Phonographic Performance Ltd v Hamilton Entertainment Ltd & Anor

This judgment relates to costs. The claimant (PPL) sued the defendants for infringement of copyright relating to numerous sound recordings. PPL’s repertoire of sound recordings includes a large number of the sound recordings available in England and Wales. The defendants run a bar in Hove called H Bar. PPL contends the defendants played sound recordings in the bar for their customers to listen to, thereby constituting a public performance of the sound recordings.

The action started in the High Court. The defendants denied the claim and the matter was transferred to the Patents County Court. It was listed for trial on 5^th September 2013. For most of the proceedings the defendants represented themselves. Shortly before the trial solicitors newly instructed by the defendants accepted a Part 36 offer made by the claimant on behalf of both defendants. Clearly the defendants were liable for some of the claimant’s costs but the parties could not agree on the particular costs consequences of what had happened and the matter came before me for a hearing on 5^th September.

At the hearing on 5^th September I rejected the defendants’ Costs Lawyer’s submission that the terms of Part 36 meant that when a Part 36 Offer was accepted, the costs rules applicable in the Patents County Court did not apply. The submission included an argument that in such a case the costs had to be subject to a detailed assessment and the provision that costs in the Patents County Court are summarily assessed (in what is now r45.30(3)) was not applicable. I rejected that argument. It would defeat the purpose of the Patents County Court costs rules, which form a key part of the overall code applicable in the Patents County Court, if they did not apply in cases in which a Part 36 offer had been accepted.

The claimant had put forward its case in Mr St Quintin’s skeleton argument for the hearing and had provided a statement of costs. However the defendants were not then in a position to make the submissions on the summary assessment. Accordingly I adjourned the summary assessment to be conducted on paper with the defendant to file written submissions and the claimant to file written submissions in reply.

By mistake and without the defendants’ written submissions being seen, the matter was considered by me on 18^th September but once the mistake had been identified, that 18^th September order could be and was set aside. I now have the defendant’s submissions dated 19^th September and also the claimant’s skeleton argument in reply. This is my judgment on the summary assessment.

On 1^st October 2013 the Patents County Court was reconstituted as the Intellectual Property Enterprise Court (the IPEC). Under the transitional provisions (Paragraph 30 of SI 2013 No. 1974 (The Civil Procedure (Amendment No. 7) Rules 2013)) proceedings which were continuing in the Patents County Court before 1^st October 2013 will continue in the IPEC and orders made previously will have the same effect as if they had been an order of the IPEC.

One of the purposes of the reconstitution is to maintain in the IPEC the same procedures, and the same overall approach to intellectual property litigation, as was being applied in the PCC before reconstitution. As with its predecessor the PCC, the purpose of the IPEC is to facilitate access to justice in intellectual property disputes for small and medium sized enterprises and individuals. Decisions made prior to the reconstitution which were applicable to proceedings in the PCC are now applicable to proceedings in the IPEC. In particular, as far as this case is concerned, the approach to costs in the PCC, as set out in Westwood v Knight [2011] EW PCC 11 and the other cases on costs in the PCC, are applicable in the IPEC.

Thus since this matter falls to be considered after 1^st October 2013, the applicable provisions are the provisions of the CPR as they are today (after 1^st October 2013). One consequence of that is that the appropriate stage limits on costs to be applied are the ones in force now. They were increased slightly on 1^st October. Although the stage limits which were in force when the costs were incurred were lower, in the absence of any transitional provision to the contrary, it seems to me that the right thing to do is to apply the stage limits which are in force at the time the assessment is being made. The alternative would be to try and apply the stage limits in force at time the action was in being. However although in this case that would not be unworkable, in a different case started before 1^st October 2013 but heard afterwards, some costs would have been incurred before 1^st October 2013 and some after. It would be an unnecessarily complicated and difficult task to try and apply two sets of stage limits. Bearing in mind what these limits represent (they are no more than caps which may or may not have an effect depending on what the costs incurred actually are) and also bearing in mind that the overall cap of £50,000 has not changed, the right approach must be to apply the limits as they are at the time of assessment.

I will start by setting out a table of the various costs. This sets out the relevant stages of the claim, the sums claimed by the claimant, the rival sum proposed by the defendants and the my assessment of the costs on a Westwood v Knight basis is below:

Four points of detail on the table:

In order to explain my reasons for reaching these conclusions, it is convenient to identify the issues by reference to points taken in the defendants’ submissions. The issues relate to the following topics:

Turning to those points.

General summary assessment

Subject to some particular points taken below, in general in my judgment the hours spent and the rates charged by the claimant’s solicitors and counsel were fair, reasonable and proportionate. Thus the costs allowed on my summary assessment are the sums actually incurred.

Unreasonable behaviour and abuse of process

The claimant submits the cap should be disapplied in relation to three matters (see the table above). The submission is put under CPR Part 63.26(2), which relates to unreasonable behaviour in relation to an application. If the argument is accepted, the costs awarded under r63.26(2) are in addition to the capped costs (by r45.32). The defendants’ written submissions also addressed arguments related to r45.30(2)(a). That latter provision relates to abuse of process and would, if a submission of abuse of process was accepted, lead to the overall capped costs regime in Section IV of Part 45 not applying to the entire action. It is a very different provision from r63.26(2), with very different consequences. The claimant (rightly) did not suggest that r45.30(2)(a) is engaged and the defendants arguments addressed to it were unnecessary.

The claimant submits that r63.26(2) applies to the application on 5^th August 2013, that the defendants behaved unreasonably in relation to it and so costs should be awarded which are not subject to the cap. The application was for specific disclosure and arose because the defendants had not properly conducted the disclosure exercise. The defendants’ first point is that it would not be right to form a view on this point since no full trial took place. I reject that. It is entirely possible to form a fair view about this issue. No trial is needed.

On the defendants behalf the only substantive excuse offered was that the defendants were representing themselves. I do not accept that that is a sufficient excuse in this case. There was no proper attempt to conduct disclosure and that caused the claimant to incur the otherwise wholly unnecessary cost of preparing an application to sort it out. The defendants’ failure was not simply a mistake or misunderstanding. The defendants had taken an obstructive approach throughout the litigation and this aspect was a part of it. The defendants’ behaviour was unreasonable and that unreasonable behaviour directly led to the claimant incurring cost it would otherwise not have had to incur. I will disapply the cap for that stage

The claimant also submits that the failure to comply with the disclosure order led to an increase in the costs of preparing the witness statements and an increase in the costs of the trial and judgment costs and so the cap should not apply to those stages either. I reject that argument. The removal of the cap for unreasonable behaviour applies to applications (CPR r63.26(2)). It does not apply to other costs. To remove the cap more generally would require r45.30(2)(a) to be engaged and for that, an abuse of process would need to be shown. The claimant did not contend that this had taken place. There is therefore no basis on which to remove the cap either for witness statements or for the trial stage.

Part 36

The defendants contended that the fact the Part 36 offer which had been accepted referred to costs on the standard basis meant that the stage limits should not be disapplied under r63.26(2). I do not accept this. The costs which might be awarded if r63.26(2) is engaged still fall to be assessed on the standard basis, albeit summarily.

I do not have to consider whether it would be fair for a party who offered to settle proceedings in the IPEC with their costs to be paid on the standard basis without making it clear that they intended to argue that Section IV of Part 45 should not apply at all, to then later argue that r45.30(2)(a) was engaged so that the IPEC costs provisions did not apply at all. I will express no view about that.

A question about whether the claimant started this claim in the wrong court

The action was commenced in the High Court and transferred to the Patents County Court. The claimant claims its costs incurred before transfer in the High Court as a distinct element unaffected by the PCC/IPEC costs cap. The defendants contended that the action had been commenced in the wrong court and in fact should have been started in the PCC (as it was at the time). So the defendants contended the costs assessment should take that into account. The defendants contended that the action was never of a high enough value to justify proceedings in the High Court. They also contended that the claimant should not recover the costs associated with the transfer. The defendants referred to the sum accepted in the compromise between the parties (just under £5,000) as indicative of the value of the claim. The claimant did not accept that the claim had been started in the wrong court and contended that if the matter had come to trial the claimant would have sought flagrancy damages in excess of £25,000. The claimant argued that the fact it settled for less does not undermine what the potential value of this claim was.

As a collecting society the claimant’s ultimate objective is to prevent people from unlawfully exploiting its repertoire but on the other hand to permit anyone who does wish to exploit the repertoire to do so lawfully by taking a licence and paying the proper tariff. With these objectives in mind PPL commences a large number of actions in the High Court of a similar nature to this claim and has done so for many years. The claimant referred to PPL v Saibal Maitra & ors [1998] FSR 749 as justifying its practice of issuing a claim form seeking an injunction only and which did not include a damages claim at that stage. That is what happened in this case. The large majority of PPL cases do not go beyond the stage of service of the Particulars of Claim. Many are settled or are dealt with in the Chancery applications court as applications for judgment in default.

It is important to keep this costs point in its proper context in these proceedings. A case in which the claimant was trying to justify costs incurred in the High Court before transfer which were much more than the applicable IPEC limits might require more detailed consideration. However that is not the case here. In this case the claimant’s pre-transfer costs come to a total of £8,961.65 (£8,246.65 + £715). In terms of the IPEC stage limits, the steps which took place in the High Court were the service of the Particulars of Claim and the transfer application. The combination of those stage limits comes to £10,000 (£7,000 plus £3,000). Of course if the action had started in the PCC/IPEC then the costs of the transfer would not have been necessary but even with that in mind the figures show that this is not a case in which the argument makes a major difference.

I do not think it was unreasonable for the PPL to commence this action, and the other actions of the same type, in the High Court. Nevertheless, the question arises as to how best to manage any of those PPL cases which go beyond the stage of serving the Particulars of Claim. This case was transferred to the PCC (now the IPEC) for directions to take it forward to a contested trial. In my judgment that was clearly the right thing to do. I would go further and suggest that most PPL actions of this type, if they are not brought to an end at an early stage, are likely to be more appropriately tried in the IPEC than in the High Court. The defendant will almost always be a small or medium sized enterprise. The damages cap applicable in the IPEC (£½ million) is well able to accommodate the claimant’s claim for flagrancy damages.

Accordingly, as far as the costs incurred in this case in the High Court are concerned, I will simply summarily assess them. There is no reason to treat them as subject to the IPEC stage limits but in any event the defendants are very unlikely to be worse off then they would have been if these costs had been subject to the IPEC stage limits.

Costs of witness statements, trial, judgment and duplication of fee earners

The defendants take a number of further detailed points which were answered in the claimant’s reply skeleton argument. The points are set out below along with my decision on them:

A more substantial point relates to the costs for the trial stage. The defendants contend they should be reduced because no trial took place. The claimant contends I should not reduce the trial costs because the figures claimed reflect only work which was actually done before the offer was made or in respect of the offer. The claimant also contended that the costs of and preparing for the hearing on 5^th September itself, principally the costs of preparing the costs statement, should be recovered as part of the costs for the trial stage. As the claimant pointed out, there are no circumstances in which the costs of preparing that costs statement could have been avoided.

The claimant also argues that the defendants’ written submissions go beyond what they were permitted to do on 5^th September and have caused the claimant to incur further substantial costs. It contends that these should be recovered within the trial stage. Overall the claimant contends that its costs of the trial stage should be summarily assessed in a sum in excess of the stage limit and so the full stage limit should be applied to those costs.

I agree with the claimant that the various matters raised here such as the costs of preparing the costs statement and the costs of addressing the defendants’ costs arguments, are all to be considered within the IPEC stage of “preparing for and attending trial and judgment”. The question is what sum would be the result of a summary assessment

I accept that the various costs referred to were incurred as the claimant contends. In my judgment the fact that the trial did not take place remains a significant factor. I find that a fair and proportionate sum to be recovered for the trial stage is two thirds of the sum incurred.

I find that the total sum due from the defendants to the claimant by way of costs is £44,967.79.