The Trademark Licensing Company Ltd & Anor v Leofelis SA

I have before me an application under CPR 11 by the defendant, Leofelis SA (“Leofelis”), for a stay of the claim in these proceedings, which are for breach of contract, pending resolution of what Leofelis claims but which the claimants deny is a “related action” in the specialist intellectual property court of Milan brought by an Italian company, Leeside Srl (“Leeside”), against the three parties to these proceedings. Since 10 October 2007 Leeside has been in liquidation. The claims against Leofelis in the present proceedings, which I shall call the 2009 Proceedings, have been brought by two UK companies which for convenience I shall describe as Lonsdale. It is not necessary to distinguish between them. Leofelis is a company incorporated under Swiss law.

Lonsdale’s claims against Leofelis in the 2009 Proceedings which were issued on 10 February 2009 arise under a trade mark licence agreement dated 21 November 2002 (“the Licence Agreement”) by which the second claimant, as licensor, granted to Leofelis, as licensee, an exclusive licence to use on clothing and other goods certain trade marks relating to the Lonsdale brand in all of the then states of the European Union except the UK and Ireland but including Hungary, Poland, the Czech Republic and Switzerland. The Licence Agreement replaced an earlier licence dated 11 June 2001 granted to Leofelis by a previous proprietor of the trade marks. The licence was for a period of six years starting on 1 January 2003 in consideration of the payment by Leofelis of a fixed royalty amounting in all to €16.15 million over the term of the agreement. It was payable by equal quarterly instalments in each year increasing from €1.6 million (in all) for year one to €3.5 million (in all) for year six.

Clause 10 of the Licence Agreement empowered Leofelis to grant sub-licences of the trade marks on various conditions one of which was the need to obtain the prior written consent of the licensor which was not to be unreasonably withheld or delayed. It was expressly provided that certain existing sub-licences, as detailed in a schedule to the Licence Agreement, were, subject to certain immaterial terms, approved by the licensor. One of those was a non-exclusive licence dated 19 June 2001 and made between Leofelis and Leeside. That sub-licence was confined to Italy.

The Licence Agreement contained provisions for its termination in stated events. By clause 11.2 it was agreed that the licensor could terminate the agreement by immediate written notice in the event, inter alia, that the licensee should commit a breach of the agreement provided that if the breach should be capable of remedy termination should only occur if the breach should not have been remedied within 30 days of the licensee having been given notice in writing specifying the breach and requiring it to be remedied. By clause 13.6 it was agreed that the Licence Agreement should be governed by and construed in accordance with English law and that the parties should submit to the exclusive jurisdiction of the English court.

The 2009 Proceedings followed proceedings brought by Leofelis and Leeside against Lonsdale and another Lonsdale group company in this Division of the High Court. Those proceedings (“the 2005 Proceedings”) were launched in October 2005. They arose out of a number of disputes including the activities of third parties using the Lonsdale marks. Leofelis incurred what it says were extensive costs (“the Italian legal fees”) in actions to protect the marks, which Leofelis claimed Lonsdale was obliged to reimburse. Lonsdale did not do so. Leofelis also alleged that, in breach of the Licence Agreement, Lonsdale was directly supplying goods bearing the marks to a connected Belgian company called Sports World Belgium involving what it claimed were very substantial sales in Belgium which affected the market for Lonsdale goods in other EU countries, thereby causing Leofelis to suffer what it alleged was considerable loss and damage. Trial of the action took place before Evans-Lombe J in late 2006. Judgment was delivered on 8 March 2007. Evans-Lombe J found, inter alia, that Lonsdale was liable to pay damages to Leofelis for breach of contract in respect of the supply of the goods bearing the Lonsdale marks to retail shops in Belgium operated by Sports World Belgium, and also the Italian legal fees.

Another issue in the 2005 Proceedings was the validity of an extension of Leeside’s sub-licence to further EU states including Germany which had been purportedly granted by Leofelis to Leeside on 20 December 2002 but which Lonsdale said that it had not approved. Leofelis contended that the need for formal approval had been waived. In relation to this, Lonsdale had obtained an injunction stopping Leeside from selling goods under the marks in Germany (“the German injunction”). Evans-Lombe J found the extension of the sub-licence to Leeside to have been valid.

On 11 April 2007 Lonsdale lodged an appeal against various of the findings made by Evans-Lombe J. The appeal came on for hearing in April 2008. By its judgment, delivered on 1 July 2008, the Court of Appeal reversed certain of the findings below including, so far as material, the judge’s finding as to the validity of the extension of Leeside’s sub-licence granted in December 2002. Leeside was one of the respondents to the appeal and was represented before the Court of Appeal. In the meantime Lonsdale’s appeal on the Belgium sales issue had been abandoned. By clause 14 of its order, the Court of Appeal declared that no valid or effective sub-licence had been granted by Leofelis to Leeside for any country within the territory defined in the Licence Agreement other than Italy. The finding below in favour of Leofelis in respect of the Italian legal fees was not challenged.

Evans-Lombe J had ordered that Leofelis’s claims in respect of the Belgian sales and the Italian legal fees should be the subject of an inquiry. He gave directions to that end. After some delay, on 2 October 2009, lengthy points of claim were served by Leofelis claiming damages well in excess of €50 million. Lonsdale contends that the claim is grossly exaggerated but has yet to serve points of defence.

In the meantime, by letter dated 14 September 2007 - which was after Evans-Lombe J had delivered judgment in the 2005 Proceedings but before the hearing of the appeal which was then pending - Leofelis, relying on the judgment below, asked Lonsdale to withdraw the German injunction, reserving its right to terminate the Licence Agreement “immediately and at any time while the injunction remains in place”. Lonsdale did not do so. Accordingly, on 28 September 2007 Leofelis gave notice to Lonsdale of termination of the Licence Agreement. The notice was on the ground that the German injunction was a repudiatory breach of the Licence Agreement. The notice stated that it was without prejudice to any other breaches on which Leofelis may be entitled to rely.

Lonsdale disputed that it was in repudiatory breach stating its belief that there was no valid sub-licence to Leeside applicable to Germany and that the ruling of Evans-Lombe J to the contrary was one which it did not accept as correct and was subject to the pending appeal. Other points were also raised in connection with that injunction. In the meantime, a few days earlier, on 2 October, Lonsdale alleged that Leofelis was in breach of the Licence Agreement by failing to pay the fourth quarter royalty for 2007 due on 1 October 2007. Lonsdale accordingly gave formal notice of that breach and of the requirement that Leofelis remedy the breach within 30 days in accordance with the relevant provision of the Licence Agreement. Leofelis did not pay, maintaining that it had already terminated the Licence Agreement with effect from the 28 September 2007 letter. Further correspondence ensued. No payment having been made, Lonsdale, by letter dated 2 November 2007, claimed to terminate the Licence Agreement for non-payment of the royalty. Further inconclusive correspondence ensued. The upshot, however, is that it was common ground that the Licence Agreement had been determined but not by whom, and therefore on what ground.

On 23 June 2008 Leeside commenced its proceedings in the specialist court of Milan (“the Milan Proceedings”). Shortly stated, the relief claimed by Leeside in those proceedings consists of (1) a declaration that Leeside was the exclusive sub-licensee of the Lonsdale trade marks for the whole of continental Europe until 31 December 2008, (2) a declaration that Leofelis and/or Lonsdale (and the other Lonsdale group company, which was a co-defendant to the proceedings) had violated the alleged sub-licence and (3) damages in the sum of not less than €50 million. I shall return later to the basis of Leeside’s claims in those proceedings.

Leofelis and Lonsdale were served with the Milan Proceedings in the course of July 2008. They were required to file defences before a hearing on 25 March 2009. Leofelis’s defence was filed on 26 February 2009. In it Leofelis pleaded that it was entitled to be indemnified by Lonsdale on the footing that any recoverable damage suffered by Leofelis resulting from the loss of its sub-licences was Lonsdale’s responsibility. Lonsdale’s defence was served on 2 March 2009. Lonsdale objected to the jurisdiction of the Milan Court and raised various jurisdiction and issue estoppel points. One of these was that the issues raised in the Milan Proceedings either had already been decided in the 2005 Proceedings by the English courts or had been raised and have yet to be decided in those proceedings, in particular on the inquiry as to damages. Lonsdale also contended that the agreement between Leofelis and Leeside as to Italian jurisdiction, and the bringing of the proceedings in Italy by Leeside against Leofelis, were an invalid contrivance or ploy to try to enable claims to be brought in Italy which had already been or ought to have been brought in this country.

On 25 March 2009 a preliminary hearing in the Milan Proceedings took place. The judge heard counsel for the parties and argument as to Lonsdale’s objections. There is a dispute between the parties as to whether at the conclusion of that hearing the judge ruled on the jurisdictional and other objections raised by Lonsdale. Leofelis contends that he did and that he ruled against those objections whereas Lonsdale contends that the judge reached no conclusion but, instead, adjourned the matter until 21 January 2010. It is not in dispute that the case was adjourned until 21 January 2010 and that directions were given to allow Leofelis and Lonsdale (and the other Lonsdale group company) to serve third party claims against one another in accordance with Italian procedural rules. The evidence does not indicate that if the judge did reject Lonsdale’s challenges he gave any reason for doing so. In view of the number, breadth and complexity of those challenges, this would seem surprising. Leofelis’s later evidence - a second witness statement by Andrew Colvin - states that the judge did not reject the plea of lack of jurisdiction, “merely that the contention was not accepted” and that the court resolved to “proceed with hearing the case on the merits unless the jurisdiction issue is reopened”.

The better view, I think, which I reach with some hesitation, is that the court at the hearing on 25 March did not reach any conclusion one way or the other on the challenges to its jurisdiction but adjourned the case to enable the cross-claims as between Leofelis and Lonsdale to be served and progressed and, if Lonsdale should desire it, to enable Lonsdale to renew its challenges to jurisdiction. In the light of the view that I take of the applicable regulatory regime which governs this application, I do not need to reach a definite conclusion as to exactly what he did do. Whatever the true position might be on this issue, I need hardly say that it would be quite inappropriate for this court to express any view on the validity of any of Lonsdale’s challenges to the exercise of jurisdiction over it by the Milan court in the Milan Proceedings. I do not therefore do so.

In the 2009 Proceedings which, as I have mentioned, were issued on 10 February 2009, Lonsdale claims (1) a declaration that the Licence Agreement was validly terminated by Lonsdale on 2 November 2007, (2) €1,675,000 in respect of royalties accrued due under the Licence Agreement prior to such termination and (3) damages in the sum of €3,500,000 in respect of royalties for the remaining term of the Licence Agreement if it had been allowed to run its course. Lonsdale contends that Leofelis has no real prospect of successfully defending the claim and has issued an application for summary judgment on it.

For its part, Leofelis disputes that this is so but, in view of its stay application now before me, has understandably been careful not to take any steps in these proceedings which might be taken as a waiver of its right to apply for a stay. This does not, of course, prevent Leofelis informing the court what its defences are to Lonsdale’s claims but Miss Amanda Michaels, who has appeared for Leofelis, said that this was not something which she and her client had yet addressed beyond asserting that, even if the particular ground on which Leofelis has sought to terminate the Licence Agreement, namely Lonsdale’s failure to have the German injunction against Leeside lifted, was no longer maintainable in the light of the Court of Appeal’s decision in July 2008, there were nevertheless other matters on which Leofelis could have relied on 28 September 2007 for terminating the Licence Agreement. Aside from one possibility faintly touched upon, what precisely those other matters are was left in the dark.

The significance of this is that if Leofelis is unable to advance grounds which entitled it on 28 September 2007 to treat Lonsdale as in repudiatory breach of the Licence Agreement there can be little if any doubt that Lonsdale was entitled, on the ground of Leofelis’s repudiatory breach of the Licence Agreement by failing, despite notice, to pay the quarterly instalment of royalty due on 1 October 2007, to treat the Licence Agreement as at an end. If that is established, the question of the loss and damage suffered by Lonsdale as a result falls to be determined. That loss and damage is said by Lonsdale to be the unpaid royalty which would have been payable to it during the remainder of the 6 years of the Licence Agreement. Questions may arise about set-off (against Lonsdale’s liability to Leofelis in respect of the Belgian sales and the Italian legal fees as found by Evans-Lombe J in the 2005 Proceedings) and the extent to which, if at all, Lonsdale failed to mitigate its loss in respect of its claim for royalty for the period between termination of the Licence Agreement and 31 December 2008 when the Agreement would otherwise have expired.

Leofelis relies for the stay it seeks on article 22 of the Lugano Convention. That article provides that:

“Where related actions are brought in the courts of different Contracting States, any court other than the court first seised may, while the actions are pending at first instance, stay its proceedings.

A court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the law of that court permits the consolidation of the related actions and the court first seised has jurisdiction over both actions.

For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and to determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

Leofelis contends that the Milan Proceedings and the 2009 Proceedings are “related actions” within the meaning of that article, that the Milan court was “first seised” and, therefore, that the English court, ie this court, has the power to stay the 2009 Proceedings to enable the Milan Proceedings to be pursued. It contends that under the Lugano Convention it is for each of the courts in question to apply its own local procedural law to determine when it became seised of the action before it. It goes on to contend that as regards Leeside’s claims against Lonsdale the Milan court became seised of them in July 2008 when the proceedings were served on Lonsdale (and also, a few days later, on Leofelis) and, as regards Leofelis’s indemnity claim against Lonsdale in those proceedings, on 26 February 2009 when Leofelis filed its defence and counterclaim in the Milan Proceedings in which it set out its claim to be indemnified by Lonsdale in respect of any damages for which Leofelis might be found liable to Leeside arising out of Leeside’s complaints. This indemnity claim, it says, was made before service on Leofelis (in Switzerland) of the 2009 Proceeding which occurred on 30 March 2009, service being the appropriate manner by which, under English law, the English court became seised of the 2009 Proceedings for Lugano Convention purposes: see Phillips v Symes (№. 3) [2008] UKHL 1; [2008] 1WLR 180 at [10] and following.

On behalf of Leofelis Miss Michaels submitted that the Milan Proceedings and the 2009 Proceedings were related actions because the Milan court is being asked to assess damages for unfair competition and lack of exclusivity suffered by Leeside while it was Leofelis’s sub-licensee of the Lonsdale marks and that in order to do so and, in particular, in order to assess the respective liabilities to Leeside of both Lonsdale and Leofelis (and of Lonsdale to Leofelis in respect of Leofelis’s indemnity claim and vice versa since there are cross-claims) it would have to make a finding as to when and by whom the Licence Agreement was terminated.

Adopting the broad commonsense approach to be adopted in considering whether two sets of proceedings are related actions, having regard to the objective of article 22 (ie, avoiding the risk of irreconcilable judgments) (see Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32 at 40 to 41) Miss Michaels submitted that it was manifestly the case that if both sets of proceedings went ahead there was a real risk of irreconcilable judgments on the issue concerning the date of (and therefore the reasons for) the termination of the Licence Agreement. She submitted that there was no reason why the discretion conferred by article 22 should not be exercised in favour of a stay and, given the risk of irreconcilable judgments if there should be no stay, good reason why the discretion should be exercised in favour of a stay. She submitted that, in considering discretion, this court should not seek to come to any view on Lonsdale’s contention that the Milan Proceedings were a ploy or a contrivance or that, for other reasons, the Milan Court should accede to Lonsdale’s challenge to the exercise there of jurisdiction over it. Nor, she submitted, should this court come to any view on the merits and likely speed of disposal of the 2009 Proceedings in advance of any defence being served in those proceedings.

For Lonsdale Mr George Leggatt QC, appearing with Mr Jasbir Dhillon, submitted that the applicable article was not, as Miss Michaels had contended, article 22 of the Lugano Convention but article 28 of Council Regulation (EU) №. 44/2001 of 22 December 2000 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) (“the Regulation”), the wording of which is for present purposes identical to article 22 of the Lugano Convention. The significance of the correct regime is that under article 30 of the Regulation “…a court shall be deemed to be seised [of proceedings] …at the time when the document instituting the proceedings or an equivalent document is lodged with the court…” rather than when the process is served on the defendant in question. The result, he submitted, is that although Leeside’s claim against Lonsdale in the Milan Proceedings was lodged with the Milan court on 23 June 2008 and, therefore, long before the 2009 Proceedings were lodged with this court (which occurred on 10 February 2009) Leofelis’s claim against Lonsdale in the Milan Proceedings for an indemnity was not lodged with the Milan court until (at the earliest) 26 February 2009. Thus, he submitted, it was not open to Leofelis to claim that the Milan court was seised of its claim against Lonsdale prior to this court becoming seised of Lonsdale’s claims in the 2009 Proceedings against Leofelis. This meant, he said, that the degree of connection between the Milan Proceedings and the 2009 Proceedings, which the court is required to consider under article 28(3), falls to be decided - so far as the Milan Proceedings are concerned - by a consideration of Leeside’s claims in those proceedings alone.

In my judgment, Mr Leggatt is right in his submissions on this point. The Lugano Convention is immaterial to the issue. The fact, which Mr Leggatt accepts, that Leofelis is domiciled in Switzerland and, let it be assumed, is only domiciled in Switzerland, which is not a Member State of the European Union is irrelevant to the operation of article 28 of the Regulation. That article and the other articles in Section 9 are concerned with proceedings which take place in the courts of different Member States. The obligation imposed by article 27 (in the case where the proceedings involve the same cause of action and between the same parties) and the discretion conferred by article 28 (where there are “related actions”) fall to be applied by the courts of Member States in the circumstances set out in those articles. The domicile of the particular litigant has no bearing on the application of the articles if the circumstances set out in the articles are found to exist. As the two courts in question in the current dispute are in Member States - Italy and the United Kingdom - the Regulation is in point.

Miss Michaels sought to rely on article 54B of the Lugano Convention. I shall content myself by saying that, in my judgment, that article is irrelevant to the present question.

It follows therefore that although Leeside’s claim in the Milan Proceedings pre-dates the 2009 Proceedings, Leofelis’s indemnity claim in Milan Proceedings does not. The latter claim is not therefore a related action for the purpose of this application.

This conclusion means that I do not have to concern myself with the question when, if the Lugano Convention was in point, the Milan court became seised of Leofelis’s indemnity claim against Lonsdale in the Milan Proceedings. I would merely mention that Mr Leggatt did not accept that if the Lugano Convention was in point the Milan court became seised of the indemnity claim before this court became seised of the 2009 Proceedings.

That brings me to the question whether Leeside’s claims (and the defences to them) in the Milan Proceedings and the 2009 Proceedings are to be regarded as “related actions”. In the sense that both are concerned with licences for the manufacture and distribution on mainland Europe of clothing products bearing the Lonsdale marks - the one by Lonsdale in favour of Leofelis and the other (by way of sub-licence) by Leofelis in favour of Leeside - it may be said that the two proceedings are related. But the question is not whether the two proceedings are to any degree related or connected but whether, as article 28(3) puts the matter:

“…they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”

What does this mean? Mr Leggatt drew my attention to guidance provided by the Court of Appeal in Research in Motion UK Limited v Visto Corporation [2008] EWCA Civ 153; [2008] FSR 20. In the judgment of the court the following appeared (at [36 to 37]):

“36.

…Article 28 involves a different concept [from article 27] tested by reference to the matters referred to in Art. 28(3). The exercise of seeing whether actions are related may well require one to look beyond the claim documents and into the defences…

37.

…[i]ts effect [ie of article 27] is not entirely mechanical. It requires an assessment of the degree of connection, and then a value judgment as to the expediency of hearing the two actions together (assuming they could be so heard) in order to avoid the risk of inconsistent judgments. It does not say that any possibility of inconsistent judgments means that they are inevitably related. It seems to us that the Article leaves it open to a court to acknowledge a connection, or a risk of inconsistent judgments, but to say that the connection is not sufficiently close or the risk is not sufficiently great, to make the action related for the purposes of the Article. Mechanics do not, for once, provide a complete answer.”

Miss Michaels described that decision as a very particular one on its facts. But, assuming that to be so, that circumstance does not detract from the value and applicability of the guidance cited above.

What is the position here? Although it refers to the judgments in the 2005 Proceedings (both in the court below and on appeal) Leeside assumes, in its Milan claim, that it had an untrammelled right to manufacture and distribute clothing bearing the Lonsdale marks on mainland Europe (and not just in Italy) up to 31 December 2008 and for a further six years if Leofelis exercised its right under the Licence Agreement to extend the agreement. Its claim assumes the validity of its sub-licence both as to geographical extent and as to duration. Its concern is to recover damages for losses it claims to have suffered up to 31 December 2008 (and for loss of the right to extend the sub-licence to 31 December 2014) as a result of what it says was the impact of Lonsdale’s activities on its rights as sub-licensee. It claims against Leofelis as its licensor for failing in breach of the terms of the sub-licence to provide exclusivity to it in the manufacture and distribution of the products bearing the Lonsdale marks in the sub-licence area. It claims against Lonsdale for unfair competition.

As I have mentioned, one of the issues decided by the Court of Appeal in the 2005 Proceedings in their decision handed down a few days after Leeside had launched its Milan Proceedings was that the purported extension of Leeside’s sub-licence on 20 December 2002 to include other countries on mainland Europe was invalid. The Court had so concluded because the necessary consent to the extension had not been obtained (or requested). The question whether the 16 January 2006 addendum (by which Leofelis purported to extend the period of the sub-licence until 31 December 2008 and replace the Swiss law and jurisdiction clause in the sub-licence of 20 December 2002 with a clause providing for Italian law and jurisdiction) was similarly invalid did not fall to be decided by the Court of Appeal. Since Lonsdale’s consent to the addendum was neither sought nor obtained, it has not been suggested before me that the addendum was in some way binding upon Lonsdale.

In its defence, not only does Leofelis not raise as an issue the termination of its licence from Lonsdale but it proceeds on the assumption that Leeside’s sub-licence did indeed lawfully continue to 31 December 2008. In terms it pleads (according to the less than perfect translation from the Italian placed before me) that it “…cannot deny the facts of evidence and the repeated events of distribution of adversarial nature complained by Leeside, recognising, nonetheless, the exclusive responsibility of [Lonsdale].” In short, it admits that what Leeside says happened did happen and seeks to cast on Lonsdale the responsibility for Leeside’s losses.

In its defence Lonsdale pleads that its licence to Leofelis was terminated in November 2007. That is an obvious reference to the Lonsdale action in terminating the Licence Agreement for breach by Leofelis. But that is only a passing reference in what is otherwise a document which deals with a host of other matters.

By contrast, the 2009 Proceedings are not in any way concerned with Leeside’s claims - whether with the losses which Leeside says that it has suffered or with the events which Leeside alleges caused those losses - but solely with the two matters earlier identified: (1) the legality of its action in terminating the Licence Agreement on 2 November 2007 and (2) (and assuming that it was so terminated) what its losses are as a consequence of Leofelis’s breach (essentially, the unpaid royalties accrued due to Lonsdale prior to termination of the Agreement and those which it would have received for the remainder of the 6-year licence period following termination).

The only issue which, so far as I can see, will arise on the first aspect is whether, if the ground in fact relied upon was insufficient, Leofelis can establish that it had other grounds for terminating the Licence Agreement for Lonsdale’s breach on 28 September 2007. For if such a defence were to fail it is difficult to see why Lonsdale was not entitled to terminate the Licence Agreement, and did effectually terminate it, for Leofelis’s repudiatory breach in failing and refusing to pay the royalty instalment due on 1 October 2007. None of this is raised by Leofelis as a defence to Leeside’s claims in the Milan Proceedings.

That being the position, are the two sets of proceedings “related actions” in the sense intended by article 28(3) as explained by the Court of Appeal in Research in Motion?

In agreement with Mr Leggatt, I am of the view that they are not. I am not persuaded either that the connection between the two proceedings is sufficiently close or that the risk of inconsistent judgments is sufficiently great to make the actions “related” within the meaning of Article 28. In particular, Mr Leggatt submitted that given the way that matters have thus far been pleaded by Leeside in the Milan Proceedings (and so far defended) it is by no means evident that the issue of Leofelis’s action in purporting to terminate the Licence Agreement for Lonsdale’s breach - the only area of potential overlaps presently affecting the two proceedings - will arise for decision in the Milan Proceedings. I agree.

In case I am wrong about that and the two proceedings are properly to be regarded as “related actions” the issue of discretion arises since article 28 confers upon the court a discretion whether to stay the later proceedings. The discretion is separate from the value judgment which the court makes in deciding whether the two proceedings are “related actions”.

Mr Leggatt referred me to Owens Bank Ltd v Bracco (Case C-129/92) [1994] QB 509, a decision of the ECJ. In his opinion in that case the Advocate General (Lenz) said this of the discretion in what is now article 28 of the Regulation:

“75.

The decision required in the context of article 22 of the Convention is a discretionary decision. It goes without saying that the circumstances of each individual case are particularly important here. The national courts must bear in mind that …the aim of this provision is

‘to prevent parallel proceedings before the courts of different contracting states and to avoid conflicts between decisions which might arise therefrom.’

It would therefore be appropriate in case of doubt for a national court to decide to stay its proceedings under article 22: see in this regard the judgment of the High Court (Ognall J) of 31 January 1990 in Virgin Aviation Services Ltd v CAD Aviation Services [1991] ILPr 79…

76.

Furthermore, there are three factors which may be relevant to the exercise of the discretion vested in national courts by virtue of article 22, but this does not mean that other considerations may not also be important. Those three factors are (1) the extent of the relatedness and the risk of mutually irreconcilable decisions; (2) the stage reached in each set of proceedings, and (3) the proximity of the courts to the subject matter of the case.

77.

Clearly, the closer the connection between the proceedings in question, the more necessary it would appear for the court second seised to stay its proceedings. If other factors are of some relevance to the proceedings pending before the court first seised, it may be appropriate for the court second seised not to stay its proceedings… The more the proceedings are related, however, and the greater the risk of the courts arriving at irreconcilable decisions, the more likely it will be that the court second seised should stay it proceedings in accordance with article 22.

78.

…it is also legitimate for the court second seised to have regard, when reaching its decision regarding a possible stay, to the stage reached in the parallel proceedings. The proceedings before the court first seised should of course have reached a more advanced stage than the proceedings before the court subsequently seised of a related action. Where this is not the case, however, and where there is no prospect of a decision in the first set of proceedings, there is nothing to prevent the court subsequently seised from taking account of this when arriving at its discretionary decision.

79.

Finally, it goes without saying that in the exercise of such discretion regard may be had to the question of which court is in the best position to decide a given question …”

Miss Michaels submitted that as the question of discretion never in the event arose in Owens (because the ECJ held that article 22 was not applicable) the Advocate General’s observations on the topic were obiter. She is correct about that: see paragraph [38] of the judgment in that case where the ECJ stated in terms that the question of discretion did not call for a reply. But, as Mr Leggatt pointed out, the courts in this country have regularly applied the guidance offered by the Advocate General in the passage to which I have referred. See, for example, Centro Internationale Handelsbank Attorney-General v Morgan Grenfell Trade Finance Ltd [1997] CLC 870 at 893 and Cooper Tire & Rubber Company v Shell Chemicals UK Ltd [2009] EWHC 2609 (Comm) at [105]).

Miss Michaels also submitted that any delay in the conduct of the Italian Proceedings is not a factor to which this court should attach weight. She referred to Erich Gasser GmbH v MISAT Srl (Case C-116/02) [2005] QB 1, and in particular to paragraphs 70 to 73 of the judgment of the ECJ where it was held that the application of article 21 of the Brussels Convention (which is the same as article 27 of the Regulation) should not be affected by excessive delays in dealing with cases in the court first seised as that would be “manifestly contrary both to the letter and spirit and to the aim of the Convention” (see paragraph 70) in that (as stated in paragraph 72):

“The Brussels Convention is necessarily based on the trust which the contracting states accord to each other’s legal systems and judicial institutions. It is that mutual trust which has enabled a compulsory system of jurisdiction to be established, which all the courts within the purview of the Convention are required to respect, and as a corollary the waiver by those states of the right to apply their internal rules on recognition and enforcement of foreign judgments in favour of a simplified mechanism for the recognition and enforcement of judgments…”

Miss Michaels accepted that the decision in that case was concerned with article 21 which dealt with the case where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States. It requires any court other than the court first seised to stay its proceedings until such time as the jurisdiction of the court first seised is established and, when that has occurred, to decline jurisdiction in favour of that court. She submitted, nevertheless, that the policy underlying the decision of the ECJ to disregard delays where article 21 is concerned was of wider import and not confined simply to article 21. In any event, she submitted, slowness of process is scarcely something of which Lonsdale can complain: it did not issue its 2009 Proceedings until 15 months after its termination of the Licence Agreement on which it relies.

In my judgment, the three factors highlighted by the Advocate General in Owens are matters which the court may properly bear in mind in the exercise of the discretion. That is not to say, as the Advocate General’s remarks in terms make clear, that there are not others which may be applicable. I would merely sound one caveat. That concerns the reference in the Advocate General’s opinion to a presumption in favour of the application for a stay where the case is one of doubt. In Centro at pages 891 to 892 Rix J doubted that there could be a general presumption of the kind to which the Advocate General referred. He observed in particular that “the situation is potentially too variable for such sweeping statements [that there is such a presumption] and that more caution is needed”. Suffice it to say that I respectfully agree with the different view taken by Rix J in Centro on this particular aspect of the discretion and do so for the reasons which appear in a passage which immediately follows my brief citation from his judgment.

The discretion in the instant case clearly favours the refusal of a stay. I say that for the following reasons which largely follow those advanced in submission by Mr Leggatt.

The first is the question of connectedness and risk of irreconcilable judgments - the first of the three factors identified by the Advocate General in Owens. Assuming, as the question of discretion necessarily does, that the threshold requirement of “relatedness” has been met, the fact remains that the degree of connection is hardly close: for the most part the Milan Proceedings are concerned with wholly unrelated matters. As to the risk of irreconcilable judgments, Lonsdale’s evidence, which was unchallenged by Leofelis, is that if the termination of the Licence Agreement (ie, when, by whom and on what ground) should have to be determined in the Milan Proceedings, the issue will be decided by the Milan court as a matter of English law, not least because, as I have mentioned, the Licence Agreement contains an English choice of law clause, and the Milan court will look to experts in English law to assist it to determine the issue. Indeed, the evidence continues, the Milan court would treat any decision by the English court on when and by whom the Licence Agreement was terminated as conclusive of that issue. Mr Leggatt submitted, and I agree, that in the light of that evidence a stay, so far from reducing the risk of inconsistent decisions, would increase that risk in that, without a stay, the decision of the English court (in the 2009 Proceedings) on the issue will be accepted by the Milan court.

The second is that of timing, namely the stage reached in each set of proceedings. Contrary to Miss Michaels’ submission, the pace of process of the Milan Proceedings is a material consideration. This is not because the English court is passing judgment on the efficacy of the Italian court process but simply because, as the Advocate General in Owens explains, a consideration of which court is likely to pronounce first on the matter which gives rise to the connectedness is relevant to whether the later proceedings should be stayed. On this, the evidence is largely all one way. On Lonsdale’s unchallenged evidence, the trial of the Milan Proceedings is not likely to be completed before early 2013 and if there is an appeal before late 2015. This is so whether, as Leofelis contends but Lonsdale disputes, the Milan court has already rejected Lonsdale’s challenge to the assertion of jurisdiction over it, since, according to Leofelis’s evidence, the Milan court envisaged that Lonsdale might wish to reopen the question. If that happens, a decision on jurisdiction is not likely to be given before early 2011. In short, Lonsdale’s unchallenged evidence is to the effect that the claims in the Milan Proceedings, which are contested, will take several years to conclude assuming Lonsdale’s challenges to the jurisdiction of the Milan court are unsuccessful. By contrast, in the 2009 Proceedings, even though it is not at all clear what matters Leofelis intends to rely upon in support of its contention that it was entitled to terminate the Licence Agreement on 28 September 2007 on grounds other than the one on which it in fact relied, the great likelihood must be that this can be determined within a relatively short period and, in all probability, long before it would come to be determined in the Milan Proceedings. In short, time favours the refusal of a stay.

As to “proximity” - the third of the factors identified by the Advocate General in Owens - namely, which court is the more suitable to determine the issue which could give rise to inconsistent judgments, the English court is obviously in the better position to do so as the issue is one of English law. Moreover, it comes ill from Leofelis which agreed, by clause 13.6 of the Licence Agreement, that the English court should have exclusive jurisdiction to seek by the stay the exercise in its favour of a discretion to enable a court other than the English court to reach a conclusion on the matter.

Last, as Mr Leggatt pointed out, it is to be noted that in its points of claim in the inquiry directed by Evans-Lombe J in the 2005 Proceedings, Leofelis has raised (at paragraph 19) the lawfulness of its purported termination of the Licence Agreement on 28 September 2007. At all events that paragraph pleads the termination and presumably does so on the footing that it is a matter which is material to its damages claim in the inquiry. It is fundamental to Lonsdale’s position that that assertion is wrong. It appears therefore to be an issue to be determined in that inquiry. If the issue is to be decided in any event in the inquiry, the stay that Leofelis seeks of the 2009 Proceedings will not reduce the risk of irreconcilable judgments if otherwise there is such a risk.

For all of these reasons I am not willing to grant the stay which Leofelis seeks. The application therefore falls to be dismissed.