COURT STEPS OUTSIDE THE FIXED COSTS REGIME: DEFENDANT’S CONDUCT AMOUNTED TO AN ABUSE

The Intellectual Property Enterprise Court (IPEC) guards its fixed costs regime very jealously. Prior to the decision in Link Up Mitaka Ltd (t/a Thebigword) v Language Empire Ltd & Anor [2018] EWHC 2728 there appears to have only been one previous decision where fixed costs have been disapplied.

Litigants in IPEC must understand that conduct which amounts to an abuse of the processes of the court will cause them to lose the benefit of the protection that the Scale Costs Scheme gives them.”

THE CASE

The claimant brought an action for trade mark infringement and passing off after the defendant set up two websites specifically designed to capture customers searching for the claimant’s services. Judgment was entered in default.  At the assessment of damages hearing  the judge was very critical of the defendant’s conduct, in relation to the second defendant she observed

I find that the Second Defendant’s credibility is so severely undermined that I cannot rely on any of his evidence, except where it is supported by credible and reliable documentary evidence.”

IPEC FIXED COSTS RULES

These are set out by HHJ Melissa Clarke in her judgment@

The applicable rules
    1. The IPEC scale costs scheme is set out at Part 45, Section IV of the Civil Procedure Rules (“CPR”) (“Scale Costs Scheme”).
    2. The scope of Section IV is set out in CPR 45.30, which provides:
45.30 (1) Subject to paragraph (2), this Section applies to proceedings in the Intellectual Property Enterprise Court.
(2) This Section does not apply where –

a) the court considers that a party has behaved in a manner which amounts to an abuse of the court’s process;

b) the claim concerns the infringement or revocation of a patent or registered design or registered trade mark the validity of which [has been previously certified]

(3) The court will make a summary assessment of the costs of the party in whose favour any order for costs is made. Rules 44.2(8), 44.7(b) and Part 47 do not apply to this Section.
(4) “Scale costs” means the costs set out in Table A and Table B of the Practice Direction supplementing this Part.
  1. As well as the two exceptions contained in CPR 45.30(2), the mandatory application of the Scale Costs Scheme is subject to the Court’s discretion to award additional amounts above the costs cap in respect of applications where a party has behaved unreasonably (CPR 45.32).
  2. Where the Scale Costs Scheme does not apply, for example because the court finds that a party has behaved in a manner which amounts to an abuse of the court’s process, then the general rules about costs found in Part 44 apply. These include the wide ranging discretion as to costs contained in CPR 44.2, and the rules relating to assessment of costs contained in CPR 44.3, CPR 44.4 and CPR 44.6.

THE JUDGE’S DECISION: DEFENDANT’S CONDUCT AMOUNTED TO ABUSE: COST CAP DISAPPLIED

    1. I accept Mr Carter’s submissions that the Defendants’ resistance to the Claimant’s application for specific disclosure, their attempts to reallocate to the Small Claims Track and their low settlement offer are, without more, insufficient to lead to a finding of abuse. But there was more. I found that the Defendants indulged in dishonest and obfuscatory conduct both at trial and during the inquiry process which, in my judgment, was intended to and did hinder not only the Claimant’s efforts to quantify the claim, but also the court’s attempts to fairly and justly assess damages. The court was left in the position, as stated at paragraph 71 of my judgment, of having to assess the quantum of lost sales arising from the 34 month operation of the Websites on the basis of a list of 38 enquiries from 9 months of that period, specifically constructed and cherrypicked to be made up of low quality enquiries that did not convert to sales, when the best quantitative evidence before it was that the Websites were successful in diverting up to 3,500 hits per month from the Claimant’s website. As I found at paragraph 81 of my judgment, on the balance of probabilities that significantly undervalued the lost sales arising from the Defendants’ wrongdoing.
    2. The Defendants’ conduct is an abuse, in my judgment, on both limbs of Lord Diplock’s guidance in Hunter, because:
i) it is manifestly unfair to the Claimant as it obscured the true scale of the effect, or ‘success’, of the Defendant’s infringements in diverting web traffic away from the Claimant’s website, and so obscured the sales they were able to convert arising from those infringements;
ii) it is manifestly unfair to the Claimant because left it with no option but to pursue the Defendants to a quantum trial and to incur significant additional costs over and above those that would normally be incurred in an ordinary case where such dishonesty and obfuscation was not a feature;
iii) it has, inevitably in my judgment, brought the administration of justice into disrepute amongst right thinking people by seeking to obscure the truth from the court and, in so doing, preventing the court from fully and justly assessing damages from the infringements.
  1. Those are my reasons for deciding last week that CPR 45.30(2)(a) is engaged such that the costs caps and limits are disapplied.
  2. I did not make this decision lightly. I accept and understand that the costs cap is a key feature and benefit of litigation in IPEC, and that certainty about the application of the Scale Costs Scheme is extremely important to facilitate access to justice for litigants in lower value intellectual property claims. However, where there is an abuse of the processes of the court, as Lord Diplock guides us, the court has a duty to identify it. If the court does not protect the integrity of the court processes to ensure that it meet the overriding objective to deal with cases justly and at proportionate cost, who will?
  3. Litigants in IPEC must understand that conduct which amounts to an abuse of the processes of the court will cause them to lose the benefit of the protection that the Scale Costs Scheme gives them.