Lidl Great Britain Limited & Anor v Tesco Stores Limited & Anor

MRS. JUSTICE JOANNA SMITH:

1. I am now asked to deal with an application for permission to appeal by Tesco in relation to my decision in the main judgment in this matter, to strike out Tesco's allegation of bad faith made in its counterclaim.

2. I am going to refuse permission to appeal.

3. My reasons, in short, are as follows:

4. First, I struck out the bad faith allegation on grounds that there was no reasonable cause of action. I considered the issue in great detail in my judgment and I arrived at a clear decision in light of the authorities, which I considered at length. I do not consider that Tesco has identified a clear error of principle in my judgment and, in those circumstances, I do not consider there to be a real prospect of my decision being overturned by the Court of Appeal.

5. Second, I reject the suggestion that I applied the wrong test or that I formulated the test in different ways in my judgment. The test I applied appears in paragraphs 95 and 96 of my judgment. I note, from its skeleton argument provided for the purposes of this application, that Tesco appears to accept that this formulation was ‘broadly correct’. The suggestion by Mr. Malynicz QC today that the rationale for my decision related to an acceptance of the ‘error of judgment’ argument, as he articulated it, is mistaken and misunderstands my judgment. That was not, in fact, the rationale for my decision and the case of McBride was not essential to my reasoning.

6. Third, in so far as Tesco has sought to focus in its submissions for the purposes of this application, on its pleading as to the so-called "ghost mark” (not a term it used during the hearing), it now raises authorities not referred to before me, or to which my attention was not drawn during the hearing. I consider that in doing so, it is simply seeking to re-argue the same point that it raised at the hearing, rather than identifying any error of principle. The Court of Appeal will need to decide on any application for permission whether these authorities take matters any further.

7. Fourth, Tesco's skeleton argument for the purposes of this application appears to me to ignore the various concessions made by Tesco at the hearing, as set out in my judgment. I reject the suggestion made orally today by Mr. Malynicz, that I, inappropriately, gave Lidl the benefit of the doubt.

8. Fifth, Tesco's skeleton argument seeks to suggest that I was influenced in my judgment by oral evidence being given by Mr Brandreth QC on behalf of Lidl, which it is suggested I incorporated into my judgment; implicit in that suggestion is that I relied on it. A reading of my judgment will show that I was in no way influenced by any of the points that Mr Malynicz now suggests in his skeleton argument were made by Mr Brandreth, even assuming that they did amount to an attempt to give evidence, which Mr. Brandreth rejects – pointing out that some appear to mischaracterise the context in which he made the various remarks. In any event, in paragraph 103 of my judgment, I expressly observed that the issue for me was Tesco's pleading, not explanations that may have been provided by Lidl during the hearing.

9. Sixth, Tesco's grounds of appeal do not begin to address the inadequacies I identified in Tesco's pleaded case and there is still no suggestion that Tesco wishes to seek permission to amend its counterclaim. For all the reasons I identified, Tesco's pleading does not give rise to a prima facie case and did not reasonably raise an inference of bad faith. I refer, in particular, to paragraphs 97-101 of the judgment.

10. Seventh, Tesco says there is doubt as to the test to be applied at the interim stage which should be clarified by the Court of Appeal. It is true that neither party referred me directly to any authorities during the hearing which dealt, at an interim stage, with the approach to be taken to a plea of bad faith. The only such authority of which I am aware is Jaguar Land Rover, to which I referred in my judgment, which was also referred to in SkyKick by the Court of Appeal. I consider that I applied the test as set out in Jaguar Land Rover (that bad faith is “akin to dishonesty and must be fully and properly pleaded”) as approved by the Court of Appeal in SkyKick. Tesco will need to persuade the Court of Appeal on any application for permission to appeal to look at that matter again. I should add that, as Mr Brandreth pointed out, Tesco did not suggest that there was any doubt as to the test to be applied during the course of the original hearing before me and, indeed, I am satisfied that I applied the test as articulated by Tesco at the time.

11. Eighth, I do not consider there is any other compelling reason for an appeal in this case. The suggestion that there is potential for the trial to go off if I do not give permission now is not, in my judgment, a compelling reason. The trial of the action is listed in early February 2023 and there is no reason why Tesco cannot immediately seek permission from the Court of Appeal. (For continuation of proceedings: please see separate transcript)

12. I must now deal with an application for costs arising in relation to the Survey Application, in respect of which there is no application for permission to appeal. Two issues arise in relation to this application, first of all the incidence of costs and, second, the question of whether there should be an interim payment.

13. As to the question of the incidence of costs, Mr. Brandreth invites the court to make an order that Lidl should recover its costs of the battle over whether the survey evidence is admissible or not. He says that was a discrete issue as to whether evidence should be used at trial, that it was an unnecessarily hard-fought battle because Tesco resisted the application in circumstances where it should not have so resisted and that Lidl prevailed on that application.

14. Mr. Brandreth accepts that Lidl needed permission from the court to rely upon the survey evidence, but his submission is that that could have been dealt with relatively swiftly had it not been resisted by Tesco and that, in those circumstances, the substantial costs of the hard-fought battle would have been saved. He relies, in particular, upon an extract from the judgment of Henry Carr J in TQ Delta LLC v ZyXEL Communications Limited [2019[ EWHC 745 (Pat) 23 to 24, in particular: “24. It is also relevant to take into account whether the claimant has won a substantial prize which it could not have achieved without coming to court, and whether the defendant has deprived the claimant of the substantial prize that it sought in the litigation. TQ Delta's position is that it is the overall winner. It has established that one of its patents in a large portfolio is valid and infringed in circumstances where, until then, that was denied. As well as financial relief, it has obtained injunctive relief sufficiently important to merit, apparently, a visit to the Court of Appeal on behalf of ZyXEL.”

15. Mr. Brandreth points out that the costs that he is seeking do not include the costs of dealing with the report of Mr. Malivoire, in respect of which Tesco prevailed at the hearing (and which are already dealt with in the draft order), or the costs of the survey itself or, indeed, the costs of his factual evidence dealing with the survey, which will be costs which will be dealt with at trial. However, he says that Lidl has achieved a substantial prize in persuading the court that the survey evidence should be admitted and that Lidl should accordingly recover its costs of so doing.

16. Mr. Malynicz opposes the application for costs on the grounds, primarily, that this is an application that would always have had to be made to the court, that the court has a supervisory function in dealing with applications of this sort by reason of the judgment of Interflora to which I have referred in my main judgment, and that it would always have been necessary for the court to deal with the application with some care regardless of the approach that Tesco chose to take, whether resisting it or remaining neutral.

17. He did, however, accept, during the course of his submissions, that the fact that Tesco resisted the application (including by means of expert evidence) meant that the costs of the application had been increased and he submitted that, if the court is minded to order costs in Lidl’s favour, at the very least a discount should be applied to those costs.

18. In my judgment, the right and just order is that Lidl should have some of its costs to reflect the fact that this was a hard-fought battle which could have been avoided had Tesco taken a more reasonable approach. I agree with Mr Brnadreth that Lidl has won a substantial prize. However, for the reasons given by Mr. Malynicz, I do not consider that Lidl should have all of its costs. It would always have had to justify its application to rely upon the survey evidence to the court in any event.

19. In the circumstances, I am going to make an order that Lidl should only recover 75% of its costs, which will then impact upon the level of the interim payment that I am going to permit it to recover (the principle that there should be an interim payment being accepted by Tesco).

20. As to the level of the interim payment, Lidl accepts that 10% should be deducted from its recoverable costs to account for the fact that the costs of the Report Application are to be costs in the case. So, taking the total figure in Lidl’s costs schedule of £64,608.80, I shall award 75% of that figure. 10% should then be deducted. Finally, in light of submissions from Mr Malynicz as to the correct percentage of the interim payment, I am then prepared to award to Lidl 60% of that figure by way of interim payment. (For continuation of proceedings: please see separate transcript) — — — — — — — — — — — —