12 January 2011

Practice: Filtco Inc v Haugh

I should first like to wish my readers a happy New Year. Good riddance to the old one which was awful. After the emergency budget in June virtually every SME in England seemed to go to earth. The explanation is not hard to fathom. Litigation is funded largely on tick. So, too, is new product design and development. With the banks rebuilding their balance sheets and making only the payments that they really have to make, such as bonuses to their executives and traders, frivolous matters such as branding and innovation just have to wait.

A sign of the times is that Judge Birss's spanking new intellectual property court is posting reports of decisions on paper like the Media CAT cases or case management conferences such as Westwood v Knight. The first case of 2011 is much more exciting. A summary judgment application would you believe.

In Fitco Inc. v Haugh [2011] EWPCC 1 (6 Jan 2011) a former director of a company that had made its peace with the claimants, was sued for joint tortfeasance in a common design. The alleged wrongdoing was breach of contract and passing off. Essentially, it was said that the defendant's company had distributed in the UK under the AIR SCIENCE sign fume cupboards that it had purchased from the claimants. AIR SCIENCE was the trade mark of at least one of the claimants in the USA. They claimed to be entitled to that mark in the UK even though the sign, UK AIR SCIENCE, had been registered by the defendant's company.

If there had been a distribution agreement between the defendant's company and the claimants it was never put in writing. The defendant's case was that that there had never any contract all and that the AIR SCIENCE sign was associated by customers and the trade with fume cupboards distributed by the defendant's company as opposed t0 fume cupboards supplied by the claimants. Eventually the parties fell out. The defendant and his company sourced fume cupboards elsewhere while continuing to supply them under the AIR SCIENCE brand.

After the exchange of witness statements the evidence against the defendant and his company seemed rather thing. It consisted of a witness statement by one director and a witness summary on behalf of another. The defendant applied for summary judgment on the ground that there was no realistic prospect of success. The hearing of the application came on before Judge Birss on 20 Dec 2010, two months before the trial of the action.

In his skeleton, the defendant's counsel, Andrew Norris, argued that the claim against his client should be dismissed altogether. His opponent, Anna Edwards-Stuart, described that submission as "application creep", a delightful phrase that I shall try to remember. She protested that it had taken her by surprise and the judge agreed with her.

His Honour relied on Mr. Justice Lewison's principles in Easyair Ltd v Opal Telecom Ltd at paragraph 15:
"
The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
When he made his Part 24 application the defendant could justifiably claim that the evidence against him was waif-like as it consisted of a witness summary from one Andre Chambre who resided in the USA and could therefore not be compelled to give evidence. It put on muscle when the defendant's summary judgment application was answered by a witness statement from Mr. Chambre who made clear that he would be in court to give evidence at the trial. As the judge observed:
"It is fair to say that the evidence from the claimants' side is terse but the test for summary judgment is an absence of reality. I do not find that in this case. There is a clear conflict of evidence between Andre Chambre and John Haugh about what was or was not agreed in 2004 but there also some common ground. These are issues to be explored at a trial, not ones to resolve on paper."
In dismissing the application the judge made the point that there was a severe risk that the costs of an action relating to a claim for passing that lasted no more than 6 weeks would dwarf the value of the claim. He advised the parties to "consider carefully whether a form of alternative dispute resolution might be a preferable way of bringing this dispute to an end." The action, or at least the solicitors, come from the North West and we have excellent specialist low cost mediation and arbitration services for the resolution of IP disputes in the North of England.

I was recently contacted by the defendant in this action who told me that all claims against him were withdrawn shortly before trial.

If anyone wants to discuss any of the issues discussed in this case note they should call me on 0800 862 0055 or use the contact form.

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