Commercial litigation podcast series – Episode 3: General update

In this third episode of our series of commercial litigation update podcasts, we look at developments in disclosure and privilege since our February update, as well as some developments relating to costs and funding. This episode is hosted by Anna Pertoldi, who is joined by Maura McIntosh and Ajay Malhotra.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode will be released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the cases covered in this podcast:

 

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Ajay Malhotra
Ajay Malhotra
Senior associate
+44 20 7466 7605

High Court finds “without prejudice” statements contained in mediation paper were admissible to defend against allegation of fraud

The High Court has held that statements made in a “without prejudice” (WP) 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 [2020] EWHC 1015 (Ch).

The defendants relied on an established exception to the WP rule, which provides that evidence of WP negotiations is admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence.

The court held that it would be “contrary to principle” if parties could rely on this exception to admit WP material into evidence to prove misrepresentation, fraud or undue influence, but could not admit such material to defend themselves against these allegations and uphold the agreement concluded between the parties. The WP material was therefore admissible under the established exception, or a “small and principled extension of it in the interests of justice”.

The decision acts as a reminder that the protection afforded by the WP rule is not absolute, and suggests that the fraud exception may extend further than previously understood. Continue reading

High Court finds evidence of without prejudice discussions should be admitted to establish real risk of dissipation of assets in support of freezing injunction

The High Court has held that evidence of statements made in “without prejudice” settlement discussions should be admitted in support of an application for a freezing order. The respondents’ threat – to move assets and structure its affairs to frustrate the applicants’ enforcement of a US judgment – fell within the narrow “unambiguous impropriety” exception to the without prejudice privilege: Motorola Solutions Inc v Hytera Communications Corporation Ltd [2020] EWHC 980 (Comm).

The court accepted that the “unambiguous impropriety” exception may be employed only in the clearest cases where a party has abused the protection of the privilege. Threats may fall within the exception, if they clearly exceed what is permissible in settlement of hard-fought commercial litigation. Here, the court was satisfied that the threshold for the exception was met, including on the basis of prior Court of Appeal authority which found that a threat to put assets out of reach by improper means fell within the concept of “unambiguous impropriety”.

While this limit on the protection of the without prejudice rule is not new, the decision provides a helpful illustration of its application in practice in the context of an application for a freezing order. In particular, it suggests that threats to deal with assets so as to frustrate enforcement may well be admissible, in some circumstances, despite being made in the course of without prejudice discussions.

The decision is also of interest in relation to the court’s approach where there is a dispute as to whether the alleged statement was made. The court held that the question it must consider is whether the statement would, if proven, meet the relevant threshold. Where a statement is disputed, the court will examine whether there is a plausible evidential basis that the statement was made, but need not apply a different or higher standard of proof. Continue reading

Court of Appeal rejects claim to without prejudice or litigation privilege in communications incorporated into settlement agreement

The Court of Appeal has 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 [2019] 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.

It is also unsurprising that any litigation privilege in those 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 litigation purpose. Continue reading

High Court finds impliedly “without prejudice” correspondence admissible on questions of costs

In a recent decision, the High Court has distinguished between correspondence which is expressly stated to be “without prejudice” and that which is only impliedly so, finding that the latter category (but not the former) can be taken into account on questions of costs: Sternberg Reed Solicitors v Harrison [2019] EWHC 2065 (Ch).

There is nothing surprising in the court’s conclusion that correspondence which is expressly made “without prejudice” is not admissible on questions of costs, unless it has been marked “without prejudice save as to costs” or the right to refer to the correspondence for that purpose is otherwise reserved. That much was clear from previous authority.

What is more novel is the court’s conclusion that correspondence which is only impliedly without prejudice can be admitted on questions of costs. That is a point on which there does not appear to be any previous authority. The Court of Appeal will not however have a chance to consider it, at least in this case, as the High Court’s decision was given in an appeal on a point of law under section 69 of the Arbitration Act 1996 and, since the judge refused permission to appeal, that is the end of the road.

The practical message for those seeking to resolve disputes is to ensure that their intentions are made clear as to the purposes for which their communications may subsequently be used. Pending any further consideration at appellate level, parties should be aware that, if correspondence is received which is aimed at settlement but is not stated to be “without prejudice”, it may be taken into account in relation to costs, even if it is inadmissible in relation to the substantive dispute. That will be an important point to remember in considering how, and on what basis, to respond. 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. 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.

Continue reading

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.