LITIGATION BY STEALTH WILL NOT DO: COURT OF APPEAL OVERTURNS ORDER GRANTING DEFENDANT PERMISSION TO AMEND: CARDS SHOULD BE ON THE TABLE AND FACE UP

The judgment of the Court of Appeal in ABP Technology Ltd v Voyetra Turtle Beach Inc & Anor [2022] EWCA Civ 594 concerns a technical issue in relation to trade marks. However it also demonstrates a very powerful principle in relation to civil procedure and amendment.  The defendant had sought to conduct its case in such a way as to deprive the claimant of the opportunity to challenge the use of a trademark.  This was contrary to the “cards on the table – face up” approach in modern civil procedure.

“In this case Voyetra have attempted to take advantage of the process of civil justice itself. To permit this application to amend, both the defence and to add the counterclaim, would be to sanction an act of deliberate concealment by the party seeking to be permitted to amend. Accordingly, I consider that the judge was wrong to permit the amendments and I would therefore allow this appeal.”

WHAT HAPPENED IN THIS CASE

The claimant brought an action for trade mark infringement over the use of the word “STEALTH”.  It applied for summary judgment.

The defendant, unknown to the claimant, obtained an earlier trade mark for the word “STEALTH” and had it assigned to them.  The trade mark had not been used for over five years.

The defendant then obtained permission to amend its pleadings to bring a counterclaim alleging that there was no breach and that the trade mark was invalid.

THE SYSTEM EXPLAINED

Birss LJ explained the system and time periods in play.

1. 1. The system of registration of trade marks includes the idea that one must use it or lose it. Registered trade marks that have been unused for five years or more are subject to revocation on the application of a third party (Trade Marks Act 1994, s46). Where a mark has been unused for such a period, there is a three-month window after the five year period in which applications for revocation can still be made (s46(3)). This window exists for the benefit of the third party so that they have time to bring a revocation application if the need arises and ignore use which restarted in that three month window.

1. 1. The system of civil justice includes the idea that litigation is conducted with cards on the table – face up. Parties are required to spell out their case to their opponents not least because opposing parties are entitled to know what case they have to meet. The system permits parties to amend their statements of case, which is for the benefit of all parties, always subject to the overriding objective of enabling the court to deal with cases justly.

1. The question on this appeal is about these two ideas. An application to make amendments to a party’s statement of case was timed in a manner calculated to deprive the other party of the benefit of the three month period referred to in paragraph 1.

THE CLAIMANT’S ARGUMENT AT FIRST INSTANCE: THE AMENDMENT WAS ALLOWED

The defendant’s timing had been such that the claimant was deprived of the three month window of opportunity to challenge the defendant’s use of the trade mark.

1. The applications were heard by Miles J on 9/10 November 2021. ABP Tech’s primary submission on the amendments was that they could and should have been made earlier, while they (the claimant ABP Tech) still had the opportunity to apply for revocation of Mark 250 on the basis of non-use, within the three month period. The timing had deprived ABP Tech of that ability and thereby caused irremediable prejudice. Therefore the amendments should be refused.

However this was not accepted by the judge at first instance who allowed the amendments.

THE CLAIMANT’S SUCCESSFUL APPEAL TO THE COURT OF APPEAL

The Court of appeal overturned the decision giving the defendant permission to amend on this issue. Birss LJ observed:-

Assessment

1. 1. ABP Tech submitted that Voyetra’s tactics amounted to deliberate concealment with a view to ensuring that ABP Tech remained unaware of Voyetra’s interest in the earlier trade mark until the s46(3) revocation opportunity had passed. Counsel for Voyetra contended that Voyetra were entitled to do this in order to make what he called a ‘meaningful amendment’ to their Defence, in other words one which could not be stymied by ABP Tech using s46(3) to revoke Mark 250.

1. 1. For the purposes of this judgment, I will assume that Voyetra’s tactic would be effective under the Trade Marks Act to amount to genuine use under s46 capable of defeating an application for revocation brought by ABP Tech once they had been given notice of the application to amend.

1. 1. However the fact that that is so does not operate as a trump card in Voyetra’s hands. The fact an amendment advances a case permissible under the relevant law is obviously relevant, but it is not determinative. Such an amendment may well be refused if its unjustified lateness is prejudicial to the other party.

1. 1. Before this court it is admitted that the shell company NCL was at all times acting on behalf of Voyetra. It is also now clear that Voyetra’s s11(1B) defence was available to them from 28 January 2021, the date on which NCL took the assignment of Mark 250. That was before the original Defence was filed. Counsel for Voyetra contended that the judge’s judgment was given on the same basis. I reject that submission. There is no express statement to that effect and overall, the section on discretion (paragraphs 65 et seq) would have been very different if it had been clear before the judge, as it now is, that Voyetra accepts it could have pleaded the s11(1B) defence from the outset. One clear example is that the judgment is written on the basis that there could have been two sets of amendments, a first set of amendments to raise the s11(1B) defence perhaps as early as March and a second set to raise the counterclaim later once legal title had been transferred. However in fact no first amendment was ever necessary because as we now know, Voyetra accepts the s11(1B) could have been pleaded from the beginning.

1. 1. As Coulson J said in CIP, citing Briggs LJ in Hague Plant v Hague [2014] EWCA Civ 1609 (see CIP para 18), lateness is a relative concept. In other words an amendment made early in the absolute frame of reference of the proceedings may nevertheless be a “late” one when its timing is considered relative to the date on which the amendment could have been raised, and taking into account the consequences of the difference. I agree with ABP Tech that even on the footing as it appeared before the judge (when the first s11(1B) amendment was regarded as available on 15 March) the judge ought to have regarded that as a late amendment and erred in paragraph 65 in concluding it was not. When one appreciates that in fact Voyetra could have pleaded this point in January and with no amendment at all, its lateness is even more stark. Nevertheless it is important not to focus too much on labels. Mere lateness is unlikely to matter. The utility in characterising an amendment as late comes from focussing attention on any prejudice caused by the timing, and the need for an explanation. That is what mattered in the present case. I will come back to the lack of evidence from Voyetra below.

1. 1. A minor aspect of this case is the holding by the judge that it was reasonable to wait and make one single amendment application, rather than making two separate applications as each amendment became possible. All things being equal, it is obviously convenient to make amendments in one go. However, while it does not matter as things have turned out, that sort of convenience would not usually justify delaying an amendment which caused prejudice to the other party. Moreover on the facts of this case the only possible justification for the amendments being in two sets was the separation of the legal and beneficial titles, which was something entirely in Voyetra’s hands and so is no justification at all.

1. 1. One of the judge’s concerns was that refusing the amendment would have the result that the court at trial would be applying blinkers to the legal realities. However it is not as simple as that. Civil trials are decided based on the issues properly before the court. Once proceedings have begun, the court has the power to refuse to permit a party to raise new issues, particularly issues which could have been included at the outset. The power to refuse late amendments which cause unjustified prejudice may well have the result that a point is excluded from consideration at trial which would not have been excluded if it had been raised earlier. Although the analogy cannot be taken too far, there are similarities with amendments which might deprive a party of a limitation defence. In that context the amending party does not have a free hand to raise any new claim later in the proceedings, if the timing of the amendment would deprive the other party of a defence. Briefly, to be allowable at all the new claim must arise from substantially the same facts as those already in issue (CPR r17.4).

1. 1. The real issue in this case is that the lateness of the amendment manifestly deprived the other party of a defence which they would have had if the point had been raised when it could have been. Therefore a justification was called for.

Justification for the lateness?

1. 1. As noted at the outset, despite the clear challenge in Mr Byrne’s evidence, Voyetra did not produce any evidence to explain the lateness of the amendments. Nor did the judge seem to question this lack of evidence, on the basis I think that the tactic employed by Voyetra was not prohibited by the Trade Marks Act. However in my judgment Voyetra’s conduct will not do. I have little doubt that the true reason no evidence was produced to justify the approach was because to have done that honestly, what would have been written down would have looked deeply unattractive. Although counsel for Voyetra took care orally to be relatively frank about his clients’ motives, the story has never been explained properly or fully. The fact that Voyetra accept in counsel’s submissions that their objective in not telling ABP Tech about the amendment until they did, was to avoid tipping off ABP Tech to bring a revocation action, is no excuse.

1. 1. As counsel for ABP Tech noted, by not putting in evidence on this issue, the position has been unclear and has developed over time. Voyetra have been able to advance arguments about timing which would have been scotched had they produced proper evidence when they should have. The shift in position in relation to when the s11(1B) defence could have been pleaded is one example of the tactical advantage secured by Voyetra by this approach.

1. 1. There is also the question of paragraph 4 of the Defence. Given that it is now clear that one of the trade marks used by the second defendant was (on Voyetra’s own case) a mark of which the first defendant Voyetra TB Inc was not the proprietor (because Mark 250 was legally held by NCL), it follows that that paragraph was plainly wrong and misleading when the original Defence was filed. Standing back, I would not be surprised if the drafting of paragraph 4 was not actually part of Voyetra’s plan to deliberately conceal its tactics, because the paragraph’s focus was on joint tortfeasance. However of course there is no evidence to that effect at all and it does not alter the fact that the paragraph was plainly wrong. One is left with an apparently well founded challenge to the statement of truth by Mr Byrne and no response. Voyetra ought at the very least to have filed apologetic evidence explaining what had happened. One might have expected Mr Stark personally to have apologised and provided that explanation, assuming he felt able to do so. None of this has happened.

1. 1. In paragraph 108 of the judgment, albeit in a slightly different context concerning the relationship between the s11(1B) amendment and the counterclaim, the judge stated that he was satisfied that the defendants proposed the amendments in good faith. In the circumstances as they were, without evidence in the form of a witness statement, at least from the solicitors, addressing the points I have described, that conclusion was not open.

1. 1. Even without paragraph 4 of the Defence, the question of what justification if any Voyetra were advancing for the timing of the amendments was a question which required an answer, and none was given. Its absence ought to have been fatal to this application. At the risk of repetition, the fact that Voyetra’s conduct can be taken to be legitimate under the Trade Marks Act did not absolve Voyetra as a litigant in civil proceedings from addressing the timing of the step taken in the litigation.

1. 1. Voyetra’s approach seems to have been that because the very purpose of the lateness was to cause the prejudice to ABP Tech, no justification was necessary. That is wrong. The right conclusion on the material before the court was that the lateness of the application to amend had been deliberately calculated to cause prejudice to the other party and no good reason had been provided for that lateness.

1. 1. Given the way Voyetra conducted the amendment application, I do not believe the case turns on the debate about checking the register for Mark 250. Nevertheless if it was necessary to decide the issue, I would hold that that point was not relevant to the exercise of the discretion in this case. Of course in theory ABP Tech could have found Mark 250 themselves and, if they had been concerned about it, applied to revoke it. It is certainly arguable that the specification of goods covers the goods in issue in this case. In the context of honest concurrent use, a similar point arose in Walton v Verweij [2018] EWHC 1608 (Ch). At paragraph 214 Arnold J held that a party did not have a duty to search the register prior to marketing their goods and then to apply to revoke any unused marks it found there. Although the context is different, in my judgment the same point applies. I do not see why it can be said to be a point against the claimant in this case that they did not search the register and identify a mark in a third party’s hands and apply to revoke it for non-use, if they believed it was not being used. They are under no duty to do that.

Conclusion

1. In this case Voyetra have attempted to take advantage of the process of civil justice itself. To permit this application to amend, both the defence and to add the counterclaim, would be to sanction an act of deliberate concealment by the party seeking to be permitted to amend. Accordingly, I consider that the judge was wrong to permit the amendments and I would therefore allow this appeal.