Without prejudice privilege – an update

With increasing numbers of litigants in person involved in negotiating and mediating disputes, understanding the rules governing without prejudice privilege is crucial for all involved. The effect and ambit of this privilege has already come up in several cases in 2016 and some of these involve litigants in person. We review the principles in the light of these decisions.

What is without prejudice privilege?

Without prejudice privilege applies to exclude all negotiations genuinely aimed at settlement, whether oral or in writing, from being given in evidence. Although it is often referred to as a type of privilege, it differs in one practically important respect from legal professional privilege: one party can decide whether or not to waive legal professional privilege in a document, whereas generally both parties to the without prejudice correspondence must agree to make the document public.

A recent failure to obtain the other party’s consent occurred in Gresham Pension Trustees v Cammack. While making submissions about costs, counsel for one party referred the judge to an attendance note purporting to record conversations between counsel outside court. This was a without prejudice exchange and the fact that counsel for the other party did not immediately object when the judge was told of the note did not amount to some form of tacit consent. The Court of Appeal held that the judge’s discretion on costs was therefore flawed and exercised the costs discretion afresh.

Why does it matter?

The rule reflects the public policy that it is good to encourage parties to settle disputes rather than to litigate to a finish. The idea is that the parties can be confident that what they say in negotiations will not be given in evidence if they fail to settle the dispute. If parties fail to comply with the rule, unfairness can result and time and costs are wasted in flawed proceedings that lead to satellite litigation and retrials.

When does it apply?

Putting “without prejudice” at the top of a letter says that it concerns negotiations to settle a dispute and should not be referred to without the consent of both parties. The fact that the phrase is used, or not used, by a lawyer will carry weight with the court when it determines the status of the correspondence but it will be less significant if the letter is written by a litigant in person. However, if the letter merely states what the writer thinks his rights are, it will not have been made without prejudice and the fact that it is marked “without prejudice” will not make it so (and vice versa). It can sometimes be difficult to decide whether the letter is an assertion of rights or an opening shot in negotiations.

How does it differ from “without prejudice save as to costs”?

Correspondence marked "without prejudice save as to costs" can be referred to by the parties when the substantive proceedings have been concluded in order to enable the court to make a costs order. Part 36 offers or other offers with this caption can be taken into account whereas an offer marked “without prejudice” cannot be seen by the court unless both parties agree.

Does the rule apply to mediation?

Negotiations and correspondence involved in the mediation process are protected by without prejudice privilege. This means that unless all parties waive their rights, the court cannot review what went on at or in connection with a mediation. Where the parties are negotiating over whether or not to mediate, unless the correspondence is marked “without prejudice save as to costs,” one party may be unable to refer to the refusal of the other to mediate when addressing the court about costs sanctions. This occurred recently in R (Wildbur) v Ministry of Defence. Once the parties have agreed to mediate, correspondence leading up to the mediation should be marked “without prejudice” since the court should not look at correspondence or anything else relating to a mediation unless one of the exceptions applies.

What are the exceptions?

There are several but some of the most readily encountered fall into two categories: where there is a dispute over the terms of a settlement agreement or whether one was reached, and where there is an allegation that the rule is being used to conceal unacceptable behaviour.

In the first category, the court will have to look at without prejudice communications where there is a dispute over whether the parties have reached a binding settlement. This includes communications during the mediation process. Without prejudice correspondence can also be admissible in order both to identify the terms of a settlement agreement and to interpret the agreement.

In the second category, the court will look at without prejudice communications where a party claims that the settlement agreement should be set aside on the ground of misrepresentation, fraud or undue influence. A party may also be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other unambiguous impropriety. The Court of Appeal held recently that this had occurred in Ferster v Ferster where Stuart and Warren Ferster sent an email in the context of a mediation seeking to blackmail their brother Jonathan into paying an inflated price for their shares in the brothers’ online gaming business.

Admissions

In Suh v Mace a couple brought proceedings alleging wrongful forfeiture of their lease of business premises against the landlord. The husband and wife fell out and Mrs Suh approached the landlord’s solicitor in order to find out how the case was progressing. The solicitor said the landlord might be prepared to negotiate to let Mrs Suh withdraw from the proceedings without paying all the costs if she made a statement confirming the admission she allegedly made at the meeting that there were outstanding arrears of rent at the time of the forfeiture.

At trial, the landlord relied on its solicitor’s evidence of the meeting with Mrs Suh and Mrs Suh put in evidence in response. The judge held that the evidence was admissible because the purpose of the meeting was not a genuine attempt to compromise a dispute between the parties. The Suhs appealed to the Court of Appeal. Allowing the appeal and ordering a retrial before a different judge, Vos LJ noted that it can be more difficult to determine whether discussions amount to negotiations genuinely aimed at settlement if they are with a litigant in person. Here it was obvious that Mrs Suh had asked for the meeting because she wanted to see how she could get out of the proceedings and not to obtain legal advice or answer questions. The Court of Appeal rejected the argument that the unambiguous impropriety exception applied because Mrs Suh later denied the alleged admissions. It also refused to accept that the Suhs had waived the point by putting in evidence in response about the meeting.

Comment

The Court of Appeal’s decisions in Suh v Mace and Gresham Pension Trustees v Cammack indicate that the courts will staunchly uphold a broad interpretation of without prejudice privilege. A party seeking to rely on evidence obtained during negotiations is likely to get short shrift, particularly if those negotiations are with a litigant in person. The courts are also critical of parties who attempt to rely on cherry-picked comments from a series of without prejudice communications, as happened recently in Ravenscroft v Canal & River Trust in the context of an application by a litigant in person for the appointment of a McKenzie Friend. Where, however, the privilege is being used as a cover for improper conduct and this is clear from a single document (as was the case in Ferster v Ferster) and does not involve picking over a chain of correspondence or dissecting what went on at a meeting, the evidence will be admitted.