Correspondence about possibility of ADR was not “without prejudice” despite being marked as such

The High Court has held that inter-solicitor correspondence about the possibility of engaging in ADR was not properly to be regarded as “without prejudice” (WP) despite being marked as such. The court could therefore have regard to it in considering the appropriate costs order following judgment: Jones v Tracey [2023] EWHC 2256 (Ch).

The decision illustrates that the question of whether or not a communication benefits from WP protection depends on the true nature of the communication and how it would be understood by a reasonable recipient. While a marking of WP (or WP “save as to costs”) will be taken into account, it will not be determinative if the context and/or content of the correspondence objectively indicates a contrary intention.

The decision is also of interest for the court’s observation that, while ADR processes will generally be conducted on a WP basis, the same is not necessarily true for correspondence about the possibility of engaging in ADR. The court considered that such correspondence is “more likely to be open than without prejudice”, as the parties will often wish to be able to rely on it later – though typically such reliance is likely to be in relation to costs issues, and so corresponding on a WP save as to costs basis may equally achieve that aim.

Outside the costs context, previous authorities have held that the WP rule protected the fact of an offer to mediate and any refusal/non-response in the same way that it would protect the making or refusal of a substantive settlement offer (see for example R (on the application of Wildbur) v Ministry of Defence [2016] EWHC 821, discussed here). But of course each case will turn on its facts.

The court’s approach in the present case might be seen as reflecting the growing acceptance of ADR as a standard element of mainstream civil procedure which parties are expected to engage in  – such that a proposal of ADR cannot in itself be prejudicial to their case. Accordingly, there may be no need for such correspondence to be protected by the WP rule. That is consistent with the approach taken in the recent Civil Justice Council report on Pre-action Protocols (considered here), which proposes that the court should be able to see communications regarding proposals to engage in a pre-action dispute resolution process, and evidence of the fact that the process took place, but not anything that discloses the substance of the negotiations.

Background

Following judgment for the claimant in a contested probate dispute, an issue arose as to whether an inter-solicitor letter dated 7 June 2023, which was marked “without prejudice”, was properly to be regarded as WP. The defendant’s solicitors, who had sent the letter, contended that it was not in fact WP despite its marking and sought to rely on it to argue that the claimant’s costs should be reduced because of failure to engage with ADR. The claimant’s solicitors, who received the letter, contended that it was WP and therefore inadmissible including in relation to costs.

The 7 June letter stated:

“We refer to your letter dated 27th April 2023 with regard to your client offering to engage with alternative dispute resolution without moving the trial date. We sent an email on 3rd May 2023 that our client was in agreement to attending alternative dispute resolution.

We understand there are several forms resolving issues before a final hearing but would invite you clarify why your client was unwilling to attend mediation given that we agreed not to move the trial date. Further the offer was some two months before the final hearing.” [sic]

Neither the 27 April letter nor the 3 May email were marked WP. The claimant’s solicitors did not respond to the 7 June letter.

Decision

The High Court (Master Marsh, sitting in retirement) held that the 7 June letter was not in fact WP and was therefore admissible. He reached that conclusion because, in summary:

  1. The court’s starting point was the manner in which the letter was drafted. A WP marking will normally be taken to indicate the writer’s intention, but if it is clear from the context that a letter was intended to be open, or WP, or WP save as to costs, it will be treated as such.
  2. Where a letter falls within a chain of communications of a particular type, it will normally be treated as of the same type unless the opposite intention is obvious.
  3. The true nature of the communication must be established objectively, by reference to a reasonably minded recipient, without regard to evidence of subjective intention.
  4. Although the 7 June letter formed part of a chain of communications dealing with the possibility of ADR, all those communications were open and were obviously intended to be so. Communications about the possibility of engaging in ADR do not need to be WP and will ordinarily be open as it will usually be preferable for both parties to be able to rely upon such communications.
  5. The 7 June letter did not contain an offer and did not relate to communications about a specific offer. It would have been obvious to the reasonably minded recipient that it was not intended to be WP.

Having found that the letter was admissible, Master Marsh went on to conclude that it did not in fact warrant a reduction in the costs awarded to the claimant. Although the claimant’s failure to engage more positively with ADR was surprising, he had made offers to settle well before the claim was issued to which there had been no substantive response, the defendant’s conduct of the claim was unsatisfactory in a number of respects, and the merits of the claim weighted heavily in the claimant’s favour. On the particular facts, it could not be said that the claimant’s silence in response to the 7 June letter amounted to a refusal to undertake ADR.

Master Marsh awarded the claimant his costs on the standard basis until 21 days after the claimant had made a well-judged pre-action Part 36 offer, and on the indemnity basis thereafter, together with interest on those costs at 4% above base rate and an additional sum of 10% of the assessed costs.

Jan O'Neill
Jan O'Neill
Professional Support Lawyer, London
+44 20 7466 2202

 

Should the UK sign the Singapore Convention? Weighing the issues…

As we previously reported, the UK government is currently consulting on whether the UK should sign the UN Convention on International Settlement Agreements Resulting from Mediation, more commonly known as the Singapore Convention. The consultation closes on 1 April 2022.

The Convention establishes a framework under which Member States agree to recognise and enforce settlements of international commercial disputes resulting from mediations conducted anywhere in the world (if they fall within scope). It currently has 55 signatories, including nine full Member States.

Since it came into force in September 2020, the Convention has been available to enforce settlement agreements resulting from mediations held in the UK (or anywhere else) in the Convention’s Member States.  However, it is only now that many are turning to consider the detail of how the Convention impacts UK-mediated settlements being enforced abroad and vice versa – and what difference it will make if the UK joins the Convention. Those issues are not straightforward, and extend beyond the Convention’s technical legal operation.

In our view, the key considerations are as summarised below. Taken together, we believe they support a view that the UK: Continue reading

High Court finds parties agreed to vary application of “without prejudice” rule in subsequent “without prejudice save as to costs” correspondence

The High Court has held that correspondence marked “without prejudice save as to costs” and which described the conduct of prior “without prejudice” (WP) negotiations (including a mediation and subsequent discussions) was admissible in an application for costs against the claimant’s lawyers: Willers v Joyce & Ors [2019] EWHC 937 (Ch).

The court accepted that the WP rule attached to the negotiations during and following the mediation. However, the subsequent “without prejudice save as to costs” correspondence amounted to an agreement to vary the WP status of the earlier negotiations, so that both parties would be able to deploy evidence of the WP negotiations in future arguments about costs.

The decision serves as a reminder to parties and practitioners to exercise care when referring to the substance of mediation discussions (or any other WP communications) in any subsequent correspondence that is not expressed to be WP. Depending on the terms of that correspondence, a court may conclude that the correspondence amounts to an agreement to exclude or vary the application of the WP rule, and therefore the circumstances in which the WP communications may be admissible.

Matthew Eglezos, a Senior Associate (Australia) in our disputes team, outlines the decision below. Continue reading

Brexit: UK unwinds implementation of EU ADR laws

Jan O’Neill
Professional Support Lawyer, London

 

The UK Government has published legislation to effectively revoke the implementation of the EU Mediation Directive (2008/52/EC) after Brexit.

The Cross-Border Mediation (EU Directive) (EU Exit) Regulations 2019 (the Regulations) were made on 1 March 2019 and will come into effect on exit day, whenever that occurs.

Why?

The development is part of a wider policy decision by the Government to revoke/repeal UK domestic legislation that implemented EU law in instances where that law is based on reciprocity between EU Member States. Continue reading

Article published – ADR reform: one size does not fit all

On 6 March, the Civil Justice Council held a workshop to discuss the recommendations made in its interim report on ADR, which was subject to consultation late last year. The interim report addresses concerns regarding a perceived underuse of ADR within some sections of the civil justice system and suggests a variety of possible corrective measures. The proposals include a power for the court to determine whether costs sanctions should be imposed for unreasonable conduct relating to ADR (such as an unreasonable refusal to mediate) not only at the end of a case, as currently, but during the matter when the decisions regarding ADR are taken.

Jan O’Neill has published a post on Practical Law’s Dispute Resolution blog in which she questions how realistic the suggestion of “midstream” assessment of parties’ conduct relating to ADR would be in practice. She suggests that many of the concerns expressed in the report as to the underuse of ADR are not relevant to many larger, complex claims, and urges the working group to tailor any final recommendations to the specific courts or dispute types for which the evidence suggests they are needed and practicable.

Click here to read the post (or here for the Practical Law Dispute Resolution blog homepage).

 

 

High Court decision potentially extends exceptions to without prejudice protection

In a recent decision, the High Court has found that documents relating to negotiations regarding recoverable litigation costs had to be disclosed to a third party (the claimant in the present action) who had an interest in the outcome of the negotiations: EMW Law LLP v Halborg [2017] EWHC 1014.

The documents could normally have been withheld on the basis of the without prejudice ("WP") rule, which (in general) prevents negotiations genuinely aimed at settlement from being admitted in evidence in proceedings. However, the judge found that exceptions to the WP rule applied in this case, essentially on the basis that justice clearly demanded that an exception be made as there was a live issue as to whether the negotiations had led to a concluded settlement and that issue could not be determined without access to the documents.

The decision may be seen to expand existing exceptions to the WP rule. Although there is a recognised exception where documents are relevant to whether a concluded agreement has been reached, in previous cases it had been one of the parties to the litigation who alleged that an agreement had been reached. Here that question was put in issue by a stranger to the negotiations. The judge was also prepared to craft a new exception by analogy to the (much-criticised) exception established in Muller v Linsley & Mortimer [1996] 1 PNLR 74, where the WP communications were relevant to whether a party had reasonably mitigated his loss in negotiating a compromise of separate proceedings.

Although the issues in this case did not arise in the context of a mediation or other formal ADR process, they could potentially apply equally in that context. However, it is worth bearing in mind that, particularly in such formal ADR contexts, it is in practice very rare for the WP status of the discussions to subsequently be challenged and even more so for the challenge to be successful.  The courts' approach to the exceptions to WP could be expected to continue to be one of applying the exceptions narrowly and preventing erosions of the protection, to avoid undermining the policy of encouraging settlement discussions.

Click here to read more on the decision on our 'Litigation Notes' blog.

 

Costs judge finds information from mediation is admissible when considering costs consequences of settlement

A costs judge has held that information about a party's costs provided for the purposes of a mediation could be used as evidence when considering the cost consequences of a subsequent settlement: Savings Advice Limited v EDF Energy Customers Ltd [2017] EWHC B1 (Costs) 

Documents produced for the purposes of mediation are generally covered by without prejudice privilege and, subject to limited exceptions, cannot subsequently be used as evidence. In the present case the costs information was provided in emails headed "without prejudice save as to costs", so it is perhaps not surprising that the costs judge concluded it could be used as evidence in subsequent cost proceedings.

However, other aspects of the reasoning for the decision are more surprising and arguably not supported by existing authorities regarding the without prejudice rule. In particular, the costs judge held that the costs information was not in any event covered by the privilege because it was a statement of pure fact rather than an admission or concession. Such distinction has been rejected in previous cases on the basis that requiring parties to a negotiation to constantly analyse whether they are making admissions or factual statements would undermine the privilege's purpose of enabling parties to speak freely in settlement negotiations (see for example the decision of the House of Lords in Ofulue v Bossert [2009] UKHL16, considered here).

While the decision will not necessarily be followed in future cases,  it serves as a reminder that parties should be aware of the limitations of without prejudice privilege and the circumstances in which information provided during mediation may be used in subsequent litigation. As a practice point, parties should ensure that they are clear as to what is intended when they provide or receive information  'without prejudice save as to costs' in the context of a mediation.

Gary Horlock (associate) and Jan O'Neill (professional support lawyer) in our dispute resolution team consider the decision further below.

Continue reading

Singapore: proposed new legislation to encourage mediation

A Mediation Bill has recently been put before the Singapore Parliament with a view to encouraging the growth of mediation in the jurisdiction.  The three key proposals in the Bill (which echo similar provisions in the EU Mediation Directive and various other mediation laws around the world) are:

(i)   A power (though not a duty) in the courts to stay proceedings in favour of mediation agreed by the parties

(ii)  A mechanism for settlement agreements reached at pre-litigation mediations to be recorded and enforced as court orders; and

(iii) Confirmation of the confidentiality of mediation communications.

Read more detail on the proposals here.  

 

Settlement offer conveyed through a mediator found not to be protected by without prejudice privilege due to ‘unambiguous impropriety’

The Court of Appeal has recently applied the rarely invoked "unambiguous impropriety" exception to without prejudice ("WP") privilege, to find that a written settlement offer conveyed through a mediator following an unsuccessful mediation was not protected by WP: Ferster v Ferster [2016] EWCA Civ 717.   

Communications in connection with a mediation (including when the mediator acts as a conduit for negotiations after the mediation) will of course normally be protected by WP privilege. However, one of the narrow exceptions to the WP privilege is where the communication involved some 'unambiguous impropriety', in the sense of an attempt to abuse the protection afforded by the privilege.  In the present case, the Court of Appeal found that correspondence conveying a settlement offer on behalf of the claimants constituted an unambiguously improper threat against the defendant in the nature of blackmail and, as such, was not protected.

The decision serves as a reminder that WP privilege cannot be used as a cloak for impropriety.  It also underlines the fact that there is a distinction to be drawn between the use of proper leverage in the context of settlement discussions and the making of improper threats.  The courts will take a dim view of the latter.   Read more commentary on the decision here.

 

Public consultation on mediation in the EU

The EU Commission has launched a consultation to gather views on the extent to which the EU Mediation Directive (2008/52/EC) has achieved its objectives and to consider whether any changes to the Directive are appropriate.

Responses to the consultation will inform a report the Commission is required to submit to the EU legislative bodies by May 2016, assessing the development of mediation throughout the EU and the impact of the Directive.  The report may, if appropriate, be accompanied by proposals to adapt the Directive. Continue reading