Nigel Woolley and Another v UP Global Sourcing UK Ltd (Formerly Ultimate Products Ltd) and Another
|England & Wales
|HH Judge Pelling
|27 February 2014
| EWHC 493 (Ch)
|Case No: HC 10 C 00996
|27 February 2014
 EWHC 493 (Ch)
IN THE HIGH COURT OF JUSTICE
The Rolls Building
7 Rolls Building
London EC4A 1NL
His Honour Judge Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: HC 10 C 00996
Mr Simon Malynicz and Dr Stuart Baren (instructed by Collyer Bristow LLP) for the Claimants
Mr Mark Platts-Mills QC and Mr Thomas Moody-Stuart (instructed by Kuits Steinhart Levy LLP) for the Defendants
Hearing dates: 17–20 February 2014
HH Judge Pelling QC :
This is the taking of an account pursuant to an Order made on 1 March 2012 by Mr Robert Englehart QC sitting as a Deputy Judge of the Chancery Division ("the Order"). The hearing before me took place between 17 and 20 February 2014. I heard oral evidence from the First Claimant ("NW"), Mr Luscombe, the Managing Director of the Second Defendant, Mr Gossage, the Chief Operating Officer of the First Defendant, Mr Clawley, the Trading Director of the First Defendant, Mr Screawn, the Finance Director of the First Defendant and from Mr McAuley, a buyer employed by Next Retail Limited, who was called by the Defendants. I also heard oral evidence from two experts – Ms Jackets, who was called by the Claimants, and Mr Beressi, who was called by the Defendants.
NW is a director of and the sole shareholder in the Second Claimant ("TSL"). TSL was founded by NW and commenced trading in 2004. NW has had a long and successful career in the wrist watch import and trade sales business. He founded TSL following his resignation as the managing director of a much larger company in the same business that he had jointly founded. TSL sell three ranges of watches of which the most successful is and was at all material times marketed under the brand name " Henley". From the date when it commenced trading to 2010 TSL had sold about 1.3 million Henley watches. TSL is the exclusive licensee from NW of the Henley mark.
The Second Defendant was at all times material to these proceedings called Henley's Clothing Company Limited and for convenience I refer to it hereafter as "HCL" being the phrase by which it is described in most of the relevant documentation. That company is controlled by Mr Luscombe. Its business is and was at all material times the sale of clothing principally targeted at males aged between 18 and 25 under the style or title " Henleys". It sells and at all material times sold its products to retailers, mail order companies and internet sales companies and also through a small network of stores operated by a wholly owned subsidiary of HCL. There is no connection between HCL and the First Defendant ("UPL") other than the commercial one to which I refer in greater detail below. There is no connection between either NW or TSL and either Defendant other than that referred to below.
UPL is an import and wholesale company with a very large business. In Paragraph 4 of Mr Englehart's judgment it is described as importing and selling by wholesale some 4000 different products. In the period with which these proceedings are concerned UPL suffered a reverse of financial fortune. In the year ended 31 July 2010 its pre tax profit had been about £2.6 million on a turnover of £54.2 million but by the end of the year ended 21 July 2012, it had made a pre tax loss of in excess of £1 million on a sharply reduced turnover of about £40.5 million. I was told and have no reason to doubt that this was the result of the continuing effects of the economic recession.
UPL decided that it would be commercially beneficial for UPL to market a range of watches that sought to take advantage of the popularity of the clothes range sold by HCL. HCL informed UPL about the existence of NW and TSL and that TSL sold watches using the Henley mark. Against that background UPL entered into a Licence Agreement with NW dated 22 June 2007 ("the NW Licence") and a Trade Mark Licence with HCL and Mr Luscombe dated 25 June 2007 ("the HCL 2007 Licence"). Under the terms of the NW Licence, NW granted UPL a non exclusive licence to use the Henley mark in relation to " … quartz analogue, digital, and mechanical gentlemen's watches …" in consideration of the payment of a royalty of 5% of the net price for which such watches were sold. There were controls as to how the mark was to be used contained in Clauses 7 and 9 and the licence was terminable on one month's notice – see Clause 17.
The HCL 2007 Licence provided for the payment by UPL to HCL of a royalty of 7% of a defined Net Wholesale Price (the definition of this phrase does not matter for present purposes) in consideration of the grant of an exclusive licence to UPL to use the Henleys marks in the manufacture, promotion, distribution and sale of watches and jewellery. That licence came into force on 1 August 2007 and was for a period of three years subject to certain renewal terms. Thereafter, UPL sold watches using the Henleys mark and paid royalties to both NW and HCL pursuant to the NW and HCL 2007 Licences respectively.
In July 2009, UPL terminated the NW licence (but not the HCL 2007 Licence) by notice but nonetheless continued to sell the Henleys watches. These proceedings were then commenced. As originally constituted, the causes of action relied on by the Claimants were (a) infringement by UPL of NW's Community Trade Mark ("CTM") and/or (b) Infringement by HCL of NW's CTM and (c) passing off by each defendant.
As against HCL, it was alleged that it had been guilty of passing off and/or trade mark infringement by stocking and offering for sale on its website and in its stores watches (amongst other products) under the Henleys mark – see Paragraph 16 and 19 of the Re-amended Particulars of Claim. There were some other allegations concerning the use of the mark on sunglasses and on stationery which do not take matters further. In addition it was alleged in Paragraph 17 of the Re-amended Particulars of Claim that HCL was a joint tortfeasor in respect of infringements by UPL and thus jointly liable with UPL for UPL's infringements – see Paragraphs 17 and 18 of the Re-amended Particulars of Claim. The allegations of joint tortfeasorship included (a) an allegation that HCL had conspired with UPL in a common design to exploit the Henleys mark in relation to watches amongst other goods or (b) that " … the Henleys licences demonstrates that the Second Defendant gave its tacit approval to the exploitation of the Henleys mark in relation to watches and jewellery …" – see Paragraph 18.1 and 18.2 of the Re-amended Particulars of Claim. In Paragraphs 18.3 and 18.4 it was alleged that:
"The HENLEYS Licences demonstrate both parties intention to:
(a) use the mark HENLEYS mark in relation to watches and jewellery;
(b) cooperate and collaborate closely in the exploitation of the HENLEYS mark in relation to watches and jewellery;
(c) benefit financially from the exploitation of the HENLEYS mark in relation to watches and jewellery …
Under the HENLEYS licences all goodwill deriving from use of the mark in relation to watches accrues to the Second Defendant"
The " HENLEYS Licences" referred to in the Re-amended Particulars of Claim are defined in Paragraph 11 of that pleading as being the HCL 2007 Licence and the licence that replaced in dated 1 November 2009. It was not alleged in terms against either Defendant that the grant of the HCL 2007 Licence (or indeed the licence that replaced it dated 1 November 2009) constituted either trade mark infringement or passing off. The Defendants' case concerning the allegation of joint tortfeasorship is pleaded at Paragraph 19 of the Amended Defence in these terms:
"Insofar as the court finds the First Defendant liable for infringement of the First Claimant's CTM in respect of goods sold under licence from the Second Defendant, it is admitted that the Second Defendant is jointly liable therefore. Save as aforesaid, paragraphs 17 and 18 are denied."
The Defendants commenced proceedings seeking to have NW's CTM declared invalid and directions were given for a split trial of the claim. Liability was severed from quantum and the liability trial proceeded exclusively by reference to the Claimants' passing off claim. That trial was heard by Mr Englehart. He gave judgment on 1 March 2012, when he also made the Order. The key conclusions set out in his judgment were that:
i) HCL's core business was selling its clothing products wholesale – see ;
ii) During the period relevant to these proceedings Henleys' products were sold retail by a HCL subsidiary called Henleys Retail Limited ("HRL") at some 18 stores but they had closed by the time of the trial and HRL had been placed in administration – see ;
iii) TSL had established a substantial goodwill in the sale of watches under the Henley name – see ;
iv) The Henley and Henleys marks were virtually the same and the addition of the letter "s" was of little or no significance; the brand names were overtly presented on the dials of watches in a very similar fashion with the same typeface frequently being used; the way in which the watches were marketed, the retail prices and the outlets through which they were sold " substantially" overlapped; and both Henley and Henleys watches were marketed as " fashion" watches – see ;
v) HCL had established considerable goodwill under its Henleys name in the clothing market, however " … I cannot accept that the Henleys clothing brand will be known to buyers of watches generally. Nor can I accept that purchasers will buy without regard to the reputation of the watches themselves and are simply interested in external associations" — see ;
vi) " … sales of watches under the...
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