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29 October 2018

Link Up Mitaka Limited Trading As Thebigword -V- Language Empire Limited & Yasar Zaman

The single biggest distinguishing factor of the Intellectual Property Enterprise Court (IPEC) is its costs cap. So when IPEC issued an extremely rare decision dis-applying the scale costs regime which fixes the maximum costs recoverable at each stage of the proceedings, owing to the conduct of the losing party, it is worth looking at closely.

Background

This was an inquiry into damages arising from the Defendants’ infringement of the Claimant’s trade mark and for passing off. Following the conclusion of proceedings, the Claimant argued that it ought to recover costs in excess of IPEC scale costs regime, because the Defendant’s behaviour was unreasonable amounting to an abuse of process, and therefore indemnity costs should be awarded.

The IPEC Scale Costs Scheme

Section IV of CPR 45 sets out the scale costs regime applicable to claims in the IPEC. The practice direction states the maximum amount recoverable at each stage in the proceedings. The scheme is intended to make litigation in the IPEC more attractive to SMEs by creating some certainty as to costs recovery.

However, CPR 45.30 states that scale costs may be dis-applied in circumstances where the court believes a party has behaved in a manner amounting to an abuse of process.

If the Scale Costs Scheme does not apply, the general costs provisions in CPR 44 shall be applied, including the court’s discretion as to awarding costs as per CPR 44.2.

The legal argument

The decision notes that there were no prior reported decisions where the court had not applied the IPEC costs scheme due to a party’s conduct. A reference to Birss HHJ QC’s decision in Xena Systems -v- Cantideck was made by the Claimant, but this was only available as a case summary. The Claimant could therefore only argue based on decisions which set out conduct amounting to an abuse of process, including Hunter -v- Chief Constable of the West Midlands Police and Fairclough Homes Ltd -v- Summers.

The Defendants’ conduct in this case had attracted various criticisms, and merited findings of dishonesty and obfuscation by the Judge. The Defendants argued that this behaviour did not amount to abuse and that there was very limited scope for avoiding the application of the scale costs, which should only be done in extraordinary circumstances.

Findings

HHJ Clarke did not find that this was an exceptional case but said the only relevant question was whether the Defendant’s conduct amounted to abuse. 

She agreed with the Defendants that resisting an application for specific disclosure, attempting to reallocate the case to a different track and a low settlement offer were not tantamount to an abuse of process.

However, the Defendants’ ‘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 had been forced to assess damages on the basis of limited, cherry-picked evidence which ‘significantly undervalued the lost sales arising from the Defendants’ wrongdoing’. Accordingly such conduct was 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.”

HHJ Clarke therefore dis-applied the scale costs scheme under CPR45.30(2)(a).

Comment

As demonstrated by the lack of supporting authorities for the Claimant’s argument, this case is highly unusual. In fact it is even more surprising when we recall the outcome in Brundle v Perry [2014] EWHC 979, where Mr. Perry impersonated the judge claiming to reverse the finding against him, and that was not enough to displace the costs cap for unreasonable behaviour.

It will therefore serve as a useful guide to litigants in IPEC faced with a badly behaved opponent in determining whether it may be possible to recover outside of the IPEC costs regime. It is worth noting that the court stated that the case need not be exceptional, and the only relevant question is whether there is conduct amounting to abuse. This may provide a valuable basis on which to argue for higher costs recovery.

Although it may also depend on the judge because Brundle v Perry was a decision of HHJ Hacon the presiding judge whereas this decision was not, and so we must look to see whether this is a trend or an anomaly.

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