Patents Court (Nicholas Caddick KC) Price and others v Flitcraft Ltd and others [2023] EWHC 1746 (Pat) (13 July 2023)
Following his judgment in Price and others v Flitcraft Ltd and others [2022] EWHC 3381 (Pat) (20 Dec 2022) and his further judgment in Price and others v Flitcraft Ltd and others [2023] EWHC 695 (Pat) (3 April 2023), Mr Nicholas Caddick KC sitting as a deputy judge of the High Court gave permission for the Official Receiver to be joined to the action at the claimants' expense. I discussed his first judgment in Patents, Copyright and Passing off - Price v Flitcraft Ltd on 16 Jan 2022 in NIPC Law and A Patent Trial in Manchester at Last - Price v Flitcraft Ltd on 17 Jan 2023 and his second in Costs - Price v Flitcraft in NIPC Law on 27 April 2023.- an application from the claimants for permission to appeal against aspects of the order for costs,
- applications by both parties to stay the order for costs, and
- an application by the defendants for payment of costs on account.
Grounds of Appeal
The grounds of appeal against the costs order were as follows:
(1) The costs orders failed to reflect the reality of the litigation because
"a. The trial was primarily about establishing liability for infringement of a patent, something on which the Second Claimant succeeded. As a result, they say, it will be the Defendants who end up 'writing the cheque' once issues of quantum are resolved;
b. Deductions were made in the costs that the Second Claimant was awarded to reflect individual issues on which the Second Claimant had lost, whereas no deduction was made from the costs awarded to the Defendants to reflect issues on which the Defendants had lost; and
c. There was no forensic basis for apportioning the costs in relation to the patent issues as to 60% for the First Claimant's patent claim and 40% for the Second Claimant's claim and that the figures had not been canvassed by the parties."
(2) It was wrong to determine that all costs payable by the first claimant should be assessed on the indemnity basis.
(3) It was wrong to apportion 20% of the costs to the copyright claims.
(4) It was wrong to order the claimants to pay costs in relation to the application to join the official receiver as a party in order to comply with s.67 of the Patents Act 1977.
It was common ground that CPR52.6 (1) allows permission to appeal to be given only where the court considers that the appeal would have a real prospect of success or there is some other compelling reason for it to be heard. In Roache v News Group Newspapers [1998] EMLR 161 CA, Sir Murray Stuart-Smith said:
"Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors in the scale."
Both parties referred to a practice note on the Court of Appeal's decision in Tanfern Ltd v Cameron MacDonald and another [2000] WLR 1311, [2000] EWCA Civ 3023, [2000] EWCA Civ 152, [2001] CP Rep 8, [2000] 2 Costs LR 260, [2000] 2 All ER 801, [2000] 1 WLR 1311 to the effect that an appeal would only lie where the exercise of discretion "exceeded the generous ambit within which reasonable disagreement is possible."
Judgment
Mr Caddick delivered a written judgment on 13 July 2023 (see Price and others v Flitcraft Ltd and others [2023] EWHC 1746 (Pat) (13 July 2023)).
Ground 1
While acknowledging that the patent infringement claim was central to the case, the deputy judge pointed out that the first claimant's patent infringement claim failed altogether and the second claimant's claim was only partially successful. Many of the issues raised in the course of the litigation related only to the first claimant's claim. The first claimant also lost the copyright claim and neither claimant was successful on the passing off claim.
As to ground 1 (b), deductions had been made to the second claimant's recoverable costs because its director's evidence in support of the first claimant's claim turned out to be untrue. The second claimant's claim failed in respect of GB2436989B failed altogether as did a significant part of its claim in relation to GB2415714C. The issues on which the defendants lost were less time-consuming. One of them was essential to the background of the first claimant's case. In the judge's view, none of these merited deductions from the defendants' otherwise recoverable costs.
The 60/40 apportionment was based on an assessment based on the evidence at trial and using the "broad-brush" approach that both parties advocated in their submissions. Neither party had suggested any better apportionment.
Applying the CPR52.6 (1) and the case law none of those arguments individually or collectively disclosed a ground of appeal with any real prospect of success.
Ground 2
Mr Caddick did not think that this ground of appeal had any chance of success. Contrary to the claimants' contention, not all of the first claimant's costs were to be assessed on an indemnity basis. Only those of the patent infringement claim were to be so assessed. In the deputy judge's view that claim should never have been brought. It could not be argued that the assessment fell outside the generous ambit of his discretion.
Ground 3
A detailed analysis of the evidence and transcript and costs schedules might have supported a lower figure but the parties had asked the deputy judge to use a "broad-brush approach" to apportionment. Neither party had suggested a different apportionment before now. This ground of appeal was unlikely to succeed."By CPR rule 52.7, unless the appeal court or the lower court orders otherwise, an appeal does not operate as a stay of execution of the orders of the lower court. It follows that the court has a discretion whether or not to grant a stay. Whether the court should exercise its discretion to grant a stay will depend upon all the circumstances of the case, but the essential question is whether there is a risk of injustice to one or other or both parties if it grants or refuses a stay. In particular, if a stay is refused what are the risks of the appeal being stifled? If a stay is granted and the appeal fails, what are the risks that the respondent will be unable to enforce the judgment? On the other hand, if a stay is refused and the appeal succeeds, and the judgment is enforced in the meantime, what are the risks of the appellant being able to recover any monies paid from the respondent?"
The claimants did not oppose the defendants' application for a stay so long as they were also granted a stay. They argued that the second claimant could expect substantial sums for patent infringement upon the taking of an account or inquiry. They had also applied for permission to appeal against the costs order which application could be renewed to the Court of Appeal. They pointed to a history of insolvencies of companies associated with the defendants.
The learned deputy judge rejected the claimants' application. Their situation was quite different from the defendants'. Most of the costs sought by the defendants were in relation to the first claimant's claim which had failed and in any case had nothing to do with the second claimant's claim. There was no evidence that the first defendant could be unable to repay any costs that the second claimant might recover from it. Its latest balance sheet dated 29 Aug 2022 showed net current assets of £693,274 and net assets of £547,027. Though one of the third defendant's other companies had failed that company had not been party to the litigation. The third defendant's evidence was that the first defendant was solvent Moreover, the second claimant could recover any costs that might be due to it from the third and fourth defendants who were natural persons. Finally, the defendants had permission to bring their appeal which meant that it had a fair chance of success by definition. That was unlike the claimants' which the deputy judge had just refused on the grounds that it had no real prospects of success.
"[23] What is a reasonable amount will depend on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. Any sum will have to be an estimate. A reasonable sum would often be one that was an estimate of the likely level of recovery subject, as the costs claimants accept, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad.
[24] In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment."
The defendants stated that their total costs were £634,615.62 of which they had already received £52,261.20 leaving a net sum of £582,354.42. 70% of that sum amounted to £407,400 of which they sought 60% from the first claimant amounting to £244,440 and 5% from the second amounting to £12,222. The claimants submitted that the starting point should be the defendants' costs budget of £283,900. After applying the same discounts the first claimant's interim payment should be no more than £119,238.
Mr Caddick chose as his starting point the defendants' costs budget of £283,900 but decided that the discount suggested by the claimants was too large. He made an interim payment award of £178,857 against the first claimant and £12,775.50 against the second.
Summary
!a. I reject the Claimants' applications for permission to appeal;
b. I will order a stay of the costs that the Defendants are liable to pay to the Second Claimant, such stay to be pending the outcome of the Defendants' appeal or further order;
c. I refuse a stay of the costs that the Claimants are liable to pay to the Defendants; and
d. I direct that the following sums be paid within 28 days by way of interim payment on account of costs:
i. The First Claimant do pay the Defendants the sum of £178,857; and
ii. The Second Claimant do pay the Defendants the sum of £12,775.50."
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