Admissibility of “without prejudice” negotiations

The following case raised questions which the judge described as “interesting and, to some extent, novel” concerning the scope and application of the without prejudice rule and the exceptions to it, in the context of mediation:

Brown v Rice and others [2007] EWHC 2155

The parties entered into a mediation agreement, which provided:

Clause 1.4:

“ Any settlement reached in the mediation will not be legally binding until it has been reduced to writing and signed by or on behalf of each of the parties.”

Clause 7.2:

“... all information provided during the mediation is without prejudice and will be inadmissible in any litigation or arbitration of the dispute.”

There was a dispute as to whether, as a matter of fact, the parties had agreed to settle their dispute; and as to whether, as a matter of law, any evidence relating to the alleged settlement was admissible in order to ascertain whether the parties had reached a settlement agreement.

What is the without prejudice rule?

The general rule on admissibility of evidence is that the statement or conduct of a party is always admissible against him to prove any fact which is expressly or impliedly asserted or admitted.

The without prejudice rule is an exception to this general rule and its justification is based on:

  • Public policy: parties should be encouraged to settle their disputes without resort to litigation and should not be discouraged by the knowledge that what transpires in the course of their settlement negotiations may be used against them in any subsequent litigation.
  • The express or implied agreement of the parties themselves that what transpired between them in their negotiations should not be admissible in evidence in any litigation if a settlement did not result.

What are the exceptions to the without prejudice rule?

The judge reviewed the authorities which identified various exceptions to the without prejudice rule. They included the following:

  • When the issue was whether without prejudice communications resulted in a concluded settlement agreement. This exception existed since it would be impossible for the court to decide whether or not the parties had reached a concluded settlement agreement, without considering the communications in question.
  • When the issue was whether an estoppel had arisen. This exception existed since, even in the absence of a concluded settlement agreement, an estoppel may arise if one party to the negotiations made a clear statement on which the other party was intended to, and did in fact, act.

Were the without prejudice communications admissible in this case? 

  • The judge reached the following conclusions: The without prejudice communications between the parties during the course of the mediation were admissible because the issue here was whether the without prejudice communications resulted in a concluded settlement agreement. A recognised exception to the without prejudice rule therefore applied.
  • Clause 1.4 of the mediation agreement (which provided that no settlement reached would be legally binding until contained in a written agreement, entered into by both parties) did not remove this exception to the without prejudice rule
  • This was because - notwithstanding clause 1.4 - the absence of a written settlement agreement entered into by both parties did not necessarily mean that the parties had not arrived at a concluded settlement. A concluded settlement would have been made if, for example, the parties expressly or impliedly agreed to vary or waive the terms of clause 1.4; and a concluded settlement would be treated as having been made if a party acted in such a way that it was estopped from relying on clause 1.4.
  • A court was entitled to investigate and determine, by way of exception to the without prejudice rule, issues such as whether clause 1.4 had been varied; and/or whether a party was estopped from relying on it.