Introduction

It is always important to establish whether or not communications with the opposing party in a dispute are truly without prejudice (“WP”). If a communication is deemed not to be protected by WP privilege, a party exposes themselves to the risk that the communication in question will be relied upon as evidence by the opposing party in any subsequent hearing.

A recent Court of Appeal decision suggests that the Courts are willing to take a broad view of WP privilege, especially in cases in which one party is unrepresented (often referred to as a litigant in person). That being said, ship owners, charterers, brokers and claim handlers should carefully consider whether or not their discussions with an opposing party truly fall within the WP rule and obtain the protection of privilege.

WP – a brief overview

The reason for WP protection sits within public policy, as parties or potential parties to a dispute are encouraged to settle their disputes outside of Court or arbitration. It is hoped that settlement is encouraged by allowing the parties to speak freely in the knowledge that, should settlement not be reached, any admissions made in respect of trying to settle the matter may not be used against them.

The WP rule is also said to arise out of a consequence of offering or agreeing to negotiate on a WP basis, i.e. by an implied contract between the negotiating parties.

The WP rule will generally prevent statements that are made in a genuine attempt to settle an existing dispute from being put before the Court or Tribunal as evidence of admissions against the interest of the party that made them. An admission in this context is not a formal admission, such as a statement contained within pleadings, it is rather a statement, whether made in writing or orally, made by a party against his own interest.

Generally speaking, a party must disclose that WP correspondence exists, however, such WP documents are not admissible as evidence before a Court or Tribunal. Even though they are disclosable, the documents need not be produced or made available for inspection.

WP protection is effectively a joint privilege and cannot be waived by one party alone.

If a claim for WP privilege is challenged, a Court or Tribunal will focus primarily on the substance of the disputed document to assess whether or not the claim for WP privilege should be upheld.

Recent decision of the Court of Appeal1

Mr and Mrs Suh held a business lease of a restaurant. In August 2010, the landlord, MACE UK Limited, the Respondent, re-entered the premises, changed the locks and purported to forfeit the lease. The Claimants claimed damages arising out of wrongful termination of the lease.

Mrs Suh, a litigant in person, requested meetings with the Respondent’s lawyers and during those meetings Mrs Suh indicated that she wanted to get out of the litigation. It was also alleged that Mrs Suh admitted that there had been rent arrears when the Respondent re-entered the premises.

The Respondent sought to rely on Mrs Suh’s admissions at trial and served a witness statement exhibiting attendance notes of the meetings with Mrs Suh. Mrs Suh served a statement in response and claimed that the meetings with the Respondent’s lawyers were WP.

At first instance the High Court held that the discussions were not WP as they were not for the purpose of a genuine attempt to compromise a dispute between the parties. Mr and Mrs Suh appealed the decision. In response, the Respondent asserted that:

  1. the meetings were not WP because their purpose was not to negotiate a settlement; and
  2. even if the meetings were WP, the cloak of privilege should be denied to the tenants as they were using it for perjury or unambiguous impropriety; and
  3. any such privilege had been waived in any event.

The Court of Appeal found in favour of Mr and Mrs Suh and allowed the appeal. The Court recognised that where litigants in person are involved it may be more difficult to determine objectively whether discussions were negotiations genuinely aimed at settlement. Vos LJ identified that he was “influenced by asking what else could it be said the discussions were about2 and concluded that the only sensible purpose for the meeting must have been to seek some kind of solution to the litigation. There was no justification for dividing the meeting into open and WP parts, as such an approach would contravene the broader view required by the authorities.

One exception to the WP rule is that one party may be allowed to give evidence of admissions if the exclusion of the evidence would act as a cloak for perjury, blackmail or other unambiguous impropriety. However, there was no evidence that Mrs Suh knew what WP meant, let alone used the WP rule to tell lies.

The Respondent’s solicitors had attempted to waive privilege by providing admissions made during the meetings in a witness statement. However, to be a legitimate waiver both parties must waive the privilege, Mrs Suh had not waived privileged by providing her unguarded response to the Respondent’s conduct. The Court held that it would be a violation of privilege to find that Mrs Suh’s conduct had amounted to waiver, since she was reacting to attempts by the Respondent to rely upon privileged documents.

The appeal was allowed and the admissions relied upon by the Respondent and referred to in Mrs Suh’s statement, were inadmissible at trial as being covered by un-waived WP privilege and a re-trial was ordered before a different judge.

Considerations for the shipping industry

The commercial reality is that there are often occasions when parties wish to discuss often sensitive facts during WP negotiations, that they would not wish to discuss during any formal proceedings. Charterers, Ship Owners, brokers and claim handlers should therefore bear in mind when conducting settlement negotiations with any party that:

  • labelling a document as WP does not automatically provide such a document or communication with protection. The communication and/or document must be made and/or produced in a genuine attempt to settle an existing dispute;
  • the court or tribunal will apply an objective test and take into account all the facts of the case in order to analyse the communication in context to decide whether or not privilege should attach;
  • whilst meetings and conversations may switch in and out of WP, a Court or Tribunal may wish to take an overall view of the nature and purpose of the meeting;
  • discussing a case “off the record” does not always fall within the ambit of the WP rule. For the sake of clarity, if you wish to speak on a WP basis you should say so. It is best practice to also obtain confirmation from the other side that they are discussing the matter on a WP basis.; and
  • the WP rule is not absolute and there are exceptions to it, for example, a court or tribunal may prevent the WP rule from applying where it considers that doing justice or balancing the interests of the parties requires it to. If you are in doubt as to whether or not WP privilege would attract to an admission seek advice prior to making such an admission.