Source: http://www.civillitigationbrief.com/2014/10/10/caps-on-damages-and-part-36-the-intellectual-property-enterprise-court/
Timestamp: 2018-01-21 16:35:30
Document Index: 109619906

Matched Legal Cases: ['ART 36', 'ART 36', 'art 36', 'EWCA ', 'ART 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 45', 'art 36', 'art 36', 'art 36', 'ART 36', 'art 36']

CAPS ON DAMAGES AND PART 36: THE INTELLECTUAL PROPERTY ENTERPRISE COURT – Civil Litigation Brief
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Some interesting and important points of procedure were considered today by H.H. Judge Hacon in Abbot -v- Design & Display Ltd [2014] EWHC 3243 (IPEC). Firstly in relation to the rules of the Intellectual Property Enterprise Court and the damages cap of £500,000 in relation to several defendants. Observations of more general importance were made in relation to Part 36.
The claimants were successful, at trial, in establishing breaches by two defendants. The damages against both defendants would exceed £500,000. However the IPEC has a damages cap of £500,000. The question the judge had to determine was whether that cap applied to each defendant or was the maximum that could be recovered against them both.
Whether the £500,000 cap applies in relation to all defendants or each of them
CPR 63.17A is as follows:
(1) In proceedings in the Intellectual Property Enterprise Court in which a claim is made for damages or an account of profits, the amount or value of that claim shall not exceed £500,000.
(a) interest, other than interest payable under an agreement; or
The cap on damages, or on a claim in an account of profits, of £½ million is absolute unless the parties agree otherwise. The court has no discretion to lift it even in the event of an abuse of process by a party (cf. CPR 45.30(2)(a) in relation to the costs cap in the IPEC).
Mr Aikens, who appeared for Abbott, argued that the distinction in CPR 63.17A(1) between ‘proceedings’ and ‘claim’ was deliberate; a claimant will have separate claims against each defendant when there are more than one of them and in relation to each such claim the cap is £½ million. I do not agree. I think that if the draftsman had intended such a distinction, clearer words to that effect would have been used (see Samsung Electronics (UK) Ltd v Apple Inc [2012] EWCA Civ 729; [2013] FSR 8 for an example of an instance in which the Court of Appeal declined to place weight on the linguistic distinction between ‘proceedings’ and ‘actions’, albeit in a different context; see also F H Brundle v Perry [2014] EWHC 979 (IPEC) at [6]). In my view in single proceedings (by which I mean proceedings having a single claim number) the amount which may be paid to a successful claimant is always limited to £500,000, no matter how many defendants there may be.
The defendants referred me to Gimex International Groupe Import Export v The Chill Bag Company Ltd [2012] EWPCC Civ 34; [2012] 6 Costs LR 1069. That was a case involving several defendants. The successful claimant sought to apportion its costs between two camps of defendants and then sought to apply both the stage costs cap and the overall costs cap of £50,000 under CPR 45.42(1) separately to the claimant’s costs in relation to each defendant. Done that way, the total award to the claimant would have been about £90,000. Judge Birss rejected the claimant’s approach and applied the overall cap of £50,000 to the costs recoverable by the claimant from all defendants.
Mr Aikens submitted that the analogy between the present case and Gimex is too inexact to be of any value. The costs cap potentially benefits both sides. Had the claimant in Gimex lost it would have been entitled to rely on the cap and so had little reason to complain that the losing defendants relied on it. By contrast, Mr Aikens said, the cap on damages benefits only the defendant. The logic of reciprocal benefit in Gimex does not apply.
As I read the case, the most important strand in Judge Birss’s reasoning was that parties in the Patents County Court (as it then was) were entitled to rely on their reasonable expectations when it came to costs:
“[18] … the consideration of certainty plays an important part in the Patents County Court costs regime. The procedures applicable in the Patents County Court are to facilitate access to justice for small and medium sized enterprises in intellectual property disputes. The costs cap has an important role in facilitating access to justice in that it allows a litigant to be confident about its possible costs exposure if it loses the case.”
Judge Birss appeared to allow for the possibility of a more flexible approach by the court to the costs cap if in other, unusual, facts the justice of the case warranted it and with the important proviso that the matter was raised by the time of the CMC (see paragraph 23).
I take the view that the parties are entitled to certainty with regard to damages just as much as with costs. I accept that the benefit of the cap on damages is not reciprocal in exactly the same way, but I do not believe that works an injustice to claimants.
A claimant who sues more than one defendant and who believes himself to be entitled cumulatively to more than £½ million has a number of options. A single action can be brought in the general Chancery Division so there will be no costs cap at all. Alternatively the claimant could bring separate proceedings in the IPEC against each defendant and claim up to £½ million against each of them. That would not change even if the actions were heard together for reasons of procedural economy. But if the claimant chooses to bring single proceedings, or if the proceedings were to be consolidated into one, a single cap of £½ million will apply.
A claimant is free to decide between the options. As Mr St Quintin, who appeared for Design & Display, pointed out, bringing one action in the IPEC against all defendants has the significant potential benefit to a claimant that if he loses he will only be liable to a maximum of £50,000 in costs (and he will pay less in court fees). He cannot complain, if he wins, about the costs and damages cap which would then benefit the defendants. A claimant may choose how many claim forms he wishes to file and in which court, but having done so must live with the consequences, good or bad.
I would add this: in contrast to the position in Gimex, even in unusual circumstances it is not open to the court at the CMC to allow for flexibility in relation to the damages cap. No such flexibility is permitted by CPR 63.17A unless it involves agreement by the parties.
The effect of CPR 63.17A does not change even if, as here, a defendant has supplied false information, thus misleading the claimant as to the size of its claim and leading the claimant to bring a single action in the IPEC. If that happens, the claimant has the option of applying to transfer the proceedings to the general Chancery Division and thus in effect removing the £½ million cap. It might be expected that where the false information from the defendant arose through deliberate concealment or alternatively negligent investigation, the court may be sympathetic to such a transfer. (I say nothing about the present case. So far there has been no evidence from either Abbott or Eureka Display in relation to a prospective transfer and in particular no evidence or submissions about the reasons for Eureka Display’s highly inaccurate sales figures.) For its part, a defendant faced with an application to transfer the proceedings to the general Chancery Division might prefer to agree to waive the cap on damages or the claim to profits pursuant to CPR 63.17A(3); that is a matter solely within the discretion of the parties.
Turning to the present case, as matters stand the cap of £½ million applies to Abbott’s claim against both defendants. Abbott indicated that it would wish to apply to have the action transferred to the Patents Court if I were to rule that there is a single cap. I will hear argument on that. I will also hear argument on costs, bearing in mind a potential effect of a future costs order against Eureka Display. Directions will have to be given in a separate account against Eureka Display. This will involve the consideration of an independent assessment of Eureka Display’s sales.
PART 36 WHEN THE CLAIMANT HAS DONE BETTER THAN ITS OWN OFFER
The next issue concerned Part 36. The claimants had made a Part 36 offer and had done better than the offer at trial. The judge was quite clear that the additional benefits of Part 36 were not subject to the cap.
The effect of Abbott’s successful Part 36 offer
CPR Part 36.14(3) is in the following terms:
The ‘prescribed percentage’ referred to is 10% of the amount awarded where that is up to £500,000 and thereafter 5% up to £1,000,000. (The notes in the White Book suggest that the second limit of £1 million may not reflect the intent of the implementing legislation, but it makes no difference here.)
Sub-paragraphs (a) and (c) cause no difficulty because interest is expressly excluded from the damages cap in CPR 63.17A. Sub-paragraph (b) might have no or reduced effect if standard costs already exceed the overall costs cap and/or scale costs of CPR 45.31 and Section IV of Part 45 respectively. I see no sanction in those provisions for lifting the caps to accommodate sub-paragraph (b).
Mr St Quintin argued that sub-paragraph (d) may also be limited in application. He submitted that the ‘additional amount’ referred to in that sub-paragraph should be treated as a species of damages and therefore, in the IPEC, would contribute towards the total damages which are subject to the £½ million cap. I do not agree. It seems to me clear from the note to CPR 36.14 in the White Book and the authorities there referred to that the ‘additional amount’ has nothing to do with compensating a claimant for any wrong committed by the defendant in the substantive dispute. Along with the other provisions in CPR 36.14(3) it is solely intended to serve as an incentive to encourage claimants to make and defendants to accept appropriate Part 36 offers. That incentive is every bit as important to effective procedure in the IPEC as it is in other courts. The court has a discretion not to apply the provisions of CPR 36.14(3) where the court considers that it would be unjust to do so. In my judgment that also allows the court to apply only some of those provisions and not others, as may be appropriate to the case. However the principle to be maintained in relation to CPR 36.14(3) is that it should be applied in a way such as to generate a vigorous incentive to make and accept claimants’ Part 36 offers.
On claimant’s part 36 offers THANKS FOR THE £500,000. NOW WHERE’S THE EXTRA £50,000 YOU OWE ME? KNOWING THE RISKS AND ADVANTAGES FOR THE CLAIMANT IN THE NEW PART 36
Tags: Damages, Part 36, Specific Courts
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