When 'without prejudice' won't offer protection

As a matter of public policy, without prejudice communication is usually privileged. This allows parties to a dispute a safe space in which to have an open and frank conversation or exchange of correspondence, with a view to achieving settlement.

However, it is a common misconception that this protection will always apply. There are a number of exceptions to this rule, one of which was recently considered by the Court of Appeal in Ferster v Ferster [2016] EWCA Civ 717.Unambiguous impropriety is the use of an otherwise privileged occasion to make a threat in the nature of blackmail or another unacceptable statement. This term was first used by Lord Justice Hoffman in Forster v Friedland [1992] CAT 1052, when he said ‘the value of the without prejudice rule would be seriously impaired if its protection could be removed for anything less than unambiguous impropriety’.

The exception, based upon the rule of unconscionability, specifically applies where the cloak of privilege is clearly being abused. For example, where a claimant was told in without prejudice negotiations, ‘You are not going to force my hand by blackmailing me’, and replied, ‘But I have got to. What would you do if you had been me?’, the privilege was lost. Similarly, the exception applied when a defendant said that unless a claim was withdrawn he would give false evidence, bribe other witnesses to do the same, and leave the jurisdiction.

However, the exception will only apply in the clearest cases of abuse and will not be invoked by an admission that a claim has no merit or a threat of bad publicity if a claim is not paid.

In Savings and Investment Bank v Finkin [2004] 1 WLR 684, Lord Justice Rix said: ‘It is not the mere inconsistency between an admission in a pleaded case or a stated position, with the mere possibility that such a case or position, if persisted in, may lead to perjury, that loses the admitting party the protection of the privilege… It is the fact that the privilege is itself abused that does so. It is not an abuse of the privilege to tell the truth even where the truth is contrary to one’s case.’

An example of the narrow scope of this exception is demonstrated in Fazil–Alizadeh v Nikbin [1993] CAR 2005, where the exception was held not to apply despite the claimant admitting he had made a payment which was denied in his pleadings and continued to be denied thereafter.

Attempt at blackmail

The most recent consideration of the unambiguous impropriety exception was in the context of post-mediation communication in Ferster.

Three months after the conclusion of an unsuccessful mediation, the mediator sent an email containing a revised settlement offer. The offer was revised upwards on the basis that the appellants had become aware of ‘further wrongdoings’ by the respondent and that he was going to be in ‘very serious trouble’ which would have ‘implications for [his] partner by reason of [his] actions’.

The email, an 11-point message from the appellants, also said that if the offer was not accepted in 48 hours, the ‘wrongdoings’ might be made public; acceptance of the offer would avoid the need for committal proceedings; and if the respondent had misled his lawyers he was likely to be imprisoned and his credibility and reputation would be destroyed.

In this case, there was no doubt in the mind of the trial judge or the Court of Appeal that it was an attempt at blackmail, which falls firmly within the exception.

While it may have been appropriate to bring committal proceedings, it was wrong to use that as leverage for other purposes. The email went beyond what is reasonable in settlement of litigation as it threatened criminal action, had serious implications for the respondent’s partner, and the purpose was clearly to obtain financial advantage. It was irrelevant that the appellants might have believed the allegations to be true.

The court determined the involvement of the mediator was not a factor that much weight should be attached to. It did not know whether the email was merely a cut and paste or whether the mediator had given it consideration. No mention was made of whether any of the provisions of the mediation agreement might have applied contractual confidentiality to post-mediation communications from the mediator.

Reminders for litigators

• Without prejudice does not always mean privileged;

• Do not assume information passed to you on a without prejudice basis can never be used in support of your client’s case;

• When conveying a message or offer from your client, be mindful to ensure that it cannot be considered an abuse of privilege; and

• A message or offer communicated by a mediator will not automatically be privileged.

Nikki Edwards is a London Solicitors Litigation Association (LSLA) committee member, a CEDR-accredited mediator, and a partner at Temple Bright www.lsla.co.uk