"On 20 September Judge Birss QC handed down an important judgment relating to the costs cap in the PCC in a multi-party action.

In his judgment on the merits of the preliminary issues [on which, see links above], handed down on 20 July 2012, the judge found in favour of Gimex and the defendants were ordered, inter alia, to pay Gimex’s costs.

The claim by Gimex was against five defendants. The defendants were divided into two “camps”. The first camp comprised the first three defendants while the second camp comprised the fourth and fifth defendants. Each camp filed separate pleadings, filed separate (but not materially different) evidence and was separately represented. At the hearing on 20 July 2012, an issue of principle arose as to whether the costs cap of £50,000 in the PCC should apply to each camp of defendants, or whether a single costs cap should apply to the costs overall. Gimex contended that, since it was litigating against defendants who were divided into two camps, it was entitled to apportion the total of its costs between the two camps of defendants and then have each portion assessed, subject to the £50,000 cap under the Civil Procedure Rules (CPR) Part 45 r 45.42(1). The judge decided that this was not the right approach. He said that the defendants as a whole were jointly and severally liable for the claimant’s costs and he summarily assessed the claimant’s costs as a single set of costs for each stage with a single overall cap.

The judge said that, as the issue raises an important question of practice and procedure in the PCC system, he would give his detailed reasons for this in a reserved judgment, which is the subject of this note. You can read the text of this decision, [2012] EWPCC 34, here.

In setting out his reasons, the judge said:

“… the consideration of certainty plays an important part in the Patents County Court costs regime. The procedures applicable in the Patents County Court are to facilitate access to justice for small and medium sized enterprises in intellectual property disputes. The costs cap has an important role in facilitating access to justice in that it allows a litigant to be confident about its possible costs exposure if it loses the case.” [18]

and:

“This kind of certainty helps facilitate access to justice even before proceedings are instituted. A small claimant who believes its IP rights have been infringed can write a letter before action to a potential defendant which includes a credible contention that, if the matter cannot be resolved, the claimant will take proceedings in the Patents County Court. Part of the reason the contention is credible is because the potential litigants both know that even though the claimant is small, the potential adverse costs risk which would be incurred by the small claimant is capped at £50,000. A defendant who might think they have infringed the IP right but in the past would have thought the claimant would never risk the costs and complexity of legal proceedings, is now in a position to know that legal proceedings are a realistic possibility. The defendant cannot expect to avoid litigation because it would be too expensive for the claimant to fight.” [19]

The judge went on to say that the same principles apply to a small potential defendant who receives a letter before action claiming an IP infringement. In the past, a small defendant, who could not have afforded to defend regardless of the merits, can now rely on the PCC regime secure in the knowledge that, if he denies the claim, the costs cap will protect his exposure to the other party’s costs, subject to certain exceptions.

Clearly, this interpretation of r45.42(1) facilitates access to justice for smaller and medium sized enterprises, but Judge Birss QC added that each case needs to be looked at to see whether the fact that there are separately represented groups of defendants is likely to increase the claimant’s costs to any significant extent over and above those which would have been incurred against a single defendant. The judge ended his judgment, at [23], by giving a very important direction to litigants in multi-party litigation in the PCC. In the future, the effect on costs of having two sets of defendants and concerns arising may have a bearing on case management and should be raised at the case management conference."