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. However, the subsequent “without prejudice save as to costs” correspondence showed that the parties had agreed 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 WP communications in any subsequent correspondence which 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

High Court considers application of much-criticised exception to without prejudice rule

The High Court has held that the content of “without prejudice” (“WP”) communications between the parties to the proceedings was inadmissible, though the fact of the WP negotiations could be referred to. The counterparty to the WP communications would be prejudiced by admission of the communications, and it had neither deployed the content of the WP communications nor put in issue matters which were only justiciable by reference to them: Briggs v Clay [2019] EWHC 102 (Ch).

Whilst the court accepted that the list of exceptions to the WP rule is not closed, it emphasised that any exception must be of the same character or a principled and incremental extension of an existing exception. The court did not regard the present case as falling within the scope of 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, and the party had himself put the reasonableness of the settlement in issue. The court noted that the Muller exception had not previously been held to apply in the case of WP negotiations in the very claim that is before the court, and said that the exception sought to be identified in this case risked significantly undermining the policy of encouraging parties to attempt to settle disputes in multi-party litigation.

The decision provides a careful analysis of previous case law on the scope of the WP rule, and seeks to clarify the extent of the Muller exception which is a matter of some uncertainty. The decision suggests that the exception will come into play where negotiations are relied on to prove some collateral matter and the other party to the WP communications will be unaffected by admission of the WP material, or where the party seeking to assert the privilege has raised an issue which is only justiciable upon proof of the WP communications.

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

Article published – Discussing settlement options: minding the gap between litigation privilege and the without prejudice rule

The recent Court of Appeal decision in WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652 (outlined here) 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.

Maura McIntosh has published a post on Practical Law’s Dispute Resolution blog which considers the decision and its implications. 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 in respect of the costs that were recoverable in litigation 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.

Interestingly, the judge in the present case also considered whether a party to WP correspondence can properly show that correspondence to a third party without the consent of the counterparty. The judge confirmed that there is nothing to prevent him doing so. The fact that WP protection can only be waived with the consent of both parties does not mean one party cannot voluntarily provide it to someone else if he so chooses, at least if there is a legitimate reason for doing so. This is an issue that sometimes arises in practice, and so it is helpful to have this clarification.

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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.

Click here to read more about the decision on our ADR Notes blog.

Two High Court decisions illustrate broad application of without prejudice protection

In two recent cases, the courts have rejected attempts to introduce evidence of without prejudice (WP) communications. The decisions emphasise the important public policy role of the WP rule in encouraging settlement by ensuring parties can negotiate freely, without fear of concessions made during settlement negotiations being used against them in the course of litigation.

In R (on the application of Wildbur) v Ministry of Defence [2016] EWHC 821 (Admin), the court found that even the fact of a failure to reply to an offer of mediation (if there was such a failure) was protected by the WP rule.

In Ravenscroft v Canal & River Trust [2016] EWHC 2282 (Ch), the court confirmed that there was no general exception to the protection of the WP rule where WP communications were referred to only for the purposes of an interlocutory hearing.

It is well-established that the protection of the WP rule is not absolute. It cannot for example be used as a cloak for impropriety (see this recent post) and there are various other circumstances where evidence of WP communications can be admitted, such as where the issue is whether a concluded settlement has been reached, or where the fact of negotiations taking place is needed to explain a party's delay (see this post for a list of recognised exceptions). However, these two decisions illustrate a general tendency on the part of the courts to give the WP rule broad application and resist making further in-roads into the protection it offers. The decisions are considered in more detail below.

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Court of Appeal finds settlement offer not subject to “without prejudice” protection as it amounted to an unambiguously improper threat

The Court of Appeal has recently considered the rarely invoked "unambiguous impropriety" exception to without prejudice ("WP") privilege: Ferster v Ferster [2016] EWCA Civ 717.

Upholding the decision of Rose J at first instance, the Court of Appeal found that a settlement offer made on behalf of the claimants following an unsuccessful mediation constituted an unambiguously improper threat in the nature of blackmail and, as such, was not protected by WP privilege.

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. Alan Watts, Catherine Emanuel and Victoria O'Dea consider the decision further below.

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Court of Appeal decision endorses broad view of without prejudice protection

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 [2016] 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.

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Important High Court decision on waiver of privilege and without prejudice protection

In a decision earlier this week, the High Court held that a defendant bank had waived both legal professional privilege and without prejudice protection in communications with regulators, because of the bank’s reliance on the subsequent regulatory decisions: Property Alliance Group Limited v The Royal Bank of Scotland PLC [2015] EWHC 1557 (Ch).

The decision helpfully confirms a number of points regarding the application of privilege to communications with regulators, on which there does not appear to be previous English authority. In particular:

  • It confirms that privileged material may be disclosed to a regulator, on terms that confidentiality and privilege are maintained, without losing privilege more widely. In other words, the English law principle of limited waiver can apply where privileged documents are provided to a regulator, despite the existence of “carve-outs” allowing the regulator to share the material with other third parties or to make it public.
  • It confirms that, in principle, a right analogous to without prejudice protection applies to communications that are part of genuine settlement discussions with the Financial Conduct Authority (FCA), and therefore presumably also to similar communications with other regulators.

The decision is however less helpful on the question of waiver as a result of the bank’s reliance on the regulatory decisions. In essence, the court held that the bank could not rely on a lack of criticism in those decisions, while at the same time seeking to maintain privilege in what it had put to the regulators. This applied equally to negotiations with the regulators which would otherwise be protected by the without prejudice rule (or something akin to it) and privileged documents provided to the regulators which would otherwise remain privileged due to application of the principle of limited waiver.

In relation to without prejudice, it has long been recognised that the protection of the rule is not absolute and that it may be lost in certain circumstances, for example where a party puts in issue the reasonableness of a settlement it has reached with a third party (as established in Muller v Linsley & Mortimer [1994] EWCA Civ 39). Legal professional privilege, however, is an absolute right and cannot normally be overridden regardless of what matters are put in issue in the case. This aspect of the decision may therefore be seen as surprising. Continue reading

Court of Appeal explores ambit of the without prejudice rule

The Court of Appeal has recently held that certain correspondence marked “without prejudice” was admissible in evidence despite this label, because there was no dispute between the parties at the time of the correspondence and the parties had not agreed that the without prejudice rule should apply in any event: Avonwick Holdings Limited v Webinvest Limited & Anor [2014] EWCA Civ 1436.

The decision is a reminder that marking a communication “without prejudice” is not conclusive as to whether the rule will apply. It is also of interest in suggesting that parties can, notwithstanding the lack of a dispute, expand the ambit of the without prejudice rule by agreement, so that communications which would not normally be covered by the rule are rendered inadmissible as evidence in potential future proceedings. It is not clear how far such a principle might apply to stretch the protection beyond its generally recognized ambit, i.e. communications aimed at settlement of a dispute between the parties.

Gregg Rowan and Alex Sharples consider the decision further below. Continue reading