Crefovi's newsletter: John Lobb Ltd v John Lobb SAS - a disconcerting attempt to void a contract for common mistake

John Lobb Ltd v John Lobb SAS: a disconcerting attempt to void a contract for common mistake

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I was always intrigued by the way John Lobb, the superb footwear brand, managed its affairs between Paris, France, and London, United Kingdom. Well, now, I know, thanks to my exhaustive review and analysis of the England and Wales High Court (Chancery division) decision dated 8 September 2022, on whether the agreement bounding the French business, John Lobb SAS, to the British business, John Lobb Limited, was void under the case law of common mistake. Was it a good call for John Lobb Ltd to pull such a claim? Did John Lobb Ltd gain anything out of this public exposure, and this washing of dirty laundry in the public eye? I don't think so and here is why.?

1. John Lobb Ltd v John Lobb SAS: the facts

John Lobb is a men's luxury footwear brand, worn by many celebrities (Cecil Beaton, Orson Welles and Katharine Hepburn).

It was founded in Sydney, Australia, in 1849 by John Lobb (born in 1826 in Cornwall, United Kingdom (?UK”), and son of a farm hand).

In 1866, the business moved to London, UK, and began trading from premises located at 296 Regent Street.?

In 1946, the business was incorporated by Eric Lobb, a descendant of the founder, into ?société John Lobb”, after the successful set up of a boutique located rue du vingt-neuf-juillet in Paris, around 1900 (?John Lobb France” or ?JLF”).?

In September 1972, Eric Lobb incorporated the shoemaking business into ?John Lobb Limited”, a private company limited by shares (?JLL”) in London, UK. The share capital of JLL is GBP10,000, divided into 10,000 shares of GBP1 each. Eric Lobb and John Hunter Lobb, master bootmaker, seemed to have been the two shareholders of JLL, upon incorporation in 1972. The five original directors of JLL were:

• Eric Lobb;
• John Hunter Lobb;
• John White (a bootmaker);
• Alice Marguarite Ellen Lobb, and
• Edward Eric Lobb.

JLL's shares are still now held by various members of the Lobb family.

In 1976, the majority of the shares in JLF was sold by Eric Lobb to the French luxury goods business Hermes (?Hermes”). Hermes acquired control of JLF as well as the rights in a trademark registered in France by Eric Lobb which protected JLF's products (the ?Trademark”).?

Meanwhile, JLF was transformed into a ?Société par Actions Simplifiée” or ?SAS” (?John Lobb SAS” or ?JLSAS”) and continued developing and operating its own luxury footwear business under the steady hand of Hermes (Guillaume de Seynes, general manager of Hermes, is also currently the CEO of JLSAS).?

From 1976 onwards, there has been collaboration between the businesses of JLL and JLSAS. JLSAS operated, or continued to operate, its business selling footwear under the ?John Lobb” name. Hermes started registering international trademarks around the work, which were international extensions of the Trademark, in order to protect the ?John Lobb” brand (together, the ?TMK portfolio”).?

In order to regularise this collaboration, as well as clarify the rights of JLL and JLSAS into the Trademark and the TMK portfolio, JLL and JLSAS, together with Eric Lobb, entered into a written agreement on 9 March 1992 (the ?Radlett agreement”). Already, signs of poor legal drafting services rendered were identified into the Radlett agreement since:

• clause 10 of the Radlett agreement set out that it was ?entered into for a period of 15 (fifteen) years at which time its operation shall be reviewed by (JLL) and (JLSAS)”;
• such clause 10 did not specify a start date for this 15 years' term;
• clause 9 of the Radlett agreement, which related to financial matters, set out that the agreement was entered into from 9 March 1992.

The recitals to the Radlett agreement set out that:

• the property rights in the Trademark were ?ceded” by Eric Lobb to JLSAS pursuant to an agreement between the parties dated 24 May 1976 (the ?Prior agreement”), in consideration of the payment of a percentage of JLSAS' turnover for the years between 31 March 1976 and 31 December 1985;
• the Trademark was registered in other countries (hence creating the TMK portfolio) and recorded the costs incurred by JLSAS in this respect;
• the parties wished to continue to collaborate and ?extend existing agreements to the manufacture, promotion and sales of products described in classes and categories of the Trademark already registered throughout the world”.

Clause 1 of the Radlett agreement gave JLSAS the right to the manufacture, promotion and sales of ready-to-wear footwear under the Trademark throughout the world. Such right was limited under clause 2, though, since JLSAS agreed not to manufacture made-to-measure hand-made footwear in the UK under the Trademark and assigned to JLL any rights which may have accrued to JLSAS in the UK by its acquisition of the Trademark in made-to-measure hand-made footwear.?

Clause 5 of the Radlett agreement provided that JLSAS agreed to make annual payments to JLL which were expressed to be in consideration for extending the Prior agreement in accordance with the terms and conditions of the Radlett agreement. Another example of poorly drafted clause!

Clauses 6 to 9 of the Radlett agreement contained provisions supplementary to clause 5. For the record, these provisions for payment to JLL were amended further to Hermes' acquisition of Edward Green and company Limited, another UK footwear manufacturer (i.e. the sums payable to JLL were increased to take into account the increase in turnover resulting from this acquisition).?

Clause 11 provided that the Radlett agreement was governed by, and construed in accordance with, the law of England & Wales.

Since the termination of the Radlett agreement was planned to take place in March 2007, negotiations between the parties kicked off in late 2005, concerning the nature and terms of the relationship between the parties which was to follow the Radlett agreement.?

On 3 March 2006, JLSAS' solicitors, DLA Piper UK LLP (?DLA”), sent a letter to Hermes which contained advice ?in relation to your rights or ownership and use of the (Trademark)” (the??Letter”). The Letter was copied to JLL as part of the negotiations. The Letter set out:??As I said at the outset whilst there have, over the years, been a number of agreements and discussions between the parties, (Hermes)'s ownership of the (Trademark) is well documented. (JLL) has received proper consideration for the acquisition by (Hermes) of those exclusive rights and (Hermes) is entitled to continue to use, exploit and protect those rights as any trade mark owner would be”.?

On 6 March 2008, JLSAS and JLL, as well as JLL's shareholders, entered into an agreement organising their future relationship, which was entitled??Agreement relating to John Lobb name and trademark” (the??2008 agreement”).?

The 2008 agreement provides that:

• the Prior agreement dealt with the sale of the Trademark;
• the Trademark was registered, for its protection, in various countries by JLSAS;
• JLO and JLSAS have fully cooperated to maintain and develop a mutual business built on the Trademark and trade name Lobb with a view to ensuring that standards continue into the future;
• JLSAS is the legal and beneficial owner and registered proprietor of the Trademark throughout the world and has all the rights in the Trademark save in respect of the rights enjoyed by JLL set out in clause 1 of the 2008 agreement;
• pursuant to clause 1, JLSAS agrees that (i) JLSAS' Prior agreement to permit JLL's exclusive right to use the Trademark in relation to its UK business in made-to-measure hand-made products (the??JLL products”) continues and (ii) JLL may also continue to use in the UK the Trademark on products ancillary to the JLL products which (for the avoidance of doubt) include solely shoe care trees, shoe care products, belts, cases and riding boot accessories;
• pursuant to clause 2, JLSAS would make annual financial payments to JLL, over two consecutive periods of five years (the first annual payment fell to be made in respect of the period from March 2007 to March 2008 and the final annual payment of GBP35,000 fell due for payment on or before 10 March 2017);
• pursuant to clause 3, JLSAS shall (in its absolute discretion) carry out the registration and renewal of the existing future trademarks, and shall remain sole judge of the measures to be taken and will bear the costs of filing, renewal and defence of the Trademark; JLL shall however be obliged, at its own cost, to give JLSAS any reasonable help and assistance it may request;
• pursuant to clause 5, the term of the 2008 agreement is from 9 March 2007 and to continue without limit of time, subject to a right of termination vested in JLSAS, in the event of a change of control of JLL to a party or parties outside the Lobb family and further subject to a right of pre-emption which apply in the event of an intended sale of shares in JLL outside the Lobb family and in the event of an intended sales of shares in JLSAS outside Hermes;
• pursuant to clause 6, the 2008 agreement is governed by, and construed in accordance with, the law of England & Wales, the parties submitting to the exclusive jurisdiction of the English courts, subject to an obligation to use reasonable endeavours to resolve problems through discussion at senior management level.

There are five annexes to the 2008 agreement, in particular annex B which sets out a list of trademarks registered in various countries, which correspond to the TMK portfolio.

From 2008 to 2017, the parties operated under the terms of the 2008 agreement without issue.

On 19 April 2017, Clintons, JLL's solicitors, sent a formal letter of claim to DLA, JLSAS' counsel (the ?Letter of claim”). The Letter of claim set out the grounds of challenge to the validity of the 2008 agreement, and asserted that it was void on the basis of common mistake.?

The above-mentioned last annual payment of GBP35,000, which fell due on or before 10 March 2017, was tendered by JLSAS but returned by JLL.

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Crefovi's live webinar:?John Lobb Ltd v John Lobb SAS - an analysis

7 February?2023?| 15:30pm London time?

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Crefovi's live webinar will begin on Tuesday 7 February at 15:30pm London time (UK), and will provide an in-depth analysis on the litigation case John Lobb Ltd v John Lobb SAS: a disconcerting attempt to void a contract for common mistake.

You haven’t yet secured your free place for our upcoming webinar on the John Lobb Ltd v John Lobb SAS litigation?

Here is your chance to join?Annabelle Gauberti ?on Tuesday 7 February 2023, 15:30pm London time (UK) as she explores the key points relating to this trademark and commercial litigation case.

In this webinar, our expert speaker will discuss:

• ?the facts;
• the procedure in the high court and court of appeal of England & Wales;
• a lack of self-awareness and impartial analysis which leads to a public relations' disaster, for John Lobb Limited.

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