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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Champagne Louis Roederer (CLR) (Roederer) v J Garcia Carrion SA & Ors [2017] EWHC 289 (Ch) (23 February 2017) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2017/289.html Cite as: [2017] EWHC 289 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, London EC4A 1NL
		23/02/2017

Master Bowles :

1. By her order dated 19^th November 2015, Rose J declared that the Claimant, Champagne Louis Roederer (CLR) (Roederer) was entitled, at its option, to either an account of profits, or an inquiry as to damages, in respect of the infringement by the first defendant, J Garcia Carrion S.A. (JGC) of its UK and EU trade marks for the word CRISTAL. JGC is a very substantial Spanish producer of wines and other beverages.
2. The facts, circumstances and reasoning giving rise, inter alia, to that declaration are set out in the judgment of Rose J handed down on 6^th October 2015, [2015] EWHC 2760 (Ch), and are not repeated here. It is to be noted, however, that Rose J found JGC to be liable both on the basis that JGC's product, a cava marketed and sold under the name Cristalino, was likely to be confused with Roederer's, well known prestige champagne, Cristal and also upon the basis that the use of the Cristalino name, in infringement of Roederer's trade marks, had the effect of diluting and taking unfair advantage of those marks.
3. To facilitate Roederer in making its election pursuant to the declaration, Rose J ordered JGC to give what is usually termed Island Records v Tring disclosure, namely disclosure of the number and value of sales within the UK of Cristalino products since 19 March 2004 (being the date six years prior to the issue of these proceedings), together with the sums received by JGC in respect of those sales. That disclosure was ordered to be provided within 28 days of the 19^th November 2015 order. It was not, however, complied with.
4. That non-compliance by JGC, even in the face of orders, such as the 19^th November 2015 order, issued with a penal notice, has been a feature of this Claim from a relatively early stage. At its inception, JGC was represented by solicitors and counsel in the UK. From about February 2013, however, JGC ceased to engage with the litigation and, by order dated 15^th August 2014, solicitors previously instructed were removed from the record. Since and, indeed, prior to that date, JGC, although fully informed as to every stage of the litigation, has elected to take no part.
5. In this regard, it is to be noted that an order for an alternative mode of service was granted to Roederer, by my order of 26^th November 2014, and that further orders for alternative methods of service have been made from time to time throughout the proceedings, including in respect of the directions order, dated 11^th August 2016 giving rise to the current hearing.
6. Initially, service was to be by way of service to two addresses of JGC, as well as by way of email to JGC's email address. Those two addresses are the address of JGC's headquarters in Madrid and the address of its major manufacturing plant in Jumilla, said by its solicitors, when coming off the record, to be its last known address.
7. Subsequently, by my order of 28^th January 2015, I directed that service by email, alone, would constitute an appropriate alternative mode of service and that alternative mode of service was reiterated in my order of 11^th August 2016.
8. In point of fact, however, as well as email service, Roederer has continued to serve, or send, all material documents to JGC at the Jumilla address.
9. I am in no doubt but that these modes of service have been effective to bring all matters to the attention of JGC. On the evidence before me there is no record of any emails having been returned as undeliverable. Likewise, no postal correspondence has been returned as undelivered. Following service of JGC, by email and post, with Rose J's order of 19^th November 2015, Mr Fontaine, a partner in a French law firm that acts for Roederer in respect of trade mark matters and is based in Alicante, received a telephone call from JGC's Madrid office apparently emanating from JGC's legal director, who informed Mr Fontaine that the order would be raised with JGC's management and would be complied with. As already stated, however, there has, in fact, been no compliance with any part of Rose J's order.
10. Notwithstanding that non-compliance, by letter and email dated 15^th April 2016, sent and served as explained above, Roederer elected an account of profits. That election, given JGC's non-compliance, was made without the benefit of any Island Records v Tring disclosure and upon the basis of evidence that Roederer was, itself, able to obtain as to JGC's sales of and profit from the infringing Cristalino products. In order to procure that evidence it was necessary for Roederer to seek and obtain from Rose J an extension of time within which to make its election.
11. Pursuant to its election and by application notice, served and sent as already explained, Roederer sought directions as to the taking of the account and, by my order, dated 11^th August 2016 directions were given as to points of Claim and Defence, disclosure, evidence, including expert evidence, and the hearing of the account. This judgment is the judgment in respect of the account.
12. Although duly served, there has been a total non-engagement by JGC with my directions order, including a total non-compliance with my directions as to disclosure. Reflecting the likelihood of continued non-engagement, I directed, as had Rose J, that, in the absence of a request by JGC to cross examine Roederer's witnesses, their evidence would stand as unchallenged evidence at the hearing of the account. No such request having been made, Roederer's factual and witness evidence stands, therefore, as unchallenged evidence before me in respect of the account.
13. The evidence before me is to be found, primarily, in and exhibited to the witness statement of Mr Jeremy Drew, a partner in Reynolds Porter Chamberlain LLP (RPC), Roederer's solicitors, in the witness statement and exhibits of Mr Fontaine and in the expert report prepared by Mr Matthew Geale FCA, a partner and head of forensic accounting at Armstrong Watson, Accountants. Mr Geale has expertise in forensic accounting over a period in excess of twenty six years, including, relevantly, in a number of intellectual property cases where accounts of profits have been taken.
14. As explained by Mr Drew, Roederer has been able to obtain information as to JGC's sales in the UK from a number of sources, perhaps most materially, from information put forward by JGC in other proceedings and in other jurisdictions.
15. In proceedings before the Commercial Court in Brussels (R.G A/06/7444) JGC filed an exhibit (referred to before me as the Villaverde Exhibit) setting out the worldwide sales of Cristalino, in the years 2004 and 2005 and showing UK sales of 429,168 units of Cristalino in 2004 and 641,394 units in 2005.
16. In proceedings in the UK Intellectual Property Office (O-150-09) (IPO), in which, at that date (2006), JGC were applying to register the trade mark 'Cristalino Jaume Serra', Mr Villaverde, the Financial Director of JCG, filed a witness statement and exhibit, dated 30^th July 2008, in which he disclosed invoices showing the extent of UK sales of Cristalino in the years 2006 and 2007.
17. In proceedings before the United States District Court of Minnesota (the Minnesota Court), brought by Roederer, in protection of its Cristal mark, the transcript of the court proceedings indicates that JGC estimated the 'contribution margin of a bottle of Cristalino' to be €0.4647. That estimate emanated from a sworn declaration, dated 15^th April 2008, made by Mr Villaverde in those proceedings.
18. That declaration was filed under a Protective Order of the Minnesota Court, but, by order of the Minnesota Court, dated 7^th November 2016, released to this court, for use, on a confidential basis, in these proceedings. By my direction, the declaration was further released to Mr Geale, in order for him to take it into account in giving his expert evidence. Although, JGC's document, I further directed that, as part of the evidence in the account, the declaration be served on JGC.
19. By my order, made at the outset of the taking of the account, I gave permission for Roederer to rely upon the addendum to his report, prepared by Mr Geale, as part of his expert evidence. The addendum had been served on JGC on the day prior to the taking of the account.
20. Under my directions order, as varied by a subsequent order, dated 19^th October 2016, expert evidence should have been filed by 8^th November 2016. The declaration was, however, only released by the Minnesota court to this court on 7^th November 2016 and my direction that it be made available to Mr Geale was, of necessity, subsequent to that. In those, circumstances, no criticism could attach to Roederer for the late presentation of Mr Geale's addendum and, given JGC's wholesale failure to provide the disclosure ordered by Rose J and the necessity, therefore, for Roederer to acquire and present information for the account from where it could, I had no hesitation in allowing the addendum into evidence.
21. In addition to the information as to sales (and margin) derived from the materials provided by JGC in other proceedings, Roederer has also made enquiries of and procured a quantity of information from those to which JGC provided Cristalino products. Two such entities were Asda Stores Limited (Asda), the Second Defendant, and WM Morrison Supermarkets PLC (Morrisons), the Third Defendant. Proceedings against both those entities were settled at an early stage and on confidential terms.
22. Asda has provided Roederer and, through Roederer, the court, with further information as to the quantities of Cristalino, or Cristalino related, products purchased from JGC and the prices paid. Although much of this information replicates information derived from JGC's own invoices, as exhibited in the IPO proceedings, the Asda materials also provide details as to purchases from and prices paid to JGC for such products in the period up until the date, December 2010, when, pursuant to its settlement with Roederer, Asda ceased to sell Cristalino.
23. Morrisons, although requested to provide information equivalent to that provided by Asda, has been unable to do so. Morrisons ceased to sell Cristalino products in February 2011. In the absence of further information, the direct evidence as to sales by Morrisons is, therefore, confined to that shown by the 2006/7 invoices, disclosed in the IPO proceedings.
24. Roederer has also obtained independent information from Majestic Wine Warehouses Limited (Majestic) as to the number of sales of Cristalino products to Majestic in the period 2001 to 2007. That information is exhibited to and contained in a second witness statement of Mr Drew, dated 21^st November 2016 and served on JGC on that date. The 2004 and 2005 figures would, as it seems to me and as indicated by Mr Drew, in his witness statement, fall within the UK element of the world wide sales set out in the Villaverde Exhibit. The 2006 and 2007 figures closely replicate the figures shown in the 2006/7 invoices exhibited in the IPO proceedings.
25. As with the declaration from the Minnesota Court, the information from Majestic was, through no fault of Roederer, only made available by Majestic very late in the day. In those circumstances and for the same reasons as apply to my admission of Mr Geale's addendum, which, also, brings into play the information obtained from Majestic, I felt it right that Mr Drew's second witness statement and its exhibits be admitted in evidence.
26. The period covered by this account is the period commencing six years prior to the issue of these proceedings (19^th March 2010) and concluding with the last known sales by JGC of the infringing products in February 2011.
27. In respect of that period, Mr Geale has analysed the available materials.
28. Based upon those materials, Mr Geale has concluded that in the period 19^th March 2004 to 31^st December 2010 (there being no information available beyond that date) there is evidence to support infringing sales of Cristalino to the extent of 2,417,829 bottles.
29. In reaching that conclusion, Mr Geale noted that the invoices provided by JGC in the IPO proceedings showed sales to Asda in 2006 and 2007 which exceeded by some 39000 the purchases shown in Asda's own records. Faced with that discrepancy, he has, rightly, in my view, preferred JGC's own invoices and records to that of Asda.
30. In reaching that conclusion, also, Mr Geale has had regard to the fact, disclosed by JGC's invoices in the IPO proceedings, that, for a period of time, JGC's cava, which was otherwise sold under the infringing Cristalino name, was sold under the name Arte Latino. Based on JGC's available invoices, that period was the period between 23^rd July 2007 and 4^th December 2007. Those sales, totalling some 197,400 bottles, have been taken out of the account.
31. He has not, however, discounted, or adjusted, the Cristalino sales figures for either the period of the account prior to July 2007 or the period of the account subsequent to December 2007.
32. In regard to the earlier period, JGC's own invoices for 2006 and 2007, up to 23^rd July, show that all UK sales of its cava were made under the Cristalino label. That evidence is consistent with submissions made by JGC in the Belgian proceedings and set out and referred to in Mr Fontaine's witness statement, to the effect that in 2007 JGC had attempted to market its cava under the name Arte Latino, but had reverted to the Cristalino label when it noticed that it was losing clientele. While those submissions were made in the Belgian proceedings, it seems highly likely to me that the attempted change of name was common to all markets in which JGC was selling its cava and took place at, or about, the same date and, in all likelihood, therefore, at or about the date when JGC's invoices begin to show sales being made under the Arte Latino label. That conclusion is also consistent with the material available in respect of Majestic, where JGC's invoices show that sales to Majestic ceased in March 2007 and that all such sales were made under the Cristalino label.
33. The only possible contra-indication is to be found in the evidence emanating from Asda. That evidence, derives, substantially, from the witness statement of Adrian McKeon, a category director of Asda, with responsibility for beers, wines and spirits, dated December 2010 and exhibited to Mr Drew's first witness statement. Mr McKeon explains that Asda's records, including, therefore, those that give rise to the 39000 bottle discrepancy mentioned above, do not distinguish between purchases of Cristalino and Arte Latino, but that Asda's own recording systems identified the product as Arte Latino and did not record the date, or dates, when the name was changed.
34. A possible inference from that description of the product is that it was in that name that the product was first purchased and that the product was only sold to Asda as Cristalino at a later and unknown date. That, however, would be inconsistent both with JGC's own invoices and with JGC's evidence in the Belgian proceedings. It seems much more likely that sales to Asda, which commenced in October 2006, commenced as Cristalino, that in July 2007 the system was altered to show the product by its rebranded name, but that, when the name reverted to Cristalino, Asda's recording system was not changed.
35. In regard to the post December 2007 period, the position is not, in my view, nearly so clear. The evidence in the Belgian proceedings does not identify the date when Arte Latino reverted to Cristalino save that it was, necessarily, before the date of the submission to the Belgian court; made in November 2008. There are no JGC invoices for the period after December 2007 and nothing, therefore, to identify with any greater precision the date upon which the product name reverted. The suggestion is made that, because the name change produced a loss of clientele, it must have been short lived. On that footing, Mr Geale has 'assumed' that all sales to Asda and, correspondingly, as set out below, Morrisons from 1^st January 2008 until 31^st December 2010 were infringing sales of Cristalino.
36. I do not think that the court can, properly, assume that sales under the Arte Latino label ceased coincidentally with the last date that JGC invoices happen to be available. Nor does it seem likely to me that JGC, having gone ahead with a rebranding, would have reverted to the old and infringing branding in the short space of time between the end of July and the beginning of December 2007. It seems much more likely that non-infringing sales of JGC's cava, as Arte Latino, continued for at least some period into 2008 and, therefore, that the infringing sales, as calculated by Mr Geale, must be adjusted to reflect that fact.
37. In making that adjustment, it is well recognised that, in the context of an account of profits, mathematical precision is impossible and, therefore, that the court must do the best it can, without falling into the trap of mere speculation.
38. Mr Malynicz QC, for Roederer, makes the legitimate point that the court should not be too tender towards a defendant, such as JGC, which elects not merely not to engage with litigation, but to breach orders made in the litigation. He submits that, in that context, a defendant, having been given every opportunity to put its position and having elected to refrain, has no cause for complaint if the court acts on assumptions which, had the defendant been so minded, it might have been able to contradict, or undermine.
39. Within limits, that submission is correct. The non-engagement, or non-compliance of a defendant cannot, however, in my view, entitle the court to act on assumptions which are against the weight of the evidence, or otherwise unlikely.
40. In this instance, I am satisfied that it is likely, on the materials I have, that some part of JGC's cava sales to Asda and Morrisons in 2008 were made under the Arte Latino label and were not infringing. Doing the best I can, I think that the broad likelihood is that sales of cava as Arte Latino will have continued for about the first quarter of 2008, by which date, as explained by JGC in the Belgian proceedings, JGC would have been able to effectively determine that the name change had given rise to a loss of clientele.
41. On that footing, it seems to me that, adjusting pro rata, twenty five per cent of the cava sales by JGC to Asda in 2008 were, or were likely to be, sales to Asda as Arte Latino. Sales, in that year, were 89,208 and, therefore, the relevant deduction from the quantity of infringing bottles is 22,302.
42. In respect of Morrisons, there is, as already stated, no direct evidence of cava sales under the Cristalino name, or label, to Morrisons for the period 2008 to 2010. The reason for that is not that no such sales took place, but, rather, that Morrisons have proved unable to reconstruct its database for the relevant period in order to provide the necessary and relevant information.
43. What is clear from the 2006/2007 invoices, disclosed in the IPO proceedings, is that, in the period covered by those invoices, Morrisons was by far the largest purchaser of Cristalino/Arte Latino from JGC. It is, accordingly, inherently unlikely that it would have ceased sales in 2008 and onward. That is confirmed, as it seems to me, both by the fact that Roederer was able to carry out a test purchase of Cristalino from Morrisons in November 2009 and by the fact that, in settling these proceedings, Morrisons agreed not to sell any Cristalino products after February 2011. It is, again, intrinsically unlikely that Morrisons would have settled on that basis if it had already ceased sale of Cristalino products.
44. It remains to consider the likely scale of sales to Morrisons in the 2008 to 2010 period.
45. Mr Geale put forward two possible approaches. One was to assess sales, in that period, as bearing the same ratio, year by year, that Morrisons' purchases of Cava had borne to those of Asda in the one year (2007) when the purchases of cava by each of Morrisons and Asda are available. The other was to assume that sales to Morrisons continued in 2008, 2009 and 2010 at broadly the same rate as in 2006 and 2007. On that footing, he suggested that sales of Cristalino might have been made by JGC to Morrisons, in those years, at the rate of 400,000 per year, resulting in additional sales of infringing Cristalino products of 1,200,000. Either approach would, for the reasons set out above, have to be modified for 2008, to reflect that some of the sales in that year would have been of non-infringing Arte Latino.
46. I am not persuaded that the assumption that Morrisons purchases of JGC's cava would have continued upon a 'straight line' basis in the years 2008 to 2010 is one that can safely be made.
47. Asda's figures for those years show considerable fluctuation, but a clear downward trend. The high point for purchases of cava (Cristalino and, where relevant, Arte Latino) from JGC was in 2007. In 2008 purchases reduced from 175,470 to 89,208 (halving), in 2009 purchases increased to 130,968, but, in 2010, purchases decreased to 38,454. That last decrease, however, will reflect that, as a result of these proceedings, Asda ceased to sell Cristalino in early December and so would not, in all probability, have made the purchases from JGC which otherwise would have been made to reflect, for example, the Christmas trade. Even, however, uplifting that final quarter, having regard, to the earlier purchases made in that year, it is clear that purchases were, or would have been, very substantially down (by more than fifty per cent) on 2009.
48. While Asda is, of course, a different business to Morrisons and will, potentially, have had a different customer profile and while there will, or would, almost certainly have been differences in respect of each business's approach to marketing, I cannot see that Morrisons would have been any the less exposed to economic pressures and changes, or, indeed, changing consumer trends, than would have been Asda. In particular, Morrisons will have been as exposed as Asda to the global economic downturn from 2008, of which the court can and does take notice, and which, as it seems to me, will, in all likelihood, have been responsible in considerable part for the slowdown in sales to and by Asda. The product with which the court is concerned, cava, is not an essential domestic purchase, but rather a 'luxury' item. It is not, therefore, a product which will, or would, be likely to be unaffected by economic events.
49. In all the circumstances and as already stated, I do not regard it as safe to make the assumption that Morrisons purchases of JCG's cava would have continued on the 'straight line' basis suggested as one of Mr Geale's alternatives. Rather, I am satisfied that the better view is that Morrisons' purchases of JGC's cava would have diminished in the years 2008 to 2010, in much the same way as did Asda's and, therefore, that an approach which, in some sense, 'tracks' Asda's is the more likely to be correct.
50. I am equally satisfied, however, given that Morrisons was, by a considerable margin, the largest UK purchaser of JGC's cava in 2006 and 2007 and given the absence of any good reason to think that that position altered in the succeeding years, that the strong likelihood is that Morrisons remained the major, or largest, purchaser of JGC's cava in 2008, 2009 and 2010 and that its purchases, in those years, remained broadly in the same proportion to those of other purchasers, such as Asda, as had been the case in earlier years.
51. Applying that approach, the figures for cava sales to Asda and Morrisons in 2007 show that, taking cava sales as a whole and not distinguishing between Cristalino and Arte Latino, Morrisons purchased two bottles of cava for every one purchased by Asda. If Cristalino purchases alone are taken into account, reflecting sales, therefore, only in the period January 2007 to 23^rd July 2007, that ratio, or proportion, uplifts to 2.6 to 1.
52. I agree with Mr Geale, however, that the wider statistical sample rather than the narrower provides a better and safer statistical base for establishing relative sales by Morrisons and Asda of JCG's cava, particularly where, as here, even the wider statistical base is only over a one year period. Accordingly, I consider that, in determining cava sales to Morrisons in the period 2008 to 2010, on the basis of the available evidence, the best approach and that likely to provide a fair and realistic assessment of those sales, is to 'track' JGC's sales to Asda on the basis that for every one sale to Asda there were two to Morrisons.
53. On that footing, there will have been in 2008, 2009 and 2010 sales of cava by JGC to Morrisons totalling 517, 260 bottles, of which 178,416 will have been sold in 2008. Of that 517,260, however, not every sale will have been infringing, given that, as earlier set out, the likelihood is that, in the first quarter of 2008, those sales will have been of Arte Latino and will require the same pro rata adjustment as I have made in respect of the sales to Asda. Making that adjustment reduces the number of infringing bottles of Cristalino sold to Morrisons to 472,656.
54. In the result, I am satisfied that, for purposes, of this account the overall number of infringing bottles sold by JGC in the UK market was 2,868,183 (2417,829 less 22,302 plus 472,656).
55. The next matter for consideration is the profit obtained, or likely to have been obtained, by JGC as a result of the infringing sales. That issue resolves into two parts. Firstly, there is the determination of the gross profit, by which, in this context, I mean the profit secured to JGC having regard to the direct costs incurred in the production of the infringing product. Secondly, there is a question as to whether that profit should, for purposes of the account, be diluted, or reduced, by way of a further allowance, or discount, against the gross profits, to reflect an element of the general overheads of JGC's business and, additionally, whether there is scope for a yet further allowance, or discount, to reflect that part of the profit which is not attributable to the infringement, but reflects, if you like, the intrinsic value of the product and the potential fact that the sale may not be 'driven' by the infringement but by some other aspect of the product, or by JGC's own goodwill, attaching to the product.
56. In regard to the gross profit (as defined above), the only, but key, material before the court is to be found in the material placed before the Minnesota Court by JGC in the proceedings before that court. As earlier stated, the transcript of those proceedings shows that JGC estimated that 'the contribution margin of a bottle of Cristalino' was €0.4647. That estimation was founded upon the declaration of Mr Villaverde, dated 15^th April 2008 and the relevant passage in that declaration is to be found at paragraph 12 and set out in paragraph 56 of the handed down judgment. Because, however, the declaration is before the court only on a confidential basis and because this is a judgment for publication, I do not cite further from the declaration.
57. Mr Geale explains the formulation, 'contribution margin', as denoting and being a proxy for the gross profit obtained by JGC from the sale of each bottle of Cristalino, on the basis that the contribution referred to by JGC is the contribution that the sale of each bottle made towards the general costs of JGC's business after the payment of the direct costs incurred in the production of that bottle.
58. Mr Geale's opinion is unchallenged and, in my view, logically coherent. I see no reason at all not to accept it.
59. My reasoning in this regard is set out and developed in paragraph 59 of the handed down judgment. Because, however, that reasoning is founded upon the content of paragraph 12 of Mr Villaverde's declaration, it is not repeated here.
60. Treating, therefore, the contribution margin as being, in Mr Geale's phrase, a proxy for gross profit, the application of that gross profit figure per bottle to the infringing sales as calculated and determined in this judgment, gives rise to a gross profit figure of €1,332,844.64 (2,868,183 x 0.4746).
61. That presupposes, or assumes, that the contribution margin in 2008 was, or had been, a constant and that that margin was, therefore, the same throughout the period 2004 to 2010. It presupposes, or assumes, also, that the contribution margin was either the same across all Cristalino products (Cristalino was sold, both in the United States and in the UK, as Brut, Rosado and Reserva), or, since JGC's submission did not distinguish between the different products, that JGC's estimation of its contribution margin was an average, or mean, across all three Cristalino products.
62. This is, of course, an area where JGC, had it been so minded, could have put in evidence in contradiction of the assumptions upon which Mr Geale has based his evidence and reached his conclusions. It could have provided evidence of the profitability, or lack of it, of its UK sales. It could, indeed, should, pursuant to my order of 11^th August 2016, have provided the documentation going to that question. JGC has elected not to do so and has, therefore, left it to the court to determine matters upon the basis of the limited material available and without any evidence to contravert the assumptions, or presuppositions, upon which Mr Geale has been obliged to operate.
63. In those circumstances, unless those assumptions, or presuppositions, are obviously unreasonable, or unlikely, JGC has only itself to blame if they are accepted by the court in its determination of the matters in issue.
64. It seems to me that the fact, that, as more fully stated in paragraph 64 of the handed down judgment, no distinction was drawn by JGC, in the Minnesota Court proceedings, between the various Cristalino products that it was, at that time, selling in the United States and that a common contribution margin was, therefore, ascribed across all three products, is most likely to indicate that, in those proceedings, a mean figure was taken across all three products. I see no good reason, in these proceedings, not to adopt the same approach.
65. As regards the contribution margin itself, it has, as set out above, always been open to JGC to put in evidence and documentation challenging the assumption made by Mr Geale that the contribution factor/profitability of JGC's Cristalino products was a constant throughout the accounting period. Its election not to put in such evidence, or to challenge Mr Geale's assumption, tends to suggest that the assumption is a good one and one that can properly be adopted by the court.
66. I add, in this regard, that, independently of the foregoing, I have been given no reason at all to believe that the contribution margin would, or might, have changed significantly in the course of the accounting period. As Mr Geale rightly points out in his report, there is no obvious, or necessary, linkage between, for example, increased sales and an increased profit per bottle. Very often increased sales will be associated with commensurately increased direct costs, such that the core profit margin remains unchanged.
67. Accordingly and in all the circumstances, reminding myself that the accounting exercise is not to be regarded as a purely mathematical exercise, I am satisfied that the approach suggested by Mr Geale is one that the court can and, in this case, should and does adopt.
68. There remains the question of general costs and the further question of any additional apportionment, or allowance, against profits to reflect the non-infringing element, if any, in the profits otherwise derived from the infringing sales of Cristalino.
69. The position, in law, in respect of general overheads seems to me to be as follows.
70. Following the decisions of the Court of Appeal, in Hollister v Medik [2013] FSR 24, it is now clear that it is not appropriate to make any automatic deduction from the profits directly arising from the sale of infringing goods to reflect the general overheads of the business carried on by the infringer. Such a deduction can only be made if the relevant overheads, for which an allowance, or deduction from profit, is sought, are properly attributable to the infringing activity.
71. This may arise if, for example, it can be shown that the infringing activity has increased the general overheads, or, conversely, if those overheads would have been lower had the infringer not engaged in the infringing activity. If, however, the overheads would have been incurred anyway then, as explained by Lewison LJ, in OOO Abbott v Design and Display Ltd [2016] FSR 27, unless, absent his infringement, the infringer would have sold, or produced, non-infringing products, in place of his infringing products and would have incurred, in respect of those products, the like overheads as are sought to be attributed to the infringing product, no allowance for general overheads can be permitted.
72. A necessary corollary, or consequence, of the decision that an automatic deduction from profits to represent a proportion of general overheads is inappropriate, is that such a deduction must be founded upon evidence which establishes that the overheads in respect of which an allowance, or deduction, is sought are properly attributable to the infringing activity.
73. In Hollister, Kitchin LJ, giving a judgment with which both other members of the court agreed, analysed, with approval, the decision of the High Court of Australia, in Dart Industries Inc. v Decor Corp Pty Ltd [1994] FSR 567. In that case, the majority of the court had held that the burden lay on the infringer to provide a reasonably acceptable basis of allocation. The facts were likely to be within the infringer's own knowledge and so the infringer had to establish that the overheads in any particular category were properly attributable to the manufacture or sale of the infringing product.
74. It was, accordingly, as set out by Kitchin LJ, at paragraph 85 of Hollister, for the defendant to 'show that the relevant overheads' were 'properly attributable to' the infringing activity. To the same effect, in OOO Abbott and in Woolley v UP Global Sourcing UK Ltd [2014] EWHC 493 (Ch), Lewison LJ (at paragraph 53) and HH Judge Pelling QC (at paragraph 34), respectively made clear that the evidential burden in establishing that particular overheads were properly attributable to the infringing activity lay on the infringer.
75. In this case, the infringer has elected not to participate in the proceedings and, in consequence, has not attempted, even, to establish any kind of basis upon which the court could determine that an element of its general, or central costs, could properly be attributed to its infringing activity. The result of that election is that the evidential burden has not begun to be met. The facts which might have led to some proper allocation of central, or general, costs against the profits derived from the infringing product are, as pointed out by the court in Dart, facts which will be within JGC's own knowledge. Accordingly, without evidence from JGC, there is no basis, of any kind, upon which the court can make an allocation. Any allocation would be a speculative guess and, if made, would amount, at best, to precisely the sort of automatic deduction which, since Hollister, has been held to be wrong in law. No allocation of central, or general, costs will be made.
76. The last matter for consideration is the question as to whether there is, on the evidence here, any proper basis for the court to determine that a further allowance, or allocation, against the profits derived from the sale of the infringing Cristalino products, to reflect the fact that the account of profits with which I am concerned is an account of the profits made by reason of JGC's trade mark infringement and should not, therefore, in principle, include profits arising from the sale of Cristalino products, but not arising from the fact that the products were sold as Cristalino.
77. As explained by HH Judge Pelling QC, in Jack Wills Ltd v House of Fraser Stores Ltd [2016] EWHC 626, at paragraph 61, the principle, as set out above, is not in doubt. In a case where the infringement does not 'drive' the sale, it is wrong to attribute the whole of the profit to the infringement. In that circumstance; that is, where the court is satisfied that the whole profit cannot be attributed to the infringement; then the court must do the best it can to carry out some form of apportionment and to work out, on a 'broad brush' basis, what proportion of the profit is due to the act of infringement (see: HH Judge Pelling QC in Jack Wills at paragraph 64, following Briggs J (as he then was) in Hotel Cipriani SrL v Cipriani (Grosvenor Street) Ltd [2010] EWHC 628).
78. That approach, however, presupposes the court making a finding that the entire profit did not derive from the infringement. The question, here, is whether, the court can and should make such a finding, in the absence of any evidence, or even submission, by JGC to that effect.
79. The starting point must be the findings at trial and, in particular, Rose J's finding, as one of the bases of infringement established against JGC, that the use by JGC of the Cristalino label and get up had had the likely effect of confusing average consumers into thinking that JGC's cava was a product of Roederer and into buying JGC's Cristalino products on that basis (paragraphs 55 to 70 of her judgment).
80. In light of that finding; namely that the likelihood, or probability, was that consumers had bought Cristalino in the belief, created by the infringing use of the Cristalino label and get up, that it was a product of Roederer; it seems to me to follow that the purchase by retailers, such as Asda, Morrisons and Majestic, of Cristalino products, for onward sale to consumers, which purchases would have been dictated by the perceived demand by consumers for those products, must also, as a matter of likelihood, have been driven, or dictated by the confusion engendered by and giving rise to the infringement.
81. This is not to say, of course, that the retailers, themselves, were confused as to the source, or provenance, of the products (plainly they were not), but, rather, that their purchases of the products were dictated by the demand for the products and that that demand, on Rose J's finding, derived from the infringing use of the Cristalino label and get up and the confusion created thereby.
82. Against that background and that finding it seems to me that, if JGC had wished to contend that the purchase of Cristalino, whether by retailers or others, had not derived from JGC's infringing conduct, then the evidential burden lay upon JGC to establish, if it could, that purchasers of Cristalino had made their purchases for reasons other than that conduct.
83. JGC could have argued, for example, as it appears to have done in the IPO proceedings, that the consumer end users of Cristalino were not motivated by the ostensible connection with Cristal and with Roederer but were driven, in whole, or part, by price, by availability, or by quality for price and, therefore, that it would be wrong to attribute the demand for Cristalino products, reflected in the purchases of those products from JGC, to that connection and to JGC's infringing conduct.
84. JGC has, however, elected not to make that argument in this account and, more materially, has elected not to put in any evidence which might sustain that argument and which might allow this court to hold that the relevant purchases were driven other than by the infringement.
85. In the result, I am not prepared to find that those purchases were driven by factors other than the infringement. There is simply no evidence to sustain such a finding and any such finding would be no more than a speculation.
86. In this regard, I respectfully share the views expressed by HH Judge Pelling QC, in Woolley, at paragraph 23, where, in dealing with a submission, made in the context of passing off, that the court could adopt an impressionistic, or broad brush approach in determining the proportion of sales resulting from the proven acts of passing off, he described the suggested process, in a case where, as here, no direct evidence had been advanced which might ground a judgment, as amounting to little more than plucking a figure from the air and where he indicated that such an approach would be 'well nigh impossible to perform on any logically defensible basis'.
87. It seems to me that the self same comment can be made in this case. Any so-called broad brush, or impressionistic, approach to a determination as to whether sales of infringing products had been driven other than by reason of the proven infringement and any consequential assessment, or determination, as to the proportion of the profits from those sales which could, properly, be said to derive from JGC's infringement, would not, in the absence of evidence directed to the point, be capable of logical defence and, as regards the proportion of profits said to be derived from JGC's infringement, amount to no more than the plucking of a figure from the air.
88. In light of the foregoing, I am not prepared, on the material before the court on this account, to make any allocation, or allowance, against the profits derived from JGC's sales of the infringing products in the accounting period, to reflect any finding that some part of those profits derived other than from JGC's infringement and any consequential apportionment of those profits. There is no evidential basis for such a finding and any such finding and any apportionment, or allocation, based upon such a finding would be no more than guesswork.
89. Accordingly, there being no proper basis for any deduction from gross profit to reflect JGC's general costs and, as discussed above, no proper basis for any further apportionment of those profits, I determine that the profits derived by JGC from its infringement, in the accounting period and recoverable, in this account, from JGC are, as set out in paragraph 60 of this judgment, €1,332,844.64.