Andrew Crossley and his law firm ACS:Law have been issued with a wasted costs order, following its mass letter writing campaign regarding alleged copyright infringement of Media CAT’s copyright material (Media CAT Ltd v Adams & Ors [2011] EWPCC 10)

BACKGROUND  

The original matter (Media C.A.T. v Adams [2011] EWPCC 6 handed down on 8th February 2011) dealt with unlawful filesharing and infringements of copyright material belonging to Media CAT. Media CAT, represented by ACS:Law and its principal Andrew Crossley issued proceedings against a number of individuals in November 2010, alleging that they had infringed copyright in certain pornographic films by means of illicit file-sharing. ACS:Law has sent out letters alleging infringement to thousands of individuals. The letters offered settlement out of court or, if this was not accepted, a possible court action. Under the retainer between Media CAT and ACS:Law, Mr Crossley would receive a contingency fee for work done, amounting to a 65 % share of any damages obtained from the defendants pursuant to the letter writing.

Several recipients of the letter responded by bringing a claim against Media CAT, asking for ACS:Law and Crossley to be joined to the proceedings. Media CAT and ACS:Law applied to have the cases discontinued, serving Notices of Discontinuance, but HHJ Birss QC, the judge hearing the case, refused to order discontinuance, as it would have meant that judicial scrutiny of the underlying copyright claims would be avoided.

In the same judgment, the judge had also directed Media CAT to join the actual owners of the copyright works to the proceedings by 22 February 2011.  

However, Media CAT made no attempt to do so and, at a further hearing, HHJ Birss QC ordered that the action should be struck out and that Media CAT should pay the defendants' costs. He also ordered that the costs should be assessed on an indemnity basis and that the scale costs provisions applicable in the Patents County Court should not apply because the court considered that ACS:Law/Mr Crossley had behaved in a manner which amounted to an abuse of the court's process.

The defendants applied for wasted costs against ACS:Law/Mr Crossley and a costs order under s 51 of the Senior Courts Act 1981.

DECISION – WASTED COSTS

The issue of wasted costs was heard by the Patents County Court.

HHJ Birss QC noted that wasted cost applications are heard in two stages. First, the Court has to be satisfied that it has before it evidence which, if unanswered, would be likely to lead to a wasted costs order being made (i.e., a merits test) and that wasted costs proceedings would be justified notwithstanding the costs involved (i.e., a proportionality test). The second stage is an assessment of the costs wasted.

HHJ Birss QC said that an important point to remember was, as the Court of Appeal stated in the leading case on wasted costs (Ridehalgh v Horsefield [1994] Ch 205), simply pursuing a hopeless case was not enough to bring on a wasted costs order. It had to be shown that the legal representative in question had abused the court process. Further, the Court only has jurisdiction to make a wasted costs order when the impugned conduct caused a waste of costs and only to the extent of such wasted costs. In other words, establishing a causal link is essential.

Various categories of costs were raised by the Defendants as being wasted, but, applying the relevant tests, HHJ Birss QC only made a stage one wasted costs order in relation to revenue sharing arrangements and service of the Notices of Discontinuance.

DECISIONS – WHO TO PAY THE COSTS

Sections 51(1) and (3) of the Senior Courts Act 1981 provide that the costs are in the discretion of the court and that the court has full power to determine by whom and to what extent the costs are to be paid. Case law has established that this means that the court has the power to order a non-party to pay costs in an appropriate case. Here, the defendants submitted that Mr Crossley should bear the costs because, in effect, they were primarily aimed at advancing ACS:Law's own interests, as shown, for example, by the 65% share of revenue arrangement. Under CPR Part 48, where the court is considering whether to make such a costs order, the person must be added as a party to the proceedings for the purposes of costs only. The question for HHJ Birss QC was, therefore, whether to add ACS:Law/Mr Crossley as a party to proceedings.

The standard HHJ Birss QC adopted was whether there was a good arguable case that ACS:Law/Mr Crossley would be liable for a third party costs order or not. HHJ Birss QC found that there was a good arguable case that ACS:Law/Mr Crossley would be liable for the costs of the case and he thus added them as a party to the action for that purpose.