A matter of timing: making the most of without prejudice communications

The “without prejudice” rule applies in litigation of all kinds, but two of the most recent decisions exploring its scope have come from the Employment Appeal Tribunal. They focus on the requirement that, in order for a settlement offer to be privileged from disclosure to the relevant court or tribunal, there must have been a genuine dispute between the parties at the time the offer was made. In both these cases, offers were made before proceedings had been issued, making it more difficult to determine whether this requirement had been met.

The Company Secretary

Mrs Garrod was a Company Secretary who had recently returned from maternity leave and was pregnant with her second child. She had raised a grievance making serious allegations against her employer’s senior management, including complaints of maternity and pregnancy discrimination. In response Mrs Garrod was invited to a meeting at a private golf club for a “preliminary discussion”. At this meeting a without prejudice offer was made involving a termination payment of around £80,000 in return for signing a settlement agreement compromising her statutory claims. No agreement was concluded, and Mrs Garrod subsequently resigned and brought proceedings in the employment tribunal.

Mrs Garrod wanted to give evidence of the offer, but the employment tribunal ruled that it was privileged. She challenged this decision on appeal, arguing that the offer had been made before her grievance had been considered, and there was therefore no dispute between the parties at the time. The EAT upheld the tribunal’s ruling, saying that it was entitled to take into account that Mrs Garrod had a law degree and had taken the legal practice course. She would therefore have understood the significance of an offer being made without prejudice. Her grievance letter had also referred to using ACAS mediation or the Early Conciliation process if the matter could not be resolved “in-house”. Applying the legal test set out in earlier case law, that meant that at the time the offer was made the parties “contemplated or might reasonably have contemplated that litigation would follow if there were no settlement.”

The Chief Risk Officer

The second decision went the other way. This time it was an offer to make a payment of over £80,000 for accrued holiday pay which the employer wished to keep from the tribunal. The claimant, Mr Evanson, had been employed as Chief Risk Officer and the offer had been made in the course of “amicable” discussions about ending his employment in a redundancy context. Negotiations eventually broke down for other reasons, and no mention was made of them being conducted without prejudice. The EAT upheld the employment tribunal’s decision that the offer was not privileged from disclosure, since litigation could not reasonably have been in the contemplation of either party when the offer was made.

Other timing issues

The cases involving Mrs Garrod and Mr Evanson illustrate the vital importance of the context in which the offer is made, if proceedings have not already been issued at that point.

There are however broader timing considerations when deciding when and how to make an offer of settlement. This is illustrated by a third recent decision from the EAT. This one involved Mr Meaker, who had suffered a series of back injuries. As a result he was unable to do his job, which involved heavy manual work. At the time the offer was made he was in discussion with his employer about alternative employment. He then received a letter marked “without prejudice” which informed him that his employment was being terminated “by mutual agreement” and offering him an enhanced termination package in return for signing a settlement agreement. Mr Meaker rejected the offer and brought proceedings for unfair dismissal.

This time there was no dispute about whether the offer was privileged from disclosure. However, the employer’s decision to combine a letter of dismissal with an offer to settle caused confusion over whether the letter had been effective to terminate Mr Meaker’s employment on the day he received it. That resulted in a dispute about when the limitation period for bringing employment tribunal proceedings started to run, which was ultimately resolved in the employer’s favour.

Conclusions

These decisions show it can be difficult to find the sweet spot when making an offer to settle, with confidence that it will not come back to haunt you.

In an employment context at least, it is best to wait until the parties’ respective positions are properly understood, even if there has not been a time for a full exploration. If the offer is to be made without prejudice, this should be fully explained at the outset. Ideally, settlement discussions should be held at a different time and place, rather than seeking to combining them with other “open” discussions.

Finally, never include a without prejudice offer in a letter dealing with other aspects of the dispute. Always keep open and without prejudice correspondence separate, even if it means writing two separate but simultaneous communications