HomeInsightsIntellectual Property Enterprise Court (IPEC) disapplies the IPEC Scale Costs Scheme for first time

Article by

On 10 October 2018, Her Honour Judge Melissa Clarke, gave judgment following the trial of an inquiry into damages, in which she ordered the defendant, Language Empire Ltd, to pay £142,044 in damages to the claimant, Link Up Mitaka Ltd t/a Thebigword, for losses incurred as a result of Language Empire’s trade mark infringement and passing off at the Link Up Mitaka Ltd v Language Empire Ltd [2018] EWHC 2633 (IPEC)to read that judgment, click here. This judgment, subsequently handed down on 17 October, related to the reasons why the Judge decided to disapply the IPEC scale costs when determining the question of costs of the proceedings, the judge noting “there is likely to be wider interest in this decision, which is a rare one in this court”

Language Empire had used two websites specifically designed to capture potential customers searching online for Link Up’s services provided under trade marks for THEBIGWORD.  Language Empire had failed to file an acknowledgment of service or a defence in response to Link Up’s claim, resulting in judgment in default being entered against it

In seeking off-scale costs award, Link up that Language Empire’s overall conduct in the proceedings had been so exceptionally unreasonable that: (i) it amounted to an abuse of process such that the ordinary IPEC scale costs, which are subject to specified phase caps and an overall cost cap for a quantum inquiry of £25,000, should not apply; and (ii) costs should be awarded on the indemnity basis.This conduct included resisting an application for specific disclosure, attempts to reallocate the claim to the Small Claims Tribunal and making of low settlement offers.

Part 45, Section IV of the Civil Procedure Rules, sets out the IPEC Scale Costs Scheme, and provides that the scheme does not apply where, “the court considers that a party has behaved in a manner which amounts to an abuse of the court’s process”.  In that situation, the general rules about costs found in Part 44 apply.  The court also has discretion as to costs awards.

HHJ Clarke disagreed with the argument that whether or not to disapply the scheme was in the court’s discretion where there was an abuse of process.  In HHJ Clarke’s view, the court had to determine whether there had been conduct by the defendant amounting to an abuse, and if there was, CPR 45.30(2)(a) provided that the Scale Costs Scheme did not apply.  There was no intermediary stage in which the court had to decide, as a matter of discretion, whether or not to lift the cap, she said.

HHJ Clarke held that Language Empire’s resistance to Link Up’s application for specific disclosure, its attempt to reallocate to the Small Claims Track and its low settlement offer were, without more, insufficient to lead to a finding of abuse.

However, Language Empire had also “indulged in dishonest and obfuscatory conduct” both at trial and during the inquiry process, which was intended to, and did, hinder not only Link Up’s efforts to quantify the claim, but also the court’s attempts to fairly and justly assess damages.

Following Lord Diplock’s guidance in Hunter v Chief Constable of the West Midlands Police [1982] AC 529, HHJ Clarke found that Language Empire’s conduct was an abuse on both limbs of Lord Diplock’s test because:

  1. i) it was manifestly unfair to Link Up as it had obscured the true scale of the effect, or “success”, of Language Empire’s infringements in diverting web traffic away from Link Up’s website, and had therefore obscured the sales it was able to convert arising from those infringements;
  2. ii) it was manifestly unfair to Link Up because it left it with no option but to pursue Language Empire to a quantum trial and to incur significant additional costs over and above those that would normally be incurred in an ordinary case where such dishonesty and obfuscation was not a feature; and
  • iii) it had inevitably brought the administration of justice into disrepute amongst right thinking people by seeking to obscure the truth from the court and, in so doing, preventing the court from fully and justly assessing damages from the infringements.

Accordingly, HHJ Clarke held that the Scale Costs Scheme should be disapplied.  Summarily assessing Link Up’s costs on the indemnity basis, with interest, HHJ Clarke ordered Language Empire to pay a total of £99,706.98 to Link Up.

HHJ Clarke said that she had not made the decision lightly.  She accepted and understood that the costs cap was a “key feature and benefit of litigation in IPEC”, and that certainty about the application of the Scale Costs Scheme was “extremely important” to facilitate access to justice for litigants.  However, she said, where there was an abuse of the processes of the court, the court had a duty to identify it.  “If the court does not protect the integrity of the court processes to ensure that it meet the overriding objective to deal with cases justly and at proportionate cost, who will?” she said.

Finally, HHJ Clarke said: “Litigants in IPEC must understand that conduct which amounts to an abuse of the processes of the court will cause them to lose the benefit of the protection that the Scale Costs Scheme gives them”.  (Link Up Mitaka Ltd v Language Empire Ltd [2018] EWHC 2728 (IPEC) (17 October 2018) — to read the judgment in full, click here).