Prudential Insurance Company of America v Prudential Assurance Company Ltd

The without prejudice rule may rest on public policy, an implied agreement, or both. Public policy alone cannot justify an English court restraining the use of material in foreign proceedings. Extra-territorial relief requires an agreement, express or implied, whose terms cover the particular proceedings. A party seeking to enforce an implied agreement must identify the material supporting it, when the agreement arose, and the scope of its obligations. A lengthy course of correspondence about resolving trade mark issues, without any without prejudice marking, does not by itself establish a worldwide and perpetual contractual restraint. The court should be cautious before implying terms of that breadth.

The Prudential Insurance Company of America appealed from the Vice-Chancellor’s refusal to restrain The Prudential Assurance Company Limited from using correspondence in trade mark proceedings in Taiwan and New Zealand. The appellant claimed that correspondence exchanged between 1974 and 1996 was protected by the without prejudice rule.

The Vice-Chancellor held that the correspondence was not covered by the rule. He also considered whether any contractual claim had been properly advanced and whether the rule should be applied with restraint in light of article 10 of the Convention and section 12(4) of the Human Rights Act 1998. The central issue on appeal was whether the correspondence evidenced an implied agreement restricting its use in foreign litigation.

1. Appeal dismissed. The application was properly refused because the appellant had not established an implied contractual restraint on the use of the correspondence.
2. The without prejudice rule has distinct possible bases. It may reflect the public policy of encouraging settlement, an implied agreement arising from the circumstances in which negotiations took place, or both. In some cases, particularly where the person resisting disclosure was not party or privy to the negotiations, public policy may be the only basis.
3. Where restraint is justified by an implied contract, the English courts may enforce it by an order affecting the use of material in foreign proceedings. The applicant must establish, or show a real prospect of establishing, an agreement that the communications would not be used in current or later litigation, in terms apt to cover the particular proceedings. The court should be cautious about granting a restraint applying to all litigation worldwide and indefinitely.
4. Where public policy is the only basis, the English court should not impose an extra-territorial restraint on foreign proceedings. The English rule balances settlement promotion against the public interest in full disclosure, and another jurisdiction may lawfully strike that balance differently.
5. The appellant had failed to identify with sufficient specificity the material from which the alleged contract was to be implied, when it arose, or the obligations said to follow. The parties’ correspondence concerned arrangements for use of the Prudential name and did not show an agreement that it could never be used in litigation anywhere in the world. The absence of any without prejudice marking over more than twenty years was material.
6. The appeal did not turn on public policy, and the Convention and the Human Rights Act 1998 did not assist in deciding whether the alleged agreement should be implied. Lords Justice Parker and Schiemann agreed with Lord Justice Chadwick.

1. Court of Appeal (Civil Division) — [2003] EWCA Civ 1154: appeal dismissed.
2. High Court of Justice, Chancery Division — the Vice-Chancellor’s order dated 20 December 2002 refused the application to restrain use of the correspondence.