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
CHANCERY DIVISION
(MR CHRISTOPHER FLOYD QC)

		Royal Courts of Justice Strand London, WC2
		27 February 2003

Thursday, 27 February 2003
1. LORD JUSTICE SCHIEMANN: Mr Justice Pumfrey will deliver the first judgment.
2. MR JUSTICE PUMFREY: Having reached our conclusion on the substance of this appeal, we now have to consider Fuller's appeal against the order for costs which was made by the learned judge. That order for costs, that each party should bear its own costs, was arrived at by the learned judge after a comparatively brief exchange of which we have been provided the transcript. The case naturally falls into two parts and the learned judge considered that he was confronted with two distinct points. The first was the point of non-use, upon which the claimant succeeded to the extent which the learned judge found and which we have upheld on appeal; and the second, which can conveniently be referred to as the distinctiveness point, upon which the claimant failed. We were told that the vast preponderance of the costs of the case, which were very substantial on the defendant's side, were expended in dealing with the distinctiveness point.
3. The defendants, Fullers, contend that the order at which the learned judge arrived was an order which could not be supported by any of the factors upon which he appears to have relied in the judgment on costs which he delivered.
4. For my part I accept this submission. The judge appears to have proceeded upon the footing that there was a degree of substantial success on the part of the claimant. If the learned judge was seeking to reflect what he considered to be a degree of practical and commercial success in his order, then it seems to me that he had insufficient material before him upon which he could have arrived at any conclusion as to who in fact had been practically and commercially successful. That being so, I consider that this was a case where the issues were so clearly distinct that it cried out for a treatment that reflected the relative magnitude of the issues upon which the claimant had failed and succeeded. This the learned judge's order for costs did not do. I consider that the learned judge erred in principle in approaching the order for costs in the manner in which he did. It seems to me that given, as the learned judge accepted, first that the great proportion of the evidence, the disclosure and the costs of the proceedings were directed towards the issue of distinctiveness, and second, that the issue of non-use consumed only a very small proportion of the costs of the action as a whole, then the only other matter which could conceivably be relevant, having regard to the requirements of CPR 44.3, would be any relevant admissible offer. The only relevant admissible offer is that contained in the letter of 31 August 2001 which, put shortly, the claimant did not beat.
5. Mr Bloch suggested that although the offer was one which contained extraneous matters, nonetheless it was proper to consider further correspondence to show which party was in fact being more unreasonable than the other. I would reject this approach to offers of this description. It seems to me that either the offer is met, or it is not; and to expend time on the analysis of what might have happened had one or other party approached the offer in a different way is both time-consuming and ultimately irrelevant.
6. Accordingly, it seems to me the best approach, and the correct approach in this case, is to consider the relative importance in terms of time and money of the two issues and to arrive at a fair allocation of costs having regard to those factors. In my judgment there is a strong reason for saying that Mr West is indeed entitled to the costs of the action which would otherwise be unallocatable as between the two issues; Fullers are in principle entitled to the costs of the issue of distinctiveness and Mr West is in principle entitled to the costs of the issue of non-use.
7. I would consider, having regard to the decision of the learned judge on the substance of the case as a whole and to the evidence that we were shown on the appeal, that a fair estimate of the costs to which Mr West was otherwise entitled would be 10 per cent of his costs. I would therefore consider that an order that Fullers should recover 80 per cent of their costs would be a correct order.
8. The final question which has to be decided is which costs are to be included in that general order. Three orders for costs were made at an interlocutory stage in this action, in which the ultimate manner in which the costs occasioned by the application resulting in the orders were reserved to the learned judge. The learned judge considered that these costs, which were concerned with a survey and its aftermath, should be dealt with as costs in the case. I can see no reason whatever for differing from that conclusion. As it happened, the survey was put in by Fullers. It was evidently insufficiently helpful to receive more than a passing reference from the learned judge and it was not relied on before us. In those circumstances I would include the costs of the three reserved applications in the costs of the action. The judge's order that those reserved costs to be costs in the case is in my view a correct order and should stand.
9. LADY JUSTICE ARDEN: The judge began his judgment on costs in this way:

"In this action I have decided that the attack on the registration of ESB as a trade mark succeeded to a limited extent, that is to say that the registration should be limited to bitter, but not extend to other beers such as lager and the pilsner beer which is the Claimant's primary interest to sell. A number of issues fall for decision this morning, the principal one of which is the issue of who is to bear the costs and what proportion of them."

In the final paragraph of his judgment, the judge said:

"Mr Bloch also invites me to have regard to commercial reality. What the parties are involved in is selling beer rather than collecting or clarifying the scope of trade mark rights. Nevertheless, looking at all the circumstances as I am required to under the Rules, taking account of the fact that both parties have achieved a measure of success and taking whatever guidance I can from the history of the matter including the without prejudice save as to costs offers, it seems to me that the right order to make in the circumstances of this particular case is to make no order as to costs. That is what I propose to do."

I deduce from those two paragraphs, and in particular from the reference in the first of those paragraphs to the proportion of costs and in the second paragraph to the judge's enumeration of factors which had guided him in the exercise of his discretion, that what the judge was doing was awarding each side costs for the issue on which they had won, and then setting them off. On that basis he concluded that the costs had been incurred in equal quantity on either side. As I see it it was not open to the judge to take that course because he found in the course of his judgment that (page 34E):

"The great majority of the evidence of the witnesses, the necessary disclosure and the costs at the hearing were devoted to the attempt by the Claimants to remove ESB from the register simpliciter."

That is all the judge says on that point; but that would indicate that it would not be open to him to conclude that the costs on either side were equal. Indeed Mr Bloch accepts that the majority of costs were incurred on the distinctiveness issue on which his clients lost. Accordingly, as I see it, it was not open to the judge to make the order which he made and it falls to this court to re-exercise the discretion.

10. The other approach which the judge may have been adopting to determine who was, in fact, the winner, or, in terms of CPR 44 who was the successful party. I have two observations about this matter. First, to determine who is the winner, the court is not, in my judgment, entitled to look at the commercial motives of the party and their respective strategies. Their commercial objectives are not one of the matters which is specifically illuminated in CPR 44, although they may directly animate their conduct. On the basis of commercial objectives, both sides in this case claimed to be the winner before the judge. In view of that dispute, as I see it, the judge could not determine that matter and form a view about it. In order to find the winner, the court would have to ascertain which party had obtained something of value to it from the litigation.
11. Secondly, if the judge was minded to proceed on the basis that one party rather than the other was the winner, on a particular issue, then bearing in mind the thrust of the CPR Rules, the judge should, in my view, have looked at the matter of success on an issues basis, and awarded proportions of costs accordingly. I have sympathy with the judge because, judging as best I can from the skeleton argument, neither party put it to the judge that they were entitled to a proportion only of costs of trial. The judge, therefore, had to do the best he could. But as I see it, under the CPR, where each side has won on significant issues, the judge should look to see whether justice can be on an issues basis.
12. The CPR have brought about great change in this regard. Under the Rules of the Supreme Court it was decided in Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, that provided he had not acted improperly or unreasonably the winner was entitled to all his costs even if he raised a plethora of issues on which he was unsuccessful. The potential unfairness of the rule that the winner takes all was highlighted by Lord Woolf in his interim report on Access to Justice (June 1995). Lord Woolf recommended that in making orders for costs the courts should pay greater regard to the outcome of individual issues (Interim Report, Chapter 25). Lord Woolf's recommendations led to the introduction of the CPR Rules.
13. In this case there is no difficulty, as I see it, in determining the incidents of costs on an issues-by-issue basis. There were, as my Lord has explained, two issues in the main and they were separate to all intents and purposes. I agree with what Pumfrey J has said about the letter of 31 August 2001. I also agree with him that the discretion falls to be exercised by this court and that it should be exercised in the manner that he proposes.
14. Accordingly, I agree with the form of order proposed by Pumfrey J including the order as to reserved costs. I note there was no application for any special order in the appellant's favour in respect of those costs.
15. LORD JUSTICE SCHIEMANN: I also agree with the proposed order. I agree that the judge erred in principle. Distinctiveness was an issue of major importance and consumed the majority of the costs. On that issue the defendants succeeded. I also endorse what Pumfrey J said about letters before action. If they offer a deal which is more than the writer obtains from the judgment, then the letter is almost always of no use to the court when deciding questions of costs.
(Judgment on costs of the appeal on costs)
16. MR JUSTICE PUMFREY: Two matters now remain for decision. The first is the question of costs of the appeal on costs, which we have disposed of today; the second is the question of the costs of the substantive appeal. For my part I consider that the costs appeal was a free-standing appeal and it should be dealt with on that basis. I would accordingly give the successful appellant on the costs appeal, Fullers, their costs of the costs appeal.
17. So far as the costs of the substantive appeal are concerned there is very considerable force in the contentions advanced by Mr Bloch in respect of the proper order for costs of that appeal. This can never be more than a matter of well informed impression and it is not normally a matter which will yield to any more sustained analysis. Having listened to the submissions on the costs of the appeal and having considered the brief figures that were produced at the end of Mr Wyand's skeleton argument, for my part I consider that the fair order for costs would be that Fullers receive 65 per cent of their costs of the appeal and cross-appeal.
18. LADY JUSTICE ARDEN: I agree.
19. LORD JUSTICE SCHIEMANN: I also agree.
(Respondent do pay Fuller's costs of the costs appeal; Respondent do pay Fullers 65 per cent of their costs of the appeal and cross-appeal; Respondent do make an interim payment of £200,000).