Leofelis Sa and Anotherl v Lonsdale Sports Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Evans-Lombe,MR JUSTICE EVANS-LOMBE |
| Judgment Date | 08 March 2007 |
| Neutral Citation | [2007] EWHC 451 (Ch) |
| Docket Number | Case No: HC05C02842 |
| Court | Chancery Division |
| Date | 08 March 2007 |
[2007] EWHC 451 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Evans-Lombe
Case No: HC05C02842
Kenneth Maclean QC, Michael Fealy, Conall Patton (instructed by Dorsey & Whitney) for the Claimants
Jeffrey Gruder QC, Charlotte May (instructed by Reynolds Porter Chamberlain) for the Defendants
Hearing dates: 15 th – 24 th November 2006 & 6 th—8 th December 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr. Justice Evans-Lombe:
1. The First Claimant (“Leofelis”) is a company incorporated in Switzerland which licenses others to distribute and sell casual clothing, sports gear, and other associated products which carry the well known Lonsdale trademark (“the Products”). The Second Claimant (“Leeside”) is a company incorporated in Italy, a subsidiary of Leofelis, which carries on the business of the distribution and sale of the Products. Leofelis is owned and controlled by Signor Massimo Buscaini (“Mr Buscaini”).
2. The First Defendant (“Lonsdale Sports”) which changed its name from Miklat Ltd on the 27 th July 2002, is a company incorporated in England and the worldwide proprietor of a number of trademarks relating to the well known Lonsdale brand. The second defendant (“TMLC”) which changed its name from Lonsdale Licensing Ltd on the 28 th July 2003, is the worldwide licensee from Lonsdale Sports of the Lonsdale Marks and carries on the business of sub-licensing trademarks, including the Lonsdale Marks, to be exploited by others. The Third Defendant (“SWIL”) until the 30 th September 2003 called Sports Soccer Ltd, is a company incorporated in England engaged, inter alia, in the distribution and sale of the Products. It is the leading sports goods retailer in the United Kingdom operating approximately 350 retail shops, including the Lillywhites stores. Lonsdale Sports and SWIL share the same registered office and are both under the management and control of a Mr Michael Ashley (“Mr Ashley”). Mr Ashley also owns and controls Brands Holdings Ltd, (“BHL”) which changed its name from Brands Inc Ltd on the 21 st July 2004, a company incorporated in England with the same registered office and sharing common directors and officers with Lonsdale Sports and SWIL. Lonsdale Sports is a wholly owned subsidiary of BHL. Mr Ashley is the controlling shareholder of SWIL.
3. Cavden Group Ltd (“Cavden”) is a company incorporated in England engaged, amongst other things, in the manufacture, distribution and sale of the Products. Until June 2005 TMLC and Cavden shared the same registered office and were both under the management and control of Howard Moher (“Mr Moher”) and Mr Moher was a director of both. In June 2005 Lonsdale Sports acquired all the shares of TMLC which since then has formed part of the Sports World Group of companies. Mr Moher was and remains, either directly or through a nominee, the controlling shareholder of Cavden and a director of that company.
4. The central issue in this case arises from an agreement dated the 22 nd November 2002 (“The November 2002 Agreement”) by which TMLC (then known as Lonsdale Licensing Ltd) and Lonsdale Sports granted to Leofelis an exclusive licence to use the Lonsdale Marks (“the Lonsdale Marks”) throughout what now constitutes the European Economic Area including Switzerland but excluding the United Kingdom and Ireland (“The Territory”) for a period of six years commencing on the 1 st January 2002 at a fixed annual royalty in accordance with schedule 3 aggregating over the whole of the six year period to €16M. By clause 2.1 of that agreement the licensors granted to Leofelis “the exclusive licence in the Territory to use the Trade Marks [the Lonsdale Marks] in relation to the Goods [the Products] subject to the provisions of certain “the Distribution Agreements” set out in part 5 of the first schedule.” By clause 2.2.1 of The November 2002 Agreement:—
“2.2.1 The licence granted pursuant to this agreement is subject to any existing licences or rights, whether written or not, which may have been granted in respect of the Trade Marks. The Proprietor [Lonsdale Sports] and the Licensor [TMLC] are not aware of any other licences or rights having been granted in respect of any of the Trade Marks.”
5. In their opening written submissions counsel for Leofelis summarised Leofelis’ claims against the Defendants under five heads as follows:—
“(1) damages for misrepresentation/breach of Clause 2.2 of the November 2002 Licence by reason of the failure of Lonsdale Sports and TMLC to disclose Mr Alavi's continuing rights in the Lonsdale marks (“the Undisclosed Rights Claim”);
(2) damages for breach of the exclusive licence by licensing Sports World companies to sell Lonsdale-branded goods in Belgium (“the Belgian Sales Claim”);
(3) a declaration that Leofelis has validly appointed Leeside as its licensee throughout the territory of the November 2002 Licence (“the Sub-Licence Claim”);
(4) recovery of the costs of bringing legal proceedings in Italy on behalf of TMLC (“the Legal Fees Claim”); and
(5) damages for breach of Clause 7.3 of the November 2002 Licence (“the Montse Claim”).”
6. In their counterclaim the Defendants plead a number of breaches of the November 2002 Agreement entitling them to damages but, more importantly, to terminate the sub-licence granted to Leofelis pursuant to it as follows:—
i) Breach of clause 2.3 by failing to promote and maintain the brand.
ii) Breach of clause 4.2 by failing to provide on request samples of the Products that it was proposing to sell in the Territory.
iii) Breach of clause 5.1 by failing to follow “brand guidelines” specified by TMLC in respect of the Products they were placing for sale.
iv) Breach of clause 3.4 by failing to provide TMLC at the specified time a statement in writing recording the main terms of all sub-licences and, insofar as available, the turnover in respect of sales of the Products thereunder.
v) Breach by the un-licensed sale of the Products in South Korea.
vi) Failure to account for agreed royalty payments in respect of sales of the Products in the Middle East, alternatively, if no licence was granted breach by un-licensed sale of the Products outside the Territory.
vii) Breach of clause 10.1 by the grant of sub-licences for which approval had not been obtained from TMLC.
7. In addition to these alleged breaches of the provisions of the November 2002 Agreement the Defendants counterclaim in respect of a failure by Leofelis to account for royalties due under an oral sub-licence by TMLC to Leofelis to sell Lonsdale branded footwear in Italy and Switzerland.
8. Finally the Defendants claim to terminate Leofelis’ licence pursuant to clause 11.2 and 11.2.2 of the November 2002 Agreement because Leofelis has undergone a change of control since the making of that Agreement.
The factual background to the issues
9. The Lonsdale Trade mark was created in 1960 when the 7 th Earl of Lonsdale granted permission to a Mr Bernard Hart (“Mr Hart”) to use the name Lonsdale as a trademark for sports clothes and equipment. For reasons which are immaterial to this judgment the rights in the word Lonsdale as a trademark became split into two ownerships. The position shortly before the events which concern this case was as follows: the right to the trademark Lonsdale displayed in a hologram in what has been, throughout the hearing, described as the “cinemascope” form was vested in a company, Lonsdale Sports Equipment Ltd (“LSE”) incorporated in England and owned and controlled by Mr Hart. It is common ground that this form of the Lonsdale trademark is the most valuable. The right to exploit the trademark Lonsdale displayed in a hologram having a diamond shaped form was vested in a company, Lord John (UK) Ltd (“Lord John”) which was owned and controlled by a Mr Javid Alavi (“Mr Alavi”). Both groups sought to exploit the word mark “Lonsdale” and this gave rise to much litigation in different countries both between these two groups and also against others seeking to sell the Products under the Lonsdale mark.
10. On the 22 nd February 2001 Lord John and Mr Alavi entered into an agreement ( “The Alavi Licence”) whereby Lord John, as proprietor of the registered trade marks listed in attachment A to the agreement, licensed the use of those trademarks to Mr Alavi. The licence was a “non-exclusive royalty free licence to use the Trade Marks throughout the world…”. Clauses 9 to 11 and 13 of the agreement provided as follows:—
“9. This Agreement shall remain in force for a period of three years from the date hereof and shall thereafter be renewable automatically without need for notification for additional three year periods unless sooner terminated.
10. Notwithstanding the provisions of Clause 9, the Licensee may terminate this Agreement by giving one months written notice of termination to the Licensor.
11. Notwithstanding the provisions of Clause 9, the Licensor may terminate this Agreement immediately by written notice to the Licensee if the Licensee commits a breach of any of the conditions of this Agreement and fails to rectify the breach within thirty days of receiving notification of the breach from the Licensor…
13. The Licensee may assign or sub-licence its rights and obligations under this Agreement subject to the prior written consent of the Licensor; such consent not to be unreasonably withheld.”
11. On the 4 th April 2001 Mattia Ghielmini (“Mr Ghielmini”) a business associate of Mr Buscaini wrote to LSE...
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Leofelis Sa and Anotherl v Lonsdale Sports Ltd and Others
...OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION MR JUSTICE EVANS-LOMBE [2007] EWHC 451 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL (Transcript of the Handed Down Judgment of WordWave International Limited A Merrill Communi......
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(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)
...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 ......