Mastercigars v Withers LLP

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Morgan,sitting with assessors,Mr JUSTICE MORGAN
Judgment Date29 Jun 2009
Neutral Citation[2009] EWHC 1531 (Ch),[2007] EWHC 2733 (Ch),[2009] EWHC 1295 (Ch),[2009] EWHC 651 (Ch)
Docket NumberCase No: SCCO Ref: 06.A.483,Case No: CH/2008/PTA/0493 & CH/2008/PTA/0814

[2007] EWHC 2733 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

ON APPEAL FROM THE SUPREME COURT COSTS OFFICE

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

Mr Justice Morgan

Sitting with Assessors (Costs Judge Campbell and Mr Carter)

Case No: SCCO Ref: 06.A.483

Between
Mastercigars Direct Limited Claiman
and
Withers Llp
Defendant

Mr Martin Farber and Mr Simon J Brown (instructed by Crane & Staples) for the Claimant

Mr Jeremy Morgan QC (instructed by Withers LLP) for the Defendant

1

Hearing dates: 11th,12th,15 th and16th October 2007

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The Appeals and the Application for Permission to Appeal

3

1. This judgment concerns three appeals, and an application for permission to appeal, in relation to four orders of Costs Judge Rogers. The first appeal (which I will refer to hereafter as “the first appeal”) is brought by Withers LLP (“Withers”) against a part of the order made on 13 th November 2006. Permission to appeal was granted by Lindsay J on 2 nd March 2007. The first appeal is in effect conceded by the Respondent to the appeal, Mastercigars Direct Limited (“Mastercigars”), but there remains an issue as to the costs of the appeal. That issue was not argued before me and I understand the parties intend to make submissions on it following the handing down of judgment in these appeals.

4

2. The application for permission to appeal (which for convenience I will call “the second appeal”) is in relation to the order of 22 nd March 2007. The Costs Judge refused permission to appeal. On 22 nd March 2007, Lindsay J refused to grant a stay of the order made by the Cost Judge earlier that day. The second appeal is by Mastercigars and its application for permission to appeal was listed for an oral hearing before me, with the substantive appeal to follow if permission were granted.

5

3. The third appeal (which I will hereafter call “the third appeal”) relates to an order of 25 th April 2007. The appeal is brought by Withers. Briggs J granted permission to appeal on the 25 th May 2007.

6

4. The fourth appeal (which I will hereafter call “the fourth appeal”) relates to the order of 15 th May 2007. The appeal is brought by Mastercigars. Openshaw J granted permission to appeal on the 7 th August 2007.

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The Earlier Litigation

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5. The underlying dispute out of which the various appeals arise relates to the bills rendered by Withers to its then client Mastercigars in relation to the litigation to which I refer in more detail below. Some of those bills were ordered to be the subject of a detailed assessment under Section 70 of the Solicitors Act 1974. Before referring to the procedural history of the costs assessment proceedings, it is appropriate to summarise the nature of the earlier litigation.

9

6. The nature of the earlier litigation was not described in much detail at the hearing before me. I was provided with a copy of a decision of the Court Of Appeal in that litigation; the neutral citation of that decision is [2007] EWCA Civ 176. In addition, I have obtained a copy of the judgment at first instance, which is reported at [2006] RPC 805.

10

7. I can take the description of the general nature of the litigation from the first four paragraphs of the judgment of the trial judge, Judge Fysh QC (sitting as a Judge of the Chancery Division). The Judge said:

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[1] This is a trade mark dispute concerning the import into the UK of many well-known brands of hand-rolled Cuban cigars (also known as “ habanos”). UK and Community registered trade marks subsist for these brands some of them dating I believe, from Victorian times. The dispute is the upshot of ongoing concern by the single Cuban proprietor of these trade marks (together with its sole and exclusive UK distributor) as to the legitimacy of importing habanos so trademarked which have been purchased from official sales outlets in Cuba and thereafter imported (duty paid) into the UK by persons other than the UK distributor for sale here. A core issue is whether such importation has the implied consent of the trade mark proprietor.

12

[2] In fact, the action has two aspects: first, there is a declaratory action by the Claimant, MasterCigars Direct Ltd (hereafter “MDL”), the importer (and owner) of a particular consignment of habanos (hereafter ‘the Consignment) which seeks its release from its present detention under powers vested in HM Customs and Excise (“HMCE”). The declaratory relief sought is broadly based upon the legitimacy claimed for the importation of the Consignment which is said to be neither counterfeit nor infringing within the meaning of the relevant UK statute and Council Regulation (EU). This action (which I shall call “the declaratory action”), is against the trade mark proprietor's UK distributor which instigated the detention by the Customs. MDL's claim is traversed on the basis that some of the material in the Consignment is indeed counterfeit being made in infringement of certain registered trade marks owned by the proprietor. Then there is a Pt 20 claim for infringement of the same trade marks by the Cuban trade mark proprietor against inter alia MDL. I shall refer to this as the “the infringement action”. The infringement action in fact has two strands—which are not spelt out as such in the Part 20 claim. First, infringement is said to have arisen on the basis of MDL's “parallel importation” of habanos bearing these trade marks and this has provoked the well-known defence of “exhaustion of rights”. I have called this “the parallel imports” case intending thereby to incorporate the defence of exhaustion of rights. As I have said, there is also an allegation in response to the declaratory action that certain cigars in the Consignment (and their associated packaging) are actually counterfeit goods. This is denied by MDL as a matter of fact. I have called this for convenience “the counterfeit case” and to the best of my recollection, this occupied the longest time at trial. It is simply a regular trade mark infringement action, albeit with some unusual features. Though the two strands of the infringement action therefore have a different procedural genesis, I have not sought to differentiate them on that basis. I would also mention at this juncture that the parallel imports case is irrelevant to the detention of the cigars by HMCE, whose powers may only be exercised in relation to goods which are actually counterfeit.

13

[3] The action has greater complexity than the above brief summary might suggest. It is evidently a test case which, as will be seen, bristles with points of law and bitter disputes of fact; it also involves inter alia questions of customs law and procedure, the legal implications of a command economy in the context of “economic linkage”, statutory offences incidental to the importation of goods which infringe IP rights—and not least, art 6 ECHR.

14

[4] The owner of most (if not all) of the trade marks in question is Corporacion Habanos SA of Havana, a Cuban company, which, as I have said, is the Pt 20 Claimant. I shall henceforth refer to this company as “HSA”. The Defendant to the declaratory action is a UK company, Hunters & Frankau Ltd (hereafter “H & F”), who have been involved in the Cuban cigar trade in this country since 1790. They are HSA's sole and exclusive distributors in the UK.

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8. The transcript of the judgment at first instance indicates that the trade mark action was tried in July, September and October 2005 and the Judge's reserved judgment was handed down on the 10 th March 2006. There were various references in the costs proceedings to the number of days of the trial of the action. According to the transcript, the matter was before the trial judge on 16 days with judgment being handed down on a 17 th day.

16

9. Judge Fysh described certain interlocutory steps that were taken in the trade mark action at paragraphs 43–45 of his judgment where he said:

17

[43] Not surprisingly, there have been a number of interlocutory events in these proceedings. Following the abandonment of an application for interim relief, David Richards J ordered that the trial of the declaratory action to be expedited (18 March 2005, A/13). On 15 April 2005, Laddie J was concerned with directions for the conduct of the Part 20 proceedings (A/14). He inter alia directed the Pt 20 Claim to be heard as part of the expedited trial and stayed the question of Mr Kenyon's personal liability pending the determination of the principal issues. There was then a disclosure and security for costs application before Etherton J on 23 June 2005 (A/15). This resulted in (inter alia) an order for substantial further disclosure by HSA, the deficient outcome of which was the subject of ongoing (and in my view justified) complaint by Mr Hobbs. Relatively few of the documents falling within the scope of the Order were ever disclosed and what was produced was both late and usually in Spanish.

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[44] Finally, there were two pre-trial reviews before Pumfrey J on 29 June 2005 and 4 July 2005. I have mentioned that a “sample” of cigars and packaging was taken from the Consignment by H&F for examination and experiments. On three occasions, once by telephone and twice by letter, Mr John Maycock a partner in Messrs Withers, MDL's solicitors, asked HMCE that this sample be released from custody for use at trial. On each occasion, HMCE refused the request. This matter therefore came before Pumfrey J at the pre-trial review hearing on 29 June 2005. I am told that the judge made it clear that the sample should be made available at the forthcoming hearing and for this purpose, should be delivered into the joint custody of the parties’ solicitors. HMCE however stood firm: there would be no handing over of the sample. Indeed, I understand that HMCE indicated that they would even resist the making of an order to that effect. On 4 July 2005, on MDL's application, Pumfrey J made an order requiring...

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