Jack Wills Ltd v House of Fraser (Stores) Ltd
| Jurisdiction | England & Wales |
| Judge | HH Judge Pelling |
| Judgment Date | 21 March 2016 |
| Neutral Citation | [2016] EWHC 626 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC B 04462 |
| Date | 21 March 2016 |
[2016] EWHC 626 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HH Judge Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: HC B 04462
Mr Roger Wyand QC and Mr Andrew Norris (instructed by Mishcon de Reya) for the Claimant
Mr Simon Malynicz QC (instructed by Lewis Silkin LLP) for the Defendant
Hearing dates: 1, 2, 4 and 21 March 2016
HH Judge Pelling QC:
Introduction
This is the taking of an account of profits pursuant to an Order made by Arnold J following a trial that took place on 20–21 January 2014 at which he held the Defendant ("HoF") liable for trade mark infringement and passing off — see Jack Wills Limited v. House of Fraser (Stores) Limited [2014] EWHC 110 (Ch). The Order requires the taking of an account " … of profits accruing to the defendants … in respect of the defendant's acts of registered trade mark infringement and passing off …"
The hearing before me took place on 1–2 and 4 March 2016. I heard oral evidence of fact from Mr Ray Kavanagh, HoF's Director of Commercial and Logistics, Mr Robert Parkin, HoF's Director of Merchandising for menswear and childrenswear and Mr Ross Wilson, HoF's Head of Buying for Menswear and accessories. I heard expert opinion evidence concerning merchandising from Ms Susan Millin (who was called on behalf of the claimant ["JWL"]) and from two forensic accountants being Mr Mathew Geale (who was called on behalf of JWL) and Mr Mark Bezant (who was called on behalf of HoF).
By the end of the trial the issues between the parties had narrowed to a limited number of issues of principle. It was common ground between the parties that I should decide the issues of principle between the parties and they would then agree the financial consequences that followed from those conclusions. The sums involved in this dispute are on any view small. The costs of the process of which the hearing before me is the culmination will have been substantial and it is greatly to be regretted that substantial commercial parties such as those involved in this dispute were unable to agree what should be paid by HoF to JWL or resolve the issues between them by early neutral evaluation and/or facilitative mediation.
Background
Although the issues between the parties have narrowed, in order to understand their significance it is necessary that I set out some of the background. The authoritative statement of the facts relevant to the dispute is to be found in Arnold J's judgment however, and nothing I say in this judgment should be treated as being or being intended to be a departure from the findings that he made.
JWL is a casual clothing manufacturer, and the proprietor of a registered Community Trade Mark that consists of a left facing image of a cock pheasant wearing a top hat and carrying a walking cane that is characterised by JWL as " Mr Wills" ("the Mark").
HoF carries on business as a retailer through a number of department stores located in city centres and retail parks across the UK as well as on line through its web site. It sells a vast number of different lines and in the context of menswear its lines break down into (a) concession sales – that is products sold by third party manufacturers hosted at stores operated by HoF, (b) bought in branded goods – that is third party manufactured and branded goods purchased by HoF and sold on by it at its stores and on line, and (c) its " own label" branded goods. HoF has two main clothing seasons – Autumn/Winter (August to January) ("AW") and Spring/Summer (February to July) ("SS"). Each store's floor space is divided into "mats" – that is areas from which specific brands of products are sold. There is a judgment to be made as to how intensively mats are stocked and how many mats are created on each floor of each store. HoF's case is that it wishes to create " … pleasant and browsable shopping experience …" and seeks to avoid the " crammed" feel that some of its competitors favour.
HoF is owned by House of Fraser Limited which in turn is ultimately owned by Highland Group Holdings Limited ("HGH"). HGH has 9 subsidiaries of which one is HoF and another is James Beattie Limited. The latter company operated two of HoF's department stores during the period when the infringing sales took place. This is significant only because the accounting material that has been disclosed by HoF consists of HGH's management accounts. These include all sales made and costs incurred across the group. There is no information available concerning what income and costs has been contributed by each subsidiary.
The HoF product line with which this case is directly concerned is HoF's own label " Linea" brand of menswear. In the period between November 2011 and March 2013 – that is AW 2011, SS 2012 and some but not all of AW 2013 — some but not all Linea products sold both in HoF's stores and on line via its web site had on it a logo consisting of a right facing pigeon with a top hat and a bow tie. I refer to this image hereafter as "the Logo" and to the goods sold with the Logo on them as the "Pigeon Goods".
It was the sale by HoF of the Pigeon Goods that was held to be the infringement of the Mark. The use of the Logo was described by Arnold J as being " … a classic case of a retailer seeking to enhance the attraction of its own brand goods by adopting an aspect of the get up of prestigious branded goods …". He added that " … due to the resemblance to the Trade Marks, the effect of House of Fraser's use of the Pigeon Logo will have been to cause a subtle but insidious transfer of image from the Trade Marks to the Pigeon Logo (and hence from Jack Wills goods to House of Fraser's goods) in the minds of some consumers, whether that was House of Fraser's intention or not. This will have assisted House of Fraser to increase the attraction of its goods in circumstances where House of Fraser did not undertake any advertising or promotion on those goods. Furthermore, House of Fraser had no justification for such conduct. Thus I conclude that House of Fraser did take unfair advantage of the reputation of the Trade Marks."
It is submitted on behalf of JWL that these findings ought to lead me to ensure that all profits made from the sale of the infringing goods must be disgorged and that any doubts concerning any of the constituent elements leading to a conclusion of what constitutes profits should be resolved in favour of JWL. In my judgment this submission must be balanced against two other principles – first the remedy of an account of profits is not penal in any sense. It is a mechanism by which an infringer is required to pay over to the proprietor of the infringed marks all profits properly attributable to the infringement. Secondly, a proprietor who elects to accept an account of profits in preference to damages is required to take the infringer as it finds it. It is not therefore open for the proprietor of an infringed mark to maintain that if the infringer had been more efficient in the manner in which it sold infringing goods a greater profit would have been made and thus a sum greater than the actual profit attributable to the infringement should be found due on the taking of the account of profits.
By the end of the trial, in effect agreement had been reached concerning the Gross Margin that HoF had made from the sale of the infringing items. In summary the agreed figures were:
Sales from Pigeon production (inc VAT)
£1,264,882
Direct Cost (inc. VAT)
£(676,417)
Margin from Sales
£588,465
Settlement discount received
£7,185
Stock written off
£(4,118)
Gross Margin
£591,532
At the start of the trial there were issues between the parties concerning whether two items (called respectively the " Alexus Crew Jumper" and the " Lemmy Shirt") were sold with the Logo on them. In opening it was submitted on behalf of JWL that I should resolve this issue against HoF because they had no records that clearly demonstrated that these items were not sold with the Logo on them and that the position was not clear. However, Mr Wilson was cross examined about this issue. In summary his evidence was these items had not been sold with the Logo on them. Mr Wyand QC accepted in his written closing submissions that it was difficult to dispute this evidence and he accepted in the course of his oral submissions, correctly in my judgment, that Mr Wilson was an entirely straightforward witness. I accept Mr Wilson's evidence on this issue and conclude therefore that ultimately the Alexus Crew Jumper and the Lemmy Shirt were not sold with the Logo on them.
The only other issue identified by Mr Wyand in his closing submissions relevant to the Gross Margin issue concerned heavy knitwear. The oral evidence was that the Logo was not embroidered onto these particular garments but had been supplied with a stitched on version. The oral evidence was that instructions were given for the removal of the Logo and that this was removed. Mr Wyand submitted that I ought not to accept this evidence because there were no documents that supported it and because it was (he submitted) inherently unlikely that a badge could be removed from 6000 garments in a seven-day period. Mr Wyand submitted that I ought to take this into consideration when arriving at what he called in paragraph 2 of his written closing submissions " the appropriate deductions" by which he meant a percentage global deduction from the costs otherwise properly deductible in order to arrive at the profits for which HoF is accountable and which it was submitted should be made as a means of adjusting out uncertainties created by what were characterised to be evidential loopholes in the material presented by HoF.
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