Scomadi Ltd & Anor v RA Engineering Co. Ltd & Ors

The first task I have this morning is to deal with the claimants’ application for permission to appeal. I have been assisted by draft grounds of appeal which I first saw this morning and these have been amplified in the course of oral submissions by Mr. Hill for the claimants.

So far as the test is concerned, that is, of course, set out in CPR Part 52.6:

“permission to appeal may be given only where –

(a)

the court considers that the appeal would have a real prospect of success; or

(b)

there is some other compelling reason for the appeal to be heard.”

The argument is addressed exclusively to the first limb of this, namely, that the appeal would, in the claimants’ submission, have a reasonable prospect of success.

In my judgment at paragraph [64] I explained why I preferred the defendants’ argument. I identified the flaw in the claimants’ arguments as their failure to face up to the key point in the case, which I described as “Hanway’s contribution to, and thus joint ownership of, the designs”. This is a reference back, in particular, to point 2A of the Supplementary Agreement which is set out in paragraph 43 of my judgment and says:

“A.

As Hanway have invested to develop the Scomadi scooter project, and supplied many good design ideas in the processes of developing the scooter, so Hanway owns some part of final design for frame, plastic parts and lamp moulds.”

I found, as set out in paragraph [64], there had been a contribution to these designs in fact, so it was therefore part of the background knowledge; and that in any event, clause 2A(f) was an estoppel against the first claimant in this respect, citing the case of Peekay. I then found that the rest of the defendants’ argument logically followed, and in particular that had it not been for the Supplementary Agreement there would have been “an unproductive and unsatisfactory stand-off”.

The claimants’ argument before me was essentially that this result lacked commercial sense from the claimants’ point of view. The claimants’ proposed grounds of appeal on this issue suffer from the same problems as I identified in my judgment. For instance, the claimants do not challenge my finding about Hanway’s contribution as a matter of fact, which is referred to in paragraph 64. Nor do they challenge my reliance on Peekay which is also in paragraph 64. They do not say that my findings of fact were wrong, nor do they have an answer to the point on Peekay.

One of the arguments put forward today is set out in paragraph 1(c) of the draft grounds of appeal. Here it is suggested that I was wrong to hold that clause 2A provided for joint ownership, and that I should instead have held it amounted to separate ownership of different intellectual property rights. It seems to me this is a new argument which was not put forward at trial or in the pleadings at any stage. I did invite Mr. Hill to show me where such an argument had been put forward and he was unable to do so.

Mr. Cuddigan, for the defendants, reminded me that the argument at trial had been a very different one, about who owned all the exclusive rights. Mr. Cuddigan also pointed out that separate ownership would still not deal with what I have described as an unproductive and unsatisfactory stand-off. In addition the suggestion that there was separate ownership of different intellectual property rights fails to identify what, if anything, is left once you exclude the frame, plastic parts and lamp moulds which are all expressly referred to in point 2A of the SA.

The real complaint seems to be that although the claimants were happy to sign the Supplementary Agreement at the time in order to get the production they wanted, they now feel that the result lacks commercial sense from their point of view.

I do not feel that there are real prospect of success in this. It was suggested in argument that the construction point was “very far from being clear”. I disagree: I found this part of the case relatively straightforward. The fact evidence all points one way. I include the evidence of EICMA which was not disputed. Although the Supplementary Agreement itself is far from perfect, I do not find its main purpose to be unclear.

The one area of the case which I did find difficult was infringement of RCD2 by the GT Scooter. I explained in my judgment that I found this close to the borderline; but no permission is sought by either party in relation to any of the design issues.

I turn now to ground of appeal 2 which relates to my approach in relation to “finding”. This together with the next one, about determination and repudiation, were raised by Mr. Hill in accordance with In Re M [2008] EWCA Civ 1261. I am grateful to Mr. Hill for approaching the matter in this way. I do not accept that my judgment did require any further elaboration on either of these points but, in any event, I have now dealt with them.

So far as the matter on “findings” is concerned, I have expanded my reasoning slightly into paragraphs 70 and 71 of my judgment as handed down. In this I give further explanation as to my finding on construction, and the factual basis on which I relied. No error of principle is identified here; the claimants simply object to the findings I have made and the conclusions I have reached. There are no real prospects of success on this either.

The final point relates to my findings as regards Hanway being in repudiatory breach of the DMA. This links to the point on termination as I have set out. But when one looks at paragraph 3(a) it simply says that I was wrong; and paragraph 3(b) simply says:

“[I] wrongly ignored the fact that under the DMA the first claimant had a right to terminate on immediate notice even for less than fundamental breaches.”

This appears to be a reference to completely different rights to terminate.

Having dismissed the application for permission to appeal on point 1(a), this is somewhat academic but, in any event, even if it had been a stand-alone point, I would have not considered there was a real prospect of success on this one either.

For the reasons I have just articulated, I therefore refuse permission but it will, of course, be open to the claimants to apply to the Court of Appeal for such permission.

I now have an application made on behalf of the defendants that the claimants should do two things: first, publish a notice on their website linking to my judgment; and, secondly, provide a witness statement supported by a signed statement of truth listing the identity and contact details of each person to whom a certain letter has been sent.

In my judgment these raise two slightly different issues. So far as the notice was concerned, it was not disputed that the relevant approach was set out in Samsung v. Apple by the Court of Appeal. In that judgment Jacob LJ stressed that a publicity order of this nature was likely to be a relatively rare event. Mr. Hill, for the claimants, has pointed out that the facts in this case are a very long way removed from the facts of Samsung v. Apple where there had been conflicting judgments and very widespread publicity.

In this case there have only been two ways in which the dispute seems to have been publicised. One was in the letter which was distributed by the claimants. The other is a short message on their website called “Scomadi Statement” dated 10^th March 2017, which was picked up by British Dealer News. I have been shown a print-out from British Dealer News which is dated 26^th October.

It seems to me that this was not particularly well publicised generally, and certainly not by the website. The fact it was picked up by a single publication on one instance does not establish anything like the same degree of publicity as there was in Samsung v. Apple.

I also accept the claimants’ submission that the defendants can easily tell anyone interested about their success (or rather the extent to which they have succeeded according to the main judgment) in their own words, on their own websites. They could have a link to my judgment if they saw fit. Mr. Hill also makes the point that it was a bona fide action by a claimant. The fact they have lost is nothing unusual.

So far as the website is concerned, I am satisfied there is no need, having regard to these facts, for a publicity order of the type sought to be made here.

In my judgment, however, the letters raise a different matter. The letter in question was sent to a number of presently unidentified persons. It is dated 13^th January 2017. The letter was sent by the claimants headed:

“Re: Termination of Scomadi scooter Manufacture with Hanwei

We write to inform you that we, Scomadi Limited, are no longer affiliated with the following entities” and then it lists a number including Hanwei.

It also contains further statements such as:

“The purpose of this letter is to explain that Hanwei are no longer approved to manufacture Scomadi scooters and as such are not authorised and entitled to use any of our intellectual property rights. …

Accordingly, we will seek to prevent importation of any scooters which infringe our intellectual property rights or pass off our Scomadi scooter designs in the branding. …

In other words, any scooter manufactured by Hanwei using badges, designs or branding which would make any customer believe the scooters are associated with Scomadi is no longer permitted. For example, we are aware that Hanwei is intending on manufacturing scooters using the brand name ‘Royalloy’…”

It was submitted by the defendants, and not actually disputed by the claimants, that this was a threatening letter. It was not pursued as a threat as such, but it is plainly something which was sent by the claimants to people who were specifically targeted because the claimants believe – rightly or wrongly – these recipients were likely to sell Hanway scooters. In other words, as Mr. Cuddigan says, this was the very market which the claimants were trying to stymie.

So far as the confidentiality of this is concerned, I am dubious as to how confidential this can be because the companies in question, I imagine, are a rather limited number of people who sell motor scooters in the United Kingdom.

I turn to the applicable law. There is no doubt that the court has a jurisdiction to order disclosure of the recipients of the letter in these circumstances. The relevant case is CHC Software v. Hopkins and Wood [1993] FSR 241 which concerned actions for slander of title, malicious falsehood and trade libel. As stated in the White Book, in that case:

“Disclosure was ordered against the defendant solicitors of the names and addresses of the persons to whom allegedly false and damaging letters had been sent together with the text thereof for the purpose of the applicant writing to them to set the record straight, and so protecting itself against the damaging consequences of the allegedly tortious act. The documents sought were also relevant to the issues pleaded in the claim.”

It does seem to me that having regard to CHC Software, the defendant does have a legitimate purpose in wanting this information. It wants to write to the recipients to set the record straight and indeed these documents themselves may even be relevant in the claim for damages in the cross-undertaking.

I am therefore satisfied that it is proper to make an order in the terms sought in paragraph 9(2) of the draft order.

I now have to consider whether to reserve the costs of the trial. I have no doubt, as the defendants submitted, this is highly unattractive. It essentially means that despite having heard the trial, having had a very clear picture of the issues, and how they were argued, I should just leave this to be decided by possibly another Judge on another date at some point in the future. To my mind that is not a result that I would seek unless I am compelled to do so.

The question then arises whether I am compelled to do so as a result of the Global Floodcase [2016] EWHC 189 (IPEC), a decision of His Honour Judge Hacon of this court. The full picture of what was going on in that case is perhaps not entirely clear. Paragraph 4 explains:

“The defendants sought their costs in relation to misrepresentation and royalties due, subject to the costs caps which apply in this court. The claimants submitted that an order for costs could not be made until judgment had been given in the threats allegation.”

The Judge then goes through the material paragraphs of CPR Part 45.31 and considers the submissions made by both sides. In paragraph 12 the Judge sets out the relevant question which he described as follows:

“The question of whether I should adjourn the assessment of costs turns on the correct meaning of the word 'claim' in CPR 45.31(1)(a). It could mean the proceedings as a whole, i.e. everything in dispute under one claim number, or something less than that – I have already used the word in a narrower sense in this judgment. CPR 45.42(2) expressly requires that, where it arises, a set-off must be applied before the overall cap of £50,000 is to be taken into account. (Following BOS, the same applies to the stage caps.) Therefore if 'claim' means the proceedings as a whole, costs cannot be assessed until all issues in the entire proceedings have been decided.”

The last sentence of this paragraph sets out the specific question which the Judge was considering. The Judge sets out the submissions set out by both sides in the case and concludes at paragraph 15 as follows:

“I respectfully agree [with Mr. Hicks’ submission]. It follows that I cannot assess costs in this claim until all the issues, including the threats allegation, have been resolved. The assessment of costs is adjourned.”

Therefore this seems to make it absolutely clear that claims do mean the proceedings as a whole and costs cannot therefore be assessed until all issues of the entire proceedings have been decided.

The defendants submitted that in practical terms all the issues in the entire proceedings have in fact been decided. As a matter of fact that is not correct. There are some issues arising on design right, although these may be more properly characterised as royalty issues rather than design right issues per se. There are also passing off and trade mark issues. I do not have any clear idea as to how significant these issues are, but it seems to me that I cannot say that “all the issues in the entire proceedings have been decided”.

However, the defendants’ second point is that the reasoning in Global Flood is very closely tied to the particular issue in that case which was about assessment of costs; and that it does not rule out an alternative approach as follows. That alternative approach is one whereby the court could make an order for costs, but not assess them and order an interim payment on account instead. Mr. Hill, for the claimants, did not have any particular answer to this other than to say that in this court generally ----

He drew my attention to CPR 63.26 which states as follows:

“(1)

Subject to paragraph (2), the court will reserve the costs of an application to the conclusion of the trial when they will be subject to summary assessment.”

However, it does not seem to me that that rules out the possibility whereby the court could make an order but not assess them and then order an interim payment on account. Of course I would have thought that any such interim payment on account would have to be accompanied by an undertaking to repay and I will not make the order sought unless the defendants give me such an undertaking. But it was not suggested by the claimants that the defendants were not good for the money.

Therefore, for those reasons I will reject the application to reserve the costs generally. I will consider whether to make an order but not assess them; that is still up for grabs; then, if so, whether I should order a payment on account; and, if so, in what sum and which way round.

I now have to deal with the matter of costs. As not infrequently happens, there is a substantial dispute as to who is the winner. I propose to adopt the guidance given by Lord Bingham, MR in Roache v. News Group Newspapers [1998] EMLR 161 at page 168:

“The judge must look closely at the facts of the particular case before him and ask: who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?”

It is true the claimants have obtained something of material value in this litigation, namely, a royalty in respect of the scooters which are the subject of this action. This was something which was always pleaded as part of the defendants’ case but it was only really offered on an unconditional basis shortly before trial.

However, the claimants did not bring this action for royalties. Indeed, I was told that they did not even seek in their particulars of claim or at any other point any royalties. Moreover, they did not stop the action when royalties were offered. On the contrary, the claimants’ case at trial was that royalties were inadequate. I was told that 40 pages of skeleton argument did not even address it, as well as it not being part of the pleaded case. It was therefore somewhat rich for the claimants now to turn around and present this as a victory.

Conversely, so far as the defendants were concerned, they have obtained clearance for the fact that they can legitimately sell their Royal Alloy scooters in Europe. The defendants’ skeleton argument gave a number of reasons why the defendants said that this was in fact the matter of substance and reality about which the trial was concerned. I agree. The defendants have won the right to be able to carry on manufacturing and selling their Royal Alloy scooters in Europe. That is the very thing which the action was brought to stop. The claimants have failed and the defendants have succeeded on that point.

It is true there are some issues on which the claimants won. For instance, they won on infringement of RCD2 by the GT scooter which was a win although, of course, the defendants already conceded before trial that this same design infringed UK unregistered design right. The claimants also won certificates of contested validity, and it is true that this was a win, but as a matter of commercial reality it is not clear that such victory has led to any particular benefit. Certainly, so far as these defendants are concerned, it was no benefit whatsoever.

The defendants had other submissions with regards to the claimants’ conduct. Conduct is something I am required to take into account when assessing costs under Part 44.2. The one which strikes me as having some substance is the fact that the issue of construction of the Supplementary Agreement could have been determined as a preliminary issue. I am not entirely sure whether it could have been determined on the papers. That would have been one route but I tend to agree with the claimants that some fact evidence would have been necessary. On the other hand, it could certainly have been possible to have a trial of the SA alone without complicating the trial with the Registered Community Design or UK UDR. Preliminary points are often described as “treacherous shortcuts” but in this case I think it would have been a good idea. However, that is to speak with the wisdom of hindsight.

The defendants also made a number of detailed criticisms of the claimants’ conduct. I do not think there is anything in any of these detailed criticisms; these are all part of the normal rough and tumble of litigation. Therefore there is nothing in these particular conduct points.

But I return to the starting position and ask myself the questions which Lord Bingham said I should ask myself. First, “Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish”? The answer to that is, “No, because royalties were offered but the claimants had no interest in them”. Secondly, “Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?” The answer to that is unequivocally, “Yes”.

I will therefore make an order of costs in favour of the defendants. I see no reason to make any discount and I shall not do so.

I now have the job of trying to assess the quantum of the payment of account which should be made in favour of the defendants by the claimants. This is a task which should not be confused with an assessment. What I am not doing is performing an assessment.

I have heard the submissions on both sides. The end point of the defendants’ submission was that I should make an award of the sum of £50,000 plus £716 for various reasons. For instance the defendants argued that I should allow the full amount of £7,000 for the particulars of claim, and also award £4,229.40 for the reply and defence to counterclaim. This was so even though they were not in fact the defendants’ own documents, they were the claimants’ documents. Therefore the actual work done by the defendants would only have been done in relation to considering these documents and not in relation to creating them.

I think it is important to bear in mind that it will not be automatic in this court (following what His Honour Judge Birss QC, as he then was, said in Westwood v. Knight) that anybody can always claim all the costs of all the pleadings. I think it is important to approach that on a case-by-case basis, particularly when considering a payment on account as opposed to an assessment.

So far as the various previous applications in this case are concerned, I have heard competing arguments as to whether I should award costs in favour of the defendants for all these applications, or whether I should in fact make no order in relation to some of them, or indeed award the claimants some of their costs thereof.

There is no dispute as regards the latter elements of the schedule, ie providing inspection and disclosure, and witness statements, and preparing for and attending at trial and judgment. It is accepted that these are the defendants’ costs.

My overall impression is that there is considerable force in the defendants’ argument that even if we make every assumption in favour of the claimants, one would still end up at the end of the day with a figure of £50,216. But, on balance, I am persuaded that given the uncertainties at this stage and given the fact I am only ordering payment on account, I should accept the claimants’ argument that the correct figure should be £42,000 which is the sum currently paid into court.

This, therefore, is the payment on account which I order.