England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
(MR JUSTICE LADDIE)

		Royal Courts of Justice Strand London, WC2
		13th February 2003

1. LORD JUSTICE ALDOUS: In this case the appeal and the cross-appeal were dismissed with costs to be paid by the losing party with a detailed assessment and a set-off.
2. However, there remained an appeal against the costs order made by the judge. He ordered that Stena should pay 20 per cent of Irish Ferries' costs and that Irish Ferries should pay 80 per cent of Stena's costs. His reasons are contained in his judgment, appearing at paragraphs 3, 4 and 5:

"3. It is right that one starts from the position that costs follow the event and, as Mr Miller points out, I have to bear in mind particularly that the major objective of these proceedings was to obtain relief in respect of the Jonathan Swift, the claimants seeking not just damages but injunctions as well. They have failed to achieve that objective. On the other hand, it appears to me that it is wring to ignore the very significant difference between the point upon which the defendant won and the points on which it lost. The point under section 60(5)(d) is a very narrow one, in the sense that it is almost entirely a matter of law. Indeed, it seems to me that it might have been suitable for determination as a preliminary issue. It is, in a real sense, an entirely discrete issue quite separate from, and unrelated to, those concerning validity and the scope of the patent. From the claimants' point of view, is was no doubt important to maintain the validity of the patent, at least in respect of claim 3, and to indicate that it had a width sufficient to cover ships of multi-hull design similar to the Jonathan Swift.

4. In my view, this is not a case where I think it would be fair to the parties to follow mechanically the approach advances by Mr Miller. I think that I should split up the issues because they are so discrete but that in doing so, I should give particular weight to the section 60(5) point because, of course, as Mr Miller says, at the end of the day what the claimants wanted was relief for infringement and they have failed to achieve that.

5. All the evidence given orally and relied on at the trial and virtually all the evidence prepared for the trial went to issues of validity and infringement. The arguments relating to section 60(5)(d) took up a comparatively small part of the trial itself. I suspect that if one were to do a detailed analysis of the costs of the section 60(5)(d) point to each side, it would not account for more than 5% to 10% of the total costs incurred and probably neared the former figure."

3. What is said by Mr Miller QC, who appeared for Irish Ferries, is that the judge went wrong in principle in that he failed to pay attention or sufficient attention to CPR 44.3 and in particular CPR 44.3.2(a) and (4). In this case Irish Ferries won the action and their arguments on validity and infringement were properly raised. There was no improper conduct. In the circumstances, Mr Miller submitted that the judge should have awarded Irish Ferries the bulk of their costs. He produced before us today figures which he submitted showed that the judge was wrong to make his client pay the substantial amount of costs. He said that stepping back, it left not sufficient amount in the armoury of the judge to deal with a case where there was improper conduct. He did not challenge the percentages made by the judge. His attack was upon the adoption by the judge of the issue-based approach.
4. For Stena, it was submitted in their skeleton argument that the judge's judgment reflected the time and expense of the issues upon which the parties succeeded. It was submitted that this court should not interfere with the exercise of the judge's discretion. He had heard the trial and was best placed to decide whether the issue approach was correct and to assess who should bear the burden of costs on the issues that were argued before him.
5. Mr Miller drew to our attention the case of Summit Property Ltd v Pitmans [2001] EWCA Civ 2020. In that case Longmore LJ referred to the judgment of Lord Woolf MR in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1999] 1 WLR 1507, at 1522H. In that passage Lord Woolf drew attention to the fact that the CPR had made a significant change of emphasis so as to require the courts to be more ready to make orders which reflected the outcome of different issues. He drew to our attention that this was a change of practice.
6. Longmore LJ drew attention to the fact that it was no longer necessary for a party to have acted unreasonably or improperly before he could be required to pay the costs of the other party upon a particular issue on which he had failed.
7. In my view the basis upon which we have to consider this appeal was set out by Chadwick LJ in paragraphs 26 and 27 of his judgment in the Summit Property case:

"26. The first question for this court is not whether it would have made the order which the judge made. The first question is whether this court is satisfied that the basis upon which the judge reached the conclusion that he did has been shown to be flawed. It is only if that question is answered in the affirmative that this court can properly interfere with the exercise of the judge of the discretion entrusted to him. It is only then that this court will go on to consider what order it will make in the exercise of its own discretion.

27. In my view, it has not been shown on this appeal that the judge erred in principle. An issue based approach requires a judge to consider, issue by issue in relation to those issues to which that approach is to be applied, where the costs on each distinct or discrete issue should fall. If, in relation to any issue in the case before it the court considers that it should adopt an issue based approach to costs, the court must ask itself which party has been successful on that issue. Then, if the costs are to follow the event on that issue, the party who has been unsuccessful on that issue must expect to pay the costs of that issue to the party who has succeeded on that issue. That is the effect of applying the general principle on an issue based approach to costs. Further, there will be cases (of which this is not one) where, on an issue by issue approach, a party who has been successful on an issue may still be denied his costs of that issue because, in the view of the court, he has pursued it unreasonably. The question, therefore, can be re-stated: was the judge entitled to approach the costs in this case on an issue by issue basis? In my view, for the reasons set out by the judge and by Longmore LJ, I am not persuaded that the judge can be criticised for adopting that approach in what he described as an unusual case, having circumstances which were special and particularly strong. If judges are to approach the question of costs on an issue by issue basis, then their decisions as to cases in which that approach is appropriate must be respected."

8. At the trial the issue between the parties involved, first, an issue as to infringement based upon the construction of section 60(5)(d) of the Patents Act 1977. Second, issues of infringement and validity which comprised the sort of issues which are normally encountered in a patent action. In essence there was the section 60(5)(d) point and a full patent action. Irish Ferries won the section 60(5)(d) point, but lost the patent action. In my view this was a case where an issue-based approach was one properly to be adopted by the judge.
9. I accept that success on the section 60(5)(d) point meant that Irish Ferries succeeded in rebutting the claim made, but in my view it was within the judge's exercise of his discretion to deal with the costs on an issue basis. Having done so, there was no error of principle in the way that he arrived at his conclusion. As he said, the section 60(50(d) point involved a question of construction that could have been decided relatively cheaply and quickly, whereas the rest of the issues involved a patent action with the need for detailed evidence and argument.
10. In my view the judge was entitled to consider that Irish Ferries had been the losing party on the patent action part of the proceedings and award costs accordingly. I would therefore dismiss the appeal on this matter.
11. LORD JUSTICE CHADWICK: I agree.
12. MR JUSTICE MUNBY: I also agree.

ORDER: Appeal on costs dismissed with costs; counsel to lodge a draft minute of order; permission to appeal to the House of Lords refused.

(Order not part of approved judgment)

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