Master Clark considered the law on disclosure of without prejudice communications in his recent decision in EMW Law LLP v Scott Halborg [2016] EWHC 2526 (Ch). He concluded that, where the documents were relevant to an issue in dispute, they could be admitted into evidence even though they were subject to without prejudice privilege, because appropriate arrangements could be made to ensure there was no prejudice to the parties who owned the privilege, meaning there was no public policy reason to refuse admission of the documents into evidence.

A disclosure application came before Master Clark in proceedings brought by a firm of solicitors against an individual, Mr Halborg (also a solicitor), to recover unpaid fees in respect of work done under an agency conditional fee arrangement (CFA). The firm had acted as agent for Mr Halborg providing legal advice in connection with a claim Mr Halborg had been engaged to bring against a firm of architects.

The underlying claim was settled pre-trial. The bill of costs included a claim for the agency charges, but these were disputed by the firm of architects in full on the basis that the work was duplicative of that carried out by Mr Halborg.

A dispute then arose between the firm of solicitors and Mr Halborg with regards costs recovery matters, specifically in relation to implied terms within the agency CFA entered into between the firm and Mr Halborg.

EMW applied for specific disclosure from Mr Halborg of various categories of documents relating to the costs recovery in the underlying claim. Master Clark had to consider Mr Halborg's objections to the disclosure application, including on the grounds that documents in one of the categories sought were protected by without prejudice privilege.

The relevant category of documents in which privilege was claimed comprised "correspondence, attendance notes or meeting notes relating to communications between [Mr Halborg] and [the law firm retained by the architects] from 22 July 2011 to date, relating to any discussion, negotiation or settlement of [Mr Halborg's] costs in the substantive claim".

The complication in this case was that any privilege attached to the relevant documents did not belong to Mr Halborg from whom disclosure was being sought, but jointly to the parties to the underlying proceedings. Each of the underlying parties was put on notice of the application for disclosure. The firm of architects did not respond. The underlying claimants (through Mr Halborg) refused to waive privilege and objected to disclosure of the documents, on the basis that disclosure would potentially release the documents into the public domain.

Deciding that the category of documents sought was relevant to the dispute regarding the implied terms in the agency CFA, Master Clark went on to consider the law on without prejudice privilege.

The starting point was the decision of the House of Lords in Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 (and which also references the judgment of Oliver LJ in Cutts v Head [1984] Ch. 290), which confirms that:

  • the without prejudice rule governs admissibility of evidence;
  • the rule is founded upon the public policy of encouraging litigants to settle their differences;
  • it applies to exclude from evidence all negotiations genuinely aimed at settlement;
  • however, the rule is not absolute and resort may be had to without prejudice materials for a variety of reasons when the justice of the case requires it. (Master Clark went on to note that the case of Unilever PLC v Proctor and Gamble [2002] 1 WLR 2346 summarises the exceptions to the rule).

Against the background of these legal principles, Master Clark was prepared to order disclosure, for the following reasons:

  • Prejudice to the parties who owned the privilege could be avoided – even if disclosure was awarded and the documents were admitted into evidence, privilege in the documents could still be retained against the rest of the world:
    • The parties to the underlying proceedings were not parties to the current claim: Disclosure of the documents was not being sought in order to use the materials to prejudice the people who owned the privilege.
    • Common interest privilege: It was possible for EMW and Mr Halborg to see the without prejudice correspondence without the people who owned the privilege losing the ability to assert privilege against the rest of the world. Not only the parties who owned the privilege but also Mr Halborg and EMW shared a common interest in negotiations as to the assessment of costs, which entitled them to see otherwise privileged documents.
    • Exclusion from the public domain: Master Clark noted that any prejudice that might be suffered by the privileged material being put into the public domain through reference to it in open court could be prevented by the court making directions under CPR 31.22 or, if necessary, directing that the public be excluded from any relevant part of the hearing.
  • The documents were relevant to an issue in dispute and there was no public policy reason to refuse admission:
    • Master Clark also considered that the exception to the without prejudice rule identified in Muller v Linsley & Mortimer [1996] 1 PNLR 74 applied to render without prejudice material discloseable in the present case.
    • In the Muller case, the court concluded that the issue to be considered by reference to the without prejudice communications was "wholly distinct" from the issue of any admissions made in the negotiations (as recorded in without prejudice communications) being used to the detriment of any party to those negotiations (which is what the public policy underlying the without prejudice rule is designed to protect).
    • As noted above, Master Clark had found as a starting point that this category of materials was relevant to the dispute regarding the implied terms of the agency CFA. A distinction could be drawn between those issues and any admissions in the underlying costs negotiations.

This case is a useful reminder that documents marked without prejudice will not necessarily be protected from future disclosure in all circumstances. The making of an order for disclosure of without prejudice documents does not necessarily mean the privilege is lost in the documents other than for limited purposes and to a limited group of people. The courts have demonstrated a willingness to assist in putting relevant protections in place. Therefore, in an appropriate case, consideration may need to be given to whether, and if so how, disclosure could be made in a way that avoids prejudice to those who own the privilege (provided they agree to the disclosure), rather than raising a wholesale objection to disclosure of all such without prejudice communications.