Taking exception to exceptional conduct: costs in the Intellectual Property Enterprise Court

One of the key features of the Intellectual Property Enterprise Court (“IPEC”) is that the costs recoverable are subject to costs caps both for particular stages of the litigation and for the overall costs, providing a degree of comfort for parties as to what their total costs exposure might be.

In Westwood (2011) and Henderson (2013), Judge Birss QC (now Mr Justice Birss) said that departing from the cap in “all but the most rare and exceptional case” or “anything other than a truly exceptional case” would undermine this costs capping system.

Two recent rulings from the Intellectual Property Enterprise Court have provided guidance on the two grounds – an abuse of process or an exceptional case – on which the overall costs caps will be set aside.

In Link Up Mitaka (2018), the claimant complained that defendants had been awkward opponents, resisting an application for specific disclosure, attempting to reallocate the case to the Small Claims Track and making a low settlement offer. However, Judge Melissa Clarke, sitting as a Deputy Judge of the High Court, ruled that such conduct was insufficient to lead to a finding of abuse (and so was not the kind of conduct to justify lifting the costs cap).

However, the defendants had also “indulged in dishonest and obfuscatory conduct both at trial and during the inquiry [into damages] which was intended to and did hinder not only the Claimant’s efforts to quantify the claim, but also the court’s attempts to fairly and justly assess damages”. That conduct did amount to an abuse and so the judge set aside the overall costs cap.

This case was followed by Tynan (2018) where the defendant had refused to comply with court orders (including an “unless” order), ran arguments that could not be supported (and were never pleaded properly and ultimately abandoned) and then wound itself up a month before trial.

Enterprise Judge David Stone found that these pieces of misconduct, whether considered separately or cumulatively, were not an abuse or exceptional. The judge noted a key distinction with Link Up Mitaka, where the conduct had involved dishonesty, although he emphasised that dishonesty was not the sole criterion for finding “truly exceptional” misconduct.

Nevertheless, it might be that the bar for an “exceptional” case is set too high. The judge noted that conduct such as winding up before trial happened all too regularly.  However, while that conduct might not of the kind to justify lifting the costs cap, to focus on the extent to which other litigants are guilty of such conduct risks lowering standards. Arguably the conduct that removes the cap should be “exceptional” not by reference to the frequency of such conduct, but to the extent to which it is an exception to the conduct that is to be expected of IPEC litigants.

By way of a parallel, the Privy Council case of Dymocks (2004) considered the ability of courts to make costs orders against third parties. The Privy Council noted that such orders are to be regarded as “exceptional”, but stated this meant no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. It added that the ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order.

While the overall costs cap provides a degree of certainty as to the exposure of an order in favour of the other side, there is little certainty as to the costs spent by a party when the other side misbehaves. The attractiveness of IPEC as a venue would be increased if a party knew that its ability to recover costs from the other side would not be restricted where its opponent departed from conduct in accordance with the spirit of IPEC.

Cases

Westwood v Knight [2011] EWPCC 11

Henderson v All Around the World Recordings Ltd [2013] EWPCC 19

Link Up Mitaka Ltd (t/a Thebigword) v Language Empire Ltd [2018] EWHC 2728 (IPEC)

Tynan v J4K Sports Ltd [2018] EWHC 3519 (Ch)

Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors (No. 2) (New Zealand) [2004] UKPC 39

For further information or quations, please contact Justin Goldspink on [email protected] or 0207 822 2222