England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		Rolls Building 7 Rolls Buildings London EC4A 1NL
		02/02/2012

His Honour Judge Birss QC :

1. This judgment deals with an application by the claimant for an order striking out the Defence and Counterclaim of the first and fourth defendants and seeking judgment in the Claimant's favour on the claim and dismissal of the counterclaim. Included in the order sought are orders for injunctions to restrain patent infringement, delivery up, an order for an inquiry as to damages and other relief. The basis of the application is that the first and fourth defendants have failed to comply with an order I made on 14th December 2011 requiring them to pay £45,833.36 to the claimant as the costs thrown away by an adjournment of the trial in this action.
2. The circumstances of the adjournment of the trial are set out in my judgment dated 24th October 2011 [2011] EWPCC 33. I will not repeat them. Having been adjourned, the trial has now been re-fixed. It will be heard starting on 5th March 2012.
3. On that occasion I ordered that claimant's costs thrown away by the adjournment would be paid by the Activ8 defendants and directed that I would summarily assess those costs in writing. I dealt with the costs thrown away in my judgment dated 14th December 2011 [2011] EWPCC 39. I will not rehearse all the matters arising there although certain points will be mentioned below.
4. In this judgment from now on "the defendants" means the Activ8 defendants, i.e. the first and fourth defendants. The second and third defendants settled with the claimants some months ago.
5. The position before me is that the order of 14th December 2011 required the defendants to pay the sum within 21 days, i.e. on or before 4pm on 4th January 2011. No such sum has been paid. The claimant contends that I should strike out the defendant's defence and counterclaim for failure to comply with the order and make the orders I have referred to above. The notice of application was provided electronically to the defendants on 23rd January and hard copies served on 25th January.
6. Before me Mr Richard Miller QC appears for the claimant instructed by Browne Jacobson. The defendants did not appear at the hearing and were not represented. Currently there are no solicitors on the record for the defendants.
7. In advance of the hearing the defendants had been in email correspondence with the claimant's solicitors and Mr Humphries, the fourth defendant, also sent an email to the court. It was possible to interpret Mr Humphries email of 31st January 2012 at 13:10 as an application to adjourn this application altogether. I heard Mr Miller's submissions about that and decided I would not adjourn this hearing. My reasons would be given in due course.
8. I then heard the claimant's application. I decided not to make the order the claimant sought but rather that in the exercise of my discretion the appropriate order to make was an unless order. In other words unless the defendants pay what they should pay by a certain date in the near future, their defence and counterclaim would be struck out. If the payment was not made the claimant would then be able to apply for the judgment it seeks. It seemed to me to be just and convenient to set the date for that further possible hearing now so that the defendants would know precisely where they stood.
9. This judgment gives my reasons for refusing the adjournment and my reasons for making the orders I have made.
10. Of course in fact, following the making of the unless order, the order I have made today provides that the remainder of the claimant's application is indeed adjourned but that is a very different kind of adjournment from the one sought by the defendants. The defendants' seek to adjourn all consideration of the claimant's application altogether.

Adjournment of all consideration of the claimant's application

11. Yesterday (31^st January) Mr Humphries sent the following email to the claimant's solicitors and the court:

Please find enclosed my "statement of fitness for work" from my doctor which was issued yesterday. Unfortunately, due to this illness, I will not be able to attend the hearing on 1st February 2012. I was hoping I could be well enough to attend last minute, hence the lateness of my communication. Please accept my sincere apologies in this matter.

In regard to the arguments put forward by Browne Jacobsen in their most recent correspondence, we strongly contest these matters, in particular in regard to the case being dismissed, due to the weak financial position of activ8-3D and myself. We have explained to the claimant, that we simply cannot meet this payment of £46,000. We wish to have the opportunity to discuss these matters in full, either at the trial scheduled for 5th March 2012, or at another appointed hearing set by the court.

For clarification, we intend to revoke Musion's GB patent, and we wish to continue on with this trial. We believe if we are not allowed to represent ourselves at court with our witness's and statements, this would prejudice our ability and opportunity to win this court case.

We politely ask the court to consider our position in this matter.

--

Warm Regards,

Simon Humphreys

Executive Director

12. Attached to the email is a copy of a Doctor's note dated 30^th January 2011 which indicates that Mr Humphries doctor assessed his case on 30^th Jan and advised him that he was not fit for work because of back pain and that this will be the case for two weeks. The email was also copied to Mr Paul Andrews. He is a director of the first defendant (Activ8) along with Mr Humphries. Both Mr Andrews and Mr Humphries were present in court on 24^th October when the trial was adjourned and Mr Andrew spoke on behalf of Activ8 at that hearing. Although formally Mr Humphries represented himself on that occasion, in substance Mr Andrews spoke on Mr Humphries's behalf as well since the positions of the two defendants were the same.
13. In reply to Mr Humphries's email, the claimant emailed Mr Humphries (and Mr Andrews). This included the following:

Would you please inform us whether you are prepared to appear by telephone at tomorrow's hearing if the court was minded to allow it? By way of confirmation, we will attend in person.

In any event, we assume that Paul Andrews will be attending the hearing tomorrow on behalf of Activ8-3D Limited as on previous occasions. We have received confirmation that the hearing will take place in Court 6.

14. The claimant received an "out of office" response from Mr Humphries' mailbox stating that he would be out of the office until 14^th February. From Mr Andrews the claimant received the following message:

With reference to your email, for this hearing scheduled 1^st February 2012, Simon was to attend on behalf of Activ8-3D Ltd and himself of course, as I was /am not available to attend on this date, due to other commitments.

15. The claimant's solicitor Mr Cushley also made efforts to contact Mr Humphries' by telephone and SMS text message but to no avail.
16. First thing this morning Mr Humphries sent an email to the claimant's solicitors (copied to Mr Andrews) as follows:

Dear All, As I have outlined I am unable to attend this hearing due to my illness. On advice, I am not prepared to appear by telephone. Warm Regards, Simon Humphries

17. In my judgment these emails do not provide a good basis to adjourn all consideration of the claimant's application for the following reasons:

i) First, whatever the position of Mr Humphries himself, there is no good reason why Activ8 is not represented at this hearing at least by telephone. Mr Andrews has represented Activ8 in the past. All that is said is that he is not available due to "other commitments". No detail is provided and I do not place any weight on that. Even if Mr Andrews could not attend in person, there is no good explanation why he could not have attended by telephone. Facilities can be made for that.

ii) Second, as regards Mr Humphries, the position concerning his health is unspecific. No detail is provided apart from the Doctor's note. It is not explained why Mr Humphries could not attend the hearing by telephone. As to attending by telephone, all Mr Humphries says is that "on advice" he is not prepared to attend that way. In other circumstances one might be prepared to make some allowances for a statement like that but I am not prepared to do so in this case. Mr Miller reminds me that in my judgment on the preliminary issue ([2011] EWPCC 12) I ruled that Mr Humphries had not been a satisfactory witness. It would not be right to disbelieve what Mr Humphries has said here and I will accept Mr Humphries's statement as true as far as it goes. However it does not go far enough. The statement does not say that Mr Humphries cannot attend by telephone but rather that he is not prepared to do so, on advice. There is no indication who advised Mr Humphries or the nature of that advice: was it medical advice, legal advice or even the advice of Mr Andrews?

iii) Third I also bear in mind the general timing. When I made the costs order which has not been complied with, it was intended to apply before trial (see paragraph 7 of my judgment of 14^th December). The sums were due on 4^th January. The trial is due on 5^th March. Adjourning this application risks prejudice to the claimant. The sooner this matter is resolved one way or the other, the earlier the claimant will know whether the trial is to go ahead. That may well lead to a substantial saving in costs.

iv) Fourth, a lesser consideration but one which is nonetheless relevant is that I do know what the defendants' position is in relation to the claimant's application. Of course if they attended then further submissions would be made but the defendants have made their essential point clear. They contend that they simply cannot meet the payment.

18. Accordingly I will hear the substance of the claimant's application.

Reasons for making the unless order

19. Mr Miller cited the judgment of the Court of Appeal (Laws LJ and Sir John Chadwick) in Crystal Decisions (UK) Ltd v Vedatech [2008] EWCA 848. In that case the court was considering applications for permission to appeal from orders of Patten J. On 6^th December 2006 Patten J had ordered that unless the defendants paid the claimant the sum of £15,600 in costs which had already been ordered to be paid by Lightman J on 30 November 2006, they be debarred from defending the proceedings. The defendant did not pay and ultimately Patten J gave judgment on the claim. The defendant appealed. The principal issue on the appeal was whether Patten J had been wrong to make the unless order. Patten J had reminded himself of the need to consider the rights conferred by Art 6 of the ECHR (right of access to the court) and had done so, particularly focussing on the question of whether the sum ordered would be impossible to pay. He held there was nothing before him which would justify a finding that the sum would be impossible to pay or a finding that a requirement to do so within a reasonable period would in some way interfere with the defendants' ability to conduct the litigation. The Court of Appeal held that Patten J's approach in that respect could not be faulted.
20. Sir John Chadwick (with whom Laws LJ agreed) went on to consider the matter in general as follows:

17. But thirdly – and, to my mind, most importantly - the court's ability to make interlocutory costs orders following, in particular, the Access to Justice reforms in 1998, is a sanction which is available to it in order to encourage responsible litigation. The court marks what it regards as an irresponsible application by an immediate order for the payment of costs. That is intended to bring home to a party - when considering whether to make an application - that an unsuccessful application may carry a price which will have to be paid at once. If the court is not in a position to enforce immediate interlocutory orders for the payment of costs which it was thought right to make, then the force of that sanction is seriously undermined. It is important that, in cases where the court thinks it right to make an order for immediate payment on an interlocutory application, that it does have the power - and can exercise the power - to ensure that order is met. For the reasons which Patten J explained, the only effective sanction in a case of this nature is to require payment of interlocutory costs as the price of being allowed to continue to contest the proceedings. Unless the party against whom an order for costs is made is prepared to, or can be compelled to, comply with, that order, the order might just as well not be made.

18. That point attracted the judge, He said this, at paragraph [16] of his judgment:

"In any event I take the view that orders of the court, even in relation to interim costs, require to be complied with and that, unless there is some overwhelming consideration falling within Article 6 that compels the court to take a different view, the normal consequence of a failure to comply with such an order, is that the court, in order to protect its own procedure, should make compliance with that order a condition of the party in question being able to continue with the litigation."

For my part, I would hold that - whether or not a statement in such general terms can be supported – the proposition can be supported in a case (such as the present) where there is no other effective way of ensuring that the interim costs order is satisfied. That, of course, is always subject to what the judge referred to as the overwhelming consideration falling within Article 6: that orders requiring payment of costs as a condition of proceeding with litigation are not made in circumstances where to enforce such an order would drive a party from access to justice. But, for the reasons that the judge explained and to which I have already referred, this was not such a case.

21. Mr Miller placed emphasis on the following points arising from this passage. First although couched in terms of the costs of an unsuccessful application, the general point made by Sir John Chadwick in paragraph 17 is applicable to other steps in litigation. I agree. Immediate orders for costs are made in part to encourage a sensible approach to litigation and to bring home to parties that certain acts in litigation carry a price which will have to be paid at once.
22. Second Mr Miller emphasised the latter part of paragraph 17. If the court cannot enforce interlocutory costs orders the force of the sanction is undermined. The only effective sanction there was to require payment of interlocutory costs as the price of being allowed to continue to contest the proceedings. It cannot matter whether the person is in the position of a defendant seeking to contest the proceedings or a claimant seeking to advance them. In the case before me the defendants also have a counterclaim for revocation of the patent. Their defence and counterclaim go hand in hand.
23. Third Mr Miller pointed out that while Sir John Chadwick was not prepared to address the generality of Patten J's statement of principle (paragraph 18) which referred to the "normal" consequence of failure to comply and "overwhelming" considerations within Art 6, nevertheless in a case like the present where there was no other effective way of ensuring that the interim costs order is satisfied, the statement could be supported.
24. I derive the following principles as being applicable to the case before me:

i) The matter is always one for the court's discretion and all relevant circumstances fall to be considered;

ii) If the court is not in a position to enforce interlocutory costs orders the force of the sanction is seriously undermined;

iii) Other options apart from the order sought must be considered

iv) It is always important to have regard to Art 6 ECHR. Orders requiring payment of costs as a condition of proceeding with litigation are not made in circumstances where to enforce such an order would drive a party from access to justice.

25. The circumstances leading up to today are dealt with in the previous judgments I have referred to. There has been no appeal from my previous judgment whereby I ordered the defendants to pay the costs thrown away by the adjournment caused by their behaviour. The costs were ordered to be paid by 4^th January 2012. That order was deliberately made to require payment in advance of trial. The defendants have not paid the costs ordered. The defendants' email of 31^st Jan states that "we simply cannot meet this payment of £46,000". I will consider the defendants' finances below.
26. The order the claimant seeks is an immediate order striking out the defence and counterclaim and giving judgment for the claimant. I am not prepared to make such an order nor am I prepared to make an alternative order proposed by Mr Miller, namely to strike out, enter judgment and then give the defendants liberty to apply to set it aside. Neither order would be appropriate. At this stage no sanction for failing to pay the costs ordered has been provided for by the court. In my judgment it would be wrong in principle simply to order now that the statement of case are struck out and judgment entered. The defendants need to be given a chance to appreciate that if they do not pay the sum ordered, the consequence will be that their defence and counterclaim are struck out and following that, judgment is likely to be entered against them and in the claimant's favour. An unless order achieves that objective. The defendants now know that if they do not comply with the order, the consequences specified will flow. I will set the period for the unless order at 7 days. It is a short period but justified in my judgment. I bear in mind particularly the imminence of the trial and the legitimate desire on the claimant's part to know where they stand. The defendants assert they cannot pay in any event (again I will consider that below). If the defendants are not going to pay the sum ordered then the earlier that happens the more costs will be saved on the claimant's side.
27. I will also set the date for the hearing at which the claimant's application for judgment will be dealt with on the assumption that no payment is made. That will be the afternoon of Tuesday 14^th February. There are a number of advantages in doing this now. It is a period three clear days after the date the payment is due and so the defendants will have a proper opportunity to prepare. The defendants now know precisely where they stand. It is also the day after the end of the two week period starting on the date of Mr Humphries' doctor's note. That note was dated 30^th January and stated that he would not be fit for work for two weeks. It is also the earliest available date provided for in Mr Humphries's out of office email message.
28. Mr Miller also referred to the other options open to a litigant to enforce orders for payment such as insolvency proceedings and the like. They all take considerable time. I accept Mr Miller's submission that particularly in the context of this case with an impending trial, an unless order is an appropriate order rather than requiring the claimant to use these other avenues.
29. The claimant also referred to further costs which are likely to fall due in future and are unlikely to be paid. There is an interim award of £40,000 which I ordered to be paid at trial (see also paragraphs 27 and 29 of my judgment of 24^th October) as well as the balance of claimant's costs of the preliminary issue itself which are likely to be over £250,000. The argument is that given that the defendants have been representing themselves for some time it is likely that even if they won the forthcoming trial, the balance of costs may well still be in the claimant's favour. In my judgment these are not relevant factors and I will not take them into account. The matter before me is the failure to comply with an order already made. I will not speculate whether further orders may or may not be complied with.
30. Accordingly, subject to Art 6, this seems to me to be a plain case for an unless order of the kind I have contemplated above.
31. The particular factor which falls to be considered under Art 6 is the defendant's contention that they cannot make the payment. So on their behalf it can be said that since they cannot pay, to make their continuation with the proceedings conditional on their compliance with an order for payment would drive them from access to justice. It would be wrong and would be a breach of Art 6.
32. In my judgment everything turns on the defendants' assertion that they cannot pay. Mr Miller submits that I should not be satisfied that the defendants cannot, as opposed to will not, pay the sum ordered. He makes a number of points.
33. First, the defendants first contended that they could not pay sums ordered by way of costs at the hearing to decide the costs of the preliminary issue on 16^th June 2011. On that occasion the defendants produced witness statements of Mr Humphries and Mr Andrews intended to support that submission. The submission was that they could pay essentially nothing at all. On that occasion the claimant submitted that the evidence did not establish that proposition. The evidence was vague on various points. Despite the defendant's submissions I made an order that the defendants paid £30,000 within 28 days. That sum was paid. Mr Miller submits today that the payment in July 2011 vindicates the claimant's submissions at the time.
34. Second, when I summarily assessed the costs thrown away I was faced with a further submission from the defendants that they had no means to pay. I addressed that submission in paragraphs 5 and 7 of my judgment. I said:

5. [… ] Second the defendants argue that their current financial status is poor and they ask to defer the costs until the trial in March. […]

[…]

7. As regards the second point, the defendants have produced no evidence to back up their contention about finances. To some extent this also is an attempt to re-argue the issues on 24^th October 2011. The reason for summarily assessing the costs thrown away was so that an order for their payment could be made now and in advance of the adjourned trial. The question of the defendants' financial status has been debated before in this litigation and the defendants know that if they wish to make the point they need proper evidence. There is none before me. The order I will make will be an order that the sum I will assess be paid within 21 days

35. This is yet another occasion on which the defendants have repeated the assertion about their means but have provided no proper evidence on the matter.
36. Third, in addition to the payment of £30,000, there are other indications that the defendants have access to funds:

i) Mr Miller submitted that it is apparent the defendants have access to legal advice. That is clear but I do not regard it as concrete evidence of access to funds. The advice could be pro bono although the defendants have never said that it is.

ii) The day after the trial was adjourned, which was another occasion on which they told the court they had no money, the first defendant started fresh legal proceedings before the EPO against the claimant in respect of another of the claimant's patents. (EP 2 141 540) The patent may be in the same family as the patent in suit but that does not matter. The first defendant has professional representation in those proceedings.

iii) Since the trial of the preliminary issue the first defendant has found the means to move offices and take a lease on a studio in Portland Place in the West End of London. As Mr Miller submits, that is hardly a cheap location.

37. I have re-considered the evidence filed on the defendants' behalf in June on which the assertion about lack of means was based. There is no other evidence before me beyond assertions. The evidence in June was not sufficiently precise to establish the proposition in any event. For example it is frequently qualified by words like "in general" and "most of". Moreover that evidence was focussed on June 2011 and not today. The defendants had good reason to file up to date evidence on the point when I summarily assessed the costs but they did not do so. I have no up to date evidence before me today either. I am not satisfied that the defendants cannot pay the sum ordered.
38. Mr Miller reminded me of the observations of Peter Gibson LJ in Keary Developments v Tarmac Construction Ltd [1995] 3 All ER 534 that the court should consider not only whether the party can fund litigation out of its own resources but whether it can raise money from other sources such as backers. Although made in the context of security for costs in my judgment the observations are equally applicable in a case like this one.
39. The defendants' assertion here that they cannot pay is not sufficiently cogent to mean that I should not make an unless order in this case. I am not satisfied that this is a case in which the defendants are actually unable to pay as opposed to a case in which the defendants are choosing not to take steps to arrange for the payment of the sums they should. Looking at matters overall, a requirement to pay the costs as the price of continuing in these proceedings is not an unwarranted interference with the defendants' access to justice.
40. Mr Miller also submitted that the defendants launched, either mendaciously or entirely recklessly as to the truth of the allegations a wholly unmeritorious and highly expensive preliminary issue. The costs they paid in June were part of the result of that. He argued that the defendants have had access to justice in this case but chose to squander it by the route of the preliminary issue. While I have considerable sympathy with Mr Miller's submission I do not need to consider it in deciding the question of the unless order. It seems to me that the issue of the defendants' ability to pay is the decisive factor.

Conclusion and costs

41. I will make an unless order against the defendants. If the sums are not paid within 7 days their Defence and Counterclaim will be struck out without further order.
42. At the hearing I also held that the defendants should pay the costs of the claimant's application to date. These were summarily assessed in the sum of £9,000 (no costs cap applies).
43. Mr Miller submitted that the costs sum should be added to the amount to be paid with 7 days under the unless order. I agree. The defendants have, with open eyes, got themselves into this position on costs. The costs of this application so far have been incurred because the defendants have not complied with an order of the court. Their explanation why they have not complied is insubstantial. It is an entirely appropriate case for an immediate costs order.
44. If the costs now to be ordered are not added to the sum due under the unless order then there is a real risk they will simply not be paid even if the sum already due is paid. The whole exercise will drag on up to trial, which is in just over four weeks time. In my judgment the defendants need to have it brought home to them that their conduct is running up substantial costs. I will include the costs incurred so far on this application within the sum to be paid under the unless order.