SDI Retail Services Ltd v The Rangers Football Club Ltd
|England & Wales
|Mr Justice Teare
|24 October 2018
| EWHC 2772 (Comm)
|Queen's Bench Division (Commercial Court)
|Case No: CL-2018-000631
|24 October 2018
 EWHC 2772 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr. Justice Teare
Case No: CL-2018-000631
Sa'ad Hossain QC and Joyce Arnold (instructed by RPC LLP) for the Claimant
Stephen Hofmeyr QC and Michael Ryan (instructed by Mills & Reeve LLP) for the Defendant
Hearing date: 10 October 2018
The parties to this action, Sports Direct and Rangers Football Club (“Rangers”), are keen on litigation. They were before this court in 2017 in a dispute concerning the right to sell Rangers branded merchandise and replica football kits; see . That litigation led to a ‘Retail Operations, Distribution and IP License Agreement’ dated 21 June 2017 ( “the Retail Agreement”), which grants the Claimant, an indirect subsidiary of Sports Direct International Plc, certain rights to manufacture, sell and distribute Rangers branded football kits and other merchandise. Disputes concerning that agreement brought the parties back before the court in July 2018. Notwithstanding the resolution of those disputes a further dispute arose in September 2018 and so the parties have returned to the court in October 2018. This latest action is being determined on an expedited basis, because it is the start of the football season and Rangers has a new “home strip”, demand for which is at its height. It is doubtful that the parties' appetite for litigation will be satisfied by this latest action.
There are, in essence, two matters for the court to determine. The first concerns the true construction of the Retail Agreement, in particular whether in the circumstances of this case Rangers is free to do deals with third parties, and, if they wish to do so, whether they must give Sports Direct a right to match any third party offers. The second issue only arises if it is determined that Rangers has acted in breach of the Retail Agreement. That issue is whether or not Sports Direct is entitled to final injunctive relief against Rangers, restraining them from future breaches and requiring them to undo their existing breach.
BACKGROUND TO THE AGREEMENT
The Retail Agreement arose out of the settlement of a previous dispute between the parties concerning a joint venture company, Rangers Retail Limited ( “RRL”) which they formed in January 2015. Pursuant to an IP Licence and Rights Agreement dated 27 January 2015, Rangers granted RRL the exclusive right to sell Rangers branded merchandise and replica football kits. It was intended at that time that the joint venture would last many years; the 2015 Agreement was only terminable on 7 years' notice.
Such co-operation was not to be. In May 2016, the parties fell out, and Rangers purported to terminate the 2015 Agreement for an alleged repudiatory breach. Sports Direct then brought a derivative action on behalf of RRL against Rangers and certain of its nominated directors of RRL. That claim, along with other related litigation, was settled in June 2017. As part of that settlement, it was agreed that RRL's trading activities would cease, and a new agreement was reached between the parties concerning the manufacture, sale and distribution of Rangers branded merchandise.
THE RETAIL AGREEMENT
The Retail Agreement is dated 21 June 2017. Recitals 1 and 2 record the history set out above. Recital 3 explains that “Rangers wishes to appoint SDIR to operate and manage the Retail Operations on an exclusive basis and SDIR wishes to accept such appointment. In relation to such appointment, Rangers also wishes to grant and SDIR wishes to receive: (a) the non-exclusive right to perform the Permitted Activities in relation to the Branded Products, replica Kit and Additional products; and (b) the non-exclusive right to manufacture (and/or have manufactured) the Branded Products. Rangers and SDIR shall co-operate with each other in relation to the Retail Operations on the terms of this Agreement.”
Clause 3 of the Retail Agreement provides (so far as is relevant) as follows:
3 RANGERS RIGHTS
3.1 Rangers hereby grants SDIR the following rights (together with the rights to sub-license such rights within the SDIR Group) in the Territory for the Term:
3.1.1 the exclusive right to operate and manage the Retail Operations;
3.1.2 the non-exclusive right to perform the Permitted Activities in relation to the Branded Products, Replica Kit and Additional Products;
3.1.3 the non-exclusive right to manufacture (and/or have manufactured) the Branded Products;
3.1.4 the Ancillary Rights; and
3.1.5 the non-exclusive right to use the Rangers Brands and the Rangers IPR as may be required in connection with the exercise of its rights under clauses 3.1.1 to 3.1.4 (inclusive),
(together the Rangers Rights).
3.2 Rangers shall not operate or manage, nor grant any third party any rights to operate or manage on its behalf, the retail sale of Branded Products, Replica Kit and/or Additional Products at bricks and mortar stores or online in the Territory during the Term.
3.3 Rangers shall not do, nor grant any rights to any third party to do, anything that would conflict with SDIR's rights to use and exploit the Rangers Rights in accordance with this Agreement. For the avoidance of doubt, the granting of non-exclusive rights to third parties to carry out activities in areas where SDIR's rights are non-exclusive (and the exercise of these rights) shall not be deemed to conflict with SDIR's rights to use and exploit the Rangers Rights in accordance with this Agreement.
The capitalised terms in those provisions are defined in clause 1 (so far as is relevant) as follows:
Additional Products means such Rangers branded products or products dealing with Rangers content (not including the Products or any Replica Kit) which are supplied by or on behalf of Rangers to SDIR which may include DVDs, videos (and other multi-media items), books and other publications, i-pods and other electronic devices, non-alcoholic beverages and alcoholic beverages (including whisky);
Ancillary Rights means the ancillary rights granted by Rangers to SDIR as set out in Schedule 4 [largely concerning IP and advertising rights];
Branded Products means the Products bearing any Rangers-related brands (including the Rangers Brands). [being the Rangers Name, the Rangers Badge and the Trade Marks [the latter of which are listed in Schedule 1]];
Initial Term shall have the meaning given to it in clause 2 [the period between the date of the Agreement and 31 July 2018];
Permitted Activities means distributing, marketing, advertising, promoting, offering for sale and/or selling all products which are or could be sold in a retail outlet or online or via any other medium together with the right to retail (whether bricks and mortar, online or via any other medium);
Products means the products listed in Schedule 2 [which contains a list of 24 products];
Replica Kit means the replica kit of the Official Rangers Kit [meaning any and all items of sportswear bearing the relevant Rangers brand to be worn by the members of the Rangers Squads] manufactured by or on behalf of Rangers during the Term;
Retail Operations means the retail sale of Branded Products, Replica Kit and Additional Products at the Ground (including at the Rangers Megastore) and on the Rangers Webstore).
Clause 13 is headed ‘Assignment and Sub-contracting’. Clause 13.2 provides:
13.2 During the Term, Rangers may not, without the prior written consent of SDIR, which consent may not be unreasonably withheld or delayed:
13.2.1 assign any of the Rangers Rights; or
13.2.2 part with any of the Rangers Rights (other than to licence to third parties on a non-exclusive basis only those Rangers Rights which are granted to SDIR on a non-exclusive basis pursuant to clause 3.1)
Schedule 3 to the Retail Agreement contains the ‘Commercial Terms’. These were expressly mentioned in clause 6 of the Retail Agreement as being the commercial terms to which the parties had agreed. Paragraph 1.1.4 provides
1.1.4 Offered Right means each of the following rights (in whole or in part):
(i) the right to operate and manage the Retail Operations;
(ii) the right to perform the Permitted Activities in relation to the Branded Products and/or Additional Products; and/or
(iii) the right to perform the Permitted Activities in relation to the Official Kit and/or Replica Kit.
At the centre of the present dispute is Paragraph 5 of Schedule 3, which provides (so far as is relevant) as follows.
5 MATCHING RIGHT
5.1 From the date falling 6 months prior to the expiry of the Initial Term, Rangers may approach, solicit, tender for or enter into negotiations with a third party in relation to that third party providing any of the Offered Rights or all or any combination of the Offered Rights.
5.2 In the event that Rangers receives an offer from such a third party ( Third Party Offer) to enter into an agreement with Rangers for any of the Offered Rights or all or any combination of the Offered Rights, Rangers shall provide SDIR with written notice ( Notice of Offer) of the terms of the Third Party Offer […]
5.3 The Notice of Offer shall include whether the Third Party Offer is made for any of the Offered Rights or all or any combination of the Offered Rights (identifying which Offered Rights as applicable), in each case together with any connected commercial arrangements, and full details of:
5.3.1 any payments to be made by the third party to Rangers;
5.3.2 any revenue share or royalties to be paid between Rangers and the third party; and
5.3.3 the duration of the agreement...
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