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Cite as: [2014] EWHC 26 (IPEC)

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Neutral Citation Number: [2014] EWHC 26 (IPEC)
Claim No. CC12P04557

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT

Claim No. CC12P04557
Rolls Building
110 Fetter Lane,
London
EC4A 1NL
20 December 2013

B e f o r e :

MR DANIEL ALEXANDER QC
Sitting as an Enterprise Judge

____________________

Between:
BOCACINA LIMITED
Claimant
and

(1) BOCA CAFES LIMITED
(2) DERCIO DE SOUZA JUNIOR
(3) MALGORZATA DE SOUZA


Defendants

____________________

Mr Jonathan Hill (instructed by Humphreys & Co) for the Claimant
Nicholas Lee (Costs Lawyer, Paragon Costs Solutions) for the Defendants

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Daniel Alexander QC

  1. On 14 October 2013, I gave judgment in favour of the Claimant, holding that the Defendants had passed off their business as and for that of the Claimant by the use of the name Boca Bistro Café. In my judgment, I ordered that written submissions on costs be provided in the following way: Claimant's submissions (to include a proposed draft order): on or before 4.00pm on 18 October 2013; Defendants' submissions: on or before 4.00pm on 25 October 2013. The Claimant complied with this direction, providing full written submissions and a draft final order in the time ordered.

  2. However, the conclusion of these proceedings has been somewhat delayed for the following reasons.

  3. The Defendants did not comply with the direction as to filing submissions. After some communications from the court, in which an enquiry was made as to whether the parties wished the matter of costs to be dealt with on paper, the Defendants indicated on 7 November 2013 that they wished to file written submissions after the deadline I had fixed. The Claimant indicated that they were minded to object to this course. On 15 November 2013, well after the deadline, the Defendants supplied a comprehensive written submission, prepared by a specialist costs lawyer, who appeared to have been recently instructed.

  4. The Claimant's primary contention is that the court should disregard the Defendants' submission as having been filed out of time. Ordinarily this court would be justified in doing so, but I consider that it would be in the interests of justice, in this particular case, to admit the submission. This is partly because the Claimant indicated that it was content for the matter to be dealt with on paper provided that it could respond to the Defendants' further written submission. It is therefore likely to save costs overall and prevent the need for a further hearing, if both the Defendants' submission and the Claimant's response to it are admitted.

  5. The Claimant has provided further written submissions and I have therefore taken all of the submissions into account in reaching my judgment. I propose to take the Defendants' non-compliance with my order into account as one aspect of their conduct in evaluating the costs position since I believe that it may have increased the costs unnecessarily to some extent.

    Substantive order

  6. There has been no challenge by the Defendants to the terms of the proposed final order which is substantially in terms of the order I proposed in the judgment. I will therefore make an order in substantially those terms.

  7. There is one significant exception. The order relating to publication of the judgment is not opposed by the Defendants but it is unsatisfactory. It should not say that the Intellectual Property Enterprise Court found the defendants "guilty" of passing off. That suggests to the lay reader that they have been convicted of an offence in some way. The notice should say "The Intellectual Property Enterprise Court held on 14 October 2013 that the use of the name "Boca" by the Boca Bistro Cafe and those behind it was passing off. A copy of the judgment is at [reference]. The court noted, in a later judgment that an offer had been made to change the name of the Defendants' cafe after the complaint was raised in 2012 and that the café had changed its name in the summer of 2013 before the case came to trial. The cafe now trades as [trading name]."

    The claim for costs

  8. The Claimant's total costs claimed are £23,460 and it contends that it should receive costs on an indemnity basis from 14 days after the preliminary indication by HH Judge Birss at the CMC that the defence was not meritorious.

    Costs – general points

  9. CPR Rule 44.2 provides, inter alia:

    (1) The court has discretion as to –

    (a) whether costs are payable by one party to another;
    (b) the amount of those costs; and
    (c) when they are to be paid.

    (2) If the court decides to make an order about costs –

    (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
    (b) the court may make a different order.

    ...

    (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

    (a) the conduct of all the parties;
    (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
    (c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

    (5) The conduct of the parties includes –

    (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;
    (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
    (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
    (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
  10. CPR Rule 44.4 provides inter alia:

    (1) The court will have regard to all the circumstances in deciding whether costs were –

    (a) if it is assessing costs on the standard basis –
    (i) proportionately and reasonably incurred; or
    (ii) proportionate and reasonable in amount, or
    (b) if it is assessing costs on the indemnity basis –
    (i) unreasonably incurred; or
    (ii) unreasonable in amount.

    (2) In particular, the court will give effect to any orders which have already been made.

    (3) The court will also have regard to –

    (a) the conduct of all the parties, including in particular –
    (i) conduct before, as well as during, the proceedings; and
    (ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
    (b) the amount or value of any money or property involved;
    (c) the importance of the matter to all the parties;
    (d) the particular complexity of the matter or the difficulty or novelty of the q uestions raised;
    (e) the skill, effort, specialised knowledge and responsibility involved;
    (f) the time spent on the case;
  11. That is not an exhaustive list of the factors that may be taken into account. The general approach to costs in IPEC is set out in Westwood v. Knight [2011] EWPCC 11. The Defendants do not take issue with that approach.

    Costs in IPEC/PCC

  12. This court has made a significant contribution to access to justice in intellectual property matters and has enabled cases to be brought which would not have been possible before. That is partly because of the limited costs regime. The object of this court is, however, not only to decide cases more efficiently and cheaply but also to help SMEs resolve disputes without the need for a trial. Quite often, the biggest obstacle to early resolution in such cases is costs. Legal costs are so large these days that they can run into many of thousands of pounds, even for a small case at an early stage.

  13. It is important for this court to be careful not to encourage disputes to continue which are, in essence, only about costs, where one side or the other has essentially given in. SMEs should be encouraged to concede points early, if they do not have a good case and to do so early.

  14. One of the ways in which this court can achieve this aim is to take account of reasonable admissible offers made to settle a case at an early stage of proceedings in determining what costs should be paid, if an action is pressed to trial in the face of such offers.

  15. This court has reflected this thinking in its previous cases. For example, in Wilkinson v London Strategic Health Authority [2012] EWPCC 55 (23 November 2012), HH Birss J took account of offers made to resolve the case at an early stage of proceedings and overall, they resulted in percentage reductions in costs, even though the offers made were not for all of the relief claimed including costs.

    Offers to settle in the present case

  16. In this case, the Defendants invite the court to give particular weight to an offer made shortly after service of the Particulars of Claim (i.e. at a comparatively early stage of the proceedings). The initial letter before action was on 2 April 2012 and it produced a response denying liability and giving reasons in May 2012. Those reasons included the fact that "boca" was a reference to a mouth in Portuguese and that the Defendants had obtained registration of a trade mark for the mark as well as a company name with the term without difficulty. That was not wholly unreasonable response in that many people believe, albeit wrongly, that registration of a trade mark entitles them to use the mark in question and that they thereby "own" the name. That letter was not answered until August 2012, timing which would not have given the Defendants a sense that the matter was particularly important.

  17. The Particulars of Claim were eventually served on 27 November 2012, again with no real urgency. Fairly soon thereafter, on 19 December 2012, the Defendants' then solicitors wrote to make an offer in these terms:

    "Our client would like to propose a settlement of this dispute on the following basis:

    1. Our client changes its name to a name which does not include the word "Boca";

    2. Our client undertakes that they will not, save for the extent set out below, use the name Boca as part of a trading style or otherwise in relation to a restaurant, café or bar in Bristol or surrounding areas;

    3. Our client will immediate take steps to surrender its UK trade mark registration no 2594410.

    Our client will need some time to affect (sic) a change to its branding. It estimates that it will need approximately 9 months but obviously it will do this as quickly as possible. In practice it may well be able to change the external appearance of its premises slightly more quickly than this and it will do what it can to ensure that this change over happens as quickly as possible".

  18. That proposal was not accepted. The Claimant says, in its skeleton argument on costs, that this offer was for a "9 month change over period" and that it did not offer any contribution to costs. The Claimant's reply skeleton on costs on the timing issue says that the Defendants "demanded" a "wholly unreasonable 9 months" in which to re-brand when all that needed to be done was repaint the signage, reprint menus and update websites. It says that only a month would have been required. In fact, as I read it the offer is not for a 9 month re-branding period as such. An offer was made to change as quickly as possible, it being stated that 9 months would be needed. There is no suggestion that the Claimant made any counter proposal for speedier re-branding and it must have known that it was unlikely that the case would come to trial much before 9 months from then.

  19. No contribution to the Claimant's costs was offered. Those were nearly £6000 by the stage of the Particulars of Claim. The Claimant says that it was entitled to immediate or rapid cessation of the use of the Boca Bistro Café name and to its full costs, subject to assessment.

  20. There is some merit in the Claimant's points but, in my judgment with some minor variations relating to the café's domain name (which does not appear to have been very important anyway, the company's name and publication of the judgment), what the Defendants offered in December 2012 was not materially worse than what the Claimant eventually received by the judgment I gave. There was no realistic prospect of requiring the Defendants to re-brand at once since no interim relief was sought and the matter had not been dealt with as an urgent issue.It is true that the Claimant had incurred some costs by December 2012 but the majority of costs were incurred since that offer.

  21. In my judgment, this offer is a factor which this court can properly take into consideration in determining what amount of costs should be awarded.

    General points

  22. There are no hard and fast rules as to how offers which omit one or other aspect of relief or which do not offer costs are to be treated for the purpose of evaluating the amount of costs. There are also no easy answers as to how they should. On the one hand a successful claimant can say with justification that it has been forced to go to trial to vindicate their rights and recover its costs. On the other hand, a defendant can say that there was no justification in going to trial in the face of an offer to provide substantive relief and the case was only really (from that point on) only about a modest amount of costs.

  23. I think, given the nature of IPEC, litigation only over costs is not to be encouraged. It is of course true that where significant costs have been incurred, it can be unreasonable for one party to make a proposal to settle without offering to pay a significant part of the other side's costs.

  24. However, where the costs incurred are a few thousand pounds, it makes little sense to take a case to trial to fight about them, because the costs expended in doing so are very unlikely to be recovered following summary assessment, even if a claimant is successful in every respect.

  25. One of the purposes of IPEC is to ensure so far as possible that cases are not about costs in the way they can become in other fora. As the claimant rightly submits, in IPEC, it is important that settlement should be encouraged and that there should be "rewards" for making settlement offers. It is in my judgment therefore right to take significant account of such offers.

    Impact on the present case

  26. In my judgment, in this case, it would be right to take the following approach.

  27. First, the claimant should have 100% its costs relatively generously assessed (by IPEC standards) down to the date of the Defendants' offer in December 2012. Second, the Claimant should have a reasonable proportion of its costs, but not all of them, after the date of that offer. In my judgment, in all the circumstances, they should have 50% of their costs from that date. Third, the Claimant should not have to bear any of the Defendants' costs. There is an element of roughness about that percentage figure but it is intended to reflect a wide range of factors in this case. They include the following.

  28. First, that the claim was meritorious and had been indicated to be so at the CMC. The Claimant's had put forward a well reasoned case in the Particulars of Claim.

  29. Second, that the Defendants had made a reasonable offer covering substantially all of the relief realistically obtainable at a relatively early stage before significant costs had been incurred, shortly after the Particulars of Claim.

  30. Third, that, following that offer, the case had essentially become largely about costs.

  31. Fourth, that despite the offer, the Defendants were continuing to deny liability, making it impossible for the Claimant to take a cheaper, summary route of obtaining judgment on admissions.

  32. Fifth, that in August 2012 the Claimant noted the changes which had been made by the Defendants from "Boca" to "Bica" but alleged that the changes were not enough to avoid liability, an allegation which was not pursued at the trial and is an issue on which the Claimant has not succeeded. The impact of this is that the Defandants would have had a reason to continue the case in order to show that they were able to continue using the mark to which they had changed which ultimately the Claimant has not sought, at the moment, to prevent.

  33. Sixth, generally in cases of this kind in this court it is right that claimants should know that if they litigate claims all the way to trial where what is in issue after service of the Particulars of Claim is not substantive relief but only a modest amount of costs, they should not expect to recover their full costs of so doing. Equally, defendants should know that if they do not offer a reasonable sum by way of costs at an early stage as part of a settlement proposal which seeks in effect to give in, they will be likely to have to bear a significant proportion of the costs of trial.

  34. That strikes a reasonable balance between providing a fair level of recovery of costs for meritorious claimants while encouraging early resolution of proceedings without a trial.

    Conduct

  35. Finally, the Claimant contends that I should have regard to the conduct of the Defendants in (a) not informing the Claimant about their actual re-branding and the alteration in who was running the café and the status of the company/who was running the new business (b) failing to turn up to the hearing on time (c) failing to provide costs submissions in time. I agree with the Claimant that these matters have, to some extent, increased the costs and the incentive or need for the Claimant to incur them, partly because it is indicative that the Defendants were approaching the case in a manner making harder to resolve at an earlier stage. I have therefore taken them into account in reaching the figure.

  36. I have also taken that into account and do so specifically in certain individual assessments to which I turn.

    The parties' contentions

  37. The approach I am taking therefore somewhere between the parties' contentions neither of which I accept in their entirety.

  38. I am not persuaded by the Claimant's argument that it should receive indemnity costs from the date on which HHJ Birss gave his indication on the CMC. It might be said that, following that indication, the Defendants should have made a further approach and offered to pay a significant contribution by way of costs but, in reality, it did not change the position significantly since the Defendants had already proposed changing well before the CMC. Nor am I particularly impressed by the point that the Defendants did not actually tell the Claimant that they had re-branded since this would have been obvious, although in my view, the fact that there was such limited communication by the Defendants had the effect of increasing the Claimant's need to devote time and energy to the case.

  39. I agree with the Claimant's general argument that, in some cases, a preliminary indication can be of importance in the costs evaluation. In particular, if an offer has been made which does not provide for costs, following an indication that the claim is likely to succeed, it is more incumbent on a defendant to make a sensible offer which includes costs if they are to avoid payment of a substantial sum. I have therefore taken that into account in the percentage figure.

  40. It is not, in my judgment, quite correct to say that this is a case in which the Claimants was "forced…to continue the litigation to trial" as is submitted in its skeleton. It is true that it was forced to do so in order to recover any of its costs. But, in the light of the offer, it was not forced to do so to obtain substantially all of the relief it was seeking. That said, I do not think this court should be too critical of claimants who seek to recover reasonable and proportionate costs of well-founded claims. It hardly contributes to access to justice if a claimant which is vindicated in its legal position nonetheless ends up very significantly worse off financially because of the costs it has had to incur to secure its rights.

  41. I therefore do not think, in the circumstances, it would be correct in this case to award the Defendants their costs from the date of that offer (which were modest in any event) as they submit, given that they did not make any proposal at all as to costs at that stage. In this case, it is right that they should bear their own costs throughout. Nor do I think it would be right for there to be no order as to costs. That would not do justice to the fact that the Claimant did have a meritorious claim which it needed to prepare.

  42. Finally, it has been said that there was some further without prejudice save as to costs correspondence from the Claimant in May and August referred to in its skeleton but I was not supplied copies of it and it is not suggested that it is of particular relevance either way. The Defendants did not in any event respond to it and I think the only relevance of it is that it indicates an unhelpful degree of disengagement on the part of the Defendants. Again, I have sought to reflect that in a general way in the percentage figure.

  43. A further without prejudice save as to costs offer was made by the Claimant almost on the eve of trial after most of the costs had been incurred. The Defendants did not disagree with it substantively, save as to costs. I do not think that it takes matters further except that it highlights that the case, by the time of trial, was really only about costs.

    The amount of costs

  44. The Defendants submit that the amount of costs claimed are unreasonable and disproportionate, and draw attention to the provisions of CPR 44.3.

  45. The Defendants contend that the hourly rates are excessive and that the assistant solicitors' hourly rate should have been £165, with the involvement of senior fee earners disallowed. The Defendants also contend that substantial reductions should be made for the letters of claim, preparing particulars (as to which they propose £1000 as reasonable). It is said that the sum claimed for general advice is excessive and that 3 hours at £165 should have sufficed. They reject the claim for photocopying and contend that this is not an exceptional case. They contend that the time for dealing with the response to the defence was excessive and that the CMC preparation was unnecessarily costly. Finally they contend that the trial costs were too large and that 12 hours cannot have been required in preparation for the case.

  46. In the context of proceedings in IPEC I think it is right to have regard to a further point. If a party knows that its opponent is not contesting a case and has substantively given in, that affects what it is reasonable and proportionate to do by way of preparation. I also take into account that the rules require a high degree of early preparation. Particulars of Claim include legal argument and an explanation of the justification for the case as well as a significant amount of evidence. Because of that, there is greater justification for looking critically at costs incurred at a later stage which involve an element of duplication of work already undertaken.

  47. I will take this into account, in assessing the costs for the various stages of the case.

    Particulars of claim and commencement of action

  48. The costs claimed up to an including service of the particulars of claim are £5868.96. These include photocopying charges of £861.46.

  49. I am satisfied that there is no basis for making an exceptional allowance for photocopying (cf. CPR PD47). There were limited documents which required copying in this case at that stage, indeed the whole trial bundle was about 1 lever arch file and the annexes to the Particulars of Claim considerably less.

  50. However, I do not accept the Defendants' submissions as to the unreasonableness of hourly rate or staffing. It seems to me that relatively junior, albeit experienced, solicitors were employed at appropriate rates for the area, who were properly subject to light partner supervision, given the significant involvement of counsel. That seems to me reasonable, although I think that the fee for general advice and preparing the claim form is somewhat too high and should be reduced somewhat. I therefore award a rounded sum which amounts to about 90% of the claimed costs (excluding photocopying).

  51. Subject to those points, I therefore substantially accept the Claimant's submissions in its reply skeleton as to reasonableness and proportionality of costs under this head and consider that the sum of £4500 should be allowed under this head. This is within the relevant IPEC limit for this stage and does not require further capping.

  52. The offer referred to was made before the following steps were undertaken.

    Defence and reply to the defence

  53. The costs claimed are £748. This is not unreasonable or disproportionate and the time spent on considering it seems modest. I propose to round it down to £700. It is within the limit. Having regard to my decision above, I award 50% of this namely £350.

  54. The costs relating to the reply claimed are £1953. In my view, this would have required limited preparation time and I allow £1200. Again this is within the limit. 50% of this is £600.

    Case management conference

  55. The total costs claimed for the case management conference are £3087.68 which is above the costs limit for this stage of £2500. 50% of these capped costs is £1250.

    Witness statement preparation

  56. There was very limited witness statement evidence but the sum claimed in respect of it is £2709.00. In my judgment, this is more than it is reasonable or proportionate in the circumstances, especially given the work already done on the Particulars of Claim. The only witness statement was very short (4 pages long) and would have required limited lawyers' input. A reasonable sum would be no more than £1000. This is within the limit. 50% is £500.

    Trial costs

  57. The total trial costs claimed are £9681.84 including £1707.34 photocopying which I disallow for the reasons given above. So the total trial costs which are recoverable in principle are somewhat less than £8000. Solicitors' preparation and attendance is claimed at £3754.50. Counsel's brief fee claimed is £4000 and the main burden of solicitors' trial preparation was undertaken by an assistant solicitor (some 8 hours pre-trial preparation with an estimate of 7 hours attendance at trial). In my judgment, this figure is too high, given the nature of what was by then at stake and what could have been anticipated in terms of length of trial (c.1/2 day) and resistance to the case. In the event, however, the legal representatives had to spend much of the day at court because the Defendants did not attend at 10.30am.

  58. Although no specific criticism is made of counsel's brief fee and, by the standards of many cases it is relatively modest, it is in my judgment somewhat too high for a ½ day case requiring probably ½ day additional preparation, having regard to (a) what was at stake (b) the prior involvement of counsel and (c) what had already been done by way of preparation on the Particulars of Claim. The trial skeleton was rightly brief and I do not criticize that. However I think that should be reflected in costs. Indeed, the argument about costs has been more lengthy than the argument at trial (there a sum of £500 is claimed for written submissions).

  59. In simple cases in IPEC, if the pleadings are sufficiently detailed, it is not necessary to duplicate points made in the pleadings in the skeleton arguments. Such documents can and should often be very brief, cross-referencing the pleadings or they can say that the pleadings will stand as the skeleton argument, with appropriate additional comments on points which have arisen since then. I have been unable to detect anything of substance said in the documents prepared for trial which was not said in the initial pleadings. That has an impact on the costs which it is reasonable to expect other parties to bear in respect of trial preparation. That said, where it is unclear what line an opposing party (or witness) is going to take, which remained unclear in this case until a late stage, a litigant necessarily has to over-prepare to take account of various possibilities. That necessarily increases the costs and is one reason why trial preparation time is unavoidably significant in almost every case.

  60. It would therefore have been necessary to review the material and prepare for contingencies. Taking all those factors into account, I think that the reasonable and proportionate sums, in all the circumstances, are £3000 by way of counsel's fee and £2500 by way of solicitors' preparation and attendance, making a total of £5500. That is within the limit for this stage.

  61. Again, I will award 50% of that sum, in accordance with the reasoning above, namely £2750, subject to the point made below on conduct.

    Conduct

  62. It is difficult to assess accurately how the Defendants' conduct (and the unsatisfactory submissions as to who was responsible for the café now) have affected costs. Save as regards the costs of arguing about costs, where an additional £500+VAT is claimed, it is not suggested that there was any specific way in which it did. However, in my view the Defendants' approach did have the effect of lengthening the day of trial unnecessarily and, to some extent, the hearing. In my view this had the greatest impact on the actual trial and its aftermath increasing the time both solicitors and counsel have had to spend on the case. It is impossible to be exact about this and I propose to deal with it by increasing the sum I allow for trial costs to take account of this generally and of the costs of arguing about costs by £1000.

    Conclusion

  63. For these reasons, the sum I propose to award is as follows

    £ Stage

    4500 Particulars of Claim.

    Costs before December 2012 – Total £4500

    350 Considering Defence.

    600 Reply to Defence.

    1250 Case Management Conference.

    300 Witness statements.

    3750 Trial and argument on form of order/costs.

    Costs after December 2012 – Total £6250

  64. This gives a total of £10,750.

    Overall considerations

  65. Having reached that conclusion, I step back and consider whether that is a reasonable and proportionate award overall, having regard to the general principles. In my judgment, it is.

  66. For the Claimant, it provides, in effect, generous percentage recovery in respect of costs (ignoring photocopying) from the beginning of the case until the Defendants offered to change the name of their business in the manner discussed above and thereby remove the real cause for complaint. In IPEC, there should be reasonably generous recovery of the modest costs of formulating a sound claim and putting it forward if it is, in substance, accepted. However, it also accords with IPEC's overall approach and ensures that there is a reduced incentive for a claimant to press on to trial after an offer has been made for substantially all of the relief sought at an early stage, even if no offer to pay the costs has been made.

  67. Overall, the sum I am awarding provides a reasonable sum by way of costs to the Claimant (it is about 50% of its total costs ignoring photocopying) but it does not unjustly penalize the Defendant by awarding full costs against it, having regard to their offer. The Defendants for their part will end up paying probably about twice as much as they would have had to pay if they had offered to meet a substantial portion of the Claimant's costs at the end of December 2012 and the claim had been compromised on those terms. This is an illustration of the general principles that there should be a large incentive for a defendant to make a reasonable offer of costs at an early stage if they are giving in and not to put their heads in the sand as regards this aspect.

  68. In my judgment, the sum should be paid within 28 days of the date of this judgment. Each of the Defendants will remain jointly and severally liable for it until it is paid in full.

    Handing down

  69. Since this judgment is provided in writing to the parties, a time will be fixed for handing down in public. The parties need not attend and this judgment need not be treated as confidential in the meantime. The parties should attempt to agree and order with the changes referred to above. I will resolve any wording issues on paper.


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