In April 2022, the Employment Appeal Tribunal (EAT) overturned the original decision in the case of Swiss Re Corporate Solutions Limited v Mrs Sommer, but reinforced the warning to employers and practitioners alike that you must be careful when negotiating an employee’s exit, or you could be found to have acted with “unambiguous impropriety” and lose the “without prejudice” protection.
Preliminary hearing decision
The employment judge at the preliminary hearing had considered a letter marked “without prejudice and subject to contract” (the WP Letter) in which a number of allegations had been made against Mrs Sommer. It was stated in the WP letter that these allegations could result in summary dismissal, criminal convictions, fines and/or findings of a breach of the Conduct Rules of the Financial Conduct Authority (FCA), which could make it difficult for her to work again in the regulated sector. The WP letter ended by offering a settlement agreement in which Ms Sommer would be paid £37,000 and her employment would be terminated.
Mrs Sommer sought a ruling from the employment judge that despite being marked “without prejudice”, the letter should be admissible in the full merits hearing on the grounds that its contents amounted to “unambiguous impropriety”.
What are the existing rules on Without Prejudice communications?
There is a strong consistent rule that communications, written or oral, when made as part of negotiations aimed at settlement of a dispute are not generally admissible in evidence in litigation between the parties over that dispute. That rule is founded upon the public policy of encouraging litigants to settle their disputes by agreement and enables them to negotiate without fear that what is said will be used in evidence.
There is, however, authority that this privilege must not be used and will not apply in a case where it would “act as a cloak for perjury, blackmail or other unambiguous impropriety”. In such a case, the public interest in disclosure will outweigh the usual public interest in maintaining the privilege.
In Mrs Sommer’s case, the WP Letter had been sent out before an investigation had been conducted to establish the facts around the allegations it contained. Consequently, the employment judge found that there was no basis at all for Mrs Sommer’s employer to assert that what she had done was serious misconduct which fundamentally undermined the employment relationship and hence merited summary dismissal or that she had committed one or more criminal offences.
At the preliminary hearing, the employment judge concluded that the employer (via their solicitors) had grossly exaggerated the severity of what Mrs Sommer had done in order to put pressure on her to accept what they proposed, namely the immediate termination of her employment. The employment judge was therefore satisfied that the making of those threats in those circumstances was an abuse of the privilege and that they unambiguously exceeded what was permissible in settlement of hard-fought litigation.
At the Employment Appeal Tribunal
Swiss Re appealed the admissibility of the WP letter to the EAT. In revisiting the decision reached at the preliminary hearing the EAT considered that the employment judge may well have been right to describe the framing of the allegations made in the WP Letter as “grossly exaggerated”. However, the EAT considered the employment judge to have failed in not acknowledging that the facts did at least arguably point to a breach of confidence, breach of contract, breach of the data protection legislation and conduct lacking integrity. The EAT therefore determined that the employment judge’s reference to allegations of serious misconduct having “no basis at all” was an error. The EAT went on to say that exaggeration will not usually pass the high threshold of unambiguous impropriety without findings as to the guilty party’s state of mind. Given the nature of the preliminary hearing at which oral evidence had not been given by the parties, the EAT concluded that there had not been sufficient evidence made available to allow for a ruling of unambiguous impropriety. That is to say, there would need to be a rigorous analysis of what an employer genuinely believed with the benefit of oral testimony. The EAT did, however, make the comment that Swiss Re and their solicitors had sailed close to the wind with the WP Letter. Nonetheless, it was concluded that the WP Letter was inadmissible in evidence at any subsequent full merits hearing.
This decision provides a useful analysis of the law surrounding the without prejudice privilege and acts as a reminder to employers and practitioners alike that they need to be very mindful of the foundation of any allegations being asserted in correspondence of this nature by way of inducing the acceptance of settlement terms. Our team can assist you in your drafting of settlement offers to ensure your correspondence attracts such valuable without prejudice protection.
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