The Intellectual Property Enterprise Court (IPEC) has recently considered the effect of a ‘Part 36’ settlement offer on its £50,000 costs cap.
A Claimant can make a settlement offer which fulfils the conditions set out in Civil Procedure Rule (CPR) 36 (a Part 36 offer) in order to protect its position on costs.
If it is not accepted by the Defendant and the Claimant is successfully awarded the same amount or more by the Court than was offered in the Claimant’s Part 36 offer, the Defendant is usually ordered to pay costs on an indemnity basis from the date the offer period of 21 days expired.
The Defendant will also be liable to pay interest on the sum awarded and on the Claimants’ costs of up to 10% above base rate. An additional sum is also payable by the Defendant of up to £75,000 depending on the amount awarded and relevant costs.
If a Defendant makes a Part 36 offer which is not accepted by the Claimant and the Court awards the same or a higher amount, the Claimant is liable to pay the Defendant’s costs and interest from the date the offer period of 21 days expired.
The costs regime in the IPEC is designed to give greater certainty and clarity for parties. The recoverable costs are fixed for each stage of proceedings and unlike in the High Court, these are capped at £50,000 for the first stage inquiry into liability.
Judge Hacon, in the recent IPEC case of Martin & Another v Kogan & others 2017, had to consider whether the effect of Part 36 offers should apply without restriction in the IPEC, i.e. to completely disregard the costs cap.
In this case, the Claimant had made Part 36 offers which the Defendant had not accepted.
Judge Hacon considered that the appropriate approach would be to allow costs to be awarded on the indemnity basis, which had the effect of increasing the costs cap by 25%. The total amount of costs which could be awarded would therefore be £62,500 rather than £50,000.
Where the Defendant made a successful Part 36 offer, the costs cap of £50,000 should remain in place. To disregard the costs cap in these circumstances would be to ’tilt the balance in the favour of Defendants’.
This case demonstrates the Court’s ability to depart from the costs cap and therefore the importance for both parties to make a well-pitched Part 36 offer to protect their positions on costs.