Factual and Procedural Background
This claim for trade mark infringement originated in the Intellectual Property Enterprise Court ("IPEC"), a forum designed to assist small and medium-sized enterprises with intellectual property disputes by capping recoverable costs at first instance. Although the claim began in IPEC, it was subsequently transferred to the Intellectual Property list of the Business and Property Courts by an order dated 3rd February 2023, with the parties agreeing that the IPEC costs cap would continue to apply despite the transfer.
The trial took place before a judge over seven days and resulted in dismissal of the claim on 31st October 2024. Permission to appeal was granted on certain grounds by the trial judge, and further permission on additional grounds was later granted by the Court of Appeal. The Court of Appeal’s order included an unusual condition that permission to appeal was subject to the provision of security for costs by the appellant, which gave rise to the current applications for a costs capping order and for security for costs.
Legal Issues Presented
- Whether the costs capping regime applicable at first instance in IPEC should continue to apply on appeal after transfer to the Business and Property Courts.
- Whether a costs capping order should be made under CPR 52.19 in respect of the appeal.
- The appropriate amount for any costs capping order.
- Whether security for costs should be ordered as a condition of the grant of permission to appeal and, if so, in what amount.
- How the principles in Goldtrail Travel Ltd v Onur Air concerning stifling of appeals apply to the security for costs application.
Arguments of the Parties
Appellant's Arguments
- The appellant argued for a costs capping order to facilitate access to justice, emphasizing the financial difficulties it faces in funding the appeal and the unavailability of after-the-event insurance.
- The appellant proposed a costs cap of £20,000, reasoning that it would be proportionate given the first instance costs cap of £60,000 and the typically greater costs of trial compared to appeal.
- The appellant provided detailed financial evidence to demonstrate limited means and efforts to raise funds, including negotiations with solicitors and counsel to mitigate appeal costs.
- The appellant contended that refusal of a costs capping order would likely cause the appeal to be abandoned, thus impeding access to justice.
Respondent's Arguments
- The respondent contended that CPR 52.19 did not apply because the trial occurred after transfer to the Business and Property Courts where costs are not normally capped.
- The respondent opposed any costs capping order and proposed no specific alternative figure, arguing that the full likely costs should be recoverable.
- The respondent challenged the appellant’s financial evidence, highlighting gaps and questioning the appellant’s protestations of impecuniosity given the scale of litigation expenditure.
- The respondent sought security for costs in the sum of £200,000, reduced from an earlier figure, but no higher amount than the capped costs was justified.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Black v Arriva Northeast Limited [2014] EWCA Civ 1115 |
Use of CPR 3.19 for costs capping orders and its limitations |
Confirmed that CPR 3.19 is not to be used for facilitating access to justice, unlike CPR 52.19. |
| Glass v Freyssinet Limited [2016] EWCA Civ 1120 |
Costs orders as a deterrent in appeals |
Recognized that the risk of adverse costs orders deters appeals and that sufficient information about means is required to succeed in a costs capping application. |
| Goldtrail Travel Ltd v Onur Air [2017] 1 WLR 3014 |
Principles governing security for costs and stifling of appeals |
Outlined the legal test for whether a condition for security stifles an appeal and the evidential burdens on the appellant. |
Court's Reasoning and Analysis
The court began by affirming that despite the transfer from IPEC to the Business and Property Courts, the fundamental nature of the proceedings remained those of an IPEC claim, and thus the costs capping provisions of CPR 52.19 continued to apply. The court rejected the respondent’s technical argument that the costs cap did not apply post-transfer.
The court noted the policy underpinning CPR 52.19, which includes facilitating access to justice, especially for small and medium-sized enterprises, a principle supported by authoritative commentary and past reports.
Turning to the appellant’s financial evidence, the court acknowledged some evidential gaps but accepted the overall picture of limited means and genuine efforts to secure funding for the appeal. The court found it plausible that refusal of a costs capping order would likely cause the appellant to abandon the appeal, thus impeding access to justice.
The court considered the respondent’s criticisms of the appellant’s financial position but found that the scale of litigation costs incurred raised questions about the appellant’s claimed impecuniosity, though this was not determinative.
Regarding the amount of the costs cap, the court rejected the appellant’s proposed figure of £20,000 as lacking principled justification and instead aligned the cap with the existing first instance cap of £60,000, reflecting a balanced approach between access to justice and deterrence against frivolous appeals.
On the security for costs application, the court accepted that the appellant was a limited company and there was reason to believe it could not pay the respondent’s costs if unsuccessful, satisfying the threshold for such an order under CPR 25.15. The court held that the security amount should not exceed the capped recoverable costs, ordering security for costs at £60,000.
The court applied the principles from Goldtrail Travel Ltd v Onur Air, emphasizing that while security for costs can stifle an appeal if it prevents continuation, the appellant had not established on the balance of probabilities that it could not raise the required sum. The court also cautioned against assuming that funds from shareholders should be considered unless the appellant company itself can raise the money.
Holding and Implications
The court granted a costs capping order limiting recoverable costs on the appeal and cross-appeal to £60,000, consistent with the cap that applied at first instance in IPEC. Additionally, it ordered the appellant to provide security for costs in the sum of £60,000 as a condition of proceeding with the appeal on the additional grounds.
This decision ensures that the appellant’s financial limitations are recognized, facilitating continued access to justice while balancing the respondent’s interest in cost recovery. The ruling does not establish new precedent but applies existing principles to the procedural context of transferred IPEC proceedings and the interplay of costs capping and security for costs on appeal.