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WILLIAM GRANT AND SONS LTD &c v. GLEN CATRINE BONDED WAREHOUSE LTD &c


OPINION OF LORD CAMERON OF LOCHBROOM

in the cause

WILLIAM GRANT & SONS LIMITED AND OTHERS,

Pursuers;

against

GLEN CATRINE BONDED WAREHOUSE LIMITED AND OTHERS,

Defenders:

________________

Pursuers: Dean of Faculty, Woolman, McGrigor Donald

Defenders: Davidson, Q.C., McSherry, McClure Naismith

19 February 1999

Background

William Grant & Sons Limited

In 1886 William Grant established a distillery in Glenfiddich in Banffshire to use the waters from a spring called Robbie Dubh. The first spirit is said to have run from the Glenfiddich Distillery stills on Christmas Day 1887. The original family business took the form of a partnership between William Grant, his wife Elizabeth and their eldest son John Grant. Its business was the selling of new malt whiskies as fillings to others for blending. The business prospered and in 1891 a second distillery was established at Balvenie for the production of new malt whiskies for sale as fillings to blenders and owners of whisky brands. At about that time the whisky industry suffered from a slump in business, aggravated by the bankruptcy of one particular company, Pattisons, the biggest wholesale whisky merchants in the country. In 1903 the business was incorporated as a private limited company, William Grant & Sons Limited, (WGS), the whole shares being held by members of the Grant family. At about the same time WGS began blending and selling its own rectified single malt whiskies. Whisky was sold under the Glenfiddich name. By 1920 WGS was selling a variety of blended products, including Irish Whisky and other spirits using labels which included the name Grant's such as Grant's Stand Fast, Grant's Family Reserve, Grant's 12 Year Old, and Grant's Best Procurable. In about 1985 WGS began to use the name William in conjunction with the word Grant's, in particular in connection with labelling of Grant's Family Reserve and Grant's 12 Year Old whiskies. From its incorporation the products of WGS carried on their labels reference to William Grant & Sons Limited as the producers and this remained unchanged after the company reconstruction in 1991.

During the period from 1903 until 1920 WGS extended its trading connections to North America and to the Far East, including India, Australia and New Zealand. On the labels produced by WGS and affixed to their products was incorporated a crest with the words Stand Fast. Some two decades or so later the use of a crest was legitimised with the approval of the Lord Lyon. That crest continues to be carried on labels of the pursuers. On the labels and in the advertising and promotional material produced from the early years of the century, WGS was accustomed to describe its products with the introductory word Grant's and likewise those who distributed its products for onward sale employed the word Grant's. This was exemplified by the production of a representative selection of labels used on the principal own branded whiskies over the course of years from the early 1900's onwards. Such labels were displayed on products available in various markets including the home and North American market. During the period between 1920 and 1939 WGS increased its volume of business substantially and had extended its markets both at home and abroad. During the Second World War years the supply of cereals was stopped. Distillation ceased but began again after the end of the War initially with restrictions on the supply of cereals. By this time exports constituted the greater proportion of sales, though with the removal of restrictions on home market sales after some years, sales in the home market increased substantially also. Up to 1960 blended whisky, with the Grant's name attached to it, formed the primary product of the company. Glenfiddich Malt Whisky which had been produced from the early days and sold locally, was at this time marketed elsewhere in Scotland and in England. From 1963 WGS began to export Glenfiddich Malt Whisky. For its blended whisky, WGS was by then employing the designation Grant's Stand Fast for sales within the United Kingdom and Grant's Scotch Whisky for export sales outwith the United Kingdom. It had continued to keep the name Grant's Best Procurable for its 12 year old blended whisky, but the word Liqueur had ceased to be used.

The expansion of sales was matched by an expansion of its business premises after the Second World War. This included the purchase of an American subsidiary which owned a brand called Clan McGregor, expansion of distilling operations at Glenfiddich and Balvenie, and the construction of a new distillery at Girvan. This expansion was matched by an advance in the volume of sales worldwide. In 1960 WGS was trading in some 143 countries and sales worldwide amounted to some 500,00 cases a year. Sales worldwide increased to one million cases by 1973 and on to some two million cases in 1988. Following a company reconstruction in 1991, sales had by 1995 advanced to just over three and a half million cases a year. In addition, the number of countries to which its products were exported had increased to some 170 countries throughout the world. WGS has, in its present form, recently moved into markets in Eastern Europe as well as new markets in Far East countries. Its principal markets extend to countries in every continent as the pursuers' production No.56/10 demonstrated. The markets in a very substantial number of these countries was first entered some decades ago and have remained as established markets ever since. The witness Mr. McGrath referred to his company, International Distillers and Vintners, as having distributed Grant's whisky in Sweden for some 60 years until very recently (1517). In 1974 WGS was awarded the Queen's Award for Industry in relation to its production of Glenfiddich. A further Queen's Award was received in 1989 covering all of its products. In 1996 the pursuers were awarded the Queen's Award for Industry again extending to all of its products. Reference was made in evidence to tables published in trade magazines which set out the comparative figures for, amongst other things, blended Scotch whisky and malt whisky. These included the Scotch Whisky Industry Review over the period between 1987 to 1995 and Impact International for the years 1992 to 1996. From these tables it appeared that Glenfiddich was placed as the world's top selling malt whisky while Grant's blended Scotch whisky was amongst the top best selling blended Scotch whiskies sold world-wide. From the evidence it is plain that whereas in the period until the late 1940's, the bulk of sales were made to outlets in the United Kingdom, the growth of the export market has been such that at the present day of total sales world-wide only 15% of sales are within the home market. I refer to the documents nos. 58/1 and 58/2. While it may be said that the major part of the pursuers' business is conducted outwith the United Kingdom, it would not be correct to suggest, as did counsel for the defenders, that the pursuers' business was as exporters since the United Kingdom market quite clearly represents a very significant fraction of their total business enterprise.

The pursuers presently expend a sum of the order of between £40 and £50 million pounds on advertising annually and, Mr. A. Grant Gordon estimated, a similar or larger sum would be provided by their distributors round the world (167/8). It would be reasonable, having regard to Mr. David Grant's evidence, to allocate some 34 per cent of that total to expenditure on Grant's whisky (413), say £15 million pounds. The nature of advertising was not limited to hard copy advertising in newspapers and magazines and the like but to promotional activities of various kinds in particular markets as was explained and illustrated in the evidence of Mr. Tait (587/612). In particular, he referred to an illuminated sign in Glasgow bearing the legend Grant's Scotch Whisky which he had seen and which was replicated in similar signs which he had seen abroad. Such signs were illustrated in the brochure for what Mr. Tait termed "point of sale" material .

Though its business was principally that of scotch whisky distillers, with the construction of the Girvan distillery in about 1963 WGS was able to produce neutral spirit for the production of gin and vodka. Until then it had produced such white spirits in small quantities from neutral spirit bought in from other sources. There were limited sales of both gin and vodka thereafter in both the home and export markets. In the main, gin was sold with the name Grant's on the label whereas vodka was sold in the home market under the name Light Brigade and in the export market under the name Grant's Imperial. The evidence demonstrated that sales of these spirits was generally small though by 1992 there was a modest increase in sales taking place. By 1992 sales had reached something materially in excess of some ten thousand cases of each product. The major part of the sales of each product had taken place in the export market. The evidence of Mr. A Grant Gordon (83) indicated that the impetus to enter the vodka market in 1963 was one dictated by a desire to widen the range of the company's products in the triangular bottle which had been adopted for Grant's blended whisky for the first time in 1957 for the home market and about a year later for the export market. Shortly thereafter the same shape of bottle was adopted for the marketing of Glenfiddich Malt Whisky.

In the labelling of its products Grant's has been the dominant name on labels in use both for blended whisky in both home and export markets and for gin and vodka sold in the export market. In documentary production No.55/23 which is the label for the pursuers' blended Scotch whisky and has been in use over the period from 1988 to date, the name Grant's is in red letters and the most prominent feature of the whole of the label. The reference to the phrase Stand Fast is in very small and unremarkable lettering. Documentary production No.55/64-66 are the labels used for both the home and export market for gin products between 1963 and the present date. Until 1970 the name Grant's was prominently displayed in blue letters on a white label. Between 1970 and 1978 the label used in both markets employed the name William Grant's in bold white letters against a blue label. Since 1978 to the present date the label has employed the name Grant's in white prominent letters against a blue background for gin products both in the home market and in the export market. For vodka products from 1963 onwards the name Light Brigade has been used in relation to home sales. Documentary production no.55/73 represents the label used for the export market from 1979 to date for vodka. In it the name Grant's is employed in distinctive white letters against a red background.

I would note in passing that it appeared from the evidence that in a cross-action raised by the defenders against the pursuers, subsequently abandoned prior to the present proof, an undertaking had been given by the present pursuers that they would not market their vodka or gin products in the United Kingdom under the name Grant's while the present action was pending. This matter was alluded to in the evidence of Mr. Bulloch (3455-6).

WGS and the pursuers have held registered trademarks which include the name Grant's over a period since 1933. In that year the mark was registered in respect of blended scotch whisky (in bottles only) for export. In the statutory declaration accompanying the application it was stated that the mark had been used since 1903 and that the goods had always been referred to and described as Grant's. (Mr. A. Grant Gordon: 172) There were supporting declarations to the effect that for a period of years prior to 1933 the name Grant's upon scotch whisky for sale either in the United Kingdom or for export abroad indicated to the declarant or to the trade generally that the goods emanated from the pursuers (Mr. A. Grant Gordon:174-6). Reference was made to honest concurrent use but the concurrent user was not identified in evidence. (Tait:889:Murgitroyd:6405). In 1961 the mark was registered in respect of scotch whisky for export. As the documents produced No.47/17 bear, the then managing director of WGS declared that WGS were then exporting scotch whisky for export to 134 countries throughout the world and claimed that the mark Grant's was distinctive of these goods. This claim was supported by statutory declarations from senior representatives of other companies in the trade. In 1974 the mark Grant's Stand Fast was registered in respect of scotch whisky. The mark Grant's was registered in respect of whisky included in Class 33 with effect from April 1988. As appears from the production 61/21 as at August 1994 there was a pending application for registration of the mark Grant's in respect of alcoholic beverages filed for the pursuers in January 1991. From the evidence of Mr. Tait (899) it appears that the Registrar of Trademarks has cited two other marks, namely Glen Grant and Grant's Morello Cherry Brandy, against the application. Mr. Tait also stated (900) that the latter mark had been cited against the application filed in 1988. In August 1984 the pursuers had filed an application for registration of the mark in respect of spirits, which was abandoned in March 1990. It appeared that this application ran out of time for the submission of supporting evidence (Tait:890). In July 1985 the pursuers had also filed an application for registration of the mark in respect of whisky and other alcoholic beverages which was subsequently abandoned in May 1992. It appeared that this had been filed inadvertently and was withdrawn on that basis (Tait:891). Mr. Tait also spoke to documentary evidence produced which comprised a compilation of trademark certificates from countries around the world in the single name Grant's, certain of which featured in litigation which had been entered into with respect to the first defenders' products abroad. He said that in present terms the pursuers spent between £150,000 and £250,000 annually on trademark applications in countries throughout the world.

Goodwill and Group Reorganisation

Against this background I turn to the first issue that arises in the case. In the present action the first pursuers are the holding company within the William Grant & Sons Group of Companies of which the second and third pursuers are members. The second and third pursuers are the wholly owned subsidiaries of the first pursuers. For the pursuers it is averred that within the group each of them has a stake in the goodwill attached to the name Grant's. They claim that that goodwill derives from the fact that the name Grant's has been associated with the pursuers and their predecessors since about 1887. It is goodwill derived from the distinctiveness of the name Grant's as associated with the pursuers and their products which, the pursuers claim, constitutes their property which has been and continues to be damaged by the defenders' actings and is the foundation of their case.

Between 1903 and 1991 the whole business of the production of whisky and related products was carried on by WGS. Following upon a company reconstruction effected between October 1991 and January 1992 and by virtue of a transfer agreement and assignation both dated 17 January 1992 the first pursuers, then known as William Grant & Sons Holdings Limited, acquired from WGS inter alia the whole industrial property, goodwill and claims to which the latter company then had right. I note however that from 1966 until 1996 distribution of the products of WGS and latterly the pursuers,was undertaken by another company, William Grant and Sons UK Sales Limited, established in partnership with Bass Allied and two other organisations. In this company WGS had a 10% shareholding. After a number of years it was agreed that the distribution of the pursuers' products within the United Kingdom would be taken over by J.R.Phillips, one of the selling branches of Allied Domecq (A. Grant Gordon:118). In 1996 the pursuers bought out their partners in the company and now deal directly with their distributors in the United Kingdom.

However, counsel for the defenders argued at the outset of his final submissions that as a result of the reconstruction, the goodwill which WGS then purported to transfer and assign had already been extinguished. In particular he asserted that the present pursuers have no title to lay claim to any goodwill which may have been acquired by WGS and hence possessed by them in October 1991 when the reconstruction was embarked upon. If correct, this submission has very material consequences for this action.

The evidence demonstrated that on 31 October 1991 the first named pursuers, then known as Pacific Shelf 405 Limited, which was then re-named William Grant & Sons Holdings Limited, was the parent company of inter alia the second and third pursuers. Together with the second and third pursuers it was to take certain steps in relation to the proposed acquisition of certain of the assets of WGS. In particular, it was agreed in business transfer agreements entered into between WGS and the second pursuers that the businesses of distilling, blending, bottling, bonded warehouse keeping and storage of whisky and potable spirits carried on by the former as at 4 November 1991 should be transferred to the second pursuers. On the same date, by transfer agreement between WGS and the third pursuers, there was transferred by the former to the latter the businesses of sale and marketing of branded whisky, other potable spirits and associated products carried on by the former as at 4 November 1991. There were further transfer agreements entered into otherwise by WGS in relation to transfer of the business of production processing and sale of wheat, bi- products and cereals and the supply of starch to Grainstone Grain Company Limited, also a subsidiary company of Pacific 405 Limited. The last agreement was one entered into between WGS and Pacific Shelf 405 Limited for the acquisition by the latter of assets and property including certain leasing agreements. As at 31 October 1991 WGS was a wholly owned subsidiary company of Pacific Shelf 405 Limited within a group of which the second and third pursuers were also members and of which Pacific Shelf 405 Limited was the parent company. At a meeting of the directors of WGS on 31 October 1991, drafts of the various business transfer agreements and transfer agreements including a transfer agreement between WGS and Pacific Shelf 405 Limited were considered and approval given to WGS entering into them. As appears from a statutory declaration made by the Company Secretary on 28 November 1991, Pacific Shelf 405 Limited subsequently became known as William Grant & Sons Holdings Limited ("Holdings"). The minute of meeting of the directors of WGS on 31 October 1991 contained the following paragraph:

"The chairman reported that none of the agreements or transfers which had just been approved provided for the transfer of any of the trademarks or any other industrial property rights belonging to the company, nor did they provide for the transfer of any part of the goodwill of the company's business or businesses. The directors resolved that no such assets or rights should be transferred by virtue of the agreements or as a result of completion in terms thereof, but that all such assets and rights should be retained by the company pending further consideration of the matter."

In each of the statutory declarations relative to the business transfers and the transfer entered into by WGS with the various other companies it is stated that the purpose of the transfer was to facilitate the administration of the group of companies of which the transferor and the transferee were members. In each case the transfer covered by the agreements took effect from 4 November 1991. Accordingly at that date it was the intention of the directors of WGS that they should continue to hold as the company's property certain industrial property rights which had thitherto belonged to the company and the goodwill which had attached to the company's businesses which were the subject of the transfers. These assets were the subject of a transfer agreement and related assignation entered into between WGS and Holdings on 21 November 1998. That agreement proceeded on a recital that it was supplemental to the three business transfer agreements already entered into, in terms of which it was agreed that certain businesses and assets of WGS be transferred to the other companies in the group. It was further declared that it was not intended by any of the parties to the agreement that any of the transfer agreements should purport to transfer or have the effect of transferring the industrial property rights and/or goodwill or any part thereof, goodwill being defined as "all the goodwill and business connection of the businesses transferred". On the same date WGS entered into a transfer agreement with Holdings upon a recital that Holdings was the holding company of WGS and that WGS was a wholly owned subsidiary company of Holdings. It went on to recite that with a view to securing the more efficient management and administration of the business carried on until 3 November 1991 by WGS, that business had by transfer agreements been conveyed to new wholly owned subsidiary companies of Holdings: that furthermore it had been confirmed by the agreement entered into on the same day by WGS and these other companies that WGS owned and had all proprietorial and other rights in and to the goodwill and industrial property referred to in that agreement and further that WGS and Holdings had agreed that it was in the best interests of WGS and Holdings and of all subsidiary companies of Holdings that the claims, the goodwill and the industrial property should be transferred to and become the property of Holdings in terms of the agreement. Goodwill was defined as the whole goodwill and business connection, including the whole goodwill and business connection of all the businesses carried on by WGS immediately prior to 4 November 1991. The related assignation provided that Holdings held the assets transferred for its own use and for the use of such companies as should from time to time be its subsidiary companies.

It appears however that as was reported at a meeting of directors of WGS on 17 January 1992, doubt was cast on the legality, validity and effectiveness of the transfer agreement dated 21 November 1991 entered into between WGS and Holdings as also a related deed of transfer and trust and various assignations relating to the goodwill, industrial property and related rights of WGS entered into pursuant to the transfer agreement. It was therefore with a view to removing all such doubts on the documentation that certain final drafts of documents were tabled, including a transfer agreement between WGS and Holdings and related assignation of the goodwill, industrial property and other rights which had been the subject of the agreements entered into on 21 November 1991. These agreements and assignations were entered into on the same day, 17 January 1992. In my opinion they amount to no more than a re-affirmation of the intention and purpose behind the legal documents entered into by WGS and Holdings on 21 November 1991. They are, however, the documents which give legal effect to any transfer of goodwill as between WGS and the present pursuers. It only remains to note that by virtue of special resolution dated 24 April 1992 Holdings changed their name to William Grant & Sons Limited, and WGS acquired the name TP Limited.

It is not in dispute that so far as the outside world was concerned, the production of whisky and other products and selling and distributing them, and indeed labelling them in various forms, which had been carried on by WGS immediately prior to 4 November 1991, remained wholly unchanged. In the same way the management of that business equally remained with those who had been concerned with it on behalf of WGS prior to 4 November 1991, except insofar as there was some change of personnel in the sense that the boards of the successor companies contained individuals who were not directors of WGS at that date.

I consider that it is clearly established that at the time when the re-organisation of the business which was carried on by WGS at 31 October 1991, and when approval was given by the directors of WGS to enter into the various agreements referred to above, the structure of the group remained the same in that Holdings were the parent company of a group of which all of WGS and those with whom the various agreements were entered into, including the second and third pursuers, were wholly owned subsidiaries. The intent and purpose as stated in the various deeds also made clear that the re-distribution of the assets in business which was to be effected by the various agreements was with a view to continuing the same business as had been conducted by WGS up until 3 November 1991. Furthermore, in relation to the group structure as it existed on 4 November 1991, it is equally clear that WGS held its assets within that group and did so for the purposes of the businesses carried on by the group, which businesses included those that had until that time been the responsibility of WGS. However the mechanism whereby its ownership of goodwill and other industrial property was to be re-distributed remained to be settled.

The substance of Mr. Davidson's submission for the defenders was that the effect of the various agreements entered into by WGS on 31 October 1991 to take effect on 4 November 1991 was to leave WGS without a business. The consequence, he said, was that the goodwill which the directors of WGS purported to hold from that date onwards had in effect been extinguished. Therefore there was no content for the agreement and assignation entered into subsequently between WGS and Holdings. In support of his submissions, Mr. Davidson made reference to a number of well known authorities. He submitted that notwithstanding the fact that goodwill and reputation often ran together, nevertheless it was goodwill of a business only which was capable of being a right of property. He referred to the speech of Lord Macnaghten in Commissioners of Inland Revenue v Muller & Companies Margarine Limited 1901 A.C. 217. Having noted that it was very difficult to say that goodwill was not property since it was bought and sold every day and might be acquired in any of the different ways in which property is usually acquired, he posed the question what is goodwill, and continued:

"It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates."

Subsequently he said this:

"For my part, I think that if there is one attribute common to all cases of goodwill it is the attribute of locality. For goodwill has no independent existence. It cannot subsist by itself. It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again. No doubt, where the reputation of a business is very widely spread or where it is the article produced rather than the produce of the article that has won popular favour, it may be difficult to localise goodwill."

Mr. Davidson also referred to the passage in the speech of Lord Diplock when delivering the opinion of the Board in Star Industrial Company Limited v Yap Kwee Kor 1976 FSR 256 at p.269. There Lord Diplock said:

"A passing off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing off one person's goods as the goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in several countries a separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill the goodwill in that country perishes with it although the business may continue to be carried on in other countries."

Then dealing with the case before the Board he went on to say this:

"Once the Hong Kong company had abandoned that part of its former business that consisted in manufacturing toothbrushes for export to and sale in Singapore it ceased to have any proprietary right in Singapore which was entitled to protection in any action for passing off brought in the courts of that country."

Reference was also made to Pink v Sharwood & Company Limited (1913) RPC 725 in which it was held that upon the ending of a plaintiff's business the goodwill in the business determined when that business was discontinued. Eve J. there made reference to an argument put forward to the effect that in view of a refusal to sell the goodwill and the deliberate election to retain it evidenced by that refusal, it was impossible to treat the plaintiff and those acting for him as having abandoned the goodwill. However, he then went on to say that the plaintiff, and those who were acting for him, had adopted a course of action which had been an end to the business to which the goodwill was attached. The business had been discontinued, everything belonging to it been sold and the conduct of the plaintiff in relation to the sale, so far from supporting any intention to retain the goodwill, had been indicative of a sale contrary to the intention altogether, since amongst other things, pots and jars stamped with the name and the labels which had formed part of the plaintiff's business had then been sold. Reference was also made to the case of Anheuser-Bush Inc. v Budejovicky Budvar N.P. 1984 FSR 413. This case was cited for the argument that some form of business activity on the part of a plaintiff is required before it can be said that he has a business to which goodwill can attach. In that case Oliver L.J. said that the mere existence of a trading reputation in the United Kingdom was insufficient to constitute a business in the absence of customers in the jurisdiction.

None of these cases however deal with the situation in which the business and property giving rise to the business activity to which the goodwill attaches, is for administrative reasons spread throughout a number of companies all of whom are constituted within one recognisable group all inter-related in structure and ownership. In Clark (Norman) Publications Limited v Odhams Press Limited 1962 RPC 163, a decision which is cited in Wadlow on The Law of Passing-Off (2nd Edition) at paragraph 2.04 for the proposition that it is well established that a passing-off action may succeed if the goodwill of the former business still exists, even if the business itself ceased several years ago, Wilberforce J. was concerned with the question whether in spite of the discontinuance of a separate publication TODAY in 1953, the plaintiffs in 1960 retained a proprietary right over the name which the law would protect. He went on to say in relation to that issue at p.168, that

"the amalgamation or incorporation of one business, or part of a business, in another, though perhaps the present time may provide more dramatic instances, is nothing new and is not confined to newspapers. It is found to happen at all times and in all trades. It must often occur that the incorporated business includes a trade name to which goodwill has attached. What are the conditions in which, after the amalgamation or incorporation, the exclusive right to use that name may be preserved? It is obvious that there are many possible variations of factual situation."

That case was one was one in which Wilberforce J. was dealing with the kind of situation not altogether dissimilar from that in the present case. Here there has been a re-organisation of the business activities within a group whose business at the time of re-organisation included use of a name Grant's to which goodwill had attached and in respect of which each company involved in that business activity in which the name was used, had a stake.

In my opinion the Dean of Faculty was entirely correct in suggesting that the submission that goodwill came to be extinguished by the very act of WGS in assigning the business transfer agreements was to ignore the realities of the corporate reconstruction. This was not a case in which the goodwill ceased to be linked to the very business activity from which it was said to be derived, namely the production and sale of whisky bearing the name Grant's over a period of time from at least 1903. Rather it had been continued to be used after the company reconstruction by companies who were to all intents and purposes continuing the same business that had been the proprietor of that goodwill prior to the company reconstruction and a business which at all times was and continues to be generally referred to in the alcoholic beverages trade and by the public as Grant's.

Leaving aside the documentary material there was ample evidence given by a number of witnesses that the effect of the changes was accurately summarised in the report and accounts for WGS for 1991. In those accounts it was stated under reference to the company reconstruction:

"In furtherance of the company's medium and long term growth strategy the present business activities of William Grant & Sons Limited have been transferred into a number of companies within the William Grant & Sons Holdings Limited Group".

The evidence given by Mr. A. Grant Gordon was particularly pertinent. He joined WGS in 1954, was appointed director in 1956 and became joint managing director in 1963. From 1968 until 1993 he was the sole managing director and between 1977 and 1996, chairman of both WGS and subsequent to 1991, of its successor in the name William Grant & Sons Limited. The re-organisation, he explained, was carried out with a view to improving, amongst other things, the management of the company and allowing non-members of the Grant family, that is to say descendants of the original William Grant, who were the only individuals entitled to hold shares in the company, to become involved in the management of the business as directors. Nevertheless as the evidence given by those involved with the business, Mr. A. Grant Gordon, Mr. David Grant, Mr. Tait, Mr. G.G. Gordon and also Mr. Dewar Drurie, who did business with WGS and its successors, indicated, there was no material change in the organisation of the business after reconstruction. It had, for instance, the same directors, the shareholders remain unchanged, the same executive committee played a key role in implementing policy, the work force remained the same, pension arrangements were unchanged. The relationship between the business and its United Kingdom distributors remained as before and the group accounts were prepared upon the same basis as previously. Nor indeed was there any evidence to suggest that to those who did business with the new companies, there was any overt change. For instance, there was no alteration in the manner in which the pursuers' products were manufactured, packaged or advertised following the re-organisation. The business was generally referred to both before and after 1991 as Grant's or William Grant's. The relationship between the new companies was such that, as Mr. Tait put it, in so far as the business might enjoy a good reputation and customer connection, all the companies within the group benefited from that reputation and connection, whereas if the good name reputation enjoyed by the business conducted by the group were to be damaged or tarnished, all companies within the group would be affected.

The fact that a business activity was conducted by one company within a group whose structure changed from time to time, does not, in my opinion, constitute that abandonment of the business so that the goodwill arising from that business activity perished. The business activity becomes as it were divided amongst other companies within the same group in a different way and nothing else. In the present case the goodwill which attached to the business activity prior to the reorganisation has remained attached to precisely the same activity after reorganisation. The business activity itself has to all intents and purposes been conducted by the same people and for the same purposes after reorganisation as it was before. Accordingly the facts in the present case are wholly removed from those which was considered on the cases such as Star Industrial Company Limited or Pink v Sharwood and those cases are to be distinguished from the present and are not in point.

I should add that this issue was touched upon in reference to the defenders' plea of no title or interest to sue on the part of the second and third pursuers when the case was before Lord Abernethy on procedure roll. While the argument before him appeared to take a slightly different line, in that he was concerned with the question whether all the companies in a particular group might have a stake in the goodwill to sue a passing-off action, his analysis of the situation as presented to him on the documents and averments is fully supported by the evidence on the matter together with the documents which were put before me. In particular, he noted that there was no plea to support an argument (which was attempted to be adduced before him) to the effect that because the first pursuers had the goodwill but not the business, while the second and third pursuers had the business but not the goodwill, no title to sue lay with the first pursuers just as it did with the second and third pursuers. I am content to adopt his conclusion that as a consequence of the re-organisation which took place between November 1991 and April 1992 the goodwill attaching to the name Grant's has not been truly separated from the underlying business so that the continued use of the name did not in any way indicate something different from what it indicated prior to the transfer. Its continued use was in no sense a fraud on the public. I agree entirely with his opinion that in a situation such as exists in the present case, the goodwill attaching to the name Grant's is goodwill which belongs to every part of the group business and how that group business is organised within the group is irrelevant for present purposes. The goodwill has flowed on with the business activity of the business which was the subject of the company reorganisation so that the pursuers are fully entitled to lay claim to that goodwill and reputation attaching to the name Grant's which had been fostered and developed by WGS and thereafter to build upon it. As the Dean of Faculty put it in his reply to Mr. Davidson's argument, it is res inter alios acta in a question with a third party such as the defenders. In the result I reject the submission for the defenders that the only goodwill to which the present action can apply, is the goodwill built up by the pursuers in the name Grant's since they assumed responsibility for the business activities in its production and sale following upon the transfer of responsibility for these activities to them from WGS. I should only add that the Dean of Faculty took objection in the course of the evidence to questions by Mr. Davidson which were directed to the submission that the pursuers were not entitled to lay claim to the goodwill and reputation of WGS. It is true that there is no specific plea-in-law directed to the matter, but the issue does arise from the pursuers' own averments concerning the nature of the reorganisation and its effect and evidence was led on that matter. I allowed the evidence to be led under reservation.

The name "Grant's"

In the form of the surname Grant together with the apostrophe and the added "s", this title has been presented by the pursuers and their predecessor from the earliest days of marketing their products to the public. Until shortly before 1960 or thereby the business of WGS was limited to the production of whisky products.

In his evidence Mr. A. Grant Gordon referred to material both advertising and in label form, which demonstrated that in the early years of this century WGS had been accustomed to use the title to introduce the names of its products, for instance Grant's Special Fine Old Highland Whisky, Grant's Stand Fast Scotch Whisky, Grant's Best Procurable Scotch Whisky, Grant's Liqueur Scotch Whisky or simply Grant's Scotch Whisky. This use of the title contrasted with the names employed by WGS in marketing its malt whiskies, principally Glenfiddich and Balvenie. As WGS moved into exporting its products abroad in the early years of the century and more particularly after the 1914 - 1918 War, advertisements and promotional material used by the company highlighted the title Grant's as applied to the names given to different grades and qualities of their blended Scotch Whiskies. Mr. A. Grant Gordon spoke to instances of such material employed in countries as far apart as Jamaica, India, Germany and South Africa at this period. At the same time the labels and the advertising material produced by WGS both in the home market and abroad, made reference to the company name, William Grant & Sons Limited, in association with the title Grant's. Although by 1939 William Grant & Sons Limited had built up a substantial overseas business in their blended whisky products, the greater share of their business remained in the United Kingdom market. In the home market their principal blended whisky product was sold under the name Grant's Stand Fast Scotch Whisky while on the overseas market it tended to be named simply Grant's Scotch Whisky. One feature of the earliest label referred to by Mr. A Grant Gordon which was repeated in later labels, was a crest with the motto "Stand Fast", the motto being that of Clan Grant.

In 1957 William Grant & Sons Limited introduced a triangular bottle for the marketing of its blended whisky. Initially this shape of bottle was used only in the home market but in 1958 the bottle was introduced for use in the overseas markets. Until that time there had been substantial distinction in the labels produced for the home market and for sales overseas with the name given to the blended Scotch whisky sold on the home market as Grant's Stand Fast, while that abroad was sold as Grant's Scotch Whisky. Following the introduction of the triangular bottle and its adoption for the marketing of the greatest part of WGS's blended whisky products thereafter, a common package was introduced for these bottles. The labels produced in evidence made it apparent that as a matter of deliberate policy the title Grant's was used on all WGS's blended whisky products thereafter, the size of the label, and hence the prominence of the title, being dictated only by the size of the bottle. In particular, the labels carried the title Grant's in red characters which stood out from the remainder of the information contained on the label. In the first decade after the introduction of the triangular bottle for WGS's blended whisky products, the words Stand Fast appeared in black on a gold stripe beneath the title Grant's. Then in the course of the 1970's, the design of the label was further altered. The title Grant's was, to use Mr. A. Grant Gordon's phrase "firmed up somewhat" by reason that the gold stripe and the words Stand Fast were further reduced in size relative to the title. As Mr. A. Grant Gordon explained, this was part of the philosophy of WGS, namely, to enhance the prominence of the name Grant's and to reinforce the identity of that name. From 1987 onwards a further change to the labels used for the blended whisky products was introduced. This involved the introduction on labels of the name William above the name Grant's and below the name Grant's the words Family Reserve in thin gold letters in place of the words Stand Fast which had thitherto appeared either in small gold or black capitals on some labels or of the words Family Reserve or Special Family Reserve which had thitherto appeared on other labels again in small gold writing. Mr. A. Grant Gordon explained that the reason for the change was

"to imply that we were a real family company producing this product, because within the industry there are a number of very large multi-national organisations who are skilled in marketing and we are competing with their staff and we have to make it in a sense attractive to the consumer, and if you can get that over that William is a real William and that the family is a real family, that was really the thinking behind it."

Mr. A. Grant Gordon also demonstrated that for other blended whisky products such as Best Procurable and Grant's Royal the same pattern of enhancing the title Grant's on their labels had been adopted following, in particular, the introduction of the triangular bottle for these products. The pursuers continue to sell their blended whisky under the name Grant's. This includes a product which is called Grant's 12, although they have a 12 year old blended whisky which has a separate packaging and is composed of different whiskies. This last whisky is known as Robbie Dubh and is produced for the South American and for the Far Eastern market. Otherwise the principal blended whiskies which are marketed and sold at home and overseas by the pursuers with the title Grant's on their label are the blended whisky and the 12 year old whisky.

Other spirits

In or about 1960 and more particularly following the construction of the distillery at Girvan in 1963 and its adaptation to enable a rectified spirit to be produced, WGS began to produce and market gin and then vodka. With the exception of the French market where the distributor provided his own labels, WGS supplied gin to its distributors in its own bottles with its own design of labels on them. At the outset the design of the label included the crest which appeared on the whisky label at the top and the title Grant's below. Underneath the title was a silver band with the words Distilled London Dry Gin printed in the band. According to Mr. A. Grant Gordon the whole design was calculated to have a family resemblance to the labels for both blended whisky and Glenfiddich. In about 1970 there was a substantial change in the form of the label when a rectangular shaped bottle came into use. The label adopted had the words William Grant's in large letters on it and was printed in blue.

When WGS began to produce vodka for the market it was sold at home under the name Light Brigade. This was a name which had previously been used for a whisky product. Initially the label was similar to the whisky label but from the late 1970's a label has been used of the same shape and colour as that of the gin label but with the name Light Brigade Vodka printed on it. In the export and duty free markets vodka has been sold under the name Grant's Imperial Vodka.

As Mr. A. Grant Gordon explained under reference to documentary production No.57/3, which set out the quantities of gin and vodka sold over the period from 1964 onwards, the yearly totals were very small by comparison with the figures for sales of whisky. Of the sales both of gin and vodka, the major part of the sales had taken place in the export markets. In the period from 1989 up until 1992 there had been an increase in the sales both of gin and vodka. However within the United Kingdom sales had declined to the point that in 1992 70 cases of gin and 76 cases of vodka were sold as compared with 12,263 cases of gin for export and 14,021 cases of vodka for export. In about 1994 the pursuers entered into an association with the Virgin organisation for the production of a vodka known as Virgin vodka (A. Grant Gordon:320). Nonetheless Mr. A. Grant Gordon conceded that the pursuers could not claim that these figures represented sales of substantial volumes.

Defenders' business origins

Mr. Alexander Bulloch is the chairman of the first defenders and has been so since 1986. He is also chairman of the second defenders. By the time he gave evidence the third defenders had ceased to function although he remained a director of the company. Prior to 1959 Mr. Bulloch had been engaged with other members of his family in a wines and spirits business under the family name, Bulloch. He had joined it after the death of his father in 1951. Apart from retail sales of other manufacturers' products, the company also had a small wholesale operation bottling wines, gin, rum and whisky under the name Bulloch, an operation in which the witness Smith would assist from time to time (Bulloch:3029:Smith:4577). It also bottled whisky with the name High Commissioner. It was a common practice for small businesses such as Bulloch's and John Grant (Wine and Food) Limited to buy in spirits and to bottle and label them using their own or other names (3046). Indeed the first defenders' whisky named High Commissioner is still sold under the name A. Bulloch (Reynolds:3837) and no reference to the name Grant appears anywhere on the label. The name A. Bulloch was the subject of a trademark application initiated by Mr. Bulloch with the assistance of Mr. Smith, who was employed at the time by J. & P. Coats, thread manufacturers, looking after that company's trademarks throughout the world (Smith:4578). In 1959 Mr. Bulloch bought the business of William Morton Wine and Spirit Merchants Limited, a wholesale wine and spirits merchants business. It had a turnover of approximately £600,000 to £700,000 at the time according to Mr. Bulloch. This purchase represented a substantial expansion of the Bulloch business. In 1966 Mr. Smith left his employment with J. & P. Coats at the invitation of Mr. Bulloch to run the wholesale operation of the business. In particular it entered into the wholesale sector of the market with sales to public houses, clubs and hotels. In the following decade Mr. Bulloch made further acquisitions both of retail shops and of wholesale businesses, in and about Glasgow. The wholesale business remained directed to the same sector of the market (3032). In this period gin and rum was sold under the William Morton name (3043).

In 1972 Mr. Bulloch's company, A. Bulloch Agencies Limited, acquired the whole shareholding and assets of John Grant (Wine and Food) Limited (cf. Morrison: 5253:Bulloch 3411).

John Grant (Wine and Food) Limited

John Grant (Wine and Food) Limited was incorporated in 1943. At that time it was a family company associated with the family name Grant. The witness Mrs. Valerie Wilson was a member of that family. From her evidence it appeared that the company was established to supply some 40 licensed premises including hotels, restaurants and public houses, either owned or managed by an existing family company Rogano Limited. Apart from a hotel in Belfast, these outlets were located either in Glasgow or in its immediate vicinity. They included a well-known restaurant named Rogano's in the centre of Glasgow. Following the company's establishment the wholesale wines and spirit business was built up by Mrs. Wilson's father in the early 1950's. In about 1955, following a family dispute, there was a re-organisation. Mrs. Wilson's father assumed control of Rogano Limited which then included its own wine and spirits company and operated a number of public houses, Rogano's Restaurant and two off-licences. John Grant (Wine and Food) Limited took over ownership and management of the other outlets including the hotel in Belfast, according to the evidence of Mr. Morrison who succeeded his father as auditor of the company in about 1965 (5232). The business of John Grant (Wine and Food) Limited during the time between 1958 and its sale to Mr. Bulloch in 1972, was described by the witness Feeney. He was employed initially as a van driver, but after 1960 became a salesman. He described the business as being that of buying wines and spirits in bulk. These were then bottled and labelled by the company and placed either in the company's own outlets, these being either directly owned or managed, or sold wholesale at other licensed outlets, off-sales and licensed restaurants and public houses in and around Glasgow. About a quarter of the wholesale business was concerned with supplying the company's own outlets. During his time as a salesman, the company was referred to by others as John Grants (4011).

The sale of the shareholding to the company in 1972 included the existing stock of wines and spirits and a stock of labels which had been used for the company business. At that time the name Grant's and a reference to John Grant (Wine and Food) Limited appeared on labels placed on both gin, white and black rum bottles produced by the company. These labels were described by Mrs. Wilson as "very simple" (5282). Whisky was sold under the name Clansman. There is reference in the annual balance sheet for John Grant (Wine and Food) Limited to 31 March 1966 (document no.59/28) to one hogshead of Grant's gin and to bottles of Grant's gin and to bottles of Grant's rum. The same balance sheet also made reference to bottles of "Standfast", which Mr. Bulloch identified as "Grant's, William Grant's Standfast" (3049).

Following its purchase by Mr. Bulloch the premises owned by John Grant (Wine and Food) Limited in Glasgow were sold to Mr. Bishop (3597) and the business was thereafter conducted from premises at Larkhall (Morrison:5236). The witness Mr. MacLean was invited to join the company as Managing Director. It was clear from his evidence that the company was at that time probably better known for their licensed premises and restaurants than for their wholesale business which, as he said, was not very large and did not seem to create a lot of problems to people selling against them (5507). The limited stock held by the company at the time of its sale was demonstrable from the stock list contained within the annual balance sheet for the period 31 March 1972 (document no.39/4). This list contained no reference to vodka. On the labels used by John Grant (Wine and Food) Limited prior to 1972, the word Grant's and the logo JG were prominent features: (Bulloch:3042: cf. production No.61/20.6) The same style of labels continued to be used for some time thereafter both before and after the name of the company was changed in 1974 to John Grant (Blenders) Limited. When the company began to bottle and sell vodka, there was a deliberate decision to employ the same style of label using the word Grant's and the logo JG as was being used for the gin products then being produced (Bulloch:3052). Mrs. Reader indicated that the labels were already in existence when bottling of vodka first began at the Catrine premises in about 1976 (4493). This is consistent with the evidence of Mr. Maclean, the first managing director of John Grant (Wine and Food) Limited after its acquisition by Mr. Bulloch, who spoke to gin and vodka being bottled for that company at the time when its name was changed in 1974. It is also consistent with the evidence of Mr. Russell who joined John Grant (Blenders) Limited as an assistant accountant at their Larkhall premises in early 1975 and spoke to vodka being "sourced from another bonded warehouse" at that time (3765). I accept the evidence of Mr. Feeney who was employed as a salesman by John Grant (Wine and Food) Limited prior to its acquisition by Mr. Bulloch, that that company did not then bottle and sell vodka. It was also consistent with the evidence of Mr. Morrison, that company's auditor (5233) which made no mention of vodka, but only of whisky, gin and sherry. In so far as the witness Mr. Bishop suggested that he had seen vodka labels on their premises prior to its acquisition, I consider that he is wholly mistaken.

The evidence of Mr. Bulloch (3051), Mr. Feeney and Mr. MacLean satisfies me that it was not until after 1972 and the acquisition of John Grant (Wine and Food) Limited that that company entered the market offering to sell vodka. A statement in the trademark application for Grant's Vodka made on the first defenders' behalf in November 1990 that there had been continuous use since 1966 was accordingly incorrect.

William Morton Limited

For a period after 1972 rum and gin continued to be sold under the William Morton name (3044). In 1974 the name of William Morton Wine and Spirit Merchants Limited was changed to William Morton Limited. In the same year the principal part of that business, which included a substantial cashflow, was sold by Mr. Bulloch to a Mr. Agnew of Agnew Stores (3057). I see no reason to disbelieve Mr. Bulloch's evidence that at that time he had in mind to sell his whole business together with a bonded warehouse at Catrine which had just been acquired, because he had quite a number of bad debts (3056). However the purchaser was not interested in acquiring the whole business. In that same year the company name of John Grant (Wine and Food) Limited was changed to that of John Grant (Blenders) Limited. In 1976 William Morton Limited was re-acquired by Mr. Bulloch. Subsequent to its re-acquisition its business activities merged with other wholesale businesses owned by Mr. Bulloch. However the company remained in existence holding the liabilities and debts of William Morton Limited (McLean:5516:Armstrong:3735-7). In 1977 there was a further reorganisation of names as a consequence of which the business conducted until that time under the name John Grant (Blenders) Limited acquired the name Glen Catrine Bonded Warehouse Limited. The company from which the name Glen Catrine Bonded Warehouse Limited was taken, originally Vinstanter Limited incorporated in 1974, took the name John Grant (Blenders) Limited. It was this company which conducted the merged wholesale business when in 1978 it acquired the name William Morton Limited (Bishop:3601). At the same time the name John Grant (Blenders) Limited was substituted as the name of the company till then known as William Morton Limited. This company remained the repository of the liabilities and debts of its predecessor in name and ceased to trade (Taylor:6144). It was dissolved and struck off the register in 1986.

From 1978 the company now known as William Morton Limited with its own sales force, became responsible for conducting the bulk of the sales of spirits bottled at Catrine under the first defenders' own labels (Bulloch:3056) until at least the latter part of the 1980s. In 1978 the witness David Bishop was appointed sole managing director of the company after Mr. McLean's departure. He remained so at the time of giving his evidence. He explained that the wholesale business conducted by William Morton Limited extended to many other products than those produced at Catrine (3602:3673). Its business was conducted within the central belt of Scotland and extended to sales to off sales premises and the independent trade including public houses and clubs (3603 -7:3641: Russell:3767: Cosh:5599). Mr. Bishop also stated that within the decade or so from about 1986 a small quantity of Grant's Vodka, of the order of 500 cases a year had been exported to Southern Ireland (3656: also Reynolds:3883) Of the turnover of £34 million in 1996, he estimated that ten per cent was represented by sales of Grant's Vodka.

John Grant Blenders Limited

In 1988 the name John Grant Blenders Limited, that is without brackets round the word Blenders, reappeared and was used for a new company which the following year changed its name to The Ostel Bay Company Limited. It has traded in livestock farming (Taylor: 6145) At the same time The Ostel Bay Company Limited, which had been incorporated in 1989, underwent a change of name to John Grant Blenders Limited without brackets round the word Blenders. It remained a non-trading company thereafter. Mr. Taylor explained that the resurrection of the name John Grant Blenders Limited came about because Mr. Bulloch became aware that there was no company bearing the name and thought it was important for his business that to have a company of that name. Mr. Bulloch explained that it was because at the bottom of the labels used by the defenders the name was printed and it would be very difficult if someone else had registered the same name. Mr. Taylor became a director of the non-trading company with that name in about 1991 or 1992. In evidence he said that one of the reasons for his appointment was that "because of all the current unpleasantness between" the pursuers and the defenders "we thought it appropriate if we had a John Grant Blenders Limited that I be involved in it." (6146). This was consistent with the evidence given by Mr. Bulloch (3418) and Mr. Jagielko (4340), both of whom were directors of the company at the time, and each of whom related the appointment to a current court case. It would appear that it was at about the same time that the change of name from "John Grant (Blenders) Limited" to "John Grant Blenders" on the first defenders' labels took place and the latter name now appears as shown on, for instance, the labels for the first defenders' premium vodka product exemplified in documentary production 42/11. The reason for this as explained by Mr. Taylor was that the first defenders were advised by their lawyers and their patent agents, Messrs. Murgitroyd, after the commencement of litigation in Greece, that a reference to John Grant (Blenders) Limited was not merely a trading style but implied that it was a company which was involved in the selling of the product (5796-7). The nature and chronology of the various relevant name changes are conveniently set out in the documentary production 56/1.

Origin of Glen Catrine Bonded Warehouse Limited

In 1974 a company was incorporated with the name Vinstanter Limited. In 1975 the name was changed to Glen Catrine Bonded Warehouse Limited. In 1977 that name was transferred to the company which from 1974 had been known as John Grant (Blenders) Limited. This company now known as Glen Catrine Bonded Warehouse Limited thereafter operated from premises at Catrine.

It was in 1974 that Mr. Bulloch had acquired disused premises at Catrine which previously had been bleaching and dye works. These were converted into a bonded warehouse (Taylor:6019). The witness Mrs. Reader, who had thitherto worked as a clerkess with William Morton Limited, was appointed as manager there for John Grant (Blenders) Limited. Initially only sherry was stored and sold from these premises while a bottling line was being installed (Bulloch:3053:Reader:4489). With the installation of bottling machinery designed initially for whisky bottling, the bottling of whisky was undertaken first at these premises (Reader:4493: Armstrong:3727). Bottling was both of High Commissioner and Clansman whisky. Thereafter the bottling of vodka and of gin was undertaken there (Reader:4492). Initially there were problems with the essence for the gin. From the evidence of Mr. Bulloch, Mrs. Reader, Mr. McLean (5515), Mr. Armstrong, Mr. Russell (3765) and Mr. Taylor 6019), I am satisfied that the bottling of vodka and of gin at Catrine began in about 1976. Subsequently the bottling of rum with the first defenders' own labels was also undertaken there (Bulloch:3054). In addition to the bottling of their own labelled products, the first defenders bottled spirits for other customers. This constituted the principal part of the bottling business from 1976 and a period of time thereafter (Bulloch:3054).

The acquisition of the bonded warehouse premises made a substantial difference to the business undertaken by the first defenders. As Mr. Bulloch explained (3055) "Because our trading had changed, we had a bonded warehouse doing bottling under bond. Prior to that any bottling that was done by ourselves was duty paid and expensive. Any bottling we were getting done elsewhere was again expensive." This distinction in the cost element for a business between having a bonded and a duty paid warehouse was also spoken to by the witness Feeney (3390).

The acquisition of the bonded warehouse coincided with a change of name from John Grant (Wine and Food) Limited to John Grant Blenders Limited. As explained by Mr. McLean, this represented a change of tack in that the new name represented a wholesale blending and bottling business as opposed to a business which initially purchased wines and foods for bars and restaurants. As the company no longer supplied food, it was considered that there was no point in retaining the word food in the name of the company (5548). It appeared to be suggested in the course of cross-examination of Mr. Bulloch in particular that there was some unworthy motive behind this change of name. However I accept Mr. McLean's explanation of the reason of the change. Such changes of name are commonplace and an example of this appeared in the evidence of Mr. Jerman in relation to his own company (5189). In the period until 1978 during which Mr. McLean was managing director, he remained at Larkhall running what was in effect the distributing and wholesale side of a business which had been merged with others upon the re-acquisition by Mr. Bulloch of William Morton Limited in 1976. Sales including those of the various spirits sold by the company under the Grant's name were carried out by salesmen under Mr. McLean's direction calling round licensed premises and clubs and the like. During that period until 1978 he described the growth in sales as being gradual. As described by Mr. McLean the strategy for sales at that time was that of calling on all the licensed trade outlets, pubs, clubs, hotels, bar and off-licences within the area in Glasgow and the west of Scotland in the vicinity of Glasgow. Mr. MacLean estimated that at the time when he was with the company, the company would be visiting something of the order of about 1,000 outlets per annum. He considered that by the time that he left the first defenders' products would have had some impact because of their price with those customers in the trade who purchased them, but there would be very little impact with the public. He explained that there was no advertisement of the first defenders' gin and vodka products because it had been a small company when taken over in 1972 and "in a bad, poor condition" and with limited assets it could not advertise (5519).

Mr. Graham Taylor entered the employment of the defenders in 1978. At that time he was without any prior experience of the alcoholic drinks industry. He was invited by Mr. Bulloch to become involved in the business conducted by the first defenders at their Catrine premises as a general worker (5770). He said that the company was at that time comparatively small and was run by a warehouse manager with Mrs. Reader as bookkeeper and administrator. He described the situation in his early years until he was appointed a director of the first defenders along with Mrs. Reader in 1981, in the following passage (5770-1)

"The company was run on a fairly relaxed basis. We had a bottling staff of about thirty people. We bottled irregularly. We might bottle for two weeks and then the ladies would not be required for perhaps another two weeks, in which case they would be laid off and we would load lorries or do some blending. Gradually the company got more and more business. I was able to help a little bit because I was, having had the benefit of some university education,....able to apply some logic and control to improve the efficiencies and gradually we began to grow and become a more professional company."

He referred to the fact that in the late part of 1978 the first defenders acquired a substantial bottling contract for the distillers, Whyte and Mackay, which give "a much better throughput" (5772-3).

That bottling was for a time thereafter of material importance to the first defenders was also clear from other evidence. Thus bottling was done for other whisky companies, for example, House of Campbell in the early to mid 1980s (Reynolds:3833) and in the mid to the latter part of the 1980s for the pursuers and some other export houses (Taylor:6195). In 1989 Mr. Taylor estimated that the first defenders were bottling about 800,000 cases under contract (6215).

As a director of the first defenders Mr. Taylor became responsible for dealing with customers, staff and suppliers though he continued to assist with the bottling and loading lines until the late 1980s (5772). By 1986 the first defenders' operations had reached a size that "we took the decision that we needed some professional help". I am in no doubt that Mr. Bulloch played a major role in this decision. This brought Mr. Reynolds into the company as general manager, after interview in November 1986 (Reynolds:3833). About the same time at Mr. Bulloch's invitation, his nephew, Colin Barclay, was made "our salesman" (Taylor: 5773). As Mr. Taylor described it, by this time the first defenders had "a very wide range of products which were gaining a toe hold" in the market. In 1988 both Mr. Reynolds and Mr. Barclay became directors of the first defenders, by which time Mr. Taylor was usually referred to as the production director (5775). In that capacity he described his job, while still covering the same areas as before, as being "able to look a little further afield, trying to sell our services as a bottler, trying to sell our services as a supplier, and looking further afield for areas to develop" (5775). This included "talking to people at Whyte and Mackay or William Grant's, United Distillers, also cash and carry proprietors, buying consortiums and supermarkets" within the United Kingdom (5775).

That Mr. Bulloch remained a dominant and controlling figure in the principal decisions to be taken was apparent from the establishment of the company which was to become responsible for sales of the first defenders' products in foreign markets. That company was set up in 1988 for the purpose of conducting the exporting side of the first defenders' business and was done so at the instance of Mr. Bulloch. It was also apparent from the fact that when Mrs. Reader retired in 1991 from the position of managing director of the first defenders, Mr. Bulloch preferred to assume the position for himself, and did so for two years before appointing Mr. Taylor to that position in 1994 (Taylor:5768:5776). It was further apparent from the manner in which through Mr. Bulloch's agency Loch Lomond Distillery Company Limited came into existence as a separate entity following upon an amalgamation, including Inland Fisheries Limited, after the acquisition of the trade and assets of Loch Lomond Distillers Limited in 1993 and its establishment as a separate organisation, including export of bulk whisky (Bulloch:3375-80).

First Defenders' Production and Sale of Spirits

After bottling of gin and vodka began to be undertaken at the premises at Catrine, there was at the outset little direct selling of spirits by Glen Catrine Bonded Warehouse Limited. It seems clear that this was because the wholesale side of the business was being undertaken and conducted from Larkhall through the business that from 1978 came to be known as William Morton Limited. Initially the production of gin was greater than that of vodka (Bulloch:3065). He estimated that at that time the number of cases each of gin and of vodka produced and bottled was of the order of 2000 cases a year (3063-5). The bottling of these products was intermittent (Taylor:6022). At this time the most important product was whisky. I have little doubt that the choice of the name Glen Catrine for the business conducted from the premises at Catrine was, as suggested by Mr. Taylor (6025), to give the impression of "a nice, small whisky company". In the latter part of the 1970s such of the first defenders' products as were sold direct from Catrine were sold predominantly to wholesalers or to cash and carry proprietors with whom in particular Mr. Bulloch had had business relationships (Taylor:5834). Thus in about 1978 the first defenders began to supply a wholesale cash and carry enterprise, Castle Cash and Carry, with whisky and vodka (Yacub Ali:4610). This enterprise moved from Hamilton to Glasgow in about 1983 and as a result its area of operations was extended and with it the number of its customers in the trade (4615:4628-9). The witness Mr. Donelan was Drinks Marketing Manager with a supermarket organisation trading in London and the south of England who became aware of the first defenders' products about 1978 or 1979. He did not then purchase them, though he was aware of another wholesaler purchasing the first defenders' High Commissioner whisky at that time (4968-9). Mr. Taylor stated that in respect of the first defenders' vodka products, it was not until about 1982 or 1983 that the volume of sales became significant (5868). The witness Mr. Smith was wine and spirits manager for the wholesalers, Watson & Philip plc between 1982 and 1989. That company was based in Dundee and supplied retailers in the trade throughout Scotland (4071). He spoke to buying the first defenders' products from William Morton Limited in about 1983 or so. He said that these products were not then very well known in the marketplace but a number of customers had been asking for them (4074-6). At that time he had been aware of Castle Cash and Carry selling Grant's vodka (4076). He had first of all taken on the first defenders' High Commissioner whisky, which was at that time sold as a low strength whisky. Subsequently he had taken on and listed the first defenders' Grant's vodka. By 1989, at which time he had moved to become licensed trade director of a competitor, C.J. Lang & Son Ltd., he said that Grant's vodka had become a significant product of his former company. The witness Mr. Atkinson, managing director of Winerite, who were wholesalers on a national basis, gave evidence about contracting with the first defenders in 1983 for the production of own brand vodka and gin for the independent supermarket company, the NISA To-days Group. At that time Mr. Bulloch had tried to persuade him to take in both High Commissioner whisky and Grant's vodka but Winerite had not done so at that time (Atkinson:4366-9). Indeed neither product was marketed by Winerite until about 1995 (4375). The witness Gordon Robertshaw, was employed in England between 1979 and 1984 with a cash and carry company which began trading successfully with High Commissioner whisky. The company was then acquired by a larger cash and carry operator, Linfoods. In their employment he began in 1987 to sell Grant's Vodka after new depots were opened in Scotland. Sales of Grant's vodka had been carried into England before he left for other employment in 1988 (5161-4). The witness Peter West was employed from 1989 until 1991 with a company, North West Vintners, which then had a substantial number of stores in England. North West Vintners had a franchise within Kwik Save known as Liquorsave which first stocked Grant's Vodka in 1989 (5119). At that date it was a new product on the market so far as he was concerned (5134). When Kwik Save took over the leases of Liquorsave in 1995 they continued to sell Grant's Vodka successfully both in England and in new stores in Scotland (5122). The witness Peter Taylor, was employed in 1983 by a company of self-service wholesalers known as Makro. At that time Makro were approached with a view to stocking Grant's vodka but decided against it (5137). In 1987 while briefly employed by Linfoods, who then had outlets throughout the United Kingdom, he found it in stock. In 1988 he moved to become buying controller with Booker Belmont Wholesale, a leading cash and carry wholesaler in the United Kingdom. He said that Grant's vodka was then in stock as an important secondary brand which grew over the next six years or so (5139). This growth, he said, had been assisted in about 1992 by a misjudged promotion by IDV as owners of the Smirnoff brand which had alienated independent retailers (5141).

In about 1985 the first defenders entered into a contract with the Spar Landmark group for the production of their own label products under the name Prince Consort, which included whisky, gin, vodka and rum, for distribution to members of the group (Donelan: 4971:Taylor:5869). This provided in return extended outlets for the sale of both the first defenders' High Commissioner whisky and Grant's vodka although certain of the group's wholesalers were already stocking the first defenders' products (Donelan: 4972). Mr. Donelan, who was the licensed trade director for Spar Landmark at the time, spoke to the substantial number of wholesalers with wholesale and retail interest in the liquor trade and separately to the large number of licensed retail outlets which were within the organisation. These outlets were strongly represented in Scotland, the north of England, Wales and the west country.

The bottling of spirits products for other companies under own labels was to become an important part of the first defenders' business (Taylor:5871). Mr. Taylor estimated that of the total of some 1.5 million case of vodka which the first defenders were bottling annually by 1997, somewhere in the order of 500,000 cases were accounted for by own label products. This used the same spirit, bottle styles and sizes as for the first defenders' own products (6001). In the same manner, the first defenders produced own label gin and whisky but would try to meet requirements for minor changes in blending or for a specific recipe. These spirits were supplied to the order of buyers which included Landmark, Aldi, Kwik Save, Somerfield and Winerite. He stated that the first defenders continued to look for this business (6002).

Of significance also was Mr. Taylor's evidence that because of the consolidation of the market to which the first defenders sold in the early 1980s, brought about by the purchase by companies such as Greenall Whitley of Warrington and Scottish and Newcastle, of the smaller chains of wholesalers and retailers, the first defenders' customer base contracted. The first defenders however maintained a competitive edge in bottling their low strength whisky (5836-7). Thus when Mr. Reynolds joined the first defenders as general manager in late 1986, High Commissioner whisky was the most important of their products (3836:3889). He estimated that the volume of sales of whisky in 1987 was about 112,000 cases as compared with a figure for sales of both gin and vodka in the same period of the order of 38,000 cases as set out in the document, production 59/17. At this time it would be reasonable to describe the first defenders' vodka as a "niche product available in the market place", an inexpensive product which sold mainly through cash and carry companies (Summers:5027:5029). Mr. Harry, who joined the defenders as a sales manager in late 1987, spoke to being employed to sell the first defenders' range of products and to develop some own label business as well (4938). He described customers as being primarily wholesalers and cash and carry businesses. Sales developed relatively slowly at the beginning with High Commissioner whisky being the most successful product at the start on the back of which sales of the first defenders' Grant's Vodka and Grant's Gin increased (4950). It was a product which he introduced onto the market in Southern Ireland in about 1989 through contacts there including the witness Ronayne, the general manager of Monaghan Bottlers Limited (Ronayne 4906: Harry:4936), as he did also with the first defenders' gin and vodka products. Thus he was responsible for orders being placed by the wholesale company for which the witness Galpin worked in Munster. These orders were first placed in about 1989 and were for both the first defenders' Grant's vodka and High Commissioner whisky (Galpin:5468: 5469-70). According to Mr. Reynolds such sales accounted for within the general home trade stock of the first defenders (3857).

In my opinion the general thrust of the evidence of these witnesses supports the description of the progress of the first defenders' business given by Mr. Morrison, the auditor of the company until he retired in 1993. He described its growth from the beginning of its operations at Catrine as gradual. His impression was for the first eight to ten years, he did not think that "an awful lot of the increase took place, but probably from about the mid 1980s, things started to improve quite considerably through turnover et cetera" because the company "would be selling more of their own products" (5238).

The evidence in relation to the advance of the first defenders into the market indicated that the first defenders received advantage from a number of substantial changes which occurred in the market place within the two decades after 1970. In the first place there was a marked change in the fashion of drinking which brought vodka into favour as an alcoholic drink. In the second place there was the movement within the liquor trade which brought the large wholesaler and cash and carry organisations into prominence, some of whom were associated with a large number of retail individual outlets, who were able to offer retailers products at discounted prices. Certain of these trading associations established their own label products challenging the more established liquor brands on price. This movement into own label products was mirrored by the large supermarket chains who at the same time were prepared to sell lower priced liquor products along with their own label products. With the acquisition of the premises at Catrine and the development there of the capacity to produce spirits cheaply and to provide bottling and labelling facilities, both for others and for their own products, by control of price the first defenders were able to offer to their trade customers a low priced product for which they themselves did not require to spend money upon advertisement or promotion by label presentation or otherwise than by making their products available at an attractive price and of an acceptable quality. At the same time until the latter part of the 1980s the first defenders were able to take advantage of legislation which enabled them to market their own products at a lower strength and so more cheaply than some of their competitors. This was particularly the cause of the success of the first defenders' High Commissioner whisky (see for instance Barclay:4232). Mr. Dewar Drurie, who was doing business with the first defenders in the mid-1980s and knew Mr. Bulloch said that he associated him principally with whisky and that it was the whisky side of the business that was predominant (1227). This also appears to be borne out by evidence that it was an immediate requirement to provide warehousing space for maturing whisky that was behind the acquisition of the Loch Lomond Distillery at Alexandria in 1985 (Taylor:5828). In 1986 the malt distillery there was brought into operation for the production of Inchmurrin Malt Whisky.

Against this background, I am satisfied that it was not until the period about the middle of the 1980s that the first defenders began to make any substantial headway into the market with their own labelled spirit products, including Grant's vodka and Grant's gin. As Mr. Taylor acknowledged, the first defenders had a comparatively small place in the market in the late 1970s (5868). He explained that the first defenders' products and sales were directed to the independent trade, more particularly wholesalers and cash and carry organisations. He pointed to the teaming up with a large association of independent traders known as Landmark in 1984/85 as being an example which enabled the first defenders thereafter to produce and distribute whisky and white spirits, both own label and with the first defenders' labels on them to the members of the association. When Mr. Barclay joined the first defenders in September 1985, contract bottling for third parties was "a big part of (the first defenders') business" (4253). He was given by Mr. Bulloch the brief to sell the first defenders' products, with the responsibility to get orders (4233). He described the sales organisation at that time as follows (4232):

"Scotland was already handled by William Mortons. There was a fledgling distribution network in England; it fell under the auspices of A. Bulloch & Company, Scotch Whisky Blenders, or, I can't remember".

Mr. Taylor also acknowledged that the thrust of selling in the domestic market coincided with the arrival of Mr. Barclay (5838), who was described by Mrs. Reader as a very dynamic salesman (4502). It is perhaps a comment upon the scale of the first defenders' operations that it was not until the advent of Mr. Reynolds in late 1986 that they instituted a proper computerised system for recording their sales. It was apparent from Mr. Taylor's evidence that the arrival of Mr. Barclay and thereafter of Mr. Reynolds gave to the first defenders' operations a far greater thrust and expertise than had been available to its management prior to the mid-1980s. It also coincided with a surge in the market itself from which the first defenders were well placed to take advantage. In particular it was following Mr. Barclay's appointment that the substantial extension of sales of the first defenders' products in England and Wales took place. The documentary productions indicated that during the first eleven months of 1987 the total sales of white spirits, including gin, vodka and rum by the first defenders amounted to some 37,600 cases and some 280 cases exported to France. While Mr. Barclay was by this time selling into what Mr. Taylor described as the infrastructure of wholesalers in England and Wales (5838/9: see also Barclay:4233), the evidence was clear that it was not until thereafter that the first defenders were able to break into the mainstream supermarkets (5842). The witness Woods said that the effect of Mr. Barclay's salesmanship was very big. He placed this in the period 1986-1988 but said it could have been later (5756-9). It was at this time that he first became aware of the first defenders' Grant's vodka as a competitor in the market. Its price was used at head office level in London by major supermarket chains as a bench mark for their own label products (5745). Mr. Reynolds placed this break into the mainstream supermarkets during the course of 1990 and 1991 (3846) though in doing so, he considered that it "virtually shut the door on on-trade sales" because of perceptions arising from price (see also Taylor:5877). This extension of the first defenders' marketing operations brought about a dramatic increase in their sales from 1990 onwards. The documentary production 59/17 indicated that by 1991 the sales of products under the Grant's name for eleven months of that year were four times those in 1987, while by 1993 the volume was more than the total of the eleven month period from January to November in each year from 1987 to 1991. I refer in particular to the evidence of Mr. Barclay (4251-3 : 4255-8). Thus by 1990 the figure was 115,000 cases. Sales increased to nearly 200,000 in 1991, to 300,000 in 1992, to 450,000 in 1993 and thereafter well above half a million cases for the period included in the document. Of the individual products the sales of vodka in particular increased very dramatically.

Contract bottling formed a substantial part of the defenders' business up until the loss of Whyte & Mackay's custom in about 1986 (Taylor: 6000). Mr. Reynolds, appointed in November 1986 as general manager of the first defenders with responsibility for the production side of the business, made clear that the loss of the custom of Whyte & Mackay without new business taken on in its place, meant that contract bottling became less and less important (3862). The first defenders continued to accept and to carry out contract bottling thereafter though to a limited extent. At the time of giving evidence Mr. Taylor estimated such business as amounting to considerably less than 100,000 cases annually. Customers included two whisky brokers and one or two London-based export houses who had their own whisky, gin or vodka labels (6000). In addition the first defenders' business extended to selling of a limited amount of bulk whisky apart from that undertaken by Loch Lomond Distillery, and to some warehousing and storage for customers.

In about 1993 work began on the construction of a grain distillery at Alexandria for the production of grain spirit. This came into production about 1995 and the spirit distilled there is used for the production of high strength or premium vodka for sale in Europe and gin for sale in America. Otherwise all neutral spirit used for the production of the first defenders' ordinary gin, vodka and rum products was bought in and flavoured, blended, bottled, labelled and packaged at Catrine for the first defenders. The first defenders are also responsible for the direction of all sales of these products and for their export, the subsidiary office established in Edinburgh having been closed in 1991 (Taylor:5784).

Export Market

In about 1988 the export market became for the first time a focus for the first defenders' efforts. Until the establishment by Mr. Bulloch of A Bulloch International Limited in that year and the employment of Mr. Douglas and Mr. Du Boullay in an office in Edinburgh, any export of the first defenders' products was very much a one-off matter and formed no substantial part of the first defenders' business, though Mr. Taylor had secured certain sales of whisky to the former Soviet bloc (Taylor:6201:6254). According to Mr. Barclay the products included whisky under names such as Scots Earl and Old Troon (4234). According to Mr. Douglas any exports had been "very small" (4018). The brief given to the new company was to export "the complete portfolio" of the first defenders' products and "anything else that we could bottle and put a label on" (Barclay:4235). He himself was concerned with the bulk export of Scotch whisky (4237). Mr. Douglas said that following the establishment of the new company, apart from the exporting of small quantities of gin to France, there had been no exports at all of the first defenders' products until 1989 (4028). However as noted before, it appears that through the medium of William Morton & Company Limited, the first defenders' products were being exported to Southern Ireland prior to 1989. Exports were also conducted through the medium of agents who would be seen as "the official exporter" (Barclay:4234). For example, the witness, Mr. Jerman, who had established a company I.W.S. Shipping in about 1976, subsequently known as I.W.S.International Limited, was engaged in the business of selling whisky and other spirits, including gin and vodka, primarily in the export market. In 1989 he purchased the first defenders' High Commissioner whisky for export and sale in Africa and one or two other places (5190). He was made aware at that time that the first defenders were also selling Grant's Gin and Grant's Vodka, though it was not until a few years afterwards that he purchased vodka for sale to Russia, Andorra and Turkey. In 1991 his company acquired the rights for worldwide distribution outside the United Kingdom of the first defenders' whisky under the names Clansman and Rutherford (5189). Since acquiring these rights, his company have redesigned the Clansman label which the first defenders used for export markets because they did not like the one that the first defenders provided (5204). The nature of the first defenders' export policy was spoken to by Mr. Taylor. He agreed that it was what he termed a somewhat "scattergun" approach though in some countries the first defenders had acquired regular steady customers since 1990 (6255). He estimated that by 1997 the first defenders were exporting products including High Commissioner and other whiskies to some 80 countries (6263). He guessed that of these some 25 to 30 markets involved their products bearing the Grant's name, but accepted that the documentary production 59/17 showed that it was only to some 14 countries to which such products were exported in 1995 and that it could be between 12 and 20 in 1997. He also indicated that where a problem had arisen with use of the Grant's name on products in any country, they had been able to switch to using other names on what was the identical spirit (6265), instancing Horseguard gin and Svenska or Nostrova vodkas (6264). He also accepted that the first defenders by agreement with the pursuers had ceased to ship Grant's gin to France because of trademark protection for the pursuers that exists there (6266), although there had been regular but small shipments to France previously (6265).

Names used for the first defenders' spirits products

The first defenders, in addition to Grant's Vodka, also use the same process for the production for sale of vodka under a number of different names including Svenska, Rolov (though this, being low strength, has since 1989 no longer been called vodka), Zaroff, Nostrova, Karenina, Protocol and Muscova, all as proprietary brands. They also bottle and sell gin, using the same process for its production as for their Grant's Gin, under the names Watson's (which being low strength is sold as light juniper spirit), Lomond and Horseguard, which name is used for gin for export. Gin produced from grain distilled at Loch Lomond is exported to the United States under the name Rear Admiral Joseph and has been so exported since about 1994 or 1995 to a customer previously a customer of a British company, Gibson International, acquired at that time by Mr. Bulloch.

Quality of first defenders' spirit products

Neutral spirit for the production of gin and vodka was in the main purchased from Greenalls of Warrington after Mr. McLean became managing director in 1972. This was of excellent quality (McLean:5514). While he remained managing director with responsibility for the wholesale activities of the business, he was unaware of any general complaint of the quality of the products sold by John Grant (Blenders) Limited. In his opinion, the quality of the gin and whisky products was excellent (5527). The witness Welsh, who was Scottish sales manager for Greenalls of Warrington for some twenty years up until his retirement in about 1988, spoke to receiving from the first defenders bulk orders for spirit for the production of vodka during that period though it appeared that latterly the first defenders took bulk spirit from the Continent, where it became available more cheaply (4430:4435). No suggestion was made to him in cross-examination that the quality of the spirit so supplied was poor. Likewise, Mr. Atkinson of Winerite expressed himself as finding the quality of the gin and vodka, as well as of High Commissioner whisky, produced for his company both as labelled and own label products, highly satisfactory (4413). Mr. Smith of C.J.Lang & Son Ltd. considered that Grant's vodka tasted like a good vodka (4086). The witness Thomas Taylor, who had been employed by Distillers Company from 1974 and after 1988 by United Distillers, latterly as quality manager, was appointed as quality manager for the defenders in 1992. The rapid growth of the first defenders' business and the consequent need for more people to undertake quality control had given rise to his appointment (4471). He gave evidence as to the quality control systems which he had instituted upon his appointment. He regarded them as being on a par with those in place while he was with United Distillers. Such systems had involved more tests before spirits reached the production line (4472). While he agreed that there had been certain complaints by customers, these had generally been of the normal industry nature (4464). The first defenders were subject to quality control audits by the supermarket chains whom they supplied. Such chains had very demanding quality standards (4463). He was unaware of any complaints about the characteristics of the first defenders' rum product from any customer. There had been a suggestion by "a gentleman from Strathclyde University" that the characteristics were not very good but this he regarded as purely subjective (4477). Another allegation about the first defenders' rum had caused it to be withdrawn but proved to be unfounded (4478). The reference to "a gentleman from Strathclyde University" was to an exercise carried out by Dr. John Piggott, a senior lecturer in food science at that University, led as a witness for the pursuers. His expertise extends to examining why particular consumers like or choose a particular product. In May 1992 he was instructed by the pursuers to examine and report upon any differences between two groups of samples of gin and of vodka, the first taken from the pursuers' products and the second from the first defenders' products. The research tests adopted for the report were carried out in the first place by using a descriptive sensory analysis by a tasting panel of people using a vocabulary of flavour descriptive terms which had previously been developed by the witness. This panel was however not representative of the population of the United Kingdom being drawn from the number of biology students at Strathclyde University. The second approach was to secure chemical analysis by gas chromatography (1399). From the results obtained through the testing panel, Dr. Piggott could only infer that the flavour of the first defenders' gin was less strong that that of the pursuers', probably because lower levels of flavouring components were used in the manufacturing process as appeared from the gas chromatography tests. He agreed that a finding that the gins sold by the first defenders were significantly less liked by the panel was not one by which he set much store and was not true market research (1410). As regards the vodka samples, while the testing panel found the first defenders' vodkas to be significantly less pungent in aroma than those of the pursuers, this, he concluded, was due to differences in the starting materials or production processes (1415). On the other hand the gas chromatography tests indicated that the two sets of vodka samples were very alike (1412-13). As Dr. Piggott pointed out modern European vodka is a very pure spirit (1414). In cross-examination he agreed that the quality of the two products was the same or equivalent (1429). In July 1993 a similar testing exercise was carried out by him in relation to rum samples, one being of the first defenders' product and the other five from different producers. The conclusion of the testing panel was to the effect that the first defenders' rum sample had very little smell by comparison with the other samples. Gas chromatography tests suggested that it had very much lower levels of flavouring compounds than the other samples (1416-17). Dr. Piggott went on to express an opinion to the effect that the rum sample did not meet requirements of European regulations but agreed in cross-examination that an analysis of a sample of the first defenders' white rum conducted for Cumnock and Doon Valley District Council in 1993 contained in a declaration by the District Environmental Health Officer, (document 42/12), demonstrated that the product was white rum produced by the fermentation and distillation of sugar cane molasses, that it conformed to United Kingdom food safety requirements and that it was authorised for distribution in the United Kingdom and for export. He agreed that there was no suggestion in the declaration that the sample did not conform to European regulations and indeed that it was implicit that it did so (1432-33). There was a suggestion during the course of the evidence that a neutral spirit which was produced from grain was better than that produced from molasses. Notwithstanding that it was on the whole more expensive and deemed to be better, there was no real evidence to suggest that the choice of one spirit rather than the other had any effect upon the finished product. The matter was put succinctly by Mr. A. Grant Gordon when he stated that while generally the grain spirit was deemed to be better, "you would need to be highly expert to tell the difference" (24:187).

I do not consider that the body of evidence substantiates claims that appeared to be made on the pursuers' behalf that there is any material difference in the quality of the first defenders' spirits products which would at present differentiate them from the quality of the pursuers' blended whisky and lead consumers who were ignorant of the true source and who thought that all were products of the pursuers, to conclude that the pursuers were producing spirits of a lesser quality than their blended whisky. The only substantial complaints about the flavour of the first defenders' products which were properly examined, indicated that there had been tampering of the bottles prior to sale to the consumer in almost all instances except that where some trace of particulate was found. This last was a case where the complaint was laid with the Environmental Health Department of the City of Glasgow District Council by the witness, Mrs. Riddell, in February 1993. It concerned a bottle of the first defenders' Grant's Vodka. She saw black specks in it (1777). But from the correspondence which related to this complaint, (documents 43/4-10) it appears that there was also a complaint that there was a taste of detergent. When analysed the contents of the bottle were found to be vodka of normal alcoholic strength.
On record the pursuers aver that the quality of the first defenders' products is variable, which the pursuer believe and aver to be due to poor quality control. There was evidence from the witness, McLinden, of a complaint made by him in relation to a bottle of the first defenders' Grant's vodka which he purchased in about 1991. When opened, it smelled of gin. He returned the bottle to the ASDA store from which he had bought it. They indicated that they would send it away for analysing. On his own initiative, Mr. McLinden wrote a letter of complaint to the name and address given on the bottle, which he said was in Ayrshire, thinking that he was writing to the pursuers as producers of the vodka. When he received no reply to his letter, he had looked up the telephone book for the pursuers' address, thinking that John Grant's and William Grant's were the same company (4116), and thereafter wrote to the pursuers complaining of the lack of a reply (also Tait:820). This incident would suggest some lack of quality control. Another complaint received in 1995 by the pursuers from the witness, Davidson, was investigated. He had been unable to trace the producers directly from the label of a bottle of the first defenders' Grant's vodka but assumed an association between the name John Grant and the pursuers (1277). He telephoned to the pursuers' premises. Subsequently he went in person and handed over the bottle to Mr. Tait (Tait:822). When analysed, the bottle was found to contain water (documentary production no.56/6). Mr. Davidson agreed that he had afterwards become aware of what he termed "a nice little scam that was going on in the area" in which a bottle of vodka was purchased, water then substituted for the contents and the bottle returned to the shop and exchanged for other drink (1287). This was in line with evidence from Mr. Taylor (6138) that a matter of this kind was reported to the police. He accepted that the first defenders themselves had received complaints from consumers amounting to some forty in all (5825) though it was not entirely clear whether these came directly from individual purchasers or from the outlets at which the purchases had been made. He spoke to an occasion in July 1995 when the bottling line had been insufficiently flushed out (6138-9). Mr. Reynolds had a general recollection of complaints (3845) and a particular recollection of particulate in bottles in a couple of instances (3896).

While there was evidence that the flavour of the first defenders' gin and the aroma of their vodka differed from that of the pursuers' gin and vodka, and that the smell of the first defenders' rum differed from that of competitors' rum products, I am satisfied that there was nothing in the evidence to substantiate the pursuers' averments as to suggest at present any variability of quality or lack of quality control on the part of the first defenders. Insofar as there were such distinctions between the first defenders' products and those of others including the pursuers', I am satisfied that no such distinctions have been shown to have any material effect in the market or with consumers. At best all that can be said is that the first defenders were less concerned to secure a reputation for a premium product as opposed to being able to sell their products at as low a price as possible while remaining reliable in quality and availability.

First defenders' labels

Between 1972 and 1974 the company then known as John Grant (Wine and Food) Limited stated on its labels for its white spirit products, including vodka, that the producer was John Grant (Wine and Food) Limited. Following the change of name of the company in 1974 to John Grant (Blenders) Limited, that name was substituted on labels for its white spirits products in place of John Grant (Wine and Food) Limited. The name John Grant (Blenders) Limited continued to appear on such labels even after the company was renamed as Glen Catrine Bonded Warehouse Limited in 1977. This practice continued up until 1991. In 1991 however the first defenders were advised by their patent agents not to use the name John Grant (Blenders) Limited. Thereafter to the present day the name John Grant Blenders has with one exception, appeared on the first defenders' white spirit products as the name of the producers. A special label was produced by the first defenders for their products to be exported to Portugal in about 1989. This label specified the name of their Portuguese distributors and also referred to "John Grant Distillers Company, London and Glasgow" as the producers and bottlers (Taylor:6070:document 43.42.1-2).

I consider that the defenders' evidence establishes that the policy which has been adopted by the first defenders from the outset has been for the production of good quality products at the keenest price at which it can afford to sell them. This has involved limited expenditure upon items such as labelling and packaging, advertising and the like. Mr. Bulloch spoke to limited advertising in trade papers and also advertising on sales lists produced by outlets at which the first defenders' products are marketed. According to Mr. Bulloch advertising in trade papers began in about 1987 or thereby, but this did not appear to be borne out by other evidence which was that that it was not until after 1990 that the trade press were aware of the first defenders' vodka or gin products making their way into the market place. Thus their presence was not monitored by Stats MR, a market research organisation providing continuous information on the sizes of retail markets to retailers, until 1992 (Humphreys:2154). This organisation made use both of information from retailers and also of material collected by field workers from a wide variety of sources. The witness Rudy, who was for some years employed by the publishers of Impactinternational, a publication of the global drinks industry, stated that although aware of the first defenders' High Commissioner, it was not until 1993 that their Grant's vodka came to his attention (1839) although in the first instance he assumed that it had been produced by the pursuers (1844). It is also significant that it was not until 1990 that the first defenders were concerned to seek trademark protection for their spirits products.

Trademarks of the Defenders

The first defenders first employed Murgitroyd and Company as patent agents in about 1985, the senior partner of which was the witness Mr. Murgitroyd. At that time the agents were concerned with a malt whisky product called Rhosdhu (Murgitroyd:6322). I am satisfied that the agents did not become concerned with the first defenders' white spirits products until 1990 shortly prior to the applications being made in relation to those products. When consulted, the agents understood that the applications were to be made in the name of John Grant (Blenders) Limited because that company was a "trading arm" of the group of companies of which Glen Catrine Bonded Warehouse Limited was also a member (Murgitroyd:6324:6437). Prior to submitting the applications, a search was conducted at the instance of the agents within the Trademark Registry for the name Grant and for all trademarks which contained the word Grant or Grants. From this and from other searches the agents concluded that the name Grant was a common surname as defined under the trademark legislation (Murgitroyd:6325-36). In November 1990 applications for trademarks were submitted by Murgitroyd & Company. John Grant (Blenders) Limited, which was then the name that appeared on the labels for the first defenders' gin, rum and vodka products as the producers of these spirits, appeared as the name of the proprietors for these applications. The applications were for the United Kingdom in the name John Grant and for labels bearing the words Grant's Special London Extra Dry Gin and Grant's Vodka. The agents were at one point made aware of the litigation involving the first defenders in Greece. This was placed by Mr. Murgitroyd as being about 1992 or 1993 but he agreed that it could have been earlier (6337). He first became aware of a dispute between the pursuers and the first defenders so far as the United Kingdom was concerned, when he was passed a copy of the letter sent by the pursuers' solicitors to the defenders in February 1992. Upon being made aware of the dispute, the agents then carried out a search of all the trademarks owned by the pursuers as William Grant and Sons Limited (Murgitroyd:6337-8: also document no.47). Subsequently on further advice from Mr. Murgitroyd, the senior partner of the firm, the applications were amended to name Glen Catrine Bonded Warehouse Limited as proprietor. In the case of the application for the label for Grant's Vodka the change was registered in September 1992 and for the application in relation to Grant's gin label the change was registered in April 1993. In November 1992 the agents applied to the Search and Advisory Service of the Patent Office for written advice on "registrability for the Marks JOHN GRANT, WILLIAM GRANT and GRANTS which all fall within Class 33" for certain specified goods. The mark Grants was chosen because it was "the worst case scenario" in that Grant's, (that is with an apostrophe), was considered to be even less distinctive than the chosen mark (Murgitroyd:6349). The preliminary advice received was contained in a letter dated 30 November 1992 produced as document number 59/33. The preliminary advice received was that the marks so specified were not registrable (Murgitroyd: 6345-9). In cross-examination Mr. Murgitroyd explained that in terms of trademark practice there was no difference between the mark Grants and Grant's in that, as appeared in the preliminary advice, Grants consisted of the plural of the common surname Grant, being descriptive of and non-distinctive for, e.g. alcoholic spirits produced by a person or persons named Grant (6402). In May 1993 the agents advised the first defenders that the trade mark "John Grant words in Class 33" (which includes alcoholic spirits such as gin and vodka) had been accepted by the Trade Marks Registry subject to objection and had been advertised in the Journal. These matters appear on the face of documents in productions 59/34 and 59/35. In July 1993 the agents conducted a search, the results of which were contained within production 59/34, for all marks then on the Trademark Register in Class 33 which contained the word Grant (Murgitroyd:6412). In August 1994 the agents carried through a search within their own data base in respect of all registrations on the Trademark Register with respect to the word Grant's (production 61/21) but which did not include labels (Murgitroyd:6404).

With the Europe-wide Registry the first defenders have applied for registration for marks for the labels for Grant's Vodka and Grant's Gin and the name John Grant. (Taylor: 5946).

In South Africa, as appears from the documentary productions 42/15 and 42/16, a trademark application was advertised in November 1990 in the name of John Grant (Blenders) Limited for the label bearing the words Grant's Special London Extra Dry Gin. This was altered in September 1992 to refer to Glen Catrine Bonded Warehouse Limited as the proprietor. Likewise an application in April 1992 for a mark Grant's initially made in the name of John Grant (Blenders) Limited as proprietor, was changed to the name of Glen Catrine Warehouse Limited in October 1992, the trademark applied for being amended in February 1994 from Grant's to John Grant. According to Mr. Taylor this change was made on the advice of trademark attorneys acting for the first defenders in South Africa (6009).

Litigation involving the parties abroad

It is convenient at this point to have regard to the evidence given in relation to litigation or threats of litigation which have taken place concerning the first defenders' products. It is appropriate to do so against the general background which appears from the evidence with regard to trademarks and to the first defenders' evidence about exporting.

There was ample documentary evidence referred to in particular by the witness Tait, that William Grant & Sons Limited possess a substantial number of trademarks registered in countries abroad. Nor was there any dispute that trademarks in such countries appeared in registers which are available for inspection by members of the public. Evidence to this general effect was given by Mr. Tait (801), the witness Mrs. Mezulanik, an in-house counsel in respect of trademarks with Bacardi & Company Limited (2181) and by the first defenders' director in charge of export sales, Mr. Douglas (4031). In addition as Mr. Murgitroyd, the first defenders' patent agent, agreed, exporting spirits to any country under any trademark without checking was to take a calculated risk (6395). According to Mr. Douglas, the first defenders had no stated policy of investigating the trademark position in any foreign country to which export of the first defenders' products was being considered for the first time until the early 1990s (4031). Indeed he agreed that he personally would not necessarily have inquired whether the pursuers' products were on sale in any country to which he sent the first defenders' products or have had any reason to know that they were (4048). He explained that at the time that in August 1988 the third defenders had been incorporated to promote direct sales of the first defenders' spirit products overseas, the scale of export by the first defenders was then very small (4017). There was no predetermined marketing strategy. Rather the sales were achieved by reason of responding to enquiries or using existing contacts already in the trade who had knowledge of customers in certain markets (4018-9). The documentary material produced for the first defenders in production 59/17 demonstrated that in the period between January and November 1987 and in the same period the following year, the only foreign country to which the first defenders' spirit products were exported was France and that in each year it only comprised a small quantity of gin. Mr. Douglas (4037) spoke to exports in the same period in 1989 to France, Bulgaria and Portugal of the first defenders' gin products, and to Greece, Oman and Rhodes of the first defenders' gin and vodka products. He said that thereafter the pattern of development of exports had been intermittent. A small consignment of gin and vodka had been sent to Australia in 1990. In 1991 3,650 cases of gin were sent to the Lebanon. Similarly, the first export to Israel was of the first defenders' gin products in 1993 and to Hungary of the first defenders' gin products in 1994. It is to be noted that his evidence was related to direct sales of the first defenders' products.

Litigation in Portugal

WGS had first sold their products in Portugal before 1960 according to Mr. Tait (783). In 1990 WGS possessed two trademarks in the name Grant's. One of them was registered in 1940 for whisky. The other was obtained in 1988 and was referable to gin and vodka specifically.

The witness Neves spoke to having worked with a company named Caves Alianca since 1975. That company was based in Lisbon. He had been principally involved with sales and marketing for the company. Amongst other activities the company had both prior to 1975 and subsequently acted as a distributor of imported products, including the pursuers' blended whisky. This the witness referred to as Grant's (2441). Sales by his company of the pursuers' blended whisky in 1995 amounted to some 115,000 cases. Lesser quantities of the pursuers' other whisky products were also sold as were some 2,500 cases of Grant's gin produced by the pursuers (2444). His company did not import the pursuers' vodka. He said that Grant's whisky was well-known in Portugal. It was the subject of promotions by his company in both the on-trade and in the off-trade and otherwise, as well as television advertising (2447). The cost of promotion promoting the pursuers' blended whisky was shared between the pursuers and his company. He said that the name Grant's was what he termed "a called brand" (2453: 2494). This, he explained, applied to a whisky product which consumers asked for by name and which consumers thought to be a very good whisky. In relation to his company's distribution of Grant's gin, being the pursuers' product, he spoke to the appearance of the first defenders' gin product in Portugal under the name Grant's in 1989. It was imported by another Portuguese distributor, Socorbebe. From the first defenders' production 59/17, it appeared that during the period from January to November 1989 1,200 cases of gin had been exported direct to Portugal, and in the equivalent period in 1990 100 cases each of gin and vodka. Mr. Neves said that the price of the first defenders' gin was around 50% less than that of the pursuers'gin (2459). The company's salesmen had complained that it was difficult to compete because of the price of the first defenders' gin and that they were losing sales. As he put it (2460)

"it was evident that we were losing sales and so the salesman was complaining very much and having problems as well with the customers because they were confused and they have to explain, it was not the same firm, it was a different gin but in fact our sales decreased, decreased because of that."

He went on to explain that he was concerned about the image of Grant's brand. He explained it in the following terms, (2461)

"because the consumer, first Grant's has a good position and price even, okay even nowadays our gin has a good position and price so the consumer started to be confused and I believe in our point of view, was harming the image of the brand because the image from the quality one of the components very important is the price because if after six months, one year your price is always down, down, so you lose the status as even if the product is the same but the consumer for the consumer's price is very important and then you lose the brand, lose the status, status, I am sorry, and then we was very concerned with the status of both gin and Grant's whisky apart from the confusion the consumer there was a Grant's with the low status image appearing."

He had spoken with his customers as the consumers who were confused. The confusion arose from the fact that as he put it:

"it appeared two different bottles with the same brand in the liquor shop, that was confusing... for the consumer and two different prices in a product, that is not exact, not different designations like age or premiums or not like whisky you can see the age, then it is a different price in gin, there was nothing, and so the people said to the same brand with two different bottles, two different labels, two different prices, so it's obvious they was confused, but you know, they started to buy at the time. I remember the other Grant's gin was selling very well and was, it was distributed... in the main liquor shops."

He had never seen an advertisement of the first defenders' gin nor a promotion of it. His opinion was that the importers used the price. As he put it

"so they were using our investment in terms of launching the product, the brand and launching it and maintenance, so they were taking profit off our investment."

Mr. Neves went on to explain that with a letter written to WGS on 10 October 1989, the commercial director of his company had enclosed a label from one of the first defenders' gin bottles. The letter said:

"Inspite of its distribution be not important the using of the brand name 'Grant's' by another company is not positive both for the image of the Grant's gin (from your company) but mainly for your scotch."

In cross-examination Mr. Neves explained that at the time when the problem of confusion between the pursuers' gin products and the first defenders' gin products arose, his company had been considering importing the pursuers' vodka under the name Grant's vodka, but had decided not to do so because of the confusion that had arisen between the pursuers' and the first defenders' gin products with the name Grant's (2487). While critical of the quality of the first defenders' labelling of their gin product, he stated that it was the use of the name Grant's that would cause confusion (2493). He also expressed the opinion that the poor quality of the image presented by the assembly of label and bottle could affect what he termed "the institution image" of the pursuers' products under the name Grant's (2492-2495). He went on to express the opinion that if the first defenders' products continued to be sold with the same get up as those distributed in Portugal, the image of the brand would be damaged so that the customer would react and sales would decline. This in turn could over the course of time damage other products sold under the same name including the pursuers' scotch whisky sold under the name Grant's. Mr. Neves said that the first defenders' gin had been sold in the Portuguese market for a period of between two and three years. He further expressed the opinion that in that period the image of the pursuers' blended whisky had suffered because of what he termed "negative reactions" which he described these as coming from persons in the trade specially in liquor shops advising that the consumer was confused and telling him that "this is very bad for the brand, please, you have to be careful, you have to act, you have to do something." (2497). When asked whether sales of the pursuers' blended whisky had fallen over the years during which the first defenders' products were on sale in Portugal, he said this:

"As I said, directly the gin fall and for me the scotch whisky, it is difficult to tell, but I have no doubt that that damage, in fact did the damage but if you're talking about volumes, it is probably difficult but the image was damaged and that is sometimes more important because to recover the image, probably you have to do investments.... you have to take time,... you need three years to recover an image that you've damaged and then that is in the business, it's very bad."

In 1991 the pursuers raised an action based upon their trademark against Socorbebe. The complaint was of the Socorbebe product being sold at a cheap rate. It sought an injunction against Socorbebe putting or placing for sale on the Portuguese market gin and vodka using the names Grant's on the label (Neves: 2469). At the time that the action had been raised Socorbebe were also importing the first defenders' vodka in addition to the first defenders' gin products. The complaint in the pleadings was also that Socorbebe had benefited from the established commercial credit and reputation which had been built up by the company for the name Grant's. The restraining order sought was based on the 1988 trademark and an injunction based on it was granted against Socorbebe, the decision of the Portuguese court being given in February 1993 (Neves: 2504).

Litigation in the Lebanon

This matter was largely dealt with in the evidence of Mr. Tait. He said that the first sale of the pursuers' products in the Lebanon had taken place before 1960. The first trademark had been registered there in 1950 (795). In September 1990 the pursuers had received a complaint from their distributor in Lebanon about the appearance of the first defenders' gin and vodka products. At that stage the distributor wished to know where these products had come from. They said that they were not going to order any more of the pursuers' gin and vodka products until the problem was resolved. An action was raised against the first defenders' distributor in the Lebanon in 1990. No further action was then taken because of the civil war in the Lebanon and because the pursuers' regional representative reported that the first defenders' products had disappeared from the market. They had re-appeared again in 1995 and the following year a settlement was reached with the first defenders' distributor. From the first defenders' documentary production 59/17 it appeared that the sole direct export to Lebanon was in 1991 and that this had only comprised 3,650 cases of Grant's gin.

I consider to be of some significance that the initial complaint of the appearance in Lebanon of the first defenders' gin and vodka products was in 1990. This would suggest that these products had been brought into Lebanon from other territories to which these products had been exported.

Litigation in Australia

Mr. Tait gave evidence that the first sales of the pursuers' products to Australia had taken place in 1910. The first trademark registration in the name Grant's had been in 1924. The appearance in the Australian market of the first defenders' gin and vodka products was reported to the pursuers in about 1990. The first defenders' documentary production 59/17 indicated that in that year 32 cases of gin and a similar number of cases of vodka had been exported to Australia. The witness Conway was the area sales manager with the pursuers in February 1991 covering Australasia and the South Pacific islands, though subsequently in February 1995 he became regional sales director with responsibility for the countries within South East Asia as well. He spoke to the budget in Australia for advertising and promotion of the pursuers' products in 1995/96 as being in excess of £1,000,000 annually. Advertising included hard copy advertising as well as films and television commercials. The main product sold in the region was the pursuers' Grant's blended whisky, sales of which were of the order of 200,000 cases a year. The brand accounted for 12% of scotch whisky sales in Australia making it the second biggest selling brand. In New Zealand it is the first placed brand, accounting for over 22% of the market share. Both the pursuers and their blended whisky were commonly referred to as Grant's. In addition, other products of the pursuers', including their Grant's gin and vodka were sold in his territory.

In 1992 he was alerted to the fact that a major wholesaler in South Australia who was a customer of the pursuers' distributor, Mildara Blass, had been offered by another company Grant's gin and Grant's vodka. The wholesaler appeared to be confused as to why another company should be offering to him as one of the pursuers' distributors' biggest customers, gin and vodka under the name Grant's.

Mr. Conway explained that when he received the report of the approach to the wholesaler, his first concern had been for the pursuers' whisky business. This concern he expressed as follows:

"Well over the years we have spent a lot of time and a lot of money building up the image and the name 'Grant's' scotch whisky.... and if we were to lose control, control over products using the 'Grant's' name it would concern me that the value of the 'Grant's' name would be undermined."

The likely effect upon consumers he expressed as follows:

"Well first and foremost, consumers in Australia recognise the 'Grant's' name with 'Grant's' scotch whisky. That's what first comes to mind. It's a very popular, popular brand and if 'Grant's' gin and vodka was to be retailed very low prices in the market as an example, it would undermine the image and reputation of the 'Grant's' brand name."

After the matter was brought to his attention, he learnt that the price at which the distributor was offering to sell the first defenders' gin and vodka products was considerably less than at which the pursuers' Grant's scotch whisky was sold. This concerned him as the pursuers spent "millions of pounds... trying to get the value of the 'Grant's' scotch whisky a named place in Australia". He said that if a cheap vodka under the name Grant's was on the market, then "if it is cheaper it will be of poor quality and if that is the case they (the consumers) will infer the 'Grant's' name as not worth its value" (2257). Mr. Conway explained that the pursuers' scotch whisky, vodka and gin were all sold at the same price (2261).

An action was raised against two distributors who had imported the first defenders' gin and vodka products into Australia. This was settled upon certain undertakings being given by the distributors (Tait: 801) including agreement that they would not sell the products. One condition of the settlement was that the labels from one consignment of vodka should be removed and handed over to the pursuers. They sent all the labels from the bottles to Mr. Conway's office. He estimated that these amounted to at least 100s, if not 1000s of labels. He described the labels as being of poor quality, very cheap paper labels (2258). A substantial number of labels were subsequently delivered to Mr. Tait (802). The labels that he received in response to the undertaking given by each distributor consisted of labels bearing the words Grant's gin and Grant's vodka.

It is of some moment that Mr. Woods, who was concerned in the distribution side of the alcoholic beverages trade both in the United Kingdom and abroad, gave evidence that he had had one experience of confusion involving the first defenders' vodka in Australia which he placed about 1991. He said that "a distributor for Glen Catrine's Vodka was confused, or somebody we were talking to was confused that that might come from William Grant, because Grant's whisky is the No.2, the No. 1 brand in Australia"(5766)

Mr. Taylor in his evidence (5931) claimed that there had been no framework for exports to Australia and that it became clear that in actual fact there was no market for low price gin and vodka there.

I see no reason to disbelieve Mr. Taylor in giving this evidence but the fact that exports were placed there without any prior examination as to the likelihood of material confusion arising was indicative of the first defenders' general approach to placing their products in a new market and the probability of confusion that would arise from their doing so where their products bore the name Grant's.

Confrontation in South Africa

Mr. Tait stated first sale of the pursuers' products had occurred prior to 1960. The first registration of a trademark on the part of WGS occurred in 1934.

In March 1993 the pursuers' distributor in South Africa received a letter from a company based in South Africa, John & Kernick, intimating that they acted on behalf of the first defenders and that the first defenders were interested in exporting gin and vodka to South Africa. It further said that they were looking for a distributor or wholesaler and gave Mr. Taylor's name and address as a contact. The letter continued:

"We feel obliged to advise you that there is a possibility that the company William Grant & Sons Limited, a British company and the producers of the William Grants scotch whisky, that is sold in South Africa, may object to the sale of our client's products. Our client would, however, be prepared to indemnify your company against any proceedings which may be instituted and damages which may be suffered by you if such proceedings are successful."

This letter was brought to the notice of Mr Tait (806). He raised the matter with the Richmond Office of William Grant & Sons International Limited. It appears that there was then further contact with the pursuers' distributors. In early April 1993 they replied to John & Kernick to the effect that they were the pursuers' agents and that if Grant's vodka or Grant's gin appeared in South Africa, they would certainly recommend opposition to their appearance. According to Mr. Taylor (5932), the first defenders had shipped a container with 600 cases each of gin and vodka, to a customer who had recently moved to South Africa and joined a cash and carry company there. Mr. Taylor alleged that the pursuers "got to him" and encouraged him not to take his order. After the container arrived in South Africa, the goods were put into a bonded warehouse. At this stage the first defenders had already started registration proceedings for their labels in the Republic of South Africa. The first defenders asked their trademark attorneys in South Africa through their Scottish patent agents if they could dispose of the goods in South Africa on their behalf. A number of importers were approached, but it proved impossible to sell the consignment. In the end, the consignment was sold in Bulgaria, since the labelling and strength of the products were such that they could not be sold in Europe (5932-3). Mr. Taylor agreed that although the original trademark application had been in the name of Grant's, it was following on advice received from the Trademark Office in South Africa that it had been amended to John Grant's (6277).

Confrontation in Hungary

Although the first sale of the pursuers' products appears to have taken place as late as 1992, Mr. Tait gave evidence that as early as 1940 a trademark had been registered in Hungary for the pursuers' scotch whisky in the name Grant's. This had been renewed in 1990. In about 1994 he had received a report from the pursuers' distributor that some of the first defenders' vodka had appeared in Hungary. He had visited the pursuers' distributor there and investigated the situation. Subsequently he had received undertakings from two organisations, namely GNG Industrial & Trading Limited and Hungarotabak Company Limited, to the effect that they would in future only import the pursuers' products. These declarations were dated 20 December 1994 and 20 December 1995 respectively. It appeared from the first defenders' documentary production 59/17 that the only export was in 1994 when 750 cases of their Grant's vodka and 150 cases of their Grant's gin had been exported to Hungary. According to Mr. Taylor (5933) the first defenders remained unaware that such assurances had been received until that that information had been given in this action. Until then, the first defenders had regarded these distributors simply as customers who had disappeared. This, he said, was not unusual.

Confrontation involving Sea France

Sea France are a channel ferry company. At about the beginning of 1996 the purchasing director of the company had approached one of the first defenders' customers, Ian Jerman, with a view to selling value for money products aboard the company's vessels. Jerman was an export agent to whom the first defenders sold a good deal of spirits predominantly for export to South America, although he had also sold containers of Grant's vodka to Russia. He had contacted the first defenders. A container load of some 1200 to 1400 cases of Grant's vodka was prepared by the first defenders and shipped to a bonded warehouse in the south of England (Taylor 5935-7). The company had then decided not to take it. Mr. Taylor wrote to the production director of Sea France a letter dated 11 January 1996. A copy of the letter was brought to the pursuers' attention. In this letter, amongst other things, Mr. Taylor wrote as follows:

"Grant's Vodka has performed very well for us over the years and is now second only to Smirnoff in the U.K. selling last year, 1995, just short of 700,000 cases.

Our friends William Grant & Company have been making some trouble for us over the past five years ever since they decided to re-name their blended whisky from Standfast to 'Grant's'......

We have produced spirits under the Grant's brand name since 1943 and our parent company has been in the wine and spirit trade since 1856.

Currently we have three malt distilleries, Loch Lomond, Glen Scotia and Littlemill, plus a very large grain distillery. In addition we produce one of the top ten selling Scotch whiskies, High Commissioner, which like Grant's Vodka is sold widely throughout the UK and abroad.

You will find that a combination of our Grant's vodka, Grant's Gin and Grant's Rum are currently available in ASDA, Sommerfield, Kwik Save, Morrisons, The Co-op, Booker, Makro, Batleys, Nurdin & Peacock and indeed most independent Cash and Carry outlets and Wholesalers.......

I shall be more than happy to help you in whatever manner you require in order to counter the mischievous and spurious threats made by our competitor against your business."

In his evidence Mr. Tait commented on this letter and stated that to his knowledge the pursuers had made no such threats against Sea France.

Other countries

Mr. Tait (811-812) said that the pursuers were aware of the first defenders having exported to certain other countries in which the pursuers' products were on sale, of which Oman was one example. In relation to Oman, he explained that the pursuers had received advice to the effect that no action could be taken in the courts in Oman.

Litigation in Greece

The pursuers' products have been sold in Greece since 1955. In that year a trademark had been registered for the pursuers' whisky under the name "Grant's Scotch whisky". In 1959 that registration was extended to all goods included in class 33, that is to say wines, spirits and other alcoholic beverages, which included gin and vodka. On mainland Greece the pursuers' products were distributed through a company named Boikos. In the Dodecanese and in particular in Rhodes, the pursuers' distributor was through an agent who carried on business under the name Missikos.

As appears from the first defenders' document 59/17, in each year between 1989 and 1995 with the exception of 1994, the first defenders have exported both Grant's gin and Grant's vodka to Greece, and in 1992 they exported Grant's rum there amounting to some 300 cases. The amounts of vodka exported annually have been consistently substantially greater than those of gin, although the overall total including both products, has fluctuated between 3,400 cases at its highest, in 1992, and 1,250 at its lowest, in 1995.

Evidence about sales on mainland Greece was given by the witness Stavros, the marketing manager for Boikos. He had been appointed as such in 1992 but from his family connection with the business and from having worked part-time in the business, he was aware of the nature of it since 1985 or so. So far as he was aware the Boikos had been distributors for the pursuers or their predecessors for some 17 years prior to 1996. The pursuers' Grant's blended whisky had been imported from the start. The pursuers' gin and whisky products, however, had first been imported some time around 1986 or 1987. He described Grant's whisky as being very well known to the trade and public in Greece and to being ranked 5th in Greece in 1996 (4199). He went on to describe the volume of sales as having been built up every year, the increase being of the order of 50% or so each year. When he was first appointed as marketing manager in 1992, expenditure on promoting the pursuers' products by way of advertising and otherwise amounted to some £400,000 a year. By 1996 the advertising promotion budget of Boikos was of the order of £1,750,000. Boikos first became aware of the importation of the first defenders' gin and vodka under the name Grant's in around 1989 and 1990 through complaints from wholesalers. Mr. Stavros explained the complaints from the wholesalers as follows:

"They thought we were selling to other wholesalers at the very, very low price and he was able to sell to them cheaper than we could sell directly."

The complaints came from all around the country, but were more concentrated in central Greece and the island of Crete. The price differential was such that Boikos could not sell any of the pursuers' gin and vodka, because the wholesalers were finding that they could buy the product with the names Grant's on gin and vodka for a substantially lower price (4209). There then followed the following passage in his evidence:

"Q:And what effect if any did the appearance of the other Grant's products have on your business, on your trade?

A:Well, of course, we couldn't sell any of our gin and vodka at the beginning.

Q:You couldn't sell it?

A:No.

Q:Why not?

A:Because the wholesaler was finding the same products lets say, the same name at the very low price, so why would he buy in our gin and vodka. He would get Grant's. The name Grant's for a very cheaper price.

Q:Did the appearance of the other products have any affect on the image of William Grant's whisky and gin and vodka?

A:Well, I presume so because, I think so because if something sells so cheap it undervalues your brands as well which you'd try to sell it more expensive.

Q:Yes.

A:Of course they had the very low cost to start with so I think it does, yes."

When giving evidence about the nature of the promotional activities of his company, Mr. Stavros was asked the following question:

"Q:What about the image of Grant's products in Greece, particularly the whisky? What - how do the public think of them?

A:Well its, we have a rather different strategy than the rest of Europe because we have a very high price for William Grant's in Greece. It's all of the same price of Johnny Walker but most of it, most of the stock is sold in this tube which upgrade the product and makes it look more expensive and it has a higher price. This allows us to do the promotions, so it's a very high, it's a high profile for the drinks, for the product.

Q:High profile. Is it seen in Greece as a high quality product?

A:Of course.

Q:And is that the way that you advertise it?

A:One of the best.

Q:As a high quality product?

A:Correct."

Mr. Stavros described in his evidence the effect of the appearance of the first defenders' products under the Grant's name by reference to confusion which arose in relation to a particular promotion. This was aimed at bar staff who were to collect bottle tops of the pursuers' products. Because the barmen were unable to recognise the difference between the pursuers' products and the first defenders' products, it had been necessary to arrange to have the caps for the pursuers' products specially printed and a notice placed on cases of the pursuers' products to the effect that bottles in those cases only take part in the competition, in order to draw the attention of bar staff to the difference between the pursuers' products and the first defenders' products. Mr. Stavros went on to say this in a further passage in his evidence:

"Q:And you said ... that when these other products appeared you were unable to sell your gin and vodka. For how long did that situation last?

A:Well it was full-blown in 93 and a good part of 94.

Q:Yes.

A:Our whisky was going very fast, but our gin and vodka sales were roughly stable.

Q:Yes, stable by what date?

A:Mid-94.

Q:Mid-94, so had the position been worse earlier on and stabilised later, is that what you are saying?

A:No. It was getting worse for gin and vodka."

In response to questions from the court he went on to say:

"Our sales were stable, didn't grow, whilst our whisky sales were growing by 50% every year."

After stating that the first defenders' distributors had ceased to operate in mainland Greece in late 1994, Mr. Stavros went on to say this:

"Q:And since they (i.e. the defenders' distributors) stopped operating in mainland Greece at that time, have you notice any difference in your gin and vodka business.

A:Yes, it has grown substantially, nearly 50% every year.

Q:So the trend of falling sales immediately was reversed.

A:It was reversed."

In cross-examination Mr. Stavros explained the difference between Greece and the remainder of Europe in the strategy followed. This he related to the fact that in Greece there were no "so-called middle price whiskies... only the top ones". These have a very high price and the remainder of the market is in own label brands for supermarkets. He also explained that in the course of the earlier part of the 1990s the pursuers' blended whisky had moved from 11th to 5th position in the market. This Mr. Stavros set down to concentration on promotions and advertising campaigns, there having been no marketing department in Boikos prior to his appointment. He further explained that the pricing strategy adopted in relation to the pursuers' gin and vodka products was the same as with whisky, namely to try to have the same price as brands such as Smirnoff and Absolut. He explained that the pursuers' gin product was faced with competing in a market in which 90% of the market was dominated by Gordon's gin. He was further asked:

"Q:Now what is it that has made the William Grant vodka product a success over the last four years?

A:It's mainly this promotion with the tops that we did. That managed to shift the cases, and also the idea that the trade could get a branded vodka with some credentials behind it, the whisky credential behind it. So they were getting good vodka for their customers."

He had understood that the first defenders' competing Grant's vodka, Grant's gin and Grant's rum had come into the market around 1989 and 1990. He was then asked the following questions:

"Q:And did these competing gins and vodkas have success in the market place?

A:At one stage they were more successful than our brand.

Q:And what caused them to be successful.

A:As I explained before, it was very cheap and it had, lets say, a good name on them, on the labels, which meant they were very credible.... only the name with the name of Grant's."

He agreed that the appearance of the first defenders' vodka did not affect the price which was charged by Boikos for the pursuers' whisky. He further agreed that the pursuers' blended whisky had been able to retain a position of premium pricing and that "to all intents and purposes it has proceeded as a success". He was then asked:

"Q:And that is irrespective of any John Grant blenders vodka appearing in Greece?

A:Irrespective for the whisky but.

Q:Yes.

A:For the gin and vodka it was very damaging for us, we couldn't sell it."

In re-examination Mr. Stavros was asked about the effect of the first defenders' Grant's gin and vodka coming into Greece on whisky prices. He was asked the following question:

"Q:What did you have in mind when you said that you could say there was some damage?

A:Well, as I explained we tried to keep a very high profile of our drink since they are good quality drinks and if suddenly something very cheap appears consumers can think it's not a very good product. Price equals quality in Greece, that is a fact, that is why you don't find middle ranges of price products.

Q:So you think the consumers might be affected in their perception of the whisky by the cheap gin and vodka?

A:In the long run, yes.

Q:Yes.

A:The wholesalers were very affected. They thought... that we were making very big margins on both the whisky and the vodka.

Q:So if the wholesalers were affected is it reasonable to suppose that the public might have been affected as well.

A:In the long term, yes."

From Mr Tait's evidence it appeared that immediately upon the appearance of the first defenders' Grant's gin and vodka in the Greek market, the pursuers had received a complaint from Boikos that the pursuers had breached the exclusive distribution arrangement that existed between the pursuers and Boikos (652). He understood that their appearance had had an effect upon sales of the pursuers' own products. This effect he described as follows:

"Well in Greece we sell Grant's scotch whisky, but we also sell Grant's gin and vodka. So we had examples of our Grant's gin and vodka not selling because other people were buying their Grant's gin and vodka. And the distributor also explained the difficulties that were being experienced by his sales force who were trying to sell our scotch whisky brand with its other gin and vodka present in the market."

He was then asked:

"Q:So there was an effect on gin and vodka sales but there was also an effect on whisky sales?

A:Yes.

Q:That was your understanding?

A:Yes."

In answer to the court:

Q:How did you understand that to arise?

A:Because the distributor would in turn sell to sub-distributors who would then in turn sell to retailers, and retailers and sub-distributors would say 'This other gin and vodka product which is on the market is made by you, it's much cheaper than your product, and its not a very good quality, and therefore we think that your scotch whisky is being over-charged to us, and also perhaps not a very good quality either, and therefore we are not going to buy it'."

In further examination he was asked:

Q:Where did you acquire this understanding of the position from?

A:From our distributor when I visited Greece."

(652-4).

An action was begun in late 1990 in the courts in Athens at the instance of the pursuers and Boikos against Amphion S.A., the distributors of the first defenders' gin, vodka and rum products. This action was founded upon the pursuers' trademarks registered in Greece, which had as their main and dominating part the word Grant's and which extended to all spirits. An initial attempt to obtain interim order prohibiting the distributors from marketing gin and vodka under the Grant's trademark throughout Greece was rejected after a hearing upon affidavits, one of which was an affidavit given by Mr. Taylor. The action however was continued upon an order for evidence to be given. In the course of 1993 two petitions were brought before the court in Athens. The first has at the instance of Bacardi and Company Limited against Amphion S.A. and the second a further petition by the pursuers and Boikos against Amphion S.A.. These petitions were directed in particular to the distribution of the first defenders' white rum product. Bacardi & Company Limited complained of a number of features including the label used on the first defenders' white rum products which was said to resemble the label used for Bacardi's white rum products marketed in Greece and which was protected by registered trademark. The pursuers' petition complained of the use of the name Grant's on such products. A provisional decree was obtained on these petitions prohibiting any distribution of the first defenders' white rum product. In regard to the Bacardi petition, following correspondence, which included a letter dated 19 October 1993 (production 42/3) addressed by the first defenders' patent agent to Bacardi & Company, the first defenders undertook to withdraw the label used on their white rum products. In the petition at the instance of the pursuers and Boikos it appears from the judgment of the First Instance Court of Athens (production 61/17), that the court gave leave to each of John Grant (Blenders) Limited, the first and the third defenders to intervene. The court, having held a hearing on affidavits, refused the application in April 1994. The court noted that Amphion SA had imported and sold rhum since 1992 in the Greek market "under the following indication: "Grant's Imported Rhum" and underneath with smaller letters "John Grant Blenders Ltd, Catrine Ayrshire", though it subsequently took note that Amphion had stated before the court that it would not import the product in the futures "since its label is not acceptable". The court went on to state, amongst other things, that the allegation that confusion might be caused to consumers from the use of the name Grant's was not sustained since the product in question was not produced or sold by the applicants. But in doing so it also ruled that confusion was unlikely to be caused to consumers because amongst other things:

"2. The company John Grant has its registered office in Scotland and is trading wines and spirits since 1943. The company introducing the additional intervention in favour of the defendants (Glen Catrine) produces rhum and sells it."

In the course of his cross-examination, Mr. Taylor was asked about the circumstances in which his affidavit for the action, (production No.40/4), came to be sworn and about the matters referred to within it. It is plain from his evidence that material that appears in the document produced, which was in turn a translation of the document in Greek language which was before the court, was not entirely correct. But it is also clear that it was sworn in accordance with advice which he received from a Greek lawyer. No mention had been made of the fact that there was no trading company called John Grant (Blenders) Limited nor that John Grant Blenders Limited was not a trading company. Insofar as the thrust of the criticism appeared to be that Mr. Taylor had deliberately or carelessly misrepresented the true position before the court, it would appear that reference had been made to the fact, as was the case, that on the label the words John Grant Blenders Limited had appeared as the name of the manufacturers of the first defenders' products. This name appears, for instance, on the first defenders' rum label shown in production 42/8, being the label which was objected to both by Bacardi & Company and referred to in the pursuers' second petition in relation to the export of the first defenders' rum to Greece and to Rhodes. I see no reason to disbelieve Mr. Taylor's evidence that the intervention in the actions on behalf of John Grant (Blenders) Limited was the result of advice received in Greece and that he was acting on advice in the course of the preparation of his affidavit. While the information in the form in which it was placed before the court was undoubtedly inaccurate, it did not reflect upon Mr. Taylor's credibility. It is of some moment, however, that the affidavit, which was sworn in January 1991 in reference to an action based upon registration of trademarks in Greece, makes general claims for the right to use the name Grant's which anticipate those that are rehearsed in the present action and which are in short compass set out in the letter addressed in 1996 to Sea France. Throughout his affidavit Mr. Taylor maintained the same position relative to John Grant (Blenders) Limited as producers of gin and vodka without making any reference to the name of the first defenders though subsequently the first defenders sought to intervene or intervened in other litigations. This, I consider, serves to emphasise that the decision to retain within the Bulloch group of companies a company which incorporated a reference to the name John Grant had been a deliberate and consciously commercial decision to link the use of the name Grant's with the products produced and sold by the first defenders.

The pursuers' original action before the court in Athens with regard to sale and distribution of the first defenders' gin and vodka remained outstanding at the date of the proof.

Litigation in Rhodes

Although Mr. Tait stated that the market had first been entered by the pursuers in 1962 (763), the witness Michael Missikos spoke to his business having become distributors of the pursuers' blended whisky in about 1959. At that time it was known to him as Grant's Standfast (2510). He had built up the import of the pursuers' blended whisky to about 15,000 cases until about 1994. He did not import the pursuers' gin, vodka or rum. His points of sale were liquor stores and hotels within the Dodecanese. He estimated that he spent around £50,000 a year on advertising promotion of the pursuers' whisky products, namely Grant's whisky, Glenfiddich and Balvenie. With the appearance of the first defenders' Grant's gin and Grant's vodka in about 1993, he had had to extend the methods by which he advertised and promoted the pursuers' blended whisky. In particular he spoke to video film which showed the shelves of a retail shop in which the first defenders' Grant's gin and vodka bottles had been placed next to the pursuers' blended whisky bottles. He was asked what kind of image the pursuers' blended whisky had in Rhodes. He expressed concern that although it had a strong image some years ago through his promotion in building the image, because the first defenders' vodka and gin was cheap, his outlets were demanding that the pursuers' blended whisky should be cheaper. Initially he had not been concerned about the appearance of the first defenders' products but his concern had increased as greater quantities were brought into the shops and more particularly into night-clubs and bars. The distributor of the first defenders' gin and vodka products was a company named Adulis. From the first defenders' document 59/17, it appears that their Grant's gin and Grant's vodka was first exported to Rhodes in 1989 and has consistently been exported each year since. Quantities have varied year by year, that of vodka always being substantially greater than that of gin. The highest total for cases of vodka was for 4.950 cases in 1994 reducing to 2,800 in 1995, while for gin the highest total was 1300 cases in 1994 reducing to 1050 in 1995.

The first defenders' white rum with the name Grant's was exported to Rhodes in each of the years from 1991 to 1993. In addition to the first defenders' product, Adulis had also purchased the pursuers' blended whisky in London. This was brought in to Rhodes at 40% proof rather than the duty free whisky sold by Missikos at 43% proof. He asserted that because the name of the pursuers' Grant's whisky was well-known in Scandinavia, Scandinavian tourists were deceived into buying the first defenders' gin and vodka thinking that it was produced by the pursuers (2521). As a consequence of the importation by Adulis, the witness had had to reduce the price at which he sold the pursuers' blended whisky. In a passage in his evidence (2523) he was asked as follows:

"Q:How much do you charge for a bottle of Grant's whisky?

A:I have to reduce price, when I went down to 1,5000 drachmas.

Q:What was it before you reduced the price?

A:1,700, 1,900.

Q:When did you make that reduction?

A:When I start bringing plastic bags, T-shirt and telephone book I have to do this, a policy to follow this policy to protect my business.

Q:Is this after the other products arrived?

A:Three years ago, lets say three years ago (that is to say 1993).

Q:You have had to spend more money.

A:More money, more time, and I must be watching around what is coming.

Q:And you say that you have had to reduce the price of your whisky.

A:Yes, I was forced to do that.

Q:Can you just explain please why it is you were forced to do that?

A:Because if I don't reduce it then he (Adulis) was using the gin and vodka price importing the Grant's whisky from London and then I have the name and got the profit.....

Q:You say because the cheap price you have had to reduce the price of your whisky.

A:To be competitive to his prices.

Q:And you say that the customers begin to believe that Grant's is not a standard whisky at all.

A:Yes, that is true.

Q:What about your sales of Grant's whisky, you said that your sales figures were 15,000 cases.

A:Before I left because I come here to place some orders, I check what I have sold till not compared with last year, (1995), already I am one container less which mean a 1,160 cases less."

In cross-examination he spoke to importations by other producer companies to Rhodes over the last few years. However, because of a contraction in the market certain of them had left again. He mentioned in particular United Distillers and Seagrams. The appearance of the first defenders' products had also affected his own sales of gin and vodka, these being Borzoi vodka and Beefeater gin. He had ceased to sell Beefeater gin in 1995, a year before he gave evidence. He was also unable to sell Borzoi vodka because of competition from the first defenders' vodka (2541-2). In the case of Beefeater gin the company had decided to do their own distribution in Greece and supply customers themselves (2544). In re-examination the witness explained that his best customers, with whom he did some 70% of his business, were liquor stores where tourists were accustomed to purchase drink.

In June 1993 the pursuers joined with the witness as parties to an action against Adulis in relation to the importation and distribution of the first defenders' rum products bearing the name Grant's on the label. At that time the market share for the pursuers' blended whisky in Rhodes was some 14%. The action was based upon the registered trademarks possessed by the pursuers in Greece in relation to Grant's whisky and the subsequent registration of a trademark with the name Grant's in reference to all alcoholic beverages within class 33. The problem giving rise to the action was described by Mr. Tait as follows:

"The problem was that we have a very significant presence in the Dodecanese as we have in many other countries in the world, and the distributor was finding that people were ordering in rum from him and I think also perhaps observing about its quality to the distributor as well. But I think that is also in addition to his general feeling that yet this was another product in addition to the existing gin and vodka which were causing a problem there." (764)

Mr. Tait made reference to an affidavit which had been produced for the hearing before the court in Rhodes, given by a salesman for Mr. Missikos, named Mintzirikis. The affidavit stated that Mr. Mintzirikis had been working with Mr. Missikos for some four years. In May 1993 orders for Grant's rum started to be received by him. Reference was made to customers ordering this product as being in confusion and being disappointed about quality. It noted a decline in the sales of whisky due to a loss of confidence among customers and continued:

"The consumer purchased products on the basis of the latter's tradename (i.e. that of Grant's). This is also true in the case of the rum. I am certain that if its tradename were not Grant's that the consumers would not have even turned to look at it."

The affidavit also went on to state that the degree of confusion in the market had caused Mr. Missikos to withhold or withdraw from proceeding with an import of the pursuers' gin and vodka because of the problem that had materialised. It made mention of Mr. Missikos' fears that he would lose his good reputation because of the quality of the other products. Mr. Tait went on to say that what was said in the affidavit fitted in with what he had understood to be the position from discussions with Mr. Missikos himself (768). Mr. Tait referred also to the official translation of the decision of the court in Rhodes (production No.40/7.2). From this it appeared that an attempt to bring John Grant (Blenders) Limited into the action was rejected. In the course of its judgment the court made reference to the pursuers being the beneficiary internationally and also in Greece since 1958 of certain trademarks which had as their prevailing and dominant part the word Grant's. It was found that the pursuers' products had been sold in Rhodes continuously and uninterruptedly since 1956. The court also made a finding to the effect that "some consumers have been disappointed by the quality of the disputed product of Grant's rum" and a further finding that "it is provoking confusion to the consumers". In the event the court were prepared to grant an order in the form of an injunction against the first defenders' distributors, Adulis. This order was made in July 1993. However from the evidence of Mr. Taylor it appears that at the time that he gave evidence in 1997 the first defenders were taking steps seeking to have the injunction against the sale of the first defenders' rum product lifted.

Litigation in Israel

The pursuers first exported their products to Israel in 1937. In 1951 they registered a trademark in the name Grant's for whisky. From the first defenders document 59/17 it appeared that the first defenders had exported only their Grant's gin to Israel, some 600 cases in 1993 and 200 cases in 1994. Until 1992 the pursuers' distributors had been a company called Akkerman. In 1992 the pursuers appointed Hacarem Society Limited as their distributor. The company was then run by the witness, Mr. Epstein. He began to import the pursuers' blended whisky and malt whisky, together with the pursuers' gin and vodka. Under reference to the document 56/10 the witness agreed that an average of the sales figures for the pursuers' blended whisky was about 8,000 cases for the period 1991-1995. However he estimated that at the time when he was giving evidence in 1996 the volume of blended whisky being imported by him was around 10,000 cases a year. A small quantity of the pursuers' malt whiskies was also imported which the witness estimated at about 200 or 300 cases a year. In addition, more or less similar quantities of the pursuers' gin and vodka were imported by him. He said that his sales of the pursuers' blended whisky had been increasing. They amounted to something of the order of one-quarter of all standard whiskies imported into Israel. He described the pursuers' Grant's whisky as a well-known brand, which everyone knew about and had a good reputation and a good image. He undertook promotions rather than advertisement in magazines, papers and publications (2398). He became aware in about 1993 of a product called Grant's gin which was different from the product that he imported from the pursuers. He explained how this was as follows (2401):

"I heard from some of my salesmen that appears in the market gin, Grant's, so I went to the wholesaler to see by my own eyes because I didn't believe it and when I saw it I was a little bit shocked because I was promised to be a sole distribution, distributor of Grant's in Israel and I saw Grant's gin on the shelves.

Q:Why were you shocked?

A:Because I, someone else imported it and not me.

Q:What did you think the product was?

A:I saw it was Grant's gin. There was no mistaking it, when I saw it it was very clear, so I took the bottle and I study it and at the end of it I found that there is a difference, it's not William Grant's, it's John Grant's.

Q:How did you discover that?

A:I have to study the label to read it carefully.

Q:Small writing.

A:The small writing."

He went on to explain that he thought that perhaps the reference to John Grant was to some subsidiary brand of the pursuers. He had got in touch with the pursuers' London office and was assured that it was not the pursuers' product. He considered that there was a problem from the marketing point of view. He was asked what was the nature of the problem, and replied as follows:

"The nature of the problem that, when we want to sell goods we have to put, as I said before, image to the goods. If you succeed, if you succeed create an image to the goods, you sell easy and you get a good price for it and you make your money, if you don't succeed making to create image to the goods you face problems, no one want to buy it and if you is ready to buy it he doesn't want to pay the price you want. Now when I, when we got the agency of Grant's we came to the market and we did our best to increase the image of the brand. Just to give you more idea of that, the Akkerman who lost the agency because he was caught selling in the market to Europe, the goods which he import to agency, when he lost the agency he went to the market and spoiled the image of the goods, he didn't say 'I was caught smuggling in the goods', he said he discovered that the goods is secondary one to Israel, Grant's bottling secondary whisky in the bottles.

Q:That is what Mr. Akkerman was saying.

A:Yes, that is what he said, that is what I was told, I didn't hear it by in my ears but that is what the market said.

Q:And you say you set about building the image.

A:Yes, and he, to punish Grant's because they took the agency, he did his best to spoil the image, he said 'this is a secondary whisky, I won't sell secondary whisky, I gave up the agency'. Anyway, we have to build the image of the goods and reclaim to all clients, say 'Listen, you get here one of the best whiskies in the world, Grant's, you can see it all over the world, its sold all over the world. The price it was all over the world is almost the same as Johnny Walker and J & B, if you go, every supermarket all over the world, every duty free shop in any airfield, you will see J & B, Grant's are more or less sold in the same price. Here we bring you best quality at best price, lets say something in the middle price, buy it'. So at the moment this gin appears, the reaction of our, my clients is 'your bluffing me, this is not standard whisky, this is not an image whisky, this is a secondary whisky and secondary gin and secondary vodka, whatever, I don't know, and it's sold for the lowest price. You just say that this is an imaged whisky and you want to collect a lot of money from us'. So I have to convince them this is that Grant's and not that Grant's, and there is another Grant's, and whatever, but it was it spoiled all my work, I have to start from the beginning."

He went on to explain that he had taken a party of wholesalers to Scotland to show them the pursuers' distillery at Glenfiddich and the related bottling and blended warehouses to convince them that Grant's was one of the biggest brands in the world. He indicated that he probably would not have done that sort of thing if the problem with the defenders' product had never arisen. He then was asked the question:

"Q:So far as you can understand it, what did wholesalers in wine shops think about where the other Grant's gin came from?

A:At the beginning we imported this gin, he didn't say 'this is another Grant's'. He came to them and said 'Listen, I bought Grant's gin, you can have it for a very low price', everyone said 'for such price, Grant's gin, okay supply me', I'm, there will be, they were very very satisfied, when I came then and said 'Listen, this is a secondary brand, this is not Grant's, it's not William Grant's,' they took the wind out of his sails."

He went on to explain that at the time the first defenders' gin product sold for 8 shekels a bottle whereas the price at which he sold the pursuers' blended whisky was 38 shekels and the pursuers' gin and vodka at 16 shekels. He was then asked the question:

Q:In your view, did the fact of the cheap price level for the other Grant's gin cause any problem?

A:No doubt about it, this is something very clear. If someone comes to, lets say,.... I shall give you an example. The Five Stars Hotel, luxury hotels, they sent to some wholesalers or importers, they sent list of goods which they intent to buy and they ask you to put your price and to give it back to them and then they compare and they buy from the one who is the cheapest one at the moment, they put Grant's gin, I put 16, the other gin appears at 8, I have no chance to sell when the Five Stars Hotel get the goods they watch it, may be he will recognise that he went another gin but this is, lets say, this, I lost lot of sales, no doubt about.

Q:What about the image of the Grant's products that you sell, would that be affected?

A:No doubt people, if it comes to a bar and they say, 'I want to drink gin, Grant's', at the moment he is aware that there are two Grant's gins on the market, he will not ask it because he will pay for William Grant's gin and he will get Grant's, John Grant's gin, everyone wants to get the value of his money so, so he want, if he knows that there are two gins with the same name, one with an image, one without an image, one high price, one low price, he will not order, no this one, neither that one."

In cross-examination he agreed that his importation of the pursuers' gin and vodka was a negligible part o