Caljan Rite-Hite Ltd v Sovex Ltd

In this action the claimant, Caljan, seeks an order for rectification of the register of trade marks and that Caljan be substituted for the defendant, Sovex, as proprietor of the mark Sovex, registered under no. 958244 ("the Mark"). I now have before me an application by Sovex for an order that the action be transferred to the Patents County Court.

Caljan contends it is the legal and beneficial owner of the Mark by virtue of a chain of title extending back to 1989.

Sovex denies Caljan's claim of title is sound. However, its primary case is that in 2003 it obtained an assignment of the Mark in good faith and in ignorance of Caljan's ownership claim. Sovex also says that Caljan has known since 2003 or thereabouts of its extensive use of the Mark and yet for over five years took no action in respect of it. In the meantime, and in reliance upon its bona fide belief that it was exclusively entitled to use the Mark, Sovex invested large sums in its exploitation, built up a substantial goodwill under it and paid all the renewal fees in respect of its registration. In these circumstances Sovex says it would be entirely unconscionable for Caljan to assert any rights in the Mark, that Caljan is estopped from denying Sovex's exclusive entitlement to use the Mark and, to the extent that Caljan owns the legal title in the Mark, it holds it on constructive trust for Sovex. In the alternative, Sovex says it is entitled to the Mark by virtue of the provisions of section 25(3) of the Trade Marks Act 1994.

These proceedings have a somewhat complicated history. In January 2009, Caljan made an application for rectification to the Registrar of Trade Marks. That application was struck out because at that time there appeared to be a gap in Caljan's chain of title. Caljan took steps to bridge the gap and, in August 2009, made a second application for rectification, again to the Registrar. At the time the original application was struck out, Sovex made clear that, should the claim be pursued, it would wish to rely on an estoppel argument and that the dispute should be dealt with in the High Court. Accordingly, and following Caljan's second application to the Registrar, Sovex made an application to have it transferred. Caljan ultimately agreed and, on 21 April 2010, the Registrar made an order that the application for rectification should be determined by the High Court.

On 20 May 2010, Caljan issued and served a claim form accompanied by particulars of claim. On 30 June 2010, Sovex served a defence and counterclaim and on 20 July 2010, Caljan served a reply and defence to counterclaim. On 21 September 2010, Sovex completed an allocation questionnaire, stating that the claim should be heard by the High Court in London, that it proposed to call six witnesses of fact and that it estimated that its costs of the whole action were likely to be £150,000.

On 27 October 2010, Deputy Master Matthews made an order that the claim be allocated to the multi-track and entered in the trial list with a time estimate of three days and gave directions for disclosure and exchange of witness statements. The trial has now been fixed to be heard in a five day window commencing on 13 February 2012. On 29 October 2010, Caljan issued an application for a case management conference and then, on 10 December 2010, Sovex issued this application for an order that the proceedings be transferred to the Patents County Court.

Sovex has made this application in order to take advantage of the new procedural regime which was introduced in the Patents County Court on 1 October 2010 and which is designed for smaller and less complex actions and to provide cheaper, speedier and more informal procedures to ensure small and medium sized enterprises and individuals are not deterred from innovation by the costs of litigation to safeguard their rights. Key elements of the regime are statements of case which set out concisely all the facts and arguments upon which parties rely and are verified by statements of truth signed by persons with knowledge of the facts alleged; no or limited disclosure; no or limited additional fact or experts' evidence; that where possible the court determines the claim solely on the basis of the parties' statement of case and oral submissions; that cross-examination is strictly limited and that the court endeavours to ensure that the trial lasts no more than two days. Another cornerstone of the regime is that only scale costs are recoverable and that the court will not order a party to pay more than £50,000 on the final determination of a claim in relation to liability. As HH Judge Birss QC explained in Technical Fibre Products Limited and Another v David Walton Bell and Others [2010] EWPCC 011, these new procedures consist of a package of measures which interact with each other. To best achieve their objective, the rules need to be applied as a whole.

Nevertheless, the High Court plainly has jurisdiction to transfer proceedings before it to the Patents County Court and the new procedural rules specifically contemplate that possibility. Hence, CPR r.63.18 provides:

Practice Direction 30 reads:

I think it is clear from these provisions that if proceedings are transferred from the High Court to the Patents County Court, the new procedural regime in the Patents County Court will apply to them.

Mr Tritton, who has appeared on behalf of Caljan, accepts this must be so in relation to proceedings which began in the High Court after 1 October 2010. But he submits that to impose the new regime on cases which began in the High Court before 1 October 2010 would be unfair and likely to lead to injustice because a party may well have incurred costs in excess of the £50,000 ceiling before that date.

I am unable to accept this submission. I recognise that it is inevitable that some steps will have been taken and costs incurred in connection with any proceedings issued in the High Court before an application for transfer to the Patents County Court is made. The later an application is made the greater the number of steps taken and costs incurred are likely to be. These are matters which the court will consider in deciding whether to specify terms for transfer under Practice Direction 30, paragraph 9.2(1) or, indeed, whether to make an order for transfer at all. But this provides no basis for concluding that the new procedural regime should not apply to proceedings issued in the High Court before 1 October 2010 but transferred after that date. Nor is there any foundation for such a conclusion in the new procedural rules themselves. To the contrary, they contemplate the application of the new regime to cases transferred from the High Court irrespective of the date on which they were issued.

I have been referred to two cases in which this question has been considered by Judge Birss. In the first, Technical Fibre Products , the judge observed at paragraph 11:

The second, Dame Vivienne Westwood OBE v Anthony Edward Knight [2010] EWPCC 016, concerned a claim issued in the High Court on 24 June 2010 and transferred to the Patents County Court by order dated 1 October 2010. Judge Birss concluded that since the case had been transferred on 1 October 2010, the new procedural rules applied to it and referred in that connection to his observations in Technical Fibre Products . For the reasons I have given, I believe the approach taken by the judge was entirely correct.

This brings me to the exercise of discretion. The matters to which the court must have regard are set forth in CPR Part 30.3 and Practice Direction 30 and were considered by Judge Birss in Alk-Abello v Meridian Medical Technologies, Dey Pharma LP [2010] EWPCC 014 in the context of an application to transfer a case from the Patents County Court to the High Court.

In the present case the material factors are, I think, these:

Sovex's application is supported by two witness statements of Mr Lindfield, one of its directors. He has exhibited abbreviated accounts for the year ended 31 December 2009 and confidential management accounts to 31 October 2010. Mr Lindfield says it is apparent from those accounts that, as of 31 December 2009, Sovex had net liabilities of £23,017, a cumulative trading loss of £156,017 and a capital and reserve deficit of £23,017. Mr Lindfield also says that, despite an injection of capital since then, the current financial status of Sovex is no better. In these circumstances, he continues, Sovex's financial position alone justifies transfer of the claim to the Patents County Court. But, he says, Sovex's difficulties have been compounded yet further by the commencement against it by Caljan's parent company of separate patent infringement proceedings; a threat by Caljan to bring a claim against it for breach of confidence and inducement of breach of contract concerning the activities of Caljan's own former managing director, Mr Hilton; and opposition proceedings in the Trade Marks Registry relating to further applications the parties have each made to register the mark Sovex.

I accept that Sovex is in a far from healthy financial state. However, it is apparent from the director's report which forms part of the abbreviated accounts that this is at least in part attributable to a development strategy which has cost Sovex around £500,000. The report also says that Sovex has enjoyed an impressive level of top line growth which continued during 2009, that it is now a well established supplier of conveyor systems and that it can now boast an impressive range of vehicle loaders and conveyors. It continues that the directors’ and shareholders' confidence in the business has led to a further cash injection in the first quarter of 2010.

In all these circumstances the attraction of the new procedures in the Patents County Court to Sovex is clear. Caljan has estimated its overall costs of the action at £225,000, but, subject to any terms for transfer, only scale costs will be recoverable in the Patents County Court if it wins the action. In this very real sense I recognise that a transfer would assist Sovex. On the other hand, the evidence does not establish that Sovex will be unable to defend these proceedings if I refuse the application for transfer. It has backers and investors who have made substantial sums available to develop its business thus far and they may be prepared to make further sums available to preserve it. Indeed, Mr Brandreth, who has appeared on behalf of Sovex on this application, accepted that it will continue to defend these proceedings if they remain in the High Court.

I must now consider whether the claim is appropriate to be determined by the Patents County Court. There can be no doubt that the claim is a very important one to both parties. The Mark has been used in relation to conveyors for over 50 years. It was acquired (or, as Caljan contends, misappropriated) by Sovex in 2003 and has been used in connection with its materials handling business ever since. Caljan says the Mark is worth over £500,000, including damages for its misuse. Sovex disputes that figure, but recognises that the Mark is an integral part of its business and, indeed, forms the distinctive element of its corporate name.

Caljan's case is, in summary, as follows. The Mark was originally owned by BBA Group plc ("BBA") and used as a trade mark for materials handling systems, including conveyors, made and sold by its subsidiary, Sovex Marshall Limited ("Marshall"). In 1989, BBA sold Marshall and assigned the Mark to Linvar Limited ("Linvar"). In July 1994, Linvar disposed of its static storage business to Apex Storage Systems limited (“Apex") but retained its materials handling business together with the Mark. By a series of transactions between December 1994 and January 2000, title to the Mark was transferred first to United Industries plc, then to Molehub Limited ("Molehub") and finally to Caljan. However, Linvar remained the registered proprietor of the Mark. Accordingly, in 2003 Caljan sought to have the register amended to reflect the true position.

In the meantime, a Mr Tucker, purporting to be a director of Linvar, filed with the Trade Marks Registry an assignment of the Mark to Sovex. The document was signed by Mr Tucker on behalf of Linvar and by Mr Lindfield on behalf of Sovex. Caljan further contends that Mr Tucker was not a director of Linvar and that Mr Lindfield was well aware that Caljan and not Linvar was the true proprietor of the Mark because he was a director of Linvar, then Molehub and finally Caljan, and that he held this last position until 2001.

Sovex joins issue with a good deal of this case and contends that in 1994 Linvar sold the whole of its business, including both its static storage business and its materials handling business, to Apex. It further contends that it obtained the assignment of the Mark in ignorance of Caljan's chain of title.

It is apparent from this brief summary that there is a significant dispute between the parties not just as to Caljan's alleged chain of title, but also as to Mr Lindfield's state of mind in 2003 and his knowledge of events dating back to 1994.

Sovex further contends that after 2003, Caljan not only knew of its use of the Mark, but took various steps which reinforced Sovex's belief that it was exclusively entitled to use the Mark and that, in reliance on this belief, it invested substantial sums and effort in developing its business under the Mark. Once again, the question of what Sovex believed is hotly disputed.

These issues are not straightforward and their resolution will inevitably require disclosure, witness statements and cross-examination. It comes as no surprise to me that Sovex anticipates calling six witnesses of fact and I have no doubt that Caljan will need to call a number of witnesses of its own.

This is certainly not a case which the court will be able to determine on the basis of the parties' statements of case and oral submissions. Nor is there a real prospect the trial will last no more than two days. Indeed, the three day estimate is I think somewhat optimistic and should be reviewed.

In the light of all these matters, I am driven to the conclusion that this is not a case which it is appropriate to determine under the new procedural regime of the Patents County Court.

Finally, I come to the overriding objective and the broader considerations it raises. Sovex says that Caljan started the proceedings in the Trade Marks Registry where only scale costs are recoverable and so can hardly complain if those proceedings are now transferred to the Patents County Court. Caljan says the proceedings were transferred to the High Court at the request of Sovex and so it has only itself to blame. In my view, neither of these points is of any great weight. I must decide whether it is just to order transfer in the light of the circumstances as they are today. In that connection I do, however, think it relevant that the High Court proceedings were issued as long ago as May 2010 and Caljan has already incurred costs of some £50,000 in relation to them.

Recognising the potential injustice a transfer at this stage would cause, Mr Brandreth, on instructions from Sovex, submitted it would be appropriate to give Caljan permission to apply to this court for its costs to date on the High Court scale, in addition to any costs it may be awarded by the Patents County Court if it should ultimately succeed in its claim. I believe the imposition of such a term of transfer would go some way to meeting Caljan's concern, but of course it would also undermine the purpose and benefit of the transfer itself. It follows, I think, that any application for transfer should in general be made as soon as possible after the commencement of proceedings.

I have also considered the time it would take for the proceedings to come to trial. As I have indicated, the trial is currently fixed to be heard in February 2012. I understand that were the proceedings to be transferred to the Patents County Court, a three day trial could be heard in the autumn of this year, that is to say some six months earlier. This would plainly be of some advantage to the parties, but I do not consider this to be a very significant factor in the light of the nature of the dispute and the fact that it is one in which the parties have now been engaged in one form or other since 2009.

Weighing all these factors together, I have come to the conclusion that this application must be refused. I am conscious that it is very important to ensure that small and medium sized enterprises and private individuals are not denied access to justice but, for the reasons I have given, I believe that Sovex will continue to defend this claim whether it proceeds in the High Court or in the Patents County Court. In all the circumstances of this case, the key factor, to my mind, is whether the claim is appropriate to be determined under the new procedural regime of the Patents County Court. In my judgment and for the reasons I have given, it is not.