LINK UP MITAKA LIMITED trading as THEBIGWORD -v- LANGUAGE EMPIRE LIMITED & YASAR ZAMAN
Section IV of CPR 45 provides for scale costs for claims in the Intellectual Property Enterprise Court. The practice direction sets out the maximum amount that can be awarded at each stage in the proceedings.
However, CPR 45.30 provides that scale costs do not apply where the court considers that a party has behaved in a manner which amounts to an abuse of the court’s process.
Where the Scale Costs Scheme does not apply, the general rules about costs found in CPR 44 apply, including the discretion as to costs contained in CPR 44.2.
Background of the Case
The substantive matter involved a Trial of an inquiry into damages payable to the Claimant in respect of loss suffered as a result of the Defendants’ trade mark infringement and passing off. Following handing down of Judgment, the Claimant sought an award of costs and contended that the Defendants’ conduct in the proceedings was so exceptionally unreasonable that it amounted to an abuse of process such that the ordinary IPEC scale costs should not apply and that costs should be awarded on the indemnity basis.
The Authorities (or lack thereof…)
The disapplication of scale costs in the Intellectual Property Enterprise Court was so rare that Counsel for the parties were unable to locate any authority in which the scheme had been disapplied for a party’s abuse of process. The only reference that Counsel for the Claimant could find was to a decision of His Honour Judge Birss QC (as he then was) in an unreported costs decision of unknown date in a case called Xena Systems -v- Cantideck, however Counsel could not locate a written Judgment or transcript, only a summary of the case in Intellectual Property Enterprise Court: Practice and Procedure by Angela Fox.
With no authority on point, Counsel for the Claimant relied on cases dealing with whether a party’s conduct amounted to abuse of process, such as Hunter -v- Chief Constable of the West Midlands Police and Fairclough Homes Ltd -v- Summers.
The Claimant argued that the serious findings, including findings of dishonesty and obfuscation, that the Judge made against the Defendants, as well as other criticisms of the Defendants’ conduct made in the Claimant’s witness evidence, amounted to an abuse of process.
The Defendants contended that their behaviour did not amount to an abuse and emphasised that the exceptions to the application of scale costs were limited and narrow, and there was no doubt that they were intended to be so and if they were anything other than that the purpose of certainty of costs could be defeated. The Defendants submitted that the lifting of the cap should only be exercised in exceptional circumstances.
HHJ Clarke disagreed that she had to find that the case was exceptional, stating the only question for the court to determine was if there was conduct by the Defendants amounting to an abuse. If there was, the consequence would be that the scale costs would not apply.
HHJ Clarke accepted the Defendants’ submissions that their resistance to the Claimant’s application for specific disclosure, their attempts to reallocate to the Small Claims Track and their low settlement offer were 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… 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… on the balance of probabilities that significantly undervalued the lost sales arising from the Defendants’ wrongdoing.”
HHJ Clarke ultimately found that the Defendants’ conduct did amount to an abuse as:
“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.”
The Court therefore found that CPR 45.30(2)(a) was engaged and the costs caps were disapplied.
This will be an important decision for any intellectual property practitioners faced with unreasonable conduct causing them to expend greater costs than they are able to recover from their opponent under the scale costs scheme.