The recent Court of Appeal judgment in the case of AutoStore Technology AS v Ocado Group Plc [2021] EWCA Civ 1003 serves as a useful warning to those involved in multi-jurisdictional disputes of the need to exercise caution in relying on the ‘without prejudice’ rule.
The ‘without prejudice’ privilege
Communication on a ‘without prejudice’ basis is, subject to certain exceptions, inadmissible as evidence in legal proceedings. The basis of the ‘without prejudice rule’ is two-fold (i) there is an overriding policy of encouraging settlement of disputes in English litigation and (ii) the express, or at a minimum, implied agreement of the parties that communications concerning negotiations should not be admissible evidence to be put before the Court. This case appears to have introduced a new exception to the without prejudice rule.
Background
AutoStore commenced proceedings against Ocado in England for patent infringement (“the English Proceedings”). There was similar simultaneous litigation between the parties in other jurisdictions, including in the US, before the International Trade Commission (“the US Proceedings”).
The parties attended settlement meetings in London in 2018 pertaining to the English Proceedings. Perhaps unsurprisingly, these meetings were conducted on a without prejudice basis. Prior to a third settlement meeting taking place, AutoStore sent Ocado a document in relation to the US Proceedings marked “confidential & without prejudice provided for purposes of settlement negotiations only” (“the Document”). At the outset of a third settlement meeting (“the Settlement Meeting”) Ocado’s solicitor confirmed, and recorded in an attendance note, that the meeting was a “continuation of the confidential and without prejudice discussions between Ocado and AutoStore and that any US law discussions were to be governed by rule 408 of the rules of evidence”. Reference to rule 408, was a reference to the US Federal Rules of Evidence relating to settlement negotiations, which have similarities to the English concept of ‘without prejudice’ negotiations (“Rule 408”).
In the US proceedings AutoStore subsequently sought to rely on the content of the Settlement Meeting and the Document in rebutting Ocado’s defence. Ocado sought an injunction in the English High Court to restrain AutoStore from using or referring to the content of Settlement Meeting and the Document in any proceedings, including the US proceedings, on the basis that this information was privileged.
An injunction was granted at first instance on 28 May 2021 on a without notice basis, but the High Court declined to continue the injunction on the return date. Ocado appealed to the Court of Appeal, where the appeal was dismissed on a 3:1 majority.
The Court of Appeal’s Decision
Whilst the Court acknowledged that (i) the Document had been marked “without prejudice” and “for the purposes of settlement negotiations only” and (ii) that the Settlement Meeting was stated as being a “continuation of the confidential and without prejudice discussions between Ocado and AutoStore”, an issue arose in that the parties referred to the application of Rule 408.
In the Court’s view, the parties had properly agreed that the Settlement Meeting and Document would be ‘without prejudice’. However, the reference to Rule 408 was a caveat to the without prejudice privilege otherwise provided. The Court found that by referring to Rule 408, the parties must have intended its provisions to apply to any future attempt to admit the document or settlement discussions, as evidence in the US Proceedings.
A key determining factor for the Court, was that the parties had not reached an express agreement on the jurisdiction to apply to the settlement discussions. Had the parties agreed that English Law applied and that the Courts of England had jurisdiction, then it is unlikely that Rule 408 could have also applied.
Insight
It would perhaps be a little surprising if this was truly the outcome that the parties had intended. It seems rather more likely that the parties had intended, when sending the Document and attending the Settlement Meeting, that in order to facilitate commercial settlement negotiations these discussions would remain inadmissible in all legal proceedings, not only the English Proceedings. However, this case has shown that the protection afforded by the English law ‘without prejudice’ privilege may have unexpected limitations, particularly in cross-border disputes.
Given the English Court’s well recognised support of ADR, this is a strange case which appears to inject a further layer of complexity and cost into the process of negotiating a resolution of the sort of international commercial disputes that the London litigation market seeks to attract. When dealing with multi-jurisdictional disputes, practitioners should not be too quick to assume that by simply marking correspondence or discussions as being ‘without prejudice’, that the parties will be afforded the full protection of the ‘without prejudice’ rule as it is typically understood.
If you are faced with a multi-jurisdictional dispute or require any further information or advice please get in touch with Nick Scott on nxs@blasermills.co.uk or Jade Brooks on jkb@blasermills.co.uk.