England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY

		Royal Courts of Justice Strand, London, WC2A 2LL
		04 November 2009

Mark Herbert QC

Introduction

1. This is an action about men's soccer-inspired leisure wear in the USA. In legal terms it is a claim for breach of contract, the contract in question being a licensing agreement governed by English law. The trial was on liability only.
2. The defendant is Umbro International Limited (which I shall call 'Umbro' or 'Umbro UK'), a large English company with an international licensing business based principally on soccer. It has a subsidiary, Umbro Corp Inc, a Delaware company, which handles its business in the US, and I shall call it 'Umbro US' to distinguish it from Umbro UK itself. The claimant Hudson Bay Apparel Brands LLC is a small US company specialising in manufacturing and marketing branded apparel. Both parties have been represented by counsel, Hudson Bay by Mr Michael Silverleaf QC and Mr Tom Alkin, Umbro UK by Mr Guy Morpuss QC.
3. In 2006 and 2007 Umbro granted two separate licences for selling soccer-based clothes in the USA, one to a major retail company called Dick's Sporting Goods (which I shall call Dick's) for on-field wear, the other to Hudson Bay for off-field wear. The precise demarcation between on-field and off-field wear is crucial to the decisions which I have to make. But generally, as the words on their own imply, on-field wear consists of clothes used on the field of play, while off-field wear consists of clothes worn by fans at a game, or at home or on the street. A particular type of on-field wear has been described as 'teamwear', which consists of soccer kit (not limited to shorts and shirts) provided to competitive teams. Umbro conducts the teamwork side of its business itself, without the involvement of licensees, so that Hudson Bay were not intended to be licensed to supply teamwear. Nor were Dick's.
4. The complaints are in three parts. First, Hudson Bay claim that Umbro have allowed Dick's to market off-field wear in breach of Hudson Bay's exclusive licence. Second, they say that Umbro have wrongly hindered Hudson Bay from exploiting their off-field licence, in breach of an implied duty of co-operation claimed to be owed by Umbro to Hudson Bay in the operation of the licensing agreement. In defence Umbro claim that they have acted within their rights under the contract, and in particular that the material marketed by Dick's is on-field wear. And they counterclaim that Hudson Bay have acted in breach of contract by marketing on-field wear. The particular focus of the counterclaim is what have been described as 'pocketless soccer basics', which include shirts and shorts made without pockets and resembling, at least in some visual respects, the type of shirts and shorts which are used on the field of play as teamwear.
5. In brief my conclusions are that Hudson Bay are broadly correct in respect of their first claim, but not in their second claim, and that Umbro are correct in their own counterclaim. My reasons appear in the following paragraphs.

Witnesses

6. Hudson Bay consist essentially of two individuals, its principal Mr John Luther ('Jock') Thompson, whose strength is in marketing, and an employee Miss Po Kyong Kang, who works on the design side and outsources the manufacture of clothes to the far east. In 2007 the principal of Umbro US was Miss Barbara Jackson, and from all accounts there was a good working relationship between Mr Thompson and Miss Jackson. But during 2008 Umbro was taken over by Nike, and there were important changes of personnel. In January 2008 Miss Jackson was replaced in her position at Umbro US by Ms Terri Hanson, and later in 2008 Ms Hanson was replaced by Mr Mark Duggan. Each of these was answerable to Mr Martin Prothero of Umbro in England. In addition to Umbro UK, Umbro US and Hudson Bay, a fourth company The Licensing Company ('TLC') was involved to oversee the licensing contract on behalf of Umbro. Like Umbro US, TLC was a US subsidiary of an English company, and at the relevant time the main individuals dealing with Hudson Bay and Umbro in regard to the contract were Ms Deborah Greenberg, Mr Ryan Dirk and their boss Ms Angela Farrugia.
7. I heard evidence from all these individuals except Mr Dirk and Ms Farrugia. Naturally Mr Thompson and Miss Po Kang gave evidence for Hudson Bay. More surprisingly perhaps Miss Jackson gave evidence for Hudson Bay as well. In the end, so did Miss Greenberg, though only after she effectively changed sides. She was originally interviewed and proofed by Umbro's solicitors, but just before the hearing she wished to change her evidence, and Umbro stated that they did not intend to call her. She was then interviewed and proofed by Hudson Bay's solicitors, and she gave evidence for them. I also heard evidence from Mr Alan Seth Finkelman, whose company acquired a majority interest in Hudson Bay during 2007, and from Mr Jeffrey Jay Adams, whose company is an important customer. On Umbro's side I heard evidence from Ms Hanson, Mr Duggan and Mr Prothero.
8. I shall make some preliminary comments on these witnesses. Mr Thompson was an engaging and candid witness who approached the issues with fairness throughout. Miss Jackson was a confident witness, but her evidence was marred by an exaggeration of her authority to bind Umbro UK. I had to treat Miss Greenberg's evidence with caution, firstly because she had changed sides and found herself correcting or contradicting her own evidence on several points. She is also garrulous, which in some instances made the precise thrust of her evidence difficult to pin down. The other side of that is that she was a candid witness. Even so, her evidence suffered from the same fault which I have mentioned with Miss Jackson. Miss Po Kang, Mr Finkelman and Mr Adams all struck me as truthful witnesses.
9. On the other side Mr Prothero and Ms Hanson were also in my judgment truthful and helpful witnesses, Mr Duggan less helpful because he sometimes found himself doggedly denying an obvious conclusion put to him in cross-examination. The persuasiveness of his evidence was not helped by its being given by a video link marked by an unforgiving camera angle.

The facts

10. Umbro is the owner of the umbro and double diamond brands. The double diamond consists of two oblate diamonds, one inside the other. Apart from teamwear, which I have mentioned, Umbro manages its licensing in the US through Umbro US, but in 2006 this part of the business was not operating successfully. (I understand that this was a contrast with more successful times in the late 1980s and early 1990s.)

Barbara Jackson

11. During 2006 Umbro appointed Miss Jackson as President of Umbro US with a remit to revive the Umbro brand in the US and to achieve rapid growth. There is no written contract for Miss Jackson's employment in evidence. The main terms of her employment are contained solely (so far as documentary evidence is concerned) in an offer letter dated 24 February 2006 signed by the director of human resources of the Americas division of Umbro. This letter states that Umbro US will be her employer, and that she will report to Simon Cunningham in England. Amusingly her job title is described as President of USA. The only statement of her duties and relationship with Umbro is this : —

'Your duties, title and reporting relationships may change over time, according to the needs of the business.'

The rest of the offer letter dealt with matters of importance, such as hours, salary, holidays, healthcare and so forth (much of which is heavily redacted), which however are not of relevance to issues in the case.

12. One of Miss Jackson's first steps was to execute a contract with Dick's to sell on-field wear through its large and popular network of sporting-goods stores. This would include soccer shirts and shorts for use on the field of play for soccer, bought typically by amateur or semi-professional players and, as was said by some witnesses, by soccer-moms for their children. Miss Jackson did not personally negotiate the terms of that contract, which had indeed taken some three years to achieve final agreement before Miss Jackson's appointment.
13. The exact extent of Miss Jackson's authority to bind Umbro is in dispute, and for that reason Miss Jackson, giving evidence for Hudson Bay, drew attention to the fact that it was she personally who signed the Dick's contract on behalf of Umbro (even though she was never an officer or employee of Umbro UK itself, only of Umbro US, and even though Umbro US was not itself a party to the contract). There is an e-mail exchange on 23 June 2006 between Miss Jackson and her immediate boss Simon Cunningham in England in which her authority to sign that contract was given. Initially the draft showed a Mr David Hare as signatory, and Miss Jackson asked Mr Cunningham if it should be changed to show his name. He replied that it was fine. After that she suggested that it might be easier for her to sign it, and she asked Mr Cunningham, 'Am I allowed to sign?' He answered, 'You are the queen and can sign anything you like.' This was evidently a joke, to judge from Miss Jackson's final response, 'lol' meaning 'laughing out loud'. That exchange suggests to me that, in the absence of it, Miss Jackson was not otherwise authorised to sign formal documents on behalf of Umbro UK.
14. Meanwhile Mr Thompson had had many years experience in marketing, particularly in golf equipment and other sports wear. In April 2006 he moved from his previous employment to take a more independent position as president of Hudson Bay, in which the women's clothes company Hudson Bay Apparel Group also had a stake. In June 2006 he ran into Miss Greenberg, a previous business acquaintance, at the TLC stand at an industry event. She knew of Miss Jackson's interest in a possible contract for off-field wear and suggested that Mr Thompson might be interested in meeting her. At the time he was more interested in a possible link with a competitor, Kappa, and it was not until October 2006 that he followed up the suggestion. After that events moved fairly quickly. In early November Mr Thompson had a conference call and then a meeting with Miss Jackson and Mr Noden, the chief financial officer of Umbro US.
15. Over the next few months Mr Thompson and Miss Jackson negotiated terms by which Hudson Bay would obtain a licence to manufacture and sell off-field wear. Both of them knew the existence of the licence granted to Dick's, and that in general terms it covered on-field wear. But Miss Jackson did not show that contract to Mr Thompson, so that he did not know the detail of the licence. They both also knew that Dick's were selling some off-field wear, namely t-shirts bearing the Umbro brand, which were not covered by their own licence and which would in due course infringe Hudson Bay's intended licence. However, they realised that it would be some time before Hudson Bay would be in a position to sell t-shirts themselves. At the same time they envisaged Dick's becoming in due course a buyer of such off-field t-shirts manufactured by Hudson Bay. Mr Thompson gave evidence, which I accept, that this particular feature of the contract represented an important opportunity for Hudson Bay to secure.
16. The licence agreement was not signed on behalf of Hudson Bay until June 2007, and not signed on behalf of Umbro until October 2007, but it provides expressly that it had effect from 1 January 2007. The text of the contract, after defining Umbro and Hudson Bay as the licensor and licensee, begins with a first unnumbered clause : —

'In consideration of the mutual promises and payments contained in this Agreement, the Licensor hereby grants to the Licensee an exclusive licence in the Distribution Channels (as defined below) to use the Licensed Property (as defined below) solely for the purposes of the manufacture, marketing, promotion, distribution or sale of the Products (as defined below) subject to, and in accordance with, the following Commercial Terms and the Standard Terms and Conditions attached hereto.'

17. The next section is headed Commercial Terms, and it runs to about 7 pages. These were what was negotiated between Miss Jackson and Mr Thompson. The Licensed Property is defined as meaning the Umbro trade marks, namely the umbro and double diamond logos (including the double diamond with umbro underneath). There follows the crucial definition of the Products : —

'The "Products" includes only those products as follows :

'Men's off-field apparel (meaning all apparel products that are not specifically intended to be used on the field of play for soccer including, for the avoidance of doubt, performance shorts and soccer jerseys) and shall, for the avoidance of doubt, only include the following : t-shirts, sweatshirts, sports polo shirts, hoodies (zip and non-zip), tank tops, reversible shirts, shorts, sweatpants, sweat suits, wind suits, warm-up suits, rain suits, pull-over jackets, pullovers, outerwear, shorts.'

The effect is that Hudson Bay may manufacture and market clothes carrying the Umbro logos only if those clothes (i) do not fall within the terms 'performance shorts and soccer jerseys' or other wear 'specifically intended for use on the field of play for soccer' and (ii) do fall within one of the descriptions specified in the second part of the definition. It is common ground that the second use of the word 'shorts' (between reversible shirts and sweatpants) is a mistake for 'shirts'.

18. The 'Licensed Products' are defined to mean any Products incorporating or using the Licensed Property (the Umbro logos) in any form. The 'Territory' means the United States and its territories and possessions. The clause continues, 'Other countries may be added to the Territory, subject to the prior written consent of the Licensor'. Under the sub-heading 'Term' it is provided : —

'This Agreement shall be deemed to have commenced as of 1^st January 2007 ("Commencement Date") and continue until 31^st December 2010, unless terminated earlier in accordance with terms of this Agreement ("Term").'

19. Clause 6 lays down the rates of royalties and possible discounts, and clause 7 provides for minimum guaranteed royalties amounting in total to $420,000 payable during the period to 31 December 2010 by Hudson Bay to Umbro.
20. The 'Distribution Channels' are defined by clause 9. They are set out under seven sub-headings, namely sporting goods chains, department stores, mid-tier department stores, apparel speciality stores, the ad speciality market (corporate catalogues), soccer speciality retail and close-out stores. Some of these categories contain individually named stores or entities. Sporting goods chains comprise only one, namely Dick's. Department stores list two, namely Macy's and Dillards. There are several listed mid-tier department stores and apparel speciality stores. Importantly for these proceedings, the ad speciality market listed Broder Brothers, Bodek & Rhodes, Heritage Imprints, S&S, Staton and Virginia Tees. S&S is the company of Mr Adams, who gave evidence. By contrast nothing is listed under soccer speciality retail except for the words 'as directed by the Licensor'. Four close-out stores are listed, but there are restrictions limiting annual sales to close-out stores to 30 per cent of the total without the prior written consent of the licensor.
21. I should interpose here to explain the reference to the ad speciality (or sometimes ad-specialty) market, also known as the ASI market. This market was well known to Mr Thompson but not initially to Miss Jackson or anyone else at Umbro. The market comprises wholesale companies, typically marketing their products through catalogues, selling 'promotional products'. These are articles used in marketing or promotional programmes. An example might be a soccer strip (or articles looking like a soccer strip) issued by a trading company to its sales representatives at a congratulatory event. Usually the articles distributed will bear the company's own logo, in which case they are called 'advertising specialties', and value may be added by the article also bearing another brand identity such as an Umbro logo. ASI stands for Advertising Specialities Inc, a company which represents the ad-specialty industry to which ASI distributors must belong in order to buy from ASI wholesalers. S&S is a large ASI wholesaler.
22. Returning to the text of the agreement, clause 10 requires Hudson Bay to provide three production samples of each licensed product to 'the Representative' for approval on behalf of Umbro, and the Representative is identified by clause 13 as meaning TLC. Clause 14 incorporates the standard terms and conditions set out in the next section of the contract.
23. In addition clause 15 contains twelve further special conditions, including minimum sales (giving Umbro the right to terminate on Hudson Bay's failure to achieve the targets) and automatic renewal for three years if Hudson Bay complies with the agreement. Clause 15(l) provides that Umbro will, where reasonably and commercially practicable, support Hudson Bay through market opportunities in four stated areas, namely (i) co-branding media, (ii) website support, (iii) viral and event marketing and (iv) licensor-sponsored athletes and teams. By clause 15(m) Hudson Bay agreed that Dick's were entitled to manufacture, market, distribute sell or offer for sale men's t-shirts until and including 31 December 2007. I have mentioned that these would otherwise have been in breach of Hudson Bay's exclusive licence.
24. The standard terms and conditions contain 26 further pages of agreed terms. For present purposes the important clauses are clauses 5 (relating to the approval of samples), 22 (waiver) and 27 (variation).
25. Under the heading 'approvals, quality control and product recall', clause 5 lays down a detailed programme by which written approval has to be obtained for each licensed product at each stage of production. Clause 5.1 provides that for each licensed product, and for each item of materials (which is defined to include artwork), Hudson Bay are successively required to submit the following to TLC for written approval on behalf of Umbro : a rough sketch, written description and/or concept layout; accurate line art (if applicable); finished artwork or final proofs; pre-production samples; final licensed products or production samples of the licensed products; and final production samples of the materials. Then clause 5.3 provides : —

'If any sample is not approved within 10 (ten) days of receipt by the Representative of such sample from the Licensee, then it shall be deemed disapproved, at which time the Licensee must amend and re-submit the sample. The Licensee shall not continue to the next stage of production without the written approval of the Licensor, to be communicated through the Representative.'

And clause 5.4 prohibits the licensee from making or marketing products before obtaining approval, which is to be communicated in writing by TLC.

26. Under the heading 'waiver', clause 22.1 provides : —

'In no event will any delay, failure or omission (in whole or in part) in enforcing, exercising or pursuing any right, power, privilege, claim or remedy conferred by or arising under this Agreement or by law, be deemed to be or construed as a waiver of that or any other right, power, privilege, claim or remedy in respect of the circumstances in question, or operate so as to bar the enforcement of that, or any other right, power, privilege, claim or remedy, in any other instance at any time or times subsequently.'

27. Clause 27 provides : 'No modification or variation of this Agreement shall be valid unless it is in writing and signed by or on behalf of each of the parties to this Agreement'.
28. The standard terms and conditions were not negotiated between Miss Jackson and Mr Thompson. What happened was that the two of them negotiated and agreed the commercial terms, and this process was complete by April 2007. Miss Jackson did not have a free hand in this process. I am satisfied that it was clear to her and also to Mr Thompson, through several e-mails sent between them and TLC (e-mails which Mr Thompson and Miss Jackson omit to mention or explain in their witness statements), that Umbro UK executives in England needed first to be persuaded to authorise negotiations with Hudson Bay in principle and later to approve the commercial terms in detail. In April Miss Jackson sent the commercial terms to Umbro in England to be incorporated into the formal agreement. Drafts of the agreement were then exchanged between the parties and their legal advisers, the first one on 19 April 2007. The final version was signed by Mr Thompson on behalf of Hudson Bay on about 6 June 2007, at which point he paid $40,000 to Umbro by way of an advance on royalties stipulated by the agreement. The agreement was not signed by Umbro until October 2007, but during all the intervening period between April and October there was no indication from Umbro that the agreement would not ultimately be signed, and the text provided that it would have effect from 1 January 2007. Both parties were keen to get started, and long before the contract was signed by Umbro, and even before the commercial terms were agreed, Mr Thompson and Miss Jackson began work on developing their marketing strategy, designing clothes, producing samples, and getting them approved.
29. There was objectively a risk in proceeding in that way, especially for Hudson Bay. Mr Thompson's evidence was that he did not see it as a risk at all : commercially both parties wanted to do business and both wanted to get clothes into the shops by the end of 2007; he regarded Miss Jackson as being authorised to represent Umbro, at any rate in commercial matters, and he describes his working relationship with her as excellent. He says that there was a high degree of trust between them, and it was a relaxed and informal relationship. In quite a different context, Mr Thompson admitted, 'I am a generally optimistic and trusting person, yes.' I have no difficulty in accepting all of that, including that Miss Jackson had authority to represent Umbro UK in the day-to-day operation of the contract in due course and to approve, on behalf of Umbro UK, designs and samples for production. Whether she was authorised to represent Umbro UK in any broader sense is a question to which I shall turn later.
30. One decision that Miss Jackson and Mr Thompson made early on was for some of the first off-field wear to be similar in appearance to Umbro's on-field teamwear products. There were several reasons for this : —

(1) First, it speeded up the initial design process, because Umbro teamwear was readily available to copy. That was important if a collection for spring/summer 2008 was to be ready by August 2007, which in practice it would need to be. It is convenient here to mention the twice-yearly 'Magic' trade shows held in Las Vegas in February and August. The clothing market is seasonal, generally producing spring-summer and fall or autumn-winter collections. The Magic show represents the end of the buying season, so that the August show is essentially the last time for securing sales for the following year's spring-summer collection, in order that clothes can then be manufactured and delivered in the following weeks and months so as to arrive at retail outlets at the appropriate time. Similarly the February show is the end of the buying season for the fall collection. Mr Thompson explained in his written evidence that designs should ideally be completed well before Magic, so that samples can be circulated to potential buyers in advance and feedback can be obtained from them.

(2) Second, the target market consisted of young men with an interest in soccer, some of whom would be expected to favour leisurewear which resembled teamwear.

(3) Third, Miss Jackson and Mr Thompson thought that success with off-field wear might assist the sale of on-field teamwear, as well as the other way around.

Hudson Bay's first collection, in the form of computer assisted designs (CADs) done by Miss Po Kang, was produced by 10 May 2007. These articles may not have been designed to the same specifications as Umbro teamwear, or not in the same materials, but some of them were influenced by, or directly copied from, Umbro teamwear articles. Others were inspired by competitors' ranges, or by unconnected but existing designs with an added Umbro logo.

31. This strategy highlighted the problem which lies at the root of the present dispute. If off-field wear is to resemble on-field wear, how is the one distinguishable from the other? Several possible criteria present themselves. For example, fabric for on-field wear might be selected with different specifications in respect of wicking qualities (absorption), fit and durability, from clothes designed for everyday wear. I take this to mean that on-field wear would tend to be 'performance' wear, preferably with high-standard wicking properties, sturdy manufacture and a generous fit. Colour might be relevant too, though perhaps unlikely to be decisive. Also the design of the artwork might well be different, with larger or more flamboyant versions of the logos being more prevalent in everyday wear. FIFA lays down rules for clothes worn on the field of play, including that shirts should have sleeves and that branding logos should be no larger than 20 square centimetres. Sleeveless shirts and large logos might therefore be indications of off-field wear.
32. In practice, and from an early stage (even as early as November 2006), the most obviously visible differentiator which Mr Thompson and Miss Jackson adopted was the presence or absence of pockets, at any rate for shirts and shorts. On-field soccer shirts and shorts do not need pockets. Pockets on such articles are considered unsafe and therefore contrary to the FIFA rules about soccer kit. The rule of thumb which they operated, at least at first, was that shirts and shorts with pockets always qualified as off-field wear, even if they also had relatively high-performance specifications as well. Pockets could be added in the side-seam of shorts quite easily without seriously affecting the overall appearance. But with soccer shirts, or t-shirts made to look like soccer shirts, pockets were something of a problem, and initially it was hard to see how a pocket could be incorporated. Tracksuits could not abide by the same clear rule, because I understand that they are generally made with pockets, even in teamwear, and the differentiators for them might have to be fabric, design and artwork. It was perceived by Mr Thompson at least, and in fact by all relevant witnesses, that tracksuits would occupy a grey area between on-field and off-field.
33. In May 2007 the first few batches of CADs were ready to be presented for approval. TLC were involved in this process, not only in the person of Miss Greenberg but also her colleague Ryan Dirk, and their boss Miss Farrugia. The first collection consisted of (1) three designs for shorts, all with pockets; (2) three designs for tracksuits and warm-ups (two of these being a matching jacket and trousers); (3) three designs for shirts, all at that stage without pockets. The shorts and shirts came to be regarded as a collection called 'soccer basics'. Later in the month came further tracksuit designs. Further designs for shorts and shirts followed as well.
34. The approval process in clause 5 of the standard provisions was not followed at all accurately. That process provides for at least three stages of approval, namely design concept (CAD), pre-production samples and production samples. (On one reading as many as six stages are involved.) Each stage is required to be approved in writing for each article before the next stage begins, and the written approval is required to be given by TLC on behalf of Umbro. TLC did not actually have authority independently to approve designs or samples without reference to Umbro, and their task was to manage the approval process, not to implement it themselves. They needed authority from Umbro US, initially from Miss Jackson, before signing off an approval form. In practice Miss Jackson was impatient with that degree of formality. She thought that the only important point was whether or not she personally had approved the design, whether in writing or not. TLC then had to obtain, collect and record the required paperwork when they could, usually after she had orally approved the design already. She also paid no attention to written forms of approval for pre-production samples or production samples. She was again concerned only with whether she herself had in fact approved them.
35. The way in which the parties actually dealt with the approval of the initial designs in May 2007 is important. As Miss Po Kang produced a series of designs in the form of CADs, Mr Thompson and Miss Jackson discussed them. Once those two were satisfied, Mr Thompson sent the CADs to Mr Dirk. Mr Dirk suggested a meeting between the three of them to complete and sign approval forms (these being the forms by which TLC would record approvals), and a meeting was agreed for 17 May. In the event that meeting was cancelled because Mr Thompson and Miss Jackson were in Philadelphia to see Urban Outfitters that day. On 21 May a revised set of CADs was sent to Mr Dirk. He asked Mr Thompson for completed approval forms. Mr Thompson was travelling and not at his office. On 23 May he e-mailed Miss Jackson on his Blackberry, 'Is this going to be any issue?' Her reply was : —

'Absolutely not. I don't like all this bureaucracy! I'll speak to Angela [Farrugia] . . . This is ridiculous and I don't like working like this.'

On 24 May Mr Thompson e-mailed to ask Mr Dirk to fill in the style numbers on the forms himself when he made his own comments on the designs. Mr Dirk's reply was that he could do that for this case, 'but moving forward everything needs to come in with its own form.' Mr Thompson's comment on this exchange in his witness statement was, 'To me this confirmed that how and when approvals forms were signed off could not be of the essence.' Importantly, he does not suggest that he believed that approval forms did not need to be signed at all, or that the clause 5 procedure had been abandoned.

36. On 31 May 2007 Mr Thompson had a meeting with Miss Jackson, at which she told him that she was concerned that the shirts in the soccer basics collection were too similar to on-field wear, specifically that they were not easily enough distinguishable from the Umbro teamwear on which the collection was based. A brainstorming session eventually arrived at a possible solution which involved three changes. One was to square-off the 'drop-tail' (teamwear shirts being generally a little longer at the back than the front). A second was to include both the umbro name and the double diamond as well (team shirts generally have only the double diamond). The third was to add pockets, this being perhaps the most immediately visible of the three changes. Mr Thompson's initial evidence was that this meeting took place 'later in June', but he corrected that to say that it took place on 31 May.
37. On 4 June Mr Thompson sent Mr Ryan CADs representing a revision of the soccer basics, and Mr Ryan replied later the same day attaching an e-mail chain from Miss Jackson in which she had added 'OK' or some other reaction against each serial number. Umbro accept that this amounts to valid approval on behalf of Umbro, but they point out that this approval applied only to the designs, not to pre-production or production samples. The soccer shorts approved in that way all had pockets, but the soccer shirts did not. Umbro claim in their pleadings that the shirts already had pockets at the time of the approval, but in point of detail the order of events was more complex. I have mentioned that on 31 May the decision had been taken to add pockets to the shirts, but the approvals given on 4 June were of CADs prepared before that meeting, and the shirts had no pockets. A few days later Miss Po Kang came up with detailed designs for three alternative types of pockets to be added to the shirts, one of which was to add a small pocket in the left shoulder-seam of the shirts so as to hold iPods (MP3 players). So far as documents are concerned, therefore, the written approval was for shirts without pockets, but Umbro UK are correct that the decision to add pockets had already been taken and that Hudson Bay, in the person of Mr Thompson, had already accepted that change.
38. It was soon after this approval that Mr Thompson signed the licence agreement on behalf of Hudson Bay. From this point at least Mr Thompson had the means to know the details of the standard terms and conditions, including clauses 5, 22 and 27 relating to approval, waiver and variation. In fact I find he had known of those provisions since April. But it was still some months before the contract was signed on behalf of Umbro.
39. In July 2007 Mr Thompson and Miss Jackson both visited Umbro in England, and there they were attracted to another line of soccer-inspired clothing, called Football Culture. These were off-field fashion wear produced by Umbro itself with strong soccer associations and a particular emphasis on Umbro's connections with equipping the England team. As such, Hudson Bay's licence would give it exclusive marketing rights for such products in the USA. Mr Thompson ordered samples and, back in the US, had them worked up into a line of clothing which he called Umbro Culture (because 'football' there does not generally mean or include soccer). The aim was to sell this line to more up-market retailers, which would, according to Mr Thompson, greatly assist in securing other buyers as well as helping to enhance the Umbro brand generally in the American leisurewear market.
40. Meanwhile Mr Thompson was meeting potential buyers, even though he had nothing in the form of finished products to show them. He was successful. During the summer he obtained relatively small but significant orders from three department stores. Then on 3 August 2007 S&S, the ASI business, placed an order for soccer basics shorts and shirts, and also tracksuits, together worth over $1 million.
41. A few days later Mr Prothero and Mr Steve Makin, senior management from Umbro in England, happened to be in New York and, while they were in a meeting with Miss Jackson, they invited Mr Thompson to join the meeting to describe this part of the business. He brought with him the S&S catalogue as well as some samples, but the invitation to the meeting had been given on the spur of the moment and no one can remember exactly what samples he took. They were probably a mixture of Umbro teamwear and Hudson Bay prototype samples. Hudson Bay rely on this meeting as an approval of the articles sold through the S&S catalogue, but that is an exaggeration. Mr Prothero explained in his evidence that he was new in his position at Umbro, and although he remembers Mr Thompson attending the meeting for about 15 or 20 minutes and seeing some samples, he is sure that he was not asked to approve anything and did not do so. He cannot remember what samples were there, and indeed neither can Mr Thompson or Miss Jackson.
42. At about the same time as securing the S&S order, there was also a change in the ownership of Hudson Bay. Mr Finkelman's group of companies, known collectively as Scope, agreed to buy out the shares of Mr Thompson's co-shareholders. This was finalized in September 2007, as a result of which Hudson Bay is now owned two-thirds by Scope and one-third by Mr Thompson. Mr Thompson has explained that Scope has a large wholesale clothing business of its own and has good relations with manufacturers, freight companies, the US customs authorities and others. The purchase gave Hudson Bay access to Scope's large sales force.
43. In early October, S&S sent Mr Thompson mock-ups of the pages which they were intending to include in their next catalogue, though he was away from his office at the time and did not immediately see them. This included two pages with a heading in capital letters, 'Proudly introducing umbro — soccer players share one love — the game.' The pages included photographs of young male models wearing the kit, some carrying a soccer ball under one arm, one with a soccer ball at his feet, and one action shot showing the model dressed in soccer kit executing a flying kick. Mr Adams, who is described as Member Manager of S&S and who is a 50 per cent shareholder in that company, wrote in his witness statement, in a passage which was not challenged, that S&S never intended to sell this line of clothing for any particular purpose. The soccer layout identified the line as connected with soccer and, according to Mr Adams, 'the primary purpose of these pictures is to communicate this unique aspect of the Umbro brand in an aspirational way.'
44. Then on 4 October S&S wrote again with some suggestions for changes to the styles. In six instances they wrote either 'No Pockets' (for shorts) or 'Would like to talk about removing MP3 Player pocket' (for shirts). Mr Thompson realised the problem, and relayed the request to Miss Jackson. He wrote by e-mail to her : —

'My suspicion, which I will confirm with them, is that they are getting a lot of interest and targeting screen printers and embroiderers who would sell the products to local soccer teams. What do you think? My two cents. It wouldn't have an impact on Dick's because it is not retail. It would have an impact on me because then I couldn't sell the same styles to retailers (ie Kohl's, Penney's etc). It may have an impact on some of what Shaun does.'

'Shaun' was Mr Shaun Jackson (no relation to Barbara Jackson), who ran Umbro's teamwear business from California. In the event Mr Thompson did not confirm his suspicions directly with S&S, though as it turned out they were justified.

45. The passage quoted above was not intended as Mr Thompson's analysis of whether the range without pockets fell within Hudson Bay's licence agreement as a matter of construction. It was a matter of who might be affected by the decision commercially. But the reason he raised the issue at all was because he realised that shirts and shorts without pockets might not be within Hudson Bay's licence. Miss Jackson too realised that there was a problem. Her immediate e-mail reply was, 'Damn, Jock, This is quite a pickle!!!'. She admits that she realised that shorts and shirts sold to S&S without pockets might ultimately be sold to soccer teams, and that this would cause a problem with Dick's licence and with Umbro's own teamwear business. Even so, she ultimately formed the same commercial view as Mr Thompson, namely that the nature of S&S's business was sufficiently different from those of Dick's and Umbro itself that the sales to S&S would not harm them. On 4 October 2007 she approved the removal of pockets from these shorts and shirts, but the intention was to limit this approval to the S&S corporate catalogue market. There is no evidence that this approval was given in writing. It was given orally over the telephone. This was a crucial event. All the subsequent differences between Hudson Bay and Umbro can be dated back to this decision of Miss Jackson's to authorise Hudson Bay to sell shorts and shirts without pockets through S&S, and to Mr Thompson's decision to act on that authority.
46. It was on about 18 October 2007 that the licence agreement was ultimately signed by Umbro in England. Before that it had been a source of frustration that it had not been signed much earlier. Under the heading 'Contract' Mr Thompson had sent an e-mail on 11 September 2007 to Miss Greenberg on his Blackberry saying, 'Seriously! This is past absurd.' Apparently Miss Jackson had even offered to sign it herself, and in evidence she pointed out that she had signed the agreement with Dick's, which was a more important contract, and that she therefore had authority to sign this one as well. But this suggestion was not taken up, and in the end it was signed in England by a senior executive of Umbro UK.
47. Returning to the soccer basics collection, Miss Jackson was right, at least, that there would be conflict with Dick's, even with pockets and without the changes to the S&S catalogue. Late in October 2007 Kohl's, a department store, set out some of the range to gauge the market, and this range included some of the shorts and shirts, with pockets. Dick's saw these and complained to Miss Jackson. Her reaction was that the t-shirts and shorts with pockets were off-field wear, but at this point she recognised that the iPod pocket sewn into the shoulders of the shirts was not prominent enough to make the shirts clearly off-field, and she admitted this to Dick's. In my view she was right to be concerned. I have been shown some samples of the shirts marketed through Kohl's at this time : some have large logos and are more fairly described as fashion t-shirts, but others have just small Umbro logos and they look and feel just like soccer shirts. The pockets on these shirts could easily go unnoticed.
48. Quite apart from products marketed through Kohl's, shorts and shirts without pockets were by December 2007 included in the S&S catalogue, and Hudson Bay began to supply them. I should mention also that this catalogue, including as it did marketing materials bearing the Umbro logos, should also have been approved by Umbro, but it was not so approved.
49. In December 2007 Miss Greenberg at TLC realised that this could lead to problems, and evidently formed the view that Miss Jackson's approval of the soccer basics line without pockets might not be valid on the ground that the versions without pockets were on-field wear and did not fall within Hudson Bay's licence. She proposed a variation of the licence agreement, and drafted provisions for consideration by Mr Thompson and Miss Jackson. They discussed, amended and eventually approved the terms, and a document of variation was signed by Mr Thompson on behalf of Hudson Bay on 2 January 2008 and by Miss Jackson soon afterwards, though the date of that signature seems unclear, purportedly on behalf of Umbro UK. The document is headed 'revised/amended deal proposal' and, next line, 'subject to contract'. The terms of the amendment included this: —

'Special Term : Shorts with no pockets designed with or without check pattern & Shirts with or without pockets may be sold to the Ad Specialty Corporate Catalogs (ASI) only specifically : Broder Brothers, Bodeck & Rhodes, Heritage Imprints, S & S, Stanton & Virginia Tees. ASI Products may not be sold to any bricks & mortar, catalog or e-commerce retail channels.'

The 'check pattern' was a distinctive black-on-black (or green-on-green etc) checker-board pattern, an Umbro favourite. 'Stanton' was a misprint for Staton.

After Miss Jackson's departure

50. On 15 January 2008 Miss Jackson was dismissed from her post at Umbro US, though this decision was not attributed to her operation of the licence agreement, of which Umbro itself had little detailed knowledge at that stage. According to Mr Prothero, whom I believe, it was more to do with her lack of rapport with senior figures in Umbro UK, including Mr Prothero himself, and particularly her reluctance to accept restrictions on her independence imposed by them. At about the same time Nike agreed in principle to become the new owner of Umbro, though the actual acquisition occurred a few months later.
51. From this point forward relations between Umbro and Hudson Bay deteriorated. Ms Hanson took over Miss Jackson's role in regard to the approval of products on behalf of Umbro. She started by checking through the approvals given by Miss Jackson, and took the view that some of the articles were in direct conflict with Dick's, namely the shirts and shorts which had been on sale at Kohl's, with pockets. On 24 January she e-mailed Mr Prothero saying, among other things : —

'I was shocked that approval was given on a (sic) teamwear products, shorts and poly jerseys, taken directly from the International Teamwear catalog, produced in performance fabric and all in team colors.'

She added that the same products were to be marketed in the spring, but that they had time to withdraw them. Mr Prothero's response was : —

'I cannot believe that Barbara has approved the product for Spring. Please feel free to be very hard with Jock Thomson (sic) we understand our priority here is Dick's.'

Ms Hanson commented in reply : —

'The product was submitted for approval last May and written approval given in June. The product was launched at Magic in August. As a licensee Jock has complied with the rules.'

52. Mr Thompson and others met Miss Hanson on 25 January 2008. Amongst other matters they discussed were ways of differentiating between on-field and off-field wear, but no conclusions were reached. Mr Thompson was reassured by this meeting that, although things would be different after the departure of Miss Jackson, Hudson Bay and Umbro would still have a working relationship. Miss Hanson reported back to Mr Prothero in England that in her view Hudson Bay were authorised to sell these shirts and shorts (with pockets) and that this feature differentiated them from on-field products.
53. On the other hand Ms Hanson was, to use Miss Greenberg's phrase, 'more process and paper oriented', and quite different from Miss Jackson. One result of this was that TLC started asking for evidence of written approval for the products without pockets supplied to the S&S catalogue. The fact was that they had not been approved in writing, either by TLC or by Miss Jackson or anyone else.
54. On 19 February 2008 Miss Farrugia of TLC wrote to Mr Thompson by e-mail complaining about the soccer teamwear in the S&S catalogue, saying that they competed directly with Umbro's own teamwear business, and that several complaints had been received. The e-mail demanded immediate withdrawal of the offending items. It also attached a proposed amendment to the licence agreement different from the one provisionally agreed between Mr Thompson and Miss Jackson, the main features of which were : (1) to expand the description of on-field wear excluded from the licence and to exclude imitations of Umbro teamwear; (2) to add a requirement that shorts must not only have pockets but also 'exterior secondary branding that is 20 cm² or larger'; (2) to require ASI products to be approved annually by the licensor; (3) that Dick's should be entitled to market men's t-shirts. This would have removed Hudson Bay's exclusive licence to supply t-shirts to Dick's, which Mr Thompson had always regarded as an important positive feature of the existing agreement. Secondary branding, as I understand it, means an additional logo such as a national or club badge (which would be attractive to fans but not appropriate to the field of play).
55. Mr Thompson replied to Miss Farrugia on 20 February. He pointed out that it was Umbro's own suggestion, via Miss Jackson, to make the off-field wear resemble the Umbro teamwear, and that the teamwear had actually been supplied to Hudson Bay by Umbro. He pointed out that it was impossible actually to withdraw the S&S catalogue, and that it would do irreparable harm to Hudson Bay's business with the ASI channel to prevent them from selling the articles in question, but he was willing to discuss a solution to the problems. As for the proposed amendment, he was unwilling to restrict the licence agreement in the ways proposed.
56. On 21 February 2008, after separate correspondence about the Football Culture line, Mr Thompson, using an e-mail address belonging to Scope, placed an order with Umbro to supply clothes for Hudson Bay's Umbro Culture collection. As I have mentioned, these were soccer-inspired leisurewear produced by Umbro itself which Hudson Bay would have the exclusive licence to distribute in the USA. Unlike the soccer basics, however, this was not a question of clothing to be manufactured by Hudson Bay. It was an order by Scope to purchase goods from Umbro for onward sale.
57. On 26 February 2008 Steven Hodkinson, general counsel for Umbro, wrote a formal letter of complaint to Hudson Bay. It included the following passage : —

'It has come to our attention that certain products have been supplied by Hudson Bay to S&S and which appear in their corporate catalogue. These products are, on any analysis, on field football kits designed and supplied expressly for the purpose of playing a competitive football match.'

The letter went on to mention the exclusive agreement with Dick's and referred to clause 2 of Hudson Bay's agreement, and said that the situation was potentially damaging for Umbro, in regard to its relationships with Dick's and soccer speciality stores. It continued that they had found no approval of these items in Miss Jackson's papers, nor any variation of the agreement. Mr Thompson was shocked to read this, because he regarded Miss Jackson as having provided the necessary consents for all the S&S products.

58. On 29 February 2008 Ms Hanson confirmed by telephone that Umbro would only accept the withdrawal of all the S&S products and the new agreement previously spelt out by Ms Farrugia. From Mr Thompson's viewpoint, Umbro had drawn a battle line, and the terms of their demands suggested to him that the true cause of their reaction was not just the lack of pockets but rather that all the shirts and shorts looked too much like Umbro teamwear. He felt that Umbro, in the person of Miss Jackson, had approved that essential strategy, and that even Mr Makin and Mr Prothero were aware of it by having seen samples in New York the previous August.
59. Even so, at about the same time, Hudson Bay sent TLC new CADs for a proposed fall 2008 collection. This was a 'country theme' collection consisting of products with designs incorporating the names and flags of soccer-playing nations. But Umbro and TLC refused to consider the fall 2008 collection at all pending resolution of the S&S dispute. On 9 March 2008 Ms Hanson also informed Mr Thompson that his Umbro Culture order had been cancelled for the same reason. This meant, according to Mr Thompson, that much preparatory work already carried out by Scope sales people had been wasted.
60. Mr Thompson was understandably concerned that Ms Hanson was now reversing what he had previously understood to have been agreed on behalf of Umbro by Miss Jackson. He wanted to know whether he could rely on Ms Hanson having authority to bind Umbro in further negotiations. On 18 March 2008 his attorney, Mr Brad Rose, wrote by e-mail to Umbro's legal team : —

'My client is amenable to having discussions but wants to make sure that Terri Hanson is authorized to bind Umbro in these discussions. I mean no disrespect in asking this question. I trust that none is taken. We just want to make sure that we are having direct discussions with the person that can bind Umbro so that we don't have to account for any possible corporate gridlock at Umbro's end.'

The question was therefore clear, but the answer was not simply Yes. On the following day Mr Jonathan Bamber of Umbro replied : —

'Terri will be Umbro's authorized representative in such discussions and will have a clear understanding as to Umbro's position both from a commercial and legal perspective. Anything that is negotiated will then be communicated to Umbro International Limited for final approval. In reality, as Terri will enter discussions with a clear brief of Umbro's position as aforementioned, she will not be agreeing to anything in such discussions will not be agreeable to Umbro International Limited. Furthermore, I would envisage that Martin Prothero of Umbro International Limited will also be party to such discussions by telephone.'

(In that passage I have supplied the words in angled brackets which, in the court bundle, appear to have been accidentally removed from the printout by a hole-punch.)

61. Hudson Bay rely on that reply to support the proposition that Ms Hanson had authority to bind Umbro UK. Mr Thompson says that he understood that to be its meaning. Umbro's submission is that Ms Hanson had no more authority than Miss Jackson. I accept Umbro's submission on this point : Mr Bamber's reply was not an unqualified statement of Ms Hanson's authority, and it stated expressly that final approval would be required from the United Kingdom, and that Mr Prothero would be available on the telephone (presumably for that purpose).
62. The fact is that on 20 March 2008 Mr Thompson had a meeting with Ms Hanson, after receiving the assurance contained in Mr Bamber's reply to Mr Rose's request. According to Mr Thompson some of this meeting involved a discussion of the issues surrounding the S&S dispute, but at the same time it involved discussions about the future operation of the licensing agreement. In the latter category, Ms Hanson gave signed approval then for Hudson Bay's fall 2008 designs. He regarded another meeting in April as having the same dual character.
63. On 20 May 2008 Ms Hanson had a further important meeting, this time with Mr Finkelman as well as Mr Thompson. These two both claim that they still regarded Ms Hanson as having authority to make decisions on behalf of Umbro. This meeting also contained both a discussion of existing issues and a positive discussion about what Hudson Bay could do in the future. They understood Ms Hanson as orally approving various individual samples of clothing which Hudson Bay were currently developing, and stating that shirts could resemble soccer shirts provided they did not replicate Umbro's own performance collection or teamwear or Nike's styles. As for the ASI channel in the future, they say that she told them that Hudson Bay could supply products similar to the existing products in the S&S catalogues provided that these were supplied by Umbro itself. This latter suggestion was important to Mr Thompson, because he thought that it enabled Hudson Bay to offer continuity to ASI wholesalers when the existing inventory was sold off. Without that continuity, according to him, Hudson Bay would lose all credibility in the market. He was reassured by Umbro's attitude at this point, because, as it seemed to him, it authorised the existing products sold through S&S and even enabled Hudson Bay to approach other ASI customers, and he believed that Ms Hanson understood that this would depend on their being able to substitute future products, including Umbro's own performance wear, when the existing inventory had been sold through.
64. In general I accept this version of the meeting given by Mr Thompson and Mr Finkelman. However, Ms Hanson's note of the meeting shows clearly that it did not result in a concluded agreement. It was optimistic that agreement could be reached, but further action was needed. Her note ends : —

'On that basis Jock and Alan left to work out a proposal that is fair (in their view) and will come back to present it to me midday tomorrow. The sentiment at the end of the meeting was quite optimistic and I felt that they were sincere. If we agree terms with them tomorrow, then we do need to move forward as partners with trust and support.'

In any event, I am satisfied that nothing which occurred at the meeting amounted to formal approval of the pocketless soccer basics. It is clear to me that the suggestion of Umbro teamwear, as replacement for the pocketless soccer basics once they had been sold through, was no more than a possible means of helping to solve the many disputes between the parties. Those disputes remained unresolved.

65. At the same meeting Ms Hanson provided samples of a different Umbro line called Diamond 5. This was a range of Umbro soccer wear designed for five-a-side indoor soccer. It includes both on-field wear, including footwear and other kit, and off-field wear as well. Mr Thompson and Mr Finkelman were doubtful that their customers would be interested in it, and were initially reluctant. But Ms Hanson thought that the line would do well, and they decided to show the line to customers, which they later did. However, this proposal was withdrawn during June, on the footing that Umbro chose not to supply the Diamond 5 line to Hudson Bay at all, and this position was confirmed and repeated in writing on several occasions during the following months. For some weeks Mr Thompson nevertheless continued to solicit orders for Diamond 5 products, and in August Macy's placed an order. Umbro repeated their refusal, and Hudson Bay have had to refuse Macy's order.
66. Also on the strength of the May meeting Mr Thompson approached ASI customers, as Ms Hanson was aware, with a view to flushing through the existing excess S&S inventory, believing that he could follow that up with Umbro's own products later as well as some of Hudson Bay's additional products if they did not resemble Umbro's teamwear. This produced orders from Statons and Virginia Tees, but for reasons which will soon become apparent, Hudson Bay could not in the event accept these orders.

Mark Duggan

67. In June 2008 Ms Hanson's position at Umbro US was being taken over by Mr Duggan, and he was initially not well informed about the nature of Hudson Bay's licence or its business. In addition he took a different position from that of Ms Hanson. During an initial meeting on 17 June, which seems to have been the day before Mr Duggan's appointment became official, Mr Thompson explained that Hudson Bay were running late in their preparation of a spring 2009 collection, and he complained of a lack of direction from Umbro in this regard in recent months. Mr Thompson claims that Mr Duggan encouraged him to do what he was doing before, which he took to mean a repetition of the 'country theme' collection which had had some success already. Mr Duggan claims that he was not in a position to give Hudson Bay guidance for the spring 2009 collection, being only just then taking up his post, and says that he merely recommended that Hudson Bay should go back to preparing designs for approval by Umbro. He points out that it would have been odd for him to have encouraged a fall theme to be repeated in a spring collection. I accept Mr Duggan's evidence on this point.
68. Be that as it may, Mr Thompson says that he regarded the June meeting with Mr Duggan as encouraging. However, that changed on 30 June 2008 when Mr Duggan wrote by e-mail that Umbro expected Hudson Bay to stop selling teamwear, and that he was not interested in 'settling' the outstanding issues between the parties. This led to a meeting on 9 July 2008 with Ms Hanson present as well as Mr Duggan, but they did not speak as one. Mr Duggan overruled Ms Hanson's previous encouragement to continue providing performance wear to the ASI market provided they were not similar to Umbro's own performance collection. He also wanted to control distribution into the ASI distribution channel. Mr Thompson was upset that Ms Hanson's encouragement, as he thought given with Umbro's authority, had now been reversed. In a follow-up exchange of e-mails Mr Duggan wrote on 14 July 2008 that he was willing to allow the existing product to be sold through, but that he would not allow it to be replaced with further products of the same type. According to Mr Thompson this meant that Hudson Bay could no longer offer Umbro products to the ASI wholesalers, and he was angry that Mr Duggan appeared not to understand this or not to care.
69. The other main topic for discussion at the July meeting was the spring 2009 collection, which everyone realised had been delayed, for several reasons, and was now urgent. The Magic show was only about six weeks away. It is common ground that the country theme was mentioned. Mr Duggan and Ms Hanson both say that they expressed concern about it and said that there would have to be greater diversity in the collection. Mr Thompson's recollection is different. He acknowledges that Mr Duggan expressed a wish to move away from this theme in the long term, which did not surprise him, but he says that there was no suggestion that Umbro might refuse approval of a spring 2009 collection in the short term. I prefer Mr Thompson's evidence on this point. He points out that, if Umbro had then been as negative as they now claim about the country theme for the spring 2009 collection, he would have regarded it as catastrophic. Six weeks would not have been time enough to alter the country theme, and he would have been clear in his reaction. As it is there is no evidence of any such reaction, either in contemporary e-mails or in the evidence of Mr Duggan and Ms Hanson.
70. In the meantime, therefore, on the strength of the meeting with Mr Duggan on 17 June 2008, Hudson Bay had started to work frantically towards preparing samples and a brochure for a spring 2009 collection to be shown at the Magic show in August. Samples and brochures were prepared in a short time and shipped to Las Vegas in anticipation, and on 15 August Hudson Bay sent CADs to TLC for approval. But on 21 August TLC replied that the spring 2009 CADs had to be revised and resubmitted because the country theme was not appropriate for the brand for 2009. In the circumstances this, from Hudson Bay's viewpoint, was disastrous. There was no time to submit amendments, and the samples shipped to Magic had to be sent back to New York unopened. Even so, revised designs were produced, revised CADs submitted to Umbro, and on 1 October 2008 they were approved.
71. Meanwhile, on 3 September 2008 Hudson Bay had sent details of proposed layouts for three catalogues for 2009. These were for S&S, Staton and Virginia Ts. But on 18 September 2008 these only received limited approval from Umbro, namely approval to 'sell through' the existing inventory already supplied to these outlets. Hudson Bay again complained that this response was unworkable, but to no avail. The result has been that the ASI wholesalers have cancelled their existing orders for pocketless soccer basics and tracksuits, and have required Hudson Bay to take back products already delivered. Again Hudson Bay complain that their credibility in the ASI market has been ruined.
72. In regard to the fall 2009 and spring 2010 collections Hudson Bay have repeatedly asked for direction in regard to the designs. This is understandable in the light of the disputes and difficulties with previous seasons. And Hudson Bay complain that for both these seasons Umbro have been unresponsive and slow in providing comment, feedback and approvals, and that Umbro have not provided anything in the way of suggested themes or product strategies. Later still Hudson Bay continue to complain of a lack of direction from Umbro. Hudson Bay have prepared designs for fall 2009 and submitted them for approval on 7 November 2008. On 20 November 2008 it emerged that Umbro would not approve certain aspects of the designs. Amendments to four of the designs were submitted on 15 April 2009, but without a response by 15 May 2009.

On-field and off-field wear

73. Hudson Bay's first claim and Umbro's counterclaim both depend on the assertion that given products were or were not off-field wear. I therefore need to establish criteria for distinguishing the two categories of off-field and on-field wear. Colloquially the distinction is between fan-wear or leisure wear (or even 'athleisure' wear) on one side, with 'performance' wear on the other. But however useful those words may be in common speech or in the industry, they are not all words used in Hudson Bay's licence agreement. For that purpose I must construe clause 2 of the agreement itself. There is no dispute about the task of the court on a question of construction, not to determine the subjective intention of the parties when negotiating the terms, but to determine objectively what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language of the contract to mean. This principle was recently endorsed by the House of Lords in Chartbrook Limited v Persimmon Homes Limited [2009] 3 WLR 267.
74. I have already mentioned that in order to be off-field wear, (1) a product must not fall within the on-field exclusion in the first part of clause 2 and (2) it must fall within the inclusive words in the second part of the clause. And to fall within the exclusion in the first part the article must be 'specifically intended for use on the field of play for soccer including, for the avoidance of doubt, performance shorts and soccer jerseys'. Much must therefore turn on the meaning of the phrase 'specifically intended'. Whose intention is relevant here? And is 'specifically' the same as exclusively? Also what are the limits of 'the field of play'? Does it embrace competitive matches only, or does it extend to any kick-around game of soccer however informal? Does it include training? Does it mean the players only, or does it include coaches on the touchline and others not actually 'within the chalk' as Mr Thompson graphically put it?
75. My starting point is that the whole phrase 'specifically intended for use on the field of play for soccer' should be construed as a whole, and that the specific examples of performance shorts and soccer jerseys are ('for the avoidance of doubt') intended to be helpful in focussing on what the parties should be taken to have had in mind. It makes little sense in the context to speak of anything being specifically intended for activities carried out by people training or people watching the game, however purposefully they may be doing so (except in the limited context of teamwear itself). Equally I am inclined to think that 'specifically' has a meaning approaching that of 'exclusively'. It makes little sense to speak of an article specifically intended for use both on and off the field of play, so that clothes intended for both would not be specifically intended for one. Similarly I reject as irrelevant the fact that informal games can be played by young men wearing t-shirts. That is true, but it would be odd to describe such clothes as specifically intended for the field of play, even if that does not exactly mean exclusively. In my view therefore the field of play means the actual field of play in a game of soccer, including informal and practice games, so that clothes specifically intended for that kind of use (including, but not limited to, the given examples of performance shorts and soccer jerseys) are the clothes excluded from Hudson Bay's licence.
76. Still addressing the words 'specifically intended', they do not in my view refer to the intention of an actual ultimate buyer, the end-user. That would lead to confusion and uncertainty. The words might refer to the intention of the licensee, or possibly the joint intention of the licensee and the licensor when approving the product for distribution. But in the context of a product made and marketed by a third party (as in the case of Hudson Bay's first claim about products marketed by Dick's) that does not make sense. Possibly it could refer to the intention of whoever distributes the article into the market. But in the end I conclude that this is not a subjective question of anyone's actual intention, because that again would lead to even greater uncertainty in the operation of the licence. In my view the intention must instead be determined by objective factors, and the intention must be that of a hypothetical supplier or buyer.
77. I take the principal factors objectively relevant to determine that intention to be the main physical characteristics of the garments in question, which I have already mentioned (paragraph 31 above) : fabric, design (including the presence or absence of pockets), fit, colours, artwork and finish. It has also been repeatedly suggested that the method of marketing is another distinguishing factor (department store versus soccer speciality store). I have come to the conclusion that this is right. I bear in mind that the agreement confers an exclusive licence to distribute products in defined distribution channels, and in practice approval is given for a particular design in an identified distribution channel. A soccer-inspired shirt approved for distribution to a department store such as Macy's might then not be specifically intended for use on the field of play, whereas a shirt similar in appearance distributed to a sports retailer like Dick's might be. I therefore accept that the distribution channel is a relevant factor.
78. To be included within Hudson Bay's licence, the clothes must also fall within the final part of clause 2, which includes (amongst other things) t-shirts, shirts, shorts, sweat suits, wind suits and warm-up suits. Soccer jerseys are not included in this list. Nor do track-suits (or track jackets or track pants) appear in the list as such, but I take them to be included in one or more of sweat suits, wind suits and warm-up suits.
79. I should add that neither side has presented evidence of a common usage in the industry of the phrases 'on-field' and 'off-field'. At one point Mr Prothero claimed that there was an industry-standard usage, but the claim was not made good by reference to any external source. I am left with a relatively pure question of construction. The real problem remains how to categorise a garment which might be described as a shirt or a t-shirt, but which closely resembles a soccer shirt or soccer jersey, at least in a superficial sense. At what point, if at all, does it become a soccer jersey? Similarly, when do shorts become on-field shorts?

Hudson Bay's first claim

80. Hudson Bay's first claim is that Umbro have knowingly authorised Dick's to market goods, not supplied by Hudson Bay itself, which infringe Hudson Bay's exclusive licence for off-field wear. Although some admissions have been made by Umbro in respect of some particular articles, their main defence is that the articles in question are on-field wear and therefore not included in Hudson Bay's licence. The articles in question fall into two categories, each of which is particularised in a Scott schedule : —

(a) Track-jackets, tank-tops and men's track pants bearing Umbro logos, on sale from 1 January 2007 onwards;

(b) T-shirts with Umbro logos on sale from 1 January 2008.

I have had the advantage of seeing not only photographs and computer-generated images of these articles, but also samples of the articles themselves, for individual consideration.

81. There are 31 images of products listed in the Scott schedule, falling into nine categories and divided between four periods of time. The descriptions of these, and my conclusions in respect of each group, are as follows : —

Spring 2007

(1) The images on pages 1–4 of the schedule comprise four cotton t-shirts superficially resembling simple soccer jerseys. They are all shirts with relatively modest artwork. They are cotton as opposed to polyester or other man-made fibre, and they strike me as off-field t-shirts, not soccer jerseys specifically intended for use on the field of play. But they are authorised by clause 15(m) of the commercial terms of the licence provided they were not sold on or after 1 January 2008.

(2) Images 5–6 comprise another cotton t-shirt (front and back). This has some artwork on the chest and further artwork on the back. Again it is in my view an off-field t-shirt, of a fabric, design and colour (off-white) such as to indicate that it is not specifically intended for use on the field of play. But again it was authorised by clause 15(m) until the beginning of 2008.

(3) Nos 7–9 are dark blue or black tracksuit tops and trousers with relatively modest Umbro logos. These fall within the words 'sweatpants, sweat suits, wind suits, warm-up suits or rain suits' and could be used for a number of purposes. Their design and fabric are functional, and these give the garments a sporty feel about them. Ms Hanson draws a distinction in her evidence between single-colour tracksuits with modest logos, which she describes as on-field warm-ups, and other tracksuits with more elaborate design features submitted by Hudson Bay for approval in October 2008. It has been suggested that tracksuits are a 'grey area', which could be on-field or off-field, depending perhaps also on the distribution channel. I see the force of that, and I accept that on-field wear can include track-suits, as well as the performance shorts and soccer jerseys mentioned for the avoidance of doubt in clause 2 of the agreement. In the circumstances I have come to the conclusion that track-suits of this kind should be accepted as specifically intended for use on the field of play (for practice) either if they are marketed as part of teamwear or if they are marketed in retail shops specialising in kit for players. Dick's are in the latter category. I am therefore persuaded that these track-suits are on-field wear, and that they do not fall within Hudson Bay's exclusive licence.

Fall 2007

(4) Nos 10–14 are more track-suits, and the same conclusion applies as for Nos 7–9.

(5) Nos 15–16 are cotton t-shirts with a large (more than 20 centimetres high) frieze-design all the way across the chest consisting of multiple Xs, each with a small umbro logo appearing in one of the upper arms of the X. They do not appear to me to be (or to resemble) soccer jerseys. They could no doubt be used for informal games or for practice sessions but, as I have said, that is not decisive. They are casual fashion-wear, and they are in my view not properly described objectively as specifically intended for use on the field of play. They are t-shirts, falling within clause 15(m) until the end of 2007. There is evidence, which I accept, that these continued to be on sale during 2008 and even 2009, and to that extent fell within Hudson Bay's exclusive licence.

Spring 2008

(6) Nos 17–18 and 22 are t-shirts with more elaborate double diamond artwork which in my judgment prevents them from being regarded as specifically intended for use on the field of play. They are fashion wear falling within Hudson Bay's exclusive licence.

(7) Nos 19–21 and 32 are sleeveless t-shirts, if that is not a misuse of language, or alternatively tank-tops, with elaborate double diamond artwork. Being without sleeves they do not in my view qualify as soccer jerseys. They are fashion shirts falling within Hudson Bay's exclusive licence. There is evidence in the form of a photograph of Mr David Beckham (alone) wearing such a shirt, with a soccer ball at his feet, which might indicate that the shirt could be intended for use on the field of play. But there was no evidence that Mr Beckham was actually on the field of play, or even that he was truly practising soccer. It may have been no more than a fashion shoot.

(8) Nos 23–27 are cotton 'country-themed' shirts. This means that they are shirts or t-shirts, made to resemble the colour and design of soccer jerseys, and with a small added national badge of a soccer-playing nation on the left side of the chest, Brazil, Italy, England and others. The national badge makes these t-shirts (obviously not being actual teamwear and not truly resembling teamwear in fabric or finish) not specifically intended for use on the field of play. In brief they are fashion wear or fan-wear. They too fall within Hudson Bay's exclusive licence.

Spring 2009

(9) Nos 28–29 and 31 are t-shirts with very elaborate and distorted double diamond designs. This alone is a strong factor pointing towards fashion-wear and away from performance wear, towards off-field and away from on-field. The colours, design and artwork tend to make these shirts unsuitable for an actual game of soccer. They too are not properly described as specifically intended for use on the field of play, and are therefore within Hudson Bay's licence.

82. In summary on this point I therefore conclude that the articles in categories (6) to (9) inclusive all fall within Hudson Bay's exclusive licence, and that Umbro UK is in breach of that licence by knowingly permitting them to be marketed by Dick's. The articles in categories (1) and (2) also fall within the definition of off-field wear, but they were authorised by clause 15(m) of the agreement if marketed during 2007. Articles in categories (3) and (4) are on-field wear. Articles in category (5) represent breaches of Hudson Bay's exclusive licence only to the extent that they were marketed after the end of 2007, and I have mentioned that some of them were indeed marketed in 2008 and 2009.

Breach of warranty

83. In order to close off one potential line of defence to their first claim, and in case Umbro have granted overlapping licences to Dick's and Hudson Bay partly for the same merchandise, Hudson Bay have added a further claim based on breach of warranty. By clause 10.1 of the standard terms of the licence Umbro warranted that it owned and controlled the Licensed Property and had authority to grant the rights granted to Hudson Bay. To the extent therefore that Umbro may turn out to have granted to Dick's the right to market the articles which I have found to be off-field wear, that is claimed to be in breach of warranty.
84. I see no defence in principle to that claim. A copy of the Dick's licence is in evidence, but it is not appropriate for me to attempt the task of construing it, seeing that Dick's are not party to the proceedings. But I recognise that in principle Umbro may have inadvertently, and in the light of the findings in this judgment, granted exclusive licences to Dick's and Hudson Bay covering the same descriptions of property. If that has happened, then the analysis is that Umbro did not have authority to grant an exclusive licence for those overlap products, and are in breach of the warranty in clause 10.1.

Umbro's counterclaim

85. Umbro's counterclaim is that the marketing of pocketless soccer basics through S&S catalogues was not authorised by the licence, on the ground that those articles are on-field wear. I therefore need to decide first whether these products were on-field or off-field wear, using the same criteria which I applied to Hudson Bay's first claim.
86. Looking first at the shorts, the shiny fabric, single block colours and streamlined design give these articles the visual features of shorts worn on the field of play. It may be that their performance qualities are not as high as kit used professionally, and that is relevant to the decision, but it is not a decisive criterion. It may be that the fit was different too, but no specific evidence was given on that. The artwork and logos are relatively modest, and the polyester (or polyester-like) fabric, together with the lack of pockets, put them to my mind in the on-field category.
87. Similarly the shirts. The shiny polyester-like fabric, cut and colours of these are different from the garments which I have described as t-shirts in the passage about Dick's products. The logos are all standard in size. They have no pockets, not even small iPod pockets. The colours are mostly primary colours making the shirts closely similar to the teamwear of competitive teams (as was the subjective intention of Miss Jackson and Mr Thompson personally). In my judgment these characteristics put these garments on-field. The shirts and shorts are available in matching colours, much like official soccer strips.
88. A further factor, which is also relevant to the conclusion, is the way in which these garments were being marketed by S&S. The advertising material in the catalogue (which I have described already) contains indications that the garments were aimed not so much at soccer fans as at soccer players, while they are playing soccer. The models in the catalogue photographs are all, or nearly all, accompanied by a soccer ball, and I have described this material, including the heading to this section of the catalogue, in paragraph 43 above. I make this finding despite Mr Adams's attempt to describe the photographic spread merely as aspirational.
89. The removal (or non-addition) of pockets in that context makes a difference which is in the end decisive. With pockets, the shirts and shorts can, at least arguably, be said not to be specifically intended for on-field use, but without them the other on-field characteristics are decisive. This conclusion should come as no surprise to Mr Thompson (or indeed to Miss Jackson). Mr Thompson dealt directly with S&S, and his initial suspicion was that their request for the pockets to be removed meant that they intended to sell not only into the corporate market but ultimately also to the soccer-playing part of the market, so competing with Umbro's teamwear business. His analysis of the situation, like Miss Jackson's response ('quite a pickle'), was expressed in terms of the potential damage the business might do to others. They concluded that it would not damage Dick's, but that it might damage Hudson Bay and it might damage Umbro's own teamwear business. Umbro, in the persons of Ms Hanson and Mr Prothero, agree with that view (at least the last part of it). But that is not particularly relevant to me. What is relevant to me is that these particular products, in this particular distribution channel, crossed the line between off-field and on-field wear.
90. The warm-ups or tracksuits in the S&S catalogue are, on analysis, no different. Hudson Bay virtually accept that, if the shirts and shorts were on-field, then so were the tracksuits. After all they were marketed together with the shirts and shorts. I have already explained my view that tracksuits will generally qualify as off-field wear, but that if they are sold as part of teamwear they may become on-field. These tracksuits are of a sporty design with modest logos, and they are capable of being used on the field of play if that phrase is construed to include practice or training, as in my view it should. It is true that they could also be worn at home or on the street, and that might suggest that they are not exclusively intended for the field of play. But that is not the test. These tracksuits were being marketed and advertised in the same collection and through the same channel as on-field teamwear shirts and shorts, and they thereby became to my mind specifically intended for use on the field of play. I find therefore that these tracksuits were on-field wear.
91. Hudson Bay's defence to this counterclaim is essentially that the pocketless soccer basics were already approved by Miss Jackson on behalf of Umbro, and that it is too late for Umbro to cancel that approval. Alternatively they were approved by Ms Hanson at the meeting in March 2008.
92. On the face of the licence agreement this defence is hopeless. There has been no written approval of pocketless shorts. It is true that the pocketless shirts in the collection were approved in writing by Miss Jackson, because that approval was given before details of the iPod pockets had been added. But the approval was given only after the brainstorming meeting on 31 May 2007 when it was decided in principle to add pockets. There is no evidence of written approval of the shirts and shorts distributed through S&S, or any other part of the ASI channel, given after S&S had requested the removal of the pockets and Miss Jackson gave Mr Thompson her oral approval in October 2007. Nor is there evidence of written approval for the tracksuits sold through S&S.
93. Umbro are also correct that that approval related only to the CADs, and there is no evidence of Miss Jackson or anyone else approving the pre-production or production samples in writing. I accept Miss Po Kang's evidence that she presented those samples for approval, and I accept the evidence of Mr Thompson and Miss Jackson that she did orally approve them. But the agreement requires such approval to be in writing at each stage.
94. Even if Miss Jackson had approved the pocketless soccer basics in writing at every level, including production samples and everything leading up to them, Umbro also rely on the more fundamental point that the pocketless soccer basics were on-field wear, as indeed I have found. It was not open to Miss Jackson to approve the marketing of on-field wear by Hudson Bay, because their licence was explicitly restricted to off-field wear. Approval of on-field wear would have required a modification of the licence, and a modification required the agreement in writing of Umbro UK as well as Hudson Bay.
95. Those are powerful difficulties, and Hudson Bay have no effective answer to them, bravely though Mr Silverleaf submitted to the contrary. His main lines of argument were that (1) Umbro UK, through Miss Jackson, had waived strict compliance with the approvals procedure in clause 5 of the standard terms and conditions, (2) Umbro UK, again through Miss Jackson, agreed with Hudson Bay at the beginning of January 2008 to modify the agreement so as to include the pocketless soccer basics line, (3) that agreement in January operated, alternatively, as a waiver of the clause 5 procedure, (4) Ms Hanson orally approved the sale of pocketless soccer basics through the ASI channel, and oral approval was adequate because Umbro UK had, through Miss Jackson, waived the requirements for writing, and (5), if all else failed, Umbro UK, through Miss Jackson or Ms Hanson, had authority to approve products even if they were not off-field wear.
96. These arguments all depend on the proposition that Miss Jackson (and in one instance Ms Hanson) had authority to bind Umbro UK, and I shall deal with that next.

Authority

97. Miss Jackson was not a director of Umbro UK or even an employee. As such she was in a different position from that of the director Mr Kapoor in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480 and that of the vice-president Mr Magelssen in Armagas Limited v Mundogas SA [1986] 1 AC 717, which Hudson Bay have prayed in aid. As president of Umbro US Miss Jackson had authority to bind Umbro US, and Umbro US was, I find, authorised to give approvals on behalf of Umbro UK in respect of products covered by the licensing agreement, and otherwise to manage the day-to-day operation of the agreement. Similarly Ms Hanson and Mr Duggan regarded themselves as authorised to grant approvals in the same way.
98. But I find nothing to suggest that Miss Jackson had actual authority to bind Umbro UK in such a matter as the making or modification of formal agreements. Mr Silverleaf points out that there is nothing explicitly limiting Miss Jackson's authority either, but for a non-director and non-employee that negative proposition is in my view not enough. To my mind it follows that she had no actual authority to bind Umbro UK with approvals of articles not otherwise covered by the licence. If an article lay outside the scope of the licence, then its marketing could be approved only by a modification of the existing licence or by the grant of a further licence, and Miss Jackson had no actual authority to do either of those things.
99. As for ostensible authority, Hudson Bay would need to show that Umbro UK, not merely Miss Jackson alone, had unambiguously held her out as having authority to bind Umbro UK in regard to the making of a licence or the modification of the agreement. I find no evidence that they did. On the contrary the history of the delayed signature for the licensing agreement itself, leading as it did to considerable frustration for Mr Thompson ('Seriously! This is past absurd'), showed that it was executives at Umbro UK in England, not Miss Jackson, who were held out as being empowered to execute the contract. It is true that Miss Jackson had been authorised to execute the Dick's licence on behalf of Umbro UK, but that depended on actual authority being granted specifically for that purpose. In fact Miss Jackson had regarded it as mildly amusing ('lol') that she had been so authorised.
100. Mr Thompson was indeed aware that Miss Jackson was in this respect answerable to her bosses in England. He and she had negotiated the commercial terms, and they had chosen to proceed on the assumption that the agreement would in due course be executed, with retrospective effect. But he knew that the execution would only follow when executives at Umbro UK had first been persuaded of the scope of the licence in principle and then had agreed the other terms. All of that ultimately happened.
101. Similarly when it came to the proposed modification of the agreement in January 2008, there is nothing to suggest that Umbro UK were holding Miss Jackson out as authorised to agree the modification on their behalf. On the contrary e-mails from Miss Greenberg show that the signatures of Miss Jackson and Mr Thompson would have to be followed by execution by executives of Umbro UK in England, and Miss Jackson and Mr Thompson were aware of the situation.
102. Miss Jackson and Miss Greenberg were emphatic in their evidence that they regarded Miss Jackson as having full authority to bind Umbro UK, apparently for all purposes. But I do not accept that evidence at face value. At best it represented a failure to distinguish between the commercial confidence which Umbro UK is said to have had in Miss Jackson, under which her business decisions were habitually respected by Umbro UK, and the legal question whether Miss Jackson had binding authority. (In fact Mr Prothero's evidence, which I accept, was that he at least did not have that degree of respect for her decisions.) But even Miss Greenberg was forced to accept in cross-examination that, although she believed that Umbro UK would abide by an agreement made by Miss Jackson on its behalf, they were not legally obliged to do so. In the context of the standard terms and conditions of the licensing agreement, and after much insistence on her part that a commercial deal was always honoured, she was asked, 'If the parties are unable to agree the later terms then the whole deal falls through?' Her answer, characteristically verbose but ultimately quite frank, was : —

'Yes, if — yes. If the parties do not agree, well — yes, if the parties do not agree it goes through, but it is also a shame because if the licence — yes, I guess. It is a shame to lose the deal but every now and again a deal does fall through.'

I think that 'it goes through' meant, in the context, 'it falls through'.

103. My conclusion on this point is therefore that Miss Jackson did not have authority, actual or ostensible, to bind Umbro UK in the matter of modifying the agreement, and equally she had no authority to grant any new licence on their behalf. In any case the modification document of January 2008 was, on its face, no more than a 'proposal' for modification and was expressly marked without prejudice. There is no evidence that Umbro UK, TLC or even Umbro US regarded it as effective on its own. That amounts to a complete answer to points (2) and (5) mentioned in paragraph 95 above. I therefore turn to the question of waiver.

Waiver

104. Hudson Bay's original case on waiver was that Umbro UK, through Miss Jackson, had waived reliance on the clause 5 procedures for approval. In that way they went on to rely on approvals of the pocketless articles given orally by Miss Jackson and later (allegedly) by Ms Hanson. By an amendment to their reply and defence to counterclaim, however, they add a more limited claim which I shall paraphrase by saying that Miss Jackson, by giving oral approval to specific articles and implicitly assuring Mr Thompson that Hudson Bay could rely on her oral approval for those articles, waived any right which Umbro UK had to rely on breaches of clause 2 or the clause 5 procedure in relation to those articles. In that way her oral approval of the pocketless soccer basics became valid.
105. As with other parts of Hudson Bay's case there are apparently insuperable difficulties. Umbro UK challenge their analysis on several fronts. They claim that (1) nothing said or written on behalf of Umbro UK amounted to a representation that they would not insist on the clause 5 process; (2) Miss Jackson had no authority to waive provisions in the contract on behalf of Umbro UK; (3) even if she did have authority, she could not have had authority to approve articles which were not off-field wear; (4) clause 22 of the agreement prevents one non-compliance from operating as a general waiver.
106. The only factual basis for Hudson Bay's case on waiver is the exchange of e-mails on 23 May 2007 mentioned in paragraph 35 above, followed by Miss Jackson's oral instruction given to Mr Thompson on 4 October 2007 to accept the requests which S&S had made for the removal of pockets. Hudson Bay need to show that Umbro UK gave them an unambiguous representation to the required effect and that Hudson Bay relied on that representation to their detriment.
107. It is the case that Miss Jackson resented the clause 5 procedure, and indeed she somewhat resented the participation of TLC more generally, especially when they expressed adverse views on the commercial merits of her decisions. But her only unambiguous representation made to Hudson Bay in May 2007 was to the effect that she disliked the procedure and that she would speak to Ms Farrugia about it, presumably to get it changed. But in the event the procedure was not changed, and Hudson Bay continued generally to operate under it. They did not in my view rely on Miss Jackson's comments as having overridden clause 5. Instead, the day after Miss Jackson's e-mail, Mr Thompson merely asked Mr Dirk of TLC if he could complete some of the details in the approval forms himself. Mr Dirk agreed, but added, 'but moving forward everything needs to come in with its own form'. This should have made it clear that clause 5 was, so far as TLC were concerned, still operative. Mr Thompson's conclusion stated in his witness statement (also recorded at paragraph 35 above) was a characteristically optimistic overstatement, but even this falls short of expressing reliance on anything Miss Jackson had said as an abandonment of clause 5 generally.
108. As for Miss Jackson's authority, I would accept that she (or perhaps more technically Umbro US) was held out by Umbro UK as having authority in regard to the approval of articles under the licence agreement. I would even accept that this included an authority, in regard to specific articles, to dispense with strict compliance with clause 5. (Clause 22 prevents any such dispensation from having any more general effect.) This means that Hudson Bay's narrower waiver claim, added as a relatively late amendment but described by Mr Silverleaf as his more important claim, becomes more credible. I would accept that, in regard to the pocketless shorts and shirts themselves, Miss Jackson's oral approval, following as it did her written approval of the pocketed versions, and taking as it did the positive encouragement to Hudson Bay on which they were expected to rely, would have amounted to an effective waiver of any other compliance with clause 5 in respect of these particular products. The same analysis would apply to Miss Jackson's oral approval of tracksuits.
109. The greater problem remains, however, that the pocketless soccer basics were on-field wear and therefore not authorised by the licence agreement at all. In my judgment Umbro US's authority can have extended no further than to approve individual products falling within the licence, and these were therefore limited to articles falling within the definition of off-field wear in clause 2. I accept the submission of Umbro UK that, if pocketless shirts and shorts (and their associated tracksuits) were to be validly authorised, clause 2 would need to be modified, and neither Umbro US nor Miss Jackson had authority to make a valid modification. I have already commented that Miss Jackson and Mr Thompson must have realised that the pocketless versions were on-field wear (or at least that there was a risk that they were), and Mr Thompson admitted as much in the witness box. TLC also realised, correctly to my mind, that a modification of the agreement would be necessary in order to justify the approval of the pocketless articles, and Miss Greenberg attempted to secure one. But no binding modification was executed.
110. Mr Silverleaf also relies on the purported variation, even if it was ineffective as a variation, as confirming the waiver of the requirement for approval of the pocketless soccer basics. With respect, this too is hopeless. The variation was attempting something completely different. The variation was an attempt at expanding the scope of the licence, so as to authorise, for the future, approval of soccer basics without pockets. A waiver, in order to have any real effect on the present case, would need to have provided both that the oral approvals already given were sufficient and that approval of samples was unnecessary. A variation for the future was in my judgment incapable of having any such effect.
111. This conclusion rules out the defences numbered (1), (3) and (4) in paragraph 95 above. I therefore find that there was no general waiver of the clause 5 procedure, and that there was no valid approval of the pocketless soccer basics, so that the marketing of those products by Hudson Bay was not authorised by their licensing agreement.

Retrospectivity

112. I shall deal here with a submission of Mr Silverleaf's that, until 18 October 2007 when the licence agreement was actually executed by Umbro UK, it was not an enforceable contract, and that Umbro cannot therefore rely on clause 5 of the standard terms in relation to events occurring before that date. On that basis the oral approval on 4 October 2007 would have been valid.
113. I do not accept that submission. The licence agreement expressly provides that it had retrospective effect to 1 January 2007. I do not have any doubt that this should be construed as meaning what it says. Hudson Bay claim that until the agreement was signed by both parties it was no agreement, and so far I accept that. But they go on to claim that even now that it has been signed, its provisions cannot be treated as applying to the period before then. Mr Silverleaf submits that between April 2007 when the commercial terms were agreed and October, the effective terms were those of the commercial terms into which are implied as much of the contractual documentation as is required to give that arrangement business efficacy (and no more).
114. I cannot accept that. With respect it goes too far at the same time as not going far enough. The commercial terms had been negotiated, but they were expressly subject to contract. They were therefore not an enforceable agreement at all. But when the arrangement became enforceable, it did so with effect from 1 January 2007. It may be unusual for commercial agreements to have such effect, but I see no reason why contracting parties may not make such a provision if they choose.
115. I suggest that Hudson Bay need not be surprised by this. The likely standard terms were known to both parties by 19 April 2007, when a first draft was circulated, and they became final in early June when Mr Thompson signed the agreement on behalf of Hudson Bay, at least in the sense that from that moment Hudson Bay knew, or should have realised, that Umbro could hold them to the agreement in that form at any time they chose.

Hudson Bay's second claim

116. In essence Hudson Bay's second claim is that Umbro have improperly prevented Hudson Bay from exploiting their licence, that they have been obstructive or difficult in the period after Miss Jackson left Umbro. Ever since Ms Hanson replaced Miss Jackson, but even more strongly since Mr Duggan replaced Ms Hanson, they claim that Umbro have failed to co-operate in the exploitation of the brand in the way which is envisaged and (they say) required by the licence agreement. An element which lies close under the surface of this claim is that Umbro have tended to take sides between Dick's and Hudson Bay, preferring to be hard on Hudson Bay and soft on Dick's ('Please feel free to be very hard with Jock Thompson we understand our priority here is Dick's'), even though the only complaint of substance against Hudson Bay concerns the pocketless soccer basics sold through the ASI channel, and that market does not significantly impinge on the business of Dick's. Another element, they say, is that the present management of Umbro reject the policy adopted at the outset by Miss Jackson to create off-field products resembling Umbro teamwear. There is truth in those two elements, so far as they go. Umbro's defence is essentially that their actions and behaviour have not amounted to any breach of the contract, and in short that there is no legal basis for this part of Hudson Bay's claim.
117. In more detail Hudson Bay plead an implied term to the effect that Umbro will do all that is necessary on their part to enable Hudson Bay to exploit its licence, and that this includes obligations that (1) Umbro will properly consider all items submitted for approval under the agreement, (2) Umbro or TLC will inform Hudson Bay of any approval within 10 days of receiving the submission, and (3) Umbro will not unreasonably withhold approval of any item proposed. Later, in particulars of breach, the implied term is claimed to include a duty for Umbro to provide guidance in regard to product development to be consistent and reliable.
118. In one part of his submissions Mr Silverleaf concentrated on clause 5.4 of the standard terms of the licence agreement, which includes the words '[the Licensor's approval] shall be communicated to the Licensee in writing by the Representative on behalf of the Licensor'. He relied on the obligatory-sounding word 'shall' to show that the obligation to satisfy clause 5.4 lay with Umbro rather than Hudson Bay. He even developed this at one point by suggesting that Hudson Bay had effectively waived the requirement for written approval. I do not accept those submissions. The words requiring approval to be in writing must be read in context and, read as a whole, clause 5.4 is a prohibition on Hudson Bay marketing licensed products without Umbro's approval. When the clause goes on to provide that the approval shall or must be in writing, this begs the question, what happens if it is not? As a matter of language the two possible answers might be (1) that Umbro is in breach of contract or (2) that the approval is not valid. I have no doubt that (2) is the correct answer. To me this is made clear by the following sentence of the clause : 'Neither the Licensed Products nor any Materials will be deemed approved unless and until such written approval is received by the Licensee'.
119. But that does not itself defeat the claim for an implied duty of co-operation. Mr Silverleaf relied directly on the authority of Mackay v Dick (1881) 6 App Cas 251, a decision of the House of Lords on appeal from the Court of Session. In that case Mackay had ordered a steam excavator from Messrs Dick & Stevenson on condition that it could excavate at a specified rate on Mackay's property. Mackay then refused to provide facilities for a proper trial of the excavator on the property, and it was held that he had prevented the satisfaction of the condition and could not rely on it. Mr Silverleaf proceeded from that authority to point out that clause 7 of the commercial terms of the contract in the present case provides for Hudson Bay to pay guaranteed royalties of $420,000, and that clause 15 gives Umbro the right to terminate the licence if Hudson Bay does not achieve sales at a specified minimum level, thus overriding the automatic continuation of the licence after 2010. How can Umbro refuse to approve products, Mr Silverleaf asks, and at the same time claim entitlement to guaranteed royalties and the right to terminate the agreement for failing to meet sales targets?
120. For Umbro Mr Morpuss declined to answer that rhetorical question. His case is that clause 5 may be cumbersome (as all of Umbro's witnesses accepted) but it is not unworkable, and it is not enough for Hudson Bay merely to claim that it is unfair and should therefore be disregarded. He also points out firmly that the licence applies only to off-field wear, and that there can be no duty for Umbro to co-operate with Hudson Bay in the marketing of on-field wear. He goes on to submit that the authority of Mackay v Dick goes no further than to prohibit a party from preventing the other party from satisfying a necessary condition, as indeed happened in Mackay v Dick itself. In particular he submits that there is no warrant for implying a term requiring co-operation in the vague and general terms pleaded (to do all that is necessary on their part to enable Hudson Bay to exploit their licence). There is indeed a more limited express provision in clause 15(l) of the commercial terms requiring co-operation, and this goes some way towards suggesting that no greater degree of co-operation should be contractually required by implication. He also says that there is no warrant for an implied obligation that Umbro must respond to submissions within the 10-day period. To do so would contradict clause 5 itself, which provides expressly in clause 5.2 for what happens if approval is not given within that period, namely that the products in question are not approved, and Hudson Bay must make an amended submission accordingly.
121. I accept Mr Morpuss's main submissions on those points. As to a contractual requirement not unreasonably to withhold approval, the ramifications of such a provision were not explored in submissions before me, but it seems to me that it would entirely change the thrust of clause 5. A requirement of this kind could doubtless have been included expressly, but I see no warrant for including it as a matter of necessary implication. The tenor of clause 5 is to put Umbro in control of the approval procedure. Hudson Bay have to submit products and materials for approval, Umbro are then free to give or withhold their approval in accordance with what they perceive to be their own commercial interests, and it is expressly provided by clause 5.3 that if they do not approve the product or materials within the 10-day period the approval is regarded as refused, and in such a case Hudson Bay will have to make an amended submission. In principle I accept that this degree of control is justified, as Mr Morpuss claimed at the forefront of his closing submissions, because Umbro are the owners of the brand and as such they are entitled to protect it and to control its exploitation under the licence. The clause 5 procedure is an element of that control.
122. On the other hand I would be prepared to accept that a term does need to be implied to the effect that Umbro is not permitted to refuse or fail altogether to consider products or materials submitted for approval. Without such a prohibition, Umbro could adopt a policy of doing nothing except to demand payment of the guaranteed royalties from time to time in accordance with the express terms. That would not be consistent with the purpose of the agreement as expressed in the unnumbered clause at the beginning. And it would also amount to Umbro preventing Hudson Bay from satisfying its obligations under the agreement, which are part of the consideration for the payments due from Hudson Bay to Umbro. I am persuaded that a term in those terms is required as a matter of necessary implication, and that it is in line with Mackay v Dick, on which Hudson Bay rely. Indeed the references in clause 5 to the ten-day period mean that Umbro could, in the absence of an implied term, achieve the same result even by refusing or failing to consider products and materials merely for the ten-day period. That too would amount to Umbro preventing Hudson Bay from satisfying their obligations.
123. That would not be identical to the implied term asserted by Hudson Bay in their pleadings, but I shall nevertheless go on to consider the alleged breaches of the term on which they rely. These are contained in some 19 sub-paragraphs of a paragraph in their re-amended particulars of claim, but I can divide them into seven identifiable complaints : —

(a) In early March 2008 Umbro refused to consider the approval of Hudson Bay's collection for fall 2008, on the ground that the dispute relating to the pocketless soccer basics sold through the S&S catalogue was unresolved (as it still is). This breach, if it is one, was later remedied when the fall 2008 collection was approved by Umbro. It is common ground on the pleadings that this approval was given after the commencement of these proceedings, which occurred in August 2008, but I have already found that Ms Hanson signed written approvals at the meeting on 20 March 2008. That meeting was held on without prejudice terms but, to the extent that it concerned the fall 2008 collection, the meeting resulted in a concluded agreement. That approval was in my view valid, and Hudson Bay have indeed assumed its validity and acted on it ever since.

(b) On 9 March 2008 Umbro, in the person of Ms Hanson, refused, pending resolution of the S&S dispute, to accept the order which Hudson Bay had made on 21 February 2008 for the supply of Umbro Culture garments.

(c) At the meeting on 20 May 2008, Hudson Bay say that Ms Hanson authorised the marketing of pocketless soccer basics in the ASI channel together with further equivalent products to be substituted when the inventory was sold through, but this was later cancelled and replaced by authority to sell-through the existing inventory alone.

(d) Also at the meeting on 20 May 2008 Ms Hanson had encouraged Hudson Bay to explore the market for the Diamond 5 line of garments but on 23 September 2008, after an order had been obtained from Macy's, Ms Hanson reversed this decision and refused to fulfil the order on the ground that the Diamond 5 line was 'performance wear'.

(e) At the meeting on 17 June 2008 Mr Duggan gave encouragement to continue the 'country theme' for the Spring 2009 collection, but then on 21 August 2008 TLC, on Umbro's behalf, refused approval of the CADs for the products which had already been shipped to Las Vegas for the Magic event.

(f) After these proceedings began Hudson Bay submitted three catalogues for marketing the pocketless soccer basics in the ASI channel, and Umbro have given only limited approval, namely to do no more than to sell the existing unsold inventory.

(g) The refusal in principle to approve generally the marketing of pocketless soccer basics is claimed to be an anticipatory breach of the implied term.

124. Mr Duggan has taken a tougher stance than Ms Hanson in regard to a possible solution to the predicament in which Hudson Bay found themselves at the beginning of 2008 when their entitlement to market pocketless shirts and shorts was challenged. Ms Hanson was prepared to contemplate ways of permitting that trade to continue in a limited way, and to explore ways of assisting Hudson Bay to accept a solution, by suggesting the substitution of Umbro's own teamwear and also the purchase of Umbro Culture and Diamond 5 products. Mr Duggan has not agreed. I accept too that Umbro have, in the event, been unhelpful by leading Hudson Bay to think that those markets might be open to them, only to remove that expectation later. The suggestion of providing Umbro Culture and Diamond 5 products, but later withdrawing that suggestion after Hudson Bay had relied on it, is a case in point. Umbro should in my view have realised that this would cause Hudson Bay to waste time and money which could otherwise have been directed towards marketing new and valid off-field designs.
125. Mr Duggan struck me as a difficult commercial partner, as well as a difficult and sometimes unhelpful witness. The different approaches of Ms Hanson and Mr Duggan, and even the different approaches of Ms Hanson herself at different times, have been inconsistent, and I accept that this is likely to have contributed to Hudson Bay's difficulties. Mr Thompson is smarting under what he sees as unfair treatment, after Miss Jackson had, so far as he was concerned, validly approved the pocketless soccer basics on behalf of Umbro. He complains also that Umbro have not been co-operative in giving Hudson Bay consistent direction in the lines which would or would not be approved in principle.
126. Personally I do regard Mr Thompson as having been unfairly treated in some of these respects, including the comparative silence from Umbro whenever asked for guidance towards acceptable product development. The contrast between the working relationship with Miss Jackson and the negative responses from Mr Duggan is striking. But on the other side I have referred from time to time to Mr Thompson's optimistic and trusting nature, and this has itself contributed to Hudson Bay's problems. I have found that the pocketless soccer basics are on-field wear, not authorised by Hudson Bay's licence, and it follows that Umbro are entitled to object to that line being marketed by Hudson Bay. Attempts have been made to resolve this issue, but Mr Thompson's solutions have always included the continued freedom for Hudson Bay to market the pocketless soccer basics in the ASI channel. His optimism has led him to hope that Umbro would ultimately agree, but this has not happened.
127. But in any event commercial and personal unfairness is not the legal issue which I am required to decide. Instead I must decide which of the above complaints is made out on the evidence, and which if any amount to breaches of the implied duty of co-operation which I have mentioned.

Sub-paragraph (a)

128. In my judgment Umbro did on 7 March 2008 refuse (albeit temporarily) to consider Hudson Bay's submission of products for a fall 2008 range, on the ground that the S&S dispute was unresolved. In my judgment the refusal to consider the products and materials in that way was a breach of the implied term which I have identified. It improperly prevented Hudson Bay from satisfying the requirement of obtaining approval. The breach was not permanent, however, because approval was given for the fall 2008 collection on 20 March 2008. It is not part of my task to say whether any loss is attributable to that period of delay.

Sub-paragraphs (b) and (d)

129. These sub-paragraphs relate to products to be supplied by Umbro to Hudson Bay for sale in the American market. Umbro claim that they are entitled to decline to sell the Umbro Culture and Diamond 5 products to Hudson Bay, just as they are entitled not to sell to any other potential buyer. They say that the licence agreement does not require Umbro to supply such products to Hudson Bay, or to approve the marketing of such products by Hudson Bay. In my judgment they are correct.
130. In regard to the Umbro Culture order, which Ms Hanson declined to process pending resolution of the S&S dispute, Umbro plead that they have a reasonable policy not to process such orders during a dispute with the licensee. Whether or not there was a formal corporate policy to that effect, as to which no satisfactory evidence was given, I accept that in this context it is not unreasonable for Umbro to act in this way. With an order for Umbro to supply the product, Umbro are themselves at risk for the costs of manufacture, delivery and possible re-delivery if the order is cancelled, and they are entitled to take their own commercial interests into account pending resolution of the dispute. This is different from the temporary refusal to consider the fall 2008 line mentioned in sub-paragraph (a).
131. As for the Diamond 5 line, I have found that Ms Hanson gave initial encouragement to Hudson Bay that this might assist a possible resolution of the dispute, and indeed a possible line of sales for the future. In my view some at least of the Diamond 5 line consists of off-field wear. But it is also clear that the encouragement was short-lived. Macy's order was not received until some two months after Ms Hanson had informed Mr Thompson that the Diamond 5 line would not be provided, and any damage caused by having to refuse the order was in my judgment not attributable to Umbro's actions.

Sub-paragraphs (c), (f) and (g)

132. Fundamental to these claims is the question whether the pocketless soccer basics are or are not off-field wear, and I have already decided that they are not. It follows from this that the licence agreement does not authorise Hudson Bay to market those products, through the ASI channel or elsewhere, under the terms of the agreement. It follows also that Umbro are entitled to refuse their approval to the marketing of such products. It would no doubt have been open to Umbro to approve such products, as they have from time to time considered doing, with or without the approval of other equivalents to replace the existing inventory when it had been sold through (though in my view this would have involved a modification of the agreement). But there is no obligation for them to do that. Umbro's attempt at permitting the sale-through of the existing inventory without permitting later equivalents has been rejected by Hudson Bay, and this has therefore led to nothing positive.
133. It follows in my judgment that the facts claimed in sub-paragraphs (c), (f) and (g) would not amount to breaches of the implied term or of the term claimed by Hudson Bay to be implied.

Sub-paragraph (e)

134. I have stated my finding that Mr Duggan's contribution to the meeting on 17 June 2008 did not amount to a positive encouragement for Hudson Bay to repeat the country theme for the spring 2009 collection. On the other hand I have also stated my finding that he and Ms Hanson did not positively discourage Hudson Bay from continuing with it, either then or at the later meeting on 9 July. Umbro did then disapprove the collection immediately before the Magic show, preventing Hudson Bay from benefiting from that display. Later, the collection was approved, but only after removal of many of the country theme features.
135. The timing was damaging. But in my view Umbro were within their rights to refuse approval for the spring 2009 collection. They responded to the submission of designs relatively promptly, and they subsequently approved revised designs. I detect no breach of the claimed implied term.
136. In conclusion on Hudson Bay's second claim, I therefore find that there is an implied term in the terms which I have identified, and that Umbro were in breach of that term by refusing to approve the Fall 2008 range between 7 and 20 March 2008. I find that there was no other breach of the term on the basis claimed by Hudson Bay.
137. I have mentioned Hudson Bay's complaints that Umbro continue to be unresponsive to requests for guidance and direction for product development. But there is no express obligation under the licence agreement for Umbro to provide that guidance, however much in practice it would be good business to do so. These actions or inactions would not prevent Hudson Bay from submitting designs and materials for approval, and they would therefore not amount to breaches of the implied term which I have identified. They might be breaches of the wide implied term which Hudson Bay claim in their pleading (to do all that is necessary to enable Hudson Bay to exploit their licence), but I do not find that there was an implied term of that vagueness and width. Besides, these alleged breaches were not relied on in Hudson Bay's pleadings.

Conclusions

138. I find in favour of Hudson Bay on the first part of their claim, to the extent that I have described, except so far as concerns tracksuits. The remedy which they seek in that regard is described simply as specific performance of the exclusive licensing agreement. I find that difficult to understand. The fact is that Hudson Bay already have an exclusive licence, without any act or order of the court. What they need is some more specific order relating to the breach of that agreement. On the other hand Dick's are not party to the proceedings, and the court cannot make an injunctive order requiring them to deliver up infringing material or, if it can, that is not an order which I would be willing to make in the present circumstances in the exercise of a discretion. No such injunctive order has been specifically asked for. Instead, but subject to further submissions on detail, I am prepared to grant declaratory relief to the effect that Umbro are in breach of the agreement by knowingly permitting Dick's to market off-field wear in breach of the exclusive licence, and to order damages for that breach to be assessed.
139. As to Umbro's counterclaim, I have found that the supply of the pocketless soccer basics was made without approval in accordance with the agreement, and that those products are not authorised by the agreement. Here the remedy sought is for Hudson Bay to deliver up, and also for an injunction, or damages in lieu. I am prepared to make orders for those elements of relief accordingly.
140. On the second part of Hudson Bay's claim I find that Umbro were in breach of the implied term which I have identified, but only by failing to approve the fall 2008 collection until 20 March 2008, and I am prepared to order damages to be assessed.