Arsenal Football Club Plc v Reed

A consent order is construed by the ordinary principles applicable to a commercial contract. Its meaning is determined from the perspective of a reasonable person with the relevant background knowledge, while negotiations may be used as factual background but not to infer contractual meaning. An obligation to supply goods at comparable wholesale prices did not require a party to remain indefinitely in the wholesale market. Read in context, the obligation protected against discriminatory treatment while the supplier continued to sell to market traders. It did not require supply of products not offered to other traders, impose obligations on independent licensees, or guarantee historic prices. A reasonable-endeavours qualification concerned the manner of supply, not whether the obligation to supply arose.

The defendant sought enforcement of paragraph 7 of a consent order made by the Court of Appeal in earlier trademark infringement proceedings. The order required the claimant to use reasonable endeavours to supply goods to the defendant at prices comparable to the lowest wholesale prices charged to other market traders.

The claimant later withdrew from direct wholesale supply and altered the way in which products were sourced and supplied. The defendant alleged that refusals to supply, changes in supply arrangements and higher prices breached paragraph 7. The central issue was the true construction and effect of that provision, including whether it required continuing wholesale supply, supply of all products sold in the claimant’s own shop, or equivalent treatment by third-party licensees.

1. Application dismissed. The defendant’s application for a declaration, damages inquiry and mandatory order failed. The claimant was awarded its costs on a summary basis. A separate application under CPR 3.1(7) remained to be determined.
2. A consent order is construed by the same principles as any other commercial contract. The court identified the reasonable-person approach in ICS Limited v West Bromwich Building Society [1998] 1 WLR 896, and treated negotiation material in accordance with Chartbrook Limited v Persimmon Homes Limited [2009] 1 AC 1101. The contractual principles were common ground, and the relevant commercial background included the parties’ knowledge that goods were obtained from both the claimant and licensed third parties.
3. Paragraph 7 protected the defendant against discriminatory treatment while the claimant remained in the wholesale merchandising market. For so long as the claimant sold products to market traders, it had to offer to the defendant the goods offered to market traders generally, at prices comparable to the lowest prices charged to those traders.
4. There was no express or implied obligation to remain in the wholesale market indefinitely. The evidence showed a genuine commercial withdrawal rather than an attempt to frustrate the order. The reasonable-endeavours wording qualified matters such as delivery arrangements, location and minimum quantities; it did not determine whether an obligation to supply arose.
5. The provision did not require the claimant to offer products that it did not offer to other market traders. Nor did it require the claimant to control the prices charged by independent licensees. No discriminatory treatment of the defendant was established.
6. The court therefore found that the complaints did not establish breach. The claimant’s costs were assessed by reference to reasonableness and proportionality, with reductions made for excessive witness-statement preparation and counsel’s fees.

The judgment records that the underlying trademark proceedings resulted in a Court of Appeal consent order dated 7 November 2013, with liberty to apply to the High Court for enforcement. The present enforcement application was transferred from the Court of Appeal to the Chancery Division. This court dismissed the defendant’s application.