Artpower Ltd v Bespoke Couture Ltd & Ors

An appellate court should not interfere with a primary finding of fact reached after the trial judge saw and heard the witnesses unless the finding was plainly wrong.

Contractual terms must be construed objectively and in light of their commercial purpose. Different expressions such as “termination” and “conclusion” may bear different meanings. A compensation obligation can remain outstanding while contractual collections continue to be sold and royalties earned.

A contractual restraint on trade requires clear language. A restriction on sales similar in price to licensed products does not ordinarily catch genuine discounted sales of out-of-season goods, even through a permanent outlet. It may apply where goods are manufactured primarily for that outlet under a sham sale rationale.

Artpower appealed from findings and contractual conclusions made by HHJ Raynor QC in the Chancery Division proceedings. The judge rejected Artpower’s allegations that the defendants had represented that O-Z Collection goods would no longer be sold after 31 August 2003. He held that the Side Letter required compensation payments after the Debenhams and BMB agreements had concluded. He also held that Bespoke’s sale of goods through its Bicester Village outlet breached clause 2.1(b) of the licence agreement.

Artpower challenged the factual findings and the construction of the compensation provision. Bespoke cross-appealed on the construction of clause 2.1(b). The central questions concerned appellate restraint on findings of fact, the meaning of “termination or conclusion”, and whether discounted out-of-season stock fell within the contractual restraint.

The court unanimously dismissed Artpower’s appeals on issues 1–3 and 5 and allowed Bespoke’s cross-appeal on issue 6. Jacob LJ gave the judgment of the court, to which Waller and Laws LJJ contributed.

1. Factual findings. Applying the approach recently re-examined in Assicurazioni v Arab Insurance [2003] 1 W.L.R. 577, the court held that an appellant challenging a primary finding reached after the judge had seen and heard the witnesses must show that the finding was plainly wrong. Artpower failed to meet that threshold. The written agreements and contemporaneous internal documents did not record the alleged assurance, the trial judge had found Mr Morris generally unreliable, and the evidence supported the conclusion that Artpower’s witnesses had made an assumption rather than received a representation. No adverse inference arose from the non-disclosure or later redaction of the underlying agreements.
2. Compensation under the Side Letter. “Termination” and “conclusion” were intended to have different meanings. Termination meant the ending of the contractual term, however that occurred. Conclusion had a different and wider meaning. The agreements had not concluded while O-Z collections continued to be sold and royalties continued to be earned. The judge was therefore right to treat the agreements as concluded when sales and royalty payments ceased, making the compensation payable in twelve monthly instalments. Earlier drafts were irrelevant to construction; the judge was right to rely on ICS v West Bromwich [1998] 1 WLR.
3. Clause 2.1(b). The clause restricted freedom to trade and therefore required clear, unambiguous language. Its meaning had to be assessed purposively in the context of clause 3.9, clause 6.1(f), and the definition of “Diffusion Line”. The clause was directed at ordinary price competition, not genuine sale prices. Discounted out-of-season goods first offered at Vigo Street could therefore be sold through a permanent Bicester outlet without engaging the restriction. Permanence and increased quantities manufactured did not, alone, prove that the operation was not a genuine sale. The court accepted that specially manufactured “Special Purchases” would breach the clause, but the alleged breach concerning “Mainline Surplus” was not established.
4. Order. Artpower’s appeals were dismissed and Bespoke’s cross-appeal was allowed. No injunction was available in relation to the Mainline Surplus sales.

1. Court of Appeal (Civil Division) — In [2005] EWCA Civ 981, Artpower’s appeals on the factual and compensation issues were dismissed. Bespoke’s cross-appeal concerning clause 2.1(b) was allowed.
2. High Court of Justice, Chancery Division — HHJ Raynor QC, sitting as a Judge of the High Court, rejected the alleged misrepresentation, held that compensation was payable after the agreements concluded, and found a breach of clause 2.1(b) concerning the Bicester outlet.