Merck KGaA v Merck Sharp & Dohme Corp & Ors

The court has an unfettered case-management power to order a preliminary issue. The decision requires a case-specific assessment of the likely advantages and disadvantages, viewed through the overriding objective. General checklists and rigid conditions are not a substitute for that assessment. Relevant considerations include whether the issue will necessarily arise, whether it is reasonably self-contained, the likely saving in evidence and trial time, overlap with the remaining issues, delay, the risk of appeal, duplication of costs and prejudice. A preliminary issue may properly be ordered where it will determine which legal system applies and enable the parties and court to prepare the trial on a single legal basis.

The defendants applied for a preliminary trial of the proper law governing agreements between the parties concerning use of the Merck name. The competing systems were New Jersey and German law. The issue arose in a wider trade mark and contractual dispute concerning alleged use of the name in the United Kingdom.

The court considered whether determining the governing law first would save expert evidence and simplify the eventual trial, against the risks of delay, appeal, cost duplication and factual overlap. The central question was whether, in the circumstances of this case, the balance favoured directing a separate preliminary issue.

1. Power and approach. CPR 3.1(2)(i) and (j) give the court power to direct a separate trial of an issue and decide the order in which issues are tried. The power is expressed in unfettered terms and must be exercised to give effect to the overriding objective.
2. No rigid checklist. The guidance in Tilling v Whiteman [1980] AC 1 and McLoughlin v Grovers [2002] EWCA Civ 1743; [2002] 2 W.L.R. 1279 was not a sure guide in every case. The court should not mechanically apply judge-made checklists, consistently with Seiko Epsom Corporation v Dynamic Cassette International Limited [2012] EWHC 316 (Pat) and the approach attributed there to Philips v Harvard [2009] EWHC 1600 (a).
3. Balancing exercise. The court must weigh the foreseeable and less foreseeable pros and cons of ordering the preliminary issue. Relevant benefits included that the governing-law question had to be decided in any event, would remove the need for expert evidence on the alternative system of law, and was substantially discrete. Relevant disadvantages included delay, a possible appeal, uncertain trial savings, some factual overlap and possible duplication of costs.
4. Application and order. The governing-law issue was capable of being resolved reasonably quickly. It would allow the parties to prepare the trial knowing which law applied and would enable the court to avoid trying the dispute on two alternative legal bases. The defendants’ application was therefore granted and the preliminary issue ordered. No stay of the main action was considered necessary.