High Court awards indemnity costs after disclosure failure delays trial for two years

22 Jul 2022

The Chancery Division has this week made an indemnity costs order against MGA, the world’s fourth largest toy manufacturer, after a four-week competition trial was adjourned when major breaches of MGA’s disclosure obligations were discovered on the eve of the PTR.

MGA manufacture the bestselling ‘LOL Surprise!’ range of collectible dolls, and had earlier success with ‘Bratz’. Cabo, the claimant in the proceedings, designed the ‘Worldeez’ line of collectibles, which it was preparing to launch in the UK in May 2017. It alleges that MGA launched a concerted campaign to exclude Worldeez from the market, threatening to refuse stock of LOL Surprise! to retailers if they stocked Cabo’s rival product and making false allegations that Worldeez infringed its IP rights.

Less than three weeks before the trial was due to start, MGA’s solicitors wrote to the Court indicating there had been serious errors in its disclosure process, and many tens of thousands of potentially relevant documents had never even been harvested. The trial was promptly vacated, and MGA and its solicitors ordered to provide a full explanation of what had occurred at a further hearing.

That hearing took place before Joanna Smith J on 20 July, where the Court heard evidence that some 900,000 documents were never captured as a result of technical errors in the harvesting process (conducted by MGA’s own IT team); the supervision of the process was also inadequate, and a number of ‘red flags’ had been missed by the solicitors, which (if properly addressed) could have led to discovery of the issues much earlier. The trial has now been relisted for October 2024, a delay of more than two years.

At this week’s hearing, the judge ordered MGA to pay Cabo’s costs of the adjourned trial (as costs thrown away) on the indemnity basis, and to make a payment on account of over £750,000. The company is also required to engage an external e-disclosure provider to repeat its entire document harvest process. Judgment was reserved on Cabo’s application for an unless order, under which MGA’s Defence would be struck out if it fails to comply with its disclosure obligations by December this year.

Ronit Kreisberger QC, Stefan Kuppen, and Alfred Artley represent Cabo, instructed by Spector Constant & Williams.

The case is being reported in the media: The Law Gazette.

The judgment handed down on 29th July can be found here.