A Nelson & Co Ltd & Anor. v Guna SPA

A contractual obligation to transfer permits, licences or registrations may extend to registrations renewed during successive distribution agreements, even where the original notification pre-dated the latest agreement. Contractual language must be construed in its commercial and factual context, but the court must interpret the words used rather than invent reasonable terms.

A claimant complies with the duty to mitigate by taking reasonable steps in the circumstances. The duty does not require it to take risks outside the normal course of business, particularly in a fluid and uncertain regulatory environment. A competition-law defence must identify the relevant primary facts, market and alleged effect with sufficient particularity, and must be proved by cogent evidence.

The claimants, English companies in the Nelsons group, supplied homeopathic flower-remedy products to Guna SPA for distribution in Italy. Their distribution agreement expired, followed by a short interim arrangement on substantially the same terms. After termination, Guna refused to transfer Italian product registrations, relying on the wording of the interim arrangement and on the effect of transfer upon its own products.

Nelsons claimed the registrations and damages for loss of the Italian market. Guna disputed contractual liability, alleged failure to mitigate by selling the products as food or through alternative channels, and pleaded that the agreement was void under Article 101 TFEU. The issues were whether the transfer clause continued during the interim arrangement, whether it covered the registrations, whether Nelsons had mitigated its loss, and whether the competition-law defence was established.

1. Contractual construction. The interim arrangement continued the terms of the 2005 Agreement for a limited period, except for provisions concerning duration and termination. Read as a whole and against the commercial background, “termination” did not remove the whole of clause 7. Clear words would have been needed for the parties to surrender the transfer right for the short extension.
2. Transfer of registrations. The registrations were permits, licences or registrations within clause 7.3.7 and were necessary for the importation and sale of the products as homeopathic products in Italy. Although first obtained in 1995, they remained active only through renewals and payments in 2001 and 2003. In substance, the registrations were obtained in respect of the successive agreements. The clause therefore required Guna, so far as possible, to transfer them to Nelsons or its nominated distributor. The adverse effect upon Guna’s own products was irrelevant to construction because that consequence was not within the parties’ contemplation when the agreements were made.
3. Mitigation. Guna bore the burden of proving failure to mitigate. Nelsons had appointed a carefully selected distributor, obtained regulatory advice, pressed for re-entry and offered a limited indemnity. Its refusal to sell through the food channel while the registrations remained with Guna was reasonable. The duty to mitigate did not require Nelsons to take risks outside the normal way of business. The claim therefore failed.
4. Article 101 TFEU. The defence was inadequately pleaded and proved. It did not sufficiently identify the relevant market, the factual basis for alleged competition, the effect on trade between Member States, or the competitive impact of the individual clauses. Market definition required a sophisticated economic assessment, and the evidence was general, anecdotal and unsupported by adequate expert or reliable market evidence. Guna failed to establish its case.
5. The claimants succeeded on liability. Counsel were directed to provide corrections, a draft order and any matters for the hand-down hearing.