SDI Retail Services Ltd v The Rangers Football Club Ltd

A contractual matching right may extend beyond ordinary retail sales where the agreed definition covers distribution, marketing, promotion, offering for sale and selling products capable of retail sale. The court must construe the matching-right regime as a distinct contractual scheme and assess the whole commercial deal, including connected commercial arrangements. Manufacturing and branding rights may therefore be matchable where bundled with an offered right. A court should imply terms into a detailed commercial contract only where the strict requirements for implication are met; a general duty of good faith cannot contradict express terms. A final injunction is ordinarily available to enforce a negative covenant unless it would be unjust, oppressive or disproportionate.

SDIR and Rangers entered into a Retail Operations, Distribution and IP Licence Agreement under which SDIR received exclusive retail-operation rights and non-exclusive rights relating to specified commercial activities. The Agreement also contained a matching-right regime for third-party offers concerning defined Offered Rights and connected commercial arrangements.

Rangers entered into the Elite/Hummel Agreement, appointing Elite as supplier and Hummel as technical brand, without giving SDIR a notice of offer. SDIR claimed that the agreement included matchable distribution rights and connected manufacturing and branding arrangements. The principal issues were the proper construction of the matching-right provisions, the availability of implied terms and estoppel, and the appropriate relief.

1. Construction. The matching-right provisions formed a distinct contractual regime. The definition of Permitted Activities was not confined to retail sales. “Distributing” included wholesale distribution, and the reference to products which were or could be sold in a retail outlet did not restrict the activities to retail operations. The words “together with the right to retail” added to, rather than qualified, the preceding activities.
2. The Elite/Hummel Agreement therefore involved Offered Rights. Rangers was required to give SDIR a Notice of Offer under Schedule 3, paragraph 5 and failed to do so.
3. Connected commercial arrangements. An arrangement connected with an Offered Right was a separate but related element of the same overall deal. The purpose of the provision was to preserve SDIR’s opportunity to match the composite commercial bargain and prevent cross-subsidy or artificial pricing. Manufacturing rights and appointment as Technical Brand became connected commercial arrangements because Rangers bundled them with wholesale distribution rights. Rangers was required to disclose them and offer them for matching.
4. Implied terms and estoppel. Applying the cumulative requirements stated in Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742, no term requiring good faith could be implied. The proposed term was unnecessary, not obvious and inconsistent with the express matching-right provisions. A proposed term confining Permitted Activities to retail matters directly contradicted the Agreement. The alleged convention limiting the matching rights lacked an evidential basis.
5. Relief. SDIR would have matched the Elite/Hummel rights. Damages were not an adequate remedy, particularly given the contractual limitation relied upon by Rangers. The losses and exposure of Rangers and Elite resulted from Rangers’ deliberate breach and did not make an injunction unjust or oppressive. Declaratory and injunctive relief was granted, subject to submissions on the precise form. Equivalent relief concerning the Elite Retail Units Agreement was also granted.