Practice - Photobooth Props Ltd v NEPBH Ltd

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Jane Lambert

Intellectual Property Enterprise Court (Pat Treacy) Photobooth Props Ltd and another v NEPBH Ltd and others [2023] EWHC 766 (IPEC) 25 April 2023

This was an application by the claimant for an order that unless the defendants make an interim payment by 16:00 on the 7th day from the date of the order, the defence of all defendants will be struck out. The obligation on the defendants to make an interim payment was an order by Ms Pat Treacy sitting as a deputy judge of the High Court at a case management conference on 2 Feb 2023. The application for the unless order was also made to Ms Treacy who decided it without a hearing on 25 April 2023 (see Photobooth Props Ltd and another v NEPBH Ltd and others [2023] EWHC 755 (IPEC) (25 April 2023)).

Importance of this Case

The reason for discussing this case is that interim costs orders are rare in the Intellectual Property Enterprise Court ("IPEC").  That is because CPR 63.26 requires IPEC to reserve the costs of an application to the conclusion of the trial when they will be subject to summary assessment unless a party has behaved unreasonably.  However, it appears from para [18] of Ms Treacy's judgment that that rule is subject to the court's discretion as to costs under CPR 44.2.

Reason for the Interim Payment Order

The order that Ms Treacy made on 2 Feb 2023 was a variation of one made by Mr John Kimbell KC sitting as a deputy judge of the High Court on 27 June 2022 (see Photobooth Props Limited and another v NEFBH Ltd and others [2022] EWHC 1634 (IPEC) (27 June 2022)).  He had heard an application by the claimants for summary judgment and cross-applications by the defendants for orders to strike out allegations of fraudulent misrepresentation and grant security for costs on 24 Feb 2022 which he decided in favour of the claimants on 1 April 2022 (see Photobooth Props Ltd and another v NEPBH Ltd and others [2022] EWHC 750 (IPEC) (1 April 2022)).   The claimants applied for an interim order for the costs of the application and cross-applications under CPR 44.2 which Mr Kimbell refused on 27 June 2022.  He reserved the costs of the application and cross-applications to trial in accordance with CPR 63.26.  I discussed both judgments in Copyright - Photobooth Props Ltd v NEPBH Ltd, on 2 Sept 2022.

When Mr Kimbell made his order the action had been listed to come on for trial in early November 2022.  Owing to the sickness of one of the defendants the trial had to be vacated and re-listed for November 2023.  The claimants made a fresh application for an order for immediate payment of the costs of the applications that Mr Kimbell had heard on 24 Feb 2022 since they would have to wait at least another 12 months for payment of those costs.  

They argued that this was a very unusual circumstance unforeseen by the IPEC rules, that it was at odds with the overall design of the IPEC regime and contrary both to the spirit of IPEC and to the overriding objective. This change in circumstances was sufficiently material to engage the court's inherent ability to vary interim orders.  It would also justify a departure from the normal rule under CPR 63.26 (1) and the exercise of the court's general discretion as to costs under CPR 44.2.

Ms Treacy accepted those submissions but she did not take the financial position of the defendants into account.  She decided not to assess costs summarily but instead ordered an interim payment on account pending final assessment at trial following Recorder Campbell's decision in Scomadi Ltd v RA Engineering Co Ltd [2017] EWHC 2907 (IPEC) and Recorder Michaels's in Madine (t/a Nico) v Phillips (t/a Leanne Alexandra) [2018] 1 Costs L.O. 103.  As in Scomadi and Madine, Ms Treacy accepted an undertaking from the claimants to repay some or all of the interim payment if that ultimately became necessary after trial.

The defendants asked for permission to pay the interim payment by instalments on the grounds of impecuniosity.   The deputy judge refused their request but granted them 28 days in which to make the payment instead of the usual 14.

The Application for an Unless Order

The defendants failed to make the interim payment.  The claimants responded with the application for an unless order.   Ms Treacy directed herself that imposition of a sanction for non-payment of costs involved the exercise of discretion according  to principles set out by Sir Richard Field at para [29] of his judgment in Michael Wilson & Partners v Sinclair [2017] EWHC 2424 (Comm):

"(1) The imposition of a sanction for non-payment of a costs order involves the exercise of a discretion pursuant to the court's inherent jurisdiction.
(2) The court should keep carefully in mind the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely, that they serve to discourage irresponsible interlocutory applications or resistance to successful interlocutory applications.
(3) Consideration must be given to all the relevant circumstances including: (a) the potential applicability of Article 6 ECHR; (b) the availability of alternative means of enforcing the costs order through the different mechanisms of execution; (c) whether the court making the costs order did so notwithstanding a submission that it was inappropriate to make a costs order payable before the conclusion of the proceedings in question; and where no such submission was made whether it ought to have been made or there is no good reason for it not having been made
(4) A submission by the party in default that he lacks the means to pay and that therefore a debarring order would be a denial of justice and/or in breach of Article 6 of ECHR should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the witness's financial position including his or her prospects of raising the necessary funds where his or her cash resources are insufficient to meet the liability.
(5) Where the defaulting party appears to have no or markedly insufficient assets in the jurisdiction and has not adduced proper and sufficient evidence of impecuniosity, the court ought generally to require payment of the costs order as the price for being allowed to continue to contest the proceedings unless there are strong reasons for not so ordering.
(6) If the court decides that a debarring order should be made, the order ought to be an 'unless' order except where there are strong reasons for imposing an immediate order."

As for the second of those principles, the deputy judge said that the order sought by the claimants would have the automatic consequence of depriving the defendants of the right to defend the action if they failed to comply. In Ms Treacy's view, that outcome was unlikely to have been envisaged by the IPEC costs rules and could not have had its intention   That factor weighed against the order sought by the claimants.

After taking all relevant circumstances into consideration the deputy judge decided that the third principle weighted in favour of the defendants.   The most important consideration of the fourth and fifth were the means of the defendants.  The claimants argued that the documentary evidence of the defendants' means was thin.   Ms Treacy did not consider that factor weighed heavily in favour of the claimants.

Having considered all the circumstances in the light of the procedural context in IPEC and the overriding objective, the deputy judge declined to make the unless order.

Comment

The judge made it clear that her previous order remained in force and could be enforced in the usual way.  She would also reconsider making an unless order if other orders were not complied with.   

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