The High Court has held that statements made in a “without prejudice” mediation paper were admissible as they were to be used to rebut allegations of fraud, by showing that the claimants had known about, and approved, the transactions said to constitute the alleged fraud: Berkeley Square Holdings v Lancer Property Asset Management Ltd  EWHC 1015 (Ch). Continue reading
Tag: without prejudice
A recent Court of Appeal decision has highlighted the need to exercise caution when referring to privileged material in settlement agreements.
The court held that the claimant was not entitled to withhold from inspection communications that had been incorporated into a settlement agreement with one of five defendants. That was despite the fact that, at the time they were made, those communications had been protected by the without prejudice rule, and potentially also litigation privilege (on the basis that the claimant’s dominant purpose in conducting those communications was to collect evidence against the other defendants): BGC Brokers LP v Tradition (UK) Ltd  EWCA Civ 1937.
The decision is unsurprising in finding that communications incorporated into a settlement agreement thereby lost their without prejudice status. It has long been established that, where a settlement agreement is concluded by the acceptance of a without prejudice offer, the offer ceases to be protected by the without prejudice rule since it forms part of the contract. It seems logical that the same should be true of without prejudice communications incorporated into a settlement agreement. Of course, where a settlement is reached at a mediation (which was not the case here), recording the agreed terms in a settlement agreement will not usually result in loss of the without prejudice protection that applies to the substance of the mediation discussions that constituted the offer and acceptance (as distinct from the agreed terms themselves). However, this decision highlights that without prejudice communications that are expressly incorporated or referred to in a settlement agreement (by, for example, including warranties that statements made during the mediation were truthful and accurate) may lose that protection.
It is also unsurprising that any litigation privilege in the communications should have been lost as a result of their being incorporated into the settlement agreement. The Court of Appeal’s reasoning on this issue may, however, be seen as more novel. The court accepts that the dominant purpose of the original communications may have been to collect evidence, but says that was not the purpose of incorporating them into the settlement agreement, and therefore litigation privilege does not apply. Ordinarily, though, the rule is “once privileged, always privileged” unless privilege is waived or confidentiality is lost – at least insofar as legal advice privilege is concerned (see this post). The present decision may suggest that the same is not true for litigation privilege. As a practical matter, therefore, parties should exercise caution in using material that is subject to litigation privilege for any purpose apart from its original purpose of obtaining advice or information for use in litigation.
Read more on our Litigation Notes blog here.
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  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
A recent Court of Appeal decision has given rise to concern regarding the extent to which litigation privilege is available to protect an organisation’s internal deliberations on its settlement options in a dispute.
In WH Holding Ltd v E20 Stadium LLP  EWCA Civ 2652 (outlined here) the Court found that litigation privilege applies only to documents created for the dominant purpose of obtaining advice or information/evidence in relation to litigation, and not the conduct of litigation more broadly. As a result, the privilege did not apply to emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute.
The decision causes real practical difficulties for commercial parties, exposing an awkward gap in the protection afforded to documents prepared for the purpose of settling a dispute.
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.
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  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  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.
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  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  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.
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  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.
The Court of Appeal has held that discussions between a defendant's solicitor and a claimant litigant in person were or ought to have been seen by both parties as "negotiations genuinely aimed at settlement" and therefore protected by the without prejudice rule. In doing so, the court overturned the High Court's decision, which it said took too narrow a view of the kinds of discussions that may be protected by the rule: Suh v Mace (UK) Limited  EWCA Civ 4.
The decision illustrates that discussions may be protected by without prejudice privilege where it should be obvious that their purpose is to try to resolve the dispute, even if that is not openly acknowledged and the question of settlement does not come up until some way into the discussions. The case suggests that a broad view is likely to be taken, particularly where one party does not have legal representation and so the purpose and status of the discussions might not be made as clear as would be expected if lawyers were involved on both sides.
The judgment also suggests that a court will be slow to find that a party has waived without prejudice privilege simply because it has responded to an opponent's attempts to introduce evidence of the discussions without raising the issue – particularly, though perhaps not exclusively, where the party in question is unrepresented. Still, the safe course where an opponent seeks to introduce evidence of without prejudice discussions must be to object to their admissibility without delay. Click here to read more on our Litigation Notes blog.
With the Chinese courts under increasingly heavy case loads, use of “judicial mediation” continues to be encouraged by all levels of the Chinese courts as a means of effective case management. Although mediation and “judicial mediation” both have long histories in China, foreign parties may find judicial mediation in China very different from what they expect. This is because unlike common law jurisdictions, judicial mediation in China is not strictly speaking an ADR mechanism, but rather an integral and important part of PRC litigation procedure. Chinese judges will often undertake dual roles, with the same judge acting as both mediator and the ultimate adjudicator in the same litigation.
Mainland China disputes specialists May Tai and Damien McDonald discuss judicial mediation and how best to prepare for it. Continue reading