Original Beauty Technology Company Ltd v G4K Fashion Ltd
| Jurisdiction | England & Wales |
| Judge | David Stone |
| Judgment Date | 28 April 2021 |
| Neutral Citation | [2021] EWHC 954 (Ch) |
| Date | 28 April 2021 |
| Docket Number | CLAIM NO.IL-2018-000105 |
| Court | Chancery Division |
[2021] EWHC 954 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
David Stone
(sitting as a Deputy Judge of the High Court)
CLAIM NO.IL-2018-000105
Ms Anna Edwards-Stuart and Mr David Ivison (instructed by Mono Law Limited) for the First and Second Claimants
The Third Claimant was not represented
Mr Chris Aikens (instructed by Fieldfisher) for the Defendants
Hearing date: 1 April 2021
APPROVED COSTS JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
David Stone (sitting as a Deputy Judge of the High Court):
Does the existence of a genuine Part 36 offer prevent the Court from dealing with the costs of a liability trial prior to quantum being determined even when the “losing” party's conduct has been egregious? When this question arose at the form of order hearing in this matter, I reserved costs and, because counsel could not refer me to any recent detailed consideration of the issue, said I would give my reasons in writing. For the reasons below, in my judgment, CPR 36.17 prevents the Court from dealing with costs at this stage of the litigation. Costs must therefore be reserved until the outcome on quantum is known.
Background
I gave judgment in these proceedings on 24 February 2021 in relation to the alleged infringement of UK unregistered design rights (UKUDR) and Community unregistered design rights (CUDR) in 20 selected garments (the Selected Garments) out of a total of 91 garments which the Claimants say are infringed by the Defendants. I found that seven of the Selected Garments infringe both UKUDR and CUDR and 13 do not. I also dismissed the Claimants' passing off action. That judgment (the Main Judgment) can be found at [2021] EWHC 294 (Ch).
A form of order hearing took place on 1 April 2021, when I made orders for dealing with the remaining 71 garments which have not yet been adjudicated (the Remaining Garments). I provisionally listed the account of profits/damages enquiry before me in October 2021. I gave a short ex tempore judgment (which can be found at [2021] EWHC 836 (Ch)) on the Defendants' request for declarations of non-infringement. An issue arose after the form of order hearing in relation to the various colourways of some of the infringing garments sold by the Defendants, and I dealt with that in a judgment which can be found at [2021] EWHC 953 (Ch).
At the form of order hearing, the First and Second Claimants sought their costs in the sum of £934,943.98, considering themselves to be the “winners” to date. They sought payment on account of those costs in the sum of £842,000, being 90% of the total costs claimed. The Third Claimant has gone into liquidation since the trial, and was not represented at the form of order hearing. For the purposes of this judgment, where I refer to the “parties”, I mean the parties represented before me now, and hence I exclude the Third Claimant.
The Defendants resisted a costs order, submitting that costs should be reserved, because of the existence of a Part 36 offer they had previously made to settle the proceedings.
If I were to make a costs order in spite of that, the parties disagreed significantly on what that costs order should be, and filed lengthy written submissions. As I have concluded that costs must be reserved, those arguments can now be saved for another day.
Part 36
It was common ground between the parties that I should assume that:
i) a genuine Part 36 offer had been made by the Defendants to the Claimants to attempt to settle the litigation;
ii) that Part 36 offer related to issues which have not yet been decided; and
iii) the relief ultimately obtained by the Claimants may be less favourable than the terms of the Part 36 offer.
It was also common ground that the Court could be told of the existence of the Part 36 offer, but not its terms (see CPR 36.6 and 36.16(4)).
Further, it was common ground that in the circumstances of this case, the usual order would be for costs to be reserved until after the determination of quantum. However, the First and Second Claimants submitted that the usual order ought not apply in this case, whereas the Defendants submitted, on the contrary, that the usual order is the only order open to me.
Both sides relied on CPR 36.17, which provides:
“ Costs consequences following judgment
36.17
(1) Subject to rule 36.21, this rule applies where upon judgment being entered—
(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; or
…
(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—
(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
(b) interest on those costs.
…
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
As set out above, the First and Second Claimants acknowledged that the effect of CPR 36.17 is that in cases where the trial of liability and quantum is split (as this one was), the usual order would be to reserve costs until quantum had been determined. But counsel for the First and Second Claimants submitted that it is not the only order available, and that I should proceed to make a costs award because of the Defendants' dishonest and unreasonable conduct to date. She relied on two submissions. First, she cited the qualification in CPR 37.17(3) whereby a claimant which does not do better than the defendant's offer ought to pay the defendants' costs (with interest) unless it is “unjust to do so” and, second, she relied on comments of Jackson J (as he then was) in Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited and Anor [2007] EWHC 659 TCC at paragraph 26.
I deal with each in turn.
“Unjust to do so”
Counsel for the First and Second Claimants submitted that the qualification to award costs to the defendant unless “unjust to do so” gives the Court a very wide discretion, even where a claimant's judgment is less favourable than a defendant's Part 36 offer. She submitted that in an exceptional case, CPR 37.17(3) enables the Court to make an award prior to determination of quantum against a defendant which has made a Part 36 offer, because the defendant offeror does not have an automatic entitlement to its costs. Thus, she said the conduct of the Defendants in this case makes it exceptional, such that the Court could exercise its discretion to make a costs order now, even though not all issues have been decided.
It does seem to me that the language of CPR 36.17 is very clear on its terms, and prevents the Court from making a costs order on the (agreed) facts of this case for the following reasons:
i) CPR 36.17 on its terms clearly envisages that the case has been determined. It refers to “judgment being entered” and requires, for its operation, that the “claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer” ( CPR 36.17(1)(a)). In this case, the parties accept that that remains a possibility — as it must, because liability has only been determined in relation to the Selected Garments and a further 71 Remaining Garments need to be agreed or adjudicated. Once that is done, a damages enquiry or account of profits needs to take place (unless the parties can agree quantum). So the parties are some months from knowing whether or not the Defendants' Part 36 offer has been beaten;
ii) CPR 36.17(3), on which the First and Second Claimants rely, only becomes relevant “where paragraph (1)(a) applies”. As noted above, paragraph (1)(a) cannot apply here, because it cannot be known whether the Claimants have beaten the Defendants' Part 36 offer;
iii) In any event, in considering whether it is “unjust to do so” within the terms of CPR 36.17( 3), CPR 36.17(5) lists those things “the court must take into account”. I emphasise the word “must” — not the discretionary “may”. That (non-exhaustive) list includes:
a) “the terms of any Part 36 offer” ( CPR 36.17(5)(a));
b) “the stage in proceedings when any Part 36 offer was made, including in particular...
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Original Beauty Technology Company Ltd v G4K Fashion Ltd
...EWHC 953 (Ch). I dealt with a further issue relating to costs where a Part 36 offer has been made: that judgment can be found at [2021] EWHC 954 (Ch). Following the Claimants' election of a damages inquiry in relation to the infringing Selected Garments, I heard a CMC on 24 June 2021. I al......
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Original Beauty Technology Company Ltd v G4K Fashion Ltd
...EWHC 953 (Ch). I dealt with a further issue relating to costs where a Part 36 offer has been made: that judgment can be found at [2021] EWHC 954 (Ch). Also on 1 April 2021, I listed the matter for trial on 6 August 2021 to deal with any of the remaining 71 garments which the parties were n......
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Original Beauty Technology Company Ltd v G4K Fashion Ltd
...request for declarations of non-infringement. I reserved costs, with reasons to be given later — those reasons can be found at [2021] EWHC 954 (Ch). 3 Following the form of order hearing, on 7 April 2021 I received an email from counsel for the Defendants concerning what he described as “s......
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Original Beauty Technology Company Ltd v G4K Fashion Ltd
...EWHC 953 (Ch). I dealt with a further issue relating to costs where a Part 36 offer has been made: that judgment can be found at [2021] EWHC 954 (Ch). By the time of the form of order hearing, the Third Claimant was no longer actively involved in the 6 Also on 1 April 2021, I listed the ma......