THE PRUDENTIAL ASSURANCE COMPANY LTD v THE PRUDENTIAL INSURANCE COMPANY OF AMERICA [2002] EWHC 2809 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2002] EWHC 2809 (Ch)Case No Case No: HC01 C05141Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
THE PRUDENTIAL ASSURANCE COMPANY LTDClaimantTHE PRUDENTIAL INSURANCE COMPANY OF AMERICADefendant
Before
THE VICE-CHANCELLORMr. Geoffrey Hobbs QC and Mr. Cohn Birss (instructed by Messrs Lovells) for the ClaimantMr. Michael Silverleaf QC and Mr. Richard Vary, Solicitor Advocate, (instructed byMessrs Linklaters) for the DefendantHearing date : Tuesday, 10th December 2002Date 20 December 2002
[1]The Vice Chancellor : The Prudential Assurance Co Ltd ("P-UK") and the The Prudential insurance Company of America ("P-US") were incorporated in England and the State of New York and have carried on the business of insurance since 1848 and 1875 respectively. In 1974, in the shadow of proceedings before the regulatory body in New York from which an appeal was made to the Court of Appeal for the District of New York an agreement ("the Agreement") was reached between the Chairman and Chief Executive of P-US and the Chief General Manager of P-UK with regard to the use of the name "Prudential" in relation to the business of insurance. In broad terms only P-US was to be entitled to use it in the USA, only P-UK in Europe and the Commonwealth, but both might use it in Canada with additions to show the geographic origin of the parent company.[2]Since then there has been correspondence from time to time between senior executives of P-US and P-UK relating to the use of the name Prudential in relation to other businesses and other countries to which the Agreement did not extend. Thus in 1986 P-UK agreed that P-US might use the name Prudential-Bache in the United Kingdom and Commonwealth but only in respect of certain services and in 1993 agreement was reached regarding use of the name Prudential in Hong Kong, Singapore and Malaysia. The documents relevant to this application concern negotiations carried on by correspondence in 1995 with regard to the use of the name Prudential in the People's Republic of China.[3]The Agreement appears to have lost much of its force. On 21st November 2001 P UK instituted proceedings in England complaining that P-US was acting in breach of the Agreement and was infringing various trade marks to which P-UK was entitled in its use of the names PRUMERICA and PRUDENTIAL-BACHE in the UK and Europe. Proceedings relating to such trade marks have been or are threatened in 36 other countries. I am concerned with three such proceedings, namely, trade mark opposition proceedings in the Taipei District Court in Taiwan, trade mark opposition proceedings before the Taiwanese trade mark registry and trade mark opposition proceedings in New Zealand. In both sets of proceedings in Taiwan P-UK has included in its evidence the 1995 correspondence concerning the People's Republic of China to which I have referred. P-UK threaten to adduce similar correspondence in the proceedings in New Zealand.[4]In March 2002 the application of P-US for an order, amongst other things, to strike out the claim of P-UK came before Laddie J. One of the grounds relied on by P-US was that the Agreement was not legally enforceable having been intended by both parties to be binding in honour only. In the course of the hearing before him all the correspondence between P-UK and P-US which has or may be put in evidence by P- UK in Taiwan or New Zealand was freely deployed. Laddie J refused to strike out the claim. He concluded that there is a good arguable case that the Agreement is legally enforceable and that the marks on which P-UK relied had been infringed. P US has appealed from the order of Laddie J but neither side suggests that the outcome of the appeal could affect what I have to decide.[5]The application now before me was issued by P-US on 22nd October 2002. P-US seeks orders that P-UK withdraw the evidence in Taiwan and New Zealand consisting of the correspondence to which I have referred and a declaration that all that or similar correspondence is "protected by privilege under the 'without prejudice' rule from use in any contentious proceedings".[6]The rule and its rationale are described in the speech of Lord Griffiths in Rush & Tompkins v Greater London Council [1989] 1 AC 1280, 1299 in the following terms:
"The "without prejudice" rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver L.J. in Cutts -v- Head [1984] Ch 290 , 306: "
That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J. in Scott Paper Co -v- Drayton Paper Works Ltd. (1927) 44 R.P.C. 151, 156, be encouraged fully and frankly to put their cards on the table. ... The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability". The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence "without prejudice" to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase "without prejudice" and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission. I cannot therefore agree with the Court of Appeal that the problem in the present case should be resolved by a linguistic approach to the meaning of the phrase "without prejudice." I believe that the question has to be looked at more broadly and resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation."[7]In Muller v Linsley & Mortimer (1994) 139 S.J.L.B. 43 Hoffmann LJ referred to the 'without prejudice' rule having "two justifications. First, the public policy of encouraging parties to negotiate and settle their disputes out of court and, secondly, an implied agreement arising out of what is commonly understood to be the consequences of offering or agreeing to negotiate without prejudice."[8]The rule was further considered and analysed by Robert Walker LJ, with whom Simon Brown LJ and Wilson J agreed, in Unilever plc v Procter and Gamble [2000] FSR 344 . At page 357 he said "In those circumstances I consider that this court should, in determining this appeal, give effect to the principles stated in the modern cases, especially Cutts -v- Head , Rush & Tompkins and Muller . Whatever difficulties there are in a complete reconciliation of those cases, they make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objection of giving protection to the parties (in the words of Lord Griffiths in Rush & Tompkins at page 1300): to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts. Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders."[9]These principles were applied by Lloyd J in David Instance v Denny Bros Printing Ltd [2000] FSR 869 to restrain the defendant from deploying in subsequent proceedings in the US documents subject to the 'without prejudice' rule in England. He did so on the basis that it was "...probable that the without prejudice communications are indeed governed by an implied agreement that they will not be used in the current or any subsequent litigation between the same or related parties." [p.884] And that "...it would be a breach of contract for the [defendants] to use these documents for the purposes of the United States litigation." [p.888][10]It is common ground that the 'without prejudice' rule is subject to exceptions. Eight of them were enumerated by Robert Walker LJ in Unilever plc v Procter and Gamble [2000] FSR 344 at pp.353/4. The only one material for present purposes is the first, namely that 'without prejudice' communications are admissible to prove that they resulted in a concluded agreement. Thus counsel for P-US accepts that P-UK is entitled in the action proceeding in England to use them to prove the Agreement on which it sues. But, he contends, the 1995 correspondence and other similar communications may not be used in the proceedings in Taiwan or New Zealand. He submits that such correspondence came into existence for the purpose of negotiating a settlement of the issues arising with regard to the use of the name Prudential in the People's Republic of China and should not be used in proceedings relating to a trade mark dispute in Taiwan or New Zealand.[11]This is disputed by counsel for P-UK. He raises a number of objections to the grant of the relief sought. First, he contends that the 1995 correspondence was not within the 'without prejudice rule' at all. He submits that the 1995 correspondence cannot be characterised as the medium for negotiations genuinely aimed at the settlement of a dispute. He submits that it was no more than commercial correspondence between two companies of world-wide repute in further implementation of the Agreement and in an endeavour to avoid confusion. Second, he submits it is incumbent on P-US to plead and prove an agreement to be implied from that correspondence that none of it should be admissible in evidence in any court in the world at any future time save within one or more of the exceptions enumerated by Robert Walker LJ in Unilever plc v Procter and Gamble . Third, assuming such an implied agreement to be sufficiently established, it is, in the circumstances of this case, invalidated by Article 10 of ECHR and s 12(1) Human Rights Act 1998 and superseded by the fact that all the relevant correspondence was deployed in open court at the hearing before Laddie J. I will consider those objections in the order in which I have described them.[12]The 1995 correspondence starts with a letter from the Vice-Chairman of P-US to the Chief Executive of P-UK dated 12th January 1995. Neither this letter nor any of the others in the voluminous correspondence between the parties in and after 1974 is marked 'without prejudice'. The letter of 12th January 1995 reveals that both parties had filed applications for a service mark in the People's Republic of China. The Vice-Chairman of P-US stated:
"The purpose of this letter is to advise you of an action we have taken in the People's Republic of China with respect to the Prudential name. It appears that both of our companies have an interest in pursuing business opportunities in China under the "
Prudential" name, in one form or another, and have taken steps to secure servicemark protection of the name for our respective uses. On learning of your company's servicemark application, and the January 6 1995 deadline for filing an opposition thereto, we elected to make an opposition filing. We did so in a defensive manoeuvre, to preserve an opportunity to discuss these issues with you directly rather than fight them out before the authorities in the PRC. In addition to merely providing you with this notice of our action, it is my hope that we can begin a dialogue that will permit us to come to some mutually agreeable terms governing our respective uses of the Prudential name in China". The Chief Executive of P-US then made a suggestion based on the arrangements relating to Canada and concluded "If this suggestion is of interest to you, please contact me so we can work out the details. Our companies' willingness to co -operate and compromise on matters such as these in the past have stood us in good stead. I hope we can do the same with respect to China."[13]Evidently the suggestion was of interest to P-UK. The Chairman responded by letter dated 3rd February 1995. Having mentioned certain reservations he had about the suggestion made by the Vice-Chairman of P-US he stated "Nevertheless in the same spirit of co-operation as has prevailed for the last twenty years, we are prepared to follow the Canadian precedent subject to one proviso." Having indicated what the proviso was he continued "We have until 15 February to respond to your opposition in China. Please therefore confirm to me by return if at all possible that the opposition is being withdrawn." The Chairman of P-UK then gave details of that company's plans for the rest of South-East Asia and Canada.[14]On 6th February 1995 the Vice-Chairman of P-US responded. He wrote "I did not mean our opposition to your filing in China to be a provocative act, but rather I wanted to make sure we had an opportunity to endeavour to avoid confusion as we will both be operating in Asia in the future.....I think a face to face meeting would be helpful to work out mutually compatible naming and branding strategies for Asia, but the concept mentioned in the penultimate paragraph of your letter seems to me to hold the key to a flexible but mutually agreeable plan." The Vice-Chairman of P-US then set out his suggestion in some detail. He concluded "I would propose that we try to work out a generalized solution, letting each of us operate throughout Asia."[15]From March to October 1995 the correspondence was continued between Associate General Counsel for P-US and the Director of Legal Services of P-UK with a view to reaching the overall agreement favoured by the senior management of both companies. As far as the evidence before me goes the correspondence concluded with a letter dated 17th October 1995 from Assistant General Counsel to P-US to the Director of Legal Services of P-UK referring to "...our continuing desire to work together toward a worldwide agreement. We continue to see a resolution in PRC as an integral part of an overall set of protocols for Prudential use in Asia....and ultimately to an agreement for use world-wide." He enclosed a draft letter to the Chinese authorities which he suggested should be signed by both parties confirming their agreement in principle and making a joint request to the relevant official in the Trade Mark Office of the People's Republic of China.[16]Counsel for P-US submitted that this correspondence fell within the 'without prejudice' rule as being part of the overall correspondence which started in 1974 in an attempt to avoid and settle litigation and continued from time to time as occasion demanded with correspondence aimed at resolving similar disputes in a local jurisdiction. As I have indicated counsel for P-UK submits the contrary.[17]Neither counsel addressed me on the detail of this correspondence. Having considered it for myself in the context of the other evidence before me, in particular the correspondence of 1974, I do not consider that it comes within the 'without prejudice' rule at all.[18]As I have observed none of this correspondence was marked 'without prejudice'. As the passage from the speech of Lord Griffiths in Rush & Tompkins I have quoted in paragraph 6 above shows, the absence of such a caption does not prevent the application of the rule if it is clear from the surrounding circumstances that the parties were seeking to compromise an existing dispute whether it had given rise to proceedings or not. Nevertheless, given that the rule is dependent to some extent on an implied agreement, it is not without significance that at no stage over a period in excess of 20 years did the senior management or legal advisers of either company see fit to add such a caption.[19]The tenor of the 1995 correspondence was not to compromise an existing dispute but to prevent any dispute arising in either China or any of the other countries to which the Vice-Chairman of P-US or the Chairman of P-UK referred. The cross-filings in the People's Republic of China were, as the correspondence shows, precautionary measures of an administrative nature not formal steps for the commencement of litigation.[20]It does not appear to me that the considerations of public policy described by Oliver LJ in Cutts v Head and referred to with approval by Lord Griffiths in Rush & Tompkins [1989] 1 AC 1280, 1299 have any application to these communications. Nothing had been said or done by either party which was likely to give rise to any litigation the outcome of which might be affected by any admission made in the course of these negotiations. And if the protection of the 'without prejudice' rule is extended to communications of this nature the effect will be to withhold from the court evidence which may be material in many diverse contexts without good reason. For the reasons I explain later the impact of the Human Rights Act 1998 indicates the need to apply the 'without prejudice' rule with restraint.[21]For these reasons I reject this application on the simple ground that the evidence to which objection has been made is not subject to the 'without prejudice' rule at all. In these circumstances it is unnecessary for me to express any view on the other submissions made by counsel for P-UK. Nevertheless in view of their importance and in case this matter goes further I should refer to them arid indicate my prima facie view in respect of them.[22]Counsel for P-UK pointed out in his written submissions that trade marks are limited territorially so that the same mark registered in two or more jurisdictions is regarded as independent of the other or others, see Article 6 of the Paris Convention Article 16(4) of the Brussels (1968) and Lugano (1988) Conventions as applied by the Civil Jurisdiction and Judgments Act 1982, as amended, provides that in proceedings relating to the registration or validity of a trade mark the courts of the country in which the mark has been applied for or registered have exclusive jurisdiction. He pointed out that by English rules of the conflict of laws the domestic law of those courts determine all matters of procedure, including the admissibility of evidence. Dicey & Morris, The Conflict of Laws 13th Ed. Paras 7-002 and 7-016. He contended that in the absence of any claim by P-US in contract or confidence the relief sought in this application was an unwarranted interference in the jurisdiction of those foreign courts.[23]In his oral, but not written, submissions counsel for P-US indicated that the cause of action lay in contract, not confidence. He relied on the implied contract to which Hoffmann LJ referred in Muller v Linsley & Mortimer . He contended that such contract would be governed by English law so that an injunction to restrain its breach would be properly granted by this court even though its effect might be felt in the foreign proceedings to which it related. He relied on the decision to that effect of Lloyd J in David Instance v Denny Bros Printing Ltd [2000] FSR 869.[24]The response of counsel for P-UK was to object to any such claim as being outside the scope of the present proceedings in England. As he pointed out the cause of action relied on for substantive relief is based on a contract which is not the subject matter of any claim, has not been pleaded and has not been proved.[25]There is much force in the objections of counsel for P-UK. It appears to me that the claim for P-US must be put on the basis of a contract governed by English law in order to entitle the court in England to intervene in relation to evidence tendered to a foreign court in respect of a matter within its exclusive jurisdiction. If it is so advanced then it is a substantive claim not an incidental application in the current action. This is not a purely procedural objection. The claim based on contract was not advanced until the hearing before me. At the very least it should have been the subject matter of some originating process followed if so advised by an application for judgment under CPR Rule 24.2. In that event it would have been properly alleged, particularised and proved.[26]If it be assumed that the 'without prejudice' rule does apply and that the claim of P US is procedurally unobjectionable it would be necessary to consider the objections of P-UK based on Article 10 ECHR, s.12(l) Human Rights Act 1998 and the effect of the deployment of the correspondence before Laddie J.[27]Article 10 confers on everyone the right to freedom of expression, including the right "to receive and impart information and ideas without interference by public authority and regardless of frontiers". But that right is subject to such restrictions as are prescribed by law and are necessary in a democratic society for the protection of rights of others. Prima facie, therefore, the right is engaged by the 'without prejudice' rule but justified by the public interests which underlie it. But what this part of the case does emphasise is the need to apply the 'without prejudice' rule with restraint and only in cases to which the public interests underlying the rule are plainly applicable.[28]The same point arises in relation to s.12 Human Rights Act 1998. By subsection (4) the court is enjoined to pay "particular regard" to the importance of the Convention right of freedom of expression. Whilst this does not require the court to do more than give such right specific and separate consideration ( Ashdown v Telegraph Group [2001] 2 WLR 967 , 980) it too emphasises the importance of confining the 'without prejudice' rule to its proper scope bounded by the public interest considerations to which I have referred.[29]Finally counsel for P-UK contended that the use of the 1995 correspondence at the hearing before Laddie J overrode the application of the 'without prejudice' rule if it were otherwise applicable. CPR 31.22 provides that "(1) a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, 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) and (c)] (2) The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to at a hearing which has been held in public." It is not disputed that the documents in question were read to or by the court, or referred to at a public hearing, as explained in Barings v Coopers & Lybrand [2000] 3 AER 910. Laddie J did not make an order pursuant to Rule 31.22(2).[30]It is an open question whether the requirement that the document in question shall have "been disclosed" is limited to disclosure under the compulsory procedures of the court. It is not necessary to decide that point to indicate the nature of the submission of counsel for P-UK. He contends that if the correspondence in question is to be regarded as so disclosed then by force of the rule it may now be used by P-UK for any purpose. If it is not to be so regarded then, he submits, how can non-confidential material so deployed be withheld from consideration by courts overseas. Is not an implied contract to that effect an infringement of the right of freedom of expression guaranteed by Article 10 ECHR? I make no attempt to answer that question. But it does appear to me to be a further reason for applying the 'without prejudice' rule with restraint.[31]For the reason given in paragraph 21 above I dismiss this application.

Cited in 9 later judgments