In Global Flood Defence Systems Ltd -v- Van Den Noort Innovations BV  EWHC 153 (IPEC) HH Judge Hacon made it clear that a court would only make an order giving conditional leave to defend in limited circumstances.
The claimants brought an action in relation to allegations of unjustified threats of proceedings for patent infringement in relation to a self-closing flood barrier. The claimants made an application for summary judgment which was rejected by the judge.
THE APPLICATION FOR CONDITIONAL LEAVE TO DEFEND
Whether there should be conditional leave to defend
- The claimants argued that in the event that I were to refuse summary judgment, there should be an order making the defendants’ permission to defend conditional on their paying a sum of money into court – see CPR 24.6, 3.1(3) and CPR 24PD 5.1. The claimants propose that the sum should be £50,000, the cap on recoverable costs in the IPEC, on the basis that in the end the claimants are likely to recover that maximum sum in costs.
- Although the rules provide that a party which does not succeed in an application for summary judgment may obtain alternative relief, I do not believe that this is to be approached as if it were a runner-up prize. The need for such relief must always be justified on the facts and will only be granted if it is necessary to do justice between the parties.
- In Allen v Bloomsbury Publishing Limited  EWHC 770 (Ch);  FSR 22 Kitchin J reviewed the authorities on alternative such relief and at  summarised the principles to be drawn from them. On appeal Kitchin J’s summary was not challenged and was quoted with approval by the Court of Appeal:  EWCA Civ 943, at . Kitchin J said this:
“32. I derive from these authorities the following propositions which have a bearing on the application before me:
(i) The court has jurisdiction under r.24.6 to make an order which is tantamount to an order for security for costs.
(ii) That jurisdiction extends to requiring someone advancing an unpromising claim to secure the defendant’s costs.
(iii) Before ordering security for costs in any case, the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned a right of access to the court; whether or not the person concerned has raised or can raise the money will always be a prime consideration.
(iv) The court has a wide discretion to ensure that justice is done in any particular case.
(v) Relevant considerations, beside the ability of the person to pay, include his conduct of the proceedings and the apparent strength of his case.
(vi) A party only becomes amenable to an adverse order for security under rule 3 once he can be seen either regularly to be flouting proper court procedures or orders or otherwise has demonstrated a want of good faith, that is to say a will to litigate a genuine claim or defence as economically as reasonably possible in accordance with the overriding objective.
(vii) Likewise, an order for security for costs would not be appropriate in every case where a party appears to have a somewhat weak claim or defence.
(viii) Exorbitant applications for summary judgment in misguided attempts to obtain conditional orders providing security for costs are not to be encouraged.
(ix) The occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between.
(x) It would be wrong to encourage litigants to regard r.3.1 as providing a convenient means of circumventing the requirements of Pt 25 and thereby providing a less demanding route to obtaining security for costs. When the court is asked to consider making an order under r.3.1(3) or 3.1(5) which is or amounts to an order for security for costs or when it considers doing so of its own motion it should bear in mind the principles underlying rr.25.12 and 25.13. In my judgment, the court should also bear this principle in mind when considering whether to make a conditional order under r.24.6.”
- Of these principles, Mr Campbell relied only on part of (vi). He submitted that the key factor was that in the second Website Notice and in the letter to Sir Peter Luff the defendants had falsely alleged that litigation had already started.
- I agree that this statement by the defendants was not correct but in my view it does not provide a sound reason why the defendants should now pay £50,000, or any sum, into court.