Litigation Newsflash - April 2016

Commercial Litigation

When can you be deprived of costs where you better your Part 36 offer?

The Claimant had achieved a more advantageous result than her Part 36 offer at trial, but only one of her two allegations of negligence was made out. She contended that she should have all her costs from the expiry of the relevant period on an indemnity basis. The Defendant said this would be unjust and the costs should be awarded on an issues-basis due to the failed allegation. The judge at first instance said that Part 36 did not prevent an issues-based or proportionate costs order, and it was just to make such an order. He therefore deprived the Claimant of all of her costs of the second, failed, allegation. The Claimant appealed.

The Court of Appeal found the judge should have addressed the question of costs incurred before and after the effective date:

• As to costs before that date, Part 44 applied. The failed allegation had not been pursued unreasonably and both allegations related to the same event. Failing on some allegations is not unusual. As such, the Claimant should not have been deprived of part of her costs.
• As to costs after that date, the provisions in Part 36 providing for indemnity applied to all of those costs unless this was unjust. Part 36 did not prevent an issues-based or proportionate costs order,

but a successful Claimant should only be deprived of all or part of her costs if to award those costs would be unjust in all the circumstances of the case.

Consequently, the Claimant should be awarded all her costs before the effective date and all of her costs afterwards on the indemnity basis. The trial judge should have taken into account the fact that the Defendant could have avoided all of the costs of the trial by accepting the Claimant's Part 36 offer.

Webb v Liverpool Women's NHS Foundation Trust [2016] EWCA Civ 365

Fees double in the Court of Appeal

From 18 April 2016 a number of fees for bringing civil appeals have more than doubled as follows. The fee has increased from £235 to £528 for:

• application for permission to appeal or for an extension of time for appealing;
• filing a respondent’s notice; and
• filing an application notice.

The fee has increased from £465 to £1,199 for:

• filing an appeal notice where permission to appeal is not required or has been granted; and
• filing an appeal questionnaire.

Although the increases are not as significant as the increases from March 2015 for issuing a claim, there may be some reduction in the number of speculative permission to appeal applications from impecunious litigants.

Consumer

CMA takes action on online reviews and endorsements

The Competition and Markets Authority (the CMA) published an open letter in April to marketing departments, agencies and their clients reminding them of the need to ensure that online reviews and endorsements are being used in line with consumer protection law.

The CMA's has previously reported that online reviews and endorsements play a significant role in informing consumer buying habits with an estimated £23 billion pounds of consumer spending potentially being influenced. The report went on to highlight serious misgivings about the industry and in particular the following practices which represent a breach of consumer protection law:

• Businesses creating fake positive online reviews about themselves or fake negative online reviews about their competitors
• Businesses commissioning third parties to write fake online reviews
• Businesses incentivising consumers to write positive reviews
• Businesses paying to use editorial content to promote products/services without making clear that the content is sponsored.

Under consumer protection law it is an offence to write or commission any kind of fake review or to not make clear if an endorsement is sponsored (ie paid for).

The CMA has secured undertakings from two marketing companies, Starcom Mediavest and TAN Media, after they were found to have organised undisclosed endorsements in online articles and blogs on behalf of their short term loan provider client, Myjar. The companies have signed undertakings to confirm that they will ensure all future advertising and other marketing in articles and blogs that it administers is clearly labelled or identified so that it is distinguishable from the opinion of a journalist or blogger. In addition the CMA has warned 13 other marketing companies, 20 businesses and 33 publishers about the need to ensure that paid for content remained distinguishable from editorially controlled opinion pieces.

Trading law

Update: Pricing Practices Guide review

Following the consultation in relation to the draft revised Pricing Practices Guide, we are waiting for the publication of a summary document giving an analysis on the comments received. There is currently no deadline for the publication of this document and the revised Pricing Practices Guide.

Insolvency

Debtors' bankruptcy applications

From 6 April 2016, debtors are no longer able to petition the court for their own bankruptcy. Instead, they must now make an online application to an adjudicator, a new insolvency office, appointed by the Secretary of State and sitting within the Insolvency Service, who will consider the application.

If a debtor's application includes all the prescribed information, and is considered appropriate, the adjudicator will make a bankruptcy order. Although the adjudication process is an administrative rather than judicial process, the resulting bankruptcy order has the same statutory force as one made by the court.

The new procedure removes the courts from the mechanics of making a debtor's bankruptcy order. This is for two main reasons. Firstly, debtor's bankruptcy petitions were granted in over 96% of cases meaning that the vast majority of applications are routine in nature and therefore do not necessitate the involvement of the courts. Secondly, the introduction of debt relief orders for low liability, minimal asset cases has seen a decline in the number of debtor bankruptcy petitions.

The changes have also meant a consequent revision to the Land Registry's Land Charges Service. The process for bankruptcy petitions issued by creditors remains unchanged.

Ending of insolvency exemption for success fees and ATE insurance premiums

As trailed in previous Newsflashes, from 6 April 2016, proceedings brought by liquidators, administrators and trustees in bankruptcy to recover the assets of the insolvent estate will no longer be excluded from the effect of:

• Section 44 of Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012) which removed the recoverability of success fees in CFAs; and
• Section 46 of LASPO 2012 which abolished the recoverability of ATE insurance premiums.

With a consequent rush to get funding agreements agreed before this deadline, it remains to be seen how these changes will affect the insolvency asset recovery landscape moving forward.

Intellectual Property

Jack Wills v House of Fraser – Clarification on how to assess unlawful profits

Where following an intellectual property claim, the choice is to seek an account of profits, the general principles have been restated by the Court of Appeal in such decisions as Design & Display Ltd v. OOO Abbott [2016] EWCA Civ 95 and Hollister Inc. v Medik Ostomy Supplies Ltd [2012] EWCA Civ. 1419. Now in a decision by HH Judge Pelling handed down on 21 March 2016 in respect of Jack Wills Limited v. House of Fraser (Stores) Ltd [2016] EWHC 626, these principles relating to an account of profits have been applied to a trade mark dispute.

Background

On 31 January 2014, Mr Justice Arnold had ruled ([2014] EWHC 110 Ch) that the use by House of Fraser Stores (“HOF”) of an anthropomorphised pigeon logo, (the “Logo”, shown below right) infringed the registered cock pheasant trade mark, (the “Mark”, shown below left) owned by Jack Wills.

The High Court had held that the use by HOF of the Logo in relation to some of the shirt products which HOF sold under its established own label LINEA brand, infringed Jack Wills’ registered rights in the Mark in that:

• there is a likelihood of confusion on the part of the average consumer in accordance with Article 5(1)(b) Trade Marks Directive (the “TMD”) and Article 9(1)(b) Community Trade Mark Regulation (the “CTMR”); and

• use of the Logo will have caused in the minds of some consumers a “..subtle but insidious transfer of image…” from the Mark to the Logo and hence from Jack Wills’ goods to HOF’s goods regardless of whether or not HOF had intended such a transfer. Accordingly, HOF had taken unfair advantage of the reputation of the Mark and had thus also infringed the rights of Jack Wills under Article 5(2) TMD and Article 9(1)(c) CTMR.  Arnold. J held that this was “…a classic case of a retailer seeking to enhance the attraction of its own brand goods by adopting an aspect of the get up of prestigious branded goods…”.

What portion of deductible general overheads should be deducted?

The judge held that when deciding what is a fair proportion of the deductible general overheads that are to be deducted (described in the judgment as the “Overheads Apportionment Issue”), in this instance it was better to divide the deductible costs by total sales and then apply the resulting percentage to the infringing sales (the so-called “Sales Revenue Basis”). He rejected the proposition for a metric that involved dividing the deductible costs of the total sales area of HOF’s business and multiplying that figure by the area occupied by the infringing products (described as the “Square Footage Basis”).

Identifying the impact of the infringing act

The next step was to make an apportionment so as to reflect that the account is in respect of the act of the infringement, rather than the sale of the goods with the Logo (called the “Infringement Apportionment Issue”). In this regard, conscious that the LINEA brand and substantially similar goods continued after HOF had ceased use of the Logo, the judge (who had previously stated that he did not demur from the findings of Mr J ustice Arnold), held that:

“…In my judgment it is simply not possible on the evidence to conclude that the infringement complained of drove the sale of the infringing product or was the essential ingredient in the infringing product…There is no evidence that the inclusion of the Logo had any significant or lasting effect on the sales of the products concerned…”.

Looking at usual trading margins and how HOF would generally pay a royalty rate of 1.5% on sales for a bare trade mark licence, the judge held that Jack Wills should recover 41% of what is the resultant net profits earned from the infringing sales after the relevant deductions.

Defamation and Privacy

High Court upholds strict one year limitation period in libel claim

In the case of Lokhova v Tymula [2016] EWHC 225 (QB), Mr Justice Dingemans refused to exercise the Court’s discretion to dis-apply the limitation period in a libel claim.

Section 4A of the Limitation Act 1980 (the Act) prescribes that claims in defamation must be brought within one year from the date on which the cause of action accrued which in libel is the date of publication. Section 32A of the Act gives the Court a discretionary power to exclude the one year limitation period.

The Lokhova v Tymula case arose following disclosure of documents in a separate Employment Tribunal (ET) claim involving the parties. The Claimant and Defendant were former colleagues and it was alleged that the Defendant sent two emails dated 21 and 22 September 2011 which were defamatory of the Claimant. The emails only became known to the Claimant in October 2012 when they were handed to the Claimant in the ET disclosure process. The Claimant issue libel proceedings in November 2012 – after the one year limitation date had passed.

Dingemans J took account of (a) the delay in the Claimant issuing a claim once she had become aware of the facts which may have given rise to a libel claim; and (b) the weakness of her claim that the publications were malicious. He also gave consideration to the prejudice to the Defendant in being involved in expensive and time consuming litigation which, on the facts, would have been more extensive than simply considering the two publications complained of. Dingemans J held that the Claimants claim, on balance, had a weak prospect of success and the balance of prejudice favoured applying the one year limitation period.

This case serves as a useful statement of what factors the Court will consider when asked to dis-apply the one year limitation period. It is also a salutary reminder to Claimants to progress claims without delay when the facts of a possible libel become known.

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