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||Neutral Citation Number:  EWHC 114 (Comm)
||Case No: 2008 FOLIO 877
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR JUSTICE CHRISTOPHER CLARKE
||(1) PORTON CAPITAL TECHNOLOGY FUNDS (A BODY CORPORATE)
(2) PORTON CAPITAL INC.
||- and -
||(1) 3M UK HOLDINGS LIMITED
(2) 3M COMPANY
Mr J. Onions QC & Mr S. Hossain (instructed by McDermott, Will and Emery)
for the Claimants
Mr S. Salzedo (instructed by Simmons & Simmons) for the Defendants
Hearing date: Friday 22nd January 2010
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Christopher Clarke :
- The claimants are investment funds incorporated in the Cayman Islands specialising in the commercialisation of technology including medical technology. They were approximately 47% shareholders in a company called Acolyte Biomedica Ltd ("Acolyte"). Acolyte's main product was an MRSA detection device for use in hospitals called "BacLite MRSA". Pursuant to a Share Purchase Agreement ("the SPA") of 14th February 2007 the shareholders of Acolyte, including the claimants, sold their shares to 3M UK Holdings Limited ("3M"), the first defendant. The second defendant is 3M's holding company. The first defendant agreed to pay the vendors an "earn out" payment being the Net Sales of Acolyte products (principally BacLite) in the year to 31st December 2009 subject to a cap of £ 41 million, and undertook certain obligations to develop and market BacLite and to seek regulatory approval to the extent required in the USA, the EU, Canada and Australia.
- According to the defendants, despite 3M's endeavours, BacLite was not a success either in passing clinical trials or finding a market and for that reason minimal revenues were generated in 2009. The dispute concerns the adequacy of 3M's steps to obtain regulatory approval for BacLite in the USA and to market BacLite in various territories. The claimants' claim is for damages amounting to a 43.48% share of £ 41 million for the earn-out they say they would have received if the obligations to develop and market BacLite had been complied with. One of the claimants' complaints is that the defendants preferred a product named Fastman over BacLite and other Acolyte products.
- The defendants' counterclaim is for damages for the claimants' allegedly unreasonable refusal from July 2008 onwards to permit them to cease developing or marketing BacLite. The SPA provided that Acolyte should not cease such development without the vendors' consent, not to be unreasonably withheld. 3M reached the conclusion by mid 2008 that there was no reasonable prospect of achieving within a reasonable time and at a reasonable cost sufficient improvement to enable BacLite to obtain FDA approval and be competitive with the other MRSA products sold in the US (Defence para 13).
Two potential witnesses
- Mr. O'Hara was an employee of Acolyte who became an employee of a 3M subsidiary. He was closely involved in the technical development of BacLite. Mr. Collier was a consultant to Acolyte who also became an employee of the same subsidiary. He was closely involved in the marketing of BacLite. Both have now left the 3M subsidiary's employment. The claimants' solicitors, McDermott Will & Emery ("MWE") wish to speak to both individuals in order to obtain factual evidence as to the manner in which 3M developed and marketed BacLite, or failed to do so, and whether it complied with its obligations in the SPA; and as to whether the reason for dissatisfaction with the BacLite product lay in its inherent characteristics or 3M's method of marketing.
- Both Mr O'Hara and Mr Collier ("the two individuals") are bound by post-employment confidentiality covenants to 3M's subsidiary which prevent them from disclosing confidential information. It is unnecessary to consider the details of those covenants.
The background to the dispute
- By a letter of 7th September 2009 MWE asked Simmons & Simmons ("S & S"), 3M's solicitors, to confirm that the defendants did not object to MWE approaching the two individuals (and two others) for the purpose of the present proceedings and would release them from any extant confidentiality restrictions arising out of their employment agreements for the purpose of the provision of information to MWE in relation to the proceedings. MWE has confirmed (in Mr Moss' third witness statement) that it will only use any information obtained for the purposes of these proceedings.
- By a letter of 25th September S & S told MWE that they were free to contact any of the four individuals, but that 3M would not waive the confidentiality provisions and that MWE should not encourage or assist any breach of them.
- Mr Moss of MWE contacted Mr O'Hara by telephone on 13th November. Initially he agreed to meet Mr Moss it seems on 8th December the day that S & S were also due to meet him. But on 28th November he sent an e-mail to MWE which read:
"I had a call from Daryl from 3M [Daryl Jones, a senior legal adviser at the 3M subsidiary which used to employ him] the 2 days after you called me. I told them I had been asked for a witness statement from yourselves and planned to be in London on Tuesday 8th December to provide a witness statement. They informed me that I was bound by a confidentiality agreement and could not provide a witness statement on this and would contact you to make that clear. Clearly I am caught between the 2 parties and need you both to clarify the conflicting legal position before I can provide a witness statement"
- In a letter of 30th November MWE referred to this response and wrote:
"What 3M have done is a clear attempt to interfere with our clients' preparation of this litigation by using totally unjustified and unfounded suggestions of continuing interests of confidentiality coupled with threats to use the undoubted might of 3M against individuals who cannot possibly be expected to stand out against such intimidation. That is simply not acceptable."
- On 2nd December S & S replied saying that Mr Jones had confirmed to them that he had never told Mr O'Hara that he could not provide the claimants with a statement; he had said that Mr O'Hara could speak with MWE but must be "mindful of his confidentiality obligations" to 3M. S & S reported that they had offered Mr O'Hara, on behalf of their clients, independent advice at their clients' expense.
- On 16th December S & S wrote to MWE to say that they had conducted interviews with the two individuals and that their clients intended to call them both as witnesses, and that both had agreed to provide them with witness statements and to give evidence on behalf of the defendants.
- The latest position of Mr Collier and Mr O'Hara is that both are willing to speak to MWE regarding the substantive issue subject to the issue of confidentiality being resolved.
- On 14th December S & S sent MWE copies of the defendants' electronic disclosure. This consisted of around 7,000 documents relating to the development and marketing of BacLite. Disclosure of other documents in hard copy had taken place on 30th October.
- On 17th December the claimants issued an application for certain orders. The orders sought have undergone some modification since the application was first brought. What are presently sought are orders that:
a. Information in relation to the matters in dispute is not confidential as between the parties for the purposes of these proceedings and accordingly MWE may seek such information from the two individuals in relation to the matters in dispute for the purpose of these proceedings and the two individuals may provide such information without either of them being thereby in breach of their confidentiality obligations to the defendants; alternatively
b. An order staying 3M's counterclaim until it waives the confidentiality obligations to the defendants of the two individuals (and those of any other relevant ex-employees/consultants of 3M or Acolyte to whom MWE may wish to speak for the purposes of these proceedings) in respect of the matters in dispute as between the parties for the purposes of the proceedings; that
c. If and so far as 3M's order for a confidentiality club (see para 15 below) is granted such order is to be subject to the condition that the two individuals (and any other ex-Acolyte or ex-3M employees or consultants to whom MWE may wish to speak for the purposes of the proceedings) are within that club and that any duties of confidentiality that they may owe to the defendants in relation to the matters in dispute be waived as between the parties for the purpose of these proceedings.
- The defendants have an application of their own which is for the establishment of what has come to be known as a "confidentiality club". They seek an order that all disclosure documents (other than the hard copy documents disclosed on 30th October 2009 and the electronic versions thereof) are to be treated as confidential by the party receiving them and that the receiving party is not to provide access to, copies of, or disseminate any of them except to a limited range of persons (the receiving party's solicitor, counsel, a person responsible for instructing solicitors, a witness intended to be called to give factual or expert evidence, and a person assisting such an expert) and then only if that person has first signed a confidentiality undertaking.
- In his submissions Mr Jeffrey Onions, QC, for the claimants indicated that what he principally sought was the first or third order since it was by one or other of those routes that he would secure that the two individuals could be interviewed without their responses being conditioned by the constraints of any duty of confidentiality to anyone in the 3M group. He contends, in my view rightly, that his application raises an important question of principle as to the extent to which access to a witness may be restricted on the grounds of confidentiality and the effect of disclosure in the proceedings on confidentiality. There must be many cases in which a party to litigation wishes to interview an employee or agent, or an ex-employee or agent, of his opponent and finds himself in difficulty in obtaining all the evidence that he seeks because the individual in question has been warned not to break duties of confidentiality owed to that opponent.
- Mr Simon Salzedo for the defendants observed that the first order now sought was the fourth attempt to formulate an acceptable wording. He pointed out a number of deficiencies in previous drafts which contained either (a) a statement of the obvious ("the matters is dispute are not confidential for the purposes of these proceedings"); or (b) provisions which were otiose ("MWE may speak to Mr. O'Hara and Mr. Collier in relation to the matters in dispute"). But his prime objection to an order such as this is that it either involves an impossible prediction (that MWE's speaking to the two individuals will not result in them being in breach of their obligations) or the court doing that which it has no power to do, namely to order that whatever the two individuals say there cannot be a breach of their obligations. As to the second order sought he submits that such an order is unprecedented and unjustified. As to the third he submits that it is an illicit attempt to link the defendants' application for the establishment of a confidentiality club, which should be considered on its own individual merits, to the question as to whether the two individuals should be released from their obligations of confidentiality.
- Certain principles are well established. Firstly there is, as has been said countless times, no property in a witness. C sues D. C may approach and speak to an individual (call him W) employed or formerly employed by D to provide information and, if necessary, to give evidence on his behalf. W has a free choice as to whether or not to assist C, although he may be compellable to give evidence at trial. But he may not lawfully give to C, nor may C legitimately seek, information which W owes a duty to D to keep confidential and which it would be a breach of his duty to give to C. This rule is not without exception. If W is called to give evidence C may ask him any question relevant to the dispute, other than one which seeks to obtain information which is both privileged and confidential, and, subject to any judicial discretion, he will be both entitled and bound to answer it.
- A duty of confidentiality does not exist in the abstract. Its extent and reach may be altered by circumstances. Thus information may be confidential as between A and B but not as between A and C such that A may reveal it to C, but not to B. The beneficiary of a duty of confidence may waive it. Thus a solicitor or other trusted adviser may not broadcast to the world information which he has received in confidence from his client. But, if his client sues him for breach of duty in court, he is not precluded from revealing, in and for the purpose of the proceedings, information which, in other circumstances, would have to remain confidential. By bringing the action the client has waived privilege.
- A litigant is bound by the Rules to make disclosure of relevant non privileged documents which fall within the confines of standard disclosure, although the court may vary that obligation. Generally speaking disclosure is required even if the documents are confidential. Such disclosure is not to be regarded as a waiver of confidentiality. The disclosing litigant loses his right to keep documents confidential because of the provisions of the Rules and subject to the protection that those Rules afford. A claimant may thus be able to see, by way of disclosure, documents which it would not otherwise be lawful for a servant or agent of the defendant to disclose to him. But under CPR 31.22 the claimant will be under an obligation not to use the documents otherwise than for the proper purposes of the action. except where :
"(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;
(b) the court gives permission; or
(c) the party who disclosed the document and the person to whom the document belongs agree."
- That being so, the next question is what use can be made of the documents disclosed for the purpose of the action? In particular, in the example given, is it possible for C's solicitors to ask W to comment on and give them information in relation to a disclosed document and, if so, may he legitimately answer their questions, even though, in other circumstances, his answer would be a breach of confidence?
- Mr Onions submits that the answer is "Yes". Once disclosure has taken place the receiving party becomes privy to any confidential information relating to a matter in issue in the proceedings. As between the disclosing and the receiving party confidentiality is, so far as the prosecution of the action is concerned, lost. The disclosing party ceases to be able to assert a claim to breach of confidence against the receiving party if the latter does no more than use the information for the purposes of the action to which it is relevant e.g. by questioning potential witnesses in relation to matters in issue in the proceedings. Such witnesses may answer such questions without being in breach of any duty of confidentiality they would otherwise have. But the disclosing party may rely on confidentiality in respect of any other use of the information, e.g. its dissemination otherwise than for the purposes of the action, and the receiving party is under a duty to use the information and any further information obtained as a result of having it only for the purposes of the action.
- This question was, Mr Onions submits, considered in China National Petroleum v. Fenwick Elliott and Techint International  EWHC 60 (Ch) upon which he placed particular reliance. The facts are complicated. In essence:
a. The Claimants were a consortium ("the Consortium") which entered into a contract with the second defendant ("Techint") to construct a marine terminal. The contract provided for increases in the contract price to be effected by a "change order" system.
b. The proceedings related to an arbitration between Techint and the Consortium for payment of sums allegedly due as increases in the contract price pursuant to the system. A consulting engineer company, OGP, had given advice (which was not privileged) to the Consortium as to payments in respect of change orders [§1-4 and 9].
c. The Consortium sought an order requiring the defendants ("FE", who were Techint's solicitors and "Techint") to identify the source of information which the Consortium alleged (on the basis of the contents of a letter written by FE to the Consortium's solicitors) they or one of them must have obtained in breach of confidence [§6 and 26].
d. The Tribunal ordered disclosure of all OGP advice regarding change orders. The Consortium agreed to give such disclosure. It also indicated that it would call evidence from OGP personnel and said that Techint could do so if it wished [§9-11].
e. Techint challenged the adequacy of the Consortium's disclosure on the grounds that OGP's advice to pay USD40 million in respect of change orders not finalised was not evidenced by it [§13]. It was this information which was said to have been obtained in breach of confidence. It emerged that information that there was such advice had been obtained by FE, Techint's lawyers, by interviewing potential witnesses. Their identity was not revealed. [§24].
f. The Consortium alleged that whether the information had come from employees or ex-employees of OGP or the Consortium, the person(s) giving the information was in breach of a duty of confidence and FE must have known that that was so [§30]. They sought orders which would have compelled revelation of his or their identity.
g. The Vice-Chancellor rejected the allegation [§37], saying, inter alia::
"I am not satisfied that any advice or recommendation by OGP to the Consortium of the type alleged in the particulars of claim is either confidential or privileged as between the Consortium and FE and Techint. The actions of the Consortium in agreeing to disclose and inviting Techint to obtain such oral evidence from OGP as they wish is inconsistent with the claim to confidence and privilege now maintained. The Tribunal has already determined that documents of the description given in the particulars of claim are discloseable and are not privileged. Neither FE nor Techint has threatened to use any information they may obtain outside the proper confines of the arbitration."
- The result was that it was not open to the Consortium which had disclosed documents relating to a particular matter (advice to pay USD40 million in respect of change orders) to contend that discussion by a solicitor on the other side with a witness on that matter amounted to procurement of a breach. As between the rival parties the information had, at any rate for the purposes of the action, ceased to be confidential.
- In that case the Consortium had, according to the Vice-Chancellor, invited Techint to obtain oral evidence from OGP witnesses. That element is absent in the present case but it was not, Mr Onions submits, a matter crucial to his decision. The Consortium alleged that there was a breach of confidence in approaching employees and ex-employees of the Consortium and not just of OGP.
- Further, Mr Onions submits, the loss of confidentiality following disclosure was not in that case, and is not generally, limited to matters that are apparent from the documents disclosed, a criterion itself difficult to apply. Firstly, in China the advice as to payment of $ 40 million was not evidenced by any of the disclosed documents. The solicitors had discussed with the witnesses matters which disclosure had not revealed and that was one of them.
- Secondly, any such limitation would be unworkable or produce very odd results. Suppose a dispute as to whether an agreement has been made. It would make no sense to allow the potential witness to be questioned, free from any obligation of confidentiality, if there was a document which made it clear that there was an agreement, but not if the document was ambiguous about it or if there was no document indicating an agreement at all. Nor would it make sense for a witness to be allowed to be questioned with a view to establishing that an apparent record of an oral agreement was true and complete, but not to be questioned by the party denying the agreement about its supposed existence if there was no document which recorded it, when one could be expected.
- I agree that, if the effect of disclosure is that the disclosing party loses his right to rely on a duty of confidence owed to him by the person to be questioned, it is difficult to draw the line as to the extent of that loss. I do not, however, accept that the effect of disclosure is in any way to alter any duty of confidence owed by (say) an employee or former employee (save that compliance with the obligations of disclosure would, obviously, not be a breach of duty). Subject to any special order of the Court the receiving party is entitled to use the documents disclosed for the purpose of the action. He may show the documents to a potential witness or provider of relevant information. But that does not mean that the witness is absolved from any duty of confidence he may owe to an opposing party (or anyone else). Fulfilment of that duty may preclude him from answering some of the questions that may be asked of him. The fact that the disclosing party has been compelled to disclose the documents to the receiving party does not alter that duty.
- I cannot believe that the Vice Chancellor intended to lay down that disclosure released potential witnesses from their duty of confidentiality to the disclosing party so far as any information relating to the issues in the action was concerned a principle which would have far reaching consequences and appears not to be reflected in any other authority or perceived by any legal author. He had before him a claim for an injunction ordering the defendant to disclose the source of the information and restraining the use of confidential information and documents. In the paragraph relied on he was, I think, doing no more than finding that, on the facts of that case, the Consortium had acted in a manner inconsistent with their claim to confidentiality in respect of the advice that OGP had given i.e. that they had waived it. He was not, in my judgment, enunciating the general principle upon which Mr Onions relies.
- Such a principle would enable one party to question his opponent's employees and confidential agents about anything which could plausibly be said to relate to something in dispute in the action. Whether the questions did so relate could be the subject of much debate and, even if they did, the answers might extend into matters that did not. Mr Onions, prompted by a suggestion of mine, proffered the proposal that the first order sought might have a proviso that information related to matters in dispute when it related to a matter on which the claimants relied or which adversely affected the case of either side or supported the defendants' case. But that could be the subject of equal if not greater debate. Whether or not the question or answer was illicit would not be likely to become known, unless the questioning took place in the presence of the disclosing party's solicitor, because it would be the subject of privilege. In the present case it is apparent that MWE do not intend to ask questions with S & S present.
- Further it would seem illogical for any release from a duty of confidentiality to be dependent on disclosure having taken place. If the two individuals may be examined, free from any duty of confidentiality, on matters upon which the disclosed documents are silent, provided those matters are in issue, it is difficult to understand why such freedom can only be obtained once disclosure takes place.
- Mr Onions submits that his clients face an unacceptable dilemma which the court should be keen to alleviate. The practical effect of the stance taken by 3M is that the two individuals, although prepared, all other things being equal, to assist, will not do so unless the confidentiality issue can be resolved. They do not want to be in breach of their obligations and are, understandably unwilling to cooperate if it is not clear to them what they may legitimately say. The effect, which Mr Onions suggests must be intended and, in any event, desired, is that the claimants can obtain no information from the witnesses in advance of trial. If witness statements are produced and the two individuals are called to give evidence, the claimants will be able to cross examine them. If they are not called the claimants can call them. But they will have no prior access to the two individuals to investigate what they may have to say which is not in their witness statements. If no witness statements are produced it will be necessary to call the two individuals blind, if they are to be called at all a perilous and unsatisfactory procedure. The claimants' inability to have unfettered access to the witnesses is said to be particularly significant given that the majority of the documentary evidence and the information relating to the critical issues as to the efforts made, or not made, by 3M will be with the employees or ex-employees of 3M and Acolyte which became its subsidiary. The defendants on the other hand have full and unfettered access to the two individuals and, within the bounds of propriety, may adduce such of the evidence the two individuals have to give as they choose. The result is that the parties are on a wholly unequal footing. This is, he submits, inconsistent with the overriding objective of dealing with cases justly which involves ensuring that the parties are on an equal footing (CPR 1.1 (2) (a)) and that the case is dealt with fairly (CPR 1.1 (2) (d)).
- There is, he submits, a way of resolving this situation. One method would be to stay the counterclaim unless the defendants waived the confidentiality obligations of the two witnesses. This is not, however, his preferred route, not least because it might result in a stay without such waiver.
- The second route is to make it a condition of any confidentiality club order which the court makes that any obligations of confidentiality of the two individuals are waived as between the parties for the purpose of these proceedings. If a litigant seeks some special order from the court, then the court may, he submits, be required as a condition of obtaining the advantage which it seeks to submit to some condition designed to ensure the achievement of the overriding objective. Here the defendants' application should only be granted on the condition to which I have referred. It is appropriate that the individuals who, under the proposed order, will have to sign a confidentiality agreement in respect of the documents, should have the benefit when talking to MWE of a release from their duties of confidentiality.
- He cites Nicholson v Halton General Hospital NHS Trust  PIQR 310, where the Court of Appeal stayed a personal injuries action unless the plaintiff provided an authority to the professor who had operated on him so as to permit him to state what anatomical reasons were found during the operation on his forearm and what condition required the repair of the lesion then found.
- In that case Sumner J held, at p.312 that:
the court will grant a stay unless a claimant consents to relevant information being obtained from a treating doctor. There is no property in a witness, but there is a right of confidentiality between a patient and his treating doctor which the law will uphold. It is a right which it is for a patient to waive and he can only waive it voluntarily. The court will not order him to waive such a right. But in an appropriate case, the court can order that the claim be stayed until such time as he consents to waive his right of confidentiality."
- It was not in dispute before the Court of Appeal that there was jurisdiction to grant a stay or whether a stay should be granted. The previous authority on granting a stay in the circumstances of a case such as that was scant. The first instance judge had refused a stay on the ground that it was unprecedented. The issue with which it was apparently necessary to trouble the Court of Appeal was whether the defendants should be compelled to put their request for information in writing or whether they were entitled to have a conversation with Professor Stanley. The dispute about a stay related to a very narrow issue and the relief granted was limited.
- I do not doubt that, in an appropriate case, the court may refuse relief save on conditions which it regards as necessary in the interests of justice or fairness. Nor do I underestimate the practical effect that reminders from large corporations or their lawyers which are in no way improper, as to a private individual's duties of confidence, may have on that individual's willingness to get involved in assisting a rival party to litigation. Such an individual may decline to assist, even though he could, at least to some extent, do so without committing any breach of duty. But that does not seem to me a reason for, in effect, compelling a party to whom legal duties of confidence are owed to release the individual concerned from any such duty when he is asked questions relating to a matter in dispute in an action. I do not regard the position as altered because the two individuals were at different stages employees of or engaged by (i) Acolyte, (ii) the 3M subsidiary, and then (iii) neither of those.
- The obligation of the court to deal with matters "justly" sits ill with an exercise of judicial discretion which absolves an individual from his legal duty. I note that in Russell v Kadian  NWSCA 328 the Court of Appeal of New South Wales held that the right of a party to call evidence in court did not permit or require a potential witness to breach an obligation of confidence other than in giving of evidence in court, nor enable a person wishing to call such a witness to require the witness to provide information that would breach such an obligation.
- The objective of ensuring that the parties are "on an equal footing" ought not, in ordinary circumstances, to require that obligations of confidence are overridden. If the court were to do so it could be said that the party whose confidence is overridden was not on an equal footing with his opponent, nor treated fairly, because his legal rights were not respected whereas those of his opponent were.
- The need to deal with a case "fairly" is a somewhat protean obligation. It may be, as the court in Richards v Kadian decided (but on which I express no opinion), that if a litigant satisfies the court that a fair trial of the action cannot be heard whilst his opponent insists on a right to keep information confidential, that the court will stay his action until that right of confidentiality is no longer insisted on. Even if that is so, I do not accept that in a case such as the present, where the claimants' case has been fully pleaded, extensive disclosure has been given, and, as matters stand, both of the two individuals are intended to be called, a fair trial of the action cannot be held.
- Whilst the fact that a litigant seeks either the indulgence of the court or a special order is sometimes a convenient and legitimate peg upon which to hang a requirement that a litigant act in a manner which he could not otherwise be compelled to adopt, I do not regard it as appropriate to use the fact that the defendants seek a confidentiality club order as the means by which to procure a waiver of obligations of confidence. The two subjects are separate. A confidentiality club order is designed to restrict the persons to whom documents compulsorily disclosed are to be shown. It is made for the purpose of reducing the risk that the documents, or the information contained in them, may be used otherwise than for the purposes of the action. The defendants do not object to the inclusion of the two individuals in the club. They may, therefore, be shown the documents and asked questions about them. However, any waiver or loss of a right of confidentiality relates, in the present context, to the answers which a witness may legitimately give to questions that are posed of him.
The confidentiality club application
- Confidentiality club orders are the exception rather than the rule. Nevertheless the court will make such an order if the justice of the case demands. The party seeking the order needs to show that the legal restrictions on the use of documents obtained on disclosure are insufficient.
- In Roussel Uclaf v ICI  RPC 45, the Court of Appeal approved the following summary of the principles from the first instance judgment of Aldous J:
"Each case has to be decided on its own facts and the broad principle must be that the court has the task of deciding how justice can be achieved taking into account the rights and needs of the parties. The object to be achieved is that the applicant should have as full a degree of disclosure as will be consistent with adequate protection of the secret. In so doing, the court will be careful not to expose a party to any unnecessary risk of its trade secrets leaking to or being used by competitors. What is necessary or unnecessary will depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered. However, it would be exceptional to prevent a party from access to information which would play a substantial part in the case as such would mean that the party would be unable to hear a substantial part of the case, would be unable to understand the reasons for the advice given to him and, in some cases, the reasons for the judgment. Thus what disclosure is necessary entails not only practical matters arising in the conduct of a case but also the general position that a party should know the case he has to meet, should hear matters given in evidence and understand the reasons for the judgment."
- In a letter of 15th October 2009 S & S said that the defendants' disclosure was likely to contain sensitive documents concerning the business, strategy and products of the 3M Medical Division. They proposed that the parties agree lists of named persons who would have access to the other party's disclosure and the terms of confidentiality undertakings to be entered into by those persons.
- On 30th October 2009, lists of hard copy documents were exchanged, without any conditions being imposed on either side as to confidentiality. The defendants' hard copy documents largely consisted of documents which had originally belonged to Acolyte and did not include any documents of the type identified in the letter of 15 October 2009 as likely to be sensitive. The defendants' application is not intended to extend to these documents.
- MWE wrote to S & S on 3rd November 2009 and said: "We agree with you that some form of mutual confidentiality club would be sensible". In the same letter they gave a list of names including "any experts who are retained by us on behalf of our client to advise on the issue
" and suggested that S & S draft an undertaking.
- By a letter of 16th November 2009 S & S provided the claimants with a list of initial names for the proposed confidentiality club, and a draft undertaking to be given by the solicitors. That undertaking would have obliged the solicitors not to give access to the documents except to a list of named individuals that had been agreed in advance and not in any event to anyone who had not signed a confidentiality undertaking a draft of which was attached. S & S suggested that it would be "necessary for the parties to re-visit the issue of confidentiality in the run-up to trial in relation to the use of confidential documents in court, but we propose that this issue be dealt with at a later date." They requested a list of names of the claimants' experts so that the defendants could consider whether they had any concerns about them as recipients of the defendants' confidential documents.
- There were then a couple of telephone conversations between the solicitors in which the principle of a confidentiality club was agreed, but the claimants expressed concern about the request to identify the experts in advance, in case they decided not to instruct the named individuals.
- There was then something of a volte-face when MWE wrote its letter of 30th November which included the following:
"However, it is clear that your clients are intent on using the issue of confidentiality to make sure that we and our clients are not able to investigate properly the relevant issues and the underlying facts and are not able to obtain the evidence which we might otherwise wish to adduce. That being the case, we are currently not minded to accede to your request that all of your clients' disclosure should be treated as confidential
- On 14th December, as an interim measure, MWE and S & S gave undertakings to each other in relation to the dissemination of the electronically disclosed documents.
- In his third statement Mr Morgan of S & S sets out what is said to be the nature of the confidential information contained in the defendants' disclosure. It is said to consist of the following:
"(A) information on the Defendants' investment strategy, and sales and profits projections for BacLite and for the Medical Division;
(B) intelligence on the competitors of the Defendants' Medical Division and their products;
(C) proprietary research that the Defendants have conducted or commissioned into the markets for MRSA and other microbial detection products;
(D) information on the resources and costs of the Defendants' Medical Division, and specific financial and strategic information about Medical Division products other than BacLite. Many of these products are still actively sold by the Defendants;
(E) specific information on the Fastman product, which the Defendants continue actively to develop; and
(F) management-level documents in the possession of senior personnel within the Defendants concerning the finances of and the short-, medium- and long-term business strategies of the Defendants' Medical Division."
The statement goes on
13. In addition, the Defendants' disclosure contains information on how the Medical Division conducts its day-to-day business. The Defendants' disclosure therefore contains a large amount of material that the Defendants view as being commercially sensitive".
- The claimants object that the latter category is a catch all provision which makes no distinction between information that 3M would rather others did not see and genuinely confidential material. They point out that in Diamond Shamrock Technologies SA's Patent  RPC 91 at 93 Whitford J observed, in the context of a dispute as to whether evidence filed in patent proceedings should be excluded from the public inspection which would normally be available:
"The fact that a document discloses matter of commercial interest described as "sensitive" does not necessarily mean that it should be excluded from public inspection. Statements of this kind are too vague to give good grounds for consideration, and if a request is made for confidentiality of this type of material, a rather more exact indication should be given as to the reasons why the document ought not to be disclosed."
The claimants' submissions
- The claimants contend that, although there may be some information in the documents which is truly confidential, there must be much that is not. The application has to be judged against the background that 3M has abandoned the development and marketing of BacLite or any MRSA detection product; 3M has no realistic prospect of selling the Acolyte business to a third party. Accordingly, so it is said, category (A) insofar as it relates to BacLite is inapposite. There cannot be any information under this head which is commercially sensitive. Further the Medical Division of 3M is huge and the BacLite product could at best only have produced a very small percentage of turnover.
- They also suggest that information as to the overall strategy, resources and finances of the 3M Medical Division is irrelevant to the matters in issue save as to whether the defendants allocated to the Earn Out Products resources to a similar extent as they did in respect of other businesses within the Medical Division and that documents in this category ought to be readily identifiable. Some of them may not be confidential at all. They question whether intelligence on competitors and their products category (B) - can embrace any information which is truly confidential.
- As to category (C) the claimants say that 3M has divested itself of its medical diagnostics business, with the exception of one flu virus detection product. Documents in relation to that product should be readily identifiable.
- As to (E) it should be very simple for the defendants to word search "Fastman" and thus discover a relatively limited set of documents and analyse whether they are confidential.
- The specific categories of documents are said by the claimants to cover only a small proportion of the overall disclosure. At the time of Mr Moss' fourth witness statement, the claimants had only identified 75 documents which fell within categories A (in relation to Medical Division), D and F, all but one of which had had redactions. Many other documents had redactions, as a result of which they could not be said to reveal confidential information.
- There should - the claimants submit - be selective treatment of any genuinely confidential material. If any order is made then the two individuals (and any other ex-employees or ex-consultants of 3M or Acolyte to whom the claimants solicitors may wish to speak for the purposes of these proceedings) should be within that confidentiality club.
- Further it should be a condition of making the order that any duties of confidentiality which such persons may owe to the defendants in relation to the matters in dispute be waived as between the parties for the purposes of these proceedings. As to the latter, as I have already indicated, I am not persuaded that, if an order is made, such a price should be exacted.
The defendants' submissions
- The draft order proffered by the defendants provides for the members of the club to be the receiving party's solicitors and counsel and anyone responsible for instructing solicitors together with any witness whom the receiving party intends to call to give factual or expert evidence and any person assisting such an expert. It seems to me that, if such an order is made, the club should include a person whom the receiving party intends or contemplates calling to give factual or expert evidence. There is no reason why the documents should not be shown to a possible witness. The draft goes on to provide for the receiving party only to give access to the documents to someone who has signed a confidentiality undertaking. More controversially it requires that undertaking to be provided to the other parties' solicitors 1 clear business day in advance of the proposed dissemination of the documents.
- The defendants' concern is that confidential documents may be made available to experts who may be employed or engaged by a competitor. They wish to have a short period in which, as Mr Salzedo put it, to squeal. The claimants object to an order which would or might have the effect of revealing what experts they had approached but not remained with. On 28th July 2009 Gross J, with marked reluctance was persuaded to allow the claimants to submit reports from 4 experts, without prejudice to whether such evidence would be admissible and whether it should be allowed to be adduced. There would, Mr Salzedo submits, be no difficulty in the claimants approaching potential experts without the disclosed documents and the Court should not, in any event, encourage expert shopping.
- As to whether such an order should be made at all, Mr Salzedo pointed out that at the time when disclosure was being worked on it would have been possible, although cumbersome, to go through the documents analysing with some precision which of them embodied what confidential information. That was not done. At the time it appeared to be common ground that there should be a club. There were undoubtedly confidential documents which merited restriction. The defendants had had to disclose documents about their investment strategy, sales and profits resources and costs in the Medical Division, not limited to BacLite, because of the contention that they had failed in their obligation to afford the same level of support to BacLite as they had given to other products. Any contention that the overall strategy of the Medical Division as a whole was irrelevant was misplaced (as were the statistics in Mr Moss' fourth witness statement which took £ 41 million as an envisaged turnover for BacLite for 2009, when it was in fact merely a cap on the possible earn-out under the SPA, and expressed that as a percentage of what was said to be the turnover of the Medical Division when the figure of $4.293 million taken was the 2008 turnover of 3M's Health Care Business of which the Medical Division was a sub-division). The defendants are still engaged in the medical diagnostics business. In addition to Fastman, which appears to have been licensed out, there is Rapid Detection, a diagnostic product for different types of flu.
- In relation to the number of confidential documents within the 7,500-odd documents disclosed there is a difference of view. S & S take the view that more than half (by number of pages) embody confidential information.
- I have come to the conclusion that I should make an order upon the lines proposed, and subject to the observations in paragraph 61 above, for reasons partly of principle and partly of pragmatism. As to the former, I am persuaded that there is likely to be a substantial body of confidential information of recent date within the documentation, whose existence justifies such an order. As to the latter, whilst pragmatism cannot override principle, I can see little benefit in requiring the defendants to go through the necessarily time consuming and, therefore, expensive exercise of producing a more focused analysis of specific documents to form the subject matter of the order. I strongly suspect that, but for the dispute about the two individuals, the parties would have been in substantial agreement about it.
- The draft put forward at the hearing provided that "(B) CPR 31.22 (1) (a) shall not apply to the Disclosed Documents". That is the rule which provides that the restriction on use of a disclosed document shall not apply if
"(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public"
Whilst the draft contains a liberty to apply I think it appropriate that this particular provision should be specifically subject to any order of the court to the contrary, in order to underscore the fact that the court may wish to reconsider the position. The present order should not include the trial of the action; although it will be open to the trial judge to make whatever order, if any, he then thinks appropriate.
- I also think that the defendants should be entitled, in the case of experts but not others, to receive the signed confidentiality agreement which they seek in advance of disclosure. I do not regard this as involving any substantial injustice to the claimants. Even if the effect is to reveal that they showed the documents to an expert and then did not produce a report from him, nothing much can be inferred from those two facts since the reason for that happening will be protected by privilege. I also accept that the court should not make orders which might foster expert shopping.
- The order must also contain a provision which records that its making does not constitute a finding that any particular document is a confidential document or contains confidential information. I make no such finding. I accept Mr Onions' submission that, absent such a provision, the effect of the order might, either in theory or in practice, determine the matter against him so that his clients, if they sought to vary the order, bore the burden of showing that a particular document was not truly confidential.
- I invite the parties to endeavour to agree an order that reflects this decision.
- I am grateful for the cogency of the submissions made to me by each side.
Note 1 Whether the Consortium had invited Techint to obtain oral evidence from OGP (their solicitors had said if [Techint] wishes to call OGP witnesses as well, this is entirely a matter for them) may perhaps be debatable. [Back]
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