England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London WC2A 2LL
		26 July 2004

JUDGMENT

Introduction

1. The claimants in this case are respectively a company incorporated in Australia called Quiksilver Pty Limited ("Quiksilver") and a company incorporated in France called Na Pali SAS ("Na Pali"). Quiksilver is and sues in its capacity as the proprietor of the "Quiksilver" trade marks ("the trade marks") registered in the UK and worldwide which are associated with the well known brand of fashion and leatherwear, clothing and sporting accessories marketed under that name. Na Pali is and sues in its capacity as Quiksilver's exclusive licensee of the trade marks in Europe.
2. The defendant, a company called Charles Robertson (Developments) Limited, is the proprietor of a discount retail outlet in Cornwall known as "Trago Mills".
3. The claim relates to a quantity of genuine Quiksilver products which were marketed and sold by the defendant at Trago Mills under the trade marks in the summer of 2002. The claimants contend that such was done without their consent and that accordingly the same constitutes an infringement of the trade marks under sections 9 and 10 of the Trade Marks Act 1994 ("the 1994 Act"). What comes before me is the trial of the action. However, it is common ground that at this trial I should only deal with the issue of liability, leaving all issues concerning the quantum of any damages, should I determine that there has indeed been an infringement, to be dealt with on an enquiry as to damages.

Background

4. The essential facts which have given rise to the claim are not in dispute. The goods sold by the defendant are part of a larger consignment of goods which were manufactured by a Turkish company which I shall call for short Palimar. Palimar's place of business is in Istanbul. Palimar has and at the material time had a licence from Quiksilver to manufacture and sell products under the trade marks. However, that licence was restricted to various specified territories in Asia and did not extend to any part of the European Economic Area ("EEA").
5. In the spring of 2001 Palimar was approached by a Russian company called Sovincom-Centre ("Sovincom") with a view to its purchasing from Palimar a quantity of goods to be sold in its various outlets in certain of the former Soviet republics, being territories covered by Palimar's licence Following negotiations Sovincom placed an order for the manufacture and supply to it of a large quantity of garments which were intended to be shipped to it in Odessa. A pro-forma invoice was issued to Sovincom dated 25 April 2001.
6. It was, however, a requirement of Palimar, before it was prepared to ship the goods to Sovincom, that it should be paid for the goods by means of a confirmed letter of credit. For that purpose Sovincom introduced as its financier a company called Maritime Finance Corporation ("MFC"), which had an address in Marbella, Spain (where its de facto managing director, a Mr Wastiram, resided) as well as some form of presence in Switzerland. It agreed to arrange the letter of credit but only on the basis that it obtained security over the goods pending payment to it from Sovincom. Accordingly the invoice was made out in its name and the goods were shipped to its order in the port of Mersin, which is to the south west of Istanbul. MFC's intention was that the goods would only be released to Sovincom once payment had been made, which it was anticipated would be been done whilst the goods were being shipped.
7. The goods were duly shipped to Mersin to the order of MFC on or about 4 September 2001 with a view to them being shipped on to the order of Sovincom to Odessa. However, before that could take place Sovincom, so it appears, defaulted on its payment obligations to MFC. As a result MFC exercised its right as chargee of the goods to sell them on. It did this by first transferring them to a sister company called Rothwell Enterprise. That company in turn then sold on the goods to various wholesalers. The quantity of goods with which this action is concerned was eventually purchased by the defendant. It did so having confirmed that the goods were indeed genuine Quiksilver products and in the belief that they had been properly and lawfully put onto the market in the EEA. The goods were subsequently sold on to members of the public at Trago Mills.

The issues

8. There are two issues that arise for my determination at this trial. The first and most important one, which is a mixed issue of fact and law, is whether Quiksilver is to be regarded as having consented, within the meaning of section 12 (1) of the 1994 Act, to the goods in question having been "put on the market in the [EEA] under the [trade marks]".
9. The second issue is whether Na Pali as a mere licensee of the trade marks has any locus standi to bring the claim at all.
10. I propose to deal first with the issue of Quiksilver's consent.

The law as to consent

11. The law on the subject is not in dispute. Section 12(1) of the 1994 Act provides as follows:

"A registered trademark is not in fringed by the use of a trademark in relation to goods which have been put on the market in the European Economic Area under that trademark by the proprietor or with his consent."

12. There is no question of the goods having been put on the market in the EEA by Quiksilver itself. That was plainly done by MFC. The issue is whether nevertheless Quiksilver is to be regarded has having given its consent for that to be done within the meaning of the section.
13. The 1994 Act, as is made clear in its preamble, was enacted to give effect in the United Kingdom to the provisions of certain EEC council directives. Decisions of the European Court of Justice (ECJ) on the meaning of its provisions are, therefore, binding in the English Courts. It is common ground between the parties that the vital decision of the ECJ for present purposes is the decision in Davidoff SA v A and G Imports [2002] RPC 20. The essential issue in that case was what constituted consent for the purposes of section 12 or its equivalent in other countries. The Court answered this issue in paragraphs 45 to 47 of its judgment in the following terms:

"45. In view of its serious effects in extinguishing the exclusive rights of the proprietors of the trade marks in issue in the main proceedings (rights which enable them to control the initial marketing in the EEA) consent must be so expressed that an intention to renounce those rights is unequivocally demonstrated.

46. Such intention will normally be gathered from an express statement of consent. Nevertheless it is conceivable that consent may in some cases be inferred from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside the EEA which in the view of the national court, unequivocally demonstrate that the proprietor has renounced its rights.

47. The answer to the first question referred ... must therefore be that, on a proper construction of article 7 (1) of the Directive, the consent of a trademark proprietor to the marketing within the EEA of products bearing that mark which have previously been placed on the market outside the EEA by that proprietor or with his consent may be implied, where it is to be inferred from facts and circumstances prior to simultaneously with or subsequent to the placing of the goods on the market outside the EEA which, in the view of the national court, unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the EEA."

(emphasis added)
14. Later in its judgment the court said this:

"55. Consequently, implied consent to the marketing within the EEA of goods put on the market outside that area cannot be inferred from the mere silence of the trademark proprietor.

56. Likewise, implied consent cannot be inferred from the fact that the trademark proprietor has not communicated his opposition to marketing within the EEA or from the fact that the goods do not carry any warning that it is prohibited to place them on the market within the EEA.

57. Finally, such consent cannot be inferred from the fact that the trademark proprietor transferred ownership of the goods bearing the mark without imposing contractual reservations or from the fact that, according to the law governing the contract, the property right transferred includes, in the absence of such reservations, an unlimited right of resale or, at the very least, a right to market the goods subsequently within the EEA."

15. This subsequent observation of the ECJ is, as will be seen below, of particular importance for the resolution of the issue that arises in this case.

The defendant's case

16. Mr Silverleaf QC, who appears for the defendant, submits that Quiksilver is to be regarded as having given its consent to the goods being put on the market in the EEA within the meaning of section 12. His primary case is that Palimar consented to the goods being put on to the market within the EEA and that Quiksilver is bound by that consent. His secondary alternative case is that for the reasons set out below Quiksilver is to be regarded as having directly given its consent or, at least, is in some way precluded from saying that that it has not done so.
17. The first and primary way that the defendant puts its case involves the determination of the following two sub issues namely:

(a) Did Palimar in fact consent, within the meaning of the Section, to the goods being put on the market within the EEA?

(b) If so, is that consent binding on Quiksilver?

The facts and the evidence

18. The first sub issue is essentially an issue of fact having regard to the guidance given by the ECJ in the Davidoff case referred to above. On this issue I have heard the evidence of a number of witnesses on behalf of the claimants and of a single witness, Mr Wastiram, the de facto managing director, as I have already mentioned, of MFC, on behalf of the defendant. I have also ruled, despite the objection of Miss Himsworth, who appears on behalf of the claimants, that certain hearsay statements produced by the defendant may be adduced in evidence under the Civil Evidence Act.

Miss Bayrak

19. The first witness I heard was Miss Feride Bayrak. She was at the time employed by Palimar as its foreign sales manager. She is no longer employed by Palimar. The gist of her evidence was that, while she was not actually responsible for negotiating the terms of the sale, she understood that the sale was a sale to Sovincom, that Sovincom was only going to sell the goods in the various former Soviet Republics in which it had its outlets, and that MFC was involved only as Sovincom's financier (as the provider of the funds necessary to secure the letter of credit). Her job was, after the terms of the sale had been agreed between the customer and Palimar's managing director, Mr Eren, to liaise with the customer with a view to bringing the sale to fruition. That involved negotiating the terms of the letter of credit and documenting the transaction.
20. She is adamant that there was never any discussion between her and anybody on behalf of MFC regarding the territories in which the goods were permitted to be sold by MFC. Indeed, while she appreciated that MFC was to have some form of security over the goods (for which purpose the goods were to be delivered to it for onward transmission to Sovincom and the invoice, which had originally been made out in the name of Sovincom, was amended so as to be in the name of MFC) she gave no thought to what would actually happen to the goods if Sovincom were to default (in reimbursing MFC for the money that it was putting up for the letter of credit). Initially the goods were to be delivered to the Freeport at Istanbul, where Palimar's factory was situated and where the goods were being manufactured. At MFC's insistence the goods were rerouted to be delivered not to the Freeport at Istanbul but to the Freeport at Mersin, which is in fact further away from Odessa, to which the goods were ultimately to be delivered, than was Istanbul. Miss Bayrak was given two reasons for this, which she accepted. The first was that it was in fact more convenient for MFC to have the goods shipped from a port which was further from Odessa than Istanbul because that allowed further time, whilst the goods were on board the ship bound for Odessa, for Sovincom to make arrangements to make payment for the goods. The second was that MFC did not have a satisfactory shipping agent in Istanbul but had one in Mersin.
21. What Mr Wastiram did not tell her, although in his evidence to me he said that it was one of the reasons he had in mind, was that it would be more convenient for MFC to have the goods shipped to Mersin in case Sovincom defaulted and MFC had to dispose of the goods. The most ready market, so he told me for the goods, was in Europe and Mersin was closer to Europe than Istanbul. As to what would happen to the goods in the event that Sovincom defaulted, Miss Bayrak's evidence, as I have already said, was that she simply did not think about it. This was because she never thought for one moment that Sovincom would default in payment.
22. Miss Bayrak's evidence was, ultimately, not seriously challenged (or at least challenged by any contrary evidence adduced on behalf of the defendant save possibly by the evidence of Mr Wastiram with which I deal below) and I accept it.

Mr Eren

23. The second witness that I heard was Mr Onder Eren, the Chief Executive Officer or Managing Director of Palimar. His evidence was again essentially to the effect that, so far as he was concerned, the goods were being supplied to Sovincom for sale in the former Soviet Republics from which Sovincom operated. He accepted that, because Sovincom had declined to enter into a formal distribution agreement with Palimar under which it would have been expressly forbidden from marketing any of the goods outside of its own territories, any restriction on the resale of the goods by Sovincom was not formally spelt out in any document. He regarded it as a "gentlemen's agreement" that they would not sell outside of their territories, but was unclear as to whether or not such agreement would have legal effect. I again accept his evidence, which was also not seriously, if at all, challenged.

Mr Akalin

24. The third witness that I heard was Mr Ismail Akalin, who, not being conversant in English, gave his evidence with the aid of a Turkish translator. He is and was at the relevant time the export manager for Palimar. In that role, his responsibility was that of issuing certificates of origin, arranging delivery and dealing with other documents relating to the export of products. He had no authority to accept orders, enter into agreements or amend orders on Palimar's behalf.
25. Essentially the only relevant part of his evidence was to recount a meeting which he had had with a Mr Witzel (acting as agent for MFC) and a Mr Sari (a Turkish lawyer also instructed on behalf of MFC). The purpose of the meeting was for Mr Akalin to verify that the goods in question were genuine Quiksilver goods. The relevance of this meeting is solely because, something which Mr Akalin vehemently denies, both Mr Witzel and Mr Sari insist, in their respective statements which I have admitted under the Civil Evidence Act, that at that meeting there was also discussed the question of where the goods could be sold- and Mr Akalin on behalf of Palimar confirmed that they could be sold anywhere in the world without restriction. Mr Akalin says that the meeting took place "on or around 14 August 2001" and was thus before the goods had actually been delivered. Both Mr Witzel and Mr Sari in their respective statements insist that the meeting took place after the goods had been delivered, namely on 2 October 2001.
26. I have no reason to doubt that Mr Akalin was an honest witness doing his best to assist the court. I do, however, have doubts as to his ability precisely to remember events. In particular it seems to me that he is almost certainly mistaken as to quite when the meeting took place. From other material which has been placed before me it is clear that the reason why the meeting took place at all was because one of the companies which was thinking of buying some of the goods (and which indeed did do so) was the Makro organisation (Makro Self Service Wholesalers Ltd) — and they insisted on having verification that the goods were genuine Quiksilver products. It was because of this, which occurred after the goods had been delivered (and indeed, after Sovincom had defaulted on payment), that both Mr Witzel and Mr Sari were instructed to arrange a meeting with a representative of Palimar. Mr Akalin was unable to recollect whether it was he who brought the samples of the goods to be examined to the meeting (which would be consistent with the meeting taking place before the goods have been delivered) or whether the samples were taken to the meeting by Mr Witzel. He was also, in his cross-examination, at first prepared to accept that the meeting may well have taken place in October 2001, although later in his evidence he recanted from this position.
27. In my judgment everything points to the meeting having almost certainly taken place on 2 October 2001 as both Mr Witzel and Mr Sari say — and that Mr Akalin is mistaken in this regard in his recollection. That he is mistaken is further supported by a document which on the evidence before me appears clearly to be a document drawn up by Palimar's internal lawyer following an interview with Mr Akalin shortly after the matters which have given rise to the present dispute had arisen. It sets out Mr Akalin's recollection of the meeting in question. Although his account of what happened at that meeting in this document is entirely consistent with the evidence which he gave to me, he did not then dispute the fact that the meeting had taken place on 2 October 2001 as both Mr Witzel and Mr Sari in their respective statements, copies of which had at the same time been made available to Palimar, asserted.
28. But I entirely accept Mr Akalin's evidence that there was no discussion at that meeting concerning where the goods were permitted to be sold - and certainly that he gave no assurances at that or any other meeting in this regard.

Mr Witzel and Mr Sari

29. In the absence of Mr Witzel and Mr Sari being prepared to come to England to be cross-examined on their respective statements, I can attach little credit to them. I would add that I in any event find their statements as regards the alleged discussion at the meeting with Mr Akalin as to where the goods could be sold unconvincing. The written instructions to Mr Sari did not suggest that the question of restrictions on the sale of the goods was a matter which he was to raise with Palimar. Furthermore, if this was a matter which was to be raised with Palimar, it was obvious that Mr Akalin was not the right representative of Palimar to raise it with. That would have been Mr Eren or Miss Bayrak. Furthermore, the whole idea that this was something that would be raised at a meeting with Palimar after the goods had already been delivered is something that I find wholly unconvincing. If MFC was already satisfied that the terms of its contract with Palimar entitled it to sell the goods wherever it wished to do so, there was no purpose in raising this issue with Palimar. If it was not so satisfied, there was no commercial reason why Palimar, several weeks after the goods had already been delivered and paid for, should agree to what on this hypothesis would be a variation of the terms of its sale. Mr Akalin also makes the point that he showed Mr Sari at that meeting a copy of his power of attorney, which details precisely what authority he had on behalf of Palimar. Mr Sari would have seen from that power of attorney that it did not extend to giving the sort of confirmation which he insists in his statement he asked for and obtained. I accordingly have no hesitation in rejecting, except for the date when they say the meeting between them and Mr Akalin took place, the evidence of Mr Witzel and Mr Sari as set out in their respective statements to the extent that they contradict the evidence of Mr Akalin.

Mr Wastiram

30. The last witness I heard was Mr Sunny Wastiram called on behalf of the defendant. Mr Wastiram, the de facto managing director of MFC, is clearly a highly intelligent and experienced businessman. He was, so he tells me, employed by BCCI before its collapse. He plainly has great experience in dealing with commercial transactions. His evidence, however, I found on the whole to be somewhat unsatisfactory. He had signed two witness statements, at a time when he was apparently unwilling to come to England to be cross-examined on them but which he appreciated were intended to be adduced in evidence, in which, amongst other things, he had insisted that he had had a full discussion with Miss Bayrak as to precisely where in the event of default by Sovincom MFC was to be permitted to sell the goods — and had been specifically told by her that there were no restrictions on the sale of the goods and that MFC was to be free to sell the goods in any part of the world, including in particular in Europe. However, when he was prevailed upon to come to England to be cross-examined on his statements, and after he had, apparently, read the transcript of Miss Bayrak's cross-examination, he signed a fresh witness statement in which he recanted to a very large extent upon the statements which he had made in his previous witness statements. He attributed the errors in those statements to the fact that they had been prepared in a hurry and without his having the benefit of being able to examine the relevant documentation. It plainly does not reflect well on his credit that he was prepared to sign witness statements for use in court proceedings which he has later to concede contain incorrect statements, particularly when those statements go to the very heart of the issue in this case, namely whether Palimar did expressly consent to the sale of their goods in Europe. In his new witness statement Mr Wastiram is still, as I find, unclear as to quite what, if any, discussion he had with Miss Bayrak on the question of resale restrictions. In paragraph 10 of his new witness statement he said as follows:

"Miss Bayrak was correct when she said that the question of restrictions on resale was never discussed apart from the explanations I gave in our introduction. Insofar as this is suggested in paragraph 9 [of one of his previous witness statements] this should read that we were aware that Miss Bayrak had indicated to Sovincom that they wanted to impose restrictions on where the goods could be sold. We advised Sovincom that we were not prepared to finance the transactions if there were any sole restrictions."

In cross-examination Mr Wastiram said that the reference to paragraph 9 should have been a reference to paragraphs 10 and 12 as well. Even with the additions of those paragraphs it is unclear quite what Mr Wastiram was intending to say. I have to say that my reading of that paragraph was that what he was saying was that there had been no discussion with Miss Bayrak (as opposed to Sovincom) as to the question of restrictions on the resale of the goods. In his "introduction" he had told Miss Bayrak that MFC were financing the acquisition of the goods by Sovincom and would require security on those goods. But he never, at least in express terms, discussed any restrictions on the re-sale of the goods with Miss Bayrak. Rather, what he did was to tell Sovincom that they were not to accept any restrictions on where the goods could be sold. However, in his cross-examination he sought once again to give a different gloss on this and suggested that in his introduction of MFC to Miss Bayrak he had in some way indicated to her that MFC was not prepared to accept any restrictions on the sale of the goods. But quite what he told Miss Bayrak I find still to be unclear from his evidence. I have come to the clear conclusion that I should reject Mr Wastiram's evidence of his conversations with Miss Bayrak to the extent that they differ from Miss Bayrak's evidence. I have already indicated that I regarded Miss Bayrak as a truthful witness. Whilst I would not accuse Mr Wastiram of being a deliberately untruthful witness, I do regard his evidence as being unsatisfactory.

31. The truth of the matter, as I find, is that Mr Wastiram, without being dishonest in any way, had nevertheless convinced himself in retrospect that he must have had some conversation with Miss Bayrak as to restrictions on the resale of the goods. Initially he had convinced himself that he had had a detailed discussion with her and she had expressly indicated that MFC would be free to sell the goods anywhere in the world, including in particular in Europe. He has, however, and correctly come to the conclusion that such a conversation is highly unlikely to have taken place and that he must be mistaken in this. After all both he and Miss Bayrak at the time the transaction was taking place assumed that the goods were going to be duly delivered to and paid for by Sovincom. Accordingly the possibility of MFC having to sell the goods was a remote possibility. In that context one can see (and Mr Wastiram has appreciated this) that it is highly unlikely that he would have had the sort of discussion with Miss Bayrak which he was originally prepared to say had taken place — and if such a discussion had truly taken place, it is inconceivable that it would not have been documented in some form. I am quite prepared to accept that MFC was concerned that Sovincom should not agree to there being any express restrictions placed upon where the goods could be sold because Mr Wastiram was concerned to ensure that, should Sovincom default, MFC would be able to dispose of the goods wherever it was able to find a purchaser. To this end I again accept Mr Wastiram's evidence that he discussed the matter with Sovincom and advised them not to accept any form of distribution agreement which would have restricted them in their ability to resell the goods (and which would then arguably apply to MFC if it as financier took over the sale contract).
32. Mr Wastiram was, as I have said, an experienced businessman. He also appears to have been abreast with the law relating to trade marks. At that time the thinking of many was that, so long as the sale contract did not impose any specific restriction on where the goods could be sold, so that in law the purchaser was entitled to sell them wherever he wished, that in itself constituted sufficient consent for the sale of the goods in the EEA for the purposes of the community Directive and the legislation in all the countries in the EEA which had given effect to that Directive. But the sale took place before the decision of the EEC in the Davidoff case. So Mr Wastiram's thinking, I am sure, at the time would have been that, provided that he ensured that neither MFC nor Sovincom accepted any express restrictions on where the goods could be sold, that was sufficient to enable MFC in the event of default to sell the goods in Europe.

Factual conclusions

33. The conclusions of fact which I reach having heard the evidence of the various witnesses and with the benefit of the contemporaneous documentation are as follows:

(a) Palimar did not expressly consent to the sale of the goods in the EEA. On the contrary it intended the goods to be sold in the former Soviet Republics where Sovincom had its outlets.

(b) There was an understanding with Sovincom that they would be selling their goods in their various outlets in the former Soviet Republics (apart from in Uzbekistan where Palimar already had a distributor). But that understanding was never formally documented and it is doubtful to what extent any restrictions on the resale of the goods actually became part of the original contract as between Palimar and Sovincom. This is not a matter that, it seems to me, I necessarily have to decide. Suffice it to say that, if and to the extent that there were in fact contractual restrictions on where Sovincom were to be permitted to resell those goods, in my judgment those contractual restrictions would have been binding on MFC, because it was effectively stepping into the shoes of Sovincom when as financier it took over the contract from them.

Did Palimar consent?

34. So the question that arises is whether, on the basis of the factual conclusions which I have reached, it can be said that Palimar had consented to the goods being put on the market in the EEA. In my judgment it is plain that they had not so consented. The onus is on the defendant to establish such consent. The guidance from the ECJ in the Davidoff case is that such consent "must be so expressed that an intention to renounce [the] rights is unequivocally demonstrated" It is equally clear from the judgment that normally that intention is to be gathered from an express statement of consent and that an implied consent is exceptional. The latter, so the ECJ stated, should only be found where the relevant facts and circumstances "unequivocally demonstrate" that the proprietor (for the purposes of the issue with which I am now dealing that would be Palimar) has renounced his right to oppose the placing of the goods on the market within the EEA. As already pointed out the ECJ has further observed that such consent is not to be inferred merely from the fact that the goods have been sold under a contract which did not contain any restrictions upon where the goods might ultimately be resold. In the event Mr Silverleaf invited me to find that there was an implied consent on, as I see it, no more than the following factors:

(a) The fact that MFC's address as known to Palimar was in Spain (although its address on the letter of credit itself was stated to be in Switzerland).

(b) Europe was the most natural and convenient market for the goods, particularly given that the goods were going to be shipped to Mersin, the port in Turkey nearest to Europe.

35. On the basis of these factors, any reasonable person, so Mr Silverleaf contends, would have concluded that the goods were going to be or, at least, were likely to be sold in Europe. In my judgment these factors come nowhere near to unequivocally demonstrating that Palimar had consented to the placing of the goods on the market within the EEA. The fact of the matter is that neither Miss Bayrak nor Mr Eren gave any real thought to where MFC would sell the goods in the event of default by Sovincom. That was entirely understandable. There was no reason for them to suppose that Sovincom, an apparently well established company in Russia, would default in its obligation to purchase the goods. But, if they had thought about it, they can hardly be assumed to have contemplated that the goods were necessarily intended by MFC to be sold in the EEA in circumstances where, as I have found on the facts, MFC did not raise specifically with them the possibility of their selling the goods in that area. I am quite prepared to accept that, if a manufacturer of goods, such as Palimar in this case, enters into a transaction whereby it sells the goods to a purchaser which it knows operates only or perhaps even principally within the EEA, it may be taken to have consented to the goods being put on the market in that area. But MFC was not, to the knowledge of Palimar, a purchaser in such a position. It was merely entering into the transaction as a financier. Accordingly it had no market as such for its goods anywhere in the world because it was not in the business of marketing goods. If it came to sell the goods, no doubt it would have to find some person or persons prepared to purchase the goods from it. But where exactly in the world that would be, was a matter for it and of no concern as such to Palimar. If, in such a situation, a financier in the position of MFC wants to be assured of an ability to sell the goods in the EEA, it seems to me that it can only do this in most cases by obtaining the supplier's express consent.

Would Quiksilver have been bound by Palimar's consent?

36. My findings as regards Palimar not having given its consent renders it strictly speaking unnecessary for me to deal with the issue of whether, had I reached the opposite conclusion, any consent given by Palimar would be binding on Quiksilver. However, in case this case goes further, I ought to express my conclusions briefly on this issue. In my judgment, even if Palimar is to be regarded as having consented to the goods being placed on the market in the EEA, there is no basis upon which such consent could be binding on Quiksilver as the proprietor of the trade marks. Palimar had only a restricted licence to apply the trade marks to goods in particular and specified territories, all of which were outside the EEA. It had no authority on behalf of Quiksilver to consent to the goods being placed on the market in the EEA. The defendant relies for this purpose on what is said to be the apparent authority of Palimar. So far as I can see there are only two matters relied upon:

(a) Various catalogues of its products supplied by Palimar to MFC in August 2001 which make no mention of any territorial limits There are two difficulties with this so far as the defendant is concerned. The first is that the catalogues were not supplied until after the letter of credit had already been issued. The second is that when they were supplied they were accompanied by a letter from Palimar which expressly indicated that Palimar was only licensed by Quiksilver in certain territories (outside of Europe). So even if the catalogues, which I accept must have been seen at some stage and approved by Quiksilver, could in themselves be regarded as a holding out by Quiksilver of Palimar as being generally authorised on its behalf (something which I very much doubt), it seems to me that it cannot possibly be relied upon as constituting such holding out to MFC given the accompanying letter.

(b) Quiksilver/Palimar website. It is not in dispute that at the material time Quiksilver had a website which contained links to the websites of its distributors, including Palimar. The claimants' evidence is that the Palimar website indicated that it was only licensed in certain territories and they have produced a print out from a CD of the site which on its face corroborates that fact. However, more detailed examination of the CD indicates that the version on it was not downloaded until August 2001 and strictly speaking, as Mr Silverleaf points out, only proves what was the state of the website as at that date. Mr Wastiram asserts that he looked at the website prior to August 2001 and before the letter of credit was issued and there was no indication that Palimar was in any way restricted in its operations to any particular territory. I am doubtful whether these statements in the website, even if I were to accept Mr Wastiram's evidence, amount to any holding out by Quiksilver of Palimar as being authorised to consent on its behalf to the placing of the goods on the market in the EEA. But, in any event, I am not prepared to accept this evidence given the generally unsatisfactory nature of Mr Wastiram's evidence to which I have referred above. Mr Wastiram may now have convinced himself that he did, indeed, look up the website and that this was, indeed, what he saw. But I am not convinced that that was so. Furthermore Mr Eren says (and I accept his evidence) that he would have been consulted about any significant changes in the Palimar website and he does not recollect having been thus consulted in 2002. This points to the likelihood that the website did not change in content during that year.

37. Accordingly, even if I had concluded that Palimar had consented to the placing of the goods on the market in the EEA, in my judgment such consent would not have been binding on Quiksilver.

Defendant's alternative case on consent

38. Having thus concluded that the defendant, upon whom the onus of proof in this respect lies, has failed to make out any case for saying that Quiksilver is to be regarded as given its consent to the placing of the goods on the market in the EEA through the agency of Palimar, I turn to consider the defendant's alternative contention that Quiksilver is to be regarded as having given such consent itself In the final analysis this case relies upon (a) an allegation that Quiksilver had failed properly to monitor the activities of Palimar and, in particular, ensure that they were not selling products outside of their licensed territories and (b) Quiksilver's failure to make, let alone proceed with, any claim of infringement against MFC itself.
39. As to (a), the short answer is that, in the light of my finding that Palimar itself never consented to the goods being placed on the market in the EEA, any failure by Quiksilver to monitor the activities of Palimar cannot possibly amount to the giving of any such consent on its part. I should add that I am by no means satisfied that there is, indeed, any valid complaint that can here be made. It does not appear on the evidence that I have seen that Quiksilver did fail properly to monitor Palimar's activities.
40. As to (b) it is a matter of some curiosity, which has not been explained by the claimants (because a claim to legal professional privilege has been maintained), that no allegation of infringement of trademark has ever been made against MFC itself. By letter dated 5 June 2002 the claimant's solicitors wrote to MFC on behalf of the claimants drawing its attention to the sale of Quiksilver products in Europe by Makro which, so the letter stated, the claimants understood Makro had purchased from MFC. But the letter did not make any claim or threaten any claim against MFC itself for infringement of trademark. It contented itself by simply asking MFC to provide details and information concerning the sale to Makro and threatening MFC, should it not provide the information, with an application to the court, "seeking an order for third party disclosure against you" Conspicuously, as Mr Silverleaf has pointed out quite correctly, it did not threaten any proceedings against MFC itself for infringement of trademark.
41. On the basis of this and the fact that the claimants have not actually sued MFC for infringement of copyright or even threatened to do so, Mr Silverleaf submits that their behaviour is consistent only with Quiksilver having taken the decision not to object to MFC marketing the goods in the EEA — and as such they must be taken to have consented to the goods being placed on the market in the EEA. When I put it to Mr Silverleaf that what he was inviting me to do was to find that Quiksilver were to be deemed to have given their consent, whatever the true position might actually be, Mr Silverleaf resisted such suggestion. He contended that all he was inviting me to do was to find that by implication such consent was given. I can well understand why he resisted the suggestion of any "deemed consent" since that would fly in the face of what the ECJ held in the Davidoff case. But on analysis, as it seems to me, that is precisely what he is inviting me to do. For the letter of 5 June 2002 itself makes absolutely plain that the one thing that Quiksilver was not consenting to was the placing of the goods on the market in the EEA. It says in express terms:

" ... Na Pali has confirmed to us that the clothing items ... have been imported into the UK from outside of the EU. This clothing is not destined for the UK market (or the rest of the EU) and as such, is not authorised for sale in the EU by Quiksilver. Makro is not authorised to sell Quiksilver products in the EU."

42. Quiksilver could hardly, therefore, as I see it, be making it plainer that it had not consented and was not consenting to the placing of any of the relevant goods on the market in the EEA. Accordingly, to find, notwithstanding that, that by not in that letter actually making a claim of infringement against MFC, which was the originator of the marketing of the goods in the EEA, Quiksilver must be taken to have consented to the placing of the goods on the market in the EEA, goes plainly against what Quiksilver through its solicitors was actually saying in that letter. Such a process can only be, as I see it, a process whereby Quiksilver is to be deemed to have given its consent notwithstanding that in plain terms it had not done so.
43. Such a "deemed consent" would, as Mr Silverleaf no doubt recognises, be contrary to the decision of the ECJ in Davidoff. As noted above, that decision allows of only two methods whereby consent can be given. The first is express consent. The second is implied consent where the facts and circumstances "unequivocally demonstrate that the proprietor has renounced his right to oppose placing of the goods on the market within the EEA". Such cannot possibly be said to be the case when one of the circumstances, indeed one of the circumstances relied upon as relevant to the giving of the consent, is a letter which by its express terms demonstrates that the proprietor, far from renouncing his right, is seeking to enforce it.

Conclusion on infringement

44. I accordingly conclude on the first and primary issue before me that the defendant has failed to establish that Quiksilver as the proprietor of the Quiksilver trademark has given its consent within the meaning of section 12 of the 1994 Act to the placing of the relevant goods on the market in the EEA. There being no other possible defence to the claim, I accordingly conclude on the question of liability that the sale by the defendant of the relevant goods did constitute an infringement by the defendant of the trade marks.

Na Pali's locus standi

45. I turn then to the second and subsidiary issue, namely whether Na Pali as licensee of the trademark has standing to sue. At first blush this issue would appear to be a purely academic one. Even if I were to conclude that Na Pali had no such standing, it is plain that Quiksilver does have such standing and would therefore be entitled to an inquiry as to damages on the basis of my conclusion on the primary issue. Furthermore, the fact that only Quiksilver, and not Na Pali, would be entitled on that basis to pursue the enquiry as to damages would, prima facie, make no difference to the quantum of damages recoverable. This is because section 30 (6) of the 1994 Act provides that in infringement proceedings brought by the proprietor of the registered trademark any loss "suffered or likely to be suffered by licensees shall be taken into account". So, prima facie, on an inquiry for damages even if pursued by Quiksilver alone the Court would award not just damages suffered by Quiksilver itself but also any damages suffered by Na Pali. The sub-section goes on to say that the court in that situation can give "such directions as it thinks fit as to the extent to which the plaintiff is to hold the proceeds of any pecuniary remedy on behalf of licensees".
46. However, Mr Silverleaf submits that a conclusion that Na Pali does not have standing itself to sue may be relevant to the question of costs. For this purpose the defendant intends to rely upon a letter from Quiksilver to Na Pali dated 24 October 2002 which stated that Quiksilver was prepared to be a co-claimant in the proceedings but on the basis that Na Pali would bear the legal costs of those proceedings. The argument would be that, should I rule that Na Pali has no legal standing to bring this claim, the action by it would be dismissed and, although Quiksilver will have succeeded in its claim and be entitled to costs, by reason of the indemnity from Na Pali it would not in fact have incurred any costs and so it would not be entitled to recover any against the defendant.
47. I have to say that my initial reaction to this potential argument is one of scepticism. Prima facie it seems to me that the indemnity as to costs given to Quiksilver by Na Pali is something that would be regarded in law as "res inter alia acta" and be disregardable accordingly. But I have not, of course, heard submissions on this point and I appreciate there could well be authorities that compel one to reach a different conclusion. I will accordingly, therefore, deal with it.
48. The right of a licensee to bring proceedings in his own name was prior to the 1994 Act governed by section 28 of the Trade Marks Act 1938 ("the 1938 Act"). In substance what that section provided was that, subject to any agreement between the parties, a licensee could bring infringement proceedings in its own name - but only if the proprietor of the trade mark had refused to bring the proceedings itself. The section further provided that in such circumstances the proprietor had to be joined in the proceedings either as co-Plaintiff or defendant. The possibility of the proprietor being joined as co-Plaintiff, notwithstanding that ex hypothesi he has refused to bring the proceedings himself, is slightly curious. For, if he has agreed to be a co-Plaintiff, prima facie he has agreed to bring the proceedings. The answer, as it seems to me, is that what the 1938 Act contemplated was that there could be a proprietor of the trade mark who, whilst unwilling himself to bring the infringement proceedings, was nevertheless prepared to allow himself to be joined to the proceedings as a co-plaintiff. This would necessarily imply that he was going to be indemnified against any costs by the licensee.
49. The provisions of section 28 of the 1938 Act are substantially reproduced in section 30 of the 1994 Act (see sub-sections (3) and (4)). Section 30(4), like the equivalent provisions of the 1938 Act, envisages the possibility of a proprietor who has refused to bring the proceedings in his own name nevertheless being joined as a co-plaintiff to proceedings brought by the licensee. And sub-section (5) goes on to provide that a proprietor who has been joined to the proceedings as mentioned in subsection (4), thus including being joined as a co-plaintiff, "shall not be made liable for any costs in the action unless he takes part in the proceedings". The wording of sub-section (5) somewhat mirrors, as it seems to me, the wording of the very letter of 24 October 2002 which provides the platform upon which the defendant's costs argument is intended to be mounted ("This is subject to Na Pali ... bearing the legal costs of such proceedings").
50. In point of fact in its pleaded case Na Pali relies not on section 30 of the 1994 Act but upon section 31. Sub-section (1) of that section provides that "an exclusive licence may provide that the licensee shall have, to such extent as may be provided by the licence, the same rights and remedies in respect of matters occurring after the grant of the licence as if the licence had been an assignment". Section 31 was a new provision first enacted by the 1994 Act. The licence granted by Quiksilver to Na Pali does not in express terms provide that Na Pali is to have to any extent "the same rights and remedies in respect of matters occurring after the grant of the licence as if the licence had been an assignment" This is not entirely surprising given that that licence was granted by an agreement dated 8 March 1993 ("the licence agreement"), thus before the 1994 Act was enacted.
51. Miss Himsworth relies upon clause 5.3(c) of that agreement as in substance conferring upon Na Pali these rights. This clause reads as follows:

"In the event of [Quiksilver] choosing not to prosecute any action involving the trade marks [Na Pali] may do so on its own behalf and in that event, [Quiksilver] shall in addition to its obligations outlined above, fully co-operate with [Na Pali] in relation to such action, and the costs and expenses of any such action shall be borne by [Na Pali], and the proceeds of any such action shall belong to [Na Pali]."

52. It seems self evident to me that that clause, and indeed the whole of clause 5.3, was written by reference to section 28 of the 1938 Act. But can those words extend to the differently worded section 31(1) of the 1994 Act? It seems to me that they can. For what that clause is in terms granting to Na Pali is an entitlement in a certain event to sue for infringement of the trade marks "on its own behalf" That, it seems to me, is only consistent with it being in the equivalent position, so far as concerns its rights and remedies for infringement, of an assignee of the trade marks — precisely the position contemplated by section 31 (1) of the 1994 Act. So in substance, it seems to me, clause 5.3(c) is in the stipulated event providing that Na Pali is to have the same rights and remedies in respect of infringement as if the licence had been an assignment.
53. But that begs the question of whether the stipulated event has in fact occurred. The event is Quiksilver "choosing not to prosecute any action involving the trade marks" Prima facie, given that it is co-claimant with Na Pali in the proceedings, it has chosen to prosecute this action — and so the event has not occurred. It seems to me that the answer to this is that, just as is apparent from section 28 of the 1938 Act to which the clause is directed (see above), the clause contemplates that Quiksilver as proprietor of the trade marks may be unwilling to prosecute the relevant action but nevertheless agreeable, subject to its not being exposed to costs, to its being joined as a co-plaintiff to such action. Ironically, as it seems to me, the very letter intended to be relied upon by the defendant is itself, as it seems to me, indicative that Quiksilver was not prepared to prosecute this action, although it was content (no doubt in compliance with its obligation under the clause to "fully co-operate with [Na Pali] in relation to such action) to have its name joined as a co-Claimant to the proceedings (and, as the letter states, to allow Na Pali to instruct solicitors to act on behalf of itself as well as Na Pali). In other words what the letter of 24 October 2002 does is entirely consistent with and reflective of the parties' respective obligations under clause 5.3(c) of the licence agreement. If Quiksilver had been willing to prosecute the action itself, the applicable clauses of the agreement would have been clauses 5.3(a) and (b). Under those clauses Quiksilver would have had the conduct of the proceedings and would have been liable to bear the costs. The letter of 24 October 2002 is entirely inconsistent with that.
54. One can thus, in my judgment, conclude from the letter of 24 October 2002 that, notwithstanding that it is joined as a co-claimant to the proceedings and, as Mr Silverleaf has pointed out, the letter before action was expressed to be written on behalf of both of it and Na Pali, in truth as between the parties to the licence agreement this was and was treated as being a case where Quiksilver had chosen not to prosecute the action itself within the meaning of the clause.
55. Accordingly, as it seems to me, the event hypothesised by clause 5.3(c) of the licence agreement has occurred. In those circumstances Na Pali was authorised to sue for infringement of trade mark on its own behalf. That involves that to that extent Na Pali was conferred "the same rights and remedies" in respect of the infringement of the trade marks "as if the licence had been an assignment". Accordingly, it seems to me that Na Pali brings itself within section 31 (1) of the 1994 Act and, as such, has standing to bring this action. I should add that I would have come to precisely the same conclusion and by the same reasoning by application of section 30(3) of the 1994 Act. Indeed for present purposes I can see little difference in substance between the two sections other than that section 31 applies only to an exclusive licensee.
56. Accordingly on the second issue I find that Na Pali does have standing as co-claimant with Quiksilver to bring this action.

Conclusion

57. I therefore conclude that both the claimants are entitled to damages to be assessed for infringement by the defendant of the trade marks by reason of the marketing and sale by the defendant of Quiksilver products at Trago Mills in the manner complained of by the claimants.