What's the development?
The Court of Appeal of England and Wales has recently considered whether to impose a costs cap for an appeal where the action at first instance was subject to a cost cap. It held that recoverable costs of the appeal should be capped at £60,000, matching the cap at first instance. This was despite the fact that the actual appeal costs were estimated to be approximately £400,000 for each party. The Court also ordered the appellant to provide security for costs in the same amount.
What costs cap applied at first instance?
At first instance, the action in question started in the Intellectual Property Enterprise Court (IPEC), a division of the High Court that hears smaller-value IP claims. The current costs cap for IPEC claims is £60,000 for a trial on liability. Although the claim in question started in IPEC, it was transferred to the main IP list of the High Court (as a longer trial etc was deemed necessary). The parties agreed that, despite the transfer, the costs cap applicable in the IPEC should continue to apply to the claim following the transfer.
Why did the Court of Appeal apply the same cost cap on appeal?
Rule 52.19 of the UK's Civil Procedure Rules (CPR) provides that "In any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies."
In applying Rule 52.19, the Court of Appeal considered the appellant's/claimant's financial position and concluded that, without a costs cap, the company would likely abandon the appeal, thereby hindering access to justice (Goldtrail applied). This was a significant factor in the court deciding to order the costs cap.
What about security for costs?
The respondent/defendant applied for security for costs of the appeal. Under CPR Rule 25.29, the court may order security for costs of an appeal against any person who appeals including where there is reason to believe that that party won't be able to pay the other party's costs if the appeal is unsuccessful.
The Court of Appeal ordered the appellant/claimant to provide security for costs in the same amount as the costs cap (£60,000) as there was reason to believe it would be unable to pay the respondent's/defendant's costs if unsuccessful.
What does this mean for you?
The decision illustrates that, if a cost cap applies at first instance (or the parties agree that one should apply), then a costs cap may also be applied for any appeal. This is an additional factor that should be borne in mind when deciding in which court to litigate.
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