Intertrade Europe Srl v Clive Christian Perfume Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Robert Nelson |
| Judgment Date | 30 January 2013 |
| Neutral Citation | [2013] EWHC 106 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ11X00394 |
| Date | 30 January 2013 |
[2013] EWHC 106 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Robert Nelson
Case No: HQ11X00394
Peter Knox QC (instructed by Davenport Lyons) for the Claimant
John Brisby QC and Alexander Cook (instructed by Kyriakides & Braier) for the Defendant
Hearing dates: 2,3,4,8,9,10 May and 12, 13,14,15,18,19,20,21 June and 18, 19 July 2012
Approved Judgment
Sir Robert Nelson1. The Claimant, Intertrade Europe SRL (Intertrade) is a worldwide distributor of luxury perfumes, based in Padua, Italy. The Defendant, Clive Christian Perfume Limited (Clive Christian) makes and supplies luxury perfumes under the brand name "Clive Christian". Between mid 2003 and September 2010 Intertrade was the distributor of the Defendant's perfumes in Europe. This claim arises out of the termination of the distributorship agreement between the parties in September 2010. The Claimant contends that the Defendant wrongfully repudiated the agreement by refusing to supply orders placed by it in July and August 2010. By letter from its solicitors, Davenport Lyons, dated 24 September 2010, the Claimant accepted the failure to supply the orders as repudiatory breaches of the agreement.
2. The Defendant denies that it was itself in breach of the agreement, and contends that it was entitled to refuse to supply the orders, or, as it did, only agree to accept them on different terms, by reason of the Claimant's breaches of the agreement. These breaches, the Defendant contends, were so serious that they entitled the Defendant to offer to continue to supply its perfumes to the Claimant only if these new terms were complied with.
3. The relationship between the parties was extremely successful in its initial years but a loss of trust and confidence developed between them from about 2009 onwards, so that on 19 July 2010 the Defendant gave the Claimant 12 months notice to terminate the agreement. Both claim and counterclaim assert an entitlement to damages for, inter alia, loss of profit arising out of the subsequent repudiation of the agreement in September 2010, up to the time when the agreement would in any event have come to an end, at the expiry of the notice to terminate in July 2011.
4. The legal issues arising in this claim are essentially straightforward but the factual issues are numerous and it is therefore necessary for the court to set out the long and complex factual background in some detail. I have chosen to do this in chronological sequence, as the parties did before me, as this is the best way of understanding the development of the relationship between them.
The factual background
5. The Clive Christian perfumes are marketed and sold as "the world's most expensive perfume". They are sold to high end retailers all over the world both directly, and indirectly, through, for example, distributors. In the UK they are marketed through Fortnum and Mason, and Harrods.
6. Intertrade is one of a group of five companies acting as distributors to perfume brands in many countries around the world. Herbarium SRL (Herbarium) is a member of the same group of companies as Intertrade, and it was with Herbarium that the distribution agreement was made. Intertrade subsequently took over Herbarium's business with the Defendant.
7. The first meeting between Herbarium and Clive Christian took place on 10 June 2003 at Fortnums in London. By this time Clive Christian had already decided to terminate its relationship with Finmark SRL, who had been acting as its agent in Italy. Finmark were agents not distributors and one of the reasons Clive Christian wanted to change was that monthly stock control was not working for them. Hence they wished to look at a distributorship relationship as another option. Unlike an agent, a distributor actually purchases and sells on the goods itself rather than, as an agent does, arranges sales for the supplier. The distributor makes profits on the sales he achieves whereas the agent earns commission on the sales which the supplier makes through his agency.
8. The meeting on 10 June 2003 in London took place between Mr Celso Fadelli for Herbarium and Mr Stephen Gray for Clive Christian. Both were senior directors of their companies.
9. The agreement between the parties was oral. Although attempts were made to reduce it into writing these were not successful. The documentation dealing with what was in fact agreed is sparse and there is a substantial disagreement between the parties as to the terms of the contract.
10. Mr Gray sent an email to Mr Fadelli on 10 June 2003 after the meeting that day.1 This email sets out some of the items discussed by the parties but records little by way of agreement. It was agreed in principle that there was to be an "exclusive arrangement for Italy…. we do not have duty free sales at present, so there is not a conflict in territory". Products and pricing were discussed, as were planned or targeted sales levels and promotion and advertising. The need to work out budgets to support the brand was stated, with "in-store visibility – drawings, posters to shop fittings. Collateral – testers, book stands, books, cards, price lists. PR events –…. For example Pitti Palace display drawings/props". A 2003 timetable was set up including marketing planning, and marketing planning finalisation in June/July; movement/initial orders/sales training in August, with the launch to be September. Mr Gray invited Mr Fadelli's thoughts for a draft marketing plan and concluded by saying he was very excited for their business in Italy.
11. The one matter which is recorded in this email as agreed apart from the exclusive arrangement for Italy which the parties "shall agree in principle", was the pricing structure. The email records that Herbarium would purchase the Clive Christian perfumes from the Defendant at 25% of the suggested retail price (SRP): that Herbarium would sell the Clive Christian perfumes to its retail customers at 50% of the SRP, and that the retail customers would sell to consumers at 100% of the SRP. This agreement has been referred to as being based on "a coefficient of 4".
12. Mr Gray said in evidence that Clive Christian aims to follow six important principles of business in its dealings with the market. First, the perfumes are a luxury brand and therefore have to be sold by a high end retailer; second the perfumes had to be presented correctly and displayed as luxurious goods: a "counter" (a display dedicated to one or more perfumes) would be permitted by the Defendant to a retailer who could demonstrate a sufficient quantity of sales; third the Defendant set the SRP by which means it was able to calculate the margin and expenses for distributors and retailers down the supply chain to the ultimate consumer: Mr Gray called this the "coefficient"; fourth the control of stock was important because the Defendant could only manufacture a limited quantity of the perfume and had to be aware of the possibility of a build-up of stock by the distributor or retailer, creating a risk of over-
stock with dumping and "grey market activity"; fifth marketing was of fundamental importance to a luxury brand and the Defendant sought to ensure that the projected sales of the perfumes were supported by commensurate marketing expenditure by both distributor and Clive Christian itself; sixth the Defendant seeks to develop the world market for the perfume in a slow, step by step, way in order to create a long-term sustainable business: this involves the Defendant monitoring the level of sales of the perfumes by retailers to their end customer, not just the sale of the perfumes to the retailers themselves.13. Mr Gray said that he had enunciated six principles, and discussed them, at the meeting of 10 June 2003, but Mr Fadelli said he had no clear recollection of them being discussed.
14. Mr Gray also said in evidence that he took along with him to the meeting of 10 June 2003 a spreadsheet which he used as an aide memoir, and showed to Mr Fadelli. This spreadsheet2 is also dated 10 June 2003 and is described at the foot of the page as "Italy 2003 plans". The document contains an item described as "Expenses" which it is suggested in the document are 22%, including 15% marketing and 7% administration/freight, including collateral. Mr Gray said this referred to the expenses to be borne by the distributor, and that he sought to negotiate the figure of 15% for marketing set out in that document, but after discussion and negotiation the figure of a minimum of 10% was agreed between him and Mr Fadelli. Mr Fadelli did not recollect being shown the spreadsheet and said that whilst marketing was discussed there was no agreement as to any minimum amount which the distributor had to pay. It is always the role of the distributor to develop the product through marketing, Mr Fadelli said, and it was understood between them that this is what Intertrade would do. The amount spent on marketing was left to Herbarium without any specific figure being agreed.
15. Mr Gray's email of 10 June 2003 which records "in essence" what was discussed, makes no mention of an agreement that the distributor would pay a minimum of 10% towards marketing out of its margin, but noted the "need to work out budgets to support the brand".
16. Herbarium set about making a marketing plan for the distribution of the line in Italy3 and put forward some suggestions in a fax of 30 June 2003.4 Mr Gray stated that he looked forward to working with Mr Fadelli to develop a launch and marketing plan.5
17. A further meeting took place between Mr Gray and Mr Fadelli in Padua on 17 July 2003, and on 21 July 2003 Mr Fadelli sent a fax setting out further proposals for Intertrade's introduction for the Clive Christian range. This fax includes...
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