Henderson v All Around the World Recordings Ltd & Anor

Factual and Procedural Background

This opinion concerns a costs hearing following a judgment given on 13th February 2013 in favour of the Plaintiff in a patent-related action in the Patents County Court (PCC). The hearing focused on issues relating to the assessment and capping of costs, specifically dealing with Conditional Fee Agreement (CFA) success fees and After The Event (ATE) insurance premiums within the PCC costs regime. The procedural context involves the application of costs rules and the court’s discretion regarding the PCC costs cap after the substantive judgment.

Legal Issues Presented

1. Whether CFA success fees and ATE insurance premiums fall within the PCC costs cap.
2. Whether the court has a discretion to depart from the PCC costs cap under CPR rules.
3. If a discretion exists, whether it should be exercised to lift or modify the costs cap in this particular case.
4. How to fairly assess and apportion the claimant’s costs, including base costs, success fees, and ATE premiums, within the PCC costs framework.

Arguments of the Parties

Appellant's Arguments

• The Plaintiff’s representative argued that CFA success fees and ATE premiums should not be subject to the PCC costs cap, allowing them to be added on top of the capped base costs.
• The Plaintiff submitted that the court has a discretion under CPR r44.3 to depart from the costs cap in exceptional cases and that this case qualifies due to the Plaintiff’s impecuniosity and the imbalance of power between an individual claimant and a large defendant company.
• The Plaintiff contended that without lifting the cap, justice would not be done because the claimant would be unable to recover the full extent of her costs, including success fees and ATE premiums.
• It was also argued that the claimant had no realistic alternative but to litigate in the PCC with a costs cap, given her lack of means and the nature of the case.

Appellee's Arguments

• The Defendant’s representative argued that CFA success fees and ATE premiums are included within the PCC costs cap and that there is no general discretion to exceed the cap.
• It was submitted that the PCC costs regime is clear and unequivocal in limiting costs, with only narrow exceptions expressly provided.
• The Defendant maintained that the case was not exceptional and that many litigants in the PCC have limited means, so the Plaintiff’s impecuniosity does not justify lifting the cap.
• The Defendant noted that the Plaintiff could have brought the claim in the High Court to recover full costs but chose the PCC, where the costs regime is different.
• The Defendant challenged the reasonableness and proportionality of the Plaintiff’s claimed costs and ATE premium.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
BOS v Cobra [2013] EWPCC 44	Application of set-off in costs before stage limits in PCC costs regime.	The court applied the set-off principle as established in this precedent to balance costs awards between parties.
Westwood v Knight [2011] EWPCC 11	Existence and limits of court’s discretion to depart from PCC costs cap under CPR r44.3.	The court revisited and affirmed the existence of a discretion but emphasized it should rarely be exercised to exceed the PCC costs cap.
Gimex v Chillbag [2012] EWPCC 34	Purpose of PCC costs rules favouring certainty over full compensation.	Supported the court’s reasoning that the costs cap promotes predictability for litigants and limits full recovery of costs.
Liverside v Owen Mumford [2012] EWPCC 40	Reinforcement of PCC costs cap principles.	Used to support the approach that the costs cap is designed to provide certainty rather than full compensation.
Polymer Logistics v DS Smith (31 May 2012)	Costs outside the PCC cap in certificate of contested validity cases.	Confirmed that certain exceptions to the costs cap exist but are narrowly defined and not applicable here.

Court's Reasoning and Analysis

The court began by confirming that CFA success fees and ATE insurance premiums fall within the definition of "costs" governed by the PCC costs cap under CPR Part 45, referencing specific rules and the IPCUC Final Report. The costs cap of £50,000 applies to total costs at final determination, including these additional liabilities.

Regarding discretion, the court acknowledged the general discretion under CPR r44.3 to determine costs but emphasized that the PCC costs regime is designed to limit this discretion to exceptional cases only, maintaining certainty for litigants. The court revisited its earlier decision in Westwood v Knight and concluded that while a discretion exists, it should be exercised very sparingly.

The court carefully considered the Plaintiff’s submission that her impecuniosity combined with an imbalance of power justifies lifting the cap. However, it found that these factors did not reach the threshold of a truly exceptional case. The court also noted the availability of the High Court as an alternative forum where full costs recovery would be possible, and rejected the argument that the case would inevitably have been transferred to the PCC if commenced there.

In assessing the claimant’s costs, the court conducted a summary assessment, reducing the claimed base costs to a proportionate figure and determining reasonable success fees and a reasonable ATE premium. The court found the claimed 60% success fee for solicitors reasonable but reduced the counsel’s success fee uplift from 100% to 60% as more appropriate. The ATE premium was adjusted downward to reflect a proportionate sum based on a reasonable insured amount aligned with PCC scale costs.

The court decided to apply the PCC scale limits for base costs and include VAT accordingly, resulting in a total costs award of £52,484.25. This award left a substantial shortfall compared to the total claimed costs including success fees and ATE premiums.

After weighing all factors, the court declined to exercise its discretion to lift or disapply the costs cap, reasoning that doing so would undermine the PCC’s costs regime, create uncertainty, and weaken access to justice for other litigants. The court emphasized that the costs cap had been a known and relied upon feature of the PCC proceedings and that the Plaintiff’s choice to litigate there was consistent with accepting the cap’s limitations.

Holding and Implications

The court’s final decision is to ORDER that the Defendant pay the Plaintiff costs in the amount of £52,484.25.

The court refused to exercise any discretion to lift or exceed the PCC costs cap, finding the case not sufficiently exceptional to justify such a departure. The direct effect is that the Plaintiff will bear a significant shortfall between her actual incurred costs and the recoverable costs under the PCC regime. No new precedent was established beyond the reaffirmation of the limited nature of discretion to depart from the PCC costs cap and the inclusion of CFA success fees and ATE premiums within that cap.