Martin Iller explores the limits of the â€˜without prejudice' rule in practice
There is no doubt that the cloak of 'without prejudice' encourages parties to explore settlement. However, issues can still arise as to how far you can spread the cloak and whether you can ever lift it. Having remained a relatively quiet backwater for many years, there has been a recent flurry of case law, much but not all of which has helped to clarify the law. This month, I am going to provide a brief summary of the major points these cases decide, concluding with the recent House of Lords decision in Bradford & Bingley plc v Rashid  UKHL 37. So here goes, hold on to your seats.
No privilege in negotiations as such
The mere fact that two parties have been engaged in lengthy 'sensitive' negotiations will not of itself confer privilege unless there is an identifiable 'dispute'. This was confirmed by the Court of Appeal in Prudential Assurance Co Ltd v Prudential Assurance Company of America  EWCA Civ 1154:
if the negotiations are that 'sensitive', you will need to enter into an enforceable confidentiality agreement.
'If you don't accept our offer we'll fight it all the way'
Until recently, many people thought, erroneously as it now turns out, that the privilege only protected statements that were 'adverse' to the party making them and that, accordingly, 'positive' statements like the one above could be 'cherrypicked' and used in evidence. The Court of Appeal in Unilever plc v The Procter and Gamble Co  1 WLR 2436 made it clear that 'all statements made by each party touching upon the strength or weakness of its own and its opponent's case' are protected. To forfeit the right to claim privilege, a party would have to accompany such an assertion with improper threats.
'The other side is lying!'
Robert Walker LJ's judgment in Unilever contains a helpful summary of the situations in which the privilege will be lost (at 2444). Notable among them are occasions on which the statement is intended to cloak 'unambiguous impropriety'. So what if the concessions made by a party in negotiation are wildly at odds with his 'open' position, for example, in his case statement or a witness statement? Can you modify your own case by seeking to rely on these inconsistencies. As a general rule, the answer appears to be: 'No.' In two recent decisions, Berry Trade v Moussavi  EWCA Civ 715 and Savings and Investment Bank v Fincken  1 WLR 667, the Court of Appeal held that:
(1) The 'mere' fact that a party makes an admission during without prejudice negotiations that conflicts with his 'open' case is not of itself a sufficient 'unambiguous impropriety' to remove protection.
(2) The fact that the admission is unequivocal and/or undisputed is not, of itself, determinative.
(3) There must be some abuse of the negotiation process such as threats, blackmail or the commission of perjury to remove the protection afforded by the privilege.
Thus, if there is evidence to suggest that a party has lied on oath at trial, the court may permit you to lift the cloak, but, as yet, there does not appear to have been a reported case (see UYB Ltd v BRB  EWCA Civ 265).
'I've changed my mind'
Bear in mind that you cannot later rely on an unconditional 'without prejudice' communication unless all other parties consent, or another exception (see Unilever) applies. Without prejudice is unique because it cannot be waived unilaterally (see Reed Executive plc v Reed Business Information Ltd  1 WLR 3026). Also, be warned! If you lift even the edge of the 'cloak' without the other party's consent, he is entitled to accept your repudiation and insist that all the without prejudice communications should go in, with potentially disastrous consequences (see Somatra Ltd v Sinclair Roche & Temperley  1 WLR 2453).
'OK, I owe you the money, but can I have more time to pay?'
Essentially, this was the situation that the House of Lords had to address in Bradford & Bingley plc v Rashid. It was a mortgagee's claim for 'shortfall' in which there was no dispute as to:
(1) the sum owed; that
(2) the 12-year limitation period (s 20(1) Limitation Act 1980) ran from 3 January 1991; or that
(3) proceedings were issued on 17 June 2003.
The crucial issue was whether a letter written on Rashid's behalf on 26 September 2001 asking for time to pay was an acknowledgement of the debt for the purposes of s 29(5) of the 1980 Act or was inadmissible on the grounds of privilege. Many commentators, myself included, were somewhat surprised that the Court of Appeal (see  EWCA Civ 1080) had held that the letter was privileged. However, the House of Lords has unanimously reversed the decision, although their reasons differed. The majority view expressed by Lord Brown (with which Lord Walker and, broadly, Lord Mance agreed) was that without prejudice privilege does not attach to communications whose ostensible purpose is to discuss the repayment of an admitted debt rather than to negotiate over a disputed liability. Accordingly, as Lord Brown himself concedes, if Rashid's letter had disputed the amount owed or argued that his property had been sold at an undervalue, the letter might well have been protected.
Tread with care: the ground underfoot is strewn with broken glass!Tags: