Keeping settlement terms confidential

A recent High Court decision has important practical implications for the drafting and filing of Tomlin orders, which are commonly used to record agreed terms of settlement: ABC Ltd v Y [2010] EWHC 3176 (Ch).

The judgment also helpfully reviews the applicable principles governing non-party access to documents on the court file.

Key points:

• The court does not have power to restrict public access to a judgment or order made in public.
• The recitals to a Tomlin order should record that the agreed terms are confidential and are not to be filed at court.
• Parties should ensure, if possible, that the document setting out the terms is in fact returned to them and is not kept on the court file.
• Where documents have not been read by the court for a hearing held in public, the court will not order disclosure unless there are "strong grounds" to think disclosure is "necessary in the interests of justice".

Background

A Tomlin order is a consent order staying the proceedings on agreed terms (which are set out either in a schedule to the order or a separate agreement referred to in the order) and granting the parties permission to apply to the court for the purpose of enforcing those terms.  Tomlin orders are intended to allow the settlement terms to remain confidential, while enabling the terms to be enforced without having to commence a new action for breach of the agreement.

Under rule 5.4C of the Civil Procedure Rules, a non-party may obtain from the court records a copy of:

• a statement of case filed on or after 2 October 2006; or
• any judgment or order made in public (which will include a consent order, unless the court directs that the order is made in private).

The rule allows a party or any person named in a statement of case to apply for an order preventing or restricting its disclosure.

Any other document on the court file (including documents filed with or attached to a statement of case – for example a copy of a contract or an expert's report) may be obtained only if the court gives permission.

Facts

In the course of proceedings alleging misuse of confidential information, there were various interlocutory hearings which were held in private. At one of those hearings, a court order was made that, subject to further order, non-parties might not obtain documents on the court file.

The proceedings were eventually compromised and a consent order (the "Consent Order") was made reciting that the parties had "agreed to the terms set out in the Schedule hereto (which Schedule is confidential and therefore not to be filed at court)". The Consent Order did not state that it was made in private.

A non-party (X) subsequently applied for copies of certain documents on the court file on the ground that the documents were required in connection with other related proceedings. The documents sought were: a full copy of the Consent Order (only a redacted version had been provided); the defence and counterclaim; and the defendant's witness statement.

Judgment

The court held that X was entitled to a full copy of the Consent Order, but not the Schedule to it nor any of the other documents sought:

• The court does not have power to restrict disclosure of a judgment or order made in public. Anyone who pays the appropriate fee can obtain a copy. The court's power to restrict disclosure of documents on the court file extends only to statements of case. Accordingly, X was entitled to a full copy of the Consent Order.
• However, X's entitlement was to a copy of the order as it existed on the court file. Since the order stated that the Schedule was not filed at court, there was no entitlement to a copy of the Schedule.
• According to principles established in the case law, where documents have been read by the court as part of the decision making process at a hearing held in public, the principle of open justice means that if the applicant can show a "legitimate interest" in having access, the court should lean in favour of disclosure.
• However, if (as in this case) the court has restricted access to documents on the court file or the documents in question were filed for the purposes of a hearing held in private, the test is whether there are "strong grounds for thinking that it is necessary in the interests of justice" for the documents to be disclosed.

Comment

This case is important for parties who wish to ensure that the terms of settlement referred to in a Tomlin order remain confidential.

As a matter of practice, when a Tomlin order is filed with the court, the court may return the schedule to the parties so that it is not kept on the court file, thereby minimising the risk that it will be disclosed to a non-party. However, in some instances the court will not return the schedule but will put it on the file in a sealed envelope marked "confidential" and will tell non-parties who request a copy of the order that they are not entitled to the schedule.

In this case, the court refused disclosure of the Schedule to the Consent Order on the ground that it had not been filed at court and therefore did not fall within the rule allowing non-party access to certain documents on the court file. It is not clear how the decision might have differed if the Schedule had been on the court file in a sealed envelope marked "confidential". In light of the decision, the safe course must be to ensure (in so far as possible) that confidential terms are not retained on the court file.