The team is joined by Guest Kats Rosie Burbidge, Stephen Jones, Mathilde Parvis, and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Hayleigh Bosher, Tian Lu and Cecilia Sbrolli.

Wednesday, 28 January 2015

Snatching defeat from the jaws of victory: the pain and the pleasure of a bondage frame dispute

All litigation takes a toll of litigants, whether in terms of money expended, time consumed, emotions drained or blood pressure sent racing.  The following guest piece, by long-standing Katfriend, IP practitioner, blogger and Old Nick devotee Barbara Cookson, reflects on an example of a case that yielded the injured party a good deal less and cost considerably more than he originally expected. Yet with an adjustment of his own expectations and a little tweaking of the procedural issues, things could have been so different ...

Snatching defeat from the jaws of victory

When litigating in the Intellectual Property Enterprise Court (IPEC), England and Wales, there are often times when the costs are in danger of becoming significantly greater than the damages in issue. While the costs cap allows those with smaller value claims to have access to justice, costs can become equally contentious.

One of the claimant's frames --
or a machine for extracting costs?
On 22 January 2015 Judge Hacon gave a written costs judgment in Haiss v Ball [2015] EWHC 74 (IPEC). The costs judgment is suitable for children whereas the principal liability case at [2013] EWPCC 35 may need to be treated with caution as it concerns frames for use during sexual activities involving bondage. At trial in July 2013, Mr Ball was found by Miss Recorder Amanda Michaels to have made infringing products. Damages could not be agreed and were eventually assessed on inquiry on the now almost inevitable user principle [on which see Barbara's earlier guest Katpost here] at 10% in December 2014 at [2014] EWHC 4019 (IPEC). This resulted in the sum due being a paltry £2,859.20 plus interest. Once that judgment was handed down, there remained the usual argument on costs. The idea in the IPEC is that costs should be determined quickly from pre-prepared schedules and that the costs decision be delivered immediately so that it can be recorded in the order prepared by the advocates. This means that both counsel and solicitors -- if present (which they may well not be) -- try to listen while simultaneously scribbling down the judge’s words. The term for this is "taking a note". You cannot use a tape recorder or other instrument for recording sound. It is contempt of court if done without leave of the court. You can of course pay for the official court recording to be transcribed, assuming that there were no faults in the recording process [This Kat can see no good reason for banning the use of recording instruments in the digital age, in which the art of short-hand writing is all but obsolete and grown-up adults can be trusted not to abuse the facility].

The problem comes when there have been offers and it is not a simple matter of assessing this costs incurred by the winning party.

Short-hand? No way!
In this case, since Haiss and Ball already had their two IPEC hearing dates, there was no time left to determine costs when judgment was handed down so it had to be done on the basis of written submissions. The good side of this is that we get the benefit of the written analysis. However, Judge Hacon doesn’t like it and makes the point that “the parties should ensure that sufficient time is set aside by the court for the hearing following judgment”. This, naturally, is all done in private so anyone interested in the costs may find themselves staring at an empty court room -- as happened to me when I attended the handing down in the Marrubi inquiry as to damages (here). At a later date, on 16 January, a good two hours were spent by the parties in sorting out the question of costs following a Calderbank offer [an offer of payment in settlement of a claim which is made without prejudice, save as to costs] that turned out not to have been beaten. Judge Hacon also gave an extempore judgment on that occasion which, had his predecessor (Mr Justice Birss) known at the pre-trial case management conference what he knew at trial, he would have transferred the case to the small claims track. This had the result that there was no costs order at all for the whole of the inquiry. But I digress ...

In Haiss v Ball, the offers to settle were Civil Procedure Rules (CPR), Part 36 offers. Judge Hacon begins his judgment by making a general observation encouraging IPEC litigants to take a realistic view as to the likely outcome. In his court, by the time of the case management conference, or completion of pleadings, the parties should be sufficiently informed to make a well-judged offer under CPR Part 36. Part 36 is not the simplest part of the CPR for an inexperienced litigators to navigate (but inexperience gives you no concessions) and it is also scheduled to be updated from 6 April 2015 (there's a useful post on that from McDaniel & Co, here). Nevertheless, Mr Ball -- then acting as a litigant in person -- had made a £15,000 Part 36 offer in August 2013. As is normal for a Part 36 offer, it did not include costs. The relevant period for Haiss to accept it expired without acceptance. The offer remained open under the current rule (from 6 April an offer can be made such that it is automatically revoked at the end of the acceptance period). 
Mr Ball did eventually revoke this offer on 30 December 2013. In retrospect this turned out to be a mistake because Mr Haiss did not beat it (though it would not have been a mistake had Mr Haiss seen the light and taken the £15,000 later in the day). His counsel (subsequently appointed presumably under direct access) pleaded that his status as a litigant in person meant that he should be given more indulgence than would be accorded to a company awash with high-powered legal advice. The judge preferred to accept the submission that “litigants in person, like all litigants, must live with the consequence of ill-advised procedural decisions”. The first offer was not totally pointless though, as a result of CPR 44.2(4)(c), which allowed the judge to decide in his discretion that Mr Haiss was unable to claim his costs after the expiry in September 2013 of the relevant period for the offer which he clearly should have accepted. Mr Ball, however, only received his costs from the expiry of the relevant period in March 2014 on a second Part 36 offer on the same terms.

At this point I feel we should stop for a round of applause for the subtlety of a Haconian judgment ['Haconian' being defined as "sensible because it avoids going into those places that will only get you into trouble if you go there"]. The reasoning is scrupulous. The litigant in person is not allowed any indulgence. Mr Haiss is spared any criticism for the sequence of offers which are spelled out purely factually in the judgment but which suggest to the reader, who knows that the final judgement was for £2,859.20 plus interest, that Mr Haiss conducted his case with some degree of disproportionate oppression. For example it is stated that Mr Haiss’ solicitors wrote to Mr Ball suggesting that he may wish to mortgage or sell property in order to raise the sums Mr Haiss was seeking.

Another useful pointer for the litigator in this judgment is the treatment of Mr Ball’s refusal to mediate. Mr Ball said that, due to the high cost of mediation and the low value (sic) of any settlement, mediation would not be cost-effective. The judge agreed with Mr Ball that, bearing in mind Mr Haiss’ stance with regard to the sum he felt was due by way of damages, he doubted that mediation would have been successful. The refusal to mediate therefore had no effect on the costs assessment.

For the litigator making an offer it may not always be possible, desirable or proportionate to give a detailed analysis of the computation used in this dispute. Judge Hacon confirms that there was no obligation on a party making a Part 36 offer to spell out his reasons -- he is entitled to pluck a figure from the air.

An IPEC litigant works
on reducing his blood pressure
While this began as a case where the costs of the inquiry greatly outweighed the damages, it transpired that the payment ordered still resulted in a sum (£9,710) that significantly exceeded the damages and it was paid by the winner to the loser. It should however be noted that the costs of the liability trial had been paid by Mr Ball since, at that time, he had not learnt about the subtleties of Part 36 or the desirability of representation in court. Therefore, overall proportionate justice probably has been done in purely financial terms. The impact of this case, which began in 2011, on the blood pressure of the participants is unknown to the writer but, we suspect it was not beneficial to either party.
Thanks, Barbara, says the IPKat, it's good to see how the admirable intention of the law to deal with litigation costs in a clear and simple manner can work out in practice, when the facts or the litigants are unfavourable.  Merpel, who is a bit cross-eyed from reading backwards and forwards through the CPR costs rules, wonders if there isn't an easier way of doing things. Do any of our continental cousins in Europe and our friends from more distant parts have better ways of doing things, she asks.


Anonymous said...

Is it stretching things to call it a racket?

Edward Smith said...

Disappointing from a mediator perspective. Refusal to mediate ought always to be factored in ! The whole point is to get the parties to reality check their positions.

Barbara Cookson said...

@Edward Smith. I think Judge Hacon's view was fair in the circumstances. Mediation does not come cheap. It's not just the mediators fees, but the time taken by your lawyers to prepare and the cost of finding somewhere to hold a mediation. If the other side is 1,000,000 miles away from you in his expectations as seems to have been the case here, you have to have a huge belief that the investment is going to be worthwhile. There has to be a high likelihood of settlement and if the value you put on the case is less (as here) on the cost of getting into a mediation, the court route looks a better option. Tell me where I am wrong. I need to know because court fees will be taking the court route out of range soon so we may be back with you

Stephen Probert said...

In my experience, the parties in a dispute often think that they are a million miles apart. That's often because they have been negotiating on the basis of their positions rather than their interests.

Mediators are skilled at closing the gap - it's what we do.

In this case, the perceived gap between the parties was relatively small compared to many of the successes that we've seen in IPO mediations.

But more importantly, the cost of a mediation would have been much less than the legal costs incurred by the parties in this case. Does it matter how much value you put on the case? Surely it's always best to choose the lowest cost method of dispute resolution?

Despite HHJ Hacon's comments on mediation, this case actually points up the consequences of not mediating - ie. both parties lost! The defendant lost on liability (and damages), and the claimant lost financially (on costs). If they had gone to mediation, they would have saved a fortune in legal costs, and they would have come away with a result that would have been better for both of them.

Edward Smith said...

As soon as the courts "endorse" a refusal to mediate we are taking a backward step IMO. We know some mediations won't work but don't ever assume that!

Edward Smith said...

IPEC should send questionnaires to the parties (to be completed without lawyers). How was your experience of Court? "Well I won but I lost but thoroughly enjoyed the experience and thought the Judge most fair." Unlikely response. More likely "Never again. Wish I'd never gotten into bondage. Can you spare £2.65 for a latte"

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