Koninklijke Philips Electronics NV v Aventi Ltd.& Ors [2003] EWHC 2589 (Pat)

Case No HC 01-04646[2003] EWHC 2589 (Pat)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Tuesday, 16 th September 2003
B e f o r e :
THE HONOURABLE MR. JUSTICE PUMFREY
Between
KONINKLIJKE PHILIPS ELECTRONICS N.V.ClaimantAVENTI LIMITEDDefendantsPRINCO DIGITAL DISC GmbHDefendantCHIN-SHOU (KNOWN AS “ARTHUR”) KUODefendant
Transcript of the Shorthand Notes of Marten Walsh Cherer Ltd.,Midway House, 27/29 Cursitor Street, London EC4A 1LT.Telephone No: 020 7405 5010. Fax No: 020 7405 5026
MR. G. BURKILL QC (instructed by Messrs. Bristows) for ClaimantMR. J. BALDWIN QC (instructed by Messrs. White & Case) for Defendants
Judgment

Mr. Justice Pumfrey:

[1]This is the last question which has to be decided in these proceedings. The claimants ("Philips") seek to make Princo GmbH and Mr. Kuo, the second defendant, liable for the costs of the action commenced by Philips against Aventi Limited, which may have been Princo's principal customer in the United Kingdom over a significant period of time.[2]In broad outline, the case is that Princo GmbH offered Aventi an indemnity against royalties and also offered to pay (and did pay) some of Aventi's costs. Aventi went into insolvent liquidation some six weeks after Princo withdrew funding. The funding is said to have been anything but disinterested, and Princo are accordingly said to have made themselves liable for the costs of the Aventi action. Before turning to the details of the support offered by Princo to Aventi, it is convenient to consider the authorities.[3]The scope of the jurisdiction to order costs against a non-party to litigation conferred by section 51 of the Supreme Court Act 1981 was revealed in Aiden Shipping v. Interbulk [1986] A.C. 965. In rejecting the contention advanced on behalf of the respondents in that case that it is the parties to proceedings who institute them and who have the conduct of them and who accordingly have the responsibility to pay the costs, Lord Goff of Chievely observed that this submission is relevant not to the construction of the statute, but to the exercise of the discretionary jurisdiction conferred by it and continued, "In the vast majority of cases it would no doubt be unjust to make an award of costs against a person who is not a party to the relevant proceedings. But, as the facts of the present case show, that is now always so.[4]He continues: "I do not, for my part, foresee any injustice flowing from the abandonment of that implied limitation [viz. to the parties to the proceedings]. Courts of first instance are, I believe, well capable of exercising their discretion under the statute in accordance with reason and justice. I cannot imagine any case arising in which some order for costs is made, in the exercise of the court's discretion, against some person who had no connection with the proceedings in question. If any problem arises, the Court of Appeal can lay down principles for the guidance of judges of first instance ....".[5]Guidance has been given by the Court of Appeal on this issue. The first case, Symphony Group v. Hodgson [1993] 4 All.E.R. 143, provides a list of cases in which a non-party had by that stage been ordered to pay the costs of the proceedings. This list is not exhaustive and it is clear from the later decision of the Court of Appeal in Murphy v. Young's [1997] 1 W.L.R. 1591 that this list did not identify circumstances in which it would necessarily be appropriate to order a non-party to pay the costs. Nonetheless, it provides a number of factors relevant to considering whether such an order might be appropriate (see the judgment of Phillips L.J. in Murphy at page 1596H).[6]The list of such factors is as follows, omitting the majority of the citation: "(a) Where a person has some management of the action, e.g. a director of an insolvent company who causes the company improperly to prosecute or defend proceedings; (b) Where a person has maintained or financed the action. Into this category Balcombe L.J. had placed the decision of Macpherson of Cluny J. in Sing v. Observer [1989] 2 All.E.R. 751, a case in which it appeared in the Court of Appeal that the third party had not, in fact, been maintaining the action at all; (c) The power of the Court to order a solicitor to pay the costs of proceedings has been approached as an instance of the jurisdiction under section 51 of the 1981 Act; (d) Where the person has caused the action, in the sense that his actions have brought it about although he is not a party; (e) Where two closely related actions between different parties have been heard together but not consolidated -- as was the case in Aiden Shipping itself; (f) Group litigation.”[7]In Murphy v. Young's, Phillips L.J. identifies the matters relevant to the exercise of the discretion set out in Symphony v. Hodgson as relating largely to questions of procedure that may impact upon the question of whether it is fair to order a non-party to pay the costs. Procedural considerations relating to the application against a non-party apart, there are five principles identified by Balcombe L.J. which may be of general application. These are:(1) An order for the payment of costs by a non-party will always be exceptional;(2) It will be even more exceptional for an order for the payment of costs to be made against a non-party where the applicant has a cause of action against the non-party and could have joined him as a party to the original proceedings. Joinder as a party to the proceedings gives the person concerned all the protection conferred by the rules, as to e.g. the framing of the issues by pleadings, discovery of documents and the opportunity to pay into court or make a Calderbank offer, and the knowledge of what the issues are before giving evidence;(3) The jurisdiction is inconsistent with the rule in Hollington v. Hewthorn by virtue of which judicial findings are inadmissible as evidence of the facts upon which they are based in proceedings between one of the parties to the original proceedings and a stranger. This departure from basic principles can only be justified if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the basic rule;(4) The fact that an employee or even a director or the managing director of a company gives evidence in an action does not normally mean that the company is taking part in that action, in so far as that is an allegation relied upon by the party who applies for an order for costs against a non-party company;(5) The judge should be alert to the possibility that an application against a non-party is motivated by resentment of an inability to obtain an effective order for costs against a legally aided litigant.[8]I think it is fair to observe at this point that the various factors that I have identified have been identified in particular cases and against a background of particular circumstances and can, I think, be viewed as being, to a certain extent at least, miscellaneous. Murphy v. Young's was itself a case in which an award of costs was sought against a legal expenses insurer. It failed, Phillips L.J. setting out the following statement of principle applicable to cases in which the main ground for suggesting that the non-party should pay is that it has been responsible for maintaining the action by funding it:
"(1) In Giles v. Thompson [1994] 1 A.C. 142 Lord Mustill suggested that the current test of maintenance should ask the question whether: 'There is wanton and officious intermeddling with the disputes of others in cases where the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse.' Where such a test is satisfied, I would expect the court to be receptive to an application under section 51 that the meddler pay any costs attributable to his intermeddling. It should be observed that that statement of principle will have to be modified in the light of the judgments in the Court of Appeal in Hamilton v. Al Fayed, to which I shall come. (2) Where a non-party has supported an unsuccessful party on terms that place the non-party under a clear contractual obligation to indemnify the unsuccessful party against his liability to pay the costs of the successful party, it may well be appropriate to make an order under section 51 that the non-party pay those costs directly to the successful party. Such an order may, for instance, save time and costs in short-circuiting the Third Parties (Rights against Insurers) Act 1930. (3) Where a trade union funds unsuccessful litigation on behalf of a member, the following factors, in addition to the funding itself, are likely to be present and, where they are, to make it appropriate to order the union to pay the unsuccessful party's costs should such an order be necessary: (a) an implied obligation owed by the union to its member to do so -- see (2) above; (b) an interest on the part of the union in supporting and being seen to support the member's claim; (c) the conduct of the litigation; (d) expectation based on convention that the union will bear the costs of the successful party should the member lose. (4) Where an unsuccessful defendant's costs are funded by insurers who have to provide cover against liability, which is not subject to any relevant limit, the same considerations as those set out under (3) above are likely to apply. (5) The position is more complex where a defendant's costs have been funded by insurers at risk under a policy under which their liability is limited to a sum which is insufficient to cover both liability and costs .... I am not persuaded that it will always be appropriate to order liability insurers to pay the plaintiffs' costs where they have unsuccessfully defended a claim made against their insured if the result of such an order will be to render them liable beyond their contractual limit of cover. It seems to me that the appropriate order may well turn on the facts of the particular case."
[9]Sixthly, and not as part of the list set out by Phillips L.J., at page 1603H-1604A of the judgment, he said:
"Funding alone will not justify an order against the funder under section 51. I do not consider that an order under section 51 will normally be appropriate where a disinterested relative has, out of natural affection, funded costs of a claim or a defence that is reasonably advanced."
[10]The last case to which it is necessary to refer is the decision of the Court of Appeal in Hamilton v. Al Fayed [2002] EWCA Civ. 665 [2002] 3 All.E.R. 641. This was concerned with the positions of the various persons who had funded Mr. Neil Hamilton's unsuccessful defamation proceedings against Mr. Mohammed Al Fayed. The judgment of Simon Brown L.J. Refers to the important decision of the Court of Appeal in Globe Equities Ltd. v. Global Legal Services Ltd. [1999] B.L.R. 232 in which Morritt L.J. considered the meaning of Balcombe L.J.'s proposition that the circumstances of the case need to be exceptional and reviews all the remaining authorities. For present purposes, the importance of this judgment is that it draws a clear distinction between "pure" funders, who have no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business and in no way seek to control its course on the one hand, and others, particularly those with a direct commercial interest in the litigation, on the other.[11]In Hamilton's case, the Court of Appeal considered a number of examples of cases in which the interests of justice plainly required that funders of unsuccessful litigation be immune from an order for costs. Of some importance was the position of directors who fund litigation by insolvent companies and of liquidators who are not infrequently funded by creditors in taking proceedings. The Court of Appeal was required to balance the need for proper access to justice on the part of impecunious litigants on the one hand and the unfairness to the successful, unfunded party on the other. This tension is, as a result of the decision in this case, to be resolved in favour of access to the courts -- see also the judgment of Chadwick L.J., who considered that the question was decided by the judgment of Millett L.J. In Metalloy Supplies Ltd. (in liquidation) v. M.A. (UK) Ltd. [1997] 1 All.E.R. 418 at 424, and Abraham v. Thompson [1997] 4 All.E.R. 362 at 377.[12]Chadwick and Hale L.L.J. also drew the distinction between pure and other funders to which I have referred, considering that the question was in essence one of access to justice. Hale L.J. was obviously unenthusiastic in the result, but considered that policy required that pure funders be immune, Parliament having concluded that access to the civil courts was no longer an interest to be secured by public funding.[13]Hamilton's case is also important in its emphasis in the need for a causal relationship between the activities of the funded party on the one hand and his receipt of funding on the other. It seems to me that if the evidence were that the funded party would have gone ahead anyway, the case for an order for costs against the funder is destroyed.[14]Simon Brown L.J. appears quite clear on this topic at paragraph 54 of his judgment, and I understand this to be accepted by the other members of the Court of Appeal.[15]In my view, the authorities now draw a clear distinction between disinterested (in the sense of commercially disinterested) funders on the one hand and those whose interests stand to be advanced by a successful outcome of the litigation on the other. It is a precondition for the making of an order that the funder is responsible for the litigation in the sense that without the funding the litigation would not take place. If the funder is a pure, disinterested funder, the order will not be made. If this condition is not satisfied, the only question is whether, in all the circumstances, justice requires that the order be made.[16]As Morritt L.J. Observed in the Globe Equities case:
"Ultimately the test is whether in all the circumstances it is just to exercise the power conferred by subsections (1) and (3) of section 51 of the Supreme Court Act 1981 to make a non-party pay the costs of the proceedings. Plainly in the ordinary run of cases where the party is pursuing or defending the claim for his own benefit through solicitors acting as such there is not usually any justification for making someone else pay the costs. But there will be cases where either or both these two features are absent. In such cases it will be a matter for judgment and the exercise by the judge of his discretion to decide whether the circumstances relied on are such as to make it just to order some non-party to pay the costs. Thus, as it seems to me, the exceptional case is one to be recognised by comparison with the ordinary run of cases, not defined in advance by reference to any further characteristic."
[17]This, of course, was a reference to the first of the factors set out by Balcombe L.J. to which I have referred.

The present case

[18]In the present case, the facts are as follows. Philips started patent infringement proceedings against Aventi Limited on 23rd October 2001. At this date, Princo were already the object of proceedings in the Mannheim District Court for infringement of the Germany equivalent of the patent in suit, and appear also to have started nullity proceedings in the Federal Patent Court in Germany.[19]Although Philips were aware that Aventi probably obtained its supplies from Princo, a deliberate decision seems to have been taken not to seek to join Princo to the litigation in the United Kingdom. Although service out was not required, it might be difficult, as I understand it, having regard to the existing German proceedings to certify the proceedings as the Brussels/Lugano Convention and the CPR require unless acts of infringement by Princo could be demonstrated in the United Kingdom.[20]The proceedings against Aventi were in respect of unlicensed disks made not only by Princo Corporation in Taiwan and imported by Princo GmbH, but in respect of the goods of other unlicensed manufacturers as well, in particular a manufacturer called Fornex or Fornet.[21]When the dispute with Philips came to a head, Mr. Kuo gave Aventi a written indemnity. Dated 10th October 2000, it says this:
"Princo v. Phillips. Dear Mr. Dobson [Mr. Dobson being the managing director of Aventi], we hereby confirm to you that as long as the legal actions we are now taking against Philips have not been judged by the court and without the recognition of the rights of Philips, we are liable for the royalties to Philips for every piece of CDR you purchase from Princo Digital Discs GmbH, Germany."
It is signed by Mr. Kuo as the managing director of Princo Digital Disc GmbH and there is the company's stamp.[22]This is obviously an interim indemnity pending the resolution of the actions and I attach no importance to it for present purposes. All it does is to make clear the obligation which no doubt falls on Princo in any event. This seems to me to be a perfectly ordinary commercial transaction and it is not relevant to any question which could affect the incidence of the costs of the Aventi action.[23]When proceedings were taken against Aventi, Princo undertook payment of the costs. They also provided such things as the list of prior art cited in the nullity proceedings in Germany. What matters, though, is the funding. They funded the defence and Mr. Dobson of Aventi understood that to be the case. He was cross-examined at considerable length on this question and the whole of the cross-examination needs to be considered in the transcript from page 518 to page 526. However, a number of points call for comment.[24]Mr. Dobson had said in paragraph 9 of his statement that, "The first I knew that these proceedings had started was when I received the phone call. That was on or shortly after the date of issue, 27th October. I immediately contacted Princo. I faxed the claim form to them and asked them what they proposed to do about it. I also spoke with Princo's managing director, Arthur Kuo." That was an error as he had in fact spoken to Mr. Kuo's assistant, to whom I referred in the main judgment. He says he cannot remember what was actually said and then the question is put, "You took great comfort from what you called the indemnity." That is the indemnity which I have quoted. Mr. Dobson said, "That is true, yes, and their support." He is then taken through the indemnity.[25]At page 522, the following exchange takes place:
"(Q) Mr. Dobson, rather than rolling over, as it were, in the action against you by Philips, the reason you felt free to continue is, if I can put it this way, first, that you knew that if it all went wrong, your damages, any damages you had to pay, would be met by Princo. That is right, is it not? (A) That is correct. (Q) And you also knew that in continuing the action, you were free to continue to trade with Princo and continue this profitable relationship with them. (A) Yes, continue to trade in general. (Q) And so, in the light of this royalty guarantee, your own desire to continue making profit at Princo, with no downside as far as you could see because of this guarantee, made you defend the action. That is right, is it not? (A) No, that is not right. The fact that they were supporting me would pay for all the costs and I would not get into trouble, that made me defend. (Q) By 'trouble', you mean pay damages. (A) Patent actions -- I was not familiar at all with litigation. I never had been involved before. I had no idea what it was all about. I just got this bundle on my desk one day, and the reason for it was Princo's CD-Rs. Princo said, 'Yes, we will support you in any court action. We believe we are going to win in Europe, so carry on, Mr. Dobson.' (Q) Though what they actually said to you was not that they would support you, that you would not be involved in this action; it was that in the light of this royalty guarantee, they would pay any damages that you had. That is right, is it not? (A) Yes, I suppose it is correct. (Q) What in fact happened was that Princo, after some telephone calls backwards and forwards, offered to contribute the cost to the tune of 10,000. That is right, is it not? (A) No, I cannot recall a figure of 10,000."
[26]Then the question of magnitude of the funding was raised. It seems to me from Mr. Dobson's evidence as a whole, including the evidence in his witness statement, that it was clear that there had been two factors which made him defend the action. The first was the indemnity as to damages, but the second was the undertaking to pay costs. So much is made absolutely clear by Mr. Dobson's reaction when the support in relation to costs was eventually withdrawn by Mr. Kuo possibly (although this would be a matter of speculation) in the light of the loss of the action in Mannheim.[27]Mr. Dobson wrote a letter to his solicitors as follows:
"It is with great regret that I must inform you of the following. Princo, the manufacturer of the CD-Rs in question, have informed me today that they have withdrawn the funding for the above-mentioned case. I feel very bitter about the whole situation as Aventi Limited is not in a position to pay for the defence itself. Could you please follow all the necessary procedures and inform the necessary parties?"
[28]All this evidence as a whole satisfies me that the funding of the costs of Mr. Dobson was a causative factor in Mr. Dobson's continuing to defend the action. I am satisfied that Mr. Dobson would not have defended the action if it had not been for the funding of his costs which he received from Princo.[29]The extent of the funding was, in the end, £29,000 or thereabouts. Mr. Kuo refused to consider continuing the funding after May 2002. Mr. Kuo says that the reason was that he understood the costs would not exceed £10,000. Whether that is so or not, the funding was not trivial, although nothing like enough to take the action through to judgment. In fact, put crudely, what Princo did was to pull the plug on Aventi.[30]Subject to being provided with the prior art, Aventi ran the action themselves. Dr. Kurig, Princo's German lawyer, had attended a conference (one of two) with counsel, but that was the extent of the company's direct involvement. There was no obligation on Aventi to take advice from Princo, and no obligation to report progress.[31]After funding was withdrawn, Aventi took a number of steps in the action during a period of about six weeks. These included the provision of lists of documents. After the collapse of the action, Jacob J. permitted the joinder of Princo and Mr. Kuo to the action for the purpose of seeking costs.[32]So far as Princo is concerned, it seems to me that the material factors are as follows. First, it was quite clearly very interested in the outcome of the English proceedings. The German proceedings did not affect the English proceedings so far as validity of the patent was concerned, and it was obviously in Princo's interests to secure the revocation of both if that could be achieved. There is no basis for any suggestion that Princo was a pure funder.[33]Second, the funding was causative of the defence to the action for the reasons I have given. It may also have been material to defending the claim in respect of the Fornet disks, but that is not very clear. In any event, Mr. Dobson did not tell Princo about the Fornet disks. Mr. Dobson would not have defended the action but for his subsidy, which he could obtain directly by not paying Princo against invoices.[34]Third, Princo did not involve itself in the action, and did not control it, subject to the provision of the relevant prior art. The approach seems to have been "hands off", but Princo were willing to give advice if required.[35]No other factors seem to me to be really material. In particular, I attach no significance to the failure to join Princo in the Aventi proceedings. Primarily, Aventi was the commercial object of the proceedings, and a patent action in respect of Princo's products does not seem to me to raise the same sort of considerations as were considered important in Symphony v. Hodgson. I am asked to find by Philips that Princo were joint tort-feasors with Aventi, but I doubt that it is open to me to do so and, in any event, there is no satisfactory material upon which such a finding is possible.[36]On the whole, I am satisfied that this is a case in which Philips ran up costs in an action which, but for Princo's funding of the defendant, Aventi, for its own commercial benefit, would not have needed to be run up. Princo should pay the costs of that action save in so far as increased by the claim in respect of the Fornex disks and any other disks of any other manufacturer.[37]There is no basis for making Mr. Kuo liable for these costs. The fact that he is jointly liable with Princo for the latter's infringement has no impact whatever upon this question. He has never provided funds to Aventi and it seems to me that is the end of it. The order will follow that conclusion. MR. BURKILL: Your Lordship was provided with a draft order. I have draft copies. It may need minor amendment in the light of what your Lordship said. MR. JUSTICE PUMFREY: What did you think I was going to do, Mr. Burkill? MR. BURKILL: I remained true to my submission that Mr. Kuo, as well as Princo, should pay. The order was drawn to cover both. As a practical matter, it may make little difference. MR. JUSTICE PUMFREY: I am not going to make any order for interim costs in that action. I am going to see it assessed first. MR. BURKILL: Which was the other point on my application, but as your Lordship pleases. In paragraph 2 ---- MR. JUSTICE PUMFREY: To be quite frank with you, there is such a dispute about the magnitude of the costs and the allegation of the costs between the two actions that there is no question of interim costs in this case. I have no handle at all on what you are likely to recover. I looked again at this issue and I just cannot begin to estimate. Those instructing you have already substantially reduced the potential bill by knocking off nearly 20%. In those circumstances, I am just not prepared to make an order for interim costs. MR. BURKILL: Clearly the costs of the two actions are going to end up being assessed together. MR. JUSTICE PUMFREY: No, they will be assessed one after the other, in fact. I think the costs judges are very unhappy about assessing things together. They like to keep things separate, I understand. There will be a row about the allegations of Professor Limebeer and also the magnitude of Professor Limebeer, but that will be for another day. MR. BURKILL: We can deal with that as and when it arises. I am sure there will be. MR. JUSTICE PUMFREY: In the light of that, paragraph 2 goes. MR. BURKILL: Paragraph 2 goes. As far as paragraph 1 is concerned, Princo Digital Disc GmbH shall pay ---- MR. JUSTICE PUMFREY: You have the Fornet discs. MR. BURKILL: Yes, of course. There was not anything beside the Fornet discs so I think that was ---- MR. JUSTICE PUMFREY: Is that all there was? MR. BURKILL: Sorry, it started with Princo discs when the claim form was served. It was then amended to add the Fornet discs. They came in and customs picked us off a couple of weeks later. Those were the only other ones. MR. JUSTICE PUMFREY: All right. MR. BURKILL: The only other matter remaining on my side is the costs of this application. I am working on the basis that they go into the costs of the action. MR. JUSTICE PUMFREY: They are the costs of the action, are they not? MR. BURKILL: They are the costs of the action and indeed on the other parts of this application, the other hearings, we are working on the basis that they were effectively working out the ---- MR. JUSTICE PUMFREY: They are part of the costs of the action. MR. BURKILL: Yes. MR. JUSTICE PUMFREY: Mr. Baldwin? MR. BALDWIN: There are two, I anticipate. First, it is the costs of the Aventi action as against Aventi. They should be paid by Princo. Secondly, it is the costs of the section 51 application. That failed against Mr. Kuo. MR. JUSTICE PUMFREY: You say he should have his costs. MR. BALDWIN: We say he should have his costs. MR. JUSTICE PUMFREY: Has he been separately represented? MR. BALDWIN: He has not been separately represented, no. MR. JUSTICE PUMFREY: Should he not have been? I know this sounds a bit picky, but should he not have been? He has never sought to set himself up against the company, has he? MR. BALDWIN: He was not separately represented. That is a fact. What you are suggesting is that we should have recognised the conflict of interests. MR. JUSTICE PUMFREY: Is there a conflict there? It is just that I am being hypersensitive, I think. As a practical matter, I do not think there is the sort of conflict which would require separate instruction provided he kept to the forefront of his mind that his interests and those of the company may not always coincide. MR. BALDWIN: It was not only this application; it was also the application for joint tort-feasors. MR. JUSTICE PUMFREY: Is not the correct order that all the costs, including the costs of Mr. Kuo, should be paid by the company? MR. BALDWIN: What we submit is actually no. With respect to the section 51 application, they have succeeded against Princo, but they have failed against Kuo. It is a joint representation. We are dealing with it in a way which took place in a case I was in recently where similar circumstances happened. There was no order for costs. It was before the Vice-Chancellor and he suggested no order for costs because it is a bit of a nightmare to sort out when you have joint representation. MR. JUSTICE PUMFREY: My question is rather different. It is why there are any costs incurred which were not incurred jointly on behalf of both of them, in which case either can pay in principle? In this case, it would not be right for Mr. Kuo to pay them, but it would be right for the company. MR. BALDWIN: But it would not be right for the company to pay for costs incurred against Mr. Kuo. MR. JUSTICE PUMFREY: Yes, but as all costs incurred by the company would also be incurred to defend Mr. Kuo, we have this position. He got off on the short point that he did not get any funding. MR. BALDWIN: But they brought proceedings against him. They sought to oppress Mr. Kuo right from the beginning. With respect to the joint tort-feasors case, they succeeded in that claim. In seeking a section 51 order against Mr. Kuo personally ---- MR. JUSTICE PUMFREY: It is going it a bit. MR. BALDWIN: I think it is going too far, especially bearing in mind their reasons for joining Kuo as joint tort-feasors. Their reason for joining Kuo was that they said that Princo might fold and they needed somebody to get the money out of. Of course, that puts it very much on the line for Mr. Kuo. They succeeded and they got an order against Mr. Kuo. They proceeded against Mr. Kuo personally for costs when, we would submit, they must have known that was a very tricky case on their part. Your Lordship said that it was a short point. Nevertheless, they maintained pressure upon Mr. Kuo by bringing this action right to its full conclusion. Mr. Kuo should recover his costs from Philips. That is part of the reason why I say that perhaps the fair order under section 51 is no order for costs at all so that Philips do not have to pay Kuo and Princo do not have to pay Philips. There is just no order. It is true that they get the costs of the Aventi action, that is to say, the costs up to the point of joining Princo and Kuo in thereafter. MR. JUSTICE PUMFREY: I get your point. MR. BALDWIN: Those are my submissions as to why that is the fair order. MR. JUSTICE PUMFREY: What do you say, Mr. Burkill? MR. BURKILL: That cannot be right. The entire weight of the debate was dealing with Princo and the argument against Mr. Kuo started right at the beginning of the hearing based on the fact that he was rightly joined in the action as a joint tort-feasor from the start. MR. JUSTICE PUMFREY: If he is jointly liable with an insolvent company to the solicitors for the costs of defending this application -- and I am told they are jointly represented -- that means that, in principle, unless there is some agreement, he is jointly liable for the costs of the whole defence. Of course, the whole defence applies to him as well. Although the facts are still the facts, you would have had to lay out all those facts in the case against Mr. Kuo if you had only gone against him personally, would you not? MR. BURKILL: We had never considered going against Mr. Kuo personally. The case was ---- MR. JUSTICE PUMFREY: On his own. MR. BURKILL: On his own, yes. MR. JUSTICE PUMFREY: The test is what part of the costs are also Mr. Kuo's costs? The answer is everything to do with the application. Is that not right? It is not just the froth on the cappuccino at the end; it is everything that is underneath it as well. MR. BURKILL: One is then peeking behind privilege as to asking how the defendants are running this case. MR. JUSTICE PUMFREY: That is what the taxing masters frequently do. MR. BURKILL: I do not know and I do not care how it has been arranged. The position is ---- MR. JUSTICE PUMFREY: Mr. Baldwin tells me that they were jointly instructed. That has certain consequences. It makes them mutually liable for the costs unless there is an agreement. MR. BURKILL: I succeeded against Princo and therefore ---- MR. JUSTICE PUMFREY: I need to know whether they are jointly liable for the costs to wind the case up or is there an indemnity. Can you tell me? MR. BALDWIN: Not without making some enquiries. MR. BURKILL: The position as far as we are concerned is that we have succeeded against Princo. Regarding the extra costs in joining Mr. Kuo, it is rather like Princo and Fornet disks. If one wants to knock off the costs of this application save and in so far as increased by the joinder of Mr. Kuo, then the answer is that you are knocking off effectively nothing because the argument was merely a few words at the end of an otherwise careful submission on the authorities and the facts, on which I succeeded. It cannot be right to say that it is cancelled out and there is no order for costs. MR. JUSTICE PUMFREY: The alternative is to just give Mr. Kuo his costs of bringing a successful defence to an application against him. You apply, you lose and he is paid. That is the alternative. MR. BURKILL: My position would be that I should have the costs of the application save and in so far as increased by the joinder of Mr. Kuo. Mr. Kuo gets his costs in so far as they were increased over and above the costs of the company. That would be my submission. The position there is that it still leaves 90 something per cent ---- MR. JUSTICE PUMFREY: That is rolled up in the costs. Have you anything else you want to say? MR. BURKILL: I ought to reject my friend's application that we were there to oppress Mr. Kuo. Your Lordship knows why he was joined. MR. JUSTICE PUMFREY: No, I cannot understand why you were oppressing Mr. Kuo. MR. BURKILL: We were successful. The problem was quite clearly there. We never had Princo Corporation taking up the responsibility. MR. JUSTICE PUMFREY: I understand. MR. BALDWIN: My Lord, in answer to your question, they were joint instructions and there was no agreement as to what would happen. MR. JUSTICE PUMFREY: That we know about. The order I am going to make is as follows. Mr. Kuo will have his costs of the application against him. Princo will pay Philips' costs of the application against them. That is how it will work. I am sorry about the complexity of it, but I am not taken with the idea that when one is trying to hold the two parties separate, one can just throw up one's hands and say "No order". MR. BALDWIN: I would ask for leave to appeal. MR. JUSTICE PUMFREY: On everything? MR. BALDWIN: We have dealt with all the other matters. MR. JUSTICE PUMFREY: Is this just on costs? I am sorry, I do not mean just on costs, but on the order. MR. BALDWIN: Yes, the section 51 application against Princo. Your Lordship will recall that the other matters have gone on for leave to appeal. MR. JUSTICE PUMFREY: I regard this as a very clear case as it happens. MR. BALDWIN: Indeed, and for that reason, you will reach a short conclusion. We have the position whereby the Court of Appeal has said "exceptional". Here, we have a circumstance which I would submit is pretty run-of-the-mill, where you have a supplier ---- MR. JUSTICE PUMFREY: I understand the point. Mr. Baldwin, I know what the thrust of the point is, but I just regard this as being a rather clear point of funding over and above what you would normally expect a supplier to do. MR. BALDWIN: But contrast it with Levy & Spencer Insurance, which is the Murphy case. Not only do they fund, but they play an active part in the management and control of litigation. They are not liable. I know there are certain matters that you took into account ---- MR. JUSTICE PUMFREY: Do I have to be satisfied that there is a real prospect of success? MR. BALDWIN: No. MR. JUSTICE PUMFREY: Or, in the old phrase, is it that I consider it a suitable matter for the attention of the Court of Appeal? MR. BALDWIN: Yes. MR. JUSTICE PUMFREY: Is it still open to me to say that? MR. BALDWIN: Indeed it is. I do not think it is a real prospect of success; I think it is an arguable prospect of success. MR. JUSTICE PUMFREY: I am telling you it is a real prospect of success. MR. BALDWIN: Or some other reason. MR. JUSTICE PUMFREY: Is it some other compelling reason? MR. BALDWIN: I do not have the rules in front of me, I am afraid. MR. JUSTICE PUMFREY: It is some other compelling reason why this appeal should be heard. It has to be apparent from my review of the authorities that the state of them is not entirely clear. You are right that this is a context which does occasionally present itself. I think it might be helpful. What do you say, Mr. Burkill? MR. BURKILL: I say that it is a clear case and it is also a discretionary matter. There may be puzzles at the ages of the authorities, but this is a case which does not require exploration of our boundaries. It is a clear case and a matter of discretion. MR. JUSTICE PUMFREY: I am going to give permission to appeal for two reasons. It will not be because I consider that there is a real prospect of success, but because I consider that there is a compelling reason why the appeal should be heard. Although this involved an exercise of discretion -- I am satisfied that upon my appreciation of the law, it is a proper exercise of discretion -- I am still not entirely happy about the legal framework. I consider this to be a matter which really should go to the Court of Appeal for a review of the exercise of this discretion in this sort of context. Accordingly, I have given permission to appeal on just about everything in this case, have I not? You are going to have tremendous fun! MR. BURKILL: There is one more, if I may. If we are going to review the boundaries, may I also have leave to appeal on the question of Mr. Kuo ---- MR. JUSTICE PUMFREY: No, you may not. On that, you can ask the Court of Appeal. Definitely not. MR. BURKILL: In that case, your Lordship does not grant it on almost everything. As your Lordship pleases. We will submit a minute. MR. JUSTICE PUMFREY: Is there anything else? MR. BURKILL: No. Your Lordship has an agreed order in relation to last time out. MR. JUSTICE PUMFREY: Do I initial this one? MR. BURKILL: Yes. MR. JUSTICE PUMFREY: Would you like to roll up this as a package? MR. BURKILL: I think it is easier to have them separate because this one has a separate action number. MR. JUSTICE PUMFREY: Very well. May I just thank you both very much for the clarity of your submissions. I am very grateful, as ever, to the Bar for keeping things more or less on the rails. MR. BURKILL: It brings back happy memories to have a judgment delivered extempore rather than in advance. MR. JUSTICE PUMFREY: Yes, it is easier. Thank you very much. - - - - -

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