In a recent decision, the
The without prejudice rule means that evidence of negotiations aimed at resolving a dispute are inadmissible and cannot be relied on by either party, unless both waive the privilege. The present decision is of interest for its discussion of when there is a dispute sufficient to give rise to the application of the rule. In particular, the decision suggests that there may be a lower threshold than for when litigation is in “reasonable contemplation” for the purposes of litigation privilege - though it seems likely that in most cases the two will go hand in hand. The test in the context of without prejudice privilege is whether, assessed objectively, the parties “have contemplated or might reasonably have contemplated litigation if they did not agree”.
The decision also finds, unsurprisingly, that without prejudice privilege will apply to the whole of a negotiation aimed at settling a dispute, including discussions about commercial matters which may not form part of the dispute itself but which are brought into account in the negotiations. There is no scope for separating out primary and secondary aims of the negotiation and applying the protection only to the former.
Background
As part of its disclosure in proceedings before the CAT and the
FDC said that Appendix 1 should have been redacted on the basis of without prejudice privilege (or common interest privilege, though this argument was not ultimately pursued), and that the unredacted version had been provided in error. It sought to have the document returned and replaced with a redacted copy.
It was agreed that the CAT's decision on the applications would determine the status of the document in the
The email which was replicated in Appendix 1 noted that the contractual arrangements between FDC and Genius were subject to a three-year break point, which would arise in the next few months. It proposed a deal by which FDC would not exercise the termination right in return for Genius's agreement to six items listed in the email, including as to FDC's interpretation of an indemnity contained in the contract as well as a number of commercial points.
FDC's evidence was that the indemnity had been the subject of disagreement between itself and Genius, and that the email amounted to FDC setting out terms either to resolve the indemnity issue or to terminate the commercial relationship. Some months after the email, FDC and Genius had entered into a deed of variation recording (among other things) FDC's revocation of its termination notice and terms to resolve the indemnity issue.
By the time of the hearing, there were two issues in dispute:
- whether the email was covered by without prejudice privilege, in circumstances where it addressed a number of commercial issues as well as the indemnity issue; and
- whether the indemnity issue had matured into a dispute sufficient to enable the email to be covered by without prejudice privilege.
Decision
The CAT (
There had been a dispute between FDC and Genius about the indemnity. This issue was settled alongside FDC giving up its right to terminate, as set out in the variation deed. The email was therefore part of a negotiation which was genuinely aimed at settlement of, among other things, the indemnity issue. That was consistent with the labelling of the email which, while not determinative, was a strong indication that it was created in an attempt to settle matters in dispute.
The CAT did not accept
As to whether there was a dispute sufficient to give rise to without prejudice privilege, the CAT noted that, as
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Ms Anna Pertoldi
Exchange House
EC2A 2HS
© Mondaq Ltd, 2022 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source