Wilko Retail Ltd v Buyology Ltd

This is an application for summary judgment or alternatively judgment on admissions in an action for infringement of trade marks and passing off. The defendant (“Buyology”) admits infringement. At the hearing judgment on admissions was not resisted. The single point at issue was whether the relief granted should include an order for disclosure in the form granted in Norwich Pharmacal [1974] AC 133. Specifically the claimant (“WLR”) seeks an order that Buyology should disclose the names and addresses of Buyology’s suppliers of the infringing goods.

WRL runs a substantial retail business with some 370 stores in the United Kingdom which sell a wide variety of consumer products. The stores are generally referred to as “Wilko’s”.

Buyology is also a retailer, though smaller, having 8 outlets in the south west of England and in Wales. It specialises in the sale of end-of-line or discontinued stock at discount rates.

The proceedings are for infringement of three UK registered trade marks, all in the form of the word WILKO, and for passing off. Buyology does not deny that it has sold goods bearing the sign WILKO without the consent of WRL, although it says that it was assured by its suppliers that it was entitled to sell the goods.

The first letter of complaint from WRL’s legal department to Buyology is dated 30 October 2012. The two principal requirements contained in the letter were that Buyology should remove Wilko-branded products from sale and that Buyology should disclose the name and address of its supplier of those products. The correspondence between the parties continued for some time. WRL’s insistence that Buyology should disclose details of its supplier was repeated in letters of 12 April 2013 and 21 June 2013.

The Claim Form was issued on 5 August 2013 and the Particulars of Claim served on 17 August 2013. The Particulars made no mention of WRL’s claim to disclosure of the details of Buyology’s suppliers either in the body of the pleading or in the prayer for relief.

On 31 October the Defence was served admitting infringement and including an undertaking not to sell any Wilko branded products without WRL’s consent. Such sales nonetheless continued. Buyology says that the sales were accidental and small in number. WRL does not suggest that the sales were in deliberate breach of the undertaking but says that Buyology took an excessively casual approach to its obligations.

In a letter dated 6 November 2013 to Buyology’s solicitors WRL complained about these continuing sales from Buyology’s stores in Bridgewater, St Austell and Plympton. The letter also made a proposal to resolve the proceedings. The letter included the following:

“The simplest way to deal with [the proceedings] is for the parties to agree a form of Order and make an application to the Court accordingly. This would bring the proceedings to a close save for our right to enforce the terms of that Order if this should become necessary.

We attach the form of Court Order which would be acceptable to use and would urge your client to agree to its terms.”

The draft order attached (“the 6 November Draft”) was in the form of a consent order which broadly followed the relief sought in the prayer in the Particulars of Claim including an order for injunction, delivery up, an inquiry as to damages or at WRL’s option an account of profits, and costs. The order proposed did not contain any requirement that Buyology should disclose any information regarding its suppliers.

Buyology’s solicitors responded in a letter dated 20 November 2013:

“Our client is prepared to agree to the terms of the draft Order. We are instructed however to address a number of provisions and do so as follows:

…

Our client is also prepared for you to collect the infringing stock from its stores. Further our client is prepared for you to attend at each of our client’s stores to inspect that it is no longer selling your products.

Whilst our client will no longer offer for sale our products in any of its stores, we consider it important that you are made aware that since the date that our client filed its Defence, it has been offered “Wilko” branded products from a number of sources and there have been no requirements from any of those sources in relation to de-branding/de-labelling.

As to paragraph 4, our client is prepared to submit to an inquiry or an account of profits. However, in the interests of saving costs and time for both parties, our client would be willing and consider it to be more beneficial for the parties to attempt to reach agreement. We trust you agree.

…

In summary, therefore, our client is prepared to agree to your draft Order. It would prefer to reach agreement as to a payment in respect of the profits as opposed to proceeding with an inquiry and we welcome your comments on that.”

Ms Chantrielle, who appeared for Buyology, submitted that the letters of 6 and 20 November 2013 constituted an offer by WRL and an acceptance by Buyology and thus a binding agreement between the parties to settle these proceedings by seeking a court order in the terms of the 6 November Draft.

Ms Pickard, who appeared for WRL, submitted that there was no binding agreement. Buyology’s letter of 20 November 2013 was not an acceptance of WRL’s offer but a counter-offer which was not accepted. She said that the counter-offer was to amend the 6 November Draft in two ways:

In my view this is not a fair reading of the letter of 20 November 2013. The letter twice states, in clear and unequivocal terms, that Buyology agreed that these proceedings should be settled on the terms set out in the 6 November Draft. The two so-called qualifications were nothing more that suggestions from Buyology as to how best to implement the terms. As to the first, allowing WRL to pick up the infringing products would be just as effective in handing them over to WRL as would Buyology putting them in a van and taking them to WRL’s premises. Buyology suggested the first means by way of offering an additional concession: WRL would be allowed to check Buyology’s stores if they wanted to. As to the second so-called qualification, in my view this was nothing more than a very reasonable indication from Buyology that it was willing to cut out the necessity for an inquiry or account and instead negotiate an agreement on quantum. It was not a counter-offer in response to the proposed term that WRL would be entitled to an inquiry or account.

I therefore take the view that there was a binding contract between the parties. That contract has now been performed by the parties attending court and agreeing to an order in the terms of the 6 November draft.

That leaves the application for disclosure of details of Buyology’s suppliers. Ms Pickard submits that even a binding agreement between the parties would make no difference to WRL’s entitlement to seek Norwich Pharmacal disclosure. This is an application independent of the proceedings proper. It could be made before, during or after the conclusion of the proceedings and therefore the right to seek details of Buyology’s suppliers cannot be curtailed by an agreement to settle the proceedings.

Ms Chantrielle submitted that when the parties settled these proceedings by agreeing to the terms of the 6 November Draft, this was understood and intended to draw a line under all claims each party has against the other relating to this dispute. WRL was now belatedly seeking to impose an extra head of relief on Buyology outside the scope of the agreed terms. WLR’s application was an abuse of process.

Ms Chantrielle also submitted that WLR could not get around the contract by starting fresh proceedings in which Norwich Pharmacal relief was sought. To do so would be contrary to the rule in Henderson v Henderson requiring finality in litigation, see (1843) 3 Hare 100, at 114, 115, per Sir James Wigram V-C, explained by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2002] 2 AC 1, at 31.

I have quite a lot of sympathy with this. It may be that Buyology thought that a deal had been reached to end all aspects of the dispute and were dismayed to find that a key aspect of it was reopened after all appeared to have been settled. Nonetheless I do not think that WRL is barred from seeking Norwich Pharmacal relief. It seems to me that the agreement settled all claims each party had against the other within the four corners of the pleaded claim. The Particulars of Claim did not include any claim to disclosure of Buyology’s suppliers. The dispute in the correspondence regarding such disclosure was outside the pleaded claim at the time of the agreed settlement.

It is also possible that Buyology had this in mind. The letter of 20 November 2013 in which Buyology’s solicitors accepted the offer in WLR’s letter of 6 November 2013, stated near the beginning, before going on to accept the offer:

“We are instructed at the outset of this letter to say that our client will under no circumstances disclose details of its suppliers to you.”

It is possible to read the letter as (a) an acceptance of WLR’s offer and (b) a clear rejection of any separate claim regarding disclosure of the details of Buyology’s suppliers in the event that WLR were to persist in such a claim.

In all events I do not take the view that the agreement shut out WLR’s right to seek such disclosure. I do not think that Henderson v Henderson assists Buyology either. WLR’s application was made as part of these proceedings, not in a fresh action after the proceedings were concluded. In my view WLR was entitled to do that without having to amend the Particulars of Claim.

There is no doubt that subject to any prohibitive effect of the agreement between the parties, there is jurisdiction to grant the order for disclosure sought by WRL. Ms Pickard relied on the judgment of Jacob J in Jade Engineering (Coventry) Limited v Antiference Window Systems Limited [1996] FSR 461. She also referred to art.8 of Directive 2004/48/EC on the enforcement of intellectual property rights:

It is important to note that Article 8 was implemented in Scotland, by regulation 4 of The Intellectual Property (Enforcement, etc.) Regulations 2006, but not in England and Wales. The Explanatory Note at the end of the 2006 Regulations says this:

“Regulation 4 implements Article 8 of the Enforcement Directive in Scotland. It creates a new type of court order, for disclosure of information about infringing goods and services. By reason of the House of Lords decision in Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133 no provision is necessary to implement this obligation in England and Wales or Northern Ireland”

Ms Pickard submitted that even though art.8 has not been implemented in this jurisdiction, it provides guidance to the interpretation of the law in relation to Norwich Pharmacal disclosure. I think this would have been an ambitious submission had it formed the platform to an argument that I should disregard or colour any aspect of the leading authorities on Norwich Pharmacal, but it did not.

Ms Chantrielle referred me to the judgment of the Supreme Court in Rugby Football Union v Consolidated Information Services Ltd (formerly Viagogo Ltd) [2012] UKSC 55; [2012] 1 WLR 3333. Lord Kerr JSC (with whom Baroness Hale, Lord Clarke, Lord Reed JJSC and Lord Phillips agreed) said this in relation to Norwich Pharmacal disclosure:

“[17] The essential purpose of the remedy is to do justice. This involves the exercise of discretion by a careful and fair weighing of all relevant factors. Various factors have been identified in the authorities as relevant. These include: (i) the strength of the possible cause of action contemplated by the applicant for the order: the Norwich Pharmacal case [1974] AC 133, 199 f–g, per Lord Cross of Chelsea, Totalise plc v The Motley Fool Ltd [2001] EMLR 750, para 27, per Owen J at first instance, Clift v Clarke [2011] EWHC 1164 (QB) at [14], [38], per Sharp J; (ii) the strong public interest in allowing an applicant to vindicate his legal rights: the British Steel case [1981] AC 1096, 1175 c–d , per Lord Wilberforce, the Norwich Pharmacal case [1974] AC 133, 182 c–d, per Lord Morris of Borth-y-Gest, and p188 e–f, per Viscount Dilhorne; (iii) whether the making of the order will deter similar wrongdoing in the future: the Ashworth case [2002] 1 WLR 2033, para 66, per Lord Woolf CJ; (iv) whether the information could be obtained from another source: the Norwich Pharmacal case [1974] AC 133, 199 f–g, per Lord Cross, the Totalise plc case [2001] EMLR 750, para 27, President of the State of Equatorial Guinea v Royal Bank of Scotland International [2006] UKPC 7 at [16], per Lord Bingham of Cornhill; (v) whether the respondent to the application knew or ought to have known that he was facilitating arguable wrongdoing: the British Steel case [1981] AC 1096, 1197 a–b, per Lord Fraser, or was himself a joint tortfeasor, X Ltd v Morgan-Grampian (Publishers) Ltd [1991] 1 AC 1, 54, per Lord Lowry; (vi) whether the order might reveal the names of innocent persons as well as wrongdoers, and if so whether such innocent persons will suffer any harm as a result: the Norwich Pharmacal case [1974] AC 133, 176 b–c, per Lord Reid; Alfred Crompton Amusement Machines Ltd v Customs and Excise Comrs (No 2) [1974] AC 405, 434, per Lord Cross of Chelsea; (vii) the degree of confidentiality of the information sought: the Norwich Pharmacal case [1974] AC 133, 190 e–f, per Viscount Dilhorne; (viii) the privacy rights under article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms of the individuals whose identity is to be disclosed: the Totalise plc case [2001] EMLR 750, para 28; (ix) the rights and freedoms under the EU data protection regime of the individuals whose identity is to be disclosed: the Totalise plc case [2001] EMLR 750, at paras 18–21, per Owen J; (x) the public interest in maintaining the confidentiality of journalistic sources, as recognised in section 10 of the Contempt of Court Act 1981 and article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms: the Ashworth case [2002] 1 WLR 2033, para 2, per Lord Slynn of Hadley.”

The only factor specifically relied on by either party was factor (iv), referred to by Ms Chantrielle. Paragraph 5 of the Particulars of Claim suggests that only two parties have been licensed by WRL to sell Wilko branded products. Buyology’s evidence indicated that the chain of supply of infringing goods to Buyology could involve up to five links. Ms Chantrielle submitted that it would be simpler and more effective to seek disclosure from the top of the chain. Ms Pickard said that the first party in the chain of supply to Buyology might be one of several suppliers to WRL, as opposed to its licensed distributors. I think the problem with seeking disclosure from either category of trader would be the lack of evidence that any one of them was involved in the supply of infringing goods and so is mixed up in a tortious act.

In my view the disclosure sought in this case – whether it should be ordered – depends on the balance of irreparable harm, analogous to the balance applied in the context of an application for an interim injunction (see Eli Lilly & Co Ltd v Neolab Ltd [2008] EWHC 415 (Ch); [2008] FSR 25, at [32], applying the judgment of the Court of Appeal in Sega Enterprises Ltd v Alca Electronics [1982] FSR 516).

The written evidence of Adam Gilbert, in-house solicitor employed by WRL, was that without disclosure of Buyology’s suppliers WRL would be unable to take appropriate action to protect its trade marks and to prevent a secondary market in its branded goods. He said that Buyology had asserted that it is continually offered infringing products which shows that this is a big problem. However this was as far as the evidence went. It must be assumed that there will be no further infringing products reaching the market through any supply chain ending with Buyology since Buyology is now the subject of an injunction to restrain the sale of such products. There was no attempt to assess whether or the extent to which there may be other chains of supply and if so, whether, why and the extent to which they would cause irreparable harm to WRL. I can see that other chains might possibly exist and if so that they could cause irreparable harm, but I have no impression as to where any such harm would lie on the spectrum between negligible and serious.

Christopher Stanford, who is Buyology’s company secretary, gave written evidence for Buyology. He said that the retail industry is a small and close knit community and if Buyology were ordered to make disclosure of its suppliers there would be a complete lack of trust in Buyology. Its reputation would be severely undermined in the eyes of its suppliers who would be concerned about future disclosures by Buyology. It seems to me that Buyology’s business might well suffer irreparable harm if disclosure is ordered. Resentful suppliers could find themselves subject to investigations on behalf of WRL to see if they had any involvement with the infringing products and may risk litigation, justified or otherwise.

In some instances it could be said that a defendant who has sold infringing products has only itself to blame if it is in this sort of predicament and the irreparable harm it may suffer should accordingly be discounted. In my view this is not that sort of case. It is not suggested that before WRL raised its complaint Buyology supplied the products complained of knowing them to be infringing. The worst that can be said about its behaviour is that once put on notice by WRL it was not as efficient as it might have been in ensuring that no Wilko products were sold without being first de-branded. Buyology’s pleaded Defence was exemplary in admitting the wrongdoing which had happened, as it accepted. When WRL offered to settle, essentially on terms that Buyology should provide all the relief sought in the Particulars of Claim, Buyology did not prevaricate and accepted the offer. WRL will be compensated for damage caused by Buyology and such damage will not recur.

I have come to the view that on the balance of irreparable harm as it appears from the evidence, I should not order the disclosure sought by WRL.