England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2 A 2LL
		26 January 2005

Mr Justice Laddie:

1. On 21 December last year I gave judgment in this matter, in which IPC Media limited was the claimant and Highbury Leisure Publishing Limited was the defendant.
2. The defendant was said to have infringed copyright in the production of its magazine called "HOME". It was said that the front covers of a small number of issues of HOME infringed copyright in front covers of issues of the claimant's magazine "IDEAL HOME" and that, similarly, there were infringements of the copyright in internal articles of HOME which were said to be reproductions of articles in IDEAL HOME.
3. The claims, at least at the trial, were almost entirely claims based upon artistic copyright. The trial lasted some three weeks and in my judgment I explain why, in my view, the claimant's case was wholly without merit.
4. Now I have before me a dispute as to the form of order which should be made pursuant to that judgment. The parties are agreed that I should dismiss the action with costs and the claimant does not seek permission to appeal. The latter, no doubt, is due, in large part, the fact that I made strong findings of fact that there was no copying in this case. Furthermore, the claimant has agreed to an order for an interim payment of costs on account in the sum of 350,000.
5. However, certain disputes still exist. The first relates to whether or not I should accede to the defendant's application for an order for interest at the rate of 1% above base rate from the time of payment of each invoice rendered to the defendant down to this order, with interest running at the Judgment Act rate thereafter until payment. Second, there is a dispute as to whether I should accede to the defendant's application for an order that its costs be assessed on the indemnity basis as from 9 July 2003. That date was three months after the defendant had made a Part 36 offer on 9 April 2003 and five months after service of the defence.
6. It is convenient to consider the two issues in that order; that is to say, interest first and indemnity costs second.
7. Mr. Mellor, for the defendant, draws my attention to an unreported decision of the Court of Appeal, Bim Kemi AB v. Blackburn Chemical [2003] EWCA Civ 889, 24 June 2003, in which the Court of Appeal gave guidance on the question of whether or not interest on costs should or should not be ordered. Whatever the position may have been under the Rules of the Supreme Court, the CPR, at CPR 44.3, specifically gives a court the power to order interest on costs from or until a certain date, including a date before judgment. In the Bim Kemi case, Waller LJ said as follows:

"Mr. Onslow in his written submissions suggested that there should be no order for payment of interest on costs. He suggested this would be a most unusual order and further suggested that such an order is never made. It is clear from CPR 44.3(6)(g) that the rules intended that the court should have power to award interest on costs and Mr. Onslow did not press these submissions orally. In any event in principle there seems to be no reason why the court should not do so where a party has had to put up money paying its solicitors and been out of the use of that money in the meanwhile. It furthermore seems to us that Mr. Wilson is right that there is no reason why Blackburn should not have interest at the judgment rate as from 30 January 2002, that being the date of the order of the trial judge. That must be so in our view because if the judge had made the order which wee now hold he should have made in Blackburn's favour, interest would have been payable at the judgment rate from the date of that order down to the date of payment - see Hunt v R M Douglas (Roofing) [1990] 1 AC 398. That leaves the question of interest on costs incurred prior to that date. It seems to us that once again, 1% over base rate is the appropriate rate of interest, that interest to run from the date of each invoice."

8. Based upon that, Mr. Mellor says that this is a case where there is every reason why the court, in the exercise of its discretion, should order interest on costs on the same basis, that is to say, 1% over base rate from the date of each invoice and at judgment rates after judgment.
9. Mr. Howe QC, for the claimant, argues to the contrary. He says that there has to be a special case made out before the court overturns the well-established practice of not ordering interest particularly in relation to the period before judgment. He says that was the way it always was prior to the CPR and that, although he accepts that CPR 44.3(6)(g) bestows upon the court a jurisdiction to order interest, it does not mandate that the established practice should be changed.
10. I agree with Mr. Howe that there is nothing in CPR 44.3(6)(g) which indicates that there should be a change in practice, but the arguments that he advances are effectively the arguments which were advanced, at least in writing, by Mr. Onslow, on behalf of the paying party in the Bim Kemi case, which, to the obvious satisfaction of Waller LJ, were not repeated in oral argument.
11. Mr. Howe says that the paragraph in Waller LJ's judgment does not explain why interest on costs prior to the date of judgment should be ordered. I am not sure that I agree but, in any event, it seems to me that the reasoning is quite simple. The purpose of an order of costs is to compensate the winning party and to relieve him of or to reduce the financial burden of having had to conduct an action which would have been avoided had the losing party given in earlier.
12. It was no doubt the practice under the Rules of the Supreme Court that interest before judgment was not ordered. Looked at now, perhaps it is possible to regard that practice as non-commercial. The purpose of a costs order is to compensate the winning party for the real cost of having conducted the litigation and the real cost is not measured simply by adding up mathematically the bills that it has paid to or agreed to pay to its lawyers. A pound paid in 1980 may be the same coin that is paid in 2005, but it is not the same in value. What the award of interest on costs allows the court to do is to ensure that the receiving party is compensated properly for the real cost to it of having conducted the litigation successfully.
13. In my view, the discretion to award interest on costs is a broad one. Courts can take into account all the circumstances in coming to a conclusion as to what to do. In my view this is a case where there is every reason for the defendant to get proper compensation for the real cost to it of conducting this litigation and I will make the order for interest as sought by it.
14. This, then, takes me into the question of indemnity costs. For many years it has been thought that indemnity costs could only be ordered where the paying party could be seen to be guilty of some sort of improper behaviour, moral turpitude, or the like. Those views now have to be looked at again in the light of the decision of the Court of Appeal in Excelsior Commercial and Industrial Holdings Ltd v. Salisbury [2002] EWCA Civ 879.
15. It is important to bear in mind that an order for indemnity costs is not to be regarded as a penalty imposed on the paying party. It is still compensatory. No award of indemnity costs can result in the receiving party receiving more than it has spent or has become obliged to pay. The question is to what extent the paying party has to meet the totality of the bill incurred by the receiving party. It is always compensatory.
16. That said, in the Excelsior case, the Lord Chief Justice went through the factors which can be taken into account in deciding whether indemnity costs should be awarded. He pointed to the fact that it was necessary to look at the conduct of the parties. He made it clear that it was not a necessary precondition that it be shown that the paying party had behaved improperly or unreasonably. He said:

"This court can do no more than draw attention to the width of the discretion of the trial judge and re-emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. This is the critical requirement."

17. It is that requirement which I have to consider in this case.
18. I have said already that this is a copyright action. Most lawyers experienced in copyright cases realise that most such actions are comparatively simple and do not normally raise complicated issues of fact. Only rarely do they raise complicated issues of law. In the overwhelming majority of cases there is no doubt that copyright subsists and the question is really one of whether or not the defendant has copied and whether that copying has been to a substantial extent. As I have indicated, this case is all about artistic copyright so, at the end of the day, it comes down to consideration of whether or not the visual features of the defendant's works have been copied from the claimant's works and whether the copying, if any, was extensive enough to represent a substantial part of the copyright works relied on.
19. An outsider might therefore think that this was a normal case of copyright infringement, but it is not. Some flavour for how unusual it is is the fact that, so far, the parties have run up a combined bill of £1.8 M in conducting this litigation. I have little doubt that the major reason for that was the way in which the claim was advanced.
20. I do not wish to go through the whole of my judgment again and point to the extremely thin claim that the claimant had, nor its wide and nebulous ambit. It was difficult in the extreme, even at the trial, to see the precise limits of what was alleged against the defendant.
21. As I pointed out in my judgment, the defendant in this case took what I consider to be a commendable, but comparatively unusual, approach in dealing with the claim made against it. Many defendants simply deny copying and put the claimant to proof. Whether or not that is a satisfactory way of pleading a defence in a copyright case I do not need to consider today, but it was not the approach adopted by the defendant. Instead, it put in a lengthy defence setting out in great detail how it said it had designed its magazine independently and without regard to the claimant's magazine.
22. As Mr. Mellor told me during the trial and as is recorded in my judgment, the defendant hoped that by making it clear beyond misunderstanding that it had used its own resources without copying, the claimant would realise the error of the claim launched and would withdraw the pleading. For example, it was pointed out that certain features alleged to have been copied by the defendant could not have been copied because the defendant could show that it had used those features before the copyright work upon which the claimant relied had come into existence. Even the most ambitious claimant could not argue that a defendant could copy in anticipation of the creation of the copyright work.
23. However, this did not deter the claimant. It simply adjusted the particulars of claim to assert, broadly, in respect of any feature which the defendant proved it had and used before the relevant copyright work upon which the claimant relied, that it must have been copied from some earlier work that the claimant had. Based on this, the claimant introduced into the proceedings a large number of other, earlier, magazines in which individual features could be seen to have been used by the claimant at an earlier date.
24. I am prepared to assume that the claim made against the defendant was made by the claimant bona fide. It was, however, in my view, an extraordinarily high risk strategy. It was Macawber-ish in the hope that something might turn up. In my view it was always immensely weak and drafted in such a wide way that the defendant inevitably came to the trial not knowing what it was, at least in all its details, that the claimant put against it. That also is referred to in my judgment. Mr. Mellor, in a forensic flourish at the end of his skeleton argument before me today, says this:

"What more can a defendant do to protect itself against what it believes to be and what turns out to be an unreasonable claim, pursued in an unreasonable fashion?"

25. Here, not only did the defendant put in an extensive defence setting out how it had arrived at its own magazine design, but it tried to encourage the claimant to take this seriously by making an offer under Part 36 to only ask for three quarters of its costs if the claimant would drop the action. I do not think that the offer, as such, makes a great deal of difference to the approach that I should adopt to this case. All that it does emphasise is the extent to which the defendant kept on knocking at the door trying to persuade the claimant to look with unclouded eyes and objectively at the allegations it had made.
26. This has been an extraordinarily expensive action. I think it would be contrary to the interests of justice if the defendant were not properly and fully compensated for the cost it has incurred in fending off a thin and, in some respects, far-fetched claim brought by the claimant. I have no hesitation in ordering indemnity costs.

MR. MELLOR: My Lord, we are much obliged. In the draft order, as I indicated, the contentious points were in square brackets.

MR. JUSTICE LADDIE: Yes. You have not asked for indemnity costs back to the stage of the defence; you have based it from after the offer that you made three months after that. I doubt whether you needed to make that concession but it is a concession you have made and Mr. Howe has not addressed the point, so I will make the order that you sought.