Within or out of scope: third party communications and without prejudice privilege

In this article, Simon Heatley discusses recent case law which considers the scope of without prejudice privilege and sets out some key considerations for dispute resolution practitioners.

Can without prejudice privilege (WPP) attach to communications with a third party in connection with settlement discussions? It is a question that arises in practice and that was answered by the Court of Appeal many years back, in Rabin v Mendoza & Co [1954] 1 WLR 271. However, that decision has come in for criticism among commentators and the question meanwhile has received little in the way of substantial judicial consideration, until now.

Understanding WPP

WPP is distinct from legal professional privilege. It is a rule of evidence that exists as a matter of policy to enable parties in dispute to negotiate freely and candidly in the knowledge that the content of those negotiations may not be deployed against them in court.

Communications with a third party

The above is well settled across decades-worth of case law. What has been less certain is the question of whether WPP can extend to communications that are not between the disputing parties but are said to be in furtherance of attempts to achieve settlement.

Rabin

In Rabin, there had been WP negotiations between two parties. In consequence of something provisionally agreed in those negotiations, and in order to facilitate them, one party commissioned and obtained a surveyor’s report. The Court of Appeal held that this report was covered by WPP. The only object of obtaining the report, in the court’s view, was to implement the understanding reached between the parties on a WP basis.

The decision has not been without its detractors. Leading commentators have criticised Rabin as being inconsistent with modern law and cautioned against any notion that the understanding between the parties should be inferred.

BNP Paribas

Rather like buses, after a long period without significant judicial consideration, the issue is at the centre of two recent cases.

In BNP Paribas Depositary Services Ltd & Anor v Briggs & Forrester Engineering Services Ltd [2024] EWHC 2575 (TCC) Mr Alan Bates, sitting as a Deputy Judge of the High Court, was of the firm view that the Court of Appeal’s judgment was sensible in terms of both its reasoning and its result (and of course was binding on him). The commissioning and obtaining of the report was a specific element forming part of the parties’ mutually agreed mechanics of an alternative dispute resolution process. He observed:

• The focus of WPP is on inter-party communications but there may be circumstances where there are documents outside that, but within a narrow penumbra around it, that the rule also renders inadmissible (an example being such as illustrated by Rabin).
• Where parties have come to a mutual understanding as to a step to be taken by one or both of them, in the course of WP negotiations and as part of a mechanism to achieve resolution, WPP may attach to a party’s internal communications and communications with third parties which are for putting that mutual understanding into effect.

This did not avail the claimants in BNP Paribas, however. The dispute concerned responsibility for the identification and removal of asbestos-containing materials as part of a contract for renovation and building works. The parties had corresponded on a WP basis. The negotiations broke down. Subsequently, the claimants obtained survey reports on the presence of asbestos in the relevant building, without informing the defendant, in the hope that the reports would be of assistance to any further negotiations between the parties.

The reports were not provided to the defendants until sometime later, by which point proceedings had been issued. The claimants asserted WPP; the defendants rejected its application.

The key factor for the court was that the evidence – in contrast to Rabin – did not show that the reports had been commissioned pursuant to a mutual agreement or understanding between the parties. They had been commissioned unilaterally and without the defendant’s knowledge.

Mornington

In Mornington 2000 (t/a Sterilab Services) v SoS for Health and Social Care [2025] EWHC 540 (TCC) a dispute had arisen concerning a contract for the supply of Covid-19 lateral flow tests. During a WP meeting, the parties discussed arrangements for an audit of the manufacturing facility (following three previous audits whose findings were disputed) as one of eight headline proposals for settlement. There followed WP correspondence where the parties discussed the scope of the proposed audit. With a date agreed for it, the audit was conducted on the instructions of the defendant, which also funded it. A dispute then arose as to whether the report was covered by WPP.

It had been common ground at the hearing that Rabin was not concerned with the public policy justification, but with the circumstances in which the ambit of the rule may be widened by agreement of the parties. It appears, though, that the defendant’s argument developed in submissions and its final position was that there was in fact no need to establish an agreement (whether express or implied); it was enough to contend that the report had been created under the umbrella of WP negotiations and so was subject to the public policy justification for WPP.

Joanna Smith J held that the report was not protected by WPP. The judge started with the public policy justification for WPP. Being an independent report from a third party, it did not fall within the public policy justification of allowing parties to speak freely in negotiations. Although there was no doubt that the WP negotiations between the parties included discussions as to the commissioning of an audit report, the court was unpersuaded that the report was automatically cloaked in WPP: the report was not itself a statement or offer made in the course of negotiations, nor a record of negotiations between the parties, nor did it have anything to do with admissions.

On the public policy point, the judge added that she did not understand Rabin to be authority for the proposition that a third party report falls within the public policy arm of WPP, that being a case (in her view) which appeared to turn on the parties’ "understanding" that the survey report should be WP. Further, the public policy rationale could not possibly cover anything the parties do further to discussions at a WP meeting: that would be to extend the ambit too far. (It didn’t help the defendant that it sought to rely upon public policy justification "at the eleventh hour".)

The court also determined that there was no express or implied agreement between the parties to extend WPP to the report. The fact that the WP discussions referred to procuring a third-party report did not mean that there was an express agreement that the report would be protected by WPP, nor was there evidence of an implied agreement to such effect.

Takeaways for parties and practitioners

There is arguably some tension between BNP Paribas and Mornington. In the latter, the court viewed Rabin as not providing authority for the proposition that a third-party report can fall within the public policy arm of WPP. By contrast, in BNP Paribas, the court considered that it was incorrect to read Rabin as being limited solely to applying WPP to such a report in order to give effect to an agreement between the parties. Rather, the "true position" was that WPP applies pursuant to the public policy justification where the parties effectively embark upon jointly the third-party communications as an element of their joint efforts to settle their dispute. There does not need to be specific agreement that the communications will be covered by WPP.

The judgments ultimately reach the same point: there needs to be some form of agreement between the parties. BNP Paribas says that specific agreement on the application of WPP is not needed, but what is needed is consent by both parties to the third party’s performance of a role forming part of the mechanisms of their WP negotiation process. Unilateral action by one party that is not part of such an agreement will likely step outside the ambit of WPP.

Where does this leave parties and practitioners? The position would benefit from further Court of Appeal authority given the differing approaches taken by two High Court judges. There is also the question of whether litigation privilege would nonetheless apply (where the communication is between client or lawyer and third party for the dominant purpose of a dispute in reasonable contemplation). This is not a point that either of the recent judgments examines, beyond a passing reference to the privilege in BNP Paribas in a hypothetical scenario.

In the meantime, the prudent course of action for parties and their legal advisers must be to ensure there is express agreement between the parties regarding any approach to a third party if it is desired that it fall within the ambit of WPP. Anything falling short of this risks falling outside the ambit, regardless if it is done purely for settlement purposes.

Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com.