Without prejudice privilege and negotiations long before litigation

CMS Cameron McKenna, an English firm, has noted a new English case on the availability of without prejudice privilege — otherwise known as negotiation privilege — over negotiations which take place long before litigation is commenced or even a reasonably certain prospect. In Framlington Group Limited v Barnetson [2007] EWCA Civ 502, an unlawful termination of employment case, the Court of Appeal said ‘the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree’. The relevant passage is:

  1. ‘for the “without prejudice” rule to give full effect to the public policy underlying it, a dispute may engage the rule, notwithstanding that litigation has not yet begun. If there were any doubt about that bare proposition, it is dispelled by the following authorities and applications of it.
  2. In Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, AC, the House of Lords proceeded upon the basis that exchanges some 21 months before the start of litigation could attract the rule in the same way as exchanges after the start of litigation. The issue there was whether admissions by a mortgagor in default as to his liability to pay the amount outstanding, against whom his mortgagee had obtained possession, were admissible in subsequent proceedings by the mortgagee for the arrears. No point arose on the appeal as to the exchanges in question having taken place before commencement of the relevant litigation, the only question being whether an acknowledgement of debt, as distinct from an offer in negotiations with a view to compromise of a disputed liability, was caught by the rule. The House held that it was outside the rule, as not coming within the public policy interest of encouraging settlement of a dispute. It was implicit in all their Lordships’ speeches that the rule, if applicable at all, included exchanges in negotiation before the start of the proceedings for the arrears. Lord Walker of Gestingthorpe, for example, described the public policy interest, at paragraph 37:
  3. “in encouraging the settlement of disputes so as to avoid (or at least shorten) litigation”

    Lord Mance, at paragraph 81, indicated the breadth of the policy, albeit obiter, by reference to Lord Griffiths’s observations in Rush v Tompkins:

    The existence of a dispute and of an attempt to compromise it are at the heart of the rule whereby evidence may be excluded (or disclosure of material precluded) … The rule does not of course depend upon disputants already being engaged in litigation. But there must as a matter of law be a real dispute capable of settlement in the sense of compromise (rather than in the sense of simple payment or satisfaction)”.

    See also per Lord Hoffmann, at paragraph 18, in his reference to the background for the ruling of Court of Appeal in Unilever PLC v The Proctor & Gamble Co [2000] WLR 2336.

  4. The question remains, how proximate, if at all, must unsuccessful negotiations in a dispute leading to litigation, be to the start of that litigation, to attract the “without prejudice” rule. Must there be, as Mr Oldham contended, an express or implied threat of litigation underlying the negotiations, or, failing any such threat, some proximity in time to the litigation eventually begun? In answering that question, the courts are logically driven back, as Mr Nicholls submitted, to the public policy interest behind the rule, of encouraging parties to settle their disputes without “resort” to litigation or without continuing it until the needless and bitter end. If the privilege were confined to settlement communications once litigation had been threatened or shortly before it is begun, there would be an incentive on both sides to escalate their dispute with threats of litigation and/or to move quickly to it, before they could safely start talking sensibly to each other. That would be a slippery slope to mutual hardening of positions and commencement of litigation – hardly the encouragement to settle their disputes without resort to litigation that Oliver J had in mind in Cutts v Head.
  5. On the other hand, the ambit of the rule should not be extended any further than is necessary in the circumstances of any particular case to promote the public policy interest underlying it. The critical question for the court in such a case is where to draw the line between serving that interest and wrongly preventing one or other party to litigation when it comes from putting his case at its best. It is undoubtedly a highly case sensitive question, or put another way, the dividing line may not always be clear. The various judicial pronouncements in the leading cases to which I have referred do not provide any precise pointers, and there are seemingly no other authorities directly in point.
  6. However, the claim to privilege cannot, in my view, turn on purely temporal considerations. The critical feature of proximity for this purpose, it seems to me, is one of the subject matter of the dispute rather than how long before the threat, or start, of litigation it was aired in negotiations between the parties. Would they have respectively lowered their guards at that time and in the circumstances if they had not thought or hoped or contemplated that, by doing so, they could avoid the need to go to court over the very same dispute? On that approach, which I would commend, the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree. Confining the operation of the rule, as the Judge did, to negotiations of a dispute in the course of, or after threat of litigation on it, or by reference to some time limit set close before litigation, does not, with respect, fully serve the public policy interest underlying it of discouraging recourse to litigation and encouraging genuine attempts to settle whenever made.
  7. Most of the judicial observations on the rule and the public policy underlying it have been made in cases where the communications in question were made after litigation had been commenced. However, as I have mentioned, in Bradford & Bingley v Rashid, they ante-dated the start of proceedings by about two years; and in South Shropshire District Council v Amos, the Court of Appeal was not deterred from upholding Gatehouse J’s acceptance of negotiations as privileged long before referral of the matter to the Lands Tribunal.
  8. In the light of the guidance derived from the jurisprudence, I have no hesitation in concluding that the Judge was wrong to reject the claim for privilege, as he did in paragraph 38 of the judgment, on the basis that there was no dispute between the end of October and mid-December 2005 because at that stage no litigation had been commenced or threatened. The summary history that I have given of what, on Mr Barnetson’s account, had passed between him and Framlington between early March and late October 2005, culminating on 28th October 2005 in Framlington’s notification of its intention to dismiss him at the end of the year, demonstrates that they were already well and truly at odds as to his contractual entitlement. All that followed over the next six or so weeks of exchanges, including those the subject of Framlington’s claim of privilege, amounted to wrangling over the terms of that entitlement, not discussions as to variation of them as the Judge found.
  9. The amount of money in issue between the parties and the manner and content of the negotiations were such that both were clearly conscious of the potential for litigation if they could not resolve the dispute without it. As I have indicated, Mr Kyprianou and Ms McMahon’s evidence was, in general,[2] of a piece with Mr Barnetson’s account of the exchanges – which the Judge accepted. On his evidence, Mr Kyprianou, on 28th October 2005, suggested that they should discuss terms for him to leave Framlington at the end of the year because “there would be no role for him in the new structure”. It was a clear indication of Framlington’s intention to dismiss him before the expiry of his full contract term, an intention to which Mr Kyprianou and others involved at Framlington adhered throughout the ensuing negotiations. And throughout, Mr Barnetson’s stance was that dismissal on the terms proposed by Framlington would be unlawful and/or unfair because they did not conform with his contractual entitlement. It is noteworthy too that, on 13th December 2005, before the final abandonment of the negotiations, he wrote to Framlington, threatening proceedings if the dispute between them was not speedily resolved.
  10. The resultant picture is one of negotiations arising out of a dispute as to Mr Barnetson’s contractual entitlement on his early dismissal, all against the backcloth of potential litigation if they could not resolve the dispute by compromise. It is not a picture of negotiations to vary his contractual entitlement against the possibility that he might not be dismissed after all, or to accommodate the proposed early dismissal, with no thought given on either side to potential litigation if variation were not agreed.’
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