Virgin Atlantic Airways Ltd. v Zodiac Seats UK Ltd and others [2012]
EWHC 3318 (Pat)
On 27th July 2012, the
High Court handed down judgment in this action: [2012] EWHC 2153 (Pat) (“the main
judgment”).
On the 8th November
2012, the Court heard argument in relation to the form of the order to be made in
relation to the main judgment and issues relating to costs. Virgin Atlantic
Limited (Virgin) had revealed in its skeleton argument, that it had made a Part
36 offer to Zodiac Seats UK Limited, (‘Zodiac’, formerly Contour Aerospace
Limited) in relating to another set of proceedings. The Court held that by referring
to what it considered a main term of the offer, Virgin had waived its without
prejudice privilege and therefore could not prevent the Court being presented
with the remaining terms.
Virgin had argued that whilst it
did not take issue with the Court being aware of the offer, its terms were
still protected and should not be revealed to the Court pursuant to the parties’
without prejudice privilege. Virgin further argued, that in previous case law,
where there had been a split trial to decide liability and the assessment of
damages separately, (e.g. HSS Hire
Services Group plc v BMB Builders Merchants Ltd [2005] EWCA Civ 626), it
was acceptable to disclose the fact that such an offer had been made, pursuant
to CPR 36.19(3). This did not mean, however, that the terms of the offer were
disclosable. It was submitted that the reasoning in HSS Services Group should be expanded to be applied in cases, such
as the present one, where there were related actions or disputes.
Zodiac submitted the following arguments
in response, (a) when the Court is dealing with costs is it is permitted under
CPR 36.13(1) to be presented with the terms of the offer; (b) by referring to
the term of the offer, Virgin had waived privilege; and (c) if strict rules
regarding privilege were enforced where a Part 36 offer was made in relation to
a different action, it would became too easy for a party to prevent the court
from dealing with costs at the conclusion of an action.
In hearing these arguments, the Court
decided that it should be presented with the terms of the Part 36 offer at the
present stage. In giving reasons for his judgment, Floyd J stated, that:
1. Firstly,
there exists a very strong presumption that the court should be able to deal
with all outstanding issues including costs at the end of a trial. The court
must be satisfied that a strong reason exists if it is to a take a different
course;
2. Secondly,
the court cannot be satisfied that it should not deal with costs at the end of
the trial merely because of the possibility of the existence of a relevant
offer. This is distinguishable from cases involving split trials- where, if an
offer exists, there is an “inherent plausibility” that it will be inclusive of
quantum and therefore relevant to costs; there is no such inherent plausibility
in the case of an offer about a separate cause of action.
3. Thirdly,
a rigid that a court is prohibited from knowing the terms of an offer could be
open to abuse.
4. Fourthly,
although caution should be taken before deciding that a party is obliged to waive
their privilege, in the present case, Virgin could have presented the existence
of the Part 36 offer to Court at a later stage or not at all. Instead, in this
instance, Virgin divulged the existence of the offer in order to ask the court
to delay dealing with costs until a later date. In deciding whether to allow
the delay, it was right that the Court saw the terms of the offer to see
whether it was justified.
Read the judgment here