Introduction
The decision highlights the way in which the English Courts impose a very high threshold for parties who seek to override the protection afforded by the "without prejudice" rule - which is intended to create an environment in which parties seeking to resolve their disputes can speak freely to one another, absent the concern that those communications/discussions may later be referred to in open court.
Background
The issue before the English Courts arose from a US judgment obtained by the Respondents ("Motorola") against the Appellants ("
In
In summary, it was alleged by Motorola that
Although
First instance decision
At first instance, Mr
The judge accepted that there was scope for misunderstanding what had been said at the meeting, but the judge's view was that this was irrelevant because all he had to decide was whether Motorola's evidence amounted to a good arguable case.
- was wrong to have concluded that that the CFO's statement amounted to unambiguous impropriety; and
- had applied the wrong test for admissibility of the evidence - he should have held that the relevant impropriety had to be proved unambiguously.
The Court of Appeal unanimously allowed the appeal and held (in a judgment delivered by Lord
In reaching this view, the
In relation to one of the cases considered (Fazil-Alizadeh v Nikbin2), Males LJ identified three points from the judgment which he considered of importance to the present appeal:
- the without prejudice rule must be "scrupulously and jealously protected" so that it does not become eroded;
- even in a case where the "improper" interpretation of what was said at a without prejudice meeting is possible, or even probable, that is not sufficient to satisfy the demanding test that there is no ambiguity;
- evidence which is asserted to satisfy this test must be rigorously scrutinised. While this last point had been made with particular emphasis in the context of evidence procured by clandestine methods, the point itself applies generally.
Males LJ noted that adopting the above approach is inconsistent with an approach "which simply takes at face value the evidence of a party seeking to disapply the without prejudice rule".
Consequently, the
The Court of Appeal drew the following conclusions from the cases:
"the courts have consistently emphasised the importance of allowing parties to speak freely in the course of settlement negotiations, have jealously guarded any incursion into or erosion of the without prejudice rule, and have carefully scrutinised evidence which is asserted to justify an exception to the rule".
The cases where the unambiguous impropriety exemption has been recognised are rare, and generally where there is no scope for dispute regarding what was said.
It was acknowledged that there are competing considerations: (i) setting a threshold that is too high - resulting in abusive statements not being admitted in evidence and impropriety not being exposed; and (ii) setting the threshold too low - resulting in statements which are not abusive being admitted into evidence, with the effect being that frank discussions in without prejudice meetings will generally be inhibited. The Court of Appeal concluded that the authorities:
"firmly and rightly set their face against any erosion of the without prejudice rule even if that means some statements disclosing or constituting impropriety, albeit not unambiguously so, retain the protection of the rule. The policy choice is that the public interest in the settlement of litigation outweighs the risk of abuse of the privilege in individual cases".
The Court of Appeal held that, instead of asking whether there was a good arguable case, the judge should instead have asked "whether the evidence before him established an unambiguous impropriety".
The Court of Appeal went onto consider whether there was unambiguous impropriety. It concluded that upon being "rigorously scrutinised" the substance of the "retreat to
Comment
This case is a helpful reminder of the extent to which the English Courts will protect the without prejudice rule.
From a public policy perspective, there are compelling reasons to maintain the sanctity of the without prejudice rule, so that parties can freely and openly conduct settlement discussions under the protection of the without prejudice umbrella, without being unduly inhibited by the concern that anything said in that context will later be used against them in Court.
Notwithstanding the above, parties entering into without prejudice discussions should have in mind that there is a point where an overly aggressive or threatening negotiation strategy could cross the line and be considered by the Court as going beyond what was "permissible in settlement of hard fought commercial litigation"3 - which could result in the without prejudice protection being lost.
However, such occurrences are likely to be rare and this judgment is a useful illustration of how difficult it is for a party to succeed in invoking the unambiguous impropriety exception, save in the clearest of cases (for example, where an improper threat is made during the without prejudice discussions themselves4). Furthermore, the position is likely to be even more challenging for an applicant where the relevant statement is not evidenced in a recording or in written form.
Footnotes
1 [2021] EWCA Civ 11
2
3 Boreh v
4 Ferster v Ferster [2016] EWCA Civ 717
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