Practice – Ocean On Land Technology (UK) Ltd and Another v Land and Others

On 16 Jan 2024, Ms Pat Treacy, sitting as a deputy judge of the High Court, heard the following applications in an action for breach of contract and patent and trade mark infringement. The claimants applied to strike out certain paragraphs of the first and second defendants’ witness statements.  Alternatively, they sought permission to reply to those paragraphs if those passages were not struck out. The defendants also sought permission to adduce additional evidence in reply to one of the claimants’ witness statements.  Ms Treacy handed down her judgment in  Ocean On Land Technology (UK) Ltd and another Land and others [2024] EWHC 396 (IPEC) on 4 March 2024.

The first and second defendants are Richard Andrew Land and Dennis Stephen Gowland.  They had been proprietors of British patent application GB2481409 for an apparatus for growing crustaceans and a method of use and shareholders of a company originally called Shellfish Hatchery Services Ltd.  That company later changed its name to Ocean On Land Technology (UK) Ltd. and is now the first claimant   In June 2016 Mr Land and Mr Gowland sold their shares in the company and assigned their patent application to the second claimant, Caribbean Sustainable Fisheries Corp.  A dispute arose between Mr Land and Mr Gowland on the one hand and one Giles Cadman on the other.  Proceedings were launched in August 2021 and a case management conference took place in 2022.  The issue over evidence must have occurred after the exchange of witness statements.  Judge Hacon ordered the applications to be heard by a judge other than himself which is how they came before Ms Treacy. 

The learned deputy judge took the defendants’ application first.   They had sought permission to reply to paragraphs 7 and 18 of Mr Cadman’s second witness statement.  At the hearing, the application in respect of paragraph 18 was not pursued.  The defendants objected to paragraph 7 on the grounds that it misrepresented the purpose of a visit by the defendants to the British Virgin Islands in 2012 and contradicted some of Mr Cadman’s other evidence.  They asked for permission to adduce a short witness statement replying to paragraph 7 and exhibiting a report on their visit.    

The claimants offered to delete the alleged misrepresentation from Mr Cadman’s witness statement explaining that it had been mentioned only for background purposes and that it did not go to any of the issues to be tried.  The deputy judge accepted the offer and ordered the deletion.

As for the alleged contradiction, the claimants denied that there was an inconsistency and that the allegation went to a material issue.  They had suggested a form of words that might be included in an order permitting limited evidence but Ms Treacy could not see the need for any further evidence since the alleged inconsistency could be challenged in other ways.  In the absence of a draft witness statement from the defendants, she could not see how additional evidence could assist the trial judge.  She refused permission to adduce the witness statement and dismissed the defendants’ application.

The claimants objected to certain paragraphs and exhibits of the witness statements of Mr Land and Mr Gowland on the ground that they contained expert evidence that they were not allowed to give, that they referred to “without prejudice” correspondence and were irrelevant.

Ms Treacy addressed the question of relevance first.  The defendants had argued that the issue should be determined by the trial judge while the claimants contended that costs could be saved by determining it before trial.  Ms Treacy decided that as there was already a hearing on the “without prejudice” issue it was appropriate to decide some of the other evidential issues at the same time.  In reaching her decision, Ms Treacy referred to the cost-benefit analysis test that applies to the Intellectual Property Enterprise Court (“IPEC”) which I discussed in detail in Practice – MCPS v Made TV on 3 April 2024 and mentioned in Practice – Wise Payments Ltd v With Wise Ltd. and others on 22 Feb 2024.  She was satisfied that dealing with several substantive disputes about evidence so far as was sensible and proportionate would meet the cost-benefit test.

CPR63.23 (1) requires enterprise judges to identify the issues in dispute from the parties’ statements of case at the first case management conference.   An example of a list of issues appears in the schedule to the case management conference order precedent in Annex B to the IPEC Guide.  The claimants argued that the paragraphs of the defendants’ witness statements to which they objected strayed beyond the issues that had been identified at the CMC.  The defendants relied on para 4.6 of the IPEC Guide:

“The issues
The issues in dispute. These should clearly emerge from the statements of case. The parties must draw up a list of issues which the court will have to resolve at trial. It is not necessary to list every sub-issue that may arise and this should not be done. The parties will be permitted to argue at trial any point which is both covered by the pleadings and which the opposing side should reasonably contemplate as falling within one or more of the listed issues. The trial judge may refuse to hear argument at trial on a point which does not satisfy those criteria.”

The claimants objected to evidence that criticized Mr Cadman.  The deputy judge decided that the relevance of most of that evidence should be determined by the trial judge.  However, she found some that was prejudicial or otherwise unjustified and ordered its deletion.

In respect of the allegations that remained, the claimants had applied for permission to adduce evidence in reply.  Ms Treacy dismissed their application.   In her view, granting such permission would serve no purpose other than to expand the dispute and generate further costs.  It therefore did not satisfy the costs benefit test. 

Expert Evidence

The claimants objected to paragraphs from Mr Gowland’s witness statement on the life cycle of lobsters and various technical issues on the grounds that they constituted expert evidence for which the defendants had no permission to adduce. In the deputy judge’s view, that evidence set the scene for the witness’s evidence of fact.  Ms Treacy could see no basis for excluding it and dismissed that part of the claimants’ application.

The claimants challenged the admissibility of the defendants’ opinions on the construction of contracts.  The deputy judge set out the following principles of contract construction at para [84] of her judgment:

“(i) Contractual interpretation is an objective exercise. Wood v Capita [2017] UKSC 24 per Lord Hodge JSC: ‘The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement’.
(ii) As a corollary, evidence of the parties’ intentions or their subjective understanding of the contract is not admissible: Prenn v Simmonds [1971] 1 WLR 1381 per Lord Wilberforce: ‘evidence of negotiations, or of the parties’ intentions, ought not to be received’, affirmed by Lord Neuberger in Arnold v. Britton [2015] UKSC 36 ‘subjective evidence of any party’s intentions’ is to be disregarded [15].
(iii) The factual context or matrix in which a contract was concluded is relevant, but only if it shows the genesis of a transaction or that a relevant fact was known to the parties: Prenn v Simmonds [1971] 1 WLR 1381 per Lord Wilberforce: ‘evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the ‘genesis’ and objectively the ‘aim’ of the transaction’, affirmed by Lord Hoffman Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38: ‘The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it.'[42].”

She directed herself as follows at paras [85] and [86]::

“[85] In brief, the evidence relied on to show one or other or both parties’ intentions as to, or subjective understanding of, the meaning of a contract or part of it is inadmissible
[86] Pre-contractual negotiation materials may be relied on to show the overall aim of a transaction or its genesis. They may also be relied on to establish a relevant background fact known to both parties, but not to establish the specific meaning of provisions in the contract.”

Applying those principles, she excluded from evidence passages which went only to the subjective undertaking of a party as to the meaning of disputed contractual provisions.

Communications between parties to a dispute containing admissions or statements made “without prejudice” to their legal positions cannot be admitted as evidence in civil proceedings.  It is not an absolute rule and there are exceptions  There was no dispute that Mr Lamd’s witness statement referred to and exhibited “without prejudice” communications but the defendants tried to rely on the following exceptions which the deputy judge summarized at para [89] of her judgment:

“(i) The Claimants were using the without prejudice rule to cloak ‘unambiguous impropriety’ as discussed in the judgment of Robert Walker LJ in Unilever Plc v Proctor & Gamble Co [2000] 1 WLR 2436 (Unilever);
(ii) by putting the Settlement Agreement in issue the Claimants had waived the protection of the rule for surrounding documents, relying on Muller v Linsley and Mortimer [1994] EWCA Civ 39 (Muller); and
(iii) some or all of the material fell within the exception in Oceanbulk Shipping SA v TMT Ltd [2010] UKSC 44 (Oceanbulk), described by Lord Clarke as the ‘interpretation exception’ [46].”

The learned deputy judge considered each of these exceptions in turn.

She summarized the scope of the “unambiguous propriety” exception at para [102]:

• “Owing to the public policy rationale which underpins the without prejudice rule and the context in which it operates – often involving those who are not legally qualified and who are speaking and writing in situations of considerable tension – the rule requires broad protection for statements made when seeking to settle a dispute and narrow application of any exceptions.
• Inconsistencies between materials covered by the without prejudice rule and those which are not are insufficient to remove the protection of the rule. Even the possibility of perjury does not suffice. It is necessary that the without prejudice rule is being used to cloak wholly improper conduct (for example, the making of unambiguously improper threats, such as to commence criminal proceedings and seeking to conceal that fact from the court).
• Conduct or statements which do not go beyond the bounds of what is to be expected in negotiation are not within the scope of the exception.”

Ms Treacy directed herself that

“documents within the scope of the without prejudice rule and comments on those documents in evidence will fall within the waiver exception only if the Claimants have deployed without prejudice material in their pleadings or evidence to advance their case on the merits”

at para [108].

Ms Treacy referred to para [45] of Mr Justice Roth’s judgment in Berkeley Square Holdings Ltd and others v Lancer Property Asset Management Ltd and others [2020] EWHC 1015 (Ch) in which he said:

“In Oceanbulk Shipping, the Supreme Court accepted as correct the parties’ recognition that another exception was rectification.”

She also referred to para [46] of Mr Justice Roth’s judgment:

She summarized that exception at [114]:

• “there is a further, principled exception which goes beyond rectification;
• it applies when without prejudice materials would, in the absence of the without prejudice rule, be admissible to assist in construing a contract;
• given the without prejudice context, material will fall within the exception only when it clearly satisfies the criteria for admissibility of precontractual materials;
• the material must be evidence of facts within the common knowledge of the parties forming part of the factual matrix relevant to construction.”

Ms Treacy said at [115]:

• “As the Defendants seek to rely on the exceptions to the without prejudice rule, it is for them to establish that the material is within any exception; and
• The rationale which underpins the without prejudice rule means that exceptions must be narrowly applied, but with regard to the requirements of justice.”

As for the waiver exception, Ms Treacy referred to her summary in para [108]   The defendants’ submissions fell outside the principles that she had identified and they had produced no authority for them;

With regard to the Oceanbulk exception, the deputy judge reviewed the without prejudice material,  She found it broadly relevant to the context surrounding the conclusion of a settlement agreement but it was not necessary to rely on those materials to establish the existence of the agreement or to interpret it.  Nor was reference to it necessary to resolve any other issue.  In her judgment, the materials fell outside the exception.

Interim Applications in IPEC

At para [21] of her judgment, Ms Treacy said that complex interim hearings should be rare in IPEC.  While the overriding objective and CPR 1.2-1.4 apply to all litigation they have particular force in a court with the stated purpose of providing access to justice for those who might otherwise be deterred from litigating for costs reasons.  She added ar [24] that both the IPEC costs benefit test and the overriding objective oblige parties to have regard to the implications of all the steps they take for costs and for the allocation of court resources.  Finally, she observed:

“[25] All procedural steps should be approached in the same way. So, for example, interim applications should be made only where they are likely to satisfy the cost benefit test and the court will have that test firmly in mind when dealing with applications. When an application is necessary, it should be focussed on issues that will make a difference at trial. While acknowledging the adversarial nature of litigation, parties should seek to resolve the matters which are the subject of an application as far as possible before the Court becomes involved. Where points are not pursued, this should be made clear as soon as possible to ensure that preparation time (and, in the case of the judge, scarce pre-reading time) can be devoted to matters that require resolution. There is no merit, and little point, in pursuing steps which will ultimately be irrelevant at trial, in failing to engage with sensible proposals from the other party, or in making points which will not have any meaningful impact on the outcome of the litigation.
[26] To spend disproportionate time dealing with marginal points or to fail to engage meaningfully with issues raised by the other party before an application is issued will increase complexity for the Court, imposing additional demands on limited court resources and raising costs for both parties in a way which is incompatible with litigating in a jurisdiction which is intended to be streamlined, speedy and available to those with limited means. While the cost capping regime may mean that some of the adverse costs consequences of litigating may be mitigated, this provides protection only against adverse costs orders, it does not assist with the costs that may need to be incurred in dealing with unnecessary points and which may not be recoverable, even by a winning party, much less the unsuccessful litigant.”

The deputy judge stated that this case is listed for a 3-day trial before Judge Hacon in June exceeding the normal 2-day limit.   She reserved the costs of this application in which both parties could claim some success to the trial judge. Despite the judge’s admonitions against interim applications in IPEC the determination of the admissibility of without prejudice material probably necessitated this hearing.  <s Treacy’s review of three of the exceptions is very helpful,

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