INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
| (1) NICHOLAS MARTIN
(2) BIG HAT STORES LIMITED
|- and -
- and -
(1) FLORENCE FILM LIMITED
(2) PATHÉ PRODUCTIONS LIMITED
(3) QWERTY FILMS LIMITED
|Defendant/Part 20 Claimant
Part 20 Defendants
Simon Malynicz QC and Ashton Chantrielle (instructed by Keystone Law) for the Defendant/Part 20 Claimant
Jonathan Hill (instructed by Wiggin LLP) for the Part 20 Defendants
Hearing date: 4 December 2017
Crown Copyright ©
"Costs consequences following judgment
(1) Subject to rule 36.21, this rule applies where upon judgment being entered —
(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.
(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)
(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, "more advantageous" means better in money terms by any amount, however small, and "at least as advantageous" shall be construed accordingly.
(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to —
(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
(b) interest on those costs.
(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to —
(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) the sum awarded to the claimant by the court; or
(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs —
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate.
(7) Paragraphs (3) and (4) do not apply to a Part 36 offer –
(a) which has been withdrawn;
(b) which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;
(c) made less than 21 days before trial, unless the court has abridged the relevant period."
The effect of a successful claimant's Part 36 offer on costs in IPEC
PPL v Hagan
" There is a tension between the relief under subparagraphs (b) and (d) of rule 36.14(3) and the caps on costs and damages in IPEC. This was briefly debated and considered in OOO Abbott v Design & Display Limited  EWHC 3234 (IPEC). Counsel for the first defendant in that case argued that an award under subparagraph (b) was still subject to the overall £50,000 cap on costs available under the IPEC rules and subparagraph (d) was subject to the overall cap of £500,000 damages. I rejected the argument in relation to subparagraph (d) but accepted it with regard to (b) (at ).
 Since then, the Court of Appeal has given judgment in Broadhurst v Tan  EWCA Civ 94;  1 WLR 1928. This has a bearing on costs awarded under rule 36.14(3)(b) in the IPEC even though it did not deal with the IPEC costs regime. Broadhurst was concerned the fixed costs regime for low value personal injury cases, provided for by Section IIIA of CPR Part 45."
" Lord Dyson felt that three further grounds supported the primary conclusion in his paragraph 25 that rule 36.14(3)(b) took precedence. The first depended on rule 36.14A(8). As I have said, there is no equivalent to rule 36.14A for IPEC cases, so it does not assist here.
 Lord Dyson also referred to with approval a submission that under the wider scheme of Part 36, where fixed costs are intended to prevail, Part 36 says so (at , referring back to ).
 Finally, Lord Dyson ruled at  that had he been in doubt, it would have been legitimate to refer to the Explanatory Memorandum as an aid to construction, applying by analogy Pepper v Hart  AC 593:
"[The Memorandum] states in terms that, if a claimant makes a successful Part 36 offer: 'the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14.'"
 Guided by the third and fourth grounds set out by Lord Dyson, both of which, it seems to me, can be applied by analogy to the tension between rule 36.14(3)(b) and rule 45.31, I conclude that the former overrides the latter: the limits on costs in the IPEC, both stage costs and the overall cap, do not apply to an award of costs under rule 36.14(3)(b)."
Whether PPL v Hagan was correctly decided
" … Where fixed costs are intended to prevail, Part 36 says so. First, rule 36.10A is introduced to disapply the right to costs assessed on the standard basis which would otherwise arise where a Part 36 offer is accepted by a claimant in a fixed costs case. Secondly, rule 36.14A makes specific provision for fixed, rather than assessed, costs in situations other than those where a claimant makes a successful Part 36 offer. Thus, if a defendant's offer is successful, rule 36.14A provides for the claimant only to recover fixed costs until the effective date of the offer, in place of the usual rule that the claimant will recover standard basis costs until that date. Thereafter, the defendant is also limited to fixed costs: rule 36.14A(7) . Thirdly, regard should be had to rule 36.21, which deals with offers made within the Ministry of Justice portal process. Here again, the rule specifically provides for fixed, rather than assessed, costs to be payable in such cases, even where the claimant has made a successful Part 36 offer: rule 36.21(4)."
"New rules 36.10A and 36.14A make provision in respect of the fixed costs a claimant may recover where the claimant either accepts or fails to beat a defendant's offer to settle made under Part 36 of the CPR . Provision is also made with regard to defendants' costs in those circumstances. If a defendant refuses a claimant's offer to settle and the court subsequently awards the claimant damages which are greater than or equal to the sum they were prepared to accept in settlement, the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14 ."
" It seems to us that because [the draftsman of Part 47.20 has not provided that the provisions of Part 36 would apply to the costs of the detailed assessment with modifications that included 47.15(5)] it must follow that the provisions of Pt 36 apply to this case and that they are not displaced by a provision of r.47.15(5). To that extent it seems to us that the scheme of the reasoning in Broadhurst helps us to reach a conclusion on the correct relationship between Pt 36 and Pt 47 on the facts of this case."
(1) The goal of predictable levels of costs and recovery, which are intended to facilitate access to justice, are otherwise undermined.
(2) Hagan allows a well-funded claimant with a weak case to put unfair pressure on a defendant by making a Part 36 offer. It forces the defendant to accept the offer rather than risk losing the benefit of the cap.
(3) Reversing Hagan would still allow a Part 36 offer to have effect in the IPEC, subject to the costs cap.
(4) Whereas the effect of rule 36.17(4) in the general list of the High Court might increase the percentage of costs awarded by a relatively modest percentage, following Hagan the percentage increase in the IPEC could be much higher, even three or four fold higher.
" … the principle to be maintained in relation to CPR 36.14(3) [now r.36.17(4)] is that it should be applied in a way such as to generate a vigorous incentive to make and accept claimants' Part 36 offers."
The Capped Costs List Pilot Scheme
"I have set out the competing arguments, because this is the only issue on which my assessors are sharply divided. After considering the powerful arguments on both sides, on balance … I favour replacing indemnity costs with a percentage uplift of 30% or perhaps 40%. BUT this is a clear issue of policy, which will need to be addressed in the consultation exercise following this report."
"3.15 Where an order for costs is made pursuant to rule 36.17(4), unless it considers it unjust to do so, the court will order that the Claimant is entitled to –
(1) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(2) costs assessed in accordance with paragraphs 3.1 to 3.11 to the date on which the relevant period expired;
(3) costs assessed on the indemnity basis in accordance with paragraphs 3.1 to 3.11 from the date on which the relevant period expired save that –
(a) the maximum amount allowed under paragraph 3.5 for any stage of the claim on which work was done after expiry of the relevant period shall be increased by 25%; and
(b) the total costs a court may order under paragraph 3.6 are not more than £100,000; and
(4) an additional amount which is 10% of the amount of –
(a) the sum awarded to the Claimant by the court; or
(b) where there is no monetary award, the sum awarded to the Claimant in respect of costs."
How rule 36.17(4)(b) should be implemented in IPEC
The implementation of rule 36.17(4)(d)
The effect of a successful defendant's Part 36 offer on costs in the IPEC
Whether Part 20 costs are subject to separate caps
"(1) Subject to rule 45.32, the court will not order a party to pay total costs of more than –
(a) £50,000 on the final determination of a claim in relation to liability; and
(b) £25,000 on an inquiry as to damages or account of profits."
The effect of the offers in these proceedings
Claimants' February 2016 offer
Claimants' September 2017 offer
Part 20 Defendants' offer
Stage Claimed Costs Cap Sum Awarded Particulars of Claim £19,626.90 £7,000 £7,000 Defence and Counterclaim £21,072.06 £7,000 £7,000 Reply and Def to C/Claim £8,813.00 £7,000 £7,000 CMC £23,276.77 £3,000 £3,000 Application £2,585.00 £3,000 £2,000 Disclosure £16,572.20 £6,000 £6,000 Witness Statements £44,189.95 £6,000 £6,000 Trial and Judgment £66,700 £16,000 £16,000 Sub-total £202,045.88 £50,000 £50,000 Court fees £790 £790 TOTAL £202,835.88 £50,790
Stage Claimed Costs Cap Sum Awarded Particulars of Claim £420.00 £7,000 £320 Defence and Counterclaim £4,770.50 £7,000 £3,500 Reply and Def to C/Claim £18,433.00 £7,000 £7,000 CMC £8,237.50 £3,000 £3,000 Disclosure £6,061.00 £6,000 £4,500 Witness Statements £10,110.00 £6,000 £6,000 Application £2,047.50 £3,000 £1,500 Trial and Judgment £34,819.25 £16,000 £0 TOTAL £84,898.75 £50,000 £25,820
Time to pay