Aurora Cavallari & Ors v Mercedes-Benz Group AG & Ors

This judgment is given in the context of the litigation commonly referred to as “Dieselgate” – that is claims brought by consumers via a range of Group Litigation orders (“GLOs”) claiming that advertised claims by car manufacturers about nitrogen oxide (“NOx”) emissions performance of certain diesel cars were inaccurate, being based on the performance of illegal “defeat devices” in tests done by regulators.

The Mercedes GLO is the most advanced of those before the Court, and is acting as the main Lead GLO. Following case management hearings last year before Fraser J (July), Constable J (November) and the PKBD, myself, Constable J and Senior Master Cook (December) I have heard a further CMC covering both Mercedes specific and Pan-NOx issues.

One of the matters considered was the Mercedes Claimants’ application dated 5 January 2023 seeking to curtail what it says are excessively broad claims to confidentiality made by the Mercedes Defendants. The Claimants seek an order that certain identified documents which the Defendants have designated as requiring the protection of an existing confidentiality ring dated 13 February 2023 (“the CRO”) bede-designatedand accordingly removed from the ring. The application is accordingly referred to as “the De-Designation Application”.

In bare summary, the background to the application is as follows. The German type approval authority (the “KBA”) has issued a number of Recall Decisions in relation to certain Mercedes Vehicles. Since the outset of the litigation the Claimants have sought from the Defendants copies of the Recall Decisions, and various information and disclosure relating to those appeals (together, the “Recall Documents”). Their first such request was made in their consolidated letter before action dated 28 January 2021. The disclosure was resisted on the grounds inter alia that the material sought was confidential.

The Claimants therefore pursued an application for early disclosure in respect of this material as part of their application for a GLO. Ultimately there was agreement to provide some of the material sought, subject to a confidentiality club. That club was agreed to by the Claimants without prejudice to their ability to challenge assertions of confidentiality, and a structure for “de-designation” was incorporated into the CRO.

The Defendants indicated that they would disclose a number of categories of document into the CRO. Those were disclosed as being confidential in their entirety. The Defendants were ordered to disclose other documents by the Order of Constable J dated 18 December 2023. Again those were disclosed subject to a blanket assertion of confidentiality. The Claimants took issue with the claims to confidentiality and issued this application.

In the draft order attached to the Application, the Claimants seek an order that each of the following categories of document be designated as not confidential pursuant to paragraph 5.5.3 of the CRO.

Following a review, the Defendants indicated before the hearing that they would not pursue a confidential designation for about half of the documents in issue. That left the following documents in dispute: (i) sevenx Recall Decisions, (ii) four KBA Appeal Decisions, and (iii) 495 Annexes and Enclosures (the “Disputed Documents”).

The provisions of the CRO as regards the designation of a document or information as confidential are as follows:

“5.1

A Party providing a document/information in connection with the Proceedings may designate that the document/information is: (i) Confidential Information; or (ii) not confidential.

5.2.

Designation of a document/information as Confidential Information must be made in writing to the Party or Parties receiving the document/information. When making the designation, each document containing information in respect of which confidential treatment is sought should be marked up as follows: (i) the information itself must be highlighted in yellow or some other prominent colour (that does not obscure the information underneath it); and (ii) each page of the document must include the header “CONTAINS CONFIDENTIAL INFORMATION”.”

The De-designation Application is made pursuant to paragraph 5.5 of the CRO which reads as follows:

“5.5

A Party receiving documents/information in the Proceedings may request that the disclosing Party or Parties amend the designation of a document/information that it has or they have provided (including amendment to a designation of not confidential) as follows:

5.5.1.

The requesting Party shall provide a written request to the disclosing Party or Parties (copied to the other Parties) specifying the following:

(a)

the relevant document/information concerned;

(b)

the designation the requesting Party believes is appropriate; and

(c)

why it is reasonable and necessary for the designation of the document/information to be amended.

5.5.2.

A disclosing Party must respond within 10 working days of having received the written request referred to in paragraph 5.5.1 confirming whether they consent or object to the proposed amendment, such consent not to be unreasonably withheld.

5.5.3.

Should the consent referred to in paragraph 5.5.2 not be obtained from each disclosing Party, the requesting Party may apply to the Court for an order that the document/information should be designated as either: (i) Confidential Information; or (ii) not confidential (as the requesting Party deems appropriate), provided that prior written notice is given of that application to the other Parties.”

The Defendants’ position was that the notice requirements under paragraph 5.5.3 of the CRO have not been met and that the application should be dismissed; although that argument was not strongly pressed orally.

As noted above, paragraph 5.5.2 of the CRO permitted the Defendants ten working days to respond to the written request made pursuant to paragraph 5.5.1. The De-designation Request (which the Defendants accept meets the requirements of paragraph 5.5.1) was made on 20 December 2023 and the De-designation Application was made only 8 working days later on 5 January 2024.

The Defendants contended that it was not appropriate for the Claimants to seek to blame the Court’s timetable (in particular the requirement for applications to be determined at this second Progress CMC to be issued by 5 January 2024) for the very limited notice that they gave, given that:

It was therefore submitted that the Claimants could and should have made the De-designation Request much earlier than they did and the proper course was for the Defendants to confirm the de-designation of the documents they accept should not be treated as confidential, but for the application to be otherwise dismissed. To do otherwise, it was submitted, would be to undercut the agreed requirements of paragraph 5.5.3 of the CRO, and to encourage premature applications for de-designation.

There are good points here, and were it not for the wider considerations of the litigation I might well have been minded to give them more weight. As I made clear at the start of the CMC hearing, it is imperative that the parties work better together and also work with more of an eye to the requirements of the timetable, which will be demanding for all involved.

However, in this case there has been a degree of uncertainty as regards the forwards progress of the case in 2023, not least in the light of the applications by other litigants for Pan-NOx directions. That has been to some extent resolved by the hearings of Michaelmas 2023. That uncertainty and the constraints of the timetable as regards the January hearing make the position as regards a technically premature application more understandable in this instance.

Further the Defendants have not been prejudiced by the short notice. The notice was only slightly short. By the time of the hearing the Defendants had had an opportunity to review and to consider de-designation for longer than the period provided for in the CRO. They had indeed provided an answer following review. On that basis and demonstrating the lack of prejudice, the points were fully argued out.

Still further there is a significant interest in moving this litigation on as efficiently as possible, and this dispute has a much wider relevance across the Pan-NOx litigation.

In those circumstances and against the background of the tight timetable set for this litigation, I am not minded to penalise the Claimants on this occasion for a premature application. However, for the future the timeousness of applications must be kept under careful review and there should be no reliance on this charitable approach being repeated.

I will commence with a fairly thorough review of the relevant law. This is essential for two reasons. The first is that the approach of the Defendants thus far indicates that these points might not be entirely in the mind of those who were responsible for the original approach to designation and a briefing or refresher is thus desirable.

The second is that other Pan-NOx defendants will have to deal with similar documents. It may therefore short circuit disputes in those cases if those involved have a “ready reckoner”.

The starting point as a matter of law is the principle of open justice. It is, as the Court of Appeal recently remarked in J.C. Bamford Excavators Ltd v Manitou UK Ltd [2023] EWCA Civ 840 at [71] a fundamental principle of English Law. The reasoning of the House of Lords in Scott v Scott [1913] AC 417 remains as sound today as it was then; as does the quote from Jeremy Bentham which they cite:

“Publicity is the very soul of justice. It is the keenest spur to exertion and the surest of all guards against improbity. It keeps the judge himself while trying under trial.”

Open justice is also, as noted in Dring v Cape Intermediate Holdings Ltd [2019] UKSC 38, [2020] AC 629 (per Lady Hale at [43]), vital to enable the public to understand how the justice system works, to understand the issues in cases and how, based on those issues, decisions are reached by the courts.

It follows from this that each party should generally have unrestricted access to the other’s disclosure (see for example Hamblen J in Libyan Investment Authority v Société Générale SA [2015] EWHC 550 (QB) (“LIA”) at [20]). All parties have the benefit of the protection offered by the collateral undertaking at r 31.22 CPR regarding the use of documents disclosed in the course of proceedings. In the vast majority of cases and for the vast majority of documents, the undertaking will be sufficient protection.

Confidentiality orders offering enhanced protection beyond the collateral undertaking are therefore “the exception rather than the rule” (per Christopher Clarke J in Porton Capital Technology Funds v 3M UK Holdings Ltd [2010] EWHC 114 (Comm) at [43]).

A confidentiality ring involves a departure from the open justice principle which must be justified. As Hamblen J made clear in LIA at [21] “It is for the person seeking the imposition of a confidentiality club to justify any departure from the norm” (see also Porton Capital at [43]). Any restriction should “go no further than is necessary” for the protection of the right in question (LIA at [21]-[22]). As Roth J explained in Infederation Limited v Google LLC & ors [2020] EWHC 657 (Ch) at [42]: “…the important points to emerge from the authorities are that: (i) such arrangements are exceptional; (ii) they must be limited to the narrowest extent possible; and (iii) they require careful scrutiny by the court to ensure that there is no resulting unfairness.”

With that scrutiny in mind, the burden lies on those seeking to displace the application of the open justice principle to produce clear and cogent evidence to explain why that departure is justified: the “real risk” of the right of inspection being used for a collateral purpose. It must be shown that “by nothing short of the exclusion of the public can justice be done” (Scott v Scott [1913] AC 417, per Viscount Haldane at page 438, and per Earl Loreburn at page 446). The question is not one of convenience, but of necessity (Al Rawi v Security Service [2011] UKSC 34; [2011] 3 WLR 388 at [11]).

The claim to confidentiality therefore needs to be focused with precision by reference to the precise contents of documents: it can often be suitably protected by the use of redaction and/or gisting as tools by which as much of a document or its relevant contents is put into open (see e.g. London Regional Transport v Mayor of London [2001] EWCA Civ 1491; [2003] EMLR 4 at [50]).

In short, a party who resists disclosure of documents otherwise falling within its disclosure obligations on the basis that the documents contain trade secrets is under a duty to consider, in relation to each piece of information within those documents, whether and to what extent that information is truly confidential. Confidential information may be excised or redacted, but there must be “as full a degree of disclosure as will be consistent with adequate protection of the secret” (per Aldous J in Roussel UCLAF v ICI Ltd [1990] RPC 45 at [49]). The court will not readily accept that the entire contents of a given document or a whole class of documents are confidential such that no part of it can be inspected by the other party.

The terms of any confidentiality order, if appropriate, will be decided in each case “having regard to the particular circumstances of the case, bearing in mind that, if a case for disclosure is made out, the applicant should have as full a degree of appropriate disclosure as will be consistent with adequate protection of any trade secret of the respondent” (per Buckley LJ in Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 at [358]).

The considerations relevant to the imposition and terms of a confidentiality club were summarised by Hamblen J in LIA at [34] (see also per Floyd LJ in Oneplus Technology v Mitsubishi [2020] EWCA Civ 1562 at [39]):

“The imposition of a confidentiality club and, if so, its terms, generally involves a balancing exercise. Factors relevant to the exercise of the court's discretion are likely to include:

(1)

The court's assessment of the degree and severity of the identified risk and the threat posed by the inclusion or exclusion of particular individuals within the confidentiality club — see, for example, InterDigital Technology Corporation v Nokia [2008] EWHC 969 at [18] and [19].

(2)

The inherent desirability of including at least one duly appointed representative of each party within a confidentiality club — see, for example, Warner-Lambert v Glaxo Laboratories [1975] RPC 354 at [359] to [361].

(3)

The importance of the confidential information to the issues in the case — see Roussel UCLAF v ICI at [54] and IPCom GmbH v HTC Europe [2013] EWHC 52 (Pat) at [20].

(4)

The nature of the confidential information and whether it needs to be considered by people with access to technical or expert knowledge — see IPCom GmbH v HTC Europe at [18].

(5)

Practical considerations, such as the degree of disruption that will be caused if only part of a legal team is entitled to review, discuss and act upon the confidential information — see Roussel UCLAF v ICI at [54] and InterDigital Technology Corporation v Nokia at [7].”

The court may order that confidential information be disclosed in its entirety to the other party subject to suitable undertakings as to confidentiality if required by the “nature of the proceeding and the nature of the allegation” (see e.g. Atari Inc v Philips Electronics and Associated Industries Ltd [1988] FSR 416, where Whitford J ordered confidential computer source code to be disclosed without limitation to the lawyers and internal expert of the party being sued for copyright infringement).

It must be kept in mind that although the parties may agree an “external eyes only” confidentiality ring, “[a]n arrangement under which an officer or employee of the receiving party gains no access at all to documents of importance at trial will be exceptionally rare, if indeed it can happen at all”, “restricting disclosure to external eyes only at any stage is exceptional”,and the“onus remains on the disclosing party throughout to justify [external eyes only] designation for the documents so designated” (per Floyd LJ in Oneplus Technology (Shenzhen) Co Ltd v Mitsubishi Electric Corp [2020] EWCA Civ 1562; [2021] FSR 13 at [39]).

One then proceeds to confidentiality itself. The question of whether, as a matter of English law, information is covered by a duty of confidentiality depends “not only on the nature of the information and the significance of the information for the [disclosing party], but also on the circumstances of the [receiving party]’s acquisition of the information”: see Phipps on Confidentiality(4^th ed.) at paragraph 3-016.

In this case, and others like it, the focus is likely to be on the first element – and indeed it is clear that what is primarily in play here is business confidentiality or “trade secrets”.

In Thomas Marshall Ltd v Guinle [1979] Ch. 227, Sir Robert Megarry VC summarised the necessary quality of confidence (as well as the practical difficulties in identifying it in the commercial context) as follows (at page 248B to G). That summary was expressed as a tentative one, but has been often adopted since:

“It is far from easy to state in general terms what is confidential information or a trade secret. …

four elements may be discerned which may be of some assistance in identifying confidential information or trade secrets which the court will protect. I speak of such information or secrets only in an industrial or trade setting. First, I think that the information must be information the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Second, I think the owner must believe that the information is confidential or secret, i.e., that it is not already in the public domain. It may be that some or all of his rivals already have the information: but as long as the owner believes it to be confidential I think he is entitled to try and protect it. Third, I think that the owner's belief under the two previous heads must be reasonable. Fourth, I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements may be entitled to protection as confidential information or trade secrets: but I think that any information which does satisfy them must be of a type which is entitled to protection.”

Although in McGill v The Sports and Entertainment Media Group Ltd [2014] EWHC 3000 (QB) at [148], HHJ Waksman QC (as he then was) suggested that “[o]ne way to describe the quality of confidence is to say it is information which is not generally available to others and which the possessor does not wish to be generally available ...” it is clear that the “subjective view of the owner [regarding confidentiality] cannot be decisive” (See Carnwath J’s comment in Lancashire Fires Ltd v S.A. Lyons & Co Ltd [1996] FSR 629 at [656]).

The editors of Phipps summarise the test in the following terms (at paragraph 4-005):

“There must be some value to the party claiming confidentiality (not necessarily commercial) in the information being treated as confidential:

(a)

The information must be such that a reasonable person in the position of the parties would regard it as confidential; and

(b)

Reasonableness, usage and practices in the relevant sector (for example, industrial or professional) are to be taken into account.”

Confidentiality is not set in stone for all eternity, however. The quality which gives rise to the confidentiality may be lost. One means whereby this may occur is where information “has entered what is usually called the public domain (which means no more than that the information in question is so generally accessible that, in all the circumstances, it cannot be regarded as confidential)” (Attorney-General v Guardian Newspapers (No 2) (“Spycatcher”) [1990] 1 AC 109 p. 282). However, a duty of confidentiality can apply despite some loss of secrecy e.g. if the information has only been disclosed to certain parties (Spycatcher at page 260, per Lord Keith).

Similarly, while no claim of confidentiality can be maintained in respect of information which can be readily obtained by inspecting an article which is publicly accessible, “relative confidentiality” can be claimed in respect of such information if it can only be obtained by a process of reverse engineering which takes time, effort and skill (per Arnold LJ in JCB at [44]). In relative confidentiality cases, what is protected is the value (in terms of money and time cost avoided) of the shortcut achieved by use of the confidential information. However, the success of such a claim will depend on precisely what is said to be confidential, whether that shortcut has any continued or current utility, and whether that specific information can readily be ascertained by inspecting the article in question: per Arnold J in Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 616 (Ch) at [222].

In addition, material which is commercially sensitive to the extent that it is confidential may cease to be confidential because the value of the information is lost by passage of time and progress. Phipps (at paragraph 4-041) indicates that:

“Trade secrets, too, may lose their confidentiality by other means than by entering the public domain. In Thomas Marshall Ltd v Guinle, Sir Robert Megarry VC suggested, inter alia, that, for information to constitute a trade secret, the party claiming confidentiality must reasonably believe that the release of the information would be injurious to him or of advantage to his rivals or others. A trade secret may cease to have that quality, for example, through changes in the confider’s business or through technological advances rendering the trade secret obsolescent.”

There is, at least in the EU context, a five-year rule of thumb which reflects this approach (Phipps at paragraph 4-042):

“However, the English courts have not gone so far as to adopt the rule of thumb employed in competition proceedings before the European Commission (in which applicants for leniency may be entitled to confidentiality).

In Evonik Degussa GmbH v European Commission, the European Court of Justice suggested that: ‘information which was secret or confidential, but which is over five years old must as a rule, on account of the passage of time, be considered historical and therefore as having lost its secret or confidential nature unless, exceptionally, the party relying on that nature shows that, despite its age, that information still constitutes essential elements of its commercial position or that of interested third parties.’”

There are other ways in which confidence may be lost. A duty to keep material confidential can be waived by the party to whom it is owed (e.g. waiver of legal professional privilege). Where correspondence with a regulator attracts privilege this, too, can be waived. One example of such a waiver is where the party claiming privilege (and, by extension, confidence) relies upon the result of proceedings before the regulator (see e.g., Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] EWHC 1557 (Ch) at [114]).

Otherwise valid claims to confidentiality can be displaced on account of the public interest in the information entering the public domain on the basis that it reveals serious wrongdoing. This is sometimes called “the Iniquity Exception”. The basis of the exception is that that there is “no confidence as to the disclosure of iniquity” or that there is “no property in [iniquitous] transactions”: see Gartside v Outram (1856) 26 LJ Ch 113.

The editors of Phipps summarise the principles applicable to public interest aspects which underpin the iniquity exception as follows (at §5-165, adopted by me in Saab v Dangate Consulting Ltd [2019] EWHC 1558 (Comm); [2019] Lloyd’s Rep. FC 542 at [133]):

“Although each case has to be examined on its own facts, the following general principles are suggested:

(1)

Respect for confidentiality is itself a matter of public interest.

(2)

To justify disclosure of otherwise confidential information on the grounds of public interest, it is not enough that the information is a matter of public interest. Its importance must be such that the duty otherwise owed to respect its confidentiality should be overridden.

(3)

In broad summary either the disclosure must relate to serious misconduct (actual or contemplated) or it must otherwise be important for safeguarding the public welfare in matters of health and safety, or of comparable public importance, that the information should be known by those to whom it is disclosed or proposed to be disclosed.

(i)

Even if the information meets that test, it does not necessarily follow that it would be proper for the defendant to disclose it.

(ii)

The court must consider the relationship between the parties and the risks of harm which may be caused (or avoided) by permitting or prohibiting disclosure, both in the particular case and more generally. For example, if the law inhibits a doctor from disclosing information about a patient which may affect another person, it may lead to risk of avoidable injury or death; but if it permits a doctor to do so, it may impair a patient’s willingness to confide in the doctor and receive treatment.

(4)

Ultimately the court has to decide what is conscionable or unconscionable, which will depend on its view of what would be acceptable to the community as a fair and proper standard of behaviour. This requires the court to make an evaluative judgment, but it does not have an unfettered discretion.

(5)

In cases where the party claiming confidentiality is a branch of Government, or a body performing a governmental function, a separate principle applies. In such cases detriment to the public interest is an essential ingredient of the cause of action.”

The iniquity exception is not limited only to crimes or civil wrongs, but “should extend to crimes, frauds and misdeeds, both those actually committed as well as those in contemplation, provided always – and this is essential – that the disclosure is justified in the public interest” (per Lord Denning MR in Initial Services Ltd v Putterill [1968] 1 QB 396 at 405E). The proposed disclosure “must relate to serious misconduct (actual or contemplated)” (Phipps at §5-165).

A claim of iniquity must have some evidential base. Allegations which are “premature and speculative” will not satisfy the test (Saab at [163]). It does not however require proof: what is required is:

There is recent discussion of the iniquity exception in the context of legal professional privilege in Al Sadeq v Dechert LLP [2024] EWCA Civ 28 from [52]-[108]. Popplewell LJ’s conclusion at [108] was that:

“The merits threshold for the existence of an iniquity which prevents legal professional privilege arising, whether legal advice privilege or litigation privilege, is a prima facie case, which means that on an assessment of the material available to the decision maker, whether that be the party or its legal adviser conducting disclosure, or the court, it appears more likely than not on a balance of probabilities that such iniquity exists. In an interlocutory context there is no distinction to be drawn between cases in which the iniquity is one of the issues in the proceedings and those where it is not. This is subject to the proviso that there might exist exceptional circumstances which could justify a court taking the view that a balance of harm analysis has a part to play.”

The wrongdoing does not necessarily have to be that of the party seeking to maintain a claim to confidentiality (see e.g. (i) Lion Laboratories Ltd v Evans & Ors [1984] 3 WLR 539; [1985] QB 526).

There is a separate exception which relates to environmental matters: Regulation 12(9) of the Environmental Information Regulations 2004 which implement the Environmental Information Directive 2003/4/EC restricts the ability of public authorities to refuse disclosure of emissions information on confidentiality grounds.