In considering costs issues following judgment in a complex patent action, the High Court had to determine whether it was appropriate for the court to be shown a Part 36 offer that had been made in relation to the current action as well as a related ongoing action: Virgin Atlantic Airways Limited v Jet Airways (India) Limited and others [2012] EWHC 3318 (Pat).

The court held that because the claimant, in arguing that the court should defer its determination of costs, had sought to rely not only on the existence of the offer but also one of its key provisions (i.e. that it extended to other proceedings) the claimant had waived its “without prejudice” privilege in the offer. This meant that the court could look at the remaining terms, as the defendant had urged it to do. The details of any financial provision in the offer were not however disclosed, as the parties had agreed that this was irrelevant to the question before the court.

This case is a reminder that where a party deploys part of its without prejudice material for the purposes of proceedings, it may be held to have waived its privilege more widely. As with any waiver of privilege, such a decision should never be taken lightly.

Background

A Part 36 offer is treated as “without prejudice except as to costs” (CPR 36.13(1)) which means it is inadmissible in relation to the claim itself but can be referred to the court on the question of costs.

Here the claimant’s skeleton argument dealing with costs issues following judgment referred to the fact that the claimant had made a Part 36 offer covering not only the present action but also a related ongoing action. On that basis, the claimant argued that the court should defer any determination of costs until the related action had concluded.

The defendant argued that because the claimant had referred to one of the terms of the Part 36 offer, namely that it extended to the related action, it had waived its without prejudice privilege and could not prevent reference to the remaining terms.

Decision

The judge (Floyd J) said it was not in dispute that “parties cannot pick and choose the terms of an otherwise privileged offer which they wish to bring to the court’s attention”. Here the court held that the claimant had waived the privilege in its offer by referring to one of its terms.

The court recognised that this made it difficult for a party to prevent the court looking at the terms of an offer where it argued that questions of costs should be deferred because there was a relevant offer involving another set of proceedings. However, this dilemma did not justify allowing the terms of the offer to be withheld. The court emphasised the strong presumption that the court should be able to deal with all outstanding issues including costs at the end of a trial. It would have to be satisfied that a strong reason existed if it was to take a different course. The mere possibility of the existence of a relevant Part 36 offer was not sufficient to persuade the court to defer questions of costs.

The effect of the court’s decision was not to force the claimant to waive its privilege in the Part 36 offer. It could continue to rely on its privilege if it chose not to deploy the offer at that stage, but if it wished to deploy the offer to request the court to defer questions of costs then it would have to disclose the terms of the offer. The judgment notes, however, that the parties had “very sensibly” agreed that it was not necessary for the court to see the details of any financial provision in the offer, and so this had been redacted from the copy provided to the court.

Having reviewed the terms of the offer, the court held that questions of costs should be deferred since there was a realistic prospect that the court would look at the issue of costs differently depending on the outcome of the related action.

Comment

This case is a useful reminder that where a party wishes to deploy without prejudice material for the purposes of proceedings, it risks being held to waive privilege over such material more widely. The position is similar to where a party wishes to deploy material which is subject to legal professional privilege (see this post). In the without prejudice context, however, the consent of both parties is required to waive the privilege. Normally therefore, where a party seeks to deploy without prejudice material in evidence or in argument (other than where one of the limited exceptions to the without prejudice rules applies – see post), the opponent has a choice whether to apply to strike out the offending passage or to treat it as a waiver of privilege so that the material becomes admissible for the benefit (or detriment) of both parties.

The decision also highlights a contrast between the court’s approach where a party seeks to defer questions of costs at the end of a trial as compared to the end of the liability phase of a split trial. In the latter case, the existence of an offer relating to both liability and quantum, which is therefore relevant to costs, is (as the court said) inherently plausible. The mere possibility that such an offer exists might therefore be enough to persuade the court to defer costs issues pending determination of quantum, as it was for example in Ted Baker Plc v Axa Insurance UK Plc [2012] EWHC 1779 (Comm) (see post). The position is quite different at the end of a trial. If a party wishes to persuade the court that questions of costs should be deferred because of the existence of a Part 36 offer which encompasses another action, it is likely that that offer will need to be disclosed.