For a range of commercial reasons it is often important to one or all of the parties to a dispute that the terms of any settlement are kept confidential between the parties. The legal device used to achieve that confidentiality when settling court proceedings is called a Tomlin Order. Usually in such cases the Tomlin order simply states that the parties have agreed a settlement, that the details are in a separate document and it may make a costs order. The document recording the details is not a formal part of the order and therefore does not go on the Court record and those who were not party to it cannot obtain a copy. A recent case has highlighted that a Tomlin Order may not always give the parties the confidentiality they require.
The High Court ruled that in certain circumstances the confidentiality of a settlement agreement is not a sufficient reason for refusing disclosure to an interested party if that interested party is able to demonstrate that it is reasonably necessary for it to know the terms of that settlement agreement.
L’Oreal issued trademark infringement proceedings against eBay and several individuals. The proceedings were concluded by a Tomlin Order against all of the defendants (save for eBay). The terms of the settlement were recorded in schedules to the Tomlin Order.
The Civil Procedure Rules (which govern most civil litigation in England and Wales) allow both those who are parties to proceedings and non-parties to obtain a copy of a Court order from the Court’s records. In addition with the permission of the Court a party can apply to Court to obtain a copy of any other document filed by another party. EBay applied to the Court for disclosure of the schedules to the Tomlin Order.
In this case both L’Oreal and eBay accepted that, as all of the defendants had been sued jointly, the release of the individual defendants from liability should release eBay from liability, unless L’Oreal had reserved the right to continue an action against eBay in the schedules to the Tomlin Order. Accordingly, eBay wanted to inspect the schedules to determine whether L’Oreal had, in fact, reserved that right.
The Court held that the confidentiality of the schedules was not a sufficient ground for refusing disclosure and that it was necessary and proportionate to allow eBay to determine whether it had been released from liability.
The disclosure was restricted to an inspection of the schedules by eBay’s solicitors.
Whilst this decision highlights a specific scenario, where the Court permitted the disclosure of the schedules to a Tomlin Order when an interested party had persuaded the Court that it was reasonably necessary, it reminds us that if confidentiality is an issue it is important for the parties and their lawyers to carefully consider the terms of the settlement agreement and the impact that those terms may have on another interested party.
One potential option for the future is to use a Tomlin Order with a basic schedule that identifies a separate settlement deed containing a confidentiality clause. A settlement deed would not be lodged at Court and would not, therefore, be in the possession of the Court for disclosure (although the Court may still in specific circumstances order its disclosure). However, the L’Oreal case has shown that confidentiality, of itself, will not always be a sufficient ground on which to prevent the disclosure of settlement terms to an interested party.