Company owners and directors will often find themselves at the early stages of a dispute, where they hope to find potential resolutions while protecting their interests. During such times, it is important to communicate openly and explore solutions without the risk of having their words later used against them. This is where the concept of privilege comes into play. Privilege allows for pragmatic, protected discussions—facilitating parties to negotiate, strategise and obtain legal advice without undermining their position. In today’s evolving legal landscape, understanding the scope and boundaries of privilege is crucial as courts continue to address new challenges and refine its application.
Privilege under UK Law
In UK law, privilege is essential for protecting confidential communications from being disclosed in legal proceedings. These can be divided into two core types of privilege: Legal Professional Privilege (including Legal Advice Privilege and Litigation Privilege) and Without Prejudice Privilege.
Legal Advice Privilege applies to all communications, between a lawyer and their client, made for the purpose of seeking or providing legal advice. Should a non-legal professional choose to instruct a lawyer from the outset of a dispute, this privilege can be utilised to protect all relevant communications. In contrast, Litigation Privilege applies more broadly to both legal and non-legal professionals, provided the communication’s dominant purpose relates to preparing or managing litigation. Notably, this privilege cannot be utilised until such a time that litigation is ongoing, pending or becomes reasonably anticipated.
Alternatively, Without Prejudice Privilege is particularly appliable at the outset of a dispute. It extends to both legal and non-legal professionals (inclusive of third parties (Rabin v Mendoza [1954] 1 WLR 271)) and encompasses all communications made as part of a genuine effort to settle the matter. Where this privilege applies, parties obtain a general right to withhold relevant communications from third parties and the court.
Core principles of Without Prejudice Privilege
For Without Prejudice Privilege to apply, the following conditions must be met:
- Existence of a Dispute: A dispute must exist between parties at the time the statement was made;
- Genuine Attempt to Settle: Communication must aim at resolving the existing dispute. This can include settlement offers or discussions aimed at constructively narrowing issues for the purpose of settlement.
- Mutual Understanding: Both parties should understand and intend that the communication is without prejudice. Where written communications take place, whilst not determinative, parties should ensure that these are clearly labelled as “Without Prejudice” as a matter of good practice, to indicate a genuine intent to settle.
Exceptions to Without Prejudice Privilege
Without Prejudice is not an absolute rule and, therefore, communications of this nature can still be resorted to in instances where “the justice of the case requires it” (Rush & Tompkins Ltd v Greater London Council and others [1988] UKHL 7, Lord Griffiths). Where an exception applies, the relevant part of the protected communication will not benefit from Without Prejudice Privilege and will be admissible to the extent of fulfilling the purpose of that exception.
Through Case Law, we have seen Without Prejudice protection fall away where communications:
- evidence facts within the parties’ common knowledge (Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] UKSC 44 (‘the Oceanbulk exception’));
- support an estoppel argument;
- explain a delay;
- address whether a settlement agreement is binding and/or the reasonableness of the settlement terms; or/and
- involve fraud, misrepresentation, undue influence or improper conduct.
(Unilever plc v Procter & Gamble Co [1999] EWCA Civ 3027)
Waiver of privilege
Without Prejudice Privilege applies to the parties to the communication, and so, it follows that this protection can only be waived by the consent of both parties. Should one party wish to unilaterally rely on Without Prejudice material, the other party may choose to either treat this as a waiver of privilege, whereby communications become admissible; or alternatively, apply to strike out the relevant material.
Recent case law developments
Pentagon Food Group Ltd and others v B Cadman Ltd [2024]
In recent months, the High Court has provided valuable insight into the application of Without Prejudice Privilege in the case of Pentagon Food Group Ltd and others v B Cadman Ltd [2024] EWHC 2513 (Comm).
This case revolved around allegations of misrepresentation and the interpretation of a settlement agreement reached during mediation. The dispute originated following a fire at a property allegedly owned by the defendant, leading to a claim that was subsequently resolved through mediation. However, it later emerged that the defendant did not own the property, and thus, had no legal basis to bring the original claim against Claimant 1. As a result, a new claim was brought against the defendant, raising the question of whether communications from the mediation could be used as evidence to support this claim.
In considering this issue, the court made the following key observations:
- there is no separate mediation privilege: whilst the court recognised the “undoubted enhanced importance of mediation” in recent years, it declined to recognise this as an enhanced form of privilege that extended beyond the standard Without Prejudice protections;
- the Oceanbulk exception (detailed above) should extend to interpreting implied contractual terms (obiter); and
- the exception to Without Prejudice Privilege, admitting communications indicative of misrepresentation, fraud or undue influence, should be extended to also encompass negligent misrepresentation (obiter).
Accordingly, Without Prejudice Privilege was held to apply to the contents of the mediation, and thus, the exceptions to this privilege were equally applicable. On the basis of alleged misrepresentation, communications arising at the mediation therefore became admissible as evidence. This ultimately led the High Court to conclude that the defendant had committed fraudulent misrepresentation, along with a breach of express terms within the settlement agreement.
Key takeaways on privilege and protecting your position
For non-legal professionals, understanding the concept of privilege and its evolving boundaries is crucial, especially in business or negotiation contexts. Without Prejudice Privilege offers a vital tool for protecting sensitive discussions during dispute resolution or settlement talks. This protection ensures that parties can negotiate freely and explore settlement options with a reduced likelihood that their statements could later be used against them in court.
As demonstrated in the Pentagon Food Group case, the scope of privilege is not absolute, and non-legal professionals must be aware of the nuances and potential exceptions that could make their communications admissible in legal proceedings. Nonetheless, by recognising the importance of privilege and adhering to best practices—such as clearly labelling communications as “Without Prejudice”—non-legal professionals can safeguard their positions to a greater degree and engage in more effective, confident negotiations.
It is important to note, however, while early-stage dispute resolution can often benefit from privilege protections such as Without Prejudice Privilege, there may come a point where instructing solicitors can prove advantageous. Engaging solicitors not only offers access to expert legal advice but also extends the scope of privilege to include Legal Advice Privilege and potentially Litigation Privilege. These protections can be invaluable as a disputes progresses, helping to ensure that sensitive communications remain confidential, and the party’s position remains secure.
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