Without prejudice?

Mediation privilege over and above without prejudice?

In Pentagon Food Group Limited and others v B Cadman Limited [2024] EWHC 2513 (Comm), the High Court considered whether there was a “mediation” privilege over and above “without prejudice privilege”.

This was first discussed in Brown v Rice [2007] EWHC 625 (Ch) where Mr Issacs QC noted: “mediation takes the form of assisted without prejudice negotiation.”

Reed Executive plc v Reed Business Information Ltd [2004] 1 WLR 3026 laid the foundation for this thinking when Lord Jacob observed that “sometimes the line between a third party assisted ADR and party-to-party negotiations may be fuzzy.”

Ultimately, Mr Issacs QC didn’t support the existence of a distinct mediation privilege.

However, he asked that the legislature or the courts consider “the existence of a distinct mediation privilege” in the future.

The academic perspective

So far, academic commentary has acknowledged that “mediation privilege has been seen as analogous to without prejudice privilege, and not giving rise to separate rules.” See Phipson on Evidence, 20th ed.

This article focuses on without prejudice communications in the context of ADR, such as negotiations and mediations, and the evolution of this privilege since the late 19th century.

It also highlights instances when the courts have diluted an absolute privilege during the settlement of a dispute.

Without prejudice as an absolute privilege

Walker v Wilsher (1889) 23 QBD 335 is one of the most cited decisions on without prejudice communications.

It also represents a strict interpretation of without prejudice privileges.

The case concerned an appeal challenging the trial judge’s decision to deny the claimant’s costs based on letters marked without prejudice that contained settlement proposals.

The Court of Appeal allowed the appeal, with Lord Esher stating: “It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise, the whole object of the limitation would be destroyed.”

Lord Esher’s opinion was supported by Lord Bowen who stated that: “[I]t would be a bad thing and lead to serious consequences if the Courts allowed the action of litigants, on letters written to them without prejudice, to be given in evidence against them or to be used as material for depriving them of costs.

“Lord Lindley, who was also deciding this appeal, agreed with the others, and conceded that there have been cases in which without prejudice letters were considered but in a restricted sense to rely on the relevant dates in answering questions of laches.”

Without prejudice in the 20th century

Fast-forward 100 years and the Court of Appeal decided on a similar point of law in the case of Cutts v Head [1984] 2 WLR 349.

The Cutts v Head decision

Cutts v Head was one of the first cases that hinted at softening the strict approach taken in Walker v Wilsher.

In it, the Court of Appeal explained the public policy that encourages settlement without litigation.

It also explained anything said during negotiations must not be used against the parties in the proceedings.

However, the court brushed aside the absolute privilege granted to without prejudice communications.

It stated that the public policy justification wouldn’t apply during the costs stage when there are no further issues to be decided.

The court did agree to the use of without prejudice communications to bring attention to costs when one party had refused all offers made by the other party.

However, the Court of Appeal’s observation highlights a unique situation “where offers have been made and refused of everything which could be obtained by the proceedings, that fact should not be brought to the court’s attention in the argument as to costs.”

Guiding principles

In 1986, the Court of Appeal was faced with a similar instance in the case of South Shropshire District Court v Amos [1986] 1 WLR 1271.

The court laid down guiding principles in dealing with without prejudice correspondences:

• The heading ‘without prejudice’ doesn’t conclusively or automatically make a document privileged
• If privilege is claimed but challenged, the court can look at a document in order to determine its nature
• Even an initial offer made at the start of negotiations (an ‘opening shot’) can be privileged

Without prejudice in the 21st century

Disclosing without prejudice negotiations

In Reed Executive plc v Reed Business Information Ltd [2004] EWCA Civ 887, the Court of Appeal decided that the court does not have the power to order any disclosure of the without prejudice negotiations to determine the question of costs.

In the case of Ravenscroft v Canal & River Trust [2016] EWHC 2282 (Ch), the High Court recognised that the “boundaries of the exclusionary aspect of the without prejudice rule are not entirely clear.”

In this case, however, the High Court was dealing with the admissibility of without prejudice communications in interlocutory proceedings.

It didn’t challenge the rule laid down in Walker v Wilshire and affirmed by Reed Executive plc v Reed Business Information Ltd.

Labelling ‘without privilege’

In 2014, the High Court decided that merely labelling a document as ‘without prejudice’ doesn’t automatically grant privilege, especially when the dispute does not even exist.

In Avonwick Holdings Ltd v Webinvest Ltd and another [2014] EWHC 3332, the High Court admitted a correspondence marked as without privilege as evidence.

This was because there was no dispute at the time of the correspondence.

In Jones v Tracey [2023] EWHC 2256 (Ch), the High Court decided that correspondence between solicitors on the possibility of engaging in ADR will not be regarded as ‘without prejudice’, despite being marked so.

This was held in a judgment relating to costs, after determining the substantive rights of the parties.

Academic literature on this subject also agrees that the presence or absence of without prejudice label will not be determinative. See The Law of Privilege, (Oxford University Press, 2018).

Privilege is a matter of substance over form

In 1988, the House of Lords dealt with the question of whether it is necessary to use the phrase ‘without prejudice’ to claim such a privilege.

In Rush & Tompkins v Grater London Council [1989] AC 1280, the Lords decided that privilege did not dependent on the use the phrase.

Instead, privilege applies as long as it is clear that the parties trying to settle the dispute.

This privilege extends to the costs stage as well. Courts cannot rely on communications if they are expressly labelled ‘without prejudice’.

While deciding Muller and another v Linsley and another [1994] EWCA Civ 39, the Court of Appeal reviewed relevant cases to identify the basis of such privilege.

They found two reasons:

• public policy, as explained in Cutts v Head
• an implied agreement based on the consequences of negotiating without prejudice

Lord Hoffmann noted that sometimes both reasons apply, and sometimes only one

He also confirmed that without prejudice communications cannot be used as admissions or “on questions of costs.”

Intention is more important than labels

The High Court, in Schering Corp v Cipla Ltd [2004] EWHC 2587 (Ch), developed the principles established in South Shropshire District Court v Amos a bit further.

In Schering, the High Court added that while the label ‘without prejudice’ shows an intention to treat the communication as part of negotiations, the court must also consider the author’s intention and how a reasonable recipient would understand it.

English courts can also treat a communication as without prejudice even if it is not marked that way.

In other words, labels aren’t essential, but they do serve a purpose.

Judge Hodge QC, in Sternberg Reed Solicitors v Harrison [2020] Ch 223, held that where “communications take place to resolve a live dispute and they are not expressly labelled ‘without prejudice’ on the substantive dispute, they may not be referred to until after the determination of that dispute, but they may thereafter be referred to on questions of costs.”

When communications are not marked as ‘without prejudice’, the law will only recognise this until the dispute is resolved.

However, these communications can be referred by the courts to determine the costs.

If there is no express labelling, the law only gives partial privilege which covers settlement discussions but allows reference for costs.

This is known as the ‘Calderbank offer’.

Conclusion

To a certain extent, English courts have diluted the without prejudice privilege.

Courts cannot order disclosure of a without prejudice document.

However, labelling a document as such does not automatically establish such a privilege.

This is certainly true if the relevant document was created at a time when there is no dispute between the parties.

Express labelling grants a wider privilege. However, no label only implies a ‘without prejudice privilege save as to costs.’