First confidentiality, now costs: Vestergaard v Bestnet refuses to go away

Now it's costs that bite ...

Still at it. Vestergaard Fransen S/A & others v Bestnet Europe Ltd and others is a case that simply refuses to go away. The events leading to the dispute are history, having taken place a decade ago or earlier.  The IPKat's first blogpost on it ("No striking out, but net gain for Bestnet?", here) goes all the way back to the winter of 2007, when Roger Wyand QC, sitting as a Deputy Judge in the Chancery Division of the High Court, England and Wales, refused to strike out Vestergaard's breach of confidence claim in relation to its polyethylene insecticide-based mosquito nets. Nearly two years later, in August 2009, Mr Justice Arnold's trial decision in favour of Vestergaard was noted here at "Net profit saved though springboard loses its spring?". Two years later, in "Bestnet Bested Over Bug-Net Boosted from the Fence", the Kat duly recorded here the Court of Appeal's decision to allow the appeal of one of the defendants in a complex appeal involving not only Arnold J's decision noted above but three other judgments arising out of the same action, involving remedies at [2009] EWHC 1456 (Ch), the remittal of further questions for the trial judge's attention at [2011] EWHC 477 (Ch) and a decision mysteriously referred to as the "Whopes I" judgment ([2009] EWHC 1623 (Pat), not available on BAILII). Once the Supreme Court got its hands on the dispute (see "Net gain for Dane: breach of confidence can't be imputed, says UK Supreme Court", here), this Kat thought he had heard the last of the matter -- but he was wrong.

The latest incarnation of this dispute is not yet available on the BAILII database but has been spotted by subscription-only service Lawtel. Its neutral case reference is [2014] EWHC 4047 (Ch).  This time round, Iain Purvis QC, sitting as a Deputy Judge, had to consider a quite fresh issue.

If this case has a motto,
this is it

Bestnet, the business which had been held liable for misusing Vestergaard's confidential information in the development of of its own mosquito nets, was ordered to pay damages -- but how much?. Following an inquiry as to damages, Vestergaard was awarded considerably less than it had originally claimed. Bestnet had previously made two offers of sums by way of damages in order to settle the claim under Part 36 of the Civil Procedure Rules, the second of which was not far below the final amount awarded. Vestergaard didn't respond to either of these offers, nor did it make any counter-offer. Meanwhile the question of deciding who should pay the costs of the inquiry as to damages remained to be determined. At the costs hearing Bestnet, wishing to criticise Vestergaard's conduct during the inquiry, served a witness statement which referred to an exchange of "without prejudice" solicitor's letters in which the parties had attempted to resolve the costs of the liability trial.

In these proceedings, Vestergaard applied to strike out various parts of the witness statement on the grounds that the letters were protected by "without prejudice" privilege. Bestnet resisted the application on two grounds. First, Bestnet maintained that Vestergaard was not entitled to the protection of "without prejudice" privilege because the letters in question had not been genuine attempts to settle the issue of payment of costs; Bestnet also argued that Vestergaard had impliedly waived its entitlement to privilege by claiming indemnity costs, which necessarily raised the issue of the parties' conduct, and by asserting in a skeleton argument that their own conduct was not to be criticised.

Iain Purvis QC granted Bestnet's application to strike out. In his view,

* there was a strong public policy justification for refusing to allow a party to rely on a "without prejudice" communication at any stage in the proceedings -- and this included the bits of the proceedings that dealt with costs assessment too.

* the basic principle was that, once a party had made a "without prejudice" offer, its recipient was free to make a "without prejudice" response: this might be in the form of a counter-offer, a request for more information, a rejection or indeed no response at all. All those responses were protected by the same "without prejudice" privilege.

* since the rejection of a "without prejudice" offer, without making a counter-offer, was not admissible in evidence, no such rejection could be given in evidence in isolation, without providing the initial offer as well. It logically followed that it could never be open to one party, who had made a genuinely "without prejudice" offer, to disclosure the response to that offer without the consent of the party to whom the offer was made.

* on the facts there had been no waiver of privilege. Vestergaard's claim to be intitled to indemnity costs was based on an allegation that Bestnet's conduct in the litigation was worthy of criticism, but that allegation was not inconsistent with Vestergaard's continuing to assert privilege in "without prejudice communications".

* the statement that Vestergaard's conduct was not to be criticised was counsel's summary of the finding that he would like the court to make, based on the evidence that it had heard and seen. However, the court had neither heard nor seen any evidence about the "without prejudice" negotiations, so counsel's statement could not be taken as making any assertion about Vestergaard's conduct and it was therefore impossible to see how it could have implicitly waived the privilege attaching to the negotiations.

This Kat is saddened that this dispute, having been litigated so long and so hard, still appears to have further mileage in it.   Having said that, he would be reluctant to remove "without prejudice" protection unless there was a cast-iron justification for doing so and, on the basis of information available in this secrecy-shrouded case, he doesn't sense that such justification is present here.