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	England and Wales Court of Appeal (Civil Division) Decisions
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE ROTH
[2012] EWHC 485 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		26 October 2012

Lord Justice Lloyd:

1. On 23 July 2012 this court handed down judgment on an appeal by Leofelis SA against an order made by Mr Justice Roth on 9 March 2012. We neither dismissed nor allowed the appeal at that stage. Instead we adjourned the appeal so that Leofelis should have the opportunity to formulate in terms of a draft amended statement of case a new contention which had been outlined for the first time at the hearing of the appeal by Mr Baldwin Q.C., Counsel for Leofelis.
2. The adjourned hearing took place on 11 October 2012. Having heard Mr Baldwin's submissions in support of his application for leave to re-re-amend the Defence and Counterclaim, and with the benefit of skeleton arguments for the appellant and for the respondent Claimants, we decided to refuse permission to make the amendment sought and, accordingly, to dismiss the appeal. This judgment sets out my reasons for making that order.
3. Our earlier judgment is available as [2012] EWCA Civ 985, to which reference can be made for the history and context of the present judgment. The judgment appealed from is at [2012] EWHC 485 (Ch). Given the availability of those two sources, as well as an earlier decision of the Court of Appeal in previous proceedings between the same parties, in July 2008, [2008] EWCA Civ 640, not to mention other judgments at first instance including one of Mr Justice Kitchin [2010] EWHC 969 (Ch), I can take a good deal of the background and history as read, and can therefore be somewhat more brief than I otherwise would in setting out the circumstances relevant to this judgment. Even so the history that I need to tell is somewhat complex. As before I will refer to the Claimants, respondents to the appeal, as Lonsdale, and to the Defendant Appellant as Leofelis. I will also use the label Punch to refer not only to the First Third Party, Punch GmbH, but also to other companies which are alleged (but, as regards the Third Third Party, not admitted) to be associated, including the Second to Fourth Third Parties. Mr Schotsman, the Fifth Third Party, is or has been the main person behind the First, Second and Fourth Third Parties.
4. Lonsdale started the present proceedings, suing Leofelis for payment of royalties due but unpaid and for damages under a trade mark licence agreement made in November 2002. Leofelis served a Defence and Counterclaim by which it not only disputed its liability for the royalties and damages claimed but also counterclaimed for damages for breach of contract alleged against Lonsdale. The issue before us is not whether Leofelis has a viable counterclaim for such damages. That was decided by Mr Justice Kitchin. We have to consider the possible scope of Leofelis' claim for damages for breach of contract. Mr Justice Roth held that Leofelis had no arguable case for claiming damages in respect of the period after the termination of the 2002 licence in 2007. He granted summary judgment to that effect. In July we held that his grounds for doing so were correct. In order to support his appeal, however, Mr Baldwin presented to us a new argument which did not feature in his grounds of appeal or his skeleton argument, and was not reflected in the Re-Amended Defence and Counterclaim as it then stood.
5. As a result of our judgment and order in July, we now have a draft Re-Re-Amended Defence and Counterclaim (RRADC) setting out the amendments for which Mr Baldwin seeks permission. That document has some relevant documents annexed, to which reference is made in the draft statement of case. In addition we have witness statements from two witnesses on behalf of Lonsdale, each of them exhibiting further documents. Disclosure in the claim and counterclaim has already taken place although Mr Baldwin told us that it is continuing in that further documents have come to light since the dates on which disclosure lists were served.
6. The 2002 licence gave Leofelis an exclusive licence to use the Lonsdale trade mark in relation to certain classes of goods in a territory which included all the then Member States of the European Union except for the UK and Ireland, plus a few other countries. It was to last until 31 December 2008, unless terminated earlier, with a right for Leofelis to have a further licence for another six years from 2009. The royalty payable did not relate to the quantity of sales made. Leofelis did not seek to exploit the licence directly, but granted a sub-licence to Leeside, an associated company, first of all for Italy (with Lonsdale's consent as required under the 2002 agreement) and later for Germany and other countries (without such consent). As a result of prior dealings Punch had a sub-licence for Germany and some other countries, which was to expire at the end of 2006.
7. By the autumn of 2005 Lonsdale and Leofelis were in litigation against each other in England, Leofelis claiming that Lonsdale had breached the exclusivity granted by the 2002 agreement by sales of Lonsdale-branded goods into Belgium. Leofelis claimed damages for that breach; Lonsdale defended the claim and raised a counterclaim. In February 2006 Lonsdale purported to terminate the 2002 agreement, but it did so equivocally. The Court of Appeal in 2008 held that this termination had not been effective, affirming the decision of Mr Justice Evans-Lombe on that point.
8. In January 2006 Leofelis gave notice to Punch terminating its sub-licence, on the ground of non-payment of royalties. Punch did not accept the validity of that termination and went on selling in the German market, but it knew that its licence would in any event expire in December 2006. The termination led to Punch approaching Lonsdale, with which it had had no previous direct dealings, with a view to getting a licence directly from Lonsdale which would enable it to continue to supply the German market after the end of 2006. Documents which we have seen show exchanges between Lonsdale and Punch, and some others, on this subject. I will refer to some of them later.
9. Leeside was not active in the German market until some time into 2006; until January 2006 any such activity would have been inconsistent with the sub-licence to Punch. On 22 May 2006 Lonsdale's solicitors, Reynolds Porter Chamberlain (RPC), wrote to those acting for Leofelis in the 2005 proceedings, Dorsey & Whitney (DW), complaining that Leeside was asserting that it had a sub-licence from Leofelis for Germany which, if true, would be a breach of the 2002 agreement for lack of Lonsdale's consent. They enclosed a number of letters from Leofelis and from its Italian lawyers, Studio Legale Ingrilli, to various parties as evidence of this. DW denied that the sub-licence was invalid. The correspondence continued into July. On 7 July 2006 Punch informed Lonsdale that Leeside was to exhibit at an imminent trade fair in Berlin and asked "can you stop Leeside showing Lonsdale in Germany?"
10. On 14 July 2006 RPC wrote again to DW requiring immediate confirmation that Leeside would not offer to supply goods, or sell or supply goods, bearing the Lonsdale trade mark at the trade fair. On the next day German lawyers acting for Lonsdale wrote direct to Leeside at the trade fair asking them to stop offering Lonsdale-branded goods at once and to undertake not to offer them for sale, and threatening proceedings in Germany if no such undertaking was given. DW continued to deny that the sub-licence was invalid, and no undertaking as requested was given. Accordingly on 25 July 2006 Lonsdale applied to the court in Berlin for an interim injunction against Leeside, which was granted.
11. In November 2006 the first English proceedings came to trial before Mr Justice Evans-Lombe. He gave judgment in March 2007. He held that the sub-licence to Leeside for Germany was valid on the basis that Lonsdale had given its consent. Lonsdale appealed against some aspects of his decision and order, including that finding. In July 2008 the Court of Appeal decided that appeal and held that the sub-licence to Leeside for Germany was not valid, because consent had not been given. It followed that the German injunction had been properly obtained, and did not amount to a derogation from the grant of exclusivity under the 2002 licence. In the meantime Leofelis had called on Lonsdale to have the injunction discharged, but Lonsdale had refused to do so because of the pending appeal. Leeside appealed against the order in Germany but failed in that appeal. The injunction remained in force at all material times.
12. In the meantime the Punch sub-licence came to an end on 31 December 2006, if it had not already been validly terminated by Leofelis in January 2006.
13. In January 2007 Lonsdale granted a licence to the Second Third Party, Sports & Clothing SIA ("S&C"), a Latvian company set up for the purpose by Punch. This licence (the "S&C licence") was to last for one year (later extended to 31 March 2008) and covered only the Baltic States, Slovakia, Slovenia, Bulgaria and Romania. (It has sometimes been referred to as the SIA licence.)
14. In and from January 2007 the position as regards Germany was that Leofelis had an exclusive licence under the 2002 agreement, which (as was later held) had not yet been validly terminated, but it did not seek to use this directly; Leeside claimed to have a valid sub-licence (wrongly, as was later established) but was unable to use it because of the German injunction; Punch no longer had a licence because, even if otherwise still valid in the latter part of 2006, its sub-licence had come to an end. Thus, in the German market, which Mr Baldwin told us had generated very substantial sales, the only party entitled to exploit the Lonsdale trade mark (Leofelis) was not doing so.
15. Leofelis' case is that, in this situation, Lonsdale's grant of the S&C licence was a façade, really intended to provide a basis on which Punch could supply the German market with Lonsdale-branded goods, and that it was used in that way. That is the basis of Leofelis' counterclaim in the present proceedings. As I have already said, the viability of that claim is not in issue before us.
16. To continue with the basic story, however, in September 2007 Leofelis' financial position was under great strain. It faced having to pay €837,500 by way of royalty under the 2002 agreement on 1 October 2007. On 14 September 2007 DW asserted to RPC that the continued existence of the German injunction was a breach of Leofelis' rights under the 2002 agreement. On 28 September 2007 DW wrote again purportedly accepting Lonsdale's repudiation of the 2002 agreement, in obtaining the German injunction and not having it discharged, and terminating the 2002 agreement on that basis. (Those letters are set out at paragraphs 4 and 5 of my judgment given last July.) If that was effective the October royalty payment did not become due. RPC did not accept the validity of that proposition on behalf of Lonsdale and, after a 30 day notice to remedy, on 2 November 2007 RPC terminated the 2002 licence for Leofelis' non-payment of the October royalty. Thus, by that date, one way or another, the 2002 agreement was at an end.
17. In 2008 Lonsdale granted a new licence to Punch, replacing the S&C licence, which was to last for a year until 31 March 2009 and covered France, Germany, Hungary, the Czech Republic and Slovakia.
18. Leofelis alleges that the S&C licence was granted as a cover for Punch to sell goods, directly or indirectly, into the German market, and that it was so used. On that basis Leofelis claims damages against Lonsdale, as well as against Punch, for breach of the exclusivity which was Leofelis' right under the 2002 agreement, as regards the German market. Lonsdale denies liability and in any event contends that the measure of damages for such a breach if proved would be limited to the period during which the 2002 agreement was in force, that is to say no later than 2 November 2007.
19. As against this, Leofelis, formulating in general terms its claim for damages in paragraph 72 of its RRADC, claims "loss of royalties that would have been enjoyed if the Agreement had not come to an end" and "loss of opportunity to renew the Agreement under clause 11.4 with the concomitant loss of royalty income which would have been associated therewith" as well as two other heads of damage relating, at least in part, to the opportunities lost by the early termination of the agreement. Only the fifth head of loss is concerned with the loss of exclusivity during the subsistence of the agreement. Mr Justice Roth was given an indication of the order of sums that Leofelis would claim by way of loss. Dividing this between pre- and post-termination claims, on an approximate basis, as at the end of 2007, he said that the pre-termination claims amounted to almost €12 million, whereas the post-termination claims would be more than €26 million.
20. Against opposition from Leofelis, Mr Justice Roth considered that, perhaps unusually, it was appropriate to resolve the issue before him by way of summary judgment: see his paragraph 39. Mr Baldwin made a somewhat similar point to us, at any rate to the effect that we should be cautious before coming to a conclusion that the position was so clear that it should not be allowed to wait until the trial, or at least the trial of liability. Such caution led us to allow Leofelis the opportunity to reformulate its counterclaim: see paragraph 29 of my judgment given in July.
21. Mr Justice Roth's reasons for holding that the post-termination profits could not be claimed by way of damages are set out neatly and clearly in his paragraphs 65 and 66, which I quoted at paragraph 20 of my judgment in July, but I will repeat here as they express the point well:

"65. … The measure of damages for breach of contract is to put the innocent party in the position that it would have been in if there had been no such breach. In this situation, if Y had not committed the repudiatory breach, the contract would still have come to an end as X decided to terminate it without knowledge of that breach by Y. X therefore should not be able to rely on Y's repudiatory breach as the grounds for recovering damages for the contract coming to an end, i.e. for loss caused by Y's non-performance of its primary obligations thereafter.

66. Leofelis submits with force that if that is correct, here it enables Lonsdale to benefit from having concealed its breach of contract concerning the SIA Licence. Had Leofelis known about that conduct, it would have relied on it as a ground for terminating the Agreement in September 2007. That may be so in one sense. However, it is only an accepted repudiatory breach that brings a contract to an end. The unknown breach of the Agreement by Lonsdale was not accepted by Leofelis as a repudiation for the obvious reason that it was unknown. Therefore, that alleged breach, although its nature met the test for a repudiatory breach, cannot be the cause of the termination and thus of the loss that flowed from the termination. Put another way, Leofelis is not able to contend that if Lonsdale had not engaged in the impugned conduct regarding SIA, then the Agreement would have remained on foot such that Leofelis was in a position to earn continuing royalties from its sub-licences."

22. We held that the judge was entirely correct on the case as it had been put to him. However, Mr Baldwin had developed before us the new argument that the German injunction ought to be ignored or disregarded because it had formed part of a sequence of events, leading to the S&C licence, and that it would not have been obtained, or once obtained would later have been discharged, but for Lonsdale's scheme to put Punch back into the German market as the licensee of the Lonsdale trade mark, in breach of Leofelis' exclusivity. It seemed to us that this new case ought to be tested by reference to a draft statement of case, of which both Lonsdale and the court had had proper notice. We therefore adjourned the appeal, allowing Leofelis until 12 September to draft and serve its RRADC, and providing for written submissions in support of and against the application for permission to make the relevant amendments.
23. The case which Leofelis seeks to make by the RRADC, in this respect, may be described as follows.
24. Leofelis contends that the German injunction "was obtained as part of, or as an integral part of, a related course of repudiatory conduct by [Lonsdale] and that [Leofelis] was justified in terminating as a result of this course of related and connected repudiatory conduct": paragraph 40. The RRADC goes on as follows:

"41. On 28 September 2007 [Lonsdale] were in repudiatory breach of the Agreement or were pursuing a course of repudiatory conduct and if [Leofelis] had been aware of such breaches, which it was not, it would have been entitled to terminate the Agreement forthwith. As had been the case with the sale to Belgium the subject of the 2005 proceedings, [Lonsdale] were again breaching the exclusivity provided for by the agreement."

25. Then the RRADC sets out what are said to be the best particulars of "such repudiatory breaches or conduct" as it is able to give prior to full disclosure. It says that at a time unknown to Leofelis, but after 18 January 2006, Punch began negotiations with Lonsdale with the intention of obtaining a licence to distribute relevant goods in Germany, and that Punch was concerned at the presence of Leeside in the German market and asked Lonsdale to prevent such operations on the part of Leeside: paragraph 43.
26. Then the obtaining of the German injunction is stated, in paragraph 44.
27. Paragraph 45 contains ten sub-paragraphs in which Leofelis gives the best particulars that it says it then could, in support of the case which I have indicated, with the following opening words of the paragraph:

"The German injunction was obtained with the object (at least wholly or in part) to clear the German market of any direct sales operation for goods bearing the [Lonsdale trade marks] in order to open the market for exploitation by [Punch]. In the absence of such a course of conduct, the German injunction would not have been obtained or would later have been discharged."

28. I will summarise the content of the ten sub-paragraphs so far as I need to.

i) After termination of the Punch sub-licence by Leofelis, Punch requested a sub-licence for Germany from Lonsdale, on numerous occasions, and Lonsdale "agreed to give the matter proper thought". On 11 April it was said on behalf of Lonsdale "we cannot at this point licence Punch directly yet". On 13 April it was said, for Lonsdale, that Punch could only sell in Germany as a sub-licensee or distributor of Leofelis but "we are currently considering what actions we can take on this matter and will get back to you shortly".

ii) Punch was particularly concerned about the position of a major customer for Lonsdale-branded goods, Quelle (to which it had been selling as sub-licensee and to which it was still so selling in 2006). On 4 July Punch sent an email to Lonsdale, copied to staff of Quelle, explaining options that had been discussed (at a meeting between Punch and Quelle), following (it seems) a telephone conversation before the meeting between Punch and Lonsdale. One option recorded was for Punch to sell goods for the spring 2007 season to a third company in December 2006, which would then sell them on to Quelle in 2007.

iii) On 7 July 2006 Punch sent Lonsdale an email about the imminent trade fair mentioned, and from which I have quoted, in paragraph [9] above. In that email Punch thanked Lonsdale "for the constructive meeting yesterday". Also on the same date Punch sent another email to Lonsdale asking for a statement by Lonsdale that it supports Punch as a German partner for Lonsdale and to reconfirm their intention to reactivate Punch as licensee in the near future. That email continues: "I'm aware that you cannot write this as per my suggestion, but I'm in desperate need of such, since the Leeside agent popped up in the market more and more customers are questioning our position in the Lonsdale business."

iv) Then the preparation and application for the German injunction and its grant are stated. It is said that the injunction "was obtained following the request and information provided by [Punch] on 7 July 2006 and as part of the plan to try to re-activate Punch as Lonsdale's licensee in the near future".

v) It is said that on 15 August 2006 Lonsdale and Punch "continued to negotiate a licence for the German area".

vi) In December 2006 Lonsdale told Punch that they were currently putting in place an agreement for Punch in 2007 so that Punch could continue to produce Lonsdale product. On 6 December 2006 Punch requested that as many as possible (unlicensed) territories be included in a licence to Punch because such a licence would not be justified if limited to the Baltic States, where there was believed to be very little demand. It appears from other emails at this time that Punch sought the inclusion of Cyprus and Malta, but that Lonsdale would not agree to that.

vii) It is also said that only in Germany was an injunction sought against Leeside as sub-licensee. It is not stated in which other territories Leeside was active or to what extent, nor whether and if so when Lonsdale knew of such activity.

29. To refer to conduct as repudiatory is meaningless, or misleading, or both, in this context unless the conduct amounts to a breach, or a series of breaches, of the relevant contract. Asked by the court to identify which of the acts alleged constituted a breach of the 2002 agreement, Mr Baldwin was in some difficulty. He made the fair point that, while his clients have had such disclosure as Lonsdale have given, on the one hand there may be more documents (he showed us an email which was disclosed more recently, though it seems to me to be of at best very marginal relevance to the present issue) and on the other hand it would remain to be seen what any witnesses might say if oral evidence is given on behalf of Lonsdale. He pointed out that the two witnesses who made witness statements for the present purpose did not deal in terms with every email which Leofelis relies on and to which they appear to have been an addressee or of which they appear to have received a copy.
30. However, he showed us an email dated 1 February 2006 from a representative of a company with a sub-licence for Spain and Portugal (Francisco Costa) addressed to the UK licensee of Lonsdale (Cavden), copied to Punch and to Lonsdale, in advance of a meeting at Lonsdale's offices on 3 February. This stated the writer's intention "to continue with Lonsdale on a possible partnership with Punch Germany but I don't know what are the possibilities due to the European licence of Leeside". He also said "any action we take together will be to let Punch out of Lonsdale business as soon as possible at the lowest cost as possible." He wanted the boss of Lonsdale to be present at the meeting. In a later email (10 April 2006) from Punch to Cavden, copied to Lonsdale, Punch said to Cavden "in our last meeting at [Lonsdale's] office you have told me not to tell our customers about the expiration of our licence, we have no choice but to play with open cards". It may be that the "last meeting" referred to was the meeting at the beginning of February.
31. As with several other items on which Mr Baldwin relied, the email of 1 February 2006 shows what others were saying to Lonsdale, or asking of Lonsdale, not by any means necessarily what Lonsdale would have said themselves or would have agreed (or did agree) to.
32. On the basis of that document and the inference (which is reasonable) that the planned meeting took place on 3 February at Lonsdale's office, Mr Baldwin argued that from that time on, if not before, Lonsdale was supporting Punch in its operation in the German market throughout the remainder of 2006, despite Punch's sub-licence having been terminated by Leofelis. He said that the 10 April email shows that Cavden encouraged Punch to keep the news of the termination (or forthcoming expiry – it is not clear) of its licence from the market. He argued that Cavden appears to have had some degree of authority on behalf of Lonsdale in this respect.
33. The 10 April 2006 email followed one on 29 March by which Punch asked Lonsdale "whether Punch can apply a license direct from [Lonsdale] since you also terminated [Leofelis'] licence". Punch had had no reply to that, which is why it wrote to Cavden. The latter's response was cautious: "in all likelihood [Lonsdale] will feel unable to respond in any meaningful way till his team have examined in detail the response that [Leofelis] have put in to our cancellation of their licence". Punch replied in frustrated terms, and sent Cavden a letter from Leofelis' Italian lawyer to Quelle, which was one of those on the basis of which, later, RPC complained to DW about Leeside holding itself out as having a valid sub-licence in Germany. It was in response to this that Lonsdale's lawyer sent the email dated 11 April from which Leofelis quotes in paragraph 45 of the RRADC, as shown at paragraph [28] (i) above. That email should be seen in full. From the passage quoted above it continues "We have "cancelled" [Leofelis'] licence but the cancellation is subject to the court determining that the cancellation is valid. Until such time as a court reaches that conclusion we must continue to act as if [Leofelis'] contract is in full force and effect and cannot breach it in any way". That cautious and careful position is consistent with other comments made by or on behalf of Lonsdale at this stage. It seems to me to provide extremely unpromising material for an argument that Lonsdale was then repudiating the 2002 agreement, that is to say behaving as if it no longer intended to be bound by its terms.
34. The email dated 4 July, mentioned in paragraph [28] (ii) above, includes these passages, on which Mr Baldwin relies: "despite of all the supporting gesture from the UK"; "having the knowledge that you are working hard on changing this licence situation on the continent, there is no certainty about the time that this actual happens"; "your intention to continue working with us in Germany this is easing the situation a bite, of course for us but also for Quelle this sounds like sunshine after bad weather"; "Now important for all of us is to get Lonsdale back on normal track before winter 2007". These were comments by Punch and cannot be taken as reliable indications of the position of Lonsdale at the time.
35. Moving on past the date of the German injunction, to matters relevant, according to Mr Baldwin, for the light they throw on what had been happening beforehand, he relies on an email dated 15 August 2006, from Punch to Lonsdale, copied to representatives of Quelle, and apparently in preparation for a telephone conversation between representatives of Lonsdale and of Quelle. This is said to provide support for the allegation mentioned at paragraph [28] (v) above. The email gives, as the purpose of the conversation, "to verify the status of Punch within the Lonsdale network". The writer describes that status, from his point of view, as follows: "Punch's licence with Leofelis will expire by the end of 2006; [Lonsdale] is to cancel the licence of Leofelis, the court case will be in November this year in London; [Lonsdale] is intended to license Punch for the German area, as soon as the legal problems are solved with Leofelis [my emphasis]; [Lonsdale] is, to her best endeavour, supporting Punch to maintain her markets." It is not clear that the call between Lonsdale and Quelle took place at that time (or at all) because the addressee for Lonsdale was then away on holiday. For my part, I do not see that this email justifies the assertion in paragraph 45(viii) of the RRADC that at this time Lonsdale and Punch were negotiating a licence for Germany. Certainly it does not show any contemplation, even by Punch, that if there were to be such a licence, it would be entered into in such circumstances as to conflict with the 2002 agreement.
36. The next matters on which Mr Baldwin relies occurred in December. By that time it is clear that there was a negotiation under way which ended in the grant of the S&C licence. It is difficult to see how such preparations can have had any separate impact on Leofelis, as regards causing it any loss, other than that which the grant of the S&C licence had. Mr Baldwin's case is that they were part of the sequence of events, planned or intended by Lonsdale and Punch from much earlier on, which led to the S&C licence, but which included the German injunction. It does not seem to me that the preparations are of importance in themselves for present purposes.
37. As Mr Justice Roth said in paragraph 65 as already quoted, in order to measure the damages for breach of contract, the court has to compare the aggrieved party's actual position with that in which it would have been if there had been no breach of contract. The process therefore involves working out an alternative history, treating breaches of contract as not having occurred and therefore treating the guilty party as if it had acted lawfully in the relevant respects. That is not sufficient by itself in the present case, because Mr Baldwin has to persuade the court at trial that Lonsdale is to be treated, in the hypothetical counterfactual world, as not having obtained the German injunction. To apply for and get the injunction was not a breach of contract, so it cannot be airbrushed out of the picture on the conventional basis. Otherwise, he cannot get over the fact that Leofelis did rely, and would in any event have relied, on the German injunction as the ground for accepting a purported repudiation by Lonsdale of the 2002 agreement.
38. The RRADC is not specific as to any act on the part of Lonsdale, of those to which I have referred in summarising the new case, as having been a breach of contract. It refers to "repudiatory conduct", as I have shown, but as already stated if that conduct does not amount to a breach of contract it does not seem to be of any relevance. Invited by the court to indicate what breaches of contract he relied on, and when they started, he said, first, that Lonsdale and Punch had agreed that Punch would be put in a position to sell Lonsdale-branded goods in the German market, thereby infringing Leofelis' exclusivity under the 2002 agreement, and that Lonsdale and Punch had carried this agreement out. Of course, the allegation of breach of contract already made in the statement of case is that Lonsdale and Punch did make such an agreement, but that was by way of the S&C licence; that is far too late to have any impact on the issue of the German injunction. Moreover it is apparent from the sequence of emails that have been shown to the court that Lonsdale was careful in all it said about a new licence for Punch to proceed on the basis that no such licence could be granted which conflicted with the 2002 agreement unless and until that had been held to be at an end. Moreover, since Punch was still trading in Germany throughout 2006, and its problem really only arose as regards 2007, it seems to me that there could be no plausible suggestion that what Lonsdale was considering in this respect was directed at the position before January 2007.
39. In order to get over such problems, Mr Baldwin developed another contention, namely that in the course of 2006, from February onwards, Lonsdale was helping Punch to sell Lonsdale-branded products in Germany despite the fact that Leofelis had terminated Punch's licence, and that in giving such help Lonsdale was in breach of the 2002 agreement. That argument in turn presents some difficulties for Mr Baldwin. One is that Punch did not accept the validity of the termination of its sub-licence. It was, therefore, continuing to trade as Leofelis' sub-licensee. No doubt it was doing so at its own risk, if it were found that the termination was effective, but that was an issue between Punch and Leofelis (which, we were told, was ultimately resolved by compromise). Moreover, since Leofelis did not intend to operate in Germany itself, and could not lawfully operate there via Leeside, it is not clear what loss Leofelis suffered through Punch's trading in Germany. Punch would be liable to Leofelis for that trading either under the sub-licence itself (if it was still in force) or by way of damages or an account (if it had been terminated effectively).
40. The greater difficulty for present purposes is that this is not any part of Leofelis' pleaded case in its RRADC. Mr Baldwin contended, somewhat faintly, that if the case had not yet got into quite the right form because Counsel had not foreseen all the difficulties, that should not be fatal to Leofelis' ability to resist the summary judgment application and therefore to support its appeal. In the light of the time allowed by the court to Leofelis to formulate its draft amended statement of case, it does not seem to me that there could be any question of allowing further time for another attempt, and Mr Baldwin did not pursue that suggestion. I am not prepared to take account of a case based on acts which are said to have been in breach of contract but which are not alleged in the RRADC. I therefore ignore that argument on Mr Baldwin's part.
41. The result of that is that Leofelis' new case is that Lonsdale and Punch were engaged in preparatory discussions for what eventually came to fruition as the S&C licence in January 2007. The grant of that licence is alleged to have been a breach of contract. No other breach of contract as such is alleged, or could plausibly be alleged on the basis of the documents now shown to the court. What is said about the German injunction is that it was obtained in order to clear the German market of direct sales by Leeside of Lonsdale-branded goods, so as to open the market for exploitation by Punch, and that, absent the course of conduct alleged, as already described, Lonsdale would not have applied for the injunction.
42. On that basis Mr Baldwin would argue that, in the hypothetical alternative world which has to be postulated in order to quantify Leofelis' damages for breach of contract, not only acts which are breaches of contract but also other acts which, as a matter of fact, would not have happened, are to be ignored. It seems to me that this approach presents some difficulties in principle, especially bearing in mind the well-established proposition that damages are to be based on the least onerous way for the party in breach of contract to have performed the contract without breach: see McGregor on Damages 18^th edition para 8-093. However, that point did not feature in argument before us, and this is not an appropriate occasion to embark on a consideration of the point in general terms.
43. The contention is bound to fail, as it seems to me, for a more simple and straightforward reason on the facts of the case. If we consider the position in July 2006, Lonsdale and Leofelis were locked into hard-fought litigation in which each made substantial claims against the other, including (by Lonsdale) that the 2002 agreement had been brought to an end already. The case was due for trial in November. Lonsdale had become aware that Leeside asserted that it had a sub-licence from Leofelis for Germany, and had protested about this on the basis that no consent had been given for such a sub-licence, as was required by the 2002 agreement. Punch was still trading in the German market, albeit subject to an issue as to whether it was doing so lawfully, as between it and Leofelis. So Lonsdale-branded goods were still on the market in Germany. There would be an issue as to supplies of such goods after the end of the year, but that did not arise immediately. Lonsdale became aware of a specific threat by Leeside to start trading, or at least offering Lonsdale-branded goods for supply, at the Berlin trade fair. On Lonsdale's view of the matter, that was plainly unlawful because no consent had been given for the sub-licence to Leeside in respect of Germany. It seems to me that it would in any event have been an obvious step to take, as a matter of litigation strategy, to seek to prevent Leeside from trading in Germany, on the basis of the argument that the sub-licence was not valid. To obtain such an injunction would put Leeside, and therefore its holding or associated company Leofelis, at a financial disadvantage, by precluding it from exploiting the German market.
44. Mr Baldwin suggested that Lonsdale would also have been concerned to protect its own brand in the very profitable German market, and that therefore it would not have obtained the injunction unless it had been intending to put Punch in place as its licensee for Germany. As to that, on the one hand it seems to me that it would be, to say the least, difficult to infer that Lonsdale would have held back from taking this step, which it considered (rightly, in the end) it was entitled to take, and which would put its opponent in the litigation at a disadvantage. On the other hand, first, Punch was in fact active in the market and, secondly, Lonsdale may have hoped that, when the case came to trial later in the year, it would succeed in establishing that it had brought the 2002 agreement to an end already, so that it could then grant a new licence to Punch without any problem as regards Leofelis, with effect from the beginning of 2007 or thereabouts.
45. For those reasons, it seems to me that Leofelis is still unable to show an arguable case for saying that, in a hypothetical alternative world in which Lonsdale committed no breaches of the 2002 agreement such as are alleged against it, Lonsdale would not have sought and obtained the German injunction. Once it had got the injunction I can see no basis on which it could have been persuaded to discharge the injunction, absent a court order to that effect, so that alternative way of putting the case is also unrealistic.
46. It also follows that Leofelis cannot eliminate from the hypothetical sequence of events its own purported acceptance of Lonsdale's repudiation of the agreement on the express basis that Lonsdale was in breach by obtaining the German injunction. Therefore the case has to be approached on the basis that Leofelis would have purported to bring the contract to an end in any event. Accordingly, it cannot claim damages on the footing that, but for any breach of contract which it is able to prove (in respect of the S&C licence), the 2002 licence would have run on to its expiry date and would have been renewed for another six years.
47. For Lonsdale, Mr Leggatt Q.C. made a further cogent point in his skeleton argument, namely that even if the 2002 agreement had not been terminated on 28 September 2007, it would have been brought to an end shortly thereafter because it is plain that Leofelis was not in a position to pay the royalty payment which was to fall due on 1 October 2007. Either way, therefore, the 2002 licence agreement would have come to a premature end, and the claim on the basis of a loss of continuing profits is unreal.
48. Those are the reasons for which I came to the conclusion that Leofelis should not be given permission to make the amendments shown in the RRADC, and that accordingly the appeal should be dismissed.
49. It will be open to Leofelis to propose other re-re-amendments, in particular to allege damage on a more limited basis, but any application for that purpose should be made in the Chancery Division.

Lord Justice Lewison

50. I agree.

Lord Justice Pill

51. I also agree.