| Date | 2 March 2005 |
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| Judgment | Schering Corporation v Cipla Limited, High Court 10 November 2004 |
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| The Issue | The application of the term "without prejudice". |
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| Implication |
Documents prepared for the purpose of negotiation, whether or not labelled "without prejudice", may be privileged from disclosure in subsequent proceedings. |
printThe recent case of Schering Corporation v Cipla provides an opportunity to consider the term "without prejudice" when applied to documents. The English legal system requires, as a matter of general public policy, the application of certain rules requiring disclosure of documents in civil proceedings. This disclosure of documents is intended to provide the parties with the relevant documentary material before a trial so as to assist them in appraising the strength or weakness of their respective cases and thus to provide for the fair disposal of proceedings before or at the trial. The obligation to disclose documents is subject to exceptions, where documents of certain categories may be privileged from disclosure. One example is communications between a party and its legal advisers, whether for the purpose of legal advice or in connection with continuing proceedings. A further exception concerns "without prejudice" communications. Documents exchanged between parties during the course of negotiations when attempting to settle the disputed matters, whether or not labelled "without prejudice", may be privileged from disclosure during subsequent proceedings. The underlying policy 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 said in the course of negotiations may be used to their prejudice in any subsequent legal proceedings. Cipla and Schering are both large pharmaceutical companies. In July 2004 Cipla wrote to Schering a letter marked "without prejudice" stating that it wished to launch a product in the UK but that it was aware of Schering's patent in respect of a related product which, if valid, would prevent Cipla from entering the market. Cipla indicated that it considered the patent to be invalid but that it did not wish to embark on confrontation without seeking a commercial solution. The letter concluded that if Cipla did not hear from Schering within four weeks, Cipla would proceed as they deemed appropriate. Schering did not respond but instead commenced proceedings in the High Court alleging an infringement of their patent based upon the contents of the letter. Cipla argued that the contents of the letter were to be treated as privileged and that being the case, Schering had no material that it could rely upon to bring the action for infringement of patent. The High Court reviewed the relevant legal authorities in order to throw light upon the manner in which the court should approach the question as to whether a letter was privileged. In Standrin v Yenton Minster Holmes in 1991 the court said "the principle to be derived from these authorities, if it can be called a principle, is that the opening shot in negotiations may well be subject to privilege where, for example, a person puts forward a claim and in the same breath offers to take something less in settlement . . . . but where the opening shot is an assertion of a person's claim and nothing more than that, then prima facie it is not protected". In Cutts v Head in 1984, the court said "the heading "without prejudice" does not conclusively or automatically render a document so marked privileged. If privilege is claimed but challenged the court can look at a document so headed in order to determine its nature. Privilege can attach to a document headed "without prejudice" even if it is an opening shot". The essential point, according to the court, was to determine whether or not the communication was intended to be part of or to promote negotiations. To determine that, the court had to work out what was the intention of the offer and how it would be understood by a reasonable recipient. If a document is marked "without prejudice", that would be some indication that the author intended the documents to be treated as part of a negotiating process and in many cases a recipient would receive it understanding that the marking indicated that that was the author's intention. Returning to the present case the court felt that Cipla's letter was perfectly clear. As is common in correspondence between parties who face potential litigation, the author had maximised the strength of his case. Cipla noted that it was confident on the basis of legal advice that Schering's patent was invalid. However, if that was all that Cipla was doing, it need not have written the letter to Schering at all, it could simply have entered the market. The letter went on to say that it was prepared to avoid a path of confrontation if there was an alternative commercial solution acceptable to both parties. That amounted to an indication that Cipla wished to talk and thus the overall message continued to be one of negotiation. In conclusion there was no doubt that the letter written by Cipla was a negotiating document and for that reason it was covered by the "without prejudice" privilege. Accordingly, Schering was not entitled to refer to it in its particulars of infringement and the action was dismissed.
CJ-0508
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