Settlement Offers and Recovery of Costs- A Sensible Approach

In a recent decision of the Intellectual Property and Enterprise Court (IPEC) (formerly known as the Patents County Court) the Judge decided that there should be a reduced incentive for claimants to continue to trial when a settlement offer proposes to provide substantive relief.

One of the purposes of IPEC is to ensure so far as possible that cases are not about costs. As the claimant rightly submitted in Bocacina Ltd v Boca Cafes Ltd [2014], in IPEC, it is important that settlement should be encouraged and that there should be “rewards” for making settlement offers. It was therefore held correct that the judge should take significant account of such offers.

In the aforementioned case, Daniel Alexander QC, sitting as Enterprise Judge, awarded the Claimant 90% of its costs up until the date of the Defendants’ settlement offer and decreased the Claimant’s recovery rate to 50% after that date. In their settlement proposal, the Defendants had offered to change their name and surrender their trade mark for “BOCA BISTRO CAFÉ”. The Judge considered that the Defendants had effectively “given in” and that the settlement offer had removed any real cause for complaint.

The Judge went on to explain that after the settlement proposal, which was rejected by the Claimant, the litigation had become a dispute about costs. As a result, even though the Claimant had been successful in its claim against the Defendants, the Judge cut significantly the proportion of costs recoverable by the Claimant after the settlement offer. However, the Judge also noted that had the Defendants offered to pay the Claimant’s costs as part of its settlement proposal, this would have avoided the action proceeding to trial and, due to the early stage at which the offer was made, would have resulted in the Defendants paying significantly less than it now had to.

This is clearly represents the fact that the rejection of a reasonable offer to settle in the IPEC may have an impact on the measure of costs recoverable, even by a successful party.

Harry Jeffries (Law Student)