusivity by Lonsdale, by sales of relevant goods using the Lonsdale trade mark in Belgium. In July 2006 Lonsdale obtained an injunction in Germany restraining Leeside from using the Lonsdale trade marks on goods sold in Germany. On the basis of Evans-Lombe J's judgment holding that the extended sublicence was valid, Leeside would have been entitled to sell such goods in Germany. Accordingly, Leofelis then took the position that for Lonsdale to have obtained this injunction, and not to have it discharged or withdrawn as they demanded, was itself a breach of the agreement in that it derogated from the grant of exclusive rights in the licence. Of course, once the Court of Appeal had reversed the judge's decision as to the validity of the extension of the sublicence, that position was no longer maintainable. Without a valid sublicence in its own favour, Leeside had no right to sell goods under the trade marks in Germany.
On 14 September 2007 Leofelis' solicitors, Dorsey & Whitney (Dorsey), wrote to Reynolds Porter Chamberlain (RPC), for Lonsdale. This letter was a preliminary to another letter which is at the heart of this appeal, but it is important for the context. The letter is headed with a reference to the 2005 proceedings, then subject to appeal but also continuing as regards the assessment of Leofelis' entitlement to damages. It read as follows:
"We refer to the injunction which remains against our clients Leeside srl selling Lonsdale goods in Germany.
As you are aware, Mr Justice Evans-Lombe found, at trial, that Leeside was a valid sub-licensee of Leofelis SA from at least early 2006. Nevertheless you continue to persist in maintaining the injunction in place.
The continuing injunction therefore represents a continuing and ongoing breach of Leofelis' rights under the November 2002 Licence Agreement. In our view this is a repudiatory breach by you.
We hereby give notice that our client reserves the right to terminate immediately and at any time while the injunction remains in place and to claim damages for breach.
We invite you to rectify your breach by taking steps to discharge the injunction.
Our client shall, of course, comply with its obligations under the November 2002 Licence Agreement pending any exercise by it of its right of termination."
The second letter followed on 28 September 2007. It referred back to the previous letter. It continued as follows:
"Our client considers the continuing injunction in Germany to be a repudiatory breach of the November 2002 Licence Agreement. Notwithstanding the invitation contained in our letter, your clients have not rectified their breach by discharging the injunction. Without prejudice to any other breaches on which our client may be entitled to rely, our client hereby accepts such repudiatory breach and terminates the November 2002 Licence with immediate effect. Our client reserves the right to claim damages for breach."
The timing of that letter was important for Leofelis. If it was able to terminate the agreement there and then, the next instalment of royalty would not fall due, as it otherwise would do on 1 October. Accordingly, Leofelis did not pay the sum otherwise due on that date. On 2 October 2007 RPC wrote to Dorsey giving Leofelis 30 days in which to remedy their breach of non-payment. On 2 November 2007 they wrote again, no payment having been made in the meantime, giving notice of immediate termination of the licence agreement on the basis of that non-payment. It is common ground that the licence agreement did come to an end, if not on 28 September 2007 then on 2 November 2007. If Leofelis was entitled to accept a repudiatory breach on 28 September, then it was entitled to, and did, bring the agreement to an end by the letter of that date. If it was not so entitled, then the royalty payment fell due, and Lonsdale was entitled to terminate the licence for non-payment when it did.
After the decision of the Court of Appeal on the appeal in the 2005 proceedings, Lonsdale began a new claim against Leofelis in February 2009 (the 2009 proceedings) claiming payment of the amounts of royalty due before termination but not paid, and damages for loss of the later royalty instalments. Lonsdale eventually applied for summary judgment in those proceedings. This came before Kitchin J who refused the application, though requiring Leofelis to make a substantial payment into court as a condition: see [2010] EWHC 969 (Ch).
The sole ground on which Kitchin J allowed the 2009 proceedings to be defended arose from the grant of a licence by Lonsdale in January 2007 (the SIA licence) to a company called SIA Sports & Clothing (SIA) (the second third party in these proceedings). On its face this gave to SIA, a Latvian company, a licence to use the Lonsdale trade marks in relation to certain goods for the calendar year 2007 (later...
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(1) The Trade Mark Licensing Company Ltd (Claimants and Part 20 Defendants Respondents) (2) Lonsdale Sports Ltd v Leofelis Sa (Defendant and Part 20 Claimant Appellant) (1) Punch GmbH and Others (Third Parties Respondents)
...accordingly, to dismiss the appeal. This judgment sets out my reasons for making that order. 3 Our earlier judgment is available as [2012] EWCA Civ 985, to which reference can be made for the history and context of the present judgment. The judgment appealed from is at [2012] EWHC 485 (Ch).......