Settlement offers aren’t confidential after all if one party sues their solicitor

Update, 14 November: here’s an English firm’s note about Vaseghi and another case involving without prejudice privilege in an employment dispute context. 

Original post: You don’t often see cases about waiver of without prejudice privilege, whereas forests fall at an alarming rate in relation to nice questions like whether ‘fairness’ or ‘inconsistency’ is the right touchstone for imputed waiver of legal professional privilege. Here’s one, though, from the English Court of Appeal: Vaseghi v Brunel University [2007] EWCA Civ 482. I have reproduced below the little precis of the law of negotiation privilege in the judgment, which emphasises that the privilege is a joint privilege ‘owned’ by each party to the communication and cannot be unilaterally waived by one party. Meanwhile, VCAT’s Senior Member Vassie has allowed evidence to be tendered in a professional negligence claim of what went on in a mediation in the underlying litigation, at the instance of one participant (who was suing his lawyer) without the consent of the other participant: Louis v G&O’B [2007] VCAT 1997 refusing to follow an earlier decision dead on point of a fellow Senior Member.

The analysis focussed on the County Court Act, 1958 and the County Court Rules of Civil Procedure, 1999 which proscribed the adduction of evidence in certain classes of proceedings of anything that was said or done in the mediation, but gave no consideration to whether the confidential offers made by Mr Louis’s opponent in the underlying proceeding, which are faithfully set out in the reasons, might have been caught by negotiation privilege at common law.

It seems anomalous to me that the protection afforded to an offer made at mediation is less than an offer made over the telephone. Imagine a bitter de facto property battle in which a de facto husband says ‘You can have Phoebe in the custody proceedings for all I care if I can keep the Porsche’. Any time within the 6 years after the mediation, that offer could be published all over the internet as the result of that offer being recorded either in a judgment in a solicitor’s negligence case brought by the de facto wife against her solicitor.

  1. When during Mr Louis’s evidence Mr Hebb asked him a question abut events that occurred during the mediation, Mr Tatarka objected. He referred me to Rule 50.07(7) of the County Court Rules. Rule 50.07(2) states that an order for reference to mediation may be made at any stage of a proceeding. Rule 50.07(7) states:

(7) Except as all the parties who attend the mediation in writing agree, no evidence shall be admitted of anything said or done by any person at the mediation.

The submission was that the rule precluded me from admitting any evidence of anything said or done at the mediation that Mr Louis might have wanted to rely upon in support of his second allegation in this proceeding against the practitioner. Mr Tatarka referred me to a decision of the Legal Profession Tribunal (a predecessor of the Victorian Civil and Administrative Tribunal) Taubitz v Patrick v J. Cannon Coburn & Associates Pty [2002] VLPT 10, in which the Registrar accepted a similar submission in a case in which a client complained of a failure by a legal practitioner to advise him, when he agreed to a settlement at a mediation, that the settlement would include a provision for payment of a party’s costs.

  1. When the objection was made I said that I would receive, subject to the objection, evidence of what was said and done during the mediation, and would rule on the objection when I gave my decision in the case generally.
  1. The County Court’s power to refer a proceeding to mediation derives from the County Court Act 1958 (as amended), section 47A. In 1996 the Act was amended to include section 47B, which (with underlining added by me) reads:

47B. Mediation

Where the Court refers a proceeding or any part of a proceeding to mediation, unless all the parties who attend the mediation otherwise agree in writing, no evidence shall be admitted at the hearing of the proceeding of anything said or done by any person at the mediation.

  1. Rule 50.70(7) should, in my opinion, be read in conformity with section 47B, so that the prohibition on admission of evidence of anything said or done at mediation applies only to admission at the hearing of the very proceeding which had been referred to mediation. Read in that way, the rule reflects the policy underlying it, which is the public interest in the promotion of settlement of disputes. Settlement is promoted if a party to a proceeding is not permitted at a trial of the proceeding to rely upon a statement made during a mediation of the proceeding as an admission of a fact or as a previous inconsistent statement. The rule has that effect. On the other hand, settlement would not be promoted if a party who alleged that the proceeding had been settled at the mediation was not permitted to adduce evidence of what had been said or done at the mediation in order to prove the fact of settlement. In my view the rule does not have that effect.
  1. The rule does not say that no evidence shall be admitted in any other proceeding (between the same parties or between any other persons) of anything said or done during the mediation of a proceeding that had been referred to mediation. If it did say that, arguably it would be beyond power. Read in the light of section 47B, it should not be given that effect. Evidently in the Taubitz case section 47B was not drawn to the Registrar’s attention. In my opinion the rule does not, in a proceeding between solicitor and client, prohibit the admission of evidence of events that occurred during the mediation of an earlier proceeding between the client and another person. I disallow the objection.’

Now, that precis I mentioned above:

‘The “without prejudice” rule is a rule of evidence. Where it applies, it operates to prevent a party from adducing evidence of negotiations genuinely aimed at settlement between him and his adversary. The privilege attaches to communications between parties to a dispute which have as their object the resolution of a dispute.

The privilege is a doctrine of high importance, as is made plain by the decision of the Court of Appeal in Savings & Investment Bank Ltd (in liquidation) v Fincken [2004] 1 WLR 667. Indeed, as that case shows, the public policy underpinning the ‘without prejudice’ rule is so powerful that it ‘trumps’ the due administration of justice when the two come into conflict As Rix LJ put it:

“It is of course distasteful for this or any court to avert its eye from an admission which, subject to any point about value, appears to incriminate Mr Fincken in lying in a sworn document. However, in the tension between two powerful public interests, it seems to me that that in favour of protection of the privilege of ‘without prejudice’ discussions holds sway – unless the privilege is itself abused in the occasion of its exercise.”

Nor is it necessary for documents or discussions to be headed “without prejudice” in order to engage the principle. If there is a dialogue with a view to the compromise of a dispute, then the privilege arises irrespective of the presence or absence of a heading (see Chocoladefabriken Lindt v Nestle [1978] RPC 287).

The privilege is not, however, engaged where there is no dispute between the parties. The absence of a dispute was the basis upon which the EAT in BNP Paribas v Mezzotero [2004] IRLR 508 had ruled that no privilege attached to discussions of the terms upon which an employee might leave employment.

Once the privilege has been engaged, it protects disclosure even after the proceedings have come to a conclusion. The principle is illustrated by the decision of the House of Lords in Rush & Tomkins v GLC [1989] AC 1280. In that case, proceedings between a claimant and the first defendant had come to an end by means of a settlement, and the claimant was pursuing remedies against the second defendant. The House of Lords ruled that ‘without prejudice’ communications between the claimant and the first defendant were not disclosible in the course of the proceedings between the claimant and the second defendant.

It is not enough for one party to seek to open up the privileged communications. Waiver must be consensual. If one party seeks to adduce evidence of the privileged discussions the other party may agree to this course of conduct or may object.’

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