Aqua Global Solutions Ltd v Fiserv (Europe) Ltd

This judgment concerns two applications. The first is the application issued by the Claimant on 30 September 2015 by which the Claimant seeks an order pursuant to CPR 31.14 and 31.15 and/or 31.12 for inspection of the document referred to in paragraph 15 of the Defence, namely an unredacted copy of the agreement between the Defendant and Tesco Personal Finance Limited (“the Tesco Licence Agreement”). The second application was issued by the Defendant on 22 April 2016 by which largely uncontroversial orders were requested to ensure that the hearing of the Claimant’s application could take place without confidentiality in the Tesco Licence Agreement being put at risk.

The Claimant is the proprietor of a modular software product which is described in the Particulars of Claim. It suffices for the purposes of this judgment to describe it simply as the “Claimant’s software”. In 2004 the Claimant’s holding company and the Defendant’s holding company entered into a co-operative marketing agreement (“the CMA”). The purpose of the CMA in its first iteration was to promote sales of their respective products for their mutual benefit.

The Claimant’s case, in broad terms, is that a contract was entered into between the Claimant and the Defendant in 2009 which was entirely separate from the CMA. The purpose of the contract was to enable the Defendant, as the Claimant’s licensee, to supply the Claimant’s software to Tesco Personal Finance Plc as part of a larger software supply and support project. The Claimant asserts that the terms upon which the Defendant supplied the Claimant’s software to Tesco breaches the terms of the contract between the Claimant and the Defendant because the contract specified monthly messaging volumes in the range between 50,001 and 100,000, whereas the use by Tesco of the software far exceeds these permitted volumes. Thus, it is said, the Defendant has infringed the Claimant’s copyright.

A further aspect of the contract alleged by the Claimant is that the Claimant would provide two types of maintenance services to the Defendant: “Core Maintenance” would be supplied for a reasonable fee and “Development Maintenance” for a 20% licence fee. The Claimant has supplied maintenance services indirectly to Tesco as the Defendant’s sub-contractor.

The Claimant seeks by way of relief (i) a declaration concerning the terms of the software licence granted by the Claimant to the Defendant, (ii) an injunction restraining the Defendant from authorising Tesco’s use otherwise than in accordance with that declaration, (iii) payment of £840,319.61 in respect of Development Maintenance” and (iv) a reasonable fee for Core Maintenance.

The Defendant’s case is that the relationship between the parties as regards the Tesco project was governed by the CMA, that the terms upon which the Tesco Licence Agreement was made complies with the CMA and there has been no infringement of the Claimant’s copyright.

On 4 March 2016 I heard an application made by the Claimant under CPR Part 24 for summary judgment in respect of aspects of the Defence. I refer to the judgment given on that occasion. Subsequently, the Defendant amended its Defence and cured the deficiencies which were highlighted by the Claimant’s application. Paragraphs 15 and 16 of the Defence are in the following terms:

“15.

On 14 July 2009, the Defendant entered into a written agreement with Tesco Personal Finance Limited (“Tesco”) licensing Tesco’s use of various software, a minor component of which was the Software (the “Tesco Licence Agreement”).

16.

The Defendant was entitled to grant such licence pursuant to rights under the CMA which had been assigned to it by FSI, the Tesco project being treated by the parties and their affiliates … as a ‘resell event’ for the purposes of Amendment 1 to the [CMA].”

Although the dispute between the parties concerns the terms upon which the Claimant licensed use of its software to the Defendant, the terms of the Tesco Licence Agreement are of some significance in the claim and the Tesco Licence Agreement is referred to, not just in paragraph 15 of the Defence, but on a number of other occasions. In summary:

This last point is picked up in an agreed List of Issues in the following way:

“7.

… Was the Defendant entitled to license the software to Tesco on the terms of the Tesco Licence Agreement? In particular, if the Defendant is correct that the parties’ relationship is governed by the CMA:

(a)

Did the Defendant obtain the Claimant’s written consent to a sub-licence on the terms of the Tesco Licence Agreement?

(b)

Are the terms of the Tesco Licence Agreement no less restrictive than those contained in Schedule B-3 of Amendment 1?”

On 5 August 2015 the Claimant’s solicitors requested a copy of the Tesco Licence Agreement pursuant to CPR 31.14, relying upon the various references to the agreement in the Defence. On 12 August 2015 the Defendant’s solicitors supplied a redacted copy of the Tesco Licence Agreement, saying:

“As explained in paragraph 15 of the Defence … the Tesco Licence Agreement governs the whole of the Defendant’s licensing arrangements with Tesco Personal Finance, a minor part of which relates to the Aqua Global Solutions. Accordingly, the majority of the Tesco Licence Agreement is irrelevant to the issues in dispute between the parties.

Moreover, the Tesco Licence Agreement contains confidential and commercially sensitive information. In accordance with the terms of the agreement, the Defendant owes a duty of confidentiality to Tesco Personal Finance.

The agreement has therefore been redacted to preserve confidentiality in those parts which are commercially sensitive and irrelevant to the present dispute.”

The Tesco Licence Agreement runs to some 71 pages. The version supplied to the Claimant was very heavily redacted. The only elements of the agreement which remained visible were the identity of the contracting parties, two out of three recitals, a small number of definitions, part of Clause 2, which is the licence to use software, and part of Exhibit 1, which describes the software components supplied to Tesco. At most, in aggregate, about five or six pages out of a total of 71 were supplied by the Defendant.

The Claimant’s application was listed for hearing on 21 October 2015. Prior to the hearing the parties reached an agreement which was embodied in a consent order approved by Deputy Master Cousins on 21 October 2015. The effect of that order (and the agreement which underlies it) is in dispute between the parties. It created a confidentiality ring, naming in Schedule A two members of the Claimant’s solicitors and Counsel as being the three individuals to whom the Tesco Licence Agreement in unredacted form could be supplied. Those individuals provided undertakings not to disclose any information contained in the agreement to any other party and to ensure that the document remained confidential. The order then made the following provisions:

“3.

The hearing of the application be adjourned to the first convenient date after 5 November 2015 (the “adjourned hearing”).

4.

The individual set out at paragraph 1 of Schedule A (Mr Morallee) shall, by 4.30 pm on 27 October 2015, write to the Defendant stating whether the Claimant intends to proceed with the application, and if so, setting out:

4.1

those individuals within the Claimant, if any, to whom he considers the Document [the Tesco Licence Agreement], or parts of it, should be disclosed;

4.2

the parts of the Document he considers should be disclosed to those individuals;

4.3

the grounds to be relied upon at the adjourned hearing in support of the case that such further disclosure is necessary and proportionate; and

4.4

any other ground which the Claimant intends to rely upon at the adjourned hearing.”

It was later agreed that Mr Chapman QC, who appeared for the Claimant, another member of the Bar and another member of the Claimant’s solicitors, Brandsmiths, would be admitted to the confidentiality ring.

The issue between the parties arising from that order is whether the terms agreed between the parties were intended to compromise the Claimant’s application so as to preclude the Claimant from proceeding any further with the application in the terms in which it was made. It is notable, to my mind, that paragraph 3 of the order contained a direction that the application would be adjourned to a future hearing.

On 27 October 2015 Brandsmiths wrote to Bryan Cave who act for the Defendant. At paragraph 2 of the letter they stated, referring to paragraph 4 of the order, that the Claimant intended to proceed with the application and to seek an order that the Tesco Licence Agreement be disclosed to, amongst others, Mr Mark Fernando, Mr Nick Fernando (both directors of the Claimant) and Mr Martin Williams, who acts as in-house legal adviser (together “the Aqua Individuals”). The letter went on to suggest that certain specified paragraphs of the Tesco Licence Agreement were relevant to the issues in dispute and should be supplied to the Aqua individuals. The letter concludes by stating that nothing in it should be taken as a waiver of the Claimant’s rights and remedies, and it reserved the Claimant’s right to refer to the letter in relation to the costs of the disclosure application.

There followed numerous exchanges of correspondence between the solicitors and by 27 November 2015 terms were all but agreed. By an email dated 27 November 2015 Ben Polak of Brandsmiths sent what he described as a final version of the consent order to Bryan Cave. The consent order made provision for specific clauses in the Tesco Licence Agreement to be supplied to the Aqua Individuals and the application was to be compromised on the basis that the Defendant would pay the Claimant’s costs agreed at £4,000. Later that day, following a conversation between the solicitors, Mr Polak sent a further email to Bryan Cave suggesting an amendment to paragraph 6 of Schedule D to the draft consent order.

The Defendant then made an application on 30 November 2015 in the Applications Court seeking an order permitting it to continue to supply services under the Tesco Licence Agreement. It appears that the application took the Claimant by surprise. In any event, the Claimant took the view that because the application was based upon the terms of the Tesco Licence Agreement, it was no longer appropriate for there to be partial disclosure of the document on the terms proposed and by letter dated 30 November 2015 Brandsmiths sought confirmation from Bryan Cave that it was entitled to provide a complete and unredacted copy of the Tesco Licence Agreement to the Claimant’s entire legal team as well as the Aqua Individuals. Further negotiations concerning the Claimant’s application were pursued, but they foundered in February 2016 when the Defendant proposed that the costs of the application should be costs in the case. The application was thereafter listed for hearing before me.

The Claimant reverted to seeking an order in unrestricted terms that the Defendant should supply a full copy of the Tesco Licence Agreement. Shortly before the hearing, the Claimant proposed that the agreement should be supplied subject to confidentiality terms with a confidentiality ring including the Aqua Individuals as well as the Claimant’s legal advisers. That was the basis upon which the hearing proceeded before me.

CPR 31.14 is expressed in unequivocal language and provides that:

“(1)

A party may inspect a document mentioned in–

(a)

a statement of case;”

Mr Chapman QC relies on observations made by Rix LJ in Rubin v Expandable Ltd & ors [2008] 1 WLR 1099. The case concerned the meaning of “mentioned in” and whether it sufficed for there to be a direct allusion to a document. However, in the course of giving the leading judgment, Rix LJ made general observations about the way in which CPR 31.14 was intended to operate and said [24]:

“ … I do not see why there should be need for a strict approach to a request for inspection of a specific document mentioned in one of the qualifying documents. The general ethos of the CPR is for a more cards on the table approach to litigation. If a party thinks it worthwhile to mention a document in his pleadings, witness statements or affidavits, I do not see why, subject as I say to the question of privilege, the court should put difficulties in the way of inspection. I look upon the mention of a document in pleadings etc. as a form of disclosure. The document in question has not been disclosed by list, or at any rate not yet, but it has been disclosed by mention in what, for the purposes of litigation, is another important and formal category of documents. If so, then the party deploying that document by its mention should in principle be prepared to be required to permit its inspection, and the other party should be entitled to its inspection. What in such circumstances is the virtue of coyness?”

Mr Burgess, who appeared for the Defendant, relies on the first instance decision of Morgan J in Danisco A/S v Novozymes A/S (No. 2) [2012] FSR 22. This was a claim in the Patents Court in which the claimant applied for the revocation of a patent. The regime for disclosure in Part 31 is modified in patents claims by paragraph 6 of Practice Direction 63. There had already been protracted disclosure, which had taken place in the claim prior to the hearing of the application made by the claimant for disclosure of a regulatory dossier which had been referred to in a witness statement served on behalf of the defendant. The dossier was said to be 1,800 pages long and to include a 36-page scientific summary which had already been disclosed in redacted form.

In the course of giving his judgment, the judge commented that although the provisions of CPR 31.14 had been referred to in argument, the argument was relatively brief and the judge accepted that the point had not been fully argued. He then made a number of obiter remarks about the court’s power to decline to grant inspection of a document under CPR 31.14. The judge was referred to the pre CPR decision in Church of Scientology v DHSS [1999] 1 WLR 723, but was not referred to Rubin v Expandable Ltd or any of the other post CPR decisions referred to in the judgment of Rix LJ in that case. Interestingly, the Church of Scientology case was not one cited to the Court of Appeal in Rubin v Expandable Ltd. In any event, the judge observed about CPR 31.14 [72]:

“Even where the rule appears to give an unqualified entitlement to inspection, it appears to be within the inherent jurisdiction of the court not only to restrict or control that inspection but to prevent it, in its entirety, on grounds that the inspection is not necessary for the fair disposal of the action.”

This formulation was derived from the judgment of Templeman LJ in Church of Scientology.

Some caution is needed before applying the judge’s remarks in Danisco v Novozymes (No. 2) to the circumstances in this case because:

For all these reasons, it is possible readily to distinguish the decision in Danisco v Novozymes (No. 2) from the circumstances in this case. I would in any event respectfully suggest that the formulation of the court’s power to decline to make an order under CPR 31.14 does not provide the right emphasis. It is, I think, not in doubt that although the words of CPR 31.14 are unqualified, there is power to decline to make an order. Examples include where:

It seems to me, however, that where a document is mentioned in one of the qualifying documents in CPR 31.14, the onus will be on the respondent to the application to justify why an order should not be made. Furthermore, it does not necessarily follow that the same considerations will apply to a document mentioned in a statement of case as to a document mentioned in a witness statement. Where a document is not just mentioned in a statement of case but is directly relevant to some of the issues in the claim, the grounds for opposing an order for the document being produced need to be particularly cogent because the document is obviously not peripheral to the claim.

There are no fewer than eight witness statements which have been produced in relation to the two applications. In part that is a result of the passage of time between the Claimant’s application being issued and the hearing before me. It is, however, unnecessary to refer to the evidence in any detail.

It is not in doubt that the Tesco Licence Agreement contains information which is commercially sensitive. The court has been provided with a complete unredacted version of the agreement and there has been an opportunity to review it. Tesco has expressed some anxiety about the entire agreement being disclosed, even within a confidentiality ring, and clearly it is important to take into account Tesco’s interests as a third party.

The evidence is more controversial concerning whether or not the Claimant and Defendant are direct competitors. The Defendant points to an exchange of emails between Mr Mark Fernando of the Claimant and Mr Michael Mustard, the legal director of Tesco Bank, on 29 September, 6 October and 8 October 2015. On 29 September 2015 Mr Fernando, having asked for a copy of the Tesco Licence Agreement, suggested that a meeting between the Claimant and Tesco would be appropriate “… to discuss a possible way forward without Fiserv”. Mr Mustard responded, saying that due to confidentiality provisions Tesco was unable to provide an unredacted copy and said that Fiserv’s preference was to continue settlement discussions direct with the Claimant. Mr Fernando then said on 8 October 2015:

“The invitation then is for you to agree going forward to pay us for maintenance and support of the product directly, so that the TPF installation is properly supported and maintained. Failing this we will give notice to Fiserv and you will not be maintained. Whilst Fiserv may have an obligation to you to provide support, they do not have access to the code and we do not believe in any event that they have the internal expertise to maintain it or to deal with any priority support issue. Regardless of the contract you have for support with Fiserv, given this, I believe from a corporate governance and regulatory perspective this would pose a problem for you. I am trying to pre-empt this problem.”

The Defendant also points to a letter from Brandsmiths to Mr Mustard dated 5 November 2015 which in effect amounts to a ‘cease and desist’ request in relation to the use of the Claimant’s software and a threat to commence proceedings in the absence of agreement. Plainly, the Claimant has exerted commercial pressure on Tesco. However, I am not satisfied there is clear evidence that the Claimant has done so in breach of any obligations of confidentiality.

The Claimant relies upon its existing knowledge which it has acquired by virtue of lawful dealings with Tesco. It is said that the Claimant has been able to piece together some of the provisions of the Tesco Licence Agreement which have not been disclosed and points to the absurdity of the court preventing inspection when, albeit informally, a good deal of information is already in the Claimant’s hands.

The hearing of the applications was adjourned part heard and during the period of the adjournment I drew the attention of the parties to paragraphs 10-17 to 10-22 in Documentary Evidence by Charles Hollander QC (12^th ed). These paragraphs deal with the principles applicable to redaction. Referring to observations by Hoffmann LJ in GE Capital v Bankers Trust [1995] 1 WLR 172 CA, Mr Burgess submitted that the Defendant is entitled to redact parts of the agreement which it considers to be irrelevant. Mr Hollander QC suggests, however, at paragraph 10-19 that:

“Where documents are irrelevant and not confidential, then it is simpler to disclose them, with the protection of the collateral undertaking. But where a document is disclosable, and there are parts of the document that are confidential, the possibility of blanking out arises.

There is no difficulty where the document contains two or more distinct subject matters, only one of which is relevant. The classic example is board minutes. There is no reason why the other side should see confidential board minutes where the minutes relate to matters nothing to do with the litigation. Another example might be where the document lists names and addresses of individuals whose identity is irrelevant but sensitive data. Where the document can be easily divided up between the relevant and irrelevant, because it deals with separate subject matters, there should be no problem either.

Blanking out is permissible even when the documents do not deal with a different subject matter. Thus, blanking out may occur of names where the identity of the individuals referred to a document is confidential and irrelevant.…

A distinction should be drawn between the blanking out of names and the blanking out of a separate part of a document. Where names are blanked out, it will usually be obvious to the other party what has occurred and why, and it will be open to the other party to make an application to court in case of dispute. But where part of a document is blanked out, it will not be apparent to the other party what has been blanked out and the other party may not have the basis of a challenge. So it is the solicitor’s obligation not to blank out in such circumstances unless satisfied that there is an entitlement to redact.”

Mr Burgess’s principal submission is that in the light of the order approved by Deputy Master Cousins, the Claimant no longer has an entitlement to proceed with this application. I do not consider he is correct. It is important to distinguish what the parties hoped would be the outcome following from the adjournment, namely a compromise agreement with parts of the Tesco Licence Agreement deemed to be relevant to this claim being disclosed, from the application being compromised by the agreement embodied in the order. The latter outcome would be a surprising one which would require clear and unequivocal language which is not present. To my mind the arrangement was merely a staging post towards a compromise and the clearest signal of this is the provision for “the hearing of the application” to be adjourned to a later date. This strongly suggests that the application was left intact by the arrangement albeit that it was hoped it would not need to be argued in full.

Mr Burgess goes on to point out that the Claimant considered which clauses of the Tesco Licence Agreement were relevant and was willing to compromise the application based upon those clauses, and those clauses alone, being disclosed to the Aqua Individuals. He submits that the court can infer that the balance of the Tesco Licence Agreement is irrelevant and either the court should exercise its discretion not to order disclosure of the balance of the document or, to similar effect, the Defendant should be entitled to blank out those irrelevant parts of the document.

Mr Chapman QC points to the importance of the Tesco Licence Agreement to the resolution of this claim. It is relied upon by both parties and has been referred to in the Defence for good reason. He submits there are three particular aspects of the claim which will involve consideration of the Tesco Licence Agreement, namely:

As I have already indicated, the circumstances of this case are very different from those which were considered by Morgan J in Danisco v Novozymes (No. 2). Here, the court is dealing with a single document (albeit one running to 71 pages) which is directly referred to by the Defendant in the Defence and which is directly relevant to issues which will have to be resolved at the trial of this claim. The starting point, therefore, is that the Claimant has an entitlement to inspect the document unless the Defendant can demonstrate that there are good grounds for limiting the right of inspection on the grounds of confidentiality or irrelevance. I will deal with those two points in turn.

There is ample evidence to support the proposition that the document contains commercially sensitive information and it is understandable that Tesco does not wish the document to be revealed any further than is absolutely necessary. It is, however, common ground between the parties that it is appropriate to make an order under CPR 31.22(2) and to prevent non-party access to the document on the court file without an order of the court. It was possible to conduct the hearing before me without the need for the hearing to take place in private by the exercise of a degree of care by Counsel when referring to the document, so that sections from it which are agreed to be confidential were not read out loud. I am satisfied that Tesco’s interests can be adequately protected in the course of this litigation so far as disclosure into the public domain of confidential information is concerned.

The wider issue of confidentiality concerns whether the Tesco Licence Agreement in entirety should, subject to the terms of a confidentiality ring, be disclosed to the Aqua Individuals. (In the case of Mr Williams, he already has quite extensive knowledge of the agreement). It is fundamentally unsatisfactory for the legal advisers in a claim to be in possession of information about which they are unable to obtain instructions from their client. And here the Tesco Licence Agreement, even if not at the heart of this claim, is of considerable relevance to it. Furthermore, in relation to what may be a reasonable fee, the agreement would need to be disclosed to the Claimant’s expert.

The fundamental issue, to my mind, is to ensure that the interests of the parties are balanced so as to ensure that the Claimant is able to conduct this litigation without undue restrictions whilst preventing confidential information being misused or leaking. Although I accept that the Claimant is a potential competitor with the Defendant and has shown an interest in entering into a commercial relationship directly with Tesco, I do not think the balance between the parties can properly be maintained without disclosure of the agreement to the Aqua individuals, but this must be subject to confidentiality provisions in the form of undertakings provided to them and an express restriction preventing them, and the Claimant, from using information obtained from inspection of the document.

Having been taken through the Tesco Licence Agreement by both Counsel, it is plain that within the lengthy document there are clauses and schedules with varying degrees of relevance to the claim. It is accepted by both parties that the parts of the agreement listed in Brandsmiths’ letter dated 27 October 2015 are relevant to the issues in the claim. There are, however, elements in the document which are marginal. I do not consider, however, that redaction of parts of the document is either necessary or desirable. It is axiomatic that the meaning of a document must be derived from a consideration of the whole document. This is not a case which is analogous to the example given by Mr Hollander QC of board minutes where it is obvious that there are different subject matters. I am satisfied that the appropriate course of action here is to make an order that the entire Tesco Licence Agreement is disclosed, subject to the terms of a confidentiality ring, to the Claimant’s legal advisers and the Aqua individuals. In due course it seems almost certain that the Claimant’s expert will need to be admitted to the confidentiality ring. I have not given consideration to the terms of the order which is sought or the undertakings which are to be provided and on the handing down of this judgment any issues which arise can be dealt with.

I ruled at the outset of the hearing that it should not take place in private. The hearing was conducted in a manner which preserved the confidentiality of the unredacted Tesco Licence Agreement. As I have indicated, I will make an order in the terms of CPR 31.22(2) but not in the wider terms of the application. I will make an order under CPR 5.4C(2) in the terms sought by the Defendant.