England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30th January 2013

SIR ROBERT NELSON :

1. The Claimant, Intertrade Europe SRL (Intertrade) is a worldwide distributor of luxury perfumes, based in Padua, Italy. The Defendant, Clive Christian Perfume Limited (Clive Christian) makes and supplies luxury perfumes under the brand name "Clive Christian". Between mid 2003 and September 2010 Intertrade was the distributor of the Defendant's perfumes in Europe. This claim arises out of the termination of the distributorship agreement between the parties in September 2010. The Claimant contends that the Defendant wrongfully repudiated the agreement by refusing to supply orders placed by it in July and August 2010. By letter from its solicitors, Davenport Lyons, dated 24 September 2010, the Claimant accepted the failure to supply the orders as repudiatory breaches of the agreement.
2. The Defendant denies that it was itself in breach of the agreement, and contends that it was entitled to refuse to supply the orders, or, as it did, only agree to accept them on different terms, by reason of the Claimant's breaches of the agreement. These breaches, the Defendant contends, were so serious that they entitled the Defendant to offer to continue to supply its perfumes to the Claimant only if these new terms were complied with.
3. The relationship between the parties was extremely successful in its initial years but a loss of trust and confidence developed between them from about 2009 onwards, so that on 19 July 2010 the Defendant gave the Claimant 12 months notice to terminate the agreement. Both claim and counterclaim assert an entitlement to damages for, inter alia, loss of profit arising out of the subsequent repudiation of the agreement in September 2010, up to the time when the agreement would in any event have come to an end, at the expiry of the notice to terminate in July 2011.
4. The legal issues arising in this claim are essentially straightforward but the factual issues are numerous and it is therefore necessary for the court to set out the long and complex factual background in some detail. I have chosen to do this in chronological sequence, as the parties did before me, as this is the best way of understanding the development of the relationship between them.

The factual background

5. The Clive Christian perfumes are marketed and sold as "the world's most expensive perfume". They are sold to high end retailers all over the world both directly, and indirectly, through, for example, distributors. In the UK they are marketed through Fortnum and Mason, and Harrods.
6. Intertrade is one of a group of five companies acting as distributors to perfume brands in many countries around the world. Herbarium SRL (Herbarium) is a member of the same group of companies as Intertrade, and it was with Herbarium that the distribution agreement was made. Intertrade subsequently took over Herbarium's business with the Defendant.
7. The first meeting between Herbarium and Clive Christian took place on 10 June 2003 at Fortnums in London. By this time Clive Christian had already decided to terminate its relationship with Finmark SRL, who had been acting as its agent in Italy. Finmark were agents not distributors and one of the reasons Clive Christian wanted to change was that monthly stock control was not working for them. Hence they wished to look at a distributorship relationship as another option. Unlike an agent, a distributor actually purchases and sells on the goods itself rather than, as an agent does, arranges sales for the supplier. The distributor makes profits on the sales he achieves whereas the agent earns commission on the sales which the supplier makes through his agency.
8. The meeting on 10 June 2003 in London took place between Mr Celso Fadelli for Herbarium and Mr Stephen Gray for Clive Christian. Both were senior directors of their companies.
9. The agreement between the parties was oral. Although attempts were made to reduce it into writing these were not successful. The documentation dealing with what was in fact agreed is sparse and there is a substantial disagreement between the parties as to the terms of the contract.
10. Mr Gray sent an email to Mr Fadelli on 10 June 2003 after the meeting that day.^[1] This email sets out some of the items discussed by the parties but records little by way of agreement. It was agreed in principle that there was to be an "exclusive arrangement for Italy…. we do not have duty free sales at present, so there is not a conflict in territory". Products and pricing were discussed, as were planned or targeted sales levels and promotion and advertising. The need to work out budgets to support the brand was stated, with "in-store visibility – drawings, posters to shop fittings. Collateral – testers, book stands, books, cards, price lists. PR events – …. For example Pitti Palace display drawings/props". A 2003 timetable was set up including marketing planning, and marketing planning finalisation in June/July; movement/initial orders/sales training in August, with the launch to be September. Mr Gray invited Mr Fadelli's thoughts for a draft marketing plan and concluded by saying he was very excited for their business in Italy.
11. The one matter which is recorded in this email as agreed apart from the exclusive arrangement for Italy which the parties "shall agree in principle", was the pricing structure. The email records that Herbarium would purchase the Clive Christian perfumes from the Defendant at 25% of the suggested retail price (SRP): that Herbarium would sell the Clive Christian perfumes to its retail customers at 50% of the SRP, and that the retail customers would sell to consumers at 100% of the SRP. This agreement has been referred to as being based on "a coefficient of 4".
12. Mr Gray said in evidence that Clive Christian aims to follow six important principles of business in its dealings with the market. First, the perfumes are a luxury brand and therefore have to be sold by a high end retailer; second the perfumes had to be presented correctly and displayed as luxurious goods: a "counter" (a display dedicated to one or more perfumes) would be permitted by the Defendant to a retailer who could demonstrate a sufficient quantity of sales; third the Defendant set the SRP by which means it was able to calculate the margin and expenses for distributors and retailers down the supply chain to the ultimate consumer: Mr Gray called this the "coefficient"; fourth the control of stock was important because the Defendant could only manufacture a limited quantity of the perfume and had to be aware of the possibility of a build-up of stock by the distributor or retailer, creating a risk of over-stock with dumping and "grey market activity"; fifth marketing was of fundamental importance to a luxury brand and the Defendant sought to ensure that the projected sales of the perfumes were supported by commensurate marketing expenditure by both distributor and Clive Christian itself; sixth the Defendant seeks to develop the world market for the perfume in a slow, step by step, way in order to create a long-term sustainable business: this involves the Defendant monitoring the level of sales of the perfumes by retailers to their end customer, not just the sale of the perfumes to the retailers themselves.
13. Mr Gray said that he had enunciated six principles, and discussed them, at the meeting of 10 June 2003, but Mr Fadelli said he had no clear recollection of them being discussed.
14. Mr Gray also said in evidence that he took along with him to the meeting of 10 June 2003 a spreadsheet which he used as an aide memoir, and showed to Mr Fadelli. This spreadsheet^[2] is also dated 10 June 2003 and is described at the foot of the page as "Italy 2003 plans". The document contains an item described as "Expenses" which it is suggested in the document are 22%, including 15% marketing and 7% administration/freight, including collateral. Mr Gray said this referred to the expenses to be borne by the distributor, and that he sought to negotiate the figure of 15% for marketing set out in that document, but after discussion and negotiation the figure of a minimum of 10% was agreed between him and Mr Fadelli. Mr Fadelli did not recollect being shown the spreadsheet and said that whilst marketing was discussed there was no agreement as to any minimum amount which the distributor had to pay. It is always the role of the distributor to develop the product through marketing, Mr Fadelli said, and it was understood between them that this is what Intertrade would do. The amount spent on marketing was left to Herbarium without any specific figure being agreed.
15. Mr Gray's email of 10 June 2003 which records "in essence" what was discussed, makes no mention of an agreement that the distributor would pay a minimum of 10% towards marketing out of its margin, but noted the "need to work out budgets to support the brand".
16. Herbarium set about making a marketing plan for the distribution of the line in Italy^[3] and put forward some suggestions in a fax of 30 June 2003.^[4] Mr Gray stated that he looked forward to working with Mr Fadelli to develop a launch and marketing plan.^[5]
17. A further meeting took place between Mr Gray and Mr Fadelli in Padua on 17 July 2003, and on 21 July 2003 Mr Fadelli sent a fax setting out further proposals for Intertrade's introduction for the Clive Christian range. This fax includes a section of the various items which were to be supplied by the Defendant free of charge (FOC).
18. On 3 September 2003 Herbarium confirmed the price structure based on the purchase price in pounds, with 75% off the Euro retail price supplied in Italy. On 15 September 2003 Laura Ferraretto, chief executive officer assistant for Herbarium, emailed Jackie Bennink of Clive Christian referring to the possibility of working on the basis of monthly sales reports, being invoiced at the end of each month according to the goods sold. That, Miss Ferraretto said, would allow a better management of the stock and a better service to the customers since it would avoid stock shortages. It seemed to Herbarium that this was the way that Clive Christian had been working with Finmark. Jackie Bennink replied that Finmark were agents, not distributors, and were therefore not receiving the 75% discount as Herbarium would be. It was in this email that she said that one of the main reasons that Clive Christian wanted to change was that "monthly stock control was not working for us". That was one of the reasons why they wanted to look at distributorship instead of agency. Herbarium had, on 12 September 2003, offered monthly stock reports, with Clive Christian being free to check their stock personally any time they wanted.^[6]
19. Although Herbarium had sought confirmation that their purchase price would be in pounds in their fax of 3 September 2003, on 11 September 2003^[7], Clive Christian said that they would like to invoice Herbarium in Euros. Laura Ferraretto responded on 22 September 2003^[8] stating that it had originally been agreed between Mr Gray and Mr Fadelli that Herbarium should be invoiced in pounds. In response to the suggestion that they should now be invoiced in Euros Miss Ferraretto wrote:-

"However this reduces our margin to the favourable exchange rate of the Euro against the pound while it increases yours. In consideration of this and in order to restore the margin originally agreed upon, on whose basis we had calculated the price structure, we propose that you take charge of the transport costs from London to our warehouse in Padova for all the future orders."

20. By 25 September 2003 it had been agreed by the parties, as confirmed in an email of that date,^[9] that Herbarium would receive invoices in pounds and would themselves be responsible for the cost of transport from London with related costs.
21. The documents relating to the terms of agreement between the parties in 2003 cease on that date. On 1 October 2003 Jackie Bennink, the sales manager of Clive Christian, sent an email to Mr Gray stating that as they did not have any contractual paperwork for Herbarium could he please outline for her and Sara, the terms of business, discounts on invoice etc. for Herbarium so that they could have it all on file.^[10] There is no response to that request. Both parties then set about the task of supply and distribution with enthusiasm and vigour. Mr Fadelli reported on 9 December 2003 that the first response of the market was positive and felt that he felt that their collaboration would "bear good fruits", which would ripen slowly but be of excellent quality. He also indicated an interest in expanding the territories into Spain.^[11]
22. There are no further documents in 2003 which evidence the nature of the agreement made between the parties. There is no dispute that an exclusive arrangement was made for Herbarium as Clive Christian's distributor in Italy nor is there any dispute that it was eventually agreed that Herbarium would buy Clive Christian perfumes in pound sterling, 25% of the sterling retail price fixed by Clive Christian, that they would sell them on to retailers at 50% of the Euro resale price in Clive Christian's list, and the retailers would in turn sell them on to customers at 100% of the Euro retail price. Herbarium were to pay the transport costs from their margin. It has also been accepted by the parties that there was an implied term that the distributorship was terminable on reasonable notice and that such a period was twelve months.
23. There remains a substantial dispute as to what other terms had been agreed, in particular as to the following five matters: firstly that Clive Christian had a discretion to refuse all orders, and if so the extent of that discretion, secondly whether Herbarium were obliged to spend no less than 10% of its turnover on marketing, thirdly whether if one or other party benefited from exchange rate fluctuations it would compensate the other for such loses, fourthly whether Herbarium was obliged to provide stock and sales plans, including their own stock levels, and fifthly whether the exclusive arrangement between the parties prevented Clive Christian from making direct sales to customers in Europe via its website.
24. It is the Defendant's case that these terms were agreed in 2003 and, in so far as marketing spend and exchange rate fluctuations are concerned agreed again in January 2009 when the parties met in Padua. The Claimant disputes any such agreement was made in 2003 and contends that the only agreement as to marketing spend and exchange rate fluctuations was made in 2009, and upon a limited basis. Each side relies upon the conduct of the parties after 2003 as evidence of their diametrically opposed submissions. As to exclusivity, the Claimant submits that Clive Christian were banned thereby from making direct website sales whereas the Defendant submits that they were not.

2004

25. The marketing plans for 2004 were discussed in November 2003 at a meeting between Jackie Bennink and Laura Ferreretto.^[12] Herbarium organised a presentation of the Clive Christian perfumes at the Luxury Exhibition in Italy which was successful.^[13] The Defendant requested information as to the sales points which Herbarium had established, and on 18 February 2004 Miss Ferraretto provided details of some of those sales points.^[14] Jackie Bennink noted to Mr Gray that she found it strange that Herbarium were reluctant to mention all of the stores where they sold Clive Christian perfume in Italy.^[15] Mr Gray said that he considered that they were being protective because it might provoke further questions, and that he knew one of the stores well and that it was a weak point of sale.^[16] This was an early example of Herbarium providing less information than Clive Christian wanted.
26. Mr Fadelli did not question Herbarium's duty to organise and pay for marketing events for Clive Christian perfumes. Indeed it was his evidence that Herbarium invested a great deal of money into promoting the brand. Clive Christian were asked to and did make a financial contribution to some of the marketing events organised by Herbarium.^[17] In her email of 1 April 2004 Miss Ferraretto thanked Clive Christian for its availability to contribute to the marketing events planned for 2004 "now that you are aware of the investments we are making to promote the line this year".^[18] This was the basis upon which the parties continued into 2004 and 2005. Thus Herbarium would spend money promoting the brand, with requests from time to time for a contribution from Clive Christian which, depending on the circumstances was granted or not. Throughout, Clive Christian would provide the "collateral" required for the events organised by Herbarium free of charge. Thus posters, display bottles without real perfume in, press packs, price lists, gifts of small 10ml bottles called Travellers sets, press releases, carrier bags, smelling strips, coats of arms etc were provided.^[19]

2005

27. During this year Clive Christian dismissed its distributor in Germany and in August 2005 appointed the Claimant as its distributor in Germany, Switzerland and Austria.^[20] France, Spain and Monaco were added in 2006 and Romania, Holland, Jakarta, Croatia, Andorra, Denmark, Finland, Greece, Hungary, Portugal, Slovenia, South Africa and Sweden between 2006 and 2008.
28. In February 2005 Penny Ashcroft, sales co-ordinator for Clive Christian, informed Miss Ferraretto that it was part of her job to monitor the retail sales globally in terms of the units and values in different markets. She asked whether Herbarium could send them information on a weekly or monthly basis from any or all of their stores. Penny Ashcroft stated that she was most interested in "sell-through" to the public rather than "sell-in" to each store. Miss Ferreretto replied that it was very difficult for them to provide such information and such an enquiry might not benefit their relationship with their customers but could be interpreted as a privacy violation or excessive interference in their activity. She explained that many of their stores were small selective perfumeries which did not have any computerised system to account for the products sold.^[21]
29. Herbarium did provide some limited information from stores^[22] and also supplied the Defendant with "sell-in" figures.^[23] These provided information as to the sales which Herbarium had made to retailers ("sell-in") but not the figures of sales by the retailers to their customers ("sell-though"). One of the problems feared by a luxury goods supplier is a "grey market", where too many unsold goods are left in the hands of retailers leading to discounting and devaluing of the name of the product. In February 2005 it was not considered by Clive Christian that a grey market was a problem for them.^[24] They were content to accept that Herbarium were unable to obtain sell-out figures from their stores.^[25] Later however, and particularly when Alex Olrog joined the Claimant as an employee in 2008 the lack of information from the Claimant was seen to be an increasing problem.
30. In June 2005 Clive Christian informed Herbarium that it was updating the Clive Christian Website www.clive.com (the website) and asked for a list of Herbarium's retail customers. On 10 June 2005 Herbarium provided a list of sales points in the most important Italian cities.^[26]
31. At the end of 2005 Mr Fadelli introduced the Claimant Intertrade, to the Defendant. Intertrade became distributor for Clive Christian in Germany, Switzerland and Austria in September 2005,^[27] and took over Italy in late 2009 from Herbarium.

2006-2007

32. There is no doubt that the relationship between the parties was developing satisfactorily, as it had been from the outset. The distributorship was expanding in Europe and Mr Gray was complimentary about the Claimant's success. After a trip to Europe, he described it as "a fabulous few days" and wrote to a German parfumerie in Dusseldorf on 2 March 2006 having just returned from a trip there, that he was very satisfied with Intertrade and that Clive Christian's overall business continued to grow healthily. On 12 April 2006 he described the presentation at the exhibition in Cosmoprof as excellent, with attention to detail and staff presenting the very best impression. It was he said 'a joy' to work with Mr Fadelli.^[28]
33. During this period of expansion the parties behaved much as they had before, with the additional countries being dealt with on the same oral terms as had been agreed for Italy. Thus the Claimant paid for promoting and marketing the product and sought contributions from the Defendant which were from time to time paid. Selling figures were sought and provided.^[29]
34. Such problems as there were in the relationship between the parties were attributed by Mr Gray to Clive Christian's fault. Thus on 30 August 2007 he expressed the view that internal changes at Clive Christian had created confusion gaps and overlaps in how Intertrade were supported^[30] and on 14 December 2007 he expressed the view that although their business had been very favourable that year, and he was pleased with the results, he thought that Clive Christian had let Intertrade down a little.^[31] Intertrade had also complained of practically running out of products in April 2006.^[32]

Sterling price increase in 2006

35. On 26 July 2006 Clive Christian informed Intertrade that they were increasing their sterling prices from 1 September 2006, but the Euro selling prices would remain the same. On 14 August 2006 Mr Fadelli wrote to Mr Gray saying that Intertrade could not accept the reduction of their margins without increasing the selling prices. He stated that the exchange rate, sterling versus Euro, was very stable and therefore an increase of the sterling price list without a corresponding increase of the Euro price list was not justified. As a consequence Clive Christian agreed that Intertrade could continue to purchase perfumes from them at 25% of the 2005 price list prices.^[33] The exchange rates sterling/Euro had remained relatively constant throughout the period. They had commenced at 1.42 in June 2003 and remained at a point between 1.42 Euros to the pound and 1.50 to the pound until the end of July 2006. The relevant figures are set out in the Bank of England – Exchange Rates from 31 January 2003 to 31 December 2010.^[34]

September 2007 Price rise and agreement

36. The following year in September 2007 a sterling price increase was effected, but as the Euro price list was to remain the same the Claimant's margin would be reduced. Ms Ferraretto said in her email of 6 September 2007 that the reason that Intertrade needed to protect its margin was to enable them to continue to support the brand and the customers as they had done until then, with PR, events, presentations, exhibitions, sales support contributions etc.^[35] In an email of 10 August 2007 Intertrade attached a spreadsheet showing that their margin would be reduced from 1/4.53 to 1/4.35^[36]. Intertrade suggested that the solution was to adjust the purchase prices or increase the new retail prices to keep the same mark-up. The Defendant's response to this was to agree to maintain the Claimant's margin by providing them with quantities of Clive Christian perfumes free of charge.^[37]
37. In February 2007 a counter, designed to display Clive Christian's perfume was installed at a perfumery called "Delfi" in Berlin. This was paid for by the Defendant and was a considerable success, apparently being credited with a 50% sales increase in the first six months after its installation.^[38] The parties agreed to develop further counters, or corners, with the support of Clive Christian, at customers who had potential to develop good sales. Mr Fadelli said in his email of 21 October 2007 that where there were doubts regarding the potential and the turnover they would wait to see the sales performance. In that email Mr Fadelli forecasts an increase in turnover of 10-15% in 2008 compared with 2007.
38. During 2007 problems began to occur with the website. On 12 March 2007 Mr Fadelli complained that references to Intertrade's collaboration had been removed from the websites.

2008

39. The parties agreed to open as many counters as possible^[39] and sales were increasing. Michela Bertaglia of Clive Christian stated in an email of 1 September 2008 that her view that Intertrade, amongst others, had registered impressive increases was not however a view fully shared by Mr Gray.^[40]
40. Problems were arising in relation to sales on the website, sales through Clive Christian's Home Showrooms and in relation to the installation and expenditure on counters. Mr Fadelli expressed concern about the apparent sale of perfumes from the Clive Christian furniture shops and described it as very worrying.^[41] It was disturbing the distribution agreed with Clive Christian.^[42] As to the website Mr Fadelli made a number of complaints as he was concerned that it was upsetting the retailers. Penny Ashcroft of Clive Christian informed him on 9 April that Clive Christian would like to offer a full global service for web sales and provide information to their customers about where they could test and buy the perfume. That would include listing Intertrade's top twenty stores.^[43] On 11 July 2008 Mr Fadelli said that he continued to receive complaints from customers because the products, or at least some of them, could be purchased via the website in pounds at a lower price than in euros in Europe.^[44] Although various discussions took place about the website and proposals were put as to how to deal with it, no final agreement was reached.
41. Alex Olrog was appointed Clive Christian's European Sales manager in April 2008 and commenced work on 19 May 2008. Her email of 23 July 2008^[45] recalls that Clive.com was receiving very few sales from the EU there having been only eight units sold into the Claimant's area over six months. It was agreed that despite this being a small number, it may cause unrest among customers and Mr Gray proposed that a contract be agreed between the parties in which web customers would be directed to their nearest store. The same email recorded that perfume was not being sold in the showrooms in Spain and Holland and was not therefore a threat to Intertrade customers in those locations. Mr Gray reassured Mr Fadelli that the showroom would only be able to use the products for gift purposes.^[46]
42. A meeting took place on 19 November 2008 between Mr Gray, Ms Olrog and Mr Fadelli. It was agreed that a marketing meeting should be organised early in 2009 and that Herbarium and Intertrade would no longer receive their free allocation of products.^[47]
43. In December 2008 Intertrade sent an invoice to Clive Christian for the sum of €12,400 in respect of counters which had been built during the year. Mr Gray expressed shock at the high cost and reiterated the agreed strategy that counters were to be used for "key doors". He said that Clive Christian could not accept invoices without agreed purchase orders.^[48]
44. The arrival of Ms Olrog on the scene was a clear factor in the deterioration of the relationship between the parties. She required more information than Mr Gray had done about their performance and how it could be monitored.
45. Mr Gray challenged the cost of the counters on the basis that he believed each one would cost about 5% of retail sales based on the Delfi model and complained that Ms Olrog was not provided with the stock and sales plans for individual accounts. He wanted to know why Delfi sales were falling.^[49]
46. Mr Fadelli replied by email of 27 December 2008 disputing that Mr Gray had ever said that the opening of a counter had to be related to a purchase order, that 5% cost was not agreed, that the cost of €3,500 had been agreed many times and that Ms Olrog would not be provided with the stock and sales plans monthly but every three months.^[50]

2009

47. The year began with complaints by Intertrade about the website. On 13 January 2009 Mr Fadelli said that two important customers had asked them to take back the stock and withdraw Clive Christian perfumes because of sales by the "mother house company" on the website. Mr Fadelli asked for confirmation that web sales in Intertrade's territory would stop until an action plan for customers had been finalised.^[51] Alex Olrog asked for details of the two accounts, expressing the view that "we can turn Clive.com back into a positive".^[52]
48. The parties had decided that a written distribution agreement was required in view of the difficulties they were experiencing and that was to be discussed as well as the marketing plan for 2009 at the meeting to take place in Padua on 23 January 2009. Ms Olrog flew to Italy on 21 January 2009 and was taken to one account, Safara in Verona accompanied by an employee of Intertrade, which was not content that the supplier should visit a customer without them being there.^[53]
49. Ms Olrog visited the store which was one of two owned by the same owner. He voiced two problems. One concerning pricing on-line and the other that of brand image. He felt that a prestige and luxury brand should not be selling on-line, and that wide distribution damaged the brand and made it difficult to sell. In her note of her visit sent in an email to Mr Gray on 22 January 2009^[54], Ms Olrog expressed the view that the case was being used as an excuse.
50. At the meeting in Padua on 23 January 2009 ("the First Padua Meeting") Heads of Terms were discussed and points apparently agreed. The agenda also included "Budgets, Clive.com, Marketing Plan 2009, Stock and Sales Plan."
51. The notes of the meeting, with both parties' comments indicate areas that were agreed between the parties.^[55] The items agreed included:-

(a) the exclusion of Clive.com from the territory which was to be the subject of a separate agreement apart from the distribution agreement. This was never drafted.

(b) an additional 10% of the Euro retail price to be paid by Intertrade on the value of the Defendant's invoices to it, to be reviewed when the exchange rate went above €1.21 to the £. This agreement was to reflect the significant strength of the Euro against the Pound at the beginning of 2009. In January 2009 it was 1.09 whereas at the end of 2007 and early 2008 it was 1.38 or 1.33.^[56]

(c) new counters to be limited, subject to minimum sale levels and only containing Clive Christian products, not mixed products.

(d) 10% of the Claimant's Clive Christian turnover would be spent by the Claimant on marketing. The meeting notes do not clearly cover this particular agreement but the parties accept that it was agreed. There is no reference to the period for which it was agreed though the term of the distribution agreement to be drafted was one of six years, and in evidence Mr Fadelli said he thought it was to last for the length of the agreement.

(e) all costs to Clive Christian, including events, were to be agreed by Alex Olrog.

52. On 10 February 2009 Laura Ferraretto sent a draft agreement, including the points discussed at the First Padua Meeting, to Mr Gray.^[57] This draft was based upon an agreement supplied by another of Intertrade's clients. It included terms from which the Claimant later sought to resile, such as clause 3.1.3 which provided that no purchase order should be binding upon Clive Christian unless and until it was accepted by Clive Christian in its discretion. Clause 1.1 described Intertrade as the "sole and exclusive distributor in the territories… to sell and distribute the product… solely in the territory during the term".
53. The First Draft Agreement also included clauses drafted in a manner which the Defendant contends did not reflect the agreement made between them. Thus in Schedule C the additional 10% to be invoiced was stated as marketing support to be paid back to the distributor which the Defendant says was not agreed; Schedule A which wrongly included E-commerce, and Schedule E which incorrectly stated the agreement as to marketing spend by the Defendant. Neither this draft agreement nor the other three attempts at producing one were successful. Mr Fadelli said in an email of 13 May 2010 that:-

"It should be noted that the Agreement as drafted and commented on by both of us reflects, as we understood it, the key commercial terms which we have agreed, and upon which we have both been operating since the contract between us commenced."^[58]

54. The tensions between the parties continued against the background of a significant drop in sales in the first two months of 2009 compared to the same period in 2008. The drop was from €108,074 to €57,590, i.e over 45%. Mr Fadelli attributed the collapse in sales to the deep de-motivation of his customers due to Clive Christian's internet sales decision. It appears, however, whatever the psychological effect upon retailers was, that internet sales were generally insignificant and had been nil for those first two months.^[59]
55. The disputes about the website continued as they did about the Claimant's marketing spend. It was the Claimant's failure to spend sufficient sums on marketing which the Defendant contends was the reason for the drop in profits in 2009.
56. The Claimants' understanding of what had been agreed was however different. Mr Fadelli considered that the additional 10% that Intertrade was paying on invoices was to be spent by Clive Christian as additional money to Clive Christian's existing market budget in Europe, not to replace it, and hence Clive Christian's market budget would be greater than 10%.^[60]
57. Ms Olrog however said that the 10% was not in addition to an existing percentage but a fair contribution to be paid by Intertrade when taking into account the margin received and the currency gains which Intertrade had made.^[61]
58. The dispute as to which side was spending adequate sums of money in promoting the product continued throughout the year.^[62]
59. Intertrade paid the additional 10% on Clive Christian's invoices from April 2009 for "marketing contribution."^[63] Clive Christian asked Intertrade to provide an account of its expenditure on marketing, which it did from January to September 2009 on 23 October 2009.^[64] Figures for the rest of the year were not provided nor expressly asked for.
60. The website was closed for eight weeks from the end of March 2009 with its future to be determined. Also in March 2009 when the Defendant introduced a variation on a perfume entitled "Pure Perfume with Silk", the Claimant was requested to supply a forecast before making its first order,^[65] but declined to do so on the basis that it needed to see the products first.
61. On 2 April 2009 a Gala dinner took place in Milan for the top European retailers of the Clive Christian perfume range. The purpose was to introduce the retailers to the new Crystals. At this dinner Ms Olrog said she was approached by Ms Madeline Florescu, the owner of Madison Perfumery in Romania, who indicated that the website sales were causing a problem in her market. Subsequently Ms Olrog said that she was told by a former employee of the Claimant, Mrs Donadei, that the complaint had been planted by Mr Fadelli and that Miss Florescu was actually unconcerned about websites sales.
62. On 26 May 2009 Mr Gray and Mr Fadelli met in Paris. A draft distributorship agreement was looked at. Mr Gray had made some amendments on this draft, none of which included alterations to the clauses concerning marketing expenditure. Nevertheless the dispute on this issue raged on with Mr Gray challenging the expenditure by the Claimant in his email of 30 July 2009 in response to Mr Fadelli's email of the same date.^[66] Mr Gray again challenged appropriate marketing spend by the Claimant on 25 August 2009^[67]. On 25 August 2009 Ms Olrog sent details of Clive Christian's market expenditure and said that despite agreeing transparency on market spend she had been given no information about this from the Claimant. She therefore assumed various figures.^[68] On 24 September 2009 Mr Gray asserted that the Claimant had been disproportionate, looking to Clive Christian for supporting their marketing, and that had been magnified considerably with the exchange rate moving in Intertrade's favour. This was in response to Mr Fadelli's email stating that the Claimant supported Clive Christian perfume in over twenty markets with strong marketing activity, constant training sessions and press support. Because of the increased marketing the Claimant could not work with a coefficient of four. Mr Fadelli suggested confirming Intertrade's investment in marketing of 10% of wholesale turnover with Clive Christian continuing to cover the cost of collaterals, brand marketing and Victoria Christian's expenses. That was possible, Mr Fadelli said, as long as the exchange rate did not exceed €1.20/£^[69].
63. Counters continued to create a problem. In particular a dispute arose over payment for and approval of a counter at Ludwig Beck in Munich.^[70] Mr Fadelli proposed a number to be built in Europe on 26 October 2009 including three in Italy, though Ms Olrog had earlier been notified of fitting schedules for counters which had not yet been agreed which she considered to be contrary to the First Padova Agreement.^[71]
64. On 18 November 2009 a meeting took place at which the Second Draft Agreement was presented by Mr Fadelli, which was similar in terms to the First Draft Agreement. It removed the Claimant's obligation to pay 10% on Clive Christian invoices and was not agreed. After the meeting Mr Fadelli set out his understanding of what had been agreed as to marketing expenses in 2010. This included Intertrade allocating 10% of Clive Christian's wholesale turnover, but ceasing to pay 10% on the invoices unless their mark-up should be increased to over 5 in which case the difference would be spent on marketing activity.^[72] Mr Gray however required a minimum marketing commitment to Clive Christian of €100,000 for 2010,^[73]and the parties failed to agree on a marketing contribution for 2010.
65. On 26 October 2009 Intertrade provided a new forecast for 2010 to update that given on 22 April 2009. This forecast envisaged 4,775 pieces, 1,592 for the first six months, 3,183 for the second six months, without any order for the anticipated new perfume "C". A training session in respect of this new perfume was to take place on 9 September 2010 before the Fragranze exhibition 2010.^[74]
66. Intertrade was going to open a new store in Cannes which would be selling Clive Christian perfume. In pursuing this course of action Mr Fadelli had "ruffled some feathers" with Taizo, the existing store in Cannes which sold the perfumes. On 7 December Mr Gray said to Alex Olrog "Taizo has not done us any favours in Cannes and is unlikely to. I'll bet this will become a problem for Celso and he'll blame Clive Christian for intervening."^[75]
67. The year ended with continued conflict on marketing spend and Mr Gray stating to Mr Fadelli in his email of 9 December 2009^[76] that the sales analysis provided a "devastating picture of our business".^[77]

2010

68. The relationship between the parties continued to deteriorate. Attempts to discuss and come to an agreement on the website failed. There was a disagreement about the Claimant having promised exclusivity to a customer in respect of all Clive Christian products for a shopping mall in Kiev, Ukraine without the Defendant's approval. This created problems for Clive Christian which wished to open a boutique in the same shopping mall.
69. The problems with Taizo became worse. A company in the Intertrade group had opened a store in Cannes and was supplying Clive Christian perfumes in direct competition with Taizo. The Claimant refused to supply Taizo's orders for the perfume on a basis which a French Court, where Taizo successfully sued the Claimant, found to be spurious.^[78] When the lawyers for Taizo served the Complaint upon the Claimant alleging abuse of market position, that letter was not immediately forwarded to the Defendant and Mr Gray complained about receiving a letter from Taizo solicitors, citing them, without having received any explanation from the Claimant first.
70. Intertrade placed an order with Clive Christian for £25,000 in early March 2010. It is said in the Defendant's opening skeleton argument that given the context of the circumstances at that time it was unsurprising that the Defendant began to consider scaling back the Claimant's distributorship to Italy. In an email dated 12 March 2010 Alex Olrog asked Mr Gray whether they should proceed with the order for £25,000 worth of perfume.^[79] She further emailed Mr Gray on 16 March 2010^[80] stating that:-

"if we are certain that we will move Celso out of all countries bar Italy this year I can send a holding email, if not I will need to address their queries."

71. Mr Gray replied to this email on the same day^[81] stating as follows:-

"My logic for continuing to supply is that the volumes are not enormous, and the amount of stock they have is going to disappear in Italy in comparison to the money they owe (cash and marketing) which will become the main and primary focus.

There is no right way here, at the moment… unfortunately… but stopping supplies is major breach of contract (yes, we do have an unwritten one)."

72. On 6 April 2010 Mr Gray sent an email, after he had had a meeting with Mr Fadelli in London, stating that he was unhappy with account churn. He felt that Intertrade's commercial pressure was disturbing the Clive Christian sell-through strategy. There was a problem with communication instanced by the fact that the Claimant had received a legal notice from Taizo without specific prior warning from Intertrade. Mr Gray expressed disappointment with the potential distribution conflict in Kiev and noted the failure of the proposals to try and make Clive.com the friend of Intertrade's customers. He notes that the Claimant was however now prepared to accept Clive.com.^[82]
73. On 9 April 2010 Mr Fadelli, in responding to Mr Gray's email of 6 April 2010, said that Intertrade were closing customers without satisfactory turnover last year as agreed in the December meeting in Italy. He said there was no commercial pressure on accounts and agreed that the launch of "C" can be an "important strategic element to strengthen the relationship with the key accounts and agree on the limited introduction in the best key doors".^[83]
74. Mr Gray in replying stated that no activity could proceed on marketing unless it had the full agreement and approval of Ms Olrog, that the launch of "C" was an integral part of the agreement and should only be launched in markets where "we have appropriate plans in place".^[84]
75. At this time a further dispute arose about Mr Fadelli's change of the Clive Christian message from "the most expensive perfume in the world" to "the most exclusive perfume in the world". Mr Fadelli had told Mr Gray that he considered that the use of the word "expensive" to be fine in America and Arab countries (Transcript /9/146/8), but less palatable to European customers who did not regard "expensive" as synonymous with luxury. In response to Mr Gray's complaint about the word "exclusive" instead of "expensive"^[85] Mr Fadelli retorted that Mr Gray knew that they were using the word "exclusive" instead.^[86]
76. On 20 April 2010 Intertrade sent a new order, 05/2010 to which Alex Olrog responded the same day by requesting a Stock and Sales Plan to be submitted before the order was processed. Laura Ferreretto replied that Intertrade would send an overall purchase forecast for the remainder of the year but that could not delay their order and asked for it to be processed immediately. Alex Olrog replied that for the Stock and Sales Plan she would like to receive information "on current stock holding, expected sales by market and expected order dates for the remainder of 2010 - a purchasing forecast has already been submitted."^[87]
77. A dispute also arose in April 2010 about the payment of invoices. The Defendant's proforma invoices stated that payments terms were 30 days from collection of the perfumes. The Claimants contended that the correct payment terms were 30 days from invoice date end of month and that the Defendant's invoice should be amended to reflect that. Ms Blackburn on behalf of Clive Christian declined to make the amendment indicating that whilst Clive Christian were aware of the way in fact Intertrade paid, the agreed term had always been that payment was due 30 days from collection date. Ms Ferraretto said that Intertrade did not intend to change their payment terms which had always been 30 days end of month, though in fact in 2006 it had been agreed that the money would be paid at the end of the month in sufficient time for the money to arrive in Clive Christian's account the last day of the month or at the latest the first day of the following month.^[88] Michela Bertaglia said in an email of 21 April 2010 that Clive Christian were aware that Intertrade paid at the beginning of the month after an invoice has become due and, "as long as payment is received by the fifth working day of that month we are not going to dispute your accounting payment system" but nevertheless she re-asserted that the agreed terms were that the invoices were due 30 days from collection date.^[89] Mr Gray said in evidence that Miss Bertaglia did not have authority to make any concession.
78. After Mr Gray had said that holding up the latest order was the only mechanism that Clive Christian appeared to have to obtain the information required, Mr Fadelli informed him on 30 April 2010 that Intertrade normally kept three month's stock to ensure timely delivery to customers, and that considering the turnover objectives agreed with Clive Christian that meant keeping stock of around €100,000. On checking their present level of stock he said that they had about €30,000 worth which was too low and hence placed an order to replenish it according to needs.^[90]
79. On 13 May 2010 Mr Fadelli said in an email that a detailed Stock and Sales Plan was clearly outside the normal course and was unclear why it was required. He had, as I have already noted earlier in this judgment, stated in this email that the draft agreement reflected the key commercial terms which they had agreed and upon which they had both been operating since the contract between them commenced. Mr Fadelli also asserted that the agreement had been breached as a consequence of direct sales through the internet by Clive Christian. This was stated to be contrary to an assurance made on 26 March 2008. Mr Fadelli had earlier referred to the website sales breaching a "gentleman's agreement" in February 2009.^[91] Mr Fadelli also stated that Intertrade had invested over €200,000 in promoting Clive Christian products in the last 24 months.^[92]
80. The parties met at Padua on 17 May 2010. A shorthand writer was present which was apparent to Mr Gray but there is a dispute between the parties as to whether Mr Fadelli informed him that there was also a tape recording being made of the meeting. It has not been possible for counsel to agree whether the tape records mention of the tape recording or not. Mr Gray asserts that he was not told that a recording was being made and Mr Fadelli said that he was.
81. The meeting produced no decisive agreement. Mr Fadelli agreed that a margin of 4.1 had been agreed when they started in Italy but said that it was not possible to work with this in other foreign markets where a coefficient of 5.1 was needed.^[93]
82. Mr Gray raised the possibility of Clive Christian selling alone and taking back some market.
83. As to new perfume Mr Gray said it needed to be given to only key accounts whereas Mr Fadelli said that if they left some customers out they would have to close them; though they could give it to them as a second step. Each side rehearsed the difficulties as they perceived it in the relationship on 19 May;^[94] Mr Gray emphasised the need for detailed marketing plan with stock and sales plans for every area; he said those had to be agreed prior to implementation.
84. On 25 May 2010 Ms Olrog said that she would like to meet with every country manager to plan the launch of the new perfume, scheduled promotional activity and confirm brand support within the region. On 3 June 2010 Ms Olrog estimated that Intertrade would need 200 pieces each of the male and female versions of C for Italy only, week commencing 6 September.^[95]
85. Mr Gray circulated a draft distribution agreement, limited to Italy only, on 14 June 2010 (the Third Draft Agreement); this, inter alia, required the provision of information and controls on marketing expenditure.^[96] It was rejected by Mr Fadelli.
86. By that time Mr Gray was asserting that Intertrade had not accounted for about €83,500 due to the marketing budget for 2008 and a similar figure for 2009. The 2010 marketing budget was subject to uncertainty.^[97]
87. Another area of dispute between the parties arose again in mid-June. The Claimants sought a counter for a retailer in Nicosia, Cyprus. As Cyprus was new territory for Clive Christian Alex Olrog suggested that the sales of the new store were monitored for six months and that at the end of that time the level of business could be decided, and a decision made as to whether a counter would be beneficial. It then transpired that the counter had already been promised to the retailer by the Claimant and Clive Christian felt that it had no option other than to allow it to start. Ms Olrog described the counter programme's intention as having been "skewed".^[98]
88. In the first part of July 2010 the Claimant started paying invoices by several small sums spread over a number of days rather than the whole amount at once. On 7 July 2010 in answer to an enquiry from Clive Christian as to why this was happening Intertrade's accounts department told them that the payments were being made from a new UK bank account where there was a daily limit of £10,000. They thought that Clive Christian would receive the money more quickly.^[99] Some of the payments were also late. Mr Gray said in his evidence that he was concerned as a consequence that the Claimant might be in financial difficulty. This was not in fact the case.
89. The meeting at which the new perfumes were to be presented to the country managers was initially fixed for 26 July 2010. Ms Olrog asked Mr Gray to put it in his diary and he replied that a country manager meeting might be quite difficult depending on where Clive Christian "were in terms of contracts with Celso at the time."^[100]
90. On 6 July 2010 Mr Fadelli repeated his assertion, made at the meeting on 17 May 2010, that the parties had worked on a margin of 4 in Italy "but only because there was no PR investment". With the acquisition of more territories the Claimant, he said, began PR support for them^[101].
91. A further order was sent in on 5 July 2010. As the previous order had been paid Mr Gray noted in an email to Ms Olrog on 8 July 2010 that the order was being processed. He added "let's not disturb this apple cart YET."^[102]
92. A question arose about the logos on the Perfume Newsletter to be published by Clive Christian. Ms Olrog asked Mr Gray whether Intertrade's logo should be included on the front page of where "C" was being launched. Mr Gray said that he was surprised not to see Intertrade in the copy after all the previous correspondence but that it was Ms Olrog's call. The other parties listed were retailers but it was Ms Olrog's "call (again) to pull it (which I agree with)."^[103]

The Provisional Notice of Termination

93. On 19 July 2010 Mr Gray sent an email as follows:-

"I am sorry that the recent correspondence between us has not reached an acceptable way forwards.

I must therefore inform you that if we are unable to agree a distribution contract with you within the next four weeks, I shall terminate all your distribution of our perfumes in all countries for us one year from today's date…"^[104]

94. The parties are agreed that a year was a reasonable period of notice.
95. Somewhat earlier on the same day Ms Olrog emailed Ms Ferraretto telling her that the meetings in Italy scheduled for 26 and 27 July "must be postponed due to present contractual and co-operation issues."^[105] This email referred to the meeting at which Clive Christian was to present its new "C" perfumes to Intertrade's country managers for the proposed launch in 2010.
96. The parties continued corresponding about the formulation of an agreement and Mr Fadelli sent a further draft distribution agreement (Fourth Draft Agreement) on 23 July 2010.^[106] On the same day Laura Ferraretto sent Clive Christian an updated purchase forecast for 2010, declining to answer the request from Clive Christian that such a forecast should include current stock levels, on the basis that stock levels "are not relevant since they change every day."^[107]
97. There followed four orders from Intertrade to Clive Christian as follows:-

i) 26 July 2010 Order F10.00172 for £28,422.50^[108]

ii) 27 July 2010 Order F10.00176 unpriced, for the new "C" perfume, of a value of about £97,500^[109]

iii) 5 August 2010 Order F10.00182 for £23,342.50^[110]

iv) 9 August 2010 Order F10.00189 for £71,130.^[111]

98. These orders, totalling £220,395 were made over the course of 14 days. It appears that they may have been made at a time when Intertrade was receiving legal advice from their solicitors Davenport Lyons. There was in fact no price entered on the order for the "C" perfume which had by then been launched in the UK but not in Europe and did not have a Euro price. An internal email of 27 July 2010 between Alex Olrog and Mr Gray set out a draft response to the "C" order which stated that the new perfume was not available to order at the time and alternative dates for the meeting with the country managers to introduce the collection, and outline suitable launch plans, by regions were awaited.^[112]
99. The parties continued to discuss a draft distribution agreement and after discussion the meeting for country managers was rearranged for 31 August 2010.^[113] Alex Olrog promised to forward an agenda to the country managers and make arrangements for the dinner after the meeting on 31 August 2010^[114]. This was never done.
100. A further request was made for stock figures which Clive Christian said their partners normally submitted with their mid year forecasts. On 3 August 2010 Ms Ferraretto refused to provide stock figures upon the basis that the information requested was confidential. She said that Intertrade had always demonstrated their ability to manage their stock accurately in all the years and they could be assured that the stock situation was constantly under control. When asked why the information was confidential Ms Ferraretto replied on 4 August 2010 that it was because Intertrade was a distributor and as such were able to manage their stock. No supplier had ever asked to know their stock levels in the ten years she had been working for the company.^[115]
101. On 9 August 2010 Miss Tania Callari of Intertrade provided their sales figures for July and said that she would seek to get figures for counters as well.^[116]
102. On 11 August 2010 pro forma invoices 6345 and 6346 were sent by Clive Christian to Intertrade relating to order 00172 and 00182 in the reduced sums of £21,975 and £17,885 respectively because some of the items were out of stock.^[117] These orders were therefore accepted by Clive Christian.
103. On 13 August 2010, the parties having failed to conclude a distribution agreement, Mr Gray emailed Mr Fadelli stating that as they had been unable to agree a distribution contract the appointment as distributor would be terminated with 12 months notice from 19 July 2010. He stated that he would be writing separately to make arrangements "to ensure a smooth cessation of your distributorship".^[118] Later that day Mr Gray sent a further email to Mr Fadelli stating that it made sense to use the meeting scheduled for 31 August to "formulate a plan for the smooth cessation of your distributorship". He said that he had therefore asked Alex to prepare an agenda accordingly and she would send it to them imminently for approval and circulation. That agenda was never sent.^[119]
104. But the following day, 14 August 2010, Mr Fadelli replied, stating that as the email had finally clarified Clive Christian's real intention to break the agreement in any case, they would consider handing the matter to their lawyers next week. He added "about the expected meeting for 31 August not confirmed by Alex as promised, I believe doesn't make any sense at this stage work out on the agenda."^[120]
105. On 17 August Mr Gray sent a further email alleging that there was an outstanding marketing spend of €85,300 for 2008, €93,000 for 2009 and €100,000 for 2010, and that until this was audited and agreed it was necessary to protect Clive Christian's position by asking Intertrade to bring its account up to date, trade on a pre payment basis only, and agree with Clive Christian a comprehensive stock and sales plan by territory for all new orders. That meant an immediate payment of £91,005 covering the orders and amounts outstanding and the orders packed not yet shipped, invoices 6345 and 6346. Until such time as that money was received and the parties had agreed the basis of the marketing spent for 2008, 2009 and 2010 Clive Christian reserved the right to withhold further shipments or to accept any new orders.^[121]
106. On 18 August 2010 it appeared clear that there was confusion between Ms Ferraretto and Ms Olrog as to whether the meeting of 31 August was still to go ahead. Ms Olrog said that samples of "C" would be available at the meeting to which Ms Ferraretto replied that there would be no meeting on August 31 as the exchange of correspondence between Mr Gray and Mr Fadelli showed. Ms Olrog said that there was some confusion about this as Mr Gray was not aware that the country managers meeting had been cancelled. If it was cancelled there would not be sufficient time to plan appropriate "C" launches by regions so it would not be available in mainland Europe that year.^[122]
107. On 20 August 2010 Davenport Lyons, the solicitors for Intertrade, asked for an assurance that the four orders would be dispatched forthwith^[123]. On 25 August 2010 Mr Gray replied to that letter,^[124] stating that it was a fundamental term he had agreed with Mr Fadelli, that an agreed amount of margin would be spent on marketing and promotion, that the Claimant was allocated money in the form of a margin which he agreed he would spend on marketing, but had failed to account for this, and that that failure led Mr Gray to believe that he had not spent the money on marketing. He reserved his right to terminate the distributorship agreement immediately due to the serious breach of agreement. The "C" perfume was a new product and couldn't be introduced into a territory without an approved marketing plan. It was introduced into the UK and the Middle East and USA after agreeing the marketing on it. The quantity order by Intertrade was far in excess of what they would normally expect Intertrade to sell. There were two issues, the return of the marketing money and the payment for goods sold and delivered. He suggested a meeting.^[125]
108. The four orders were resent on 9 September 2009 with Intertrade saying that it was running out of stock with several items.^[126]
109. Davenport Lyons described the purported notice given by Clive Christian as a sham as it was preventing Intertrade from exercising its rights.^[127] Mr Gray made it clear that he doubted Intertrade's good faith in dealing with Clive Christian's product for the remaining period of the distributorship. A meeting which had been suggested for 24 September did not take place and on that date Davenport Lyons sent a letter accepting the failures to supply the orders as repudiatory breaches of the agreement for which Intertrade would seek damages.
110. On 28 September 2010 Clive Christian's solicitors Kyriakides and Braier suggested terms for the goods to be supplied but Davenport Lyons rejected this proposal and said that there had by now been a complete breakdown in trust and confidence in the business relationship.
111. The Defendant appointed a replacement distributor for France and Germany but took over for itself the distribution to the rest of the European and other territories which had previously been in Intertrade's distributorship.

The Issues

112. The central question which the court must determine is what brought about the premature end of the distribution agreement, before the 12 months notice period to terminate, which had been validly served by the Defendant, expired on 19 July 2011. This involves considering the conduct of the parties and in particular whether the conduct of either party constituted a breach of the terms of the agreement, and if so, whether such a breach was sufficiently serious to amount to a repudiation of that agreement.
113. The parties have each outlined the issues in their closing submissions, and whilst they vary in detail I essentially agree as to what needs to be determined. The claim and counter claim over-lap in that the principal breaches relied upon by the Defendant in its counterclaim are also relied upon as its grounds for justifying its refusal to supply Intertrade with the last four orders that it placed.
114. The main issues are firstly, whether Clive Christian was in repudiatory breach of the distribution agreement by refusing to supply any of the last orders, save on different terms, or was Clive Christian entitled so to act upon the basis that Intertrade was itself in repudiatory breach of the agreement, or that the orders were unreasonable. Secondly whether Clive Christian was in breach of the distribution agreement by making direct sales on its website to customers in Intertrade's territory? Thirdly is Clive Christian entitled to damages on its counterclaim?
115. I propose to approach these issues firstly by ascertaining the terms of the distribution agreement, secondly by considering whether either of the parties was in breach of those terms, thirdly the single and cumulative effect of each breach as at the date when the last four orders were placed. Fourthly whether the four orders were reasonable and fifthly whether any breach singly or cumulatively amounts to repudiatory conduct, bringing an end to the distribution agreement. Lastly I shall consider the counterclaim and whether the Defendant is entitled to damages or an account.

The Submissions

116. I am very grateful to the parties for their oral and written submissions. The submissions in writing, both opening and closing, total some 495 pages including the revised chronology. I have considered each party's submissions in detail and have taken them fully into account in reaching my conclusions in this judgment. I shall refer to individual submissions throughout the judgment.

The Witnesses

117. Each party contends that the other side's witnesses have been less than wholly truthful. The Claimant contends that Mr Gray and Ms Olrog of Clive Christian embarked upon a strategy of removing Intertrade as distributor, without any valid reason, in order to take over its business and supply direct. The answers they gave in denying this intent and the steps towards achieving it were inaccurate. The Defendant contended that Mr Fadelli and Ms Ferraretto, for Intertrade, gave inaccurate and untruthful answers about how the agreement was managed and about interlocutory matters such as disclosure of documents. Mr Gray called Mr Fadelli a "rogue trader" and although Mr John Brisby QC, on behalf of the Defendant submitted that that was merely an attempt to say a distributor 'out of control', in reality Mr Gray was in fact saying he had justified suspicions that the Claimant had knowingly failed to spend adequately in promoting the brand out of its substantial margin, and failed to give information when sought to ensure that that under funding could not be verified.
118. I shall deal with the evidence when dealing with the issues which arise in this judgment but it is appropriate to make some general comments on the witnesses from the outset.
119. When considering the evidence of Mr Fadelli and Ms Ferraretto I have taken into account the fact that English is not the first language of either of them, though it has to be said that they are entirely fluent in it. The fact remains however, that however fluent a speaker is of a second language, some of the nuances and idiomatic phrases may escape him. That was clearly the case here and I have taken that into account when assessing their evidence. Even when such allowances are made however it is right to say that both Mr Fadelli and Ms Ferraretto were defensive in their answers, often spending time in establishing where a question was going before being prepared to answer it, and rarely being prepared to admit even obvious inferences in case it might disadvantage them.
120. Mr Gray, when asked to comment on an ambiguity, draw a different inference or make an admission which might be to some extent adverse, would frequently reply "it says what it says" or "it is what it is". He was a somewhat nervous and on occasions emotional witness who regularly asked for questions to be repeated.
121. If for nothing else the style of each of the three was a factor in the lengthening of the trial.

The Terms of the Distribution Agreement

122. There is a preliminary contractual point to determine. Mr Brisby submitted to me that one view of the contractual situation here was there was not one overarching contract, but a series of contracts, each subject to the same or similar terms. There would be a separate contract for each order and hence no single contract to repudiate. Each separate contract, i.e. order, would have to be decided upon at the time of the order and determined whether it should be accepted. There would be no general obligation to place an order or accept an order. There may however be an obligation to accept a disputed order if that order is reasonable.
123. Mr Brisby's submission is based upon the authority of Carmichael and National Power PLC [1999]1WLR 2042.
124. I do not accept Mr Brisby's submission which was made somewhat late in the day. Carmichael, a case concerning casual employment arrangements, is a very different case to one, like here, where the parties clearly intended to create an agreement which had some general rules applicable to all supplies made under it, but might also vary in accordance with subsequent agreements relating to particular orders. An oral distribution agreement was made between the Herbarium and the Defendant in this case between June 2003 and September 2003. Where Carmichael is helpful is in its indication that parties may intend that their agreement should be contained partly in letters, partly in oral exchanges and partly to evolve by conduct as time passes by. Thus what the parties said and wrote in 2003 in this case is an important source for determining the nature of their relationship, but not the only one. In addition what they did and said subsequently is information from which inferences can properly be drawn as to what the contractual relationship was between them. Furthermore, as I have earlier indicated, subsequent variations as to conduct may be agreed. There is therefore one oral distribution agreement made between the parties which, subject to agreed variations, covers all orders made under it during its existence. The terms made must be ascertained from what was said in 2003, what was written in 2003 and from subsequent conduct.
125. I now turn to the particular terms of the distribution agreement:-

(a) Clive Christian's Obligation to Supply Orders

126. The Claimant's case is that Clive Christian was obliged to accept all reasonable orders, whereas the Defendant's case is that no purchase order placed by the Claimant was binding upon the Defendant unless and until accepted by the Defendant, at the Defendant's discretion.
127. There is nothing in the emails or correspondence, at the time that the agreement was made, to indicate that the parties put their minds to the Defendant's entitlement to decline orders. There is no document which suggests that the parties considered whether the Defendant had discretion or whether they were obliged to supply orders placed.
128. Nor is there any reference in subsequent correspondence, nor in the dealings between the parties which suggest that there was any agreement upon this issue, or that it even came into the contemplation of the parties. Orders were placed and, subject to availability, supplied.
129. The basis for the Defendant's contention is that when the First Draft Agreement was drawn up by the Claimant and sent by it to the Defendant in February 2009, clause 3.1.3 of that agreement provided that no purchase order would be binding on the Defendant unless and until it was accepted at the Defendant's discretion save that once delivery dates had been agreed in writing by the Defendant the order had to be accepted.^[128]
130. The same clause was contained in the Second Draft Agreement drafted by Mr Fadelli and circulated in November 2009, and in the Third Draft Agreement circulated by Mr Gray in June 2010.
131. Mr Brisby submits that by putting forward an agreement containing such a clause the Claimant must have been happy to do business upon such a term and must have understood that to have been the basis of the trading relationship between the parties to date. Otherwise he would not have included it, and continued to include it in the draft agreements he submitted to Mr Gray.
132. There was no trade custom which would require the implication of such a term, but there were sound commercial reasons for the Defendant only accepting orders at their discretion Mr Brisby submitted. Thus the ingredients they used were rare, limited quantities of the perfume were made at any given time; Clive Christian wanted to develop the brand sustainably, and needed therefore to have it in their control, and they needed to avoid a grey market and hence needed to be the ultimate arbitrator of whether an order should be delivered or not.
133. Clause 3.1.3 was only withdrawn from the draft agreements when the Fourth Draft Agreement was circulated on 23 July 2010 shortly before the first of the large orders was placed on 26 July 2010. By this time the Claimant's solicitors were already on the scene and Mr Brisby submitted, must have assisted with the drafting of the Fourth Draft Agreement. The re-drafted clause stated that the "Defendant will not unreasonably withhold or refuse to accept any order placed by the Claimant"^[129]. Mr Brisby submits that this was an attempt to tie the Defendant to supplying these late orders when, because of the existence of the discretion they had no obligation to supply them.
134. It was, Mr Brisby submitted, wholly improbable that Intertrade would have suggested terms less favourable than those which they were currently working upon. It follows that Mr Fadelli must have believed that Clive Christian were not obliged to supply Intertrade.
135. Intertrade's evidence was that the First Draft Agreement was derived from a template provided to Mr Fadelli by Shishedo, a manufacturer, some years ago.^[130] Ms Ferraretto was tasked with producing the draft agreement and this was the template which was used. She said in evidence that she was not responsible for negotiating the terms, but was the one putting in writing "what was negotiated and agreed between the parties".^[131] Mr Fadelli said in his email of 13 May 2010, at which time 3.1.3 was still in its original form, that:-

"It should be noted that the Agreement as drafted and commented upon by both of us reflects, as we understood it, the key commercial terms which we have agreed, and upon which we have both been operating since the contract between us commenced."^[132]

136. Mr Peter Knox submits on behalf of the Claimant that the template was used by the Claimant in an uncritical fashion, and had until recently, been used in all of its English form agreements. It is correct to say that at the time that the drafts were circulated, and indeed up to the time of the four last orders, the nature of the obligation to supply upon the Defendant had never been an issue between the parties.
137. Where as here, no written term had been agreed, Mr Knox submits that there must be an implied term in the agreement that the Defendant would supply all reasonable orders, but that no other restriction was placed upon the orders, such as the Defendants entitlement to exercise their discretion as to whether to supply them.
138. In Mr Knox's submission the matter is clear beyond doubt when one considers three matters, firstly Mr Gray's internal email of 16 March 2010, secondly his own evidence in cross examination and thirdly the existence of two distribution agreements which Clive Christian had entered into neither of which gave Clive Christian the discretion to refuse orders.
139. In Mr Gray's email of 16 March 2010 he said, in relation to continuing to supply perfume to the Claimant that, "… stopping supplies is a major breach of contract (yes, we do have an unwritten one)".^[133] If Mr Fadelli had agreed in June 2003 that Clive Christian retained a general discretion to reject orders, Mr Knox submits, it is inconceivable that Mr Gray would have written to Ms Olrog in such terms. When he was being cross examined, Mr Gray sought to explain what he regarded as the obligation upon the supplier who received an order. If a customer of Intertrade who was buying other products added a Clive Christian product to the list there was an implication that that would probably be accepted.^[134] This evidence, Mr Knox submitted, was inconsistent with the Defendant having a discretion to refuse any order save for one for which delivery dates had already been agreed.
140. Mr Gray returned to this matter the following day and sought to resile from these answers.^[135] But he accepted there was an obligation to keep Intertrade in business which could only be by supplying stock. If Clive Christian wanted to maintain a business relationship with the Claimant, it had to have a stock of Clive Christian perfumes to sell. The deal right from the beginning was that Mr Fadelli would develop a business to sell Clive Christian into select perfumery distribution channels. That was the essence of the agreement, and in order for him to do that he clearly had to have products.^[136]
141. Mr Knox submitted that this clearly indicated that Clive Christian had to supply Intertrade with its orders so that it could develop the market and that therefore stopping supplies would be a major breach of contract.
142. Clive Christian had two distribution agreements, one with Calle for Italy and one for Esterk for Russia.^[137] In each of these agreements clause 5.2 provided that the supplier undertook "to use all reasonable endeavours to meet all accepted orders for the products forwarded to it by the distributor…" this clause is consistent with an obligation to supply reasonable orders and not with Clive Christian having a discretion to refuse them, Mr Knox submitted.
143. Mr Brisby said that Mr Gray's answers in cross examination were consistent with the existence of a discretion. Mr Gray was effectively saying that Clive Christian had a discretion but that orders would probably be accepted and the discretion could not be used as an excuse for starving the Claimant of stock. Thus the discretion had to be exercised reasonably.
144. There is nothing in the documentation in 2003, or indeed afterwards until the First Draft Agreement in February 2009 to suggest that the Defendant had a discretion to refuse orders. Nor is there any custom or practice within the industry to suggest that such a term should be implied. Nor is there any instance of the party behaving as if the Defendant had such a discretion. There is nothing in the day to day, week to week correspondence between the parties that suggests the parties thought that such a discretion existed.
145. Nevertheless, the First Draft Agreement together with a Second and Third demonstrate that the Claimant was prepared to do business on a distribution agreement containing such a term. The reluctance of Mr Fadelli in evidence to accept that the fact that he had put forward such an draft agreement including clause 3.1.3 meant that he was prepared to do business on those terms, but instead had only put that and other terms into the draft agreement as part of a negotiation process,^[138] was unconvincing.
146. Furthermore, Mr Fadelli on 13 May 2010 said in an email to Mr Gray that the draft agreement reflected the key terms upon which they had both been operating since the contract commenced. This is an important fact to weigh in the balance. I do however accept the evidence of Ms Ferraretto and Mr Fadelli that the draft agreement was a template which had been provided by a manufacturer, and that its standard clauses which had not been the subject of any issue between the parties up to the time of the First Draft Agreement, may well not have been the focus of Mr Fadelli or Ms Ferraretto's attention when the Draft Agreements were submitted. It appears that until after the events of this case Mr Fadelli used this template, as Mr Knox puts it, rather uncritically in all his English form agreements.
147. What in my judgment is of particular significance however is not merely the absence of anything to suggest in the correspondence or dealings between the parties that the Defendant had a discretion, but Mr Gray's evidence that the distributor had to have stock in order to advance the business for the benefit of both parties and that if a customer wanted to place an order for Clive Christian with Intertrade that would probably be accepted. Furthermore, Mr Gray's evidence that stopping supplies would be a major breach of contract is consistent with his evidence in cross examination, and quite inconsistent with the proposition that Clive Christian had a discretion to refuse orders, or indeed that Mr Gray thought they did.
148. On balance therefore I conclude that the Defendant did not have a discretion to refuse orders but was obliged to supply orders which Intertrade placed provided that such orders were reasonable. There is no imbalance between a supplier and a distributor with such a clause, where the distributor is an exclusive distributor with a duty to use, and an interest in using all reasonable endeavours to maximise brand awareness of the product in its territory. It is noted that a clause such as 3.1.3 does not exist in the Claimants Italian or French agreements. Both parties made their submissions on the basis that if there was no discretion in the Defendant to refuse orders then the obligation upon Clive Christian to supply orders was subject to such orders being reasonable.

(b) Marketing Spend

149. It is the Defendants case that it was agreed between Mr Gray and Mr Fadelli from the outset in June 2003 that Herbarium would spend not less than 10% of the wholesale price (Herbarium sales to retail customers) on supporting the Clive Christian brand (Marketing Spend). The case as pleaded in the Re Re-Amended Defence and Counterclaim alleges that this is one of a number of express, or alternatively, implied terms. It is said that the fact that a "coefficient of four" was agreed between the parties meant that marketing spend of 10% had been agreed.^[139]
150. The Claimant contends that there was no such agreement, save in 2009, and that the Claimant had to spend money on developing the brand, but could do so in whatever manner it thought best, with no specific budget being agreed.
151. It is clear that the discussion which took place between Mr Gray and Mr Fadelli in June 2003 and at their subsequent meetings before the contract was finalised in September 2003 would have included matters which are not documented in the emails and other correspondence. They talked about "promotion and advertising", "the need to work out budgets to support the brand" and "draft marketing plans" all of which are referred to in Mr Gray's email of 10 June 2003. I have no doubt that Mr Gray referred to his "Principles" of running Clive Christian during the discussions. I also accept that it is likely that Mr Gray had with him the spreadsheet prepared for the meeting and referring to marketing of 15% and that he discussed, or raised, that figure with Mr Fadelli, even if he did not show him the document. It is probable that Marketing Spend was discussed during this initial meeting. None of the documentation however contains any reference to an agreement of a minimum market spend. There were numerous references to marketing plans during the years 2003-2009 and there is no doubt on the evidence that marketing plans were submitted by the Claimant, discussed with the Defendant and agreed between the parties. It was in the interests of both sides that this should be done. It cannot however properly be inferred that the agreement of marketing plans, including specific items of expenditure, showed that Intertrade was obliged to spend not less than 10% in marketing contributions. What can be inferred is that the parties were seeking to do that which was necessary for their own mutual interests, to promote and develop the brand and sell as much as was sustainable for its future development and sales.
152. Mr Fadelli accepted that Intertrade was under an obligation to promote the brand, not least because it would be in Intertrade's own interest to achieve as many sales as possible. He said in evidence that the consequences of reducing the marketing spend was that he risked losing turnover. They needed to discuss at the beginning of the year the marketing that they wanted to apply in support of the brand.^[140] That in itself was sufficient incentive to persuade Intertrade to make an appropriate market contribution without the need to require any minimum sum.
153. It is also right that Mr Fadelli accepted in evidence that 10% was not an unreasonable amount to support the Defendant's brand.^[141] The other agreements before the court indicate that in some instances the 10% minimum may be agreed, and in others there will be no such agreement. Of the 23 agreements before the court which Mr Knox had analysed, six had no minimum spend, ten had a 50/50 split, two had a 10% spend, one a 5% spend and four had varied provisions for marketing spend.
154. Mr Fadelli not merely admitted but asserted that he spent the 10% on marketing the perfumes between 2003 and 2010. In his email of 13 May 2010 he said that Intertrade had invested in excess €200,000 in promoting the perfumes over the last 24 months, on the basis of their ongoing contract.^[142] Mr Brisby submits that such a large sum of money would not have been spent unless Intertrade believed that it was under an obligation to spend it. In view of the Claimant's own interests in investing in the brands to achieve sales however I do not consider that this inference can properly be drawn. Such expenditure is equally consistent with expenditure for self interest or expenditure for an obligation to spend a reasonable amount but not a minimum amount.
155. When Intertrade, as they did from time to time, asked for a contribution towards the costs of promoting the brand from Clive Christian, there was no occasion on which Clive Christian declined to do so on the basis of the existence a 10% minimum spend obligation. Nor did Clive Christian seek a reconciliation at a year end to reconcile marketing expenditure by the Claimant and contributions by the Defendant. There is no evidence of any discussion as to what costs should be taken into account in considering the 10%. Nor is there anything in the correspondence to demonstrate that an account was sought of the Claimant's marketing spend by the Defendant between 2003 and 2008. Mr Gray said that he made such requests verbally even though there were none in writing, though no such oral requests are referred to in his witness statement.
156. Mr Brisby submitted that 10% minimum would probably have been agreed because firstly it was a reasonable amount, secondly because Mr Gray would have raised the 15% and Mr Fadelli would have beaten him down from that, thirdly because other distribution agreements have a minimum 10% spend in them and fourthly because the Claimant actually spent about 10% on marketing contributions.
157. There is no dispute that at the First Padova meeting in February 2009 it was agreed that the Claimant would make a minimum contribution of 10% marketing spend. This agreement is not separately noted in the meeting notes for 23 January 2009 but appears to have been linked in the parties' minds to the currency fluctuation agreement. Schedule E of the First Second and Third Draft Agreements each contain the specific clause requiring the distributor to allocate 10% for marketing etc on condition that the exchange rate £/€ did not exceed £1/€1.20.^[143] Mr Brisby submits that if the 10% Marketing Spend was a new obligation it would have been recorded in the notes of the meeting and the fact that it was not expressly so recorded, unlike the currency fluctuation clause, indicates that it was not a new concept but something already agreed.
158. Mr Fadelli contended that the agreement was solely for 2009 though it is not so limited in the First Draft Agreement that he sent to Mr Gray in February 2009. Mr Fadelli proposed that the 10% should be continued for 2010^[144] but Mr Gray refused to agree it and demanded €100,000 as a fixed amount for a marketing contribution for 2010.
159. It was submitted by Intertrade that the agreement in 2009 as to 10% marketing spend related only to that year. Mr Gray accepted in evidence that it was agreed in 2009 that Intertrade would contribute 10% although it would not necessarily finish then.^[145] Ms Olrog agreed that the parties were talking about 2009 when the agreement was made but said that Intertrade's obligation for marketing spend was continuous and had been previously. On 23 October 2009 the Defendant requested the figures for marketing spend for 2009 up to 30 September 2009. Up to that time Mr Gray said that he would discuss marketing spend on an ongoing basis with Mr Fadelli who would give him accounts of expenditure orally, and put some of it in writing.^[146] Mr Gray did not challenge or question any of the information he was given by Mr Fadelli until the end of 2008 when presented with counter bills which he regarded as excessively high. This made him question the information he was being given by Mr Fadelli. The date of the First Padova meeting was fixed at the end of 2008. There is nothing in the emails or other correspondence to indicate that Mr Gray had found any reason to challenge the figures discussed and showed by Mr Fadelli prior to 2008.
160. After the First Padova meeting however the Defendant did seek details of marketing spends. In her emails of 18 May and 19 May 2009 Ms Olrog asked for an account of the contribution to date that year and when this wasn't provided by 25 August 2009 she made her own assumptions and calculations of the marketing contribution due. The Claimant then provided figures from January to September 2009 on 23 October 2009. No further figures were provided though the last months of the year were promised in an email dated 14 January 2010.^[147]
161. On the basis of the evidence and submissions before me I conclude that it was not agreed between the parties in 2003 that there should be a 10% minimum market spend by the Claimant. The question of marketing spend would certainly have been discussed between Mr Fadelli and Mr Gray in June 2003, but as the mood between the parties was one of trust and optimism, and it was always in Intertrade's best interest to make a substantial contribution in order to achieve sales, no fixed or minimum percentage was agreed between them. Had it been I am satisfied that there would have been a reference to this in the documentation between June 2003 and early 2009, but there is none.
162. It is equally clear, as Intertrade accepted, that there was an obligation upon them to promote the brand by spending money on marketing. In these circumstances and in order to give the agreement market efficacy, a term must be implied into the agreement that the distributor has to spend a reasonable amount on marketing the perfumes. I do not accept Mr Brisby's submission that not less than 10% is a reasonable amount. There is no established custom and practice that the figure should be not less then 10% even though 10% was in fact spent on the facts of this case. I do not consider that the market or the court would override the flexibility which I find the parties themselves had adopted by not agreeing a fixed percentage.
163. A reasonable amount to be implied for marketing expenditure on the perfumes is a figure of the order of 10% per annum. This provides the necessary flexibility to the distributor to determine what level of expenditure is appropriate at any given time relating to the market, so that on some occasions a figure of 10% or rather higher may be spent, and on others somewhat less.
164. Such a term would be implied in the distribution agreement with a corresponding duty upon the distributor to give the supplier details of its marketing spend, until such time as the parties displaced it by a different express term on the same issue. Until 2009 there was no express agreement as to a minimum marketing spend. In that year there was, and Mr Fadelli proposed that it should be continued at 10% minimum for 2010. It was Mr Gray who declined to accept that and put forward a fixed amount of €100,000 for marketing contribution.^[148] I conclude that no agreement was reached for an express term order in 2010 with the consequence that the implied term that the sum of the order of 10% on marketing should be spent in that year operated, as it had done between the commencement of the contract and the 2009 agreement.

(c) Exchange rate fluctations/currency gain

165. Mr Gray's email of 10 June 2003 stated that the pricing structure was to be:-

"Retail (including IVA) 100: Herbarium wholesale 50: Clive Christian wholesale 25".

This meant that Herbarium would purchase the perfumes from Clive Christian at 25% of the suggested retail price (SRP) which would be fixed by the Defendant, that Herbarium would then sell the perfumes to its retail customers at 50% of the SRP and Herbarium's retail customers would then sell to consumers at 100% of the SRP. This established a coefficient of 4.1, in other words the margin calculated by the Defendant for distributors and retailers.^[149]

166. Mr Fadelli did not accept in cross examination the coefficient of 4 had ever been agreed. In the notes of the meeting of 17 May 2010 however it is recorded that Mr Fadelli accepted that a coefficient of 4:1 had been agreed for Italy. It is also recorded that Mr Fadelli said that the margin of 4:1 had been agreed when Intertrade started with Italy but that it was not possible to work with that coefficient in the foreign markets where they needed a minimum of 5.1.^[150]
167. Further, in an email dated 6 July 2010 Mr Fadelli acknowledged Mr Gray's email asserting that he had a agreed a market coefficient of 4 by saying that that was true at the very beginning when Intertrade only had Italy: that was because there was no promotional investment. As they acquired more territories however, Mr Fadelli said, a more substantial coefficient of at least 5 was required.
168. I am satisfied on the documentation that Mr Fadelli did agree with Mr Gray a coefficient of 4:1 at the meeting in June 2003. The question which then arises is whether, as the Defendant submits, a term must necessarily be implied that if the margin changes by reason of currency fluctuations, the beneficiary is obliged to make restitution to the other party of the gain in order to preserve the agreed coefficient or margin. There is no evidence that there was any express agreement as to the restoration of currency gain. Mr Gray essentially relies upon the agreement of the coefficient as demonstrating the circumstances in which it must he says, follow that that margin was to be maintained and restored if currency rate fluctuations disturbed it.
169. The Claimant has certainly demonstrated throughout an anxiety to ensure that its own margin was preserved. Initially it had been agreed that the Claimant should buy the perfumes in Sterling and sell on in Euros. The Defendant then suggested in September 2003 that it should invoice the Claimant in Euros rather than Sterling. The Claimant rejected this on the basis that this would reduce their margin "due to the favourable exchange rate of the euro against the pound, while it increases yours. In consideration of this and in order to restore the margin originally agreed upon, on whose basis we have calculated the price structure, we propose that you take charge of the transport costs from London to our warehouse in Padova for all the future orders."^[151] That did not happen as the parties reverted to their original agreement, and the Claimant was invoiced in Pounds and paid the transport costs.
170. In June 2003 the parties hoped that the prices and exchange rates would remain relatively constant. The exchange rate did, until about 2008 and prices were only changed twice in seven years. When the Defendant proposed raising its Sterling price, but leaving its Euro prices the same, in August 2006, Intertrade objected upon the grounds that without a corresponding increase in Euros its margins would be damaged. As a consequence, Mr Gray did not implement the price increase for 2006/2007 in spite of the fact that doing so enabled Intertrade to continue enjoying a margin above 1:4.^[152]
171. Mr Peter Knox QC submits on behalf of the Claimant that there is nothing in the documentation which suggests any agreement as to currency gain either expressly or impliedly. Mr Gray made no suggestion that it existed when Ms Bennick asked him for the terms of the contract in October 2003^[153] nor did Mr Gray set up any internal system to monitor exchanges rates so that he knew what the parties' liabilities might be. Nor did he inform the auditors of the agreement, even though there was a potential for significant liabilities on the part of the Defendant. Mr Gray's response to the Claimant's objection to the proposed Sterling price increase in 2006, Mr Knox submits, is quite inconsistent with an express or implied agreement as to currency gain.
172. The same argument applies to the price increase in August 2007 which was implemented. Intertrade calculated that the effect of this would be to reduce their mark-up. They produced a schedule^[154] which demonstrated that their mark-up would be reduced from 1:4.53 down to 1:4.35, with other variations depending on the product. Intertrade's response was not, Mr Knox submits to say "you are not entitled to such high margins", but rather, to maintain the margins in excess of 4:1 by offering free of charge products from September 2007 onwards.^[155] Mr Gray said in evidence that he had been weak in not reinforcing the coefficient.^[156]
173. The Claimant remained swift to guard its margin. It was very conscious of the stability of Sterling as against the Euro both in August 2006^[157] and July 2008 when discussing the allocation of free products.^[158] Mr Gray however took no steps to suggest that the Defendant's margin should be preserved until the end of 2008 though he must of course have been aware of the issue because of the Claimant's own response to it. Mr Brisby submits that as a matter of logic any disturbance to the coefficient should be compensated for by the benefiting party and that what is sauce for the goose should be sauce for the gander.^[159] At the very end of 2008 the exchange rate became more adverse to the Defendant, although in truth it had been adverse to the Defendant for much of that year. Thus it ranged from 1.28 in March 2008 to 1.10 in December 2008, compared with 1.43 in 2003. When however the parties had discussed the continued allocation of free products in July 2008 Mr Gray agreed to continue the free allocation, apparently accepting Mr Fadelli's suggestion that the matter should be reviewed on 1 January 2009 when it could be seen whether the exchange rate had stabilised at the end of 2008.
174. On 23 January 2009 at the First Padova Meeting the Claimant did agree to pay the additional 10% on invoices issued to it. This additional payment was not stated by Mr Gray to be due to currency gain, or in order to restore the coefficient, but because "the Euro retail prices are giving Intertrade extra margin which we want to be used for marketing under our control".^[160] The Claimant contends that this additional 10% on invoices was only intended to apply to 2009 and was intended to be spent on marketing the perfume in the Claimant's territories. The minutes of the First Padova Meeting do not suggest such limitations, nor does the First Draft Agreement at Schedule C, nor the signed draft agreement at Schedule C, nor Laura Ferreretto's email of 23 April 2009.^[161]
175. Mr Fadelli said in evidence that it was limited to 2009.^[162] Ms Olrog said in evidence that she did not remember it being attributed to a specific year. It was "to be reviewed, looking at the currency".^[163]
176. The interrelationship between currency gain and marketing spend is shown in Mr Gray's email of 27 May 2009 when in recording the notes of a meeting the previous day he states under the heading "marketing" that the Claimant was to prepare a schedule of his currency gain in 2008 so that they could examine the "2008 hangover" of marketing spend.^[164] Mr Fadelli did, in response to this request, prepare a schedule of its currency gain in 2008. This showed an average rate of £1/€1.29,^[165] but it did not provide any information about the 2008 marketing spend, which remained a source of mistrust between the parties.
177. I am not satisfied on the evidence that there was any time limitation on the additional 10% agreed at the First Padova Meeting. The documentary evidence does not suggest that there was any such limitation. It was open to review, depending on the exchange rate as Ms Olrog said in evidence. Nor do I consider that the Claimant's contention that the 10% was to be used solely for marketing spend in the Claimant's territories to be correct. If the 10% was because of Intertrade's extra margin, it would not make commercial sense for the Defendant to be obliged to spend the whole of that sum in the Claimant's own territory. I accept Mr Gray's evidence, and that of Ms Olrog, to the effect that the additional revenue could be used by the Defendant on its global marketing or marketing under its control.^[166]
178. When the parties met in November 2009 the continued payment of 10% was clearly discussed; in the email from Mr Fadelli to Mr Gray of 20 November 2009 it was stated that it had been agreed that "from January 1^st 2010 Clive Christian will no longer add 10% as marketing contribution on Intertrade Europe's invoices…. When/if the average exchange rate pound versus Euro in the purchases of 2010 should result in our mark-up over five, the difference will be allocated for marketing activities too".^[167] On 27 November 2009 after Mr Gray and Mr Fadelli had discussed what had transpired at the meeting, Mr Fadelli sent Mr Gray an email setting out various points. Under the heading "Marketing Expense" the passage stating that the 10% would no longer be added to the marketing contribution was included. The email^[168] contains typewritten comments by Mr Gray upon the contents set out by Mr Fadelli. Mr Gray makes no comment in relation to this issue though he does state that the €100,000 is the minimum marketing commitment to Clive Christian perfume by Intertrade for 2010. Reading the document as a whole it does not appear that the parties had reached agreement in relation to marketing allocation, marketing spend or the 10% marketing contribution on the invoices. All these interrelated issues were at large.
179. I conclude on the exchange rate fluctuation/currency gain issue that there was no express agreement in 2003 that the beneficiary should compensate the loser for any currency gain. Nor do I consider that such a term was to be implied. The agreement as to a coefficient price does not carry with it the necessary implication that any exchange rate fluctuations causing currency gain would have to be compensated. Had that been the intention of the parties arising out of the agreement of a coefficient, then one would have expected that such an intention would have been recorded. But it is not, nor did the Defendant seek to make any claim for compensation for currency gain until November 2008.
180. The exchange rate appeared relatively stable at the time when the agreement was made in 2003, and there was no reason at that time why the parties would necessarily have seen the need to make a specific agreement in relation to currency fluctuations. Once the pricing structure had been settled and the original margin restored there is nothing in the evidence to suggest that the parties did anything other than deal with the matter on an ad hoc basis raising the issue as and when the exchange rate seemed to demand it. Each party was thereby able to, and did, seek agreement as to how the exchange rate fluctuation was to be dealt with. Thus in 2006 Intertrade persuaded Clive Christian that there should be no increase in prices so as to upset their margin and in 2007 agreed a free allocation of goods to maintain the Claimant's margin at a rate even higher than the coefficient. In 2009 Clive Christian were able to persuade Intertrade to agree to pay an additional 10% on invoices to be spent on marketing.
181. The conduct of the parties and the documentation demonstrates in my judgment that there was no express or implied term to compensate for currency gain but an understanding that if the rate changed too much and a need for adjustment arose, then the parties sought to and achieved agreement upon that. I can see no basis for saying that for business efficacy or indeed any other reason a term requiring the beneficiary of currency gain to compensate in every year was implied.
182. The matter falls to be dealt with in my judgment on the basis that separate agreements were reached in 2007, 2008 and 2009 between the parties which have to be dealt with in accordance with their particular terms.

(d) The provision of stock and sales information

183. The Defendant contends that the Claimant was obliged to provide information under the terms of the distribution agreement. Mr Gray was uncertain whether the obligation was implicit or actually agreed with Mr Fadelli.^[169] The Claimant in fact provided "sell-in" figures from around March 2005. These figures provide information as to the sales made by the distributor, Intertrade, to its retail customers. In addition Intertrade provided sales forecasts, that is, an estimate of the sales they anticipated in any particular period. It is the Claimant's case that it provided all the information that it was contractually bound to provide. It was critical however, the Defendant contends, that "sell-through" figures should have been provided, which showed the sales made by the retailers to the ultimate customer. This was essential because it enabled the Defendant to satisfy itself that sales were sustainable, and that there was no 'churn' (sales to new accounts which rapidly closed down and were replaced by new accounts) or grey market activity (overstocking leading to enforced discounts, loss of sales and loss of market position as a luxury brand).
184. Furthermore when, as it frequently did, the Defendant asked for a "stock and sales plan" this was intended, it was submitted, to require the Claimant to provide an estimate based on actual stock figures and provide those figures.^[170] Mr Gray said that a stock and sales plan starts with an opening stock which can only come from one place.^[171] It is on the basis of this logic and these inferences that it is contended that there was an implied duty upon the Claimant to provide not only its sell-in figures, and its forecasts, but also its sell-through figures and its stock levels. Ms Olrog said in evidence that conversations about the retail figures regularly took place, as they needed, and sought, that information. There is however no written request for such information save in relation to specific customers, which was provided.
185. Whilst there were requests for "stock and sales plans" by the Defendant, there were no requests for "stock levels" until the email of 20 April 2010 from Ms Olrog which required information on "current stock holding, expected sales by marketing and expected order dates for the remainder of 2010" – a purchasing forecast having already been submitted.^[172] Mr Fadelli responded by saying that the Claimant held only around €30,000 worth of stock,^[173] whereas Ms Ferraretto described the request from the Defendant as "unpolite" as it suggested that the Defendant did not trust the Claimant's stock management capability after many years during which they had demonstrated "to be able to do it in a proper way."^[174]
186. On 2 May 2010 Mr Fadelli complained that holding up the stock order was not the correct way to get information and stated that the Claimant normally kept a three month stock level to ensure timely delivery to customers. "Considering the turnover objectives agreed with you, this means keeping a stock of around €100,000."^[175] Mr Gray said in evidence that a two to three month stock level was the right amount of stock for their business.
187. The Defendant reiterated its request for current stock levels on 15 July 2010 but the Claimant declined to provide them on the grounds that the information was confidential "because we are a distributor and as such we are able to manage our stock."^[176] Mr Fadelli also stated that the Defendant asked them for details of his stock because they did not believe he was managing his stock in the proper way and that was not a polite request.^[177]
188. The Defendant submits that the refusal to provide such information was highly suspicious. Two of the Claimant's own distribution agreements with other companies required them to give details of stock levels. The agreement with Andrea Maack required the Claimant to give the number of products in stock at the inventory date, and the agreement with Iredale Mineral Cosmetics required them to provide inventory stock levels.^[178]
189. The Claimant asserted that the Defendant wanted the Claimant stock levels solely because it wanted to "starve" the Claimant of stock and was conspiring, by this means to bring an end to the distribution agreement. The Defendant's answer from Ms Olrog was:-

"We wanted to know their stock holding in April 2010 because they had just placed an order for £52,000, having received an order for £5,000 a couple of week prior. That was an enormous order and was the biggest they had ever placed, so I don't think it was unreasonable considering that at that point, the relationship was difficult, we were looking at alternatives, etc. We were asking to know their stockholding because there was a concern they may be stock piling."^[179]

190. There are various difficulties in the face of the Defendant's contention that there was from the outset an express or implied term that the Claimant would provide the Defendant with "sell-through" figures and its stock levels, whether as part of a stock and sales plan or otherwise. There is no material in any of the documentation which raises these obligations, save by inference where the term "stock and sales plan" is referred to. It is not recorded by Mr Gray as a term of the contract, nor is any information given to Ms Bennick on 1 October 2003 that it was such a term. Nor in any later emails is there any suggestion that the acceptance of orders was conditional upon such information being provided. In any event, Mr Knox submits the proposition would be inconsistent with Mr Gray's email of 16 March 2010^[180] stating that stopping supplies would be a major breach of contract.
191. When giving evidence Mr Gray emphasised, as he did throughout that the issue of trust was critical.^[181] When it was put to him that the way the agreement operated was the provision of forecasts by the Claimant from 2006 or 2007 onwards every six months and the orders were accepted in the normal way, he confirmed that that was the way the business was conducted.
192. He also referred to the issue of trust^[182] when stating that the focus was on the sales and how the market was being conducted. If you trust your partner, he said, then the focus is the sales figures because a well managed distributor will manage their stock within two or three months or six whatever their figure is. The distributor's role Mr Gray said, is the logistics of managing the stock and generating interest within the brand:-

"did I specifically discuss stock and did Mr Fadelli agree that he would provide levels? ….it would have been a conversation along the lines of:

"You are a good distributor, you will manage your stock "Yes of course I will". And that would be my …. That's the agreement."^[183]

193. These answers are not in my judgment consistent with an obligation, either express or implied in the contract for a provision of "sell-through" figures or more particularly stock levels. In fact the term "stock and sales plan" were until 2010 treated as requests for forecasts i.e anticipated sales and not for more detailed information.
194. Nor was there any term requiring the provision of such information in the draft distribution agreement which Mr Gray himself amended and apparently had in Paris for the meeting on 25 May 2009. The only information there sought was Intertrade's own monthly sales figures.^[184]
195. Mr Knox submits that if the provision of such information, as a pre-condition, had in fact been agreed in 2003 it would have been expressly referred to in the various documents and included in the amended draft in Paris or later drafts in 2009.
196. When the contract was formed in 2003 Mr Gray acknowledged in cross- examination that there was at that time no problem with a grey market.^[185]
197. I am satisfied that there was no express or implied term in the distribution agreement in 2003 that the Claimant would provide information as to stock levels or "sell-through" figures whether as part of a stock and sales plan or otherwise. There is no evidence to suggest that any such terms were expressly agreed and the parties conduct up to 2010 and Mr Gray's evidence is contrary to the implication of any such terms. Such a term cannot be implied because of business efficacy; only two of the distribution agreements entered into by the Claimant with other suppliers required the provision of information as to stock levels, and Mr Fadelli said that he had never had a request for such information in 23 years, even in those agreements.
198. There was however an implied obligation to provide reasonable information relevant to the running of the brand as I set out later in this judgment; different considerations apply as to whether in the circumstances which pertained in 2010 the request for information as to stock levels was reasonable and relevant to the orders placed in July and August 2010 and were reasonably required by the Claimant. I deal with that later in this judgment.

(e) Late payment

199. It is the Defendant's case that the Claimant was late in paying invoices in respect of the two most recent orders before 23 July 2010, namely order OF10.00092 for £47,490 due by 30 June 2010 paid in five instalments between 5 July 2010 and 8 July 2010, and secondly order OF10.000122 for £28,500, due by 30 July 2010 but paid in two instalments on 2 August and 4 August 2010. The complaint is not merely that these payments were late but that they were also paid by instalments which was not authorised under the contract. A third invoice of 15 July 2010 for £20,605 is not relied upon by the Defendant in its closing submissions.
200. The term for payment under the contract was 30 days from invoice date or 30 days from the collection date on regular orders, as per the Defendant's invoices, or alternatively 30 days from invoice date end of month as the Claimant contended. Upon either basis the invoices in respect of the orders complained of were paid late. It is the Claimant's case that provided payment was made before the end of the appropriate month, the term was satisfied even if the money did not actually arrive in Clive Christian's account until early the following month.
201. Furthermore the Claimant relies upon an email dated 20 April 2010 in which Michela Bertaglia of Clive Christian wrote as follows:-

"while we are fully aware of the way Intertrade pays, that is at the beginning of the month after an invoice has become due, and as long as payment is received by the fifth working day of that month we are not going to dispute your accounting payment system, agreed terms are that invoices are due 30 days from collection date (corresponding to final invoice date). This is how our accounting system works. On all invoices for Intertrade it has always been stated "Due 30 days from collection date", and no terms other than these have been at any time agreed between Clive Christian Perfumes and Intertrade."

202. The Claimants relied upon this letter as indicating that the strict requirements under the contract had been waived. The Defendant does not accept that the email amounts to a waiver and Mr Gray said in evidence that Ms Bertaglia had no authority to vary the agreed payment terms.
203. It appears from Mr Brisby's closing submissions^[186] that it is not disputed that the payment terms were "30 days end of invoice date end of month", which meant that the Claimant was obliged to pay 30 days after the end of the month in which the invoice had been delivered. Two issues then arise, firstly whether that clause would be satisfied by the Claimant sending instructions to its bank within that time as opposed to the Defendant receiving payment within that time. The proper construction in my judgment is that payment means receipt by the payee not the drawing of a cheque or the arrangement of a transfer. Secondly whether the Defendant waived that requirement and permitted receipt of payment until the fifth day of the month thereafter.
204. From 2008 the Claimant had been late in the payment of several invoices, usually by a matter of days. This practice was acknowledged in Ms Bertaglia's email. Whether or not she had authority from Mr Gray, and on the face of it she certainly had apparent authority, she appears to be endorsing a practice of acceptance of the Claimant's accounting and payment system provided the payment was received by the fifth working day of the relevant month. The fact that there may have been in force a system of not insisting on the strict rights of payment is further suggested by the fact that at no stage was a complaint made about late payment up to September 2010. When asked why, if the matter remained important to him he had failed to mention it in correspondence, Mr Gray replied, as he had on other occasions, "it is what it is".^[187]
205. In any event both the payments were arranged after the end of the relevant month and in the case of the payment relating to £47,490 the last payment was made more than five days after the fifth working day of the relevant month.
206. From July 2010 the Claimant started the practice of paying invoices by tranches, or instalments. This it was said was due to the fact that they were paying, at least in part, from a UK bank account which had a £10,000 limit on withdrawals from the account done by internet transfer. Although no term as to the mode of payment was expressly agreed under the contract it is to be noted that the Fourth Draft Agreement^[188] stated that payments should be made by wire transfer in sterling and the full amount stated in the invoice. The more important contractual requirement however was the time of payment. On the evidence I find that the agreement required the Claimant to make payment 30 days after the end of the month in which the invoice had been delivered.
207. I shall deal with the question of breach and the significance of any such breach, later in this judgment.

(f) The Website

208. The Clive Christian website, Clive.com was set up in May 1997 as a marketing tool. It was controlled by Mr Clive Christian himself who marketed his furniture collection through it. In 2001 the website introduced perfume as a category and listed all retails of the Defendant's products worldwide.^[189]
209. The website was not active as far as perfumes were concerned. In June 2005 Clive Christian informed Laura Ferreretto that they were working on their new Clive Christian website which was due to be launched in July 2005. They asked for a list of the Claimant's Italian stores which was provided by Ms Ferraretto on 10 June 2005.^[190] Ms Ferraretto requested that another customer be added to the website and provided the details on 13 January 2006.^[191] On 12 March 2007 Mr Fadelli complained to Mr Gray that the new website, for which he congratulated him for the elegance and luxury feeling it conveyed, had had all references to Intertrade's collaboration with Clive Christian removed.^[192] There was no immediate answer to this point, though on 18 June 2007 a customer on the website was informed, when requesting two bottles of perfume, that the website only sold sample sets direct from the website and suggested a link to "retailers" which showed where the main fragrances were stocked.^[193] The reference to "sample" set is a reference to what Clive Christian called "Travellers Sets" which contain three small bottles of perfume.
210. In early 2008 the website started selling the perfumes themselves. On 14 February 2008 Mr Fadelli emailed Mr Gray saying that he was sorry and surprised to see that Clive Christian had renewed their website without introducing Intertrade's contact details as distributor^[194]. On 19 February 2008 Mr Fadelli emailed Mr Gray about receiving a request from the website, and requested that Intertrade's contact details should be put on it.^[195]
211. The website was discussed at the meeting between Intertrade and Clive Christian in March 2008. It was not uncommon that the notes of what was agreed did not tally; Mr Fadelli said that it was agreed that the Clive Christian website would not sell on-line in the territories assigned to Intertrade and their distribution^[196] whereas Mr Gray said that he had agreed to keep Mr Fadelli informed of his plans for Clive.com, would like to offer a full global service of web sales and provide information to Clive Christian customers about where they could test and buy the perfume. That would include listing Intertrade's top twenty stores.^[197]
212. At about the same time Mr Fadelli expressed concerns that the Clive Christian furniture shops appeared to be selling or providing perfume to customers which he described as very worrying.^[198] Mr Gray informed him that the Clive Christian Home Showrooms were independent of the perfume company and were only supplied with Traveller Sets at that time.^[199]
213. From mid 2008 onwards the website became a source of dispute between the parties. Mr Fadelli wished the internet sales to customers in his territory to cease and Mr Gray wanted to develop website sales. Both parties sought a solution which would make the website the "friend" of the retailer. On 23 July 2008 Ms Olrog stated in an email that Clive.com was receiving very few sales from the EU. Only eight units had been sold into the areas. She said that it was agreed "that despite this being a small number it may cause unrest amongst customers." Mr Gray therefore proposed that if given a full list of stockists web customers could be directed to the Claimant's nearest store. It was agreed that a contract would be drawn up.^[200] This was however never done. In spite of many discussions about the issue, various proposals and tentative agreements such as that set out in Ms Olrog's email of 23 July 2008, nothing was agreed.
214. Mr Fadelli made it very clear that his objection to the website was that it was de-motivating the retailers and damaging sales. When he said in an email of 13 January 2009, shortly before the First Padova Meeting, that there had been two dangerous episodes in relation to the website and that two important customers had asked Intertrade to take back the stock and withdraw Clive Christian perfumes from their exclusive shops because the brand was being sold on the web by the supplier, Ms Olrog asked for details and requested a visit to the retailers in question. She was taken to one retailer, Safara, who had two stores only one of which was open. The owner felt that making the brand widely available on the web would damage its value and make the product difficult to sell,^[201] though Ms Olrog formed the view that the account was not important and that the case was being used as an excuse.^[202]
215. Mr Fadelli did not provide details of any further complaint and neither a letter nor an email making such a complaint was passed on to the Defendant. Mr Knox submits that many of the retailers in Italy were small shops who would be more likely to relay the complaint orally rather than put it in writing. Furthermore Ms Madeline Florescu did complain to Ms Olrog at the dinner in Milan on 30 March 2009. Ms Donadei, a former employee of Intertrade, suggested that Ms Florascu's account was a plant but she was not called to give evidence and no reliance could be placed upon her reported assertion, Mr Knox submitted. Clive Christian did in fact close the website down in April and May 2009 because Mr Gray recognise that a solution was needed.^[203]
216. The Claimant contends that by effecting sales on Clive.com to customers within the Claimant's exclusive territories, the Defendant was in breach of the distribution agreement. The natural construction of the grant of an "exclusive" distributorship in identified territories means, Mr Knox QC submits on behalf of the Claimant, the grant of the right to distribute there to the exclusion of all others including the manufacturer itself. This is not an implied term, Mr Knox submits, but the proper interpretation of an exclusive distributorship. The concept of "sole distributor" is different from "exclusive" distributor. The former, "sole", means the only distributor, whereas "exclusive" means that everyone, including the grantor is excluded. Mr Knox points out that in its subsequent agreement with Intertrade's replacement in Italy, Càlle, Clive Christian granted only a "sole distributorship".^[204] There is no logical basis, Mr Knox submits, for Clive Christian retaining for itself a right to sell direct into Intertrade's territories, in competition with Intertrade, by website or any other means. This is in conflict with an "exclusive distributorship". Some direct sales would be likely to, as Clive Christian accepted, de-motivate retailers themselves and thereby reduce the value of the distributor's exclusivity.
217. It may be true that Mr Fadelli did not complain that sales by the website was a breach of contract, but rather that it violated the parties' "gentleman's agreement" but that, Mr Knox submits was because he was seeking to find a commercial solution to the problem.
218. Mr Gray's oral evidence that he had qualified the definition of "exclusive distributorship" at the meeting of 10 June 2003 to make it clear that the reference was to retail outlets, and his oral evidence that at the same meeting he had informed Mr Fadelli that Clive Christian would be selling its perfume through its home showrooms, was, Mr Knox submits, implausible. Neither piece of evidence is dealt with in the witness statement nor the defence, nor put in cross-examination. The qualification to the word "exclusive" does not appear in the email of 10 June 2003. It states "we shall agree in principle to an exclusive arrangement for Italy (law permitting) we do not have duty free sales at present, so there is not a conflict in territory."^[205] Mr Knox submits that the meaning of this is plain; if there had been duty free sales in Italy that would conflict with exclusivity, but as Clive Christian did not sell duty free there, there could be no conflict.
219. Nor had Mr Gray referred to the qualified nature of the exclusive distributorship when answering Mr Fadelli's complaints.
220. The same is true, Mr Knox submits of the evidence that Mr Gray told Mr Fadelli about Clive Christian selling through its home showrooms. When Mr Fadelli complained about such sales Mr Gray did not respond that he had agreed or consented to them back in 2003. Instead he minimised the sales or their effect.^[206]
221. It cannot be contended, Mr Knox submits, that the manufacturer retained a right to sell direct to the end consumer and that the distributor's right was only to sell through retail outlets, as such a sales structure would undermine the exclusivity of the distributorships. That is the effect, which Mr Knox submits, which direct sales by a supplier would have. Mr John Brisby QC on behalf of the Defendant submits that the words "exclusive arrangement for Italy" cannot have a set meaning in the context of a distributorship arrangement. One has to look, he submits, at what the Claimant and Defendant explicitly, or by implication, agreed.
222. Mr Gray said that Herbarium wanted to be the Defendant's only distributor in Italy, that is, the Defendant could not appoint another competing distributor in that country, but the Defendant did not agree that the only method by which customers would be able to obtain the Clive Christian perfumes was through Herbarium's distributorship. The distributorship related to Mr Fadelli's particular skill, dealing with retail outlets.
223. Mr Brisby relies upon various factors as indicating that the words "exclusive arrangement for Italy" did not mean that the Defendant was prohibited from selling directly via the websites. First the perfumes had been sold since about 2000 from the home showrooms in Europe, and Clive Christian might wish to open such an outlet in Italy or other European territories. It cannot have been, and was not on Mr Gray's evidence, his intention to abandon this practice of direct sales. Further, Mr Gray says in paragraphs 127 and 128 of his witness statement^[207] that Mr Fadelli had known of the practice of the Defendant selling small quantities of Clive Christian perfumes to the home showrooms from the outset of their trading relationship.
224. Second, it cannot have been intended, Mr Brisby submits, that by granting ad hoc permission to distribute in territories Europe wide other than Italy, the Defendant thereby excluded itself from making any sales in those territories other than through the Claimant's distributorship. It is inherently unlikely he submitted, that Mr Gray would have agreed to the Claimant effectively preventing the Defendant from placing any perfumes on its website. The website was part of the Defendant's international brand marketing and the Defendant would have wished it to remain so.
225. Thirdly the evidence of subsequent conduct assists in the construction of the words used in June 2003. Whilst he complained regularly about the use of the website from mid 2008 onwards Mr Fadelli did not contend that it was a breach of contract until after May 2010 when the relationship had broken down. The language used in his emails of complaint was wholly inconsistent with website sales being a breach of the agreement. He said that he did not wish the Defendant to close the e-commerce but to make it a friend of the retailer.^[208] The Defendant equally made it clear that it would continue to use the website and turn it "back into a positive".^[209]
226. The Claimant, Mr Brisby submitted, clearly acknowledged that no agreement had been reached in relation to the website and proposed that a separate contract be drafted on 14 January 2009.^[210] Fourth, the Claimant sought to persuade the Defendant that website sales were damaging Intertrade sales which he would not have done had he thought he had a contractual right to prevent them. No such contractual right however was asserted until the Claimant received legal advice.
227. Fifth, if the phrase "exclusive distributor" by definition prohibits sales on the internet there would be no need to introduce into the First Draft Agreement as the Claimant did, a clause prohibiting sales by e-commerce directly or indirectly.
228. Sixth the signed draft agreement circulated on 11 June 2009 contains a clause which refers to the Defendant not appointing another distributor of the perfumes in the territories. This, Mr Brisby submits, suggests that the Claimant well knew that "exclusivity" was directed at ensuring that no other distributors were appointed rather than at prohibiting a direct sale.
229. Seventh some of the other distribution agreements between the Claimant and other suppliers either permit the supplier expressly to sell on-line, or the Claimant has in practice allowed this to happen. Thus in the agreement with Czech and Speake the agreement permits the supplier to sell by distance sales via the internet, and in the agreement was Nasomatto, the Claimant agreed to permit the supplier to sell two pieces for each client. The agreement with Miller Harris precluded entitlement to sell in the territories by e-commerce, but the printouts from the internet for that company which Mr Brisby put in cross-examination indicate that a customer can purchase perfumes from Miller Harris and have them delivered in the territories in respect of which the Claimant was exclusive distributor.^[211]
230. The Claimant's distribution agreement with Six Scents permits the Claimant to distribute "worldwide" but nevertheless the supplier's website shows that perfume may be bought online from them for delivery in the UK on payment of a US shipping fee. Mr Alexander Cook, junior counsel for the Defendant made further test purchases on the internet and ascertained that a customer could order perfumes, for example, from Miller Harris, in two territories where the Claimant was "exclusive distributor" with that supplier.^[212]
231. Mr Fadelli stated that the internet de-motivated retailers and made them feel exploited because they perceived that internet sales were low quality and not appropriate for a luxury brand. That was inconsistent Mr Brisby submitted, with his acceptance in evidence, that if an Italian buyer visited a perfume shop in Italy, saw Clive Christian perfumes, then went home and purchased the same perfume online to be delivered to an address in London, that would not be a breach of the agreement.^[213] Mr Fadelli said that the key was the final destination of the products, if that was in one of the territories Intertrade covered it would be a breach of the agreement.^[214] Nevertheless, he accepted in evidence that if Fortnum and Mason sold Clive Christian perfume on the internet and delivered it into Europe that would not be a breach. This Mr Brisby submitted, is inconsistent with Mr Fadelli's case that the only way a customer in Europe could receive Clive Christian perfumes in Europe without breaching the agreement was through the Claimant's own distribution.^[215]
232. Mr Fadelli's rationale for internet sales being prohibited, Mr Brisby submits, is therefore confusing and inconsistent; he was unable to explain why, in a distribution agreement where Intertrade was appointed exclusive distributor, the supplier was apparently able to sell the same goods online such as in the case of Czech and Speake, Miller Harris, and Six Scents.
233. Furthermore, some of the retailers that Intertrade sold to operated websites and sold Clive Christian perfumes themselves. Mr Gray posed the question in evidence that if Herbarium was happy to sell to a shop in Germany that was selling on the web, how could the argument stand up that Clive Christian could not sell directly.^[216] Mr Brisby submitted that the reality was that retailers would simply have to get used to the idea that they were competing with the internet, and it can't have mattered to them whether such sales were effected by other retailers or by the Defendant.
234. Mr Fadelli was content to let Travellers Sets be sold on the website as he considered that this helped the brand and the retail customers.^[217] He also stated however that when he said in his email of 2 April 2008 that website sales must stop, he was referring only to Travellers Sets.^[218] Mr Brisby says that these inconsistent answers suggest that the Claimant's approach to all website sales was essentially the same; namely they represented a practice which the Claimant was not happy with, but one which it could not prevent. Hence the need for a separate agreement to any distribution agreement.
235. The "de-motivating" effect on retailers which the Claimant asserted was challenged by Mr Brisby on the basis that the perfumes were unique, and a few websites sales would not disturb or disillusion a retailer, especially not the right kind of retailer. Further, as a number of retailers themselves were selling the perfumes online, retailers generally would have to accept such competition whether from other retailers or from the Defendant.
236. Having considered the evidence and the detailed submissions by Mr Knox and Mr Brisby I have come to the conclusion that website sales by the Defendant were not prohibited by the oral agreement between the parties. There was no express or implied term to this effect.
237. The words "an exclusive arrangement for Italy" do not, on a natural construction mean the right to distribute in identified territories to the exclusion of all others, including the manufacturer. The words more readily mean that the distributor was to be the only distributor in Italy. It is the distributorship, namely the right to distribute to retailers which is exclusive. Nor do I consider that the words "sole" and "exclusive" necessarily bear separate and distinct meanings. Again they may or may not do depending upon the circumstances and other matters agreed.
238. It is clear from the other Distribution Agreements in bundle M that in some instances the word "sole" is used by itself, in others the word "exclusive" by itself, and on occasions they are both used. It appears from these contracts that they do not always bear the same meaning, as different words or combination of words appear to be used when the effect is intended to be the same. It cannot be in such circumstances that there is a standardised trade or business meaning for these words. They must be construed according to their context, the circumstances and what the parties said and did. The conduct of the parties afterwards may also throw light upon what was intended (see Carmichael).
239. Nor do I accept Mr Knox's submission that the words "we do not have duty free sales at present, so there is not a conflict in territory"^[219] bears the clear meaning which he attributes to it. The sentence is under the heading "Territory" and whilst it could mean that duty free sales in Italy would, if Clive Christian were to sell duty free there, conflict with exclusivity, it could equally mean, given that it is under the heading of "territory", the conflict between the market for full price goods sold by retailers and the market for discounted goods such as duty free.
240. I do not regard this phrase as being sufficiently clear to indicate an agreement to exclude direct sales by the supplier. This is especially so when faced with the evidence that Mr Gray says that there was no such agreement and Mr Fadelli does not assert any such agreement until May 2010 after the relationship had broken down. He "invited" Mr Gray to stop internet sales,^[220] he stated that he did not want to close the e-commerce but just to make it a friend of the retailer^[221] and the parties approached the matter on the basis that the problem required a separate agreement. Even when making allowances for the fact that Mr Fadelli was seeking to find a commercial solution to the problem rather than force a dispute, it is surprising, if there had been a clear agreement by the parties that the supplier was not entitled to make any sales in the territory itself, that no mention was made of that between mid 2008 and May 2010 in the many communications on the issue that the parties had together. Although Mr Fadelli was complaining about website sales having a de-motivating effect on the retailers and effecting sales, he did not during this period at any time say that the Defendant was prohibited by the terms of their agreement from making such website sales. It was treated as a problem which had to be dealt with, not one which was already covered by the agreement.
241. Sales of Clive Christian perfume on the internet were unlikely to have been a live issue between the parties in 2003 as the sales were few if any at that time. It was really only from April 2007 that a problem arose. The website had been set up by Mr Clive Christian and was operated by him. It appears that it was regarded by Clive Christian as a marketing tool. I accept Mr Gray's evidence that at no time did he have any intention to exclude Clive Christian's right to sell itself via the web. I also accept his evidence that he did not intend the practice of selling small quantities of perfume from the Home Showrooms in Europe to be prevented. Mr Knox challenges whether Mr Gray communicated anything about the Home Showrooms to Mr Fadelli, but the probability is that he would have done. His evidence made it clear that he is passionate about the Clive Christian brand. Furthermore he is capable of being both voluble and on occasions somewhat emotional as his cross-examination showed. I think it likely that he would have given Mr Fadelli a history of the product and its engagement in Europe which included the Home Showrooms, albeit the quantities of perfume sold there were very small. I make this finding in spite of Mr Knox's points at paragraph 169 of his closing submissions, noting as I do, that Mr Gray did state at paragraphs 127 and 128 of his witness statement that Mr Fadelli did know about the practice of the sale of quantities of perfumes to the Home Showrooms and that Mr Gray was informing him that these Home Showrooms existed in Europe and that small quantities of perfume were sold there. I doubt however that Mr Fadelli's formal agreement for such sale was sought or obtained; the Home Showroom sales were simply part of the information discussed between the parties.
242. Nor am I convinced that Mr Gray qualified the definition of "exclusive" at the 10 June 2003 meeting, or that if he did so, he did so clearly. This is probably an example of Mr Gray's belief that what he must have said, he did say. What I am satisfied about, having heard the evidence, is that Mr Gray did have in mind throughout his discussions with Mr Fadelli that it was the distributor's skill in finding retailers and dealing with them which was one of the key advantages of having a distributor, and that when he referred to an "exclusive arrangement for Italy" in his email of 10 June 2003 he was intending to indicate that it was Mr Fadelli's company which was the only person who could sell to retailers.
243. It is therefore my conclusion on the evidence that there was no express term agreed between the parties which was intended to or did prohibit the Defendant from selling direct on the Clive Christian website. I have also concluded that no such term can be implied in the circumstances. Certainly no such term could be implied by reason of business efficacy. Internet sales are, and were in 2003, a substantial and an increasing factor in any sale of goods market. The existence of an exclusive distributorship cannot, without express agreement, be used to exclude the supplier or manufacturer from the benefit of such a potential market and marketing tool. The fact that other suppliers, such as Czech and Speake, Nasomatto, Miller Harris and Six Scents sold direct on the internet when they had "exclusive" distributorship agreements with, for example Intertrade, or were expressly permitted to sell on the web as in the case of Nasomatto, is powerful evidence against the implication of any term prohibiting internet sales. The officious bystander would not consider it reasonable to imply such a term.
244. Furthermore in this case, the contention that the term would not only apply to Italy, but the numerous other European counties, some with Home Showrooms and others where Clive Christian might wish to open an outlet (as it did in Kiev), is unrealistic.
245. In all the circumstances there was no express term, and I do not consider that a term can be implied into this distribution agreement, prohibiting internet sales by the Defendant.

Other contract terms

246. The Defendant relies upon other express or implied terms of the agreement, which it is alleged the Claimant is in breach of. These are said to be relevant by way of background to the repudiation claim only, and do not form part of any monetary claim under the counterclaim.^[222] The Defendant's case upon this is not wholly consistent however as, for example, it is said in relation to the unauthorised amendment of the tag line of Clive Christian that it was conduct which would have entitled the Defendant to terminate the agreement immediately. In his oral closing submissions Mr Brisby submitted that all the breaches, including these other matters, should be considered cumulatively when considering the Claimant's conduct and repudiation. No detailed contractual terms are specified by the Defendant, save to refer to them in the Re Re-Amended Defence and Counterclaim as "basic terms of the agreement".
247. I turn therefore to the contractual basis for these other matters which relate to: unauthorised amendment of the Defendant's tag line, permitting the unauthorised installation of expensive counters, discounting without permission, permitting exclusivity without authority, and failing to disclose conduct towards another store in Cannes, which was likely to be damaging to the reputation of the Defendant's brand.

(i) "The world's most expensive perfume"

248. The fact that the Defendant had carefully chosen its key marketing message, "the World's Most Expensive Perfume" is demonstrated by the fact that they have had this verified by the Guinness World Records.
249. Mr Fadelli was of the view that such a marketing line might work in the United States or Arab countries, but not in Europe where it was not "elegant" to say that it was the most expensive thing in the world.^[223] As a consequence of this view he changed the tag line to "the World's Most Exclusive Perfume" in catalogues for fairs or exhibitions, though not in the official communications from Clive Christian itself. He did this two or three times over the course of six years.^[224] There is no doubt that Mr Fadelli made his views known to Mr Gray and equally clear that Mr Gray did not give him permission to change the tag line on any occasion:

"…I told Celso repeatedly that the world's most expensive perfume is a driver for business and it must not be changed."^[225]

250. In so far as Mr Fadelli says that Mr Gray was not only aware of what he was doing but impliedly assented to it I reject that evidence. I am satisfied he knew perfectly well that Mr Gray did not on any occasion authorise the change.
251. A particular occasion when this occurred was for the perfume fair, Esxence 2010. No authority was given for this change.
252. As Mr Knox points out in his submissions this does not form part of the Claimant's original case, nor was it pleaded as a breach of contract as such. The Defendant relied upon it as background conduct likely to destroy the good relations between the parties, whether it damaged the brand image or not, and "demonstrates why the Claimant was manifestly unfitted to continue to act as the Defendant's distributor." The conduct would have been sufficient to entitle the Defendant to terminate the agreement immediately Mr Brisby submits.^[226]
253. In paragraph 118 of his closing submissions Mr Brisby lists the amendment of the marketing message as one of the examples of a breach of express or implied term of the Agreement. There was no express term to this effect agreed in June to September 2003 by Mr Gray and Mr Fadelli, though it would in my judgment be an implied term in a distribution contract that the distributor should not change the product logo or marketing message without the consent of the manufacturer. It is to be noted that in the First Draft Agreement it was expressly provided that the distributor "will not distribute, sell, promote or offer for sale or otherwise deal in the Products under any name or style other than the (Defendant's) Marks." ^[227]

(ii) Counters

254. The installation of counters was not in the contemplation of the parties at the time of the 2003 Agreement as the first counter was not installed until late 2006 at the Delfi store in Berlin. The installation of counters was an important sales initiative suggested by the Claimant. The counters or corners as they are sometimes referred to, provided a dedicated display section in a store, designed to emphasise the luxury and appeal of the Clive Christian perfume. Ms Ferraretto suggested that a counter or corner was not necessarily dedicated to Clive Christian but may include the perfume of other clients as well.^[228]
255. The counters were, at the outset, successful. In general they were paid for by the Defendant but on occasions the cost was shared and in the case of the store in Nicosia, Cyprus, paid for by the retailer. The approval of the Defendant for the installation for any particular counter, as well as to its design, was regularly sought by the Claimant.^[229] Certainly after April 2009 it was agreed between the parties that approval was required before counters could be installed. Ms Olrog required a detailed stock and sales plan for the counters proposed, full store details and quarterly reports on sell-in stock.^[230]
256. In both 2007 and 2008 the Claimant had agreed that where there were doubts regarding the potential and the turnover they would wait to see sales performance. Because counters were successful it was agreed that as many corners as possible would be opened, at Clive Christian's cost, on condition that the selected sales points were of high level.^[231]
257. There was therefore an express agreement between the parties from April 2009 onwards that counters had to have the approval of the Defendant before they could be installed; that the budget for future investment into counters depended on detailed stock and sales plans for the counter proposed, together with full store details including location, sales history, contract details, and quarterly reports on sell-in stock.^[232]

(iii) Cannes – Taizo

258. This allegation is that the Claimant damaged the Defendant's brand by its conduct in relation to Taizo Parfumerie, one of the Defendant's retailers in Cannes. One of the companies in the Intertrade Group "HI France" opened a store in Cannes called Venulys and was supplying Clive Christian perfumes to that store in competition with Taizo. The Claimant refused to supply Taizo's orders for Clive Christian perfume and Taizo successfully sued the Claimant's French associate, the court finding that the defence had been conducted in bad faith.^[233]
259. Although under the heading of breach of express or implied terms of the agreement in the Defendant's submissions this is another example of background conduct by the Claimant which the Defendant submits should be taken into account by the court when assessing the issue of repudiation. No specific implied term is asserted in relation to the damaging of the Defendant's brand though I note that in the First Draft Agreement there is an express obligation upon the Claimant to do generally all things necessary to further and preserve the goodwill and reputation of the Defendant.^[234]
260. Mr Knox submits that there is nothing in this point other than, at most, a complaint that the Claimant did not send a copy of Taizo's complaint to the French Court direct to the Defendant. I shall deal with the relevance of the Claimant's conduct later in this judgment.

(iv) Unauthorised promise of exclusivity/Kiev

261. The Defendant contends that the Claimant promised exclusivity in respect of all Clive Christian products to a retailer in a shopping mall in Kiev, Ukraine without the Defendant's prior approval. The exclusivity was granted over all products including furniture, which meant that the Home Showroom run by Clive Christian could not open another store in the same mall where exclusivity had been granted.
262. The Claimant contends that retailers had to be given exclusivity and that the problem arose because Clive Christian did not inform Intertrade it was proposing to set up a furniture store in the same mall.
263. The Defendant alleges that the conduct was unauthorised and demonstrative of the insensitivity of the Claimant to the brand. No express or implied term is asserted. I note that in cross-examination Mr Gray said that he had been too informal with the way he had allowed Intertrade to increase its territory and the way the agreement happened in Kiev was "probably confusing at best".^[235]

(v) Discounting

264. The Claimant offered substantial discounts on the SRP of the perfumes to retailers in the Ukraine, Romania, Poland and Bulgaria. This, the Defendant contends reduced the size of the turnover against which Marketing Spend should have been calculated, damaged the brand image of the perfume, and made it more difficult for the Defendant to re-enter the market itself for direct sales at the correct price in the future.
265. The Claimant acted in breach of the agreed coefficient, the Defendant contends, and was not entitled to do this even if, as it contends, transportation costs were high and penal import duties existed.
266. A direct breach of the express term of the contract related to the coefficient of 4 is therefore alleged in respect of this complaint.

Breach of the Distribution Agreement

(1) Marketing Spend

267. I have found that there was no express term that there was a minimum of 10% marketing spend PA, but that there was an implied term that the Claimant would spend a reasonable amount of its margin on marketing spend each year, and that a reasonable amount was of the order of 10%.
268. There was no challenge by the Defendant of the Claimant's marketing spend until 2008. From 2003 – 2007 inclusive Mr Gray discussed the Claimant's marketing spend with Mr Fadelli and on the basis of what he heard and saw made no complaint that insufficient was being spent.
269. Mr Gray did however become concerned in 2008 at the high level of costs the Claimant was asking the Defendant to pay for counters. When the parties agreed that a minimum marketing spend of 10% should be in place for 2009 it would appear that this was looking ahead to the future because of the exchange rate, as Mr Knox submits, and also, looking back to 2008. This can been seen from Mr Gray's email of 27 May 2009^[236] where he asked the Claimant for a schedule of the currency gain in 2008 "so that we can examine the 2008 "hangover" of marketing spend."
270. Mr Gray was not given any details of the Claimant's marketing spend of 2008 but did not pursue the "hangover" of marketing spend in 2008 after he had received the Claimant's schedule of exchange rates for the year 2008. The fact that Mr Gray considered that there remained an underspend in 2008 is however clear from subsequent correspondence. For example on 30 July 2009 he put forward figures on the basis of which he said he would "be prepared to mitigate 2008 spend against that year…"^[237]. When discussions between the parties had failed to resolve all the issues between them Mr Gray stated on 1 June 2010 that he calculated that the Claimant had not accounted for about €83,500 for the marketing budget of 2008.
271. As to 2009 after being pursued for the details of its marketing spend as agreed at 10% minimum, the Claimant provided figures for January – September 2009 and promised the balance later. Those were never provided and the Defendant did not remind the Claimant of its agreement to provide them.
272. Once there is either an express term requiring a minimum of 10% marketing spend, as in 2009, or an implied term as to marketing spend of a reasonable amount, of the order of 10%, there is in my judgment a duty upon the distributor to provide proper details of the actual expenditure on marketing so that the supplier can be satisfied that the appropriate amount has been spent. No details were provided of the 2008 marketing spend even though expenditure in that year was being challenged and full details of the year 2009 were not provided. Even though in the latter case it was only the last three months that were missing the duty to provide the full years figures remained. The same applies to the year 2010, where, as I have indicated earlier in this judgment, the implied term was applicable as no express term had been agreed for that year, even though the full year had not been completed.
273. No details of marketing spend in 2008, 2009 (save for the brief schedule of the first nine months) or 2010 were provided at the time. Since the commencement of this litigation a schedule of marketing spend from the outset of the agreement in 2003 to its end in 2010 has been provided, together with supporting documentation. The first tranche of documents was disclosed after an application for specific disclosure in July 2011. A second application for specific disclosure had to be made because the first documents were insufficient to enable it to be known precisely what expenditure had occurred on the Clive Christian perfumes. The second affidavit was also incomplete^[238]. At trial Ms Ferraretto revealed that the Claimant also kept internal records which had been used to produce the relevant document, but neither this process nor any such further documents had been disclosed. The court therefore made a further order as a result of which yet further documents were disclosed. Obtaining relevant documents from the Claimant therefore proved to be a lengthy and difficult task. The failure to disclose properly and earlier was very unsatisfactory.
274. The material which was disclosed is, Mr Brisby submits, insufficient. He gives five examples, two relating to 2009 and three relating to 2008.^[239] The first relates to the cost of counters in 2009 where it appears that the whole of a counter at Galleries Lafayette was attributed to the Defendant when the cost should have been apportioned between the Defendant and other brands apparently displayed on the counter. The Claimant's solicitors have said in their letter of 12 July 2012 that the whole of the sum of €18,455 was correctly attributed to Clive Christian as the sum was spent in order to rebuild Clive Christian counter only. This explanation was not dealt with in evidence, nor does it deal with the apportionment issue. The second example is of a case where the whole of an event in Milan in 2008 was charged for when only a proportion of the €13,908 could be attributed to the Defendant. The third in 2008 where it is alleged that €4,995 was overcharged. The fourth in 2008 where €10,800 was spent on gifts to journalists (excluding a payment for which a credit note was issued). The fifth is where in 2009 it is alleged that €4,802 was claimed whereas only €3,210 maximum could have been claimed.
275. Since the conclusion of the evidence the Claimants solicitors have put forward certain figures and explanations but these were not dealt with by the witnesses nor gone through with the court, nor did they form the subject of argument. There is, in my judgment, no proper evidential basis for any conclusion to be reached on the level of marketing spend by the Claimant in 2008 and 2009, but what the court is able to conclude is that at the end of each of those respective years the Claimant should have provided the Defendant with proper details of its marketing spend. This it failed to do and was accordingly in breach of the implied term set out above. The duty was not merely to make the expenditure but provide relevant information to the Defendant showing what that expenditure was. The Defendant was clearly seeking details of 2008, when asking for the "hangover" of the expenditure for that year and still complaining in 2010 that the expenditure had not been made.^[240] As to 2009 the Claimant had expressly agreed to provide the figures but only provided them for the first nine months having promised them for the whole year. The Defendant's doubts as to the levels of marketing expenditure by the Claimant were not therefore allayed, and the failure to provide details of marketing spend remained a serious breach.

(2) Currency Gain/Exchange Rate Fluctuations

276. There was no express agreement in 2003 that the beneficiary of any currency gain should compensate the loser for that loss. Nor was there any implied term arising out of the coefficient or otherwise. There were, as I have found earlier in this judgment, specific agreements relating to orders placed in 2006, 2007/8 and 2009 arising out of exchange rate fluctuations and the effect that these might have upon the margin. These agreements were however all satisfied and there was no breach.

(3) The Provision of Stock and Sales Information

277. Whilst there was no express obligation upon the Claimant to provide "sell through" figures or stock levels, there was an implied obligation upon them to provide reasonable information relevant for the running of the Clive Christian brand. This is not only implicitly accepted by Mr Fadelli^[241] but necessary for a viable relationship between distributor and supplier. There has to be the free exchange of information reasonably required for the giving, accepting and satisfying of orders. Without such information both the trust and confidence in the relationship and, its efficiency are threatened. The question arises as to what information it is reasonable to provide, and what information it is reasonable to withhold. Mr Knox QC submits that neither sell through figures not stock levels were sought until 2010 and that there was no need for such information as Mr Gray trusted Mr Fadelli to run the distributorship properly.^[242] In the absence of requests for information about sell through figures or stock levels prior to 2010, the inference, Mr Knox submitted, to be drawn was that it was neither important nor necessary. This, he submitted, is borne out by the fact that there was no distribution agreement which made the obligation to supply conditional upon the provision of stock levels. Nor, Mr Knox submitted, did the draft distribution agreement, either amended by Mr Gray for Paris or otherwise contain any of these preconditions. The fact that a term was not needed is re-enforced, Mr Knox submitted, by the fact that Mr Fadelli had never been asked for his stock levels in 23 years of business and there was no provision, save in one, under any of the distribution agreements with Intertrade for it to provide information of stock levels; such information might be needed to prevent a "grey market" arising because of over stocking, but that was not a concern of Clive Christian's at the time.^[243] Furthermore, Clive Christian wanted to get away from the need to manage stock, Mr Knox submitted, as monthly stock control hadn't been working for them with Finmark.^[244]
278. Mr Brisby QC for the defendant however submits that three pieces of information were required, namely a sales forecast, existing stock levels and an estimate of what the distributor needed for going forward.^[245] In April 2010 Ms Olrog said that they wished to know the Claimant's stock holding because there was concern that they may be stock piling.^[246]
279. Mr Fadelli regarded the request for information of stock levels as an indication that he was not managing his stock in a proper way. It was not a "polite request"^[247] Ms Ferraretto said that the information was confidential because Intertrade was a distributor and as such was able to manage its stock.^[248]
280. When giving evidence Mr Fadelli could not put forward any persuasive reason for declining to give stock levels. There is no basis for such information being confidential as the fact that two of the distribution agreements, Andrea Maack and Iredale, require the distributor to provide stock level information to the supplier confirm. Furthermore, on 15 September 2003 it was the Claimant who suggested the possibility of working on the basis of monthly stock reports with the Defendant. That would have involved them keeping in the warehouse a stock of products of the Clive Christian brand which would be insured, sold and invoiced at the end of each month according to the Claimant's sales and stock report. "Of course you would be free to check out stock personally any time you want."^[249] This was not the agreement which the Defendant wished, as it had had trouble with Finmark and stock control; nevertheless it demonstrates that the Claimant was perfectly prepared to give information as to stock levels, including allowing personal checks by the Defendant. This is, in my judgment, wholly inconsistent with stock levels being confidential.
281. Sell through figures were not always easy for the Claimant to provide because many of the retailers were small outlets which did not run computerised accounts. When the Claimant did provide more detailed 'sell in' information on 27 November 2009^[250] it did not identify the retailers or where they were located. This would have enabled the Defendant to have had a better understanding of sales by region but Mr Fadelli refused to provide information as to the identity of these retailers.^[251]
282. By April 2010 when the request for stock levels was made, the Claimant had shown a general reluctance to provide information. The identity of retailers, which would have assisted on the sell through figures where those were difficult to obtain were refused; no figures for marketing expenditure for 2008 were provided in spite of the fact that this was an issue between the parties; and stock levels were refused. Trust and confidence by that time had substantially broken down, although attempts to retrieve the situation were still being made. Mr Fadelli's attitude was that he ran the distributorship and he was entitled to do so in the way that he wished as, having purchased the goods from Clive Christian, he was the one at risk. This attitude did not take account of the role of the creator of the brand and its need and desire to develop sustainable sales.
283. When asked to provide stock levels in April 2010 Mr Fadelli replied that the Claimant only held around €30,000 worth of stock.^[252] On 2 May 2010 whilst complaining that holding up the stock order was not the way to get information Mr Fadelli said that the Claimant normally kept a 3 month stock level, which meant a stock of around €100,000. The Claimant refused to give further information.
284. I am satisfied that, given the lack of trust and confidence that had developed at this time, and the ongoing disputes between the parties that the Defendant reasonably required information from the Claimant as to stock levels so as to be able to satisfy itself that it was properly obliged to supply the order. In fact the Defendant did supply the order even though detailed stock levels were refused, and did not therefore treat this breach as repudiatory.
285. I deal later in this judgment with the issue as to whether the Defendant was entitled to require detailed stock levels from the Claimant before accepting the last four orders placed in July and August 2010.

(4) Late Payment

286. The Claimant paid the invoices of 25 May 2010 for £47,490, 24 June 2010 for £25,800, and 15 July 2010 for £20,605. Each payment was several days after the end of the month by which it should have been paid. Some of the payments were by tranches rather than by one single payment.
287. These late payments were in breach of the payment terms under the contract, whether on the Claimant's or Defendant's view of the payment provisions. The Claimant contends that these provisions were waived by the Defendant's conduct in accepting late payments over the duration of the agreement. In particular they rely upon the email of Ms Bertaglia^[253] stating that as long as payment was received by the fifth working day of the relevant month Clive Christian would not take any issue with Intertrade.
288. Whilst Mr Gray said that Ms Bertaglia did not have authority to waive contractual provisions I am satisfied that the Defendant held her out as a person who had authority to make such statements in correspondence. I am not however satisfied that the contents of her letter or the conduct of the Defendant amounted to a waiver of the payment provisions. The acceptance of late payments up to the fifth working day of the relevant month which Ms Bertaglia states in her letter of 21 April 2010, is accompanied by confirmation of the agreed terms under the contract. The letter in effect reserves the right to abide by the strict terms of the contract which are reaffirmed and does not constitute a formal waiver.
289. Nevertheless I accept Mr Knox's submissions that the breach of contract by virtue of these late payments does not amount to a repudiatory breach. The time of these payments was not of the essence of the contract in a long term distributorship agreement such as this. Decro-Wall International SA v Practitioners In Marketing Ltd [1971]1WLR 361 at 365 E-F. Nor did the practical consequences of the failure to pay on time go to the root of the contract. No loss was sustained and for many years Intertrade had been regular payers, with payment often accepted a few days late as Ms Bertaglia's email confirms.
290. Whilst these breaches do not go to the root of the contract for these reasons, I do not however accept that the Defendant was in April 2010, as opposed to in earlier years, unconcerned about late payments. An explanation was sought for late payment in the email of 6 July 2010^[254] and Mr Gray said in evidence that he did become concerned at that time about the Claimant's financial position. Whilst the Claimant's financial position in fact gave no cause for concern I accept Mr Gray's evidence that at that time, when the relationship between the parties had substantially broken down, late payment and payment by tranche or instalment troubled him.
291. It remains the case however that these breaches, set against the history of, on occasions, the acceptance of somewhat late payment, do not amount to repudiatory breaches in the circumstances, even though they raised a question mark in Mr Gray's mind as to why the Claimant had begun to pay in instalments or tranches rather than by a single payment. The explanation that the payment would be made out of the English bank account and payments received sooner given by Ms Ferraretto does not appear to be fully borne out by the facts. For example one payment in respect of an invoice was made by one payment up to the £10,000 limit of the English bank but also made by a payment of some £15,000 from an Italian bank. Furthermore, the payments were still received late.

(5) The Tag Line "Most Expensive"

292. I have no doubt that Mr Fadelli used the description "most exclusive" rather than Clive Christian's own marketing message of "most expensive" without Mr Gray's agreement passive or active. Indeed Mr Gray made it clear that this was not permitted but Mr Fadelli went his own way. The fact that he may have been right in his analysis of what would be more attractive to the European market is nothing to the point as Mr Brisby submits. He could not and should not have altered the Defendant's carefully chosen central message without authority.
293. This is not pleaded as a breach of contract as such, though the distribution agreement would in my view have had an implied term that the distributor should observe the supplier's Marks.
294. Whilst it is not however formally alleged that this amounts to a breach of contract, it is alleged to be an important part of the background of the case and demonstrates, Mr Brisby submits, Mr Fadelli's arrogant attitude, and his belief that he was entitled to operate the distributorship without regard to the Defendant's views. It shows, he submits, why Mr Fadelli was manifestly unfitted to continue to act as the Defendant's distributor, and amounted to conduct which would have entitled the Defendant to terminate the agreement immediately.^[255]
295. Mr Gray made it clear to Mr Fadelli that "the world's most expensive perfume is a driver for the business and must not be changed".^[256] Mr Fadelli stated that he was told not to change the official communication but took the view that he'd only done that two or three times in six years and Mr Gray had never complained of it. I do not accept that evidence. As I have stated earlier I am satisfied that Mr Fadelli knew perfectly well that he should not change it but took the decision to do so because as he said in evidence he felt that he was free to be able to communicate the brand in the way that he wished.^[257] This was high handed conduct as he knowingly changed the brand's main marketing message without permission but it was not in my judgment conduct, which if it had been a breach of contract, would have been repudiatory set against the background of the long standing business relationship between the parties. It was however conduct which was calculated to concern Mr Gray about the way the distributorship was run.

(6) Counters

296. When the policy of installing counters was introduced it was anticipated that the Defendant would either pay for them, or pay a substantial part of their costs. As I have held earlier in this judgment I am satisfied that the approval of the Defendant for the installation and principle of a counter as well as its design had to be obtained by the Claimant from the Defendant pursuant to the agreement they reached on the issue of counters. There is no dispute between the parties that after April 2009 such approval had to be sought.
297. When Ms Ferraretto asked for approval for the first time in respect of the installation of a counter at Ludwig Beck in Munich, she sought approval by the end of the day since they had to give an answer urgently. The Claimant was already committed to a cost of about €8,000. The cost had therefore already been occurred before approval was sought. This was in breach of the express agreement in relation to counters. The Claimant insisted on approval without a stock and sales plan for the store being provided and even though the figure was above the remainder of the Defendant's marketing budget for 2009.
298. In June 2010 it transpired that the Claimant had promised a counter to a retailer in Nicosia, Cyprus without seeking the approval of the Defendant.^[258] The Defendant's requirement that the counter was not to be installed until the store had proved that it was suitable over a six month period had to be overridden and the Defendant was forced to concede approval. The store was not however able to sell all perfumes that it had ordered.^[259]
299. The fact that the Nicosia counter would be no cost to Clive Christian as the retailer was paying for it itself, does not alter the fact that approval was not sought when it should have been.
300. In October 2009 Ms Olrog was informed that two counters were scheduled for fitting before the end of the year. These are further examples of commitments being made before approval had been obtained. Mr Gray became suspicious that counters were used as inducements by the Claimant to open new points of sale without proper regard to the extent to which the retailers would be able to sell the products.^[260] This could lead to the reputation of the brand being diminished. The granting of permission for the installation of counters without authority was a serious breach of contract.

(7) Taizo/Cannes

301. Whether or not the conduct of the Claimant was in bad faith in relation to the manner in which it treated Taizo is not an issue before this court as a very late amendment alleging dishonesty by the Claimant in the French proceedings, was not permitted, though the extent to which the Claimant informed the Defendant of the nature and progression of this dispute and in particular the fact that proceedings had been issued in the French court is an issue.
302. The evidence suggests that Mr Fadelli declined to acknowledge that such a dispute leading to court proceedings could be damaging to the Defendant's brand, though it had that potential, and demonstrates Mr Fadelli's view that he could deal with such issues as if they did not involve Clive Christian.^[261]

(8) The Granting of Exclusivity in Kiev

303. I do not find that there has been any breach of contract here. Mr Gray conceded in cross examination that he had been too informal with the way he allowed Intertrade to increase its territory and the agreement that was in Kiev was … "confusing at best."^[262]
304. Confusion rather than breach is as likely a cause of the lack of communication between the parties on this issue.

(9) Discounting

305. The Defendant was not aware that the Claimant had been discounting until after the agreement had been terminated in respect of one small instance in Germany. No authorisation had been granted to the Claimant for discounting in Eastern Europe. It was a breach of the costs structure of the sales as set out in the coefficient of 4. The contract required sale at 50% of the SRP and permission should have been sought to vary it. Discounting could give rise to the development of a grey market, ultimately having the potential to damage the reputation of the brand. It was a serious breach.

Review of the position at the date of the last 4 orders

306. Sales had been substantially down in the first months of 2009 and in the latter part of that year turnover was some 18% down. This was of concern to both parties both because of the reduction in profit, and particularly as far as the Defendant was concerned, the lack of development of the brand. Sales picked up in 2010 however, and there were substantial increases in June and July as can be seen from the Claimant's tables^[263]. In fact on the basis of these figures there had been the increase in sales in every month in 2010 compared with 2009, save for April. Sales in June 2010 were £108,294.95 compared with £72, 825.10 in June 2009. In July 2010 the trend was substantially higher by the time the last orders were put in, so that when the figures for that month were available they showed £140,026.06.
307. By the time of the last orders there was nevertheless a fundamental tension between the parties as to how the distributorship should be, and was being, operated. The Claimant took the view that it could and should make the sales and purchase decisions and the essential marketing and promotion decisions for the brand, as it took the risk once it had bought the perfumes for resale and expended money on marketing; the Defendant, however, felt that, as the creator of the brand, and the custodian of its future, it could and should be involved in and frequently make those decisions which determined the brand's reputation and its sustainability. From 2003 until 2007, running into 2008, the parties had a very good working relationship, each being confident in the other, and in their discussions, and the decisions made. The tension present in 2009 and 2010 did not yet therefore exist; both parties were perceived to be working in the interests of the brand as both had a vested interest in its reputation as this was an important factor in sustained profitability.
308. The tensions which arose from 2008, but mainly in 2009 and 2010, were concerned with the Claimant's margin, marketing spend, currency gain, the website, and the Claimant's conduct of the distributorship. The issues of margin, marketing spend and currency gain were all interrelated in the sense that marketing spend was affected by Intertrade's margin which was itself affected by currency gain. The interrelationship can be clearly seen from Mr Gray's email of 27 May 2009 in which he requested that Mr Fadelli prepare a schedule of his "currency gain" in 2008 so that "we can examine the 2008 "hangover" of marketing spend".^[264] After the schedule of exchange rates during that year had been sent by Mr Fadelli to Mr Gray^[265]with the request that the discussion about currency gain in 2008 should be closed, the Defendant did not pursue the question of "hangover" on marketing spend in 2008 until 2010.
309. Mr Fadelli made it clear in his email of 30 July 2009^[266] that the usual margin Intertrade sought to work with was 1:5 "to allow us to give the necessary marketing and PR support to the brands we represent". The parties had started off, when the distributorship related only to Italy, with a co-efficient of 1:4, though in September 2007 Clive Christian ensured that Intertrade's margin would not be reduced from 1:4.53 by the provision of FOC goods as Mr Gray acknowledged in his email of 30 July 2009^[267]. There had been no new agreement as to margin when the additional European countries became part of the distributorship, and promotional and marketing expenses increased. Mr Gray would not accept a margin of 1:5 and the parties continued to deal with currency gain on an ad hoc basis; hence between December 2007 and November 2008 FOC goods were provided to protect the Claimant's margin and in 2009 the Claimant had agreed to pay 10% on its invoices because of the extent to which the exchange rate had moved in its favour.
310. No request for an "audit" or an account of the 2008 marketing spend was made by Mr Gray until August 2010, though it is clear from his email of 1 June 2010^[268] that he felt that a substantial sum had not been accounted for by the Claimant. In 2009 marketing spend figures were requested and obtained for that year up to September. No further req uest was made for figures for the balance of the year until in August 2010 Mr Gray said that the figures from 2008 should be audited.
311. At the time of the last four orders there was clearly considerable tension between the parties as to what had been agreed as to margin and currency gain and marketing spend and a strong feeling on Mr Gray's part that the Claimant had taken advantage of currency gains without paying the appropriate marketing spend. Mr Fadelli on the other hand felt that his margin should be 1:5 rather than 1:4.53 and had been complaining that the Website had been affecting sales.
312. Mr Gray and Ms Olrog were also concerned about provision of information by the Claimant as stated earlier in this judgment. The Claimant had difficulties in obtaining "sell-through" figures from many of the smaller retailers characteristic of the Italian businesses selling perfume, though it is true to say that the Claimant was reluctant to give the names of retailers to the Defendant. Whilst Ms Olrog did ask verbally for sell-through figures from retailers from time to time I am satisfied that no request was made by the Defendant for the Claimant's stock levels until 20 April 2010, after trust and confidence had broken down between the parties. I note that in 2003 the Defendant did not wish to deal with the Claimant's stock levels and rejected their suggestion of a system which involved monthly checks of their stock. It is also the case that when Mr Fadelli stated that they normally carried €100,000 of stock at any given time and that that level had now been reduced to €30,000 the order which was being held up in 2010 was allowed through. Nevertheless as the Defendant's concerns about the distributorship and overstocking in particular grew, their requests for information grew, and the Claimant's refusal to provide it fuelled their suspicions.
313. The other source of tension between the parties at the time of the last orders was the Claimant's conduct of the distributorship. I have dealt above with the issues of late payment, failure to seek the Defendant's approval for counters, the unauthorised use of the "tagline", "most exclusive", the failure to inform the Defendant of impending litigation in the Taizo matter, promises of exclusivity in Kiev, and discounting. It was this conduct, when combined with the underspend on marketing, unauthorised currency gain and failure to provide information, that led to Mr Gray to the view, as he stated in evidence, that the Claimant was "a rogue distributor".
314. I turn now to the way in which the Defendant dealt with its perception of the Claimant in 2010. Mr Gray strongly disputes the Claimant's assertion that the Defendant had decided upon a campaign to starve the Claimant of goods and force the end of the distributorship. Mr Gray rejects the Claimant's "conspiracy theory", and states that he and Ms Olrog were doing no more than debating whether to limit the Claimant's distributorship to Italy and eventually deciding in July to serve formal contractual notice of termination upon the Claimant.
315. On 16 March 2010, after the Claimant had put in an order for £25,000 worth of perfume, Ms Olrog sent an email to Mr Gray stating:-

"If we are certain that we will move Celso out of all countries bar Italy this year I can send a holding email… if not I will address their queries"^[269]

Mr Gray replied on the same day suggesting that the order should be processed, explaining that:-

"My logic for continuing to supply is that the volumes are not enormous, and the amount of stock they have is going to disappear in Italy in comparison to the money they owe [cash and marketing] which will become the main and primary focus.

There is no right way here, at the moment unfortunately….but stopping supplier is a major breach of contract [yes we do have an unwritten one]"^[270].

316. Ms Olrog's email suggests that she and Mr Gray had got close to a decision to limit or seek to limit, the Claimant's distributorship to Italy in 2010 but had not yet reached that decision. Ms Olrog said in evidence that they were looking to approach Celso about him taking the distribution for Italy only, or looking at potentially not working with Intertrade at all, but they had not by then engaged in discussions with any distributors or anything of that nature to find a replacement. They were still working with Intertrade and that was the premise upon which they were working.^[271] As part of the enquiries they generally receive Ms Olrog said she had been given the distributor's addresses for Italy and Germany but that had nothing to do with what they were proposing to do with Intertrade.^[272]
317. Mr Gray said that there was no fixed plan in anybody's mind and that the words of his response did not mean, and were not intended to mean that the Defendant was going to starve the Claimant of goods. In fact what they intended to do was to supply the goods in the correct way.^[273]
318. Mr Knox submits that the coincidence between this email and what Mr Gray eventually did on 17 August 2010 by blocking the last orders, showed that it was the execution of a carefully worked out plan, to starve Intertrade of its stock so that Clive Christian could move into its territory and sell at considerably higher prices.
319. The coincidence is such, Mr Knox submits, that the conclusion that there was a decision to starve the Claimant is irresistible. He further submits that the fact that Mr Gray sent a revised Draft Agreement to Mr Fadelli on 11 June 2010 limiting the distributorship to Italy on terms he knew Mr Fadelli would not like, also confirms that the decision had been made, not merely to terminate in accordance with the terms of the contract, but to oust the Claimant.
320. There is a second email relied upon by Mr Knox which he submits further confirms his contention. In this email dated 8 July 2010, when referring to an order for about £52,000 Mr Gray says to Ms Olrog:-

"Celso has now paid, this order is being processed. Let's not disturb this applecart YET. Long email [response to mine] from Celso, to which I am preparing a reply and we'll discuss next week."^[274]

321. Ms Olrog said, that the emails referred to "perhaps not working with Intertrade." Clive Christian respected what Intertrade had done, but, Ms Olrog said they were not the right partner for them. They were looking at other options but still working with Intertrade. There was no indication at all that they would just refuse to supply. "Absolutely not."^[275]
322. Mr Gray said in evidence that they had difficulties with a distributor who was not behaving correctly in all markets, that something was going to explode but he was not going to let it do so yet. "Let's not disturb this applecart yet" is a whole culmination of the emotions and feeling he was experiencing about Intertrade and its behaviour.^[276] Mr Gray denied that upsetting the applecart meant not honouring the order. Mr Knox however submitted that the phrase must inevitably relate to the processing of orders from the wording of the email.
323. Mr Brisby submitted that there was no nefarious plan to oust the Claimant as distributor altogether. The Defendant did not wish to work with the Claimant any more and that is why it served notice of termination, but it did not plan to stop the supply of goods but control the supply as Mr Gray said in evidence.^[277]
324. As Ms Olrog confirmed, Mr Brisby submitted, there was no intention to starve Intertrade of stock and it should be noted that the Defendant supplied the Claimant with an order of £47,490 worth of perfume a month later in April. The Defendant had to work with the Claimant for the remainder of the notice period and that included the launch of C. If an agreement was not reached to limit the distributorship then notice would be served Ms Olrog said.^[278] Mr Brisby submitted that the "upset the applecart" email merely indicated that the Defendant did not want to work with the Claimant any more and that at some stage something would have to be done to address the concerns he had.^[279]
325. The first occasion on which stock levels were expressly sought from the Claimant in writing was by email of 20 April 2010. That request was, Ms Olrog said, nothing to do with taking business away from Intertrade but the seeking of information to see if the order placed was warranted.^[280]
326. It is clear that at the time of his email of 16 March 2010 Mr Gray did not intend to stop supplying the Claimant, except insofar as the volumes requested were "enormous", as he had formed the view that at that time stopping supplies would be a major breach of contract. He did not consider, on the basis of this document, that the Claimant's conduct had, up to that date, repudiated the contract, and would therefore justify stopping supplies.
327. The email of 8 July 2010 on its face refers to the processing of orders. Disturbing the "apple cart" is, on its ordinary meaning, refusing to process orders. Again however it is not "yet" that the Defendant intends to do that. Both emails indicate, in my judgment, an intention not to process 'enormous' orders if made, and that if the way ahead was not agreed then a route to recouping their losses would have to be found. It is only after the four last orders had been placed that Clive Christian blocked all orders, imposed different payment terms and demanded €272,000 said to be owed by the Claimant to the Defendant for marketing. The two smaller orders were not substantial in themselves, but when all four orders are considered the total amount was very substantial, and as the Defendant's response showed, were thought by Mr Gray to be considerably in excess of the Claimant's needs.
328. It is also necessary to look at the postponement and cancellation of the country manager's meeting to understand the situation more fully. On 19 July 2010, the same day as the provisional notice of termination was sent, Ms Olrog sent her email to Laura Ferraretto advising that the country manager's meeting scheduled for 26 and 27 July "must be postponed, due to present contractual and co-operation issues."^[281]
329. The recent history had indicated the difficulty of there being any resolution of the various issues between the parties, and the revised draft agreement sent on 11 June 2010 by Mr Gray to Mr Fadelli limiting the distributorship to Italy, and thereby removing a very substantial part of the Claimant's distributorship, made it unlikely that a new distributorship agreement would be forthcoming. Ms Ferraretto expressed her disappointment at the postponement of the meeting, in view of the fact that the area managers had already booked their flights which were non-refundable."^[282]
330. When Mr Gray said that "it makes sense to use the meeting scheduled for 31 August to formulate a plan for the smooth cessation of your distributorship". He specified only that purpose for the meeting. Mr Knox submitted that the Claimant interpreted this email as meaning that the only issue to be dealt with at the 31 August meeting was the proposed termination arrangement, and not the C-launch but I see no reason why the launch of C should not have been part of the discussions of the "smooth cessation" of the distributorship. Ms Olrog did not, however, send the promised agenda for the meeting when it was still being suggested that the country managers might still be attending.
331. On 14 August Mr Fadelli replied to Mr Gray's email stating "about the expected meeting for 31August not confirmed by Alex as promised, I believe doesn't make any sense at this stage work out on the agenda."^[283] He considered, as did Mr Gray, that he was cancelling the meeting by so replying, though he does not expressly say this in his email. On 18 August 2010, in response to Ms Ferraretto's request for samples of C, Ms Olrog said that they would be available at the meeting to present the collection.^[284] Ms Ferreretto replied that that meeting had been cancelled as per the previous exchange between Mr Fadelli and Mr Gray. Ms Olrog then replied that Mr Gray was not aware that the country manager's meeting had been cancelled and stated "if you wish to cancel the meeting there will not be sufficient time to plan appropriate C-launches by region, therefore C will not be available in mainland Europe this year."^[285]
332. Mr Gray however said in evidence that he thought that the meeting had been cancelled, albeit by Mr Fadelli's email of 14 August, and that the whole situation with Intertrade was then on hold.^[286]
333. There was no satisfactory explanation of Ms Olrog's failure to send an agenda or confirm the meeting date as she had promised. Mr Gray clearly believed that the meeting at least to discuss the smooth cessation of the distributorship had been cancelled, though it appears that Ms Olrog thought that he considered that the country manager's meeting might still go ahead. After careful reflection, I do accept Ms Olrog's evidence that she believed it was the Defendant's intention to work with Intertrade until the expiry of the notice in July 2011 if no agreement for an earlier cessation of its distributorship could be reached, and that hence, it was still intended that Intertrade would be involved in the launch of C. The Defendant wanted the distributorship to end, but considered that it could not, prior to the end of the notice period, save by agreement. I also accept Mr Gray's evidence that his intention was not to starve the Claimant of supplies, but to continue to supply it, unless excessive orders were placed, or a further breach of contract occurred.
334. This has not been an easy matter to resolve, but having heard Ms Olrog and Mr Gray I have accepted their evidence upon this issue.

The Last Four Orders – Repudiation and Reasonableness

335. These orders^[287] total £220,395. The first order was for £28,422.50 placed on 26 July 2010, the second, an order for C with an unspecified price but agreed between the parties at £97,500 placed on 27 July 2010, the third for £23,342.50 placed on 5 August 2010 and the last for £71,130 placed on 9 August 2010. The orders were therefore placed with a period of 14 days, the first two in the last week of July and the second two at the end of the first week and the beginning of the second week of August.
336. The largest single order for a month prior to this was £48,902.50. The largest total for the months of July and August was £81,221.25, in 2008.^[288]
337. The number of items ordered in respect of the orders other than C was consistent with the forecasts provided by the Claimant on 26 October 2009^[289] revised on 23 July 2010^[290] and further revised on 17 September 2010^[291]. The Defendant contended however that the Claimant's forecasts were not reliable as could be seen from that for 2009 which Ms Olrog calculated was 40% higher than the actual sales figure in 2009.^[292]
338. One of the items concerned the new 30ml sprays for men and women. When the revised forecast on 23 July 2010 was sent the Claimant had 494 items left of the 960 which it had had in stock on 30 June 2010. Unsold stock was not taken into account in the revised forecasts, though, Mr Brisby submits, it was relevant. Mr Knox points out that at the end of July 2010 Intertrade had only 263 pieces of the 30ml left out of the 960 ordered only a month earlier. By the end of the year its entire balance ran out apart from a very small number returned. Therefore he submits there was nothing unreasonable in the further orders of the 30ml. The proof of the pudding, Mr Knox submits, that the orders other than C were reasonably required, is demonstrated by the fact that Intertrade's sales plummeted in October 2010 to December 2010. This showed that it was desperately short of stock as a result of the failure to deliver the order. Mr Brisby submits that if there really had been a need for the items ordered one would have expected the stock to have been depleted much earlier than it was, given none of the last orders were in fact processed.
339. The stock which Intertrade held at the end of July 2010 was agreed on the evidence to be a figure between €109,931.95 and €117,204.68. Ms Ferraretto had produced figures only up to March 2010, which was not helpful, but after cross examination by Mr Brisby, and having made her own calculations on the figures he put forward, she agreed that the stock held at the end of July 2010 was either €109,931.95 as she had calculated, or €117,204.68 as Mr Brisby had calculated. Mr Fadelli had told Mr Gray on 2 May 2010 that Intertrade normally kept a three month stock level to ensure timely deliveries to the customers, which, considering the turnover objectives agreed with him, meant keeping a stock of around €100,000. He said that he had checked the stock levels and found them to have a stock of about €30,000, necessitating an order.^[293] Mr Gray accepted in cross examination that a stock level of between 2-3 months was about right.^[294]
340. The stock level at 27 July 2010 was therefore in excess of the stock reserve which Mr Fadelli said the Claimant sought to keep in May 2010. The orders for perfumes other than C totalled £122,895 which at 1 August 2010 was the equivalent of €147,474. When added to the stock level which the Claimant already had a total of €264,678 is reached, producing a sum of €164,678 above the preferred rolling stock level.
341. In her witness statement Ms Ferraretto, when dealing with the orders made in July and August 2010, and in refuting the allegation made against Intertrade that it was not being truthful when saying that the stock was running extremely low, relied upon the amount of stock left in March 2010 of €22,400.^[295] She accepted in cross examination that she was saying that there was nothing extraordinary about the orders made in July and August and was making the point, by reference to the time the orders were placed, that the stock was dangerously low. When asked why, in that case, she relied on a stock figure at March rather than the stock figure of July and August she said that she was referring to a conversation between Mr Fadelli and Mr Gray but did not identify this. She later said in evidence that the reason she used the March figure was that she didn't have a print out for July. As Mr Brisby points out however she had been asked by Ms Olrog on 23 July 2010 to enter the then stock level figures in a column on Intertrade's forecasts. She did not do so, yet must have known what the stock levels were at that time.^[296]
342. Ms Ferraretto's use of the March 2010 figures instead of the July 2010 figures in apparent support of the assertion that Intertrade's stock was "running extremely low" in July and August 2010 was unsatisfactory and her explanation for doing so unconvincing. I found that a dent was left in her credibility by this part of her evidence. It should be noted that the stock level in March 2010 appears to demonstrate that Intertrade did not always succeed in keeping a rolling stock figure of about €100,000. Conversely it might also be thought that the use of the March 2010 figure to illustrate the stock was running extremely low indicated a recognition that a stock level of €100,000 could not be thought to be low. The stock level figures for the end of July must have been available to Ms Ferraretto at the time that she signed her first witness statement on 5 April 2012.
343. The sales figures in 2010 were higher than they had been in 2009^[297] and the months of June and July were very substantially higher. The Claimant described the increase as between 30% and 46% though there was no agreed figure. Some months are below 30% and some above 46%. The higher figures in June and July meant, Mr Knox submitted, that the projections in August 2010 would have been higher than in April 2010 which Mr Fadelli would have been referring to in his email of 2 May 2010. Thus, Mr Knox submitted, three months stock would have been a higher figure in August than it was in May. Mr Brisby submits there was no reference to up rating the €100,000 three months stock level in the Claimant's witness statements when it undoubtedly would have been had turnover been increasing at a substantial level, and it was in any event unlikely that turnover would have changed substantially in the three months between Mr Fadelli's email of May 2010 and the time when the other orders were first placed.
344. On the basis of the revised order of 23 July 2010 the orders other than C would, Mr Knox submits, have provided Intertrade with only ? of its requirements under that revised forecast by mid September. Further orders amounting to some £154,860.77 would still be needed for the balance of the year and would have to have been ordered in September and October to ensure that the last of the items ready for Christmas were available for sale. It was necessary, Mr Knox submitted, for the order for £71,130 to be placed on 9 August 2010 in addition to the two smaller other orders, because at time of the year it could take up to five weeks for an order to be processed and delivered to Intertrade.
345. The first revised forecast was provided on 23 July 2010 three days before the first of the orders, other than C, and the second on 17 September 2010 after the orders had been refused. Mr Brisby submits that the forecasts cannot be relied upon as being accurate any more than those in 2009, even allowing for the fact that Christmas was the busiest time of the year. The pattern of orders from the Claimants in the past, he submits, had mostly been on a monthly basis and none had been the size of these orders. The only year approaching a total of £122,895 (the 'other orders') over the months of July and August, as here, was in 2008 when a total of £81,221.25 was ordered in those two months. Furthermore Mr Brisby submits, such substantial orders as those placed in July and August 2010 were not needed so early for the Christmas period, as delivery for that had to be in October or the latest November and goods ordered in July and August would be available long before that time. Although some orders could take longer to deliver in a busier period the norm was about 15 days. Even allowing for a Christmas period surge and the energy provided by a new product, orders of that size were simply not necessary.
346. Mr Brisby submitted that the Defendant's response to these very substantial orders in the context of serious disputes between the parties and the loss of trust and confidence on both sides was entirely understandable and appropriate. Had the Defendant known that the stock levels held by the Claimant were of the order of €109,000 - €117,000 they would have been even more certain in their knowledge that the orders were unnecessary and should be rejected. The fact that the Claimant was not prepared to give stock levels at the time was suspicious and now the true figures are known it is not surprising that they were not revealed, Mr Brisby submits.
347. As to C, this new perfume had been a phenomenal success in the UK where it had been launched on 19 July 2010. The launch for Europe had not then been planned however, and although the price in Pounds Sterling in the UK was known, and hence the price at which the Claimant would buy, no Euro price had yet been fixed. It was however essentially a matter of calculation once the Sterling price was known and that calculation could in my judgment have readily been made. No marketing plan had been agreed for C in Europe but Clive Christian had envisaged that it could be launched in Europe in 2010 if the country managers meeting took place on 31 August 2010. This is made clear in Ms Olrog's email of 18 August 2010.^[298] Thus, although time would be short, it was thought to be sufficient for press magazines editorials and exhibitions to be arranged and to take place. The exhibition could either have been at the Fraganze Exhibition at the Pitti Palace in September, or even if delayed there might still have been time to have dealt with it in the third week of September at the Exhibition at the Savoia Palace in Milan.
348. Any later than 31 August 2010 for the country managers meeting would have been difficult to arrange and likely to postpone the launch until 2011, though if discussions about the winding down of the distributorship had taken place and the parties had agreed on a modus for the final months, the Defendant would have used the Claimant for the launch of C.
349. The Defendant's contention that the order for C was too large to be reasonable is, Mr Knox submits, without merit. The facts demonstrate that Clive Christian, when it had established its new system for distributing perfumes, sold 1674 pieces from 24 August 2011 to 31 December 2011 and 364 pieces from 1 Jan 2012 to 24 April 2012, i.e. a total of 2038 pieces altogether excluding tester sprays. Thus Mr Knox submits, in just eight months Clive Christian sold more than the 2000 it said Intertrade could not have sold in 11 months. Clive Christian sold 929 pieces of C for its initial orders but those were sold in some 15 days.
350. The marketing plan and launch procedures however with a new distributor and setting up of its own distributorship, took Clive Christian some 11 months and expenditure of many tens of thousands of pounds. The order which the Claimant placed for C involved 2000 units, excluding testers; such an amount would, in my judgment have taken months to sell, probably beyond Christmas 2010.
351. It had been agreed between Mr Gray and Mr Fadelli that C was to be launched to a limited number of prestigious outlets. In an email dated 9 April 2010 Mr Fadelli said:-

"I totally agree that the launch of C can be an important strategic element to strengthen the relationship with the key accounts and agree in the limited introduction in the best key doors."^[299]

352. Mr Gray wanted the new perfume to be rolled out gradually starting with retailers who would be able to create sustainable sales. He said that this is what happened when it was launched in September 2011.
353. When however it was put to Mr Fadelli in cross examination that he knew perfectly well that the plan was to launch the new product to a very limited number of outlets only of the most prestigious kind, he said "who say that" and then said "if I knew that, I doesn't make this order, I make a smaller one".^[300]
354. When the Claimant's order was placed Mr Fadelli had changed his mind about limiting the introduction of C, without discussing this with Mr Gray, and based his order upon all his retail outlets. Thus the calculation was 135 outlets in total each receiving 12 units, i.e. 1620.
355. Mr Fadelli said in evidence that he had changed his mind after speaking to his sales people. It was a difficult strategy to say to some of the retailers that they wouldn't get the product.^[301] Ms Ferraretto said in evidence that in order not to de-motivate the customer they couldn't simply tell them that they wouldn't get the perfume. "So we can start with some customers, the best customers may be, but after some time we have to deliver the product to the other customers too. Otherwise it is likely probable that we will lose the customers."^[302]
356. Mr Brisby QC submitted that the Claimant's order for all its retail outlets was based upon a policy in direct contravention of the Defendants express instruction which had been agreed by Mr Fadelli. The change of policy, without being agreed with Mr Gray demonstrated the fundamental tension in the relationship: who was really in charge of the brand, and had the effect of increasing the number of items the Claimant might be said to be justified in ordering. Mr Knox QC submitted the change of strategy was entirely reasonable and that the initial ordering process, as Mr Fadelli said in evidence, would have lasted for about 2 or 3 months up to October/November after which further orders would have been required.^[303]
357. The Defendant sought information about Intertrade's stock levels on 20 April 2010^[304] 15 July 2010^[305] and 15 September 2010^[306]. The terms of the request on 15 July 2010, made shortly before the first of the last four orders, were as follows:-

"Please find attached your 2010 forecasts submitted in October of last year. As part of our mid year review it is imperative that we receive an updated forecast, along with current stock levels.

Please fill in the two additional columns and send back to me by Friday 23 July."^[307]

358. The proper inference to be drawn from the wording of this request and the form sent by the Defendant to the Claimant is that the Defendant required the stock levels for the forecast, and was not prepared to accept the forecast without stock levels. The form itself was the Claimant's stock forecast 2010 with two additional columns, one the revised quantity July to December 2010 and the other for current stock levels at Intertrade's warehouse.^[308] The Defendant was making it clear by this request that the information that Mr Fadelli had to give them in his email of 30 April 2010, namely that their stock levels were very low at €30,000, was insufficient.^[309]
359. As stated earlier in this judgment Mr Fadelli and Ms Ferreretto said that their own stock levels were confidential to them though the Claimant was unable to explain the basis for this confidentiality. The Claimant had in September 2003 been prepared to permit the Defendant to examine its stock levels^[310] and appears not to have considered stock levels as between itself and its retailers to be confidential.^[311] When making its own calculations as to what a reasonable order might be, one of the matters which Mr Fadelli said he would take into account was how many orders the Claimant had in its portfolio and how much stock it had in its warehouse.^[312]
360. Mr Brisby submits that the Claimant was obliged to give information as to its stock levels under the terms of the contract or alternatively it was unreasonable of it to refuse to provide this information in the circumstances. Mr Knox submits that as there was no obligation to provide the information there could be no question of there being any breach of contract by not doing so. It didn't matter whether the failure to provide information which it was not obliged to do was reasonable or not, and there was no contractual basis upon which the Defendant was entitled to withhold credit for non provision of information about stock levels. In any event, Mr Knox submits, the Claimant did not act unreasonably as this was not the sort of information which distributors usually gave, nor did the Defendant give a proper reason for requiring the information. The reason it did give, namely that the orders were far in excess of what they would normally sell in a 12 month period was plainly incorrect and accepted as such by Mr Gray in cross examination.^[313]
361. Furthermore, Mr Knox submits, Intertrade's responses were entirely reasonable in that the information Mr Fadelli gave about their stock levels being at €30,000 was sufficient and thereafter the point was not pressed and the April goods supplied. Stock levels change every day as Ms Blackburn of Clive Christian appeared to accept.^[314] And the revised forecast was not challenged. Intertrade were not creating a grey market, their performance was well up on 2009 in 2010 and the launch of C would create powerful energies in the market. Any suggestions, Mr Knox submits that Intertrade was stock piling or acting as a "rogue distributor" were irrelevant and should be rejected. The real reason Clive Christian wanted information of stock levels, Mr Knox submits, is not because of fear of stock piling but they wanted to know about Intertrade's stock levels in order to be able to take over its market, or all of it except Italy.
362. Mr Brisby, on the other hand, submits, that the real reason the Claimant did not want the Defendant to know its stock levels was because they would have proved that the Claimant did not require the quantities of the perfumes it had ordered and would give the Defendant a cast iron basis for refusing to supply. The Claimant's refusal to confirm its stock levels was, Mr Brisby submits, very suspicious and led the Defendant to believe, correctly, as it turned out that the Claimant had not been running out of stock. The spurious claim that stock levels were confidential also made the Defendant very suspicious. Mr Brisby submitted that the orders other than C had not been placed bona fide. It was not true, he submitted, to say that Intertrade had never created a grey market as there had been an incident of a 50% discount in Germany pointed out by Mr Gray to Mr Fadelli at the meeting of 17 May 2010, albeit that this was an account which Mr Fadelli closed.^[315] Unknown to Mr Gray at the time similar discounts had been granted without the Defendant's authority in Eastern Europe.
363. In the circumstances, Mr Brisby submitted, it was entirely reasonable for the Defendant to refuse to satisfy the orders unless and until it had received the information as to stock levels.

Unreasonable Amount of Credit

364. The Defendant submits that had the Claimant fulfilled the orders, other than C, the total credit which the Defendant would be extending to the Claimant would be some £174,862.50, because at the time that the other orders were placed the Claimant had been provided with quantities of the perfumes worth £51,967.50 which it had not yet paid for. It seems to me that the figure is somewhat less than this as the total of the orders, other than the C order, amounted to £122,895 and the only order outstanding not yet paid for was one for £30,720.^[316] This produces a total of £153,615 as opposed to the figure put forward by the Defendant.
365. That would be a level of credit some 63% of the total value of sales to the Claimant in 2009 namely £241,977.50.
366. If the value of the C order of around £97,500 is added the total sum of credit is £251,115, a larger sum than the total value of sales to the Claimant in 2009.
367. The four orders were placed at the end of July extending credit to the end of August, and at the beginning of August extending credit to the end of September.
368. This was a very substantial amount of credit to be given in such a short space of time, Mr Brisby submits, and in circumstances where previous payments on invoices had been late. It was, he submitted, commercially fanciful. Further, he submitted, the Defendant was not obliged to extend such a level of credit in view of the concerns that Mr Gray had about the Claimant's financial position. It was an additional reason entitling the Defendant to refuse the orders.
369. Mr Knox QC points out that it is not pleaded that the Defendant was entitled to refuse orders because credit limits would be exceeded and no such opportunity had been given for the investigation of the parties' own practice and financial position in order to determine what a reasonable credit limit would have been. Nor was this a point relied upon, Mr Knox submits at the time for refusing the orders so the option is not open to the Defendant. In any event, he submits, credits of up to at least £70,000 were extended in October 2008 and October 2009^[317]. And if there was a problem in granting credit the answer would have been to stagger acceptance of deliveries over a month or two so as to reduce the credit risk.
370. I note that Mr Knox did not request an adjournment when the credit issue was raised in the Defendant's opening, though he did object to the fact that it was not pleaded.
371. The Defendant did in fact indicate on 25 September 2010 that it would be prepared to accept the two smaller orders of 26 July 2010 in the sum of £28,422.50, and that of 5 August 2010 for some £23,342.50, and made them available to the Claimant, albeit on revised terms as to payment. The Claimant did not however proceed with those orders as it required all of them to be fulfilled.^[318]

Reasonableness of the Orders

372. The last four orders were placed in a very short space of time, one day apart in respect of the first small order and the order for C (£28,422.50 and £97,000), nine days before the next small order (£23,342.50) and a further four days until the remaining large order other than C (£71,130). It is appropriate in the circumstances to treat them as one large order, or alternatively as two orders, one for C and one for the other orders.
373. The Claimant treated these orders as effectively one, and never sought to suggest that anything other than all four orders would be acceptable to them.
374. I have reached the clear conclusion on the evidence and the submissions made to me that the last four orders were not reasonably required by the Claimant, nor in themselves reasonable. Just over £220,000 worth of orders were placed in the space of 14 days. This was prima facie excessive: it contained two orders considerably larger than any other single order since 2003 (the order for £97,500 and the order for £71,130 compared with the earlier largest order of £48,902); the total of £220,395 was only just short of the whole of the previous year of 2009 (£241,977) and the orders were placed over a period of 14 days, two at the end of the month of July and two at the beginning of the next month – August. Orders were in fact normally made monthly: orders for Christmas were not placed at the end of July/ start of August, but spread over July, August, September, October, as 2008 shows.^[319] Delivery for Christmas was normally required in October/November and goods were normally delivered in 15 days, though they could take as long as five weeks. Spacing of orders was important for the Defendant's manufacturing and order preparing process. The orders other than C might have been sold by Christmas or might have gone into the New Year; the C order would probably not have been sold until several months into the following year: it took the Defendant, after substantial and expensive launch campaigning, 8 months starting in September 2011 to sell just over 2000 units.
375. The order for C was excessive in itself. The Defendant had reasonably required that when launched, it would be supplied to only the most prestigious retailers: this had been agreed by Mr Fadelli who clearly considered it to be a valid and proper policy. When the Claimant ordered C however, it did so on the basis of all the retailers being provided with C on the grounds that the Claimant's sales staff advised Mr Fadelli that this was necessary so as not to de-motivate the retail customers: Laura Ferraretto however had agreed in evidence that it would have been possible to have started supplies to "key doors" and then provided to the remaining retailers in a second wave. This would have prevented any possible "demotivation" if that was a risk.
376. The Claimant did not inform the Defendant of its unilateral change of policy nor seek to discuss it or agree it with the Defendant. 1,620 units of the C order was made up of twelve units to 135 customers Ms Ferraretto said in evidence. Mr Fadelli said in evidence that some of the 135 outlets would receive only six units and the others would receive twelve i.e. fewer than 1,620. The inference to be drawn is that the order was calculated so as to provide a basis for putting in as large an order as possible, irrespective of the agreement with the Defendant that only key doors would be supplied. The order was put in without any agreed launch and when samples of the perfume had not been provided.
377. At the time that the first order was placed on 26 July 2010 the Claimant had in stock units to the value of between €109,000 and €117,000. The production, by Ms Ferraretto, of the March figures instead of the July figures which were clearly needed for a proper calculation of the stock level at the time when the last four orders commenced, was most unsatisfactory, and in the context of the litigation appeared to demonstrate a continued unwillingness on the part of the Claimant to reveal its stock figures. I am satisfied that if the stock levels accepted by Ms Ferraretto in cross-examination had been revealed to the Defendant at that time it would have been entitled to refuse all the orders on the grounds that they were not reasonably required.
378. I conclude that the orders were not placed wholly for a genuine current business need, but as an attempt to place such orders as the Claimant might require over a substantial part of the remaining period of the termination notice. The orders, of such a size and placed over such a short period of time, were in excess of anticipated sales at the time that they were placed. The size of the orders was therefore meant to represent the very maximum which the Claimant might be justified in ordering for a period well in excess of the orders that might properly be made in July and August over two weeks.
379. The Defendant had been concerned about over-stocking by the Claimant. The lack of information about "sell through" and the refusal of the Claimant to give the identity of the retailers so that the Defendant could check itself, together with the failure to reduce, as had been agreed, the number of retail outlets, raised the Defendant's concern. When stock levels, an obvious way of giving some helpful information upon this issue, needed to be qualified and explained, but were refused by the Claimant, the Defendant was understandably made more suspicious. If the Claimant was prepared to state what stock it normally carried, as it did, and to state what the stock figures were at a particular time, as they did, the question arises as to why the actual figures could not have been set out in the columns provided by the Defendant on the copy of the Claimant's forecast for 2010.
380. The very substantial supplies required by the orders placed over such a short period of time made it entirely reasonable for the Defendant to require the Claimant to provide their stock levels, if it was to satisfy the Defendant that the orders that they had put in were reasonably required by it. In the absence of that information the Defendant was entitled to refuse all the orders, even if it eventually chose in fact to accept the two smaller ones.
381. An additional reason for requiring the Claimant to provide stock levels was the level of credit which the orders involved. £251,115 (including an outstanding sum of £30,720) over two months, more than the value of the whole of the previous year's orders, was a very substantial increase. It justified the request for stock levels and was also itself a reason for considering that the orders were not reasonable, nor reasonably required.
382. I conclude that the orders were not wholly for a genuine current business need, but as I have found, to protect the Claimant's interest for the remaining period of the contract or a substantial part thereof. They were not reasonable for its anticipated sales when made, and the Defendant was entitled to reject them and make their acceptance subject to different terms.
383. I do not accept the Claimant's submission that the Defendant was seeking to take over the Claimant's distributorship. The time which it took the Defendant to launch C suggests that there was no organisation, and no system in place at the time when the contract came to an end. I accept Ms Olrog's and Mr Gray's evidence that the Defendant's attitude was that it would continue to supply the Claimant as distributor until termination in July 2011 subject to agreeing a way ahead, or until there was a further breach of contract by the Claimant.

Repudiation

384. The last four orders were placed against a background of an entrenched and contentious dispute between the parties. The Claimant was concerned about website sales and its margin. The Defendant was concerned about what it perceived as inadequate market spend in 2008, 2009 and 2010. No details of market spend in 2008 had been given; details of the first nine months in 2009 had been given but not the last three months, and no details had been given of marketing spend in 2010. There was however I find a duty to provide the details of marketing spend in 2008 and for the last three months of the year and, a duty to provide details on a monthly basis in 2010 in view of the implied obligation to spend a sum on marketing in the order of 10% per annum.
385. The Defendant was also concerned about churn with too many stores being opened without adequate regard to sell through, and an agreement to close some of them not being kept, and the opening of counters in new accounts without sales being established, such as in Nicosia. There was also concern by the Defendant in the lack of information provided by the Claimant on sell through figures, the identity of retailers and stock levels.
386. Mr Gray was also of the view that the Claimant was making too much money on currency gain without spending the appropriate amount on marketing spend.
387. The Defendant was also suspicious that the Claimant had been over-stocking. This was brought about by various factors including the failure to reduce the number of stores when that had been agreed, granting permission for counters too readily without approval, and the reluctance to give the Defendant what it regarded as proper information. The doubts about marketing under-spend, late payment, the use of an incorrect tag line without authority, the failure to recognise the need to keep the Defendant informed when legal proceedings had been commenced against Intertrade in France with the risk that that might affect the reputation of Clive Christian, and the use of discount in Germany, all led to the apprehension that the distributorship was not being run properly in the interests of Clive Christian as well as Intertrade. In fact the Defendant was unaware at that time that discounting to a level of about 50% had been carried out by Intertrade in Eastern Europe without its authority. The apprehension was that discounting could lead to a devaluation of the reputation of the goods and the development of a grey market.
388. I have no doubt that some of these Italian retailers, the smaller ones in particular, were concerned about the website sales. The fact however, that the Claimant was unable to produce any details of complaints in writing or lists of those who had complained, and took Ms Olrog to only one complainant, suggests that whilst there were such complaints, the extent and force of them had been somewhat exaggerated. As to margin, 1:4 was agreed for Italy at the outset but there was no further agreement save that the Claimant's margin of 1:4.53 was protected by the provision of free of charge goods by the Defendant in 2008.
389. I am satisfied that the Defendant's concerns were real, save that there was no agreement that the loser should be compensated for currency gain. As to marketing spend however there was an obligation upon the Claimant to provide details of that for 2008, to complete the details for 2009, and to provide monthly details for 2010. I am satisfied from the correspondence and the evidence that the Claimant knew that the Defendant continued to believe that there had been under-spend in those years and wanted it to be dealt with. I am satisfied that the Defendant was justified in considering that there may have been churn and was certainly right in thinking that the Claimant was reluctant to give relevant information. There was a genuine and realistic fear of over-stocking, greatly enhanced by the successive orders at the end of July and early August 2010.
390. The failure to provide details of marketing spend, the failure to provide information, the failure to seek approval for the counters and the continuing discounts, some of them unknown to the Defendant were all continuing breaches of duty which when taken cumulatively would have entitled the Defendant to accept repudiation of the contract. It chose however not to do so but to continue supplying perfume to the Claimant. As the breaches were however continuing the Defendant was entitled to accept them as repudiation at any time whilst they still continued.
391. Against that background the placing of excessive orders without any information to support or explain them was clearly regarded by the Defendant as the last straw. I am satisfied that the placing of such excessive orders did entitle the Defendant to accept the continuing repudiatory conduct by imposing new terms. For my part I consider that the placing of the orders themselves, without giving the appropriate information in support of them, would have justified the Defendant in saying that that was an additional repudiatory breach of the contract.

Counterclaim

392. It follows that the claim is dismissed and the counterclaim succeeds to the extent set out below.
393. The Defendant is entitled to an account in respect of marketing spend for 2008, 2009 and 2010.
394. It is not entitled to an account in respect of currency gain as I have found that there is no general term in the contract entitling the Defendant to make such a claim. Nor has there been any breach in respect of those years where a specific agreement in respect of currency gain was made.
395. The Defendant is entitled to recover the sum of £30,720 in respect of the unpaid order 10.000152, invoice 6310. This claim is not disputed and as the Claimant has not recovered damages in the claim there can be no set-off.
396. The Defendant also counterclaims in respect of a secret profit made by the Claimant in respect of the unauthorised sale of testers. "Testers" were supplied to the distributor free of charge and was supposed to be passed on to the client free of charge. In fact the Claimant did charge for some testers to retailers where they were accumulating testers and then selling them. Mr Fadelli said his practice was to supply testers to the retailers for every four or six items sold but thereafter charge them so as to prevent them selling them on themselves.
397. There is no dispute between the parties that this issue was discussed between Mr Gray and Mr Fadelli although Mr Fadelli says that Mr Gray was happy for him to charge for testers on occasions, whereas Mr Gray says that his response was to tell Mr Fadelli to close down the customer if it was selling testers.
398. The point is de minimis in that it appears from the evidence that only 168 testers were sold during the course of the whole relationship.^[320] Nevertheless I prefer Mr Gray's evidence upon this issue and consider it to be another example of the Claimant dealing with matters as it thought best irrespective of the views of the supplier.
399. The Defendant is entitled to an account in respect of the unauthorised sale of testers.
400. I will hear argument from counsel when the judgment is handed down as to the form of order relating to damages arising out of loss of profit under paragraphs 30.4 and 30.7 of the Re Amended Defence and Counterclaim.

Conclusions

401. 1. The distributorship agreement between the parties was an oral agreement, evidenced in the emails between them from June to September 2003, and in the conduct of the parties thereafter.

2. The Defendant was not entitled under the contract to refuse at its discretion any order placed by the Claimant, but was obliged to accept all orders which were reasonably required.

3. There was no express term as to marketing spend, but it was an implied term of the agreement that the Claimant would spend a reasonable amount of its margin on marketing spend each year, and that a reasonable amount was of the order of 10%. The distributor was under a duty to demonstrate compliance with the implied term by providing the supplier with details of its actual expenditure on marketing. The Claimant failed to comply with that duty in 2008, 2009 and 2010.

4. There was no term in the contract, express or implied, that the beneficiary of any currency gain should compensate the loser for that loss, save in 2008 and 2009 when specific ad hoc agreements were reached and satisfied.

5. There was no express term in the agreement that the Claimant would provide "sell-through" figures, or its stock levels, but there was an implied term that it would provide the Defendant with reasonable information for the running of the brand, including the giving, accepting, and satisfying of orders.

This duty included the provision of information as to the Claimant's stock levels where reasonably required by the Defendant. Information as to the Claimant's stock levels was reasonably required by the Defendant from April 2010, when trust and confidence in the relationship between the parties had broken down, in large part due to the Claimant's conduct of the distributorship. The information was not provided.

6. The Claimant paid invoices late in May, June, and July 2010, and made payment in tranches or instalments, rather than in the full amount in one payment.

7. The Claimant changed the Clive Christian main marketing message without permission: it authorised the creation of counters in retail stores without, as had been agreed in 2009, seeking the approval of Clive Christian: it failed to inform the Defendant of the fact that a dispute with a retailer, Taizo, in Cannes, had led to litigation in the French courts, and it permitted substantially discounted sales in Germany (one instance) and Eastern Europe, without authority from the Defendant. These actions amounted to high handed behaviour which reduced the level of trust and confidence between the parties.

8. The failure to provide details of the 2008 marketing spend, the failure to provide information as to stock levels from April 2010, the unauthorised creation of counters without approval, and the allowing of discounting were, cumulatively, serious breaches of contract and would have entitled the Defendant to accept them as repudiatory breach.

9. The Defendant chose not to accept them as repudiatory, but to continue to supply the Claimant, having served a notice of termination of the distributorship upon the Claimant, giving a twelve month period of notice. The breaches were however continuing.

10. The Defendant remained concerned that the Claimant was creating churn, or threatening the reputation of the brand, by not closing down stores in Italy when that had been agreed, by granting unauthorised counters to new stores, and by over-stocking. The Defendant's concerns were fuelled by the Claimant's refusal to provide information as to its stock levels.

11. The four last orders placed by the Claimant at the end of July and at the beginning of August 2010 were neither reasonable nor reasonably required, but excessive and not necessary for their reasonable business needs when ordered. The Defendant was entitled to reject them and put forward different terms. By so acting the Defendant accepted the Claimant's continuing breaches of contract.

12. The Contract was thereby terminated as a result of the Claimant's conduct. The claim therefore fails and is dismissed and the counterclaim is allowed to the extent set out above.

Note 1   H2    [Back]

Note 2   H/3    [Back]

Note 3   H/3a    [Back]

Note 4   H/4    [Back]

Note 5   H/5    [Back]

Note 6   H/9,9a    [Back]

Note 7   H/7d    [Back]

Note 8   H/11    [Back]

Note 9   H/16    [Back]

Note 10   H/25.(2)    [Back]

Note 11   H/25d    [Back]

Note 12   H25b    [Back]

Note 13   H26,28    [Back]

Note 14   H26    [Back]

Note 15   H26    [Back]

Note 16   L1    [Back]

Note 17   H30    [Back]

Note 18   L4    [Back]

Note 19   H30-32,H52-53, H37, 41    [Back]

Note 20   H92a, 92b and 93    [Back]

Note 21   H/56, 57    [Back]

Note 22   H/60    [Back]

Note 23   H/61    [Back]

Note 24   H/58    [Back]

Note 25   H/61    [Back]

Note 26   H/83    [Back]

Note 27   L/11    [Back]

Note 28   H/117    [Back]

Note 29   L13,15    [Back]

Note 30   H/174     [Back]

Note 31   H/243    [Back]

Note 32   H/118a-b    [Back]

Note 33   H/125    [Back]

Note 34   K/328    [Back]

Note 35   H/118-189    [Back]

Note 36   H/173,173a    [Back]

Note 37   H/184/187    [Back]

Note 38   H/217    [Back]

Note 39   H/271    [Back]

Note 40   H/322,325    [Back]

Note 41   H/254    [Back]

Note 42   H/256    [Back]

Note 43   H/275    [Back]

Note 44   H/295    [Back]

Note 45   H/296    [Back]

Note 46   H/298    [Back]

Note 47   H/340    [Back]

Note 48   H/358-361    [Back]

Note 49   H/358    [Back]

Note 50   H/365    [Back]

Note 51   I/1    [Back]

Note 52   I/3, L/28    [Back]

Note 53   I/6    [Back]

Note 54   I/10    [Back]

Note 55   I/12-14    [Back]

Note 56   K/328    [Back]

Note 57   I/22-37    [Back]

Note 58   J/138-141    [Back]

Note 59   I/90 3 May 2009    [Back]

Note 60   I/79,88,89    [Back]

Note 61   I/79 19 February 2009    [Back]

Note 62   I/148 email 15 May 2009, I/154 email 18 May 2009 and I/58, 164-165 20 May 2009    [Back]

Note 63   H/130    [Back]

Note 64   I/302a, 302b    [Back]

Note 65   I/95-96    [Back]

Note 66   I/209,212    [Back]

Note 67   I/261    [Back]

Note 68   I/268    [Back]

Note 69   I/279    [Back]

Note 70   I/135,135a,145-6,148    [Back]

Note 71   I/299    [Back]

Note 72   I/306    [Back]

Note 73   I/308,310    [Back]

Note 74   I/362D    [Back]

Note 75   I/361A    [Back]

Note 76   I/364    [Back]

Note 77   I/364    [Back]

Note 78   K/100    [Back]

Note 79   J/82    [Back]

Note 80   J/88    [Back]

Note 81   J/87,88    [Back]

Note 82   J/95    [Back]

Note 83   /97    [Back]

Note 84   J/99,J/107    [Back]

Note 85   J/99    [Back]

Note 86   J/101    [Back]

Note 87   J107AA, J107BB    [Back]

Note 88   L/41,L/20A, B-C    [Back]

Note 89   L/42,43    [Back]

Note 90   J/125    [Back]

Note 91   J/138, I/88-89    [Back]

Note 92   J/138    [Back]

Note 93   J/145, P/224    [Back]

Note 94   J/151    [Back]

Note 95   L/53    [Back]

Note 96   J/177    [Back]

Note 97   J/168    [Back]

Note 98   J/178-182    [Back]

Note 99   J/197-198    [Back]

Note 100   J/145a,145i    [Back]

Note 101   J/194    [Back]

Note 102   J/199    [Back]

Note 103   J/200b    [Back]

Note 104   J/208,204    [Back]

Note 105   J/205    [Back]

Note 106   J/211…    [Back]

Note 107   J/267    [Back]

Note 108   J/246    [Back]

Note 109   J/252    [Back]

Note 110   J/278    [Back]

Note 111   J/283    [Back]

Note 112   J/254c    [Back]

Note 113   J/255,257,269A and 269B    [Back]

Note 114   J/269A    [Back]

Note 115   J/266,267    [Back]

Note 116   L55-56    [Back]

Note 117   J/290-91 and J/286    [Back]

Note 118   J/292    [Back]

Note 119   J/293A    [Back]

Note 120   J/294    [Back]

Note 121   J/295    [Back]

Note 122   L54-57    [Back]

Note 123   J/297    [Back]

Note 124   J300    [Back]

Note 125   J300    [Back]

Note 126   J301, L59-60    [Back]

Note 127   J300A    [Back]

Note 128   Email 10 February 2009 I22-37    [Back]

Note 129   J/230    [Back]

Note 130   T9/172-175    [Back]

Note 131   Transcript 4/148    [Back]

Note 132   J138    [Back]

Note 133   J88    [Back]

Note 134   T11/79-81    [Back]

Note 135   T12/34-40    [Back]

Note 136   T12/65    [Back]

Note 137   K/56, K/153A    [Back]

Note 138   T5/125    [Back]

Note 139   A230    [Back]

Note 140   T8/79    [Back]

Note 141   T8/74    [Back]

Note 142   J138    [Back]

Note 143   I36, I60, I67H and I1820    [Back]

Note 144   I306,309-10, 332, 342    [Back]

Note 145   T13/168-9    [Back]

Note 146   T11/28    [Back]

Note 147   J2    [Back]

Note 148   I/308,309    [Back]

Note 149   C55, paras 30-33 and C62, para 7.2    [Back]

Note 150   J145,P205    [Back]

Note 151   H13    [Back]

Note 152   H125,1476,K328,L126 & see Claimant’s submissions para 69(1)(2)(30    [Back]

Note 153   H25(2)    [Back]

Note 154   H173A    [Back]

Note 155   171-1174, 177, 180,184-6    [Back]

Note 156   T13/81    [Back]

Note 157   H/125    [Back]

Note 158   H/298    [Back]

Note 159   Defendant’s closing submissions, para 59    [Back]

Note 160   I115    [Back]

Note 161   I59-62, I34, I182M, I134    [Back]

Note 162   T8/67, 105-6, 111-12,122-123    [Back]

Note 163   T10-71    [Back]

Note 164   I168    [Back]

Note 165   I205-07    [Back]

Note 166   I115    [Back]

Note 167   I306    [Back]

Note 168   I310    [Back]

Note 169   Transcript 12/89    [Back]

Note 170   Ms Olrog T10/119    [Back]

Note 171   T12/92    [Back]

Note 172   J/107AA    [Back]

Note 173   J/125    [Back]

Note 174   J133    [Back]

Note 175   J128-131    [Back]

Note 176   J279    [Back]

Note 177   T6/8    [Back]

Note 178   M12 & M23    [Back]

Note 179   T10/178    [Back]

Note 180   J87    [Back]

Note 181   T/12/158    [Back]

Note 182   T12/152&154    [Back]

Note 183   T13/154    [Back]

Note 184   I167A&167H    [Back]

Note 185   T12/98    [Back]

Note 186   Paragraphs 261-273, 267.3    [Back]

Note 187   T14/91    [Back]

Note 188   Email 23 July 2010 J211/243    [Back]

Note 189   Mr Gray’s witness statement C60 paragraphs 60-61    [Back]

Note 190   H83-84    [Back]

Note 191   H100    [Back]

Note 192   H153    [Back]

Note 193   H167    [Back]

Note 194   H262    [Back]

Note 195   H265    [Back]

Note 196   H271    [Back]

Note 197   H275, email 9 April    [Back]

Note 198   Email 1 February 2008 H254    [Back]

Note 199   H262    [Back]

Note 200   H296    [Back]

Note 201   I/10    [Back]

Note 202   I10,11    [Back]

Note 203   I/104    [Back]

Note 204   K/56,61,59,79    [Back]

Note 205   H/2    [Back]

Note 206   H262,265,266    [Back]

Note 207   C77    [Back]

Note 208   J16    [Back]

Note 209   I3/4    [Back]

Note 210   I3/4    [Back]

Note 211   P63/69 & 70,79    [Back]

Note 212   P63/69 & P70/79    [Back]

Note 213   T3/95    [Back]

Note 214   T3/95    [Back]

Note 215   T4/44, B57    [Back]

Note 216   T11/145    [Back]

Note 217   T3/89    [Back]

Note 218   T4/30    [Back]

Note 219   H2    [Back]

Note 220   I305    [Back]

Note 221   J16    [Back]

Note 222   Paragraph 1.18 Defendant’s closing submission    [Back]

Note 223   T9/146    [Back]

Note 224   T9/147    [Back]

Note 225   T14/155    [Back]

Note 226   Defendant’s closing submissions paragraph 124    [Back]

Note 227   I24    [Back]

Note 228   Transcripts 7/59    [Back]

Note 229   H144, H216, H241    [Back]

Note 230   I230    [Back]

Note 231   H271    [Back]

Note 232   I231    [Back]

Note 233   K101A    [Back]

Note 234   1.23 clause 1.2 (c)    [Back]

Note 235   T14/142    [Back]

Note 236   I168    [Back]

Note 237   I212    [Back]

Note 238   K215    [Back]

Note 239   Paragraph 41-48 defendants closing submissions     [Back]

Note 240   I168, J168    [Back]

Note 241   Transcript 6/8    [Back]

Note 242   See generally claimants closing submissions paragraph 37-47 and T12/152-157    [Back]

Note 243   H58 and T12/96, T4/67    [Back]

Note 244   H9    [Back]

Note 245   Defendants closing submissions Para 154    [Back]

Note 246   T10/178    [Back]

Note 247   T6/8    [Back]

Note 248   Email 4 August 2010 J279    [Back]

Note 249   H9A    [Back]

Note 250   I308    [Back]

Note 251   Transcript 10/141    [Back]

Note 252   Email 30 April 2010 J125    [Back]

Note 253   L42, 43    [Back]

Note 254   J197    [Back]

Note 255   Defendants closing submission paragraph 124    [Back]

Note 256   T14/155    [Back]

Note 257   T9/152    [Back]

Note 258   J178-182    [Back]

Note 259   L62-65    [Back]

Note 260   C82 Para 154 and C58 Para 46 and 47    [Back]

Note 261   J144    [Back]

Note 262   T14/142-152    [Back]

Note 263   K377    [Back]

Note 264   I168    [Back]

Note 265   I205,206    [Back]

Note 266   I209    [Back]

Note 267   I212    [Back]

Note 268   I?    [Back]

Note 269   J88    [Back]

Note 270   J87,88    [Back]

Note 271   T10/159    [Back]

Note 272   Transcript 10/159    [Back]

Note 273   Transcript T13, 208-222    [Back]

Note 274   J199    [Back]

Note 275   T10/192    [Back]

Note 276   T14/45-49    [Back]

Note 277   Transcript 12/65    [Back]

Note 278   T10/197    [Back]

Note 279   T14/47,49    [Back]

Note 280   T10/186    [Back]

Note 281   J205    [Back]

Note 282   J208A    [Back]

Note 283   J294    [Back]

Note 284   L54    [Back]

Note 285   L57    [Back]

Note 286   T14/201    [Back]

Note 287   See Paragraph 99 of this judgment    [Back]

Note 288   P48,K377    [Back]

Note 289   I 297 A    [Back]

Note 290   J267, 268a    [Back]

Note 291   J304, K294    [Back]

Note 292   L32    [Back]

Note 293   J128    [Back]

Note 294   T13/214    [Back]

Note 295   B48    [Back]

Note 296   T5/72, T6/39 J268A    [Back]

Note 297   K377    [Back]

Note 298   L57    [Back]

Note 299   J97    [Back]

Note 300   T9/72    [Back]

Note 301   T9/74    [Back]

Note 302   T5/85    [Back]

Note 303   T9/76,186    [Back]

Note 304   J107AA    [Back]

Note 305   J295    [Back]

Note 306   J302    [Back]

Note 307   J268    [Back]

Note 308   J268A    [Back]

Note 309   J125    [Back]

Note 310   H9A    [Back]

Note 311    H57, 60A    [Back]

Note 312   T4/65    [Back]

Note 313   T14/104    [Back]

Note 314   J279    [Back]

Note 315   Transcript meeting 60-61    [Back]

Note 316   P51    [Back]

Note 317   K377     [Back]

Note 318   Schedule at P53/55    [Back]

Note 319   K377    [Back]

Note 320   T14/142    [Back]