Commission Recovery Ltd v Marks & Clerk LLP
| Jurisdiction | England & Wales |
| Judge | Mr Justice Robin Knowles CBE |
| Judgment Date | 24 February 2023 |
| Neutral Citation | [2023] EWHC 398 (Comm) |
| Docket Number | Case No: CL-2021-000405 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 398 (Comm)
THE HON Mr Justice Robin Knowles CBE
Case No: CL-2021-000405
IN THE HIGH COURT OF JUSTICE
THE BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
John Machell KC and Russell Hopkins (instructed by Clifford Chance LLP) for the Defendants
Nico Leslie (instructed by Signature Litigation LLP) for the Claimant
Hearing dates: 3, 4 and 5 May 2022
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 24 March 2023 at 10:30am.
Introduction
This is the Court's judgment on the Defendants' application to strike out the claim and for a direction that the Claimant, Commission Recovery Limited, may not act as a representative of others.
There are other applications but the parties have agreed that those be stood over until after this judgment. It is agreed that I should treat the statements of case as including currently proposed amendments.
The First Defendant, Marks & Clerk LLP, was incorporated on 19 February 2009. It operates as a firm of patent and trademark attorneys and is the successor to the business of a partnership named Marks & Clerk. Its primary business relates to the preparation, filing and prosecution of applications for patents, trademarks and designs. It also provides related advisory services.
On the evidence before the Court, it is common for the holders of registered intellectual property (IP) rights to have to pay renewal fees in the jurisdictions in which the rights are registered.
Assistance with renewals has been termed renewal services in these proceedings. Unless specifically agreed with a client, the First Defendant does not itself provide renewal services to its clients. Instead, its practice has been to pass information about the relevant client and upcoming renewal to a particular renewal service provider, CPA Global Limited (“CPA”).
CPA then contacts the client of the First Defendant and the client may decide to retain CPA to provide renewal services. CPA pays commission to the Second Defendant, a firm by the name Long Acre Renewals, based on the fees it receives from those clients of the First Defendant who do retain CPA to provide renewal services. The Second Defendant is associated with the First Defendant. The Claimant describes it as a partnership established by partners and ex-partners of the First Defendant.
This practice, with the commission arrangements, is alleged by the Claimant (Commission Recovery Limited), to have been undisclosed to the clients concerned.
The Defendants suggest that in some cases information may have been provided informally, but there is at present little evidence and one example to support this position. Claims are alleged to be available to the clients of the First Defendant as a result. These have more recently been focussed on recovering the amount of the commissions. Declaratory relief is among the forms of relief sought.
The Claimant was not a client. Its sole director and shareholder is a Mr Rouse. Mr Rouse is a solicitor (non-practising) and is also the sole director and shareholder of Patent Annuity Costs Limited (“PACL”). PACL was incorporated in 2015 to advise holders of IP rights about alternative providers of renewal services. The Claimant itself was incorporated on 22 January 2019. It claims to have two capacities in these proceedings.
The first capacity is as the assignee of claims against the Defendants of one of the clients of the First Defendant. The relevant client, now dissolved, was named Bambach Saddle Seat (Europe) Limited (“Bambach Europe”).
The second capacity is as a representative under CPR Rule 19 of current and former clients of the First Defendant who have commission-related claims against the First or Second Defendants. There may be a large number of these. The commissions involved may range from 12% to 60% and total some tens of millions of pounds. As things stand the representation is proposed by the Claimant to continue on an “opt out” basis.
The above is a summary but appears to represent the essential pattern relevant to the present application. There may be some difference, including over time, from client to client or renewal to renewal and this will need to be considered.
Definitions
The period the subject of the proceedings is defined, and that definition of period is explained as follows in the Particulars of Claim in proposed amended form:
“As for the temporal delimitation of the class by reference to 14 March 2009 and 1 February 2018, this is applied on account of (i) the alleged transfer to [the First Defendant] of the business of its predecessor firm on the former date, and (ii) changes in [the First Defendant's] terms and conditions that were made on or after 1 February 2018.”
The Claimant continues:
“The Claimant makes no admissions as to the relevance of the alleged transfer or of those changes and reserves the right to bring claims in respect of payments made on or before 14 March 2009, or on or after 1 February 2018. In the meantime, and pending disclosure, the Claimant infers that the commission arrangement which is the subject of the present proceedings existed before 31 January 2006 and/or 14 March 2009 on the same or substantially the same terms as the arrangement described below.”
The “class” definition currently formulated by the Claimant is as follows, in proposed amended Particulars of Claim:
“For the avoidance of doubt, the relevant class of affected clients comprises all current and former clients of [the First Defendant]: (i) that had a direct contractual relationship with [the First Defendant]; (ii) that were subject to [the First Defendant's] standard terms of business (“ToBs”) from time to time; and (iii) in respect of the renewal of whose IP rights CPA made payments to [the First Defendant] and/or [the Second Defendant] after 14 March 2009 and prior to 1 February 2018. For the avoidance of doubt, the class includes current or former clients in respect of which such payments were made before 14 March 2009 and/or after 1 February 2018 (although by these Amended Particulars of Claim the Claimant only claims in respect of payments made between that those dates). The Claimant reserves the right to expand the relevant class pending disclosure and/or further particulars.”
According to the Claimant, the class members are largely small or medium-sized businesses. According to the Defendants there are significantly larger businesses too.
Terms of Business
Written Terms of Business were provided by the First Defendant to its clients. Over the period of 2009 to 2015 the Terms were amended from time to time but on the Claimant's case they remained materially identical.
For present purposes I can adopt with thanks this summary by Mr Nico Leslie for the Claimant:
“Pursuant to Clause 2.2, [the First Defendant] undertook to practice competently, conscientiously, and objectively, to put the client's interests foremost and to avoid conflicts of interest.
Pursuant to Clause 4.1, [the First Defendant] notified its clients that it might be necessary to instruct third parties to act on their behalf (and if so then [the First Defendant] would do so), and at Clause 4.2 stated that it endeavoured to select third parties whose performance and expertise [the First Defendant] regarded as being of good quality.
Pursuant to Clause 4.3, [the First Defendant] stated that its ‘Services’ did not extend to issuing reminders for and processing the renewals of any of the clients' IP rights, absent contrary agreement. However, its “standard practice is to pass details of all cases we handle requiring such renewal agents” and the [Terms of Business] granted [the First Defendant] an authority by which the client agreed in each case to authorise [the First Defendant] to instruct [CPA] to remind the registered proprietors concerned or their appointed representatives of due dates for payment of renewal fees.” That authority was provided under the general rubric “Instruction of Third Parties to Act on Your Behalf.””
On 1 February 2018, the First Defendant introduced a new set of Terms of Business. At Clause 4.4 these did disclose that CPA paid a “client management fee” on “all renewals work that we refer to them”. The “fee” was for “Services” provided in relation to the transfer of data to CPA and there was provision for the clients to consent to the “fee”.
Bambach Europe
I should record that the Defendants emphasise their case that Bambach Europe was not, in fact, referred to CPA by the First Defendant contrary to the Particulars of Claim as originally pleaded.
The full ramifications of this are not clear, for there remain the facts on the Claimant's case that the involvement of the First Defendant with CPA and the receipt of commission by LAR from CPA were not disclosed. The Claimant also has an assignment from another client, Fire Angel, to use if Bambach Europe has no claim.
Secret or undisclosed commissions
In the recent decision of the Court of Appeal in Wood v Commercial First Business [2021] EWCA Civ 471, a number of passages in the judgment of David Richards LJ (with whom Males and Elizabeth Laing LJJ agreed) provide a valuable summary, with reference to authority and sufficient for present purposes, of the law in relation to secret or undisclosed commissions. The summary can be taken from this starting point:
“42. … Romer LJ said in Hovenden & Sons v Millhof (1900) 83 LT 41, [1900–03] All ER Rep 846:
“… It may, therefore, be well to point out what is a bribe in the...
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