Kangol Ltd v Hay & Robertson Plc Rev 1

A contractual termination clause must be construed as a whole. Where one part provides for termination forthwith on non-payment and another addresses payment when due, the latter should be given a coherent commercial meaning rather than converted into a general cure period. A provision allowing termination for failure to pay a minimum royalty may protect a licensee who has already paid the relevant amount through running royalties, but it does not ordinarily permit late payment after termination to revive the licence.

Relief against forfeiture is generally inappropriate for a trade mark licence because the resulting uncertainty and delay are inconsistent with the nature of the licence.

Kangol Limited granted a trade mark licence to Hay & Robertson plc, with Big Hit Limited participating as a former licensee and the vehicle through which the licence was administered. The agreement required quarterly payment of a minimum guaranteed royalty and permitted termination if that royalty was not paid when due.

After a minimum royalty instalment remained unpaid, Kangol served notice terminating the licence. The instalment was paid 14 days late. On an application under Part 8 of the Civil Procedure Rules, the High Court judge treated the termination as provisional and refused a declaration that it was valid. Kangol appealed. The administration issue was left open and was not pursued on the appeal. The central issue was the proper construction and effect of the termination clause.

1. Appeal allowed. The notice of termination dated 1 May 2003 was a valid termination, and the declaration sought was agreed. Costs were to be agreed.
2. Clause 9.2 had to be read as a whole. The words providing that Kangol might terminate forthwith on failure to pay the minimum royalty were inconsistent with treating termination as provisional and capable of being undone by payment within a reasonable further period. The comparison with clause 9.1 reinforced that conclusion: clause 9.1 expressly allowed a period to remedy other breaches, whereas clause 9.2 did not.
3. The latter part of clause 9.2 could nevertheless be given effect. The agreement distinguished between the minimum royalty and the running royalty. A licensee might have paid enough in running royalties to be substantially in credit against the minimum royalty, while still being required by clause 3.1 to make the minimum payment. The clause could protect that situation if the running-royalty surplus was in Kangol’s hands by the due date. It did not create a general right to cure non-payment by later payment.
4. The phrase “continue yearly” in clause 3.1 meant that the payment arrangements continued in the same way in each following year for which the licence remained in force.
5. Any implied term dealing with an accidental or very temporary delay would, at most, be extremely limited. It could not be expanded into a general term permitting payment within a reasonable time, and would not assist on these facts.
6. Relief against forfeiture did not arise because no application for it had been made. In any event, the reasoning approved in Sport International v Inter-footwear Limited treated a trade mark licence as an inappropriate context for the uncertainty and delay inherent in relief against forfeiture.

• Court of Appeal (Civil Division) allowed Kangol Limited’s appeal from the High Court Civil Division and held that the 1 May 2003 termination was valid.
• High Court Civil Division refused the declaration that the termination was valid, holding that the termination was provisional and had been avoided by the subsequent late payment.