In Secretary for Justice v Wong, the Court of First Instance of the High Court reviewed the legal principles that underpin the protection afforded to without prejudice communications.(1) The court's decision makes it clear that for a communication to be without prejudice, there must be a dispute in existence, as well as a genuine attempt at settlement – an issue that a court determines applying an objective (reasonable person) test. Mere negotiation without more is not enough. In this case, although the defendant's solicitors' letter was marked 'without prejudice' and set out the defendant's negotiation position, the court did not consider that there was (at the time of the letter) a relevant dispute in existence as to the government's right to the land in question – in the absence of a dispute, the letter had not been written on a without prejudice basis and was, therefore, admissible in evidence. While the outcome in the case is best explained on its facts, the case is a useful reminder for legal practitioners and their clients to make their intentions clear and, if they mean to negotiate on a without prejudice basis, it should be in the context of a relevant dispute.
In 2017 the government commenced legal proceedings against the defendant and certain alleged occupiers of a plot of land in the New Territories of Hong Kong. The government (acting by the secretary for justice) claimed possession of the land. Prior to the proceedings, the District Land Office (DLO) wrote a letter (in November 2014) to (among others) the defendant, requesting that certain structures allegedly erected on an occupied area of the plot of land be removed. Matters appear to have escalated and eventually the DLO wrote another letter (in October 2015) demanding that occupation of the plot of land cease. It appears that the defendant did not reply to either of these letters himself.
Rather, the defendant's solicitors wrote to the DLO in November 2015. The letter was marked 'without prejudice'. It appears to have set out the fact of the defendant's co-ownership of the plot of land, his family's occupation, the existence of a dispute between the co-owners regarding the plot of land and a request for a tenancy of the plot of land at a nominal rent – importantly, the defendant's solicitors' letter does not appear to have expressly challenged or denied the government's right to the land and, apparently, did not assert a possessory right which the defendant later asserted during the proceedings by a claim of adverse possession.
In its reply in December 2015, the DLO demanded that the defendant cease occupying the plot of land and reminded the defendant that land control action would be taken in the event of non-compliance. The DLO's letter was not marked 'without prejudice'.
During the proceedings (commenced in 2017), the government referred to both the defendant's solicitors' letter (of November 2015 – marked 'without prejudice') and the DLO's reply in its formal pleading ('statement of claim'). The defendant applied (among other things) to have those parts of the statement of claim struck out on the basis that they referred to inadmissible without prejudice correspondence. The defendant's application was refused by the lower court.
On an appeal (by way of a new hearing), the issue for determination by the High Court judge was whether the two letters had been written on a without prejudice basis – that, in turn, depended on whether there was a dispute between the parties with respect to the subject matter of the action when the letters were sent.
The court dismissed the defendant's appeal.
Legal principles While well set out in previous case law, the court used the opportunity to review the relevant legal principles that underpin the protection afforded to without prejudice communications.(2) A communication has to evidence a genuine attempt to settle one or more issues in dispute between the parties. This should be judged by whether a reasonable person considers that the communication is made on a without prejudice basis – which is objectively determined bearing in mind the factual matrix and other relevant circumstances. Marking a letter 'without prejudice' is not conclusive but is a starting point.
An important element of the protection is that there must be a 'dispute' in existence. Not all disputes would be relevant disputes for this purpose. A mere assertion of a right by one party does not necessarily equate to a dispute.(3)
Factual circumstances While there was a dispute between the co-owners regarding the plot of land, the court did not consider that a relevant dispute existed with the DLO at the time of the defendant's solicitors' letter. Therefore, it was not made on a without prejudice basis. While the letter did not admit the government's right to the plot of land, it did not dispute it. Further, the letter sought an indulgence (also described by the court as, in effect, a 'favour') from the DLO, in the form of the grant of a tenancy. The court noted:
Even if the request for a tenancy can loosely be described as an attempt to negotiate, the court must scrutinise the attempt to see what exactly was being negotiated. The 1st defendant was not giving up any right of his own. He was just asking for a concession, not giving one. As such, the fact of there being an attempt to negotiate does not point to the existence of any relevant dispute for without prejudice purposes.(4)
Therefore, the court concluded that the defendant's solicitors' letter, while marked 'without prejudice', was not in substance made in contemplation of a relevant dispute and, as such, was admissible. It followed that the DLO's letter in reply (in December 2015) was not part of a continuum of protected correspondence and was equally admissible.
The defendant applied for permission to appeal the court's decision, which was refused.(5)
On the face of it, the rejection of the claim to without prejudice protection with respect to the defendant's solicitors' letter may appear to be a rather tough decision. The traditional policy reasons for the protection are generally generous and the defendant appears to have been engaged in a rather robust negotiation with the DLO, at a time when legal proceedings might fairly be said to have been anticipated. However, the absence of a 'relevant dispute' as objectively considered appears to have been fatal to the defendant's claim to without prejudice protection. The case is best explained on its facts.
However, there are several practical points to consider.
While the label 'without prejudice' is extensively used by clients and legal practitioners in practice, it pays to give thought to whether the substance of a communication justifies the label. As is noted in the court's decision, some clients and legal practitioners appear to label correspondence 'without prejudice' without much thought to the context or contents.(6) Replying to another party's 'open' correspondence by marking a letter 'without prejudice' does not make the reply without prejudice unless it is justified by the content and should not alter the status of the previous correspondence. Further, while a without prejudice communication can form part of a series of communications, good practice suggests that such correspondence should stand alone without reference to correspondence written on any other basis.
While a 'dispute' is a constituent element of without prejudice protection, the case is a useful example of the point that the dispute must be a relevant one. In this case, there appears to have been a dispute at some stage between the co-owners but that was not relevant to the status of the correspondence in issue between the defendant and the DLO.
There is also the point that, if one party is going to enter into without prejudice communications with another party, it is important to expressly set out one's position in contradiction of the other party's position as well as entering into a genuine attempt at negotiation – negotiation, of itself, does not guarantee without prejudice protection.
Finally, as noted earlier, one might be excused for thinking that the outcome in the case is a tad harsh on the defendant (and it will be interesting to see whether there is an application for permission to appeal to the Court of Appeal). Some aspects of the court's decision raise important questions about the policy that underpins the protection afforded to without prejudice communications and are arguably deserving of appellate court review. This is particularly so given a recent trend by some common law courts to critically review the protection and its evolving exceptions.(7)
(7) For example, see Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd ( EWCA Civ 551), an important decision of the England and Wales Court of Appeal (for the background to the first-instance decision, please see "Privileged but admissible? When can without prejudice material be pleaded in statements of case?", 23 June 2020).