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25 April 2019

Making Briggs without Clay

Legal professional privilege has been in the spotlight (and very rarely out of it) in recent times, such that other forms of privilege – in particular without prejudice (“WP”) privilege – may have felt a little neglected by the courts.

The decision in Briggs v Clay [2019] goes some way to addressing this. The case raises, as the court observed, important issues of principle regarding how WP privilege operates and how and when it may no longer be relied upon. It illustrates that the court will be slow to make inroads into the privilege and will do so only in narrow circumstances.

The WP rule

WP privilege operates to render inadmissible written or spoken communications which are made for the purpose of a genuine attempt to settle a dispute between the parties. A public policy justification underpins the rule: settlement discussions (and, it is hoped, settlement itself) will be facilitated if parties can speak freely, secure in the knowledge that what they have said, and, in particular, any admissions made to try to settle the matter, may not be used against them should the settlement discussions fail.

While it represents another form of privilege, WP privilege has its own distinct character and does not share the same attributes as legal professional privilege. For example:

  • Legal professional privilege (“LPP”) is a substantive right, while WP privilege is a rule of admissibility, with debate ranging in case law as to whether the rule is based on an implied contractual right or public policy or a mixture of both.
  • WP privilege cannot (normally) be waived unilaterally. This further means that, should a party come into possession of a WP document, they will not be entitled to use it without the consent of the other party.

Nor is the WP rule absolute. As the House of Lords explained in Rush & Tompkins Ltd v Greater London Council and others [1988] , WP documents may be resorted to “for a variety of reasons when the justice of the case requires it.” The principal exceptions were set out by the Court of Appeal in Unilever plc v Procter & Gamble Co [1999] as follows:

  • Where the issue is whether the WP communications have resulted in a concluded settlement agreement.
  • As evidence of misrepresentation, fraud or undue influence.
  • Where a statement may have given rise to an estoppel.
  • As evidence of perjury, blackmail or other unambiguous impropriety.
  • To explain delay.
  • As evidence about the reasonableness of a settlement (also known as the “Muller” exception).
  • On the question of costs when the parties have written without prejudice save as to costs offers.
  • Where communications are received in confidence with a view to matrimonial conciliation.

Other circumstances may arise where justice demands that the WP material be admitted into evidence. However, only principled, incremental developments of the existing exceptions or a comparable exception will likely be permitted. For example, in Oceanbulk Shipping & Trading SA v TMT Asia Ltd and others [2010], the Supreme Court held that WP material was potentially admissible as part of the factual matrix for the purposes of construing a contract concluded after WP negotiations. This has been described as an additional “interpretation” exception, though it may also be seen as the logical extension of the principle that WP communications are admissible to determine whether they have resulted in a concluded compromise agreement.

Briggs v Clay - background

The claimants were participating employers and trustees in a pension scheme. The scheme was administrated by Aon. Separate proceedings had taken place between the claimants and representative beneficiaries of the scheme in which various deeds Aon had prepared for the scheme were held to be invalid. The claimants engaged in WP discussions with the representative beneficiaries which resulted in settlement. Aon was not involved in the discussions but was kept informed by the claimants.

In the instant proceedings, the claimants brought a professional negligence claim against Aon. Aon’s defence, in addition to denying any breach of duty, alleged that the claimants’ previous solicitors and counsel (the “Defendant Lawyers”) were negligent in their conduct of the separate proceedings and the WP discussions, in failing to raise an argument that certain employees never became part of the scheme (the “Participating Employer Argument”). Aon argued that this represented a new intervening act, breaking the chain of causation between its alleged liability and the claimants’ losses.

The claimants adopted these arguments and added the Defendant Lawyers to the proceedings. In defence, together with denying any negligence, the Defendant Lawyers pleaded that Aon was closely involved in both the proceedings involving the representative beneficiaries and the negotiations leading to the settlement with those beneficiaries. In support of their pleading, the Defendant Lawyers set out a large amount of detail in relation to the WP negotiations between the claimants and Aon.

Aon sought a declaration that the fact and content of the communications were inadmissible in the proceedings.

Exceptions

There was no dispute that the relevant correspondence was WP. The question for the court, therefore, was whether any exception to the rule applied.

The Defendant Lawyers argued that:

  1. Implied waiver: Aon had impliedly waived the WP privilege by making the allegations they had against the Defendant Lawyers.
  2. The exception laid down in Muller v Linsley & Mortimer [1996] (the “Muller exception”): the Defendant Lawyers were entitled to rely on the WP correspondence by way of this exception (or a comparable exception) because it would be unjust to require them to face the allegations made against them without being allowed to deploy material that might enable them to answer those allegations.

Implied waiver

Waiver of WP privilege requires the consent of both parties. The claimants had already expressly waived WP privilege in the relevant communications. The issue was whether Aon had waived WP privilege, for its part, by implication of the allegations it made against the Defendant Lawyers.

Waiver of WP privilege cannot be partial or limited (as established in Somatra Limited v Sinclair Roche & Temperley [2000]). The court noted the wide-reaching effect of this: “If Aon is taken to have waived its privilege, the whole of the without prejudice communications with the Claimants become admissible in evidence.”[per Fancourt J at para 77]

As such, the court held that waiver was not lightly to be inferred. It depended on some distinct act, putting in issue the content or effect of WP communications..

The Defendant Lawyers relied on Somatra, among other case law, for the proposition that when a party to WP negotiations deploys the content of without prejudice negotiations as evidence on the merits of the claim, even for a limited purpose, they thereby waive their right to insist on the protection of the rule in relation to those negotiations if the other party accepts that the negotiations may be referred to.

The court rejected the Defendant Lawyers’ argument.

  • Aon had put in issue the reasonableness of the settlement, the negligence of the Defendant Lawyers in failing to raise the Participating Employer Argument, the question of whether that negligence should be treated as the only effective cause of the claimants’ loss and, if not, the extent to which the Defendant Lawyers rather than Aon should be held responsible for the claimants’ loss.
  • Aon had not deployed any of the content of the WP negotiations between them and the claimants.
  • The issues above were independent of the fact or content of the negotiations being conducted between Aon and the claimants.
  • The consequence of the Defendant Lawyers’ argument, if it succeeded, would be that merely by pleading its defence to a claim, following attempts to settle the claim in WP negotiations but without any reference to those negotiations, a party may be exposed to any admissions in those negotiations being put in evidence at trial. Such a conclusion would be liable to discourage attempts to settle litigation and be contrary to the public policy underlying the rule.

If the Defendant Lawyers were to succeed, therefore, it had to be on the basis of a Muller-type exception to the WP rule.

The Muller exception

In Muller, the claimant had been dismissed from his employment and was then involved in a shareholder dispute. After settlement, he sued his solicitors, alleging that their negligence had triggered his dismissal. In that claim, he pleaded that he had acted reasonably to mitigate his loss. The solicitors sought disclosure of the communications leading up to the settlement over which the claimant asserted WP privilege. The court held that the communications should be produced: the claimant had put the reasonableness of his own attempt to mitigate his loss in issue and so could not both assert the reasonableness of the settlement and claim privilege for the documents by which it was achieved.

The potential ramifications of the decision in Muller has caused concern. In that case, the court proceeded on the basis that the material relevant to the issue of the reasonableness of the settlement could be separated from material that went to the question of admissions. But drawing this distinction could be very difficult in practical terms and result in parties dissecting every statement made during a negotiation with a view to seeking disclosure.

As noted by the Court of Appeal in Unilever, to dissect out identifiable admissions and withhold protection for the remaining WP communications (save for an exceptional reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties. They would be inhibited from speaking freely, feeling compelled to monitor every sentence with lawyers at their shoulders as minders

Did the Muller exception apply here?

The court drew a distinction between a party in the position of the representative beneficiaries and one in the position of Aon.

  • Where negotiations were relied on to prove a collateral matter (such as reasonable mitigation of loss) and the other party to the WP communications was unaffected by the claim – like the representative beneficiaries in this case – the Muller exception would be applicable.
  • However, Aon was not in the same position as the representative beneficiaries, whose claims had been settled. The very claim against Aon that was being negotiated in the WP communications was pending. This was, in the court’s view, a significant difference from Muller. Aon had a legitimate continuing interest in the broad protection provided by the WP rule and it risked losing that protection if the content of the WP communications was put in evidence, even if to prove a collateral matter.

The court did not think there was any significance in the fact that it had been Aon that had first raised the allegations of negligence against the Defendant Lawyers. The very foundation of the rule would be undermined if the making of allegations against another party to proceedings took one outside the scope of the WP rule.

A further significant differentiating factor from Muller was that, in Muller, it was material that the claimant had put in issue the reasonableness of his negotiations with the shareholders. That issue was not justiciable without disclosure of the negotiations. Here, the negotiations with Aon were unnecessary to make the allegation of unreasonable settlement justiciable. The fact of Aon’s involvement to some degree in discussing the basis of the settlement was apparent from the open correspondence. What would be missing was material showing the degree of Aon’s involvement. However, it was far from necessary to refer to the WP communications in order to have a fair trial of the issues.

The court did agree with the Defendant Lawyers that the fact (but not the content) of the WP communications could be referred to in evidence. In the court’s view, once this was admitted, there was relatively little of any substance that would be excluded.

In a final attempt to win over the court, the Defendant Lawyers suggested that the court could separate out the WP material and redact it as necessary, so that matters relating to the claimants’ claims against Aon were not deployed at trial but matters relating to the claimants’ negotiations with the representative beneficiaries were able to be used.

At first blush, this seemed an attractive course to the court. However, invoking the Court of Appeal’s observations in Unilever, the court was quick to point out a number of difficulties both in practice and in principle:

  • There was no clear dividing line: the two aspects of the negotiations could not properly be separated.
  • In some instances, the redaction of particular documents would result in the removal of parts of paragraphs or of a single sentence. There was “no definitive map of the surgery” that would need to be performed to achieve the objective.
  • The risk of such an exercise being conducted, as the court in Unilever made clear, would tend to undermine the public policy that litigants should be encouraged to speak openly in an attempt to settle their disputes, and not have to take great care about what they say for concern that parts of their discussions may become admissible in the trial of the very dispute they were attempting to settle.

Comment

A party will likely face an uphill struggle to persuade the court to lift the veil on WP privilege unless the circumstances fall within a recognised exception (or an incremental extension to that) or else justice demands it. As the court in Briggs emphasised, the WP rule is “designedly broad in its effect and the exceptions are narrow”.

The WP rule, therefore, is perhaps less vulnerable to challenge than LPP has been in recent times. Parties, however, must be mindful of the fine dividing line that exists where one party decides to deploy an argument touching upon matters that are the subject of WP negotiations. In Briggs, Aon fell the right side of the line (from their perspective) since the court did not consider – on the facts – that they had deployed the content of WP material, nor that this content was required for a fair trial.

One point not apparently raised before (and therefore addressed by) the court was whether any statements made by Aon in the WP correspondence may have given rise to estoppel, which is a recognised category of exception, as noted above. Presumably statements were not identified sufficient to raise an estoppel but it is an interesting consideration.

The extent of the Muller exception has been the source of some uncertainty and the court’s judgment goes some way to addressing that. The exception will likely only come into play where either (1) negotiations are relied on to prove some collateral matter and the other party to the WP communications will be unaffected by admission of the WP material, or (2) the party seeking to assert the privilege has raised an issue which is only justiciable upon proof of the WP communications. Meanwhile, persuading the court to embark on a redaction exercise as a middle ground is unlikely to succeed.


This blog was first published by the Commercial Litigation Journal.

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