GB - Gul Bottlers (PVT) Ltd v Nichols Plc

Judgment

Mr Justice Cooke:

Introduction

In these proceedings the claimant (Gul) seeks damages in respect of the profits which it contends it would have made under a licence agreement (the Agreement) granted to it by the defendant (Nichols) for the production and distribution of Vimto double strength (DS) cordial and ready-to-drink carbonated Vimto drinks across Pakistan. It was Gul’s contention that, after months of negotiations and the expenditure of significant time and money, shortly before Gul was about to launch these products into the market in Pakistan, Nichols withdrew Gul’s licence to produce the DS Cordial because of pressure applied to it by its largest distributor, Aujan Industries Co (Aujan).

Aujan was not only considerably larger than Nichols but had a long standing relationship with it over a period of some 90 years. The owner of Aujan and the chairman of Nichols (Mr John Nichols) had known each other over a considerable period of time and the distributorship agreement with Aujan was negotiated by the two personally. Aujan had reason to oppose the production of DS Cordial in Pakistan since it feared that it would impact on its own sales in that territory, although it had no franchise for it under the terms of its own distributorship agreement. From the documents and evidence before me, it is clear that Aujan exported to Pakistan and in consequence there existed what is known as a “grey market” for Vimto products in that country. Because its products were produced and bottled abroad, there were inevitably additional shipment costs and the DS Cordial was accordingly sold as a premium product in the more expensive “top end” stores in Karachi at prices ranging between 325 rupees and 345 rupees a bottle. Aujan may also have feared that Vimto DS Cordial produced in Pakistan by Gul might “leach” into its own franchise territories.

Nichols contested Gul’s claim on three separate grounds:

Nichols contended that the Agreement had never been for DS Cordial at all but only covered single strength cordial (SS) and carbonated products.

Nichols contended that Gul failed to mitigate its losses by rejecting an offer made by Nichols in January 2013 (six months after Gul’s letter before action). The offer made was to conclude a new Licence Agreement on the terms which Gul had always contended were the terms of the original Agreement.

Nichols contested the quantum of Gul’s loss as put forward by Gul and Mr Sequeira of Navigant Consulting, the expert eng