Lufthansa Technik AG v Panasonic Avionics Corporation & Ors

The relief-from-sanctions regime applies only where breach of a rule, practice direction or order attracts an express or implied sanction which has already taken effect. Mandatory wording and a time limit do not themselves create a sanction.

Breach of an Island Records order attracts no automatic sanction. Such an order supplies sufficiently reliable, readily available information to permit an informed election between damages and an account of profits. It does not replace disclosure in the ensuing remedies proceedings, and estimates may later change.

An application concerning inaccurate Island Records information is therefore governed by ordinary case-management powers and the overriding objective. A proportionate response may permit corrected information and allow the claimant to remake its election, with suitable costs protection.

After succeeding in patent-infringement proceedings, Lufthansa Technik AG received an Island Records order requiring Panasonic to provide sales, costs and profit information so that Lufthansa could elect between damages and an account of profits. Lufthansa elected an account. Panasonic later supplied corrected information which reduced the estimated profit by about $30 million.

Lufthansa applied to prevent reliance on the corrected information. Panasonic cross-applied to extend time for compliance. By common consent, the deputy judge treated the matter as an application for relief from sanctions and refused relief: [2023] EWHC 1043 (Pat).

On appeal, Panasonic argued for the first time that no sanction existed and that the applications should instead be determined under ordinary case-management principles. The central question was whether correction of information supplied under an Island Records order engaged CPR rule 3.9.

1. Appeal allowed. CPR rules 3.8 and 3.9 operate only where an express or implied sanction for non-compliance already exists. They do not create sanctions. The court must examine the position which would prevail without an extension or other relief. Mandatory wording alone does not engage the relief-from-sanctions regime: [2023] EWCA Civ 1273, paras 20–25.

2. An Island Records order enables a successful intellectual-property claimant to make an informed election between damages and an account of profits. The information should be available quickly and at proportionate cost. It need only be sufficiently reliable for that limited purpose. Explained approximate estimates are permissible because fuller disclosure and analysis follow in the selected remedies proceedings: paras 26–27.

3. Neither the order, the Civil Procedure Rules nor any practice direction imposed an automatic consequence for breach of the Island Records order. CPR rule 31.21 did not apply because Panasonic was not seeking to rely upon an undisclosed document. Nor could that rule be extended by analogy. The Island Records statement did not replace disclosure in the account, and its estimated figures could legitimately differ from the figures ultimately established: paras 28–36.

4. The rival applications therefore fell to be determined under the overriding objective and ordinary case-management powers. The seriousness and significance of the breach, its causes and its consequences remained relevant. Panasonic's error was serious, was caused partly by using a person who was not a director, and was aggravated by the delay in correction. The court nevertheless had a free hand to impose a proportionate response rather than starting from an existing sanction: paras 37–42.

5. The proportionate course was to permit the corrected information and give Lufthansa a fresh opportunity to elect its remedy. The proceedings remained sufficiently early for either remedy to be tried without imperilling the trial date. Lufthansa would suffer no prejudice beyond costs once allowed to re-elect. Panasonic was not to be barred from relying upon the corrected information: paras 43–48.

6. Time for compliance was extended to the date of the corrected statement. Lufthansa was allowed 14 days to elect an inquiry as to damages or confirm its election for an account. If it chose damages, Panasonic was to pay the costs thrown away by the erroneous information up to the end of January 2023. Newey and King LJJ agreed with Birss LJ: paras 48–51.

1. Court of Appeal (Civil Division): Allowed Panasonic's appeal on ground 1, holding that no sanction existed and that ordinary case-management principles applied: [2023] EWCA Civ 1273.

2. High Court, Patents Court: Recorder Douglas Campbell KC, sitting as a deputy High Court judge, treated the applications by common consent as concerning relief from sanctions and refused Panasonic relief: [2023] EWHC 1043 (Pat).