Dyson Appliances Ltd v Hoover Ltd (No 4)
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE JACOB |
| Judgment Date | 18 February 2003 |
| Neutral Citation | [2002] EWHC 2229 (Pat),[2003] EWHC 624 (Pat) |
| Court | Chancery Division (Patents Court) |
| Docket Number | No. HC 1999 02754 |
| Date | 18 February 2003 |
[2002] EWHC 2229 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Royal Courts of Justice
Mr. Justice Jacob
No. HC 1999 02754
MR. D. KITCHIN Q.C. and MR. G. BURKILL Q.C. (instructed by Messrs. Olswang) appeared on behalf of the Claimant.
MR. C. FLOYD Q.C. and MR. M. VANHEGAN (instructed by Messrs. Weightman Vizards, Liverpool) appeared on behalf of the Defendant.
(As approved by the Judge)
BEVERLEY F. NUNNERY & CO.
OFFICIAL SHORTHAND WRITERS
I have before me a number of issues relating to costs, levels of costs, interest on damages and interest on costs. They arise following the substantial litigation which has taken place between the claimant, Dyson, and the defendant, Hoover. Mr. Kitchin has produced a helpful document setting out the key dates against which the issues which arise can be understood.
From March 1999 to September 2000, Hoover infringed Dyson's patent for a vacuum cleaner. Shortly before the matter came to trial at first instance, Hoover made an offer in effect that each side walk away. Dyson rejected that, and nothing turns on that offer.
But Dyson also made a Part 36 offer. The letter was headed "Part 36 offer". The terms set out were as follows:
"Our client will agree to the stay of the action and counterclaim if the Defendant:
1. Acknowledges that [the patent] is valid and has been infringed by its Triple Vortex vacuum cleaner;
2. Pays to the Claimant a royalty in relation to all Triple Vortex vacuum cleaners manufactured, imported, disposed of or sold up to 14 July 2000 or 6% of the net invoice price;
3. Ceases within one month of 14 July 2000 all manufacture, importation, distribution and sale of its Triple Vortex vacuum cleaner in the UK for the remainder of the term of [the patent]. The Claimant will allow the Defendant until 14 August 2000 to distribute all existing stock but any stock existing after that date is to be destroyed within one month of that date. The Claimant will not seek a royalty payment or damages in relation to all Triple Vortex vacuum cleaners distributed after 14 July 2000 but before 14 August 2000;
4. Destroys on or before 14 August 2000 the moulds for the parts of the Triple Vortex vacuum cleaner which are enclosed within the red box on the attached drawing of the Triple Vortex vacuum cleaner;"
Annexed was a drawing showing that it was the vortex bit of the vacuum cleaner that was being talked about.
"5. Verifies on Affidavit (within 7 days of 14 August 2000) and sworn by a duly authorised representative of the Defendant that the moulds referred to in 4. above have been destroyed;
6. Discontinues its counterclaim seeking revocation of the Patent, and discontinues its counterclaim as to threats..
7. Pays the Claimant's costs of the action and counterclaims (to be assessed if not agreed);
8. Enters into a formal agreement which includes the above terms."
That Part 36 offer was not accepted. The matter went to trial.' Dyson were successful. Hoover went to the Court of Appeal. Dyson were successful again. The costs of those two matters have been ordered to be assessed on a standard basis, and Dyson do not seek now to alter that basis.
The proceedings then commenced for an enquiry as to the damages suffered by Dyson. After they had been on foot for some while, Hoover made a Part 36 payment in, £1.7 million. Dyson did not accept it. By September this year the trial was imminent, due to start today, 21st October. The parties were far apart. Dyson were claiming over £20 million, Hoover contended that the maximum damages were £900,000. On 13th September Hoover paid into court a further £2.3 million, taking the amount into court up to £4 million. The notice of payment into court reads as follows:
"Take notice the defendant Hoover Limited has paid £4,000,000.00 not inclusive of interest (a further amount of £2,300,000) into court in settlement of the whole of your claim. It is in addition to the amount of £1,700,000 already paid into court on 15 March 2002 and the total amount in court now offered in settlement is £4,000,000. It is not inclusive of interest—to be assessed by the Court."
The document went on also to say:
"The gross amount of the compensation payment is £4,000,000 not inclusive of interest."
There was an accompanying letter of 12th September which, amongst other things, complained about the size of Hoover's claim. There was a suggestion that it was inflated and there was failure to give discovery and other matters:
"Accordingly, we are instructed to make an offer of £4,000,000 in full and final satisfaction of your clients claim for damages pursuant to CPR Part 36. For the avoidance of doubt this sum is exclusive of interest, in respect of which we suggest that the Court should determine the appropriate figure.
If accepted, our clients will pay your clients' reasonable costs of this inquiry subject to a detailed assessment in default of agreement."
On 3rd October, within the 21 days allowed by the CPR, Dyson accepted the offer in the following way. There was a letter, a notice of acceptance of payment into court, Part 36. The letter first of all answered the points about failure to disclose documents and the like, whether the claim was exaggerated or not. Then the letter went on as follows:
"We have received instructions from our client to accept on their behalf the Part 36 Payment In detailed in the Form N242A accompanying your letter of 12 September. Please take this letter as notice of our clients acceptance of the payment in. A copy of the practice form N243 Notice of Acceptance of Payment Into Court (Part 36) which is being lodged at court is attached together with a Court Funds Office Form 201(it is necessary for you to provide your firm's bank name, account number, and sort code) The issue of interest is not covered in the Notice of Payment In. The notice states that interest should be assessed by the Court. We will write to you separately on the issue of interest.
In relation to costs, these will have to be assessed if not agreed. Further, we remind you that our client made a Part 36 offer to your client on 21 June 2000 prior to the liability hearing … and our client has now exceeded this offer. Therefore, our client should receive costs on an indemnity basis rather than on a 'to be assessed basis' which is only the minimum basis for assessing costs."
Reference is then made to a publication in the Law Society Gazette.
"Please let us know whether your client is prepared to agree to paying costs on this basis. In any event our client reserves the right to apply to Court in relation to costs pursuant to Rule 36.15(5) (b)."
The form which was referred to in that letter is headed "Request for Payment in the Chancery Division of the High Court", and it says:
"To the Accountant General, Court Funds Office…
Notice is given that the sum of £4,000,000 lodged into Court for the credit of the above account title has been accepted by the claimant in satisfaction of the claim in respect of which it was lodged, and I request the payment of the sum to be made to…"
Then it is set out. The form indicates when the payment in was made and when the notice of acceptance was made, thus showing it is within the allowed 21 day period and that it was not more than 21 days since notice of payment in.
I now turn to the questions which arise as a result of all that. Firstly, may Dyson seek costs higher than a standard basis, namely an indemnity basis? Secondly, if they are, should they be awarded on a higher basis? Thirdly, what rate of interest on damages should be awarded? Fourthly, when from? Fifthly, should there be interest on costs running back to a time before that provided for in the rules, and what rate should that be?
The biggest question is plainly whether Dyson are entitled to ask for, and, if so, whether they can have, costs on the indemnity basis. Their broad position is simply this: if you look at their original Part 36 offer whereby Hoover were to stop manufacture and pay 6% of their net sales, what they have in fact achieved by the litigation is a good deal better. It is monstrous, they say, that they have had to go through all that litigation and not get some recognition of the fact that they were willing to settle for a good deal less earlier. They say if the effect of their taking the money into court is to bar them from urging a case for indemnity costs, then the whole purpose of the rules and Part 36 offers is being undermined.
What then do the rules say about all this? I begin with Rule 36.13:
"(1) Where a Part 36 offer or a Part 36 payment is accepted without needing the permission of the court the claimant will be entitled to his costs of the proceedings up to the date of serving notice of acceptance;
(2) Where —
(a) a Part 36 offer or a Part 36 payment relates to part only of the claim; and
(b) at the time of serving notice of acceptance the claimant abandons the balance of the claim,
the claimant will be entitled to his costs of the proceedings up to the date of serving notice of acceptance, unless the court orders otherwise."
I can omit subpara. (3), but then comes the important paragraph:
"(4) Costs under this rule will be payable on the standard basis if not agreed."
I then jump straight to Rule 44.12, headed "Cases where costs orders deemed to have been made". Rule 44.12 provides:
"(1) Where a right to costs arises under —
(a) rule 3.7 (defendant's right to costs where claim struck out for non— payment of fees)
(b) rule 36.13(1) (claimant's right to costs where he accepts defendant's Part 36 offer or Part...
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