Binstead & Anor v Zytronic Displays Ltd

This is an application (made without the benefit of an application notice) to have certain matters determined as preliminary issues at a preliminary trial. The application is brought by the claimants Ronald Peter Binstead and Binstead Designs Limited (to whom I shall refer collectively as “the Claimants”), and is resisted by Zytronic Displays Limited (“the Defendant”). The Claimants are represented by Mr. Thomas St. Quintin and the Defendant by Mr. Jonathan Hill.

It is common ground that on 16 November 1999, the First Claimant attended a meeting with the Defendant at the Defendant’s premises, at which the First Claimant demonstrated a technique related to touch screen technology. It is not necessary for present purposes to discuss that technology in any depth. Following the demonstration, the Claimants granted a series of licences to the Defendant. Those licences have now come to an end.

The Claimants say the Defendant has continued to manufacture touch screens using the Claimants’ technology. This is said to infringe the First Claimant’s patent, as well as to be a breach of the licence agreements and a breach of confidential information provided by the Claimants to the Defendant. The Defendant denies these allegations, and seeks its own remedies, including a declaration of invalidity of the patent.

The Claimants propose that the following three issues be determined at a preliminary trial:

No witness statement has been filed by the Claimants. The Defendant relies on the second witness statement of its solicitor, Mr. George Festing.

The court’s jurisdiction to order the separate trial of a preliminary issue is not in doubt. The only question before me is whether, in the exercise of my case management responsibilities, it is appropriate to make the order for a preliminary trial sought by the Claimants.

In Steele v Steele [2001] CP Rep 106, Neuberger J (as he then was) set out, following a detailed examination of the law, those issues which he thought appropriate to a determination of whether or not a preliminary trial is appropriate. These were:

In a more recent judgment, Wentworth Sons Sub-Debt SARL v Anthony Victor Lomas and Others [2017] EWHC 3158 (Ch), Hildyard J referred to those 10 points and made clear that they should not be considered as “Ten Commandments”. Rather he said that the 10 points provide “useful criteria and a useful reminder of the caution and care to be exercised”.

In assessing those 10 points, though, it does seem to me that it is important to keep in mind the many preliminary issue trials which have not been a success. In Woodland Trust v Essex County Council [2013] UKSC 66 Lord Sumption set out in his judgment the unattractiveness of trying preliminary issues which are not decisive. He said at paragraph 2:

“The issue on the present appeal arises out of an allegation in the Appellants’ pleadings that the Council owed her a 'non-delegable duty of care’, with the result that it is liable at law for any negligence on the part of Ms. Burlinson or Ms. Maxwell. Langstaff J struck it out on the ground that on the pleaded facts the education authority could not be said to have owed a 'non-delegable duty of care'. The Court of Appeal affirmed his decision by a majority (Tomlinson and Kitchin LJJ, Laws LJ dissenting). The appeal provides a useful occasion for reviewing the law on what have been called 'non-delegable duties of care'. But it must be very doubtful whether deciding such a point on the pleadings was really in the interests of these parties or of the efficient conduct of their litigation. The pleadings are unsatisfactory. There are no findings of fact and almost everything is disputed. A decision of the point presently before us will not be decisive of the litigation either way, because there are other bases of claim independent of it. The point has taken more than two years to reach this stage, during which, if the allegation had been allowed to go to trial, it would almost certainly have been decided by now. As it is, regardless of the outcome of this appeal it will now have to go back to the High Court to find the relevant facts.”

In Rossetti Marketing Limited and Another v Diamond Sofa Company Limited [2012] EWCA Civ 1021, Lord Neuberger MR (as he then was) said this at paragraph 1:

“This is an appeal from a decision of Cranston J, determining certain preliminary issues arising out of a dispute between (i) Rosetti Marketing Limited ('RML') and Solutions Marketing Limited ('SML'), and (ii) Diamond Sofa Company Limited ('Diamond'). It represents yet another cautionary tale about the dangers of preliminary issues. In particular, it demonstrates that (i) while often attractive prospectively, the siren song of agreeing or ordering preliminary issues should normally be resisted, (ii) if there are nonetheless to be preliminary issues, it is vital that the issues themselves, and the agreed facts or assumptions on which they are based, are simply, clearly and precisely formulated, and (iii) once formulated, the issues should be answered in a clear and precise way.”

Lord Neuberger also dealt with the issue in Bond v Dunster [2011] EWCA Civ 455 at paragraphs 106-107:

“The first problem was that the parties agreed to the determination of preliminary issues. This appears to me to have been very unwise, given that the hearing was anticipated to last four days, and, it would seem, to involve oral evidence, much of it from parties or witnesses who could reasonably have been expected to give evidence at any subsequent hearing. By the time the preliminary issues hearing was intended to start, the proceedings would have already been on foot for nearly two years and the relevant events would have taken place nearly four years earlier.

While they have their value, it is notorious that preliminary issues often turn out to be misconceived, in that, while they are intended to short-circuit the proceedings, they actually increase the time and cost of resolving the underlying dispute. It would, in my judgment, require a very exceptional case, almost inevitably one where a subsequent multi-week trial was anticipated, before a preliminary issue hearing, involving witnesses and expected to last four days, could be justified.”

Lord Hope of Craighead said this in SCA Packaging Limited v Boyle [2009] UKHL 37 at paragraph 9:

“It has often been said that the power that tribunals have to deal with issues separately at a preliminary hearing should be exercised with caution and resorted to only sparingly. This is in keeping with the overriding aim of the tribunal system. It was set up to take issues away from the ordinary courts so that they could be dealt with by a specialist tribunal as quickly and simply as possible. As Lord Scarman said in Tilling v Whiteman [1980] AC 1, 25, preliminary points of law are too often treacherous short cuts. Even more so where the points to be decided are a mixture of fact and law. That the power to hold a pre-hearing exists is not in doubt: Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005 (SR 2005/150), Schedule 1, rule 18. There are, however, dangers in taking what looks at first sight to be a short cut but turns out to be productive of more delay and costs than if the dispute had been tried in its entirety, as Mummery J said in National Union of Teachers v Governing Body of St Mary's Church of England (Aided) Junior School [1995] ICR 317 , 323. The essential criterion for deciding whether or not to hold a pre-hearing is whether, as it was put by Lindsay J in CJ O'Shea Construction Ltd v Bassi [1998] ICR 1130, 1140, there is a succinct, knockout point which is capable of being decided after only a relatively short hearing. This is unlikely to be the case where a preliminary issue cannot be entirely divorced from the merits of the case, or the issue will require the consideration of a substantial body of evidence. In such a case it is preferable that there should be only one hearing to determine all the matters in dispute.”

Although his Lordship was addressing a preliminary trial in the Northern Ireland Industrial Tribunal, it seems to me that these comments apply to preliminary issues more generally.

Further, I was taken to a judgment of David Steel J sitting in the Court of Appeal in McLoughlin v Grovers [2001] EWCA Civ 1743, where he suggested that preliminary issues should generally be: (a) issues which are decisive or potentially decisive; (b) questions of law; (c) decided on the basis of a schedule of agreed or assumed facts; and (d) triable without significant delay making full allowance for the implication of a possible appeal.

Counsel for the Claimants submitted that the pointers provided by David Steel J were “indications”. He described them as sufficient, but not necessary, conditions for an order for the trial of a preliminary issue. He submitted that they do not displace the court’s obligation to consider the matters before it in light of the Overriding Objective. I accept that up to a point. The use of the word “generally” indicates that there may be exceptions, but I consider the guidance provided not to be something I can ignore.

It is therefore clear to me from the speech of Lord Hope, the judgment of Lord Sumption, the three judgments of Lord Neuberger and the judgment of David Steel J that in exercising the court’s case management discretion I must not be overly enthusiastic in assuming that the best outcome will occur should a preliminary trial take place. Rather, I understand that I should take a realistic approach to the likely outcome on the various matters I have to examine. This is the best way to ensure that the power to determine a preliminary issue is “sparingly exercised” and that the “siren song” is resisted appropriately.

I turn now to Neuberger J's 10 points. First, “whether the determination of the preliminary issue would dispose of the case or at least one aspect of the case” Counsel for the Claimants submits an emphatic “Yes”. He says that if the case is determined in full against the Claimants then it in effect goes away. If it is determined in favour of the Claimants, he concedes that the Defendant still has cards to play, but submits that the issues remaining will be simpler and that the matter is very likely to settle. He took me in detail to the pleadings on this point to demonstrate his position on the three aspects of the case, being patent infringement, breach of confidential information and breach of contract.

Counsel for the Defendant rejected those submissions, saying that even if the Defendant is completely successful, there will remain aspects of the case that still need to be determined. If things go the other way, settlement is no more likely without some determination of the value of the rights in issue. The value of the rights in issue is not one of the matters it is proposed will be determined at the preliminary trial.

Applying, as I have suggested, a realistic approach, it does seem to me that Counsel for the Defendant’s suggested outcome is more likely. It does not seem to me that this is a “succinct, knockout point” to adopt Lindsay J’s words. I would add to that that it is entirely possible that the judge on the preliminary issue questions may reach a midway position that is neither fully determinative in favour of the Defendant nor provides the Claimants with sufficient leverage to enable the case to settle. Indeed this seems to me the more likely outcome given the range of issues between the parties, and the nature of those issues.

It therefore seems to me that it is by no means guaranteed that determining the preliminary issue will dispose of the case. There will be instances where the preliminary issue will dispose of the case (for example, in Wentworth Sons v Comas before Hildyard J, the question was whether or not the action was time-barred) but this is not one of them.

The second of Neuberger J's points was “whether the determination of the preliminary issue could significantly cut down the cost and time involved in pre-trial preparation or in connection with the trial itself”. Here, again, the parties’ views differ. Counsel for the Claimants says that the preliminary issue could be tried in two days, with a day of reading, followed by a trial of four days, presumably with a day of reading, totalling eight days. Counsel for the Defendant says that the first trial will require detailed witness evidence, including cross-examination, and potentially even expert evidence (although the Claimants rejected this), and would last four days, to be followed by a trial potentially lasting five days, and in each case I would presume there would be a day of reading, making a total of eleven days. I note in passing that the Claimants initially filed this case in the Intellectual Property Enterprise Court (IPEC), where trials are expected to be completed in two days.

It seems obvious to me that the determination of the preliminary issue will not cut down the overall hearing time or costs. I have before me two differing costs estimates of splitting the determination of issues. In addition to the discussion of trial time, Counsel for the Claimants suggests that the additional costs would be only £80,000. The response from Counsel for the Defendant is that a preliminary issue trial would add over £400,000 to the total costs.

It seems to me that, whilst perhaps exaggerated, the £400,000 figure is potentially closer to the truth than the £80,000 figure. Both parties agree that costs will be higher if there is a preliminary trial. In my judgment, there are real prospects that costs will be significantly increased.

The preliminary issues set out by the Claimants involve mixed questions of fact and law, as submitted by both parties. It is difficult to squeeze such issues into Neuberger J's pointers 3, 4 and 5. Obviously, a question of law can usually reasonably readily be determined on the basis of agreed facts. Here, it is the facts themselves that are very hotly in dispute. Those facts would first need to be determined and then the law on confidential information would need to be applied to those facts. The facts, as I understand it, relate to the period up to 1999, the meeting in 1999, and then a number of later issues. It does seem to me that that is about as far as it is possible to get from the facts being agreed by the parties on the basis of which the law can be determined. There is also a real issue, as put by Counsel for the Defendant, that the determination of facts reached by the preliminary issue judge will turn out not to be needed. Again, this mitigates against trial of the preliminary issue.

Sixth, “whether the determination of a preliminary issue may unreasonably fetter either or both parties or the court in achieving a just result”. Counsel for the Defendant submitted that it may be necessary for witnesses to be called twice. As noted by Neuberger MR in Rosetti, this potentially risks their giving different answers on each occasion. I do not regard that as a high risk here. In my judgment this factor is neutral.

Seventh, Neuberger J says, “the court should ask itself to what extent is there a risk of the determination of the preliminary issue increasing costs and/or delaying the trial”. I have found (above) that costs will be increased, potentially significantly. In relation to the delay of the trial, even with the best efforts of the court to list the second hearing now, Counsel for the Claimants concedes that there will be a delay in resolving the matter. Add to that judgment-writing time, the potential for one or more appeals (which, contrary to the submission of Counsel for the Claimants I consider to be far from “illusory”, given the mixed issues of law and fact in the proposed preliminary issue trial) and it does seem to me that there is a real risk of significant delay to the final determination of the matter.

I mentioned to the parties during the course of submissions that patent cases are usually split in terms of liability and quantum. This case is no different. Hence, I must consider the potential for not just two trials, but three, with the risk of these running on for some years, particularly if there are appeals from any or all of the three judgments.

Eighth, “the court should ask itself to what extent the determination of the preliminary issue may turn out to be irrelevant”. That question has been addressed by both sides. Counsel for the Claimants says that the issues do need to be determined. Counsel for the Defendant suggests that matters are likely to narrow before the eventual trial, potentially rendering some issues irrelevant. I accept Counsel for the Defendant’s submission, but do not put it too highly. I consider this factor to be neutral, perhaps leaning slightly against ordering a preliminary issue to be determined.

Ninth, “is there a risk that the determination of the preliminary issue could lead to an application for the pleadings to be amended so as to avoid the consequences of the determination?” This was not addressed in any detail by the parties, so I consider it to be neutral.

Tenth, “taking into account the previous points, is it just to order a preliminary issue” Here, I must step back from the earlier determinations I have made and ask myself, in the round, is it just to order a preliminary trial, taking into account the Overriding Objective, which includes to do justice between the parties, to allocate court resources appropriately, and to ensure that what is done is proportionate, whilst also trying to save costs.

Here, the parties have made submissions in relation to the high value of the case. Whilst I accept that the question of proportionality may indicate greater costs may be incurred in relation to higher value disputes, I do not consider that this discussion assists either party on the question of a preliminary trial. The parties appear to be similarly resourced, such that there is no inequality of arms which might otherwise weigh in favour of determining a knockout preliminary issue.

In my judgment, taking all those factors into account for the reasons I have set out above, it would be inappropriate in this case to order the three issues identified to be tried as preliminary issues.

I therefore reject the Claimants’ application.

The Defendant seeks its costs. I have been provided with a statement of costs and asked to assess them summarily. Those costs total £14,409 being made up of £6,424 of solicitor's costs, and £1,585 of counsel’s fees for advice and conferences and a further £6,400 for Counsel's brief fee. The Defendant seeks all of those costs.

The Claimants resist any award of costs. Counsel for the Claimants submits that, as this was an ordinary CMC, it would be unusual for costs to be determined (summarily or otherwise) in relation to specific aspects of it. Counsel for the Claimants therefore submits that there should be no order for costs in relation to this issue, but that the costs of today should be costs in the case. The Claimants say that theirs was a sensible application to make in an effort to further the Overriding Objective.

If I am against him on that, in relation to the actual figures, Counsel for the Claimants makes two further submissions. First, he says that Mr. Festing’s second witness statement, for which approximately £3,000 of costs have been claimed, was largely argument and was largely repeated in Counsel for the Defendant’s skeleton argument. Therefore, he says, these duplicate costs should not be allowed.

Second, in relation to the claimed brief fee, he points to the Defendant’s schedule of costs for the purposes of the costs budgeting exercise to which we are yet to turn this morning, and says that that schedule includes a brief fee of £5,000 for today, lower than the fee now claimed. Hence he says that the Defendant’s recovery of the brief fee should be limited to 80% of £5,000 (the 80% reflecting the estimate of the likely proportion of today’s CMC to be taken up by the preliminary issue application). Counsel for the Claimants concedes that no costs management order having yet been made, I am not bound by that £5,000 figure, but he suggests I ought to take it into account in the exercise of my discretion.

Counsel for the Defendant submits in response that the costs budget was not prepared on the basis of the need to argue against the determination of the preliminary issue, and that overall his brief fee is “not an unreasonable sum” in the context of this litigation. In relation to Mr. Festing’s second witness statement he says that it was helpful to the Claimants to have the Defendant’s position early. Mr. Festing set out that position, but he also included, in addition to legal argument, various factual matters, which the parties have relied on before me this morning.

It is important in summarily assessing costs not to engage in lengthy satellite litigation and end up spending valuable resources arguing over comparatively small sums. This is a case which I am told is worth many millions of pounds. The costs budget put forward by the Defendant is close to £1 million. The costs in dispute before me this morning amount to approximately £4,000. Proportionality is key.

I start first with the question of whether or not the Defendant should have its costs at all. In my judgment it should. Whilst this was a CMC, it is clear that it would have been more appropriate for this issue to be determined before the CMC by way of an application made in an application notice. Not knowing the outcome of this application, at least one of the parties prepared directions and costs budgets for two very different possibilities. The other party was able to deal with directions and costs budgeting only if my judgment on the preliminary issue went one way, but not the other. That was inappropriate. Rather, if this issue had been determined first, both parties could have approached the CMC knowing whether there was going to be one trial or two (or, in reality, two trials or three). That would have avoided the situation I have set out above. It would also have avoided any issues having to go off to future dates, as has been proposed by both parties, on the basis that they are not able to deal with them now. In my judgment, a separate application should have been made. Given that it was not, it should be treated as one for which the Defendant is entitled to its costs in the usual way.

In relation to the costs claimed, starting first with Counsel’s brief fee, it seems to me that it is reasonable in all the circumstances. This was an additional issue raised by the Claimants that needed to be dealt with. I do not consider that the Defendant should be bound by the costs budgeting schedule, first, because no costs management order has yet been made, and, second, because it was drafted on the basis of an ordinary CMC, rather than one at which this issue would need to be argued. Indeed, it is now 1 o'clock and we have taken up the two and a half hours estimated for the CMC dealing with this one issue. We have several issues yet to run, including directions, as well as costs management. The Defendant should have the full amount of Counsel’s brief fee.

In relation to Mr. Festing’s witness statement, there is some force in what Counsel for the Claimants submits. As I read Mr. Festing’s witness statement, it was clear to me that it did not comply with the Chancery Guidelines, which set out that witness statements should only include issues of fact that are within the knowledge of the deponent, should not recite documents which are otherwise in evidence and should not include legal argument. Mr. Festing’s witness statement, in my judgment, fails on all three grounds. The result is significant repetition.

In JD Wetherspoon Plc v Harris and Ors [2013] EWHC 1088 (Ch), Sir Terrence Etherton, then the Chancellor, set out the importance of parties complying with the Chancery Guide when drafting witness statements. Paragraph 19.3 of the current edition states:

“A witness statement should simply cover those issues, but only those issues, on which the party serving the statement wishes that witness to give evidence in chief. It should therefore be confined to facts of which the witness can give evidence. It is not, for example, the function of a witness statement to provide a commentary on the documents in the trial bundle, nor to set out quotations from such documents, nor to engage in matters of argument, expressions of opinion or submissions about the issues, nor to make observations about the evidence of other witnesses. Witness statements should not deal with other matters merely because they may arise in the course of the trial.”

This applies equally to witness statements for applications:

“The same guidelines apply to the content of witness statements in support of applications as to witness statements for trials.”

I acknowledge that there were aspects of first hand evidence in Mr. Festing’s witness statement, but I disallow half the costs of the preparation of that witness statement for the reasons I have set out.