Virgin Atlantic Airways Ltd v Jet Airways (India) Ltd & Ors

Part 36 offers remain protected by the without prejudice save as to costs rule unless privilege is waived. A party cannot disclose selected terms of an offer while withholding the remainder. The court should ordinarily determine all outstanding costs issues at the end of the trial, and should defer costs only where there is a strong reason. A mere possibility of a relevant offer does not justify deferral. Where an offer concerns related litigation, deferral may be appropriate if there is a realistic prospect that the eventual result will materially affect the costs assessment. Indemnity costs require conduct outside the norm. Interim costs payments must reflect the uncertainty of assessment, and postponement of judgment-rate interest requires justification.

The judgment concerned costs following the court’s main patent judgment, [2012] EWHC 2153 (Pat), in complex proceedings involving Virgin, Zodiac, Air Canada and Jet. The court considered whether Virgin’s Part 36 offer, which covered the present proceedings and an earlier damages inquiry, could be disclosed and whether costs between Virgin and Zodiac should be deferred pending related proceedings and a possible Supreme Court appeal concerning the Unilin principle.

The court also determined the appropriate costs orders between Virgin and Air Canada and between Virgin and Jet, including deductions, indemnity costs, interim payments and interest.

1. Part 36 offer. The parties agreed that the court could be told that Virgin had made an offer. The offer nevertheless remained protected under CPR 36.13(1). Virgin had waived privilege by disclosing the existence of the offer and one of its material terms. It could not select that term while withholding the remainder. The offer’s terms could therefore be considered.
2. Deferral of costs. There is a strong presumption that all outstanding issues, including costs, should be dealt with at the end of the trial. Deferral requires a strong reason. The mere possibility of a relevant offer is insufficient, particularly where the offer concerns separate proceedings. Here, however, there was a realistic prospect that the outcome of the earlier damages inquiry and the amount recovered could affect whether Virgin was regarded as the overall winner of the combined litigation and how CPR 44.3 should be applied. Further costs issues between Virgin and Zodiac were accordingly deferred.
3. Air Canada. Air Canada was the overall winner, but recovered no costs for the severable designation issue. A percentage deduction was inappropriate because the recoverable costs might be assessed down for disproportionate or duplicated work. Virgin was ordered to pay Air Canada’s costs subject to deduction of £228,000, with an interim payment of £910,000. The offers and conduct relied upon did not justify indemnity costs.
4. Jet. Similar offers did not justify indemnity costs. Virgin was ordered to pay Jet’s costs on the standard basis, with an interim payment of £160,000. Interest was awarded at 1% above clearing bank base rate until judgment. The judgment rate applied thereafter, subject to a four-month postponement for Air Canada’s disputed balance.

High Court (Patents Court): Following the main judgment dated 27 July 2012, [2012] EWHC 2153 (Pat), the court determined specified costs issues and deferred the remaining costs issues between Virgin and Zodiac.