Pecuniary Remedies - Equisafety Ltd v Battle, Hayward and Bower Ltd
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Intellectual Property Enterprise Court (Recorder Amanda Michaels) Equisafety Ltd v Battle, Hayward and Bower Ltd 2023] EWHC 1821 (IPEC) (21 July 2023) and Equisafety Ltd v Battle, Hayward and Bower Ltd and another [2024] EWHC 283 (IPEC) (15 Feb 2024)
In Practice - Lufthansa Technik AG v Panasonic Avionics Corporation on 10 Nov 2023 I said that proceedings in the Chancery Division take place in two stages. First, there is a trial to determine whether the defendant is liable to the claimant, If the court finds that the defendant is liable it can order an account of profits or an inquiry as to damages. An account of profits is a determination of the profits that the defendant has gained from his or her wrongdoing followed by an order for him or her to pay those profits to the claimant. An inquiry as to damages is a determination of the injury, loss or damage that the claimant has suffered as a result of the defendant's wrongdoing and an order for payment to the claimant.
Difference between an Account and an Inquiry
Lord Justice Kitchin explained the difference between the two in paras [54] and [56] of his judgment in Hollister Incorporated Dansac AS v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419, [2012] WLR(D) 327, [2013] Bus LR 428:
"[54] A claimant who has succeeded in an action for infringement is entitled to damages as of right. If it seems the claimant may have suffered more than nominal damage then he will generally be entitled to an inquiry, the central purpose of which is to ascertain the extent of his losses and so restore him to the position he would have been in if the infringement had not been committed.
[55] Alternatively, a successful claimant may seek an account of the profits made by the infringer. This is an equitable remedy and the court has a discretion whether to order it. It may be refused if, for example, the infringer was entirely innocent or the trade mark owner has delayed in bringing proceedings. The purpose of an account is very different from an inquiry as to damages. It is to deprive the infringer of the profits he has made by the infringement. He is treated as if he has conducted the infringing business on behalf of the claimant. The losses the claimant has suffered by reason of the infringement are therefore not relevant.
[56] It can be seen that the remedies of an inquiry as to damages and an account of profits proceed on very different bases. A successful claimant must therefore elect between them. Often, a successful claimant has insufficient information to make an informed decision as to which remedy he should pursue, and in those circumstances, the court may order the defendant to provide limited disclosure and give the claimant a reasonable period of time thereafter in which to make his election."
Lord Justice Kitchin explained the difference between the two in paras [54] and [56] of his judgment in Hollister Incorporated Dansac AS v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419, [2012] WLR(D) 327, [2013] Bus LR 428:
"[54] A claimant who has succeeded in an action for infringement is entitled to damages as of right. If it seems the claimant may have suffered more than nominal damage then he will generally be entitled to an inquiry, the central purpose of which is to ascertain the extent of his losses and so restore him to the position he would have been in if the infringement had not been committed.
[55] Alternatively, a successful claimant may seek an account of the profits made by the infringer. This is an equitable remedy and the court has a discretion whether to order it. It may be refused if, for example, the infringer was entirely innocent or the trade mark owner has delayed in bringing proceedings. The purpose of an account is very different from an inquiry as to damages. It is to deprive the infringer of the profits he has made by the infringement. He is treated as if he has conducted the infringing business on behalf of the claimant. The losses the claimant has suffered by reason of the infringement are therefore not relevant.
[56] It can be seen that the remedies of an inquiry as to damages and an account of profits proceed on very different bases. A successful claimant must therefore elect between them. Often, a successful claimant has insufficient information to make an informed decision as to which remedy he should pursue, and in those circumstances, the court may order the defendant to provide limited disclosure and give the claimant a reasonable period of time thereafter in which to make his election."
The Dispute
The Choice
Mr Caddick granted Equisafety an injunction and the choice of an inquiry as to damages or an account of profits. He ordered Battle to provide trade and financial information about its business so that Equisafety could make an informed decision. Mr Dewey supplied that information by a witness statement dated 28 Jan 2022. Equisafety opted for an account of profits. Points of claim and defence were exchanged. A case management conference took place on 9 Nov 2022 at which the following issues were ordered to be tried:
"1. Whether the First Defendant's gross profit figures are accurate, including:
1.1. Whether the figures for sales of infringing products by the First Defendant are accurate; and
1.2. Whether the figures for purchases of infringing products by the First Defendant are accurate.
2. Whether any apportionment of general overheads is appropriate.
3. If so:
3.1. Which general overheads may properly be the subject of apportionment? And
3.2. On what basis should the apportionment of those overheads be made?
4. What proportion of the First Defendant's net profits relating to the infringing products are attributable to its acts of infringement?
5. What interest if any should be paid?"
"1. Whether the First Defendant's gross profit figures are accurate, including:
1.1. Whether the figures for sales of infringing products by the First Defendant are accurate; and
1.2. Whether the figures for purchases of infringing products by the First Defendant are accurate.
2. Whether any apportionment of general overheads is appropriate.
3. If so:
3.1. Which general overheads may properly be the subject of apportionment? And
3.2. On what basis should the apportionment of those overheads be made?
4. What proportion of the First Defendant's net profits relating to the infringing products are attributable to its acts of infringement?
5. What interest if any should be paid?"
The Hearing of the Account of Profits
The hearing of the account of profits came on before Recorder Amanda Michaels on 16 and 17 May 2023. She handed down her judgment in Equisafety Ltd v Battle, Hayward and Bower Ltd [2023] EWHC 1821 on 21 July 2023. She awarded Equisafety £12,568 by way of accountable profits, together with £2,140.92 interest
Applicable Law
In her judgment, Recorder Michaels referred to para [69] of Lord Justice Kitchin's judgment in Hollister:
"…an account of profits does not compensate the trade mark owner for the losses he has suffered. It simply deprives the infringer of the profits he has made from an activity in which he should never have engaged. It therefore ensures the infringer does not benefit from his wrong, but it contains no element of punishment. Moreover, as an equitable remedy, it may be refused if for any reason it would produce an unjust result."
"…an account of profits does not compensate the trade mark owner for the losses he has suffered. It simply deprives the infringer of the profits he has made from an activity in which he should never have engaged. It therefore ensures the infringer does not benefit from his wrong, but it contains no element of punishment. Moreover, as an equitable remedy, it may be refused if for any reason it would produce an unjust result."
She directed herself that in an account of profits "the extent of any damage caused to the claimant by the infringing activities is not relevant to the assessment of the sum to be paid by the defendant." The principles for taking an account had been summarized by Mr Caddick in para [5] of his judgment in Bei Yu Industrial Co v Nuby (UK) LLP and another [2022] EWHC 652 (IPEC) which referred to the decisions of the Court of Appeal in OOO Abbott v Design and Display Ltd [2016] FSR 27 and Jack Wills Ltd v House of Fraser (Stores) Ltd [2016] EWHC 626 (Ch):
"a. The purpose of the account of profits is to deprive Nuby of the profits which it has improperly made by its wrongful importation and sale of the Nuby Baby Bath and to transfer those profits to Bei Yu – see Hotel Cipriani v Cipriani Grosvenor Street [2010] EWHC 628 (Ch) per Briggs J at [8]. In this regard, it is Nuby's actual profit that the court has to identify rather than the profit that Nuby could or ought to have made. In effect, Bei Yu must take Nuby (and its profit) as it is – see Jack Wills Ltd v House of Fraser (Stores) Ltd [2016] EWHC 626 (Ch), at [10]).
b. The relevant profits are the sum left after deducting Nuby's allowable expenses from the sums received or receivable by Nuby in respect of its infringing acts.
c. The allowable expenses will include any costs that were associated solely with Nuby's infringing acts. Those costs might be direct costs (e.g. the costs of purchasing and importing the relevant products) or any increased overheads specifically related to the infringing acts. Such expenses may be deducted in their entirety – see OOO Abbott v Design and Display Ltd [2017] EWHC 932 (IPEC), per HHJ Hacon at [57 (1) and (2)].
d. The allowable expenses can also include a proportion of Nuby's general overheads unless (a) the relevant overhead would have been incurred anyway (i.e. it would have been incurred even if the infringing acts had not occurred) and (b) the sale of infringing products would not have been replaced by the sale of non-infringing products – see OOO Abbott per HHJ Hacon at [57 (3)].
e. Where a deduction can be made in respect of a general overhead, the amount deducted is such proportion of the overhead figure that can fairly be attributed to Nuby's infringing activities as opposed to its non-infringing activities. This apportionment is done on a broad brush basis - see Jack Wills at [53]. However, it may be appropriate to use different bases of apportionment for different types of overhead. A basis that is fair and appropriate in relation to, for example, an expense relating to the business premises may not be fair and appropriate when applied to, say, wages - see Jack Wills at [53]. As noted by Lewison LJ in OOO Abbott [2016] EWCA Civ 95 at [39], the question posed by the court as regards deductible overheads is a relatively simple one to ask, even if it may not be easy to answer.
f. The evidential burden rests on Nuby to support a claim that it is appropriate to make a deduction on account of a sum said to be an allowable expense under the principles set out in (b) to (e) above – see OOO Abbott [2017] EWHC 932 (IPEC) at [57(4)]."
The recorder also referred to the following paragraphs of Lord Justice Lewison's judgment in OOO Abbott:
"[34] Mr St Quintin of course accepts that so much of the profit made on the sale of the incorporated panel as is attributable to the infringing insert must be included in the account. But he says that this is not a case in which the article itself (the incorporated panel) would not have come into existence at all but for the infringement. Nor was it an essential ingredient in Design & Display's whole product (i.e. a panel with an insert). That is demonstrated by the fact that Design & Display continued to sell incorporated panels after it ceased to use the infringing insert without any drop in sales. In those circumstances he argues that the overall profit should be apportioned between the insert on the one hand and the panel on the other. Mr Cuddigan said that this argument was not permissible because of the way that the issue was framed. The issue was framed as follows: 'Are the Claimants entitled to claim the profits which accrued to [the Defendant] as a result of the sale of slatted panels sold together with the clip in aluminium extrusion?'
[35] He argued that this was a binary question which the judge had to answer either 'Yes' or 'No'. I do not agree. It was open to the judge to answer the question by holding that such profits could be recovered in some circumstances but not in others.
"[34] Mr St Quintin of course accepts that so much of the profit made on the sale of the incorporated panel as is attributable to the infringing insert must be included in the account. But he says that this is not a case in which the article itself (the incorporated panel) would not have come into existence at all but for the infringement. Nor was it an essential ingredient in Design & Display's whole product (i.e. a panel with an insert). That is demonstrated by the fact that Design & Display continued to sell incorporated panels after it ceased to use the infringing insert without any drop in sales. In those circumstances he argues that the overall profit should be apportioned between the insert on the one hand and the panel on the other. Mr Cuddigan said that this argument was not permissible because of the way that the issue was framed. The issue was framed as follows: 'Are the Claimants entitled to claim the profits which accrued to [the Defendant] as a result of the sale of slatted panels sold together with the clip in aluminium extrusion?'
[35] He argued that this was a binary question which the judge had to answer either 'Yes' or 'No'. I do not agree. It was open to the judge to answer the question by holding that such profits could be recovered in some circumstances but not in others.
[36] Let me revert to the example given by the Full Court in Dart Industries v Decor Corp [1994] F.S.R. 567. A manufacturer sells a car which includes a patented brake. If the car did not have brakes, the manufacturer could not have sold it, but it did not have to have that particular brake. In those circumstances, the Full Court clearly thought that it would be unjust to charge the manufacturer with the whole profit made on the car and I agree with them. In my judgment, the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not 'drive' the sale, it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular, it does not follow from the fact that the customer wanted a slat wall that incorporated an insert that the customer wanted a slat wall that incorporated the infringing insert. Mr Cuddigan argued that the infringing inserts and the slot were the 'very essence' of the incorporated and unincorporated panels. But the judge made no such finding, and his observations at [32] suggest the contrary. In addition, I do not consider that the judge was correct at [31] in saying that because the sales went together, the sale of inserts caused … the sale of the panels…'The mere fact that the two went together is not, in my judgment, sufficient to establish that the whole of the profit earned on the composite item was derived from the invention. One might just as well say that the sale of the panel caused the sale of the insert. As the judge himself recognised the customer specifies panels, and on the hypothesis that he was considering at [31] the customer is indifferent about the inserts (provided that some form of insert is included). On the judge's approach, because the sale of the patented brake went with the sale of the car, the whole of the profit on the car would be included in the account. If the judge had found on the facts that the infringing insert was 'the essential ingredient in the creation of the defendant's whole product' (i.e. the incorporated panel), then he would have been justified, on the facts, in declining to apportion the profit. But I cannot see that he made that finding.
[37] In my judgment therefore in cases simply falling within the factual hypothesis discussed at [31] the judge should have apportioned the overall profit. The question of apportionment will therefore have to be returned to IPEC, although the judge would not be precluded from finding as a fact that the infringing insert was the 'essential ingredient" of the incorporated panel.'"
[37] In my judgment therefore in cases simply falling within the factual hypothesis discussed at [31] the judge should have apportioned the overall profit. The question of apportionment will therefore have to be returned to IPEC, although the judge would not be precluded from finding as a fact that the infringing insert was the 'essential ingredient" of the incorporated panel.'"
Recorder Michaels noted that His Honour Judge Pelling QC applied the same reasoning in Jack Wills which was also a trade mark and passing-off case:
"The Infringement Apportionment Issue
[61]. In my judgment the law in this area is now settled by Design & Display Limited (ante). In relation to this issue and having considered all the relevant authorities Lewison LJ concluded at [36] that:
'In my judgment, the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not 'drive' the sale, it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular, it does not follow from the fact that the customer wanted a slat wall that incorporated an insert, that the customer wanted a slat wall that incorporated the infringing insert. … If the judge had found on the facts that the infringing insert was "the essential ingredient in the creation of the defendant's whole product' (i.e. the incorporated panel) then he would have been justified, on the facts, in declining to apportion the profit. But I cannot see that he made that finding.'
"The Infringement Apportionment Issue
[61]. In my judgment the law in this area is now settled by Design & Display Limited (ante). In relation to this issue and having considered all the relevant authorities Lewison LJ concluded at [36] that:
'In my judgment, the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not 'drive' the sale, it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular, it does not follow from the fact that the customer wanted a slat wall that incorporated an insert, that the customer wanted a slat wall that incorporated the infringing insert. … If the judge had found on the facts that the infringing insert was "the essential ingredient in the creation of the defendant's whole product' (i.e. the incorporated panel) then he would have been justified, on the facts, in declining to apportion the profit. But I cannot see that he made that finding.'
[62]. As it seems to me the position is now that unless … there is a finding that the infringement drove the sale, there must be an apportionment to take account of the fact that the profits to be disgorged are those properly attributable to infringing use of the mark not all the profits derived from sale of the item – see also and by way of example Cartier v. Carlile (1862) 31 Beav. 292 per Sir John Romilly MR at 298, and Hotel Cipriani SrL and another v. Cipriani (Grosvenor Street) Limited and others [2010] EWHC 628 per Briggs J (as he then was) at [8]: '… where a single head of profit is attributable to a number of causes, some of them infringing and some of them not, it is necessary and appropriate for the court to conduct an apportionment so as to work out on a broad brush basis what proportion of the profit is due to the act of infringement …' There is no justification in law for approaching the profit taking exercise differently simply because this is a trade mark infringement case – see Cipriani (ante) at [7]."
Equisafety had referred Ms Michaels to reg 3 (1) of the Intellectual Property (Enforcement) Regulations 2006, SI 2006 No 1028, but the learned recorder held that that provision applied to assessments of damages and not to accounts of profits.
Battle's Gross Profits
Between pra [15] and para [37] the recorder considered Battle's gross profit from its infringements and passing off and assessed the figure at £24,356.
Overheads
Between [37] and [41] she considered whether it was appropriate to deduct overheads and decided that it was appropriate to deduct 14%.
Apportionment of the Net Profit
Battle noted that Mr Caddick had not found that its infringement had driven its sales. It argued that there must be an apportionment to ensure that the profits to be paid to Equisafety were only those properly attributable to the infringing use of its mark and that not all the net profits derived from sales of those items. The recorder referred to para [63] of Judge Pelling QC's judgment in Jack Wills:
"It is now necessary to turn to the facts of this case. In my judgment it is simply not possible on the evidence to conclude that the infringement complained of drove the sale of the infringing products or was the essential ingredient in the infringing products. I do not propose to summarise again all the factual material set out above. However a key point is that the Logo was used on articles of clothing that formed part of the LINEA line sold by HoF; the same lines were sold both before the infringement commenced and after it had been brought to an end and essentially the same articles were sold both before and after the infringement with the only material difference being the absence of the Logo. There is no evidence that the inclusion of the Logo had any significant or lasting effect on the sales of the products concerned. What evidence there is suggests that there was no increase in either sales or margins that resulted from the use of the Logo ... The infringing goods were clothing. They have a value to consumers independently of the presence on the goods of the Logo. Indeed on some lines, the Logo was not permanently affixed to the garments but was present in the form of a detachable label. The products not only had on them the Logo but also the LINEA marks. The Logo was not prominently displayed in any advertising or promotional material. However, all of this material (which was not available to Arnold J) has to be balanced with the conclusions that he reached as set out earlier in this judgment. In all the circumstances, there is no difference between this case and the hypothetical example posited by Lewison LJ in Design & Display Limited (ante) at [36]: 'A manufacturer sells a car which includes a patented brake. If the car did not have brakes the manufacturer could not have sold it but it did not have to have that particular brake. In those circumstances … it would be unjust to charge the manufacturer with the whole profit made on the car …'"
"It is now necessary to turn to the facts of this case. In my judgment it is simply not possible on the evidence to conclude that the infringement complained of drove the sale of the infringing products or was the essential ingredient in the infringing products. I do not propose to summarise again all the factual material set out above. However a key point is that the Logo was used on articles of clothing that formed part of the LINEA line sold by HoF; the same lines were sold both before the infringement commenced and after it had been brought to an end and essentially the same articles were sold both before and after the infringement with the only material difference being the absence of the Logo. There is no evidence that the inclusion of the Logo had any significant or lasting effect on the sales of the products concerned. What evidence there is suggests that there was no increase in either sales or margins that resulted from the use of the Logo ... The infringing goods were clothing. They have a value to consumers independently of the presence on the goods of the Logo. Indeed on some lines, the Logo was not permanently affixed to the garments but was present in the form of a detachable label. The products not only had on them the Logo but also the LINEA marks. The Logo was not prominently displayed in any advertising or promotional material. However, all of this material (which was not available to Arnold J) has to be balanced with the conclusions that he reached as set out earlier in this judgment. In all the circumstances, there is no difference between this case and the hypothetical example posited by Lewison LJ in Design & Display Limited (ante) at [36]: 'A manufacturer sells a car which includes a patented brake. If the car did not have brakes the manufacturer could not have sold it but it did not have to have that particular brake. In those circumstances … it would be unjust to charge the manufacturer with the whole profit made on the car …'"
Ms Michaels noted the similarities of Jack Wills to the case before her.
Although there had been no finding in Mr Caddick's judgment that Battle's infringements had driven its sales there were certainly findings that could have supported such a conclusion. She decided at [48] that it was right to apportion the profits because the infringement would not have been the sole factor driving the sales of the infringing goods. On balance, the recorder was satisfied that the use of the mark would have been a significant factor in driving sales of Battle's goods. Taking a broad brush approach she concluded that 60% of the profits should be attributed to the uses of the infringing signs.
Although there had been no finding in Mr Caddick's judgment that Battle's infringements had driven its sales there were certainly findings that could have supported such a conclusion. She decided at [48] that it was right to apportion the profits because the infringement would not have been the sole factor driving the sales of the infringing goods. On balance, the recorder was satisfied that the use of the mark would have been a significant factor in driving sales of Battle's goods. Taking a broad brush approach she concluded that 60% of the profits should be attributed to the uses of the infringing signs.
Award
Interest
Finally, Ms Michaels referred to paras [46] and [47] of Mr Caddick's judgment in Bei Yu for the appropriate principles on interest:
"[46] The relevant principles with regard to interest were set out in Carrasco v Johnson [2018] EWCA Civ 87 at [17] where, having reviewed the authorities, Hamblen LJ stated that:
"[46] The relevant principles with regard to interest were set out in Carrasco v Johnson [2018] EWCA Civ 87 at [17] where, having reviewed the authorities, Hamblen LJ stated that:
[17] The guidance to be derived from these cases includes the following:
(1) Interest is awarded to compensate claimants for being kept out of money which ought to have been paid to them rather than as compensation for damage done or to deprive defendants of profit they may have made from the use of the money.
(2) This is a question to be approached broadly. The court will consider the position of persons with the claimants' general attributes, but will not have regard to claimants' particular attributes or any special position in which they may have been.
(3) In relation to commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers.
(4) In relation to personal injury claimants the general presumption will be that the appropriate rate of interest is the investment rate.
(5) Many claimants will not fall clearly into a category of those who would have borrowed or those who would have put money on deposit and a fair rate for them may often fall somewhere between those two rates.
(1) Interest is awarded to compensate claimants for being kept out of money which ought to have been paid to them rather than as compensation for damage done or to deprive defendants of profit they may have made from the use of the money.
(2) This is a question to be approached broadly. The court will consider the position of persons with the claimants' general attributes, but will not have regard to claimants' particular attributes or any special position in which they may have been.
(3) In relation to commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers.
(4) In relation to personal injury claimants the general presumption will be that the appropriate rate of interest is the investment rate.
(5) Many claimants will not fall clearly into a category of those who would have borrowed or those who would have put money on deposit and a fair rate for them may often fall somewhere between those two rates.
[47]. I also note that at [19] and [25], Hamblen LJ emphasised that the court has a broad discretion in relation to an award of interest.
[48]. Applying these principles, I have concluded that this is a case where Nuby is correct and that interest should be awarded at the base rate only. At paragraphs 28 and 29 of its Points of Defence, Nuby expressly pleaded that the base rate was appropriate given that savings are earning negligible interest and that Bei Yu had not set out any case as regards why a rate based on the cost of its borrowing would be appropriate. That remained the position at trial and no evidence was adduced by Bei Yu that would assist (even on a "broad brush" basis) in determining the appropriate rate of interest in this case. In my judgment, given that the issue had been clearly raised in the pleadings, Bei Yu is not entitled simply to rely on the general presumption referred to in Carrasco at paragraph 17 (3) (see above) and it would not be appropriate to order interest."
In the absence of any evidence by either side as to the appropriate rate or of any adverse financial consequences to Equisafety, the recorder ordered interest on the award to be fixed at the rate to be 2.5% over the average rate for the period 21 Jan 2019 (when the claimant first complained of the infringement) to 17 July 2023 (the date of judgment in the account of profits) compounded annually on 21 Jan from 21 Jan 2020.
Part 36 Offer
A "Part 36 offer" is an offer to settle a dispute in accordance with Part 36 of the Civil Procedure Rules. CPR 36.17 (3) provides that where a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer the court must, unless it considers it unjust to do so, order that the defendant is entitled to (a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
(b) interest on those costs. Battle made such an offer which expired shortly before the case management conference in the account of profits proceedings. As a result of that offer the parties were unable to agree on the amount due to Equisafety in respect of profits and interest, the costs of the trial before Mr Caddick or the costs of the hearing before the recorder. Further Hearing
A further hearing to decide those issues was fixed for 4 Dec 2023. Shortly before it was due to take place Equisafety requested an adjournment. The adjourned hearing took place on 8 Feb 2024 and judgment was handed down on 15 Feb 2024 (see Equisafety Ltd v Battle, Hayward and Bower Ltd and another [2024] EWHC 283 (IPEC)).
The recorder made a number of decisions on that day which she summarized in para [4] of that judgment
"a. The First Defendant is to pay the Claimant £12,568 by way of profits, together with interest assessed at £2,140.92;
b. The First Defendant is to pay the Claimant its costs of the Liability Proceedings, subject to a 10% discount relating to two issues on which the Claimant lost at trial. The Claimant's director, Ms Fletcher, who has acted on its behalf since around the time of the CMC in the Quantum trial, had provided several documents relating to the Claimant's costs, which were not easily reconcilable. The most recent document was a summary table of costs provided under cover of a signed letter from her solicitors, and in my judgment that was the appropriate document to use to assess the Claimant's costs.
c. Ms Fletcher included a substantial amount of her own costs (including her time and her disbursements relating to the Liability trial) in her claim. I did not add these to the Claimant's legal costs as it was not possible to tell whether any of these sums were incurred before she/the Claimant was legally represented, and no additional costs or disbursements could be added to the Claimant's recovery in relation to the trial, as I had already assessed its costs of the trial and awarded the full amount of the IPEC stage cap.
d. On that basis, the Claimant's costs of the Liability trial were assessed at £33,763.15, including £510 court fees.
e. However, the costs awarded to the Claimant had to be set off against certain costs to which the Defendants were entitled, which I assessed together at £11,500. The sum payable to the Claimant in relation to the costs of the Liability trial was therefore reduced to £22,263.15.
f. I found the Claimant to be the successful party in the Quantum proceedings, so in principle entitled to its costs. However, the amount awarded by way of profits and interest was less than the sum offered to the Claimant by the First Defendant in an offer made pursuant to Part 36 on 30 September 2022. That offer expired shortly before the CMC in the Quantum trial. Applying Part 36, the First Defendant was entitled to its costs after expiration of the offer. I awarded the Claimant £2,250 in respect of the initial stages of the Quantum trial, as well as another £510 court fees, and assessed the Defendant's costs from the CMC onwards at £23,000."
Remaining Issues
Two issues remained in dispute. The first was whether interest should be charged on the costs due to Battle under CPR 36.17 (3). The second was whether Equisafety should pay some or all of Battle's costs incurred since the date of the judgment in the account of profits hearing on the basis of what Battle said was Equisafety's unreasonable behaviour.
The recorder held that it would not be unjust to order interest to be paid in accordance with CPR36,17 (3) (b) and that she would have done so but for the IPEC costs cap. As she had already awarded Battle the maximum allowable for each of the stages of the account of profits proceeeings from the CMC onwards under the IPEC stage costs caps. there was no scope to add interest to those sums.
The recorder held that it would not be unjust to order interest to be paid in accordance with CPR36,17 (3) (b) and that she would have done so but for the IPEC costs cap. As she had already awarded Battle the maximum allowable for each of the stages of the account of profits proceeeings from the CMC onwards under the IPEC stage costs caps. there was no scope to add interest to those sums.
As for the second issue, Battle relied upon Equisafety's failure to agree interest calculations, its failure to provide proper cost schedules, and its failure to pay anything like the amount in respect of its costs which Battle had offered (without prejudice save to the costs of the assessment) to pay in October 2023. Battle pointed to further aspects of Equisaafety's handling of the proceedings which, it said, amounted to an abuse of process. Battle complained that it had been put to considerable additional expense and claimed £20,000 outside the costs cap.
The recorder refused Battle's request on the ground that the circumstances in which the costs cap had been lifted in the past had been exceptional. Equisafety's conduct may have been misguided, ill-judged or unfortunate but it was not comparable to the circumstances in Westwood v Knight [2011] EWPCC 11, Azumi Ltd v Zuma's Choice Pet Products Ltd [2017] EWHC 45 or Link Up Mitaka Ltd (t/a thebigword) v Language Empire Ltd (No.2) [2019] FSR 9 where the cap had been lifted.
However, she ordered Equisafety to pay £2,000 for the costs thrown away as the result of a last-minute request for an adjournment of the hearing that was due to take place in December. That sum brought the costs Equisafety was required to pay up to the £25,000 costs limit.
Comment
The recorder refused Battle's request on the ground that the circumstances in which the costs cap had been lifted in the past had been exceptional. Equisafety's conduct may have been misguided, ill-judged or unfortunate but it was not comparable to the circumstances in Westwood v Knight [2011] EWPCC 11, Azumi Ltd v Zuma's Choice Pet Products Ltd [2017] EWHC 45 or Link Up Mitaka Ltd (t/a thebigword) v Language Empire Ltd (No.2) [2019] FSR 9 where the cap had been lifted.
However, she ordered Equisafety to pay £2,000 for the costs thrown away as the result of a last-minute request for an adjournment of the hearing that was due to take place in December. That sum brought the costs Equisafety was required to pay up to the £25,000 costs limit.
Comment
On Wednesday 21 Feb 2024, I attended a seminar on patent law presented by a leading law firm. A very experienced patent practitioner told the audience that he had made it a rule never to seek an account of profits. It was in his view much more difficult to build a case for an account of profits than an inquiry as to damages. He had in mind Lufthansa Technik AG v Panasonic Avionics Corporation and others [2023] EWCA Civ 1273 (1 Nov 2023) rather than Equisafety but the case helps to prove the point, Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or he or she may send me a message through my contact page.
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