Defendants’ application to exclude evidence said to be ‘without prejudice’ The case concerned a pension scheme for employees within a group of companies. In a prior action by way of a Part 8 claim brought by the trustees of the scheme, the court had held that various deeds prepared for the scheme over many years by the scheme administrators, Aon, were invalidly executed and of no effect. As a result, the burden on the participating employers was increased. There were many employees of associated companies whose claim to membership of the scheme derived not from the deeds directly at issue in the proceedings but from deeds of adherence. Following judgment on the Part 8 claim, there was consideration by the trustees and employers as to whether to appeal, and the solicitors for Aon were involved in those discussions since it was clear that the extra burden on the employers and the expenses of the litigation would be the subject of a claim against Aon. Following negotiations between the trustees/employers and the representative beneficiaries, the parties reached a settlement which included the granting of benefits to those employees whose membership depended on the deeds of adherence.
The employers then brought professional negligence proceedings against Aon. By its defence, Aon contended that the employers should never have accepted in the Settlement that those employees who were subject to deeds of adherence became part of the scheme; and that the legal advisors of the employers had been negligent in failing to pursue that argument (referred to as ‘the Participating Employer Argument’) in the Part 8 litigation and the settlement negotiations, which negligence broke the chain of causation. The employers thereupon joined their former lawyers, both solicitors and counsel, as additional defendants, adopting Aon’s allegations. By their defence, the lawyer defendants contended that Aon, through its solicitors, had been kept closely informed about the issues and arguments in the Part 8 proceedings and, although not directly involved, had liaised with them on those issues and arguments, including during the negotiations which led to the Settlement.
The judgment explains: ‘Aon disputes in particular that it was ‘closely’ involved or that there was close liaison in such matters. There is, however, no dispute that Aon were involved to some extent with the way in which the negotiations with the representative beneficiaries were being conducted: some of the communications between Gowling and Aon’s lawyers are open and will be admissible to prove a degree of liaison and involvement.’
The lawyer defendants sought to rely extensively on the WP communications which they conducted on behalf of their clients with Aon’s lawyers regarding the negotiations which led to the Settlement. They stressed that they sought to rely on that material not for the truth or falsity of anything said or for any admission or implied admission, but only so that the trial judge could see the extent to which Aon’s lawyers were involved. The lawyer defendants contended that this evidence was admissible under the Muller exception to the WP rule.
Held: After a comprehensive review of the authorities, Fancourt J explained the issue facing the court: ‘In both Muller and EMW Law, the without prejudice negotiations involved third parties and related to a different claim, albeit a claim that had some connection with the proceedings before the court. In Muller the negotiations had been concluded and the claim against the third party had been resolved. In EMW Law, there was no finding that the dispute with the third party had been resolved. The orders for disclosure made in neither case included without prejudice communications about the claim that was before the court.
What is distinctive about this case is that there is one claim against different parties: Aon – who, unless they have waived it, have the benefit of privilege in the without prejudice communications with the Claimants – and the Lawyer Defendants, who acted for and advised the Claimants in those negotiations and who wish to rely on the privileged material. The case is unusual in that related without prejudice communications between the Claimants and the representative beneficiaries will be in evidence at trial. The Claimants have waived privilege by suing their former solicitors and Counsel in relation to the conduct of those negotiations and the representative beneficiaries have confirmed their agreement to those negotiations being disclosed. But the Lawyer Defendants seek to put in evidence the content of separate without prejudice communications made in an attempt to settle this claim at the same time as the Approved Settlement was being negotiated with the representative beneficiaries’ lawyers.’
Having rejected the argument that Aon had impliedly waived the WP protection, Fancourt J turned to consider the ratio and scope of the Muller exception: ‘It is significant that all three Lords Justices in the Muller case considered it to be material that the plaintiff had put in issue the reasonableness of his negotiations with the shareholders and that that issue would not be justiciable without disclosure of the negotiations. Similarly, in EMW, Newey J considered it to be material that Mr Halborg had referred to the content of his without prejudice negotiations with BLM and that it was hard to see how EMW’s claim would be justiciable without disclosure of the negotiations. Lewison LJ observed in Avonwick that it was hardly surprising that the court ordered disclosure of the negotiations in Muller given that the plaintiff had put that matter directly in issue.
In this light, the general principle that bringing a claim or making an allegation does not disentitle a party to rely on without prejudice privilege may well be qualified where an issue is raised that is only justiciable upon proof of without prejudice negotiations. Indeed, in cases where the Muller exception has been applied, the judges have emphasised that the claim would otherwise be non-justiciable. A claimant (or defendant) cannot at one and the same time raise an issue to be tried and rely on without prejudice privilege to prevent the court from seeing the evidence that is needed to decide it. However, this exception has not previously been held to apply in the case of without prejudice negotiations in the very claim that is before the court.
I consider that there are a number of facets to the so-called Muller exception, which go beyond the fact that the negotiations have some independent relevance as a fact apart from the truth or falsity of anything stated in them. That is no doubt a necessary condition for any exception applying, otherwise the policy underlying the without prejudice rule would be directly infringed, but it is not a sufficient condition for the application of the Muller exception. This appears to me to depend on the necessity of admitting the material to resolve an issue raised by a party to without prejudice negotiations, in circumstances in which the legitimate protection given to the parties to the negotiations is not adversely affected.
It is clear, on authority, that there is no exception to the without prejudice rule merely because justice can be argued to require one on the facts of a particular case. In EMW Law, Newey J did not conclude that disclosure should be given because justice required it: he concluded that it was just to regard an established exception to the without prejudice rule, whether the Muller exception or a comparable one, as applying on the facts of that case. The facts of EMW Law were somewhat different from Muller, in that there was no evidence of a concluded settlement with Savage Hayward on costs, therefore there was a possibility of prejudice from disclosure of the negotiations. However, given that the family’s and Savage Hayward’s rights were not being adjudicated by the court in that claim, the court felt able to protect them in a different way. The outcome was the same: the legitimate interests of neither party to the without prejudice communications would be prejudiced by their being available to be referred to at trial.’
Analysing the issues raised in the proceedings on that basis, Fancourt J held that evidence of the WP discussions between Aon and the lawyer defendants should not be admitted. He found that consideration of that evidence was not necessary in order to determine whether the lawyer defendants were negligent in failing to raise the Participating Employer Argument, nor to determine whether the Settlement was reasonable. On the issue whether there was a break in the chain of causation, Fancourt J noted that the fact that Aon’s solicitors failed to identify the Participating Employer Argument ‘will surely be uncontentious at trial’ and in any event could be proved without reference to the WP correspondence. Nonetheless he acknowledged that this correspondence was potentially relevant to show the degree of Aon’s involvement. He explained his decision as follows:
‘In my judgment, the issue of causation pleaded by Aon is far from being non-justiciable in the absence of the content of the without prejudice negotiations. The fact of Aon’s involvement to some degree in discussing the basis of the Approved Settlement emerges from the open correspondence. What on a fair analysis the Lawyer Defendants seek to establish by relying on the without prejudice communications is, first, a greater degree of involvement in discussions that may emerge from those communication (such as to justify their pleading that Aon was ‘closely involved’), and secondly some colour derived from statements and assertions in that correspondence, which they hope will make it less credible for Aon to argue that the failure to identify the Participating Employer Argument was grossly negligent.
I accept that the fact of the without prejudice communications and the content of some of them is relevant, but it is far from necessary to refer to them in order to have a fair trial of the issues of gross negligence and break in the chain of causation. Even in the absence of the content of the without prejudice communications, Aon cannot mislead the court by making untrue assertions about the extent of any involvement, and (for reasons I give in the final part of this judgment) the Lawyer Defendants will be entitled to refer to the fact of without prejudice discussions with the Claimants at the time of the appeal and Approved Settlement. It should also be borne in mind that the Lawyer Defendants’ primary defence is that they were not negligent because, as the trustees were advised in November 2011 by a different Leading Counsel, the Participating Employer Argument would fail.
I therefore do not accept that by pleading a new intervening act defence Aon has disentitled itself to rely on the privilege attaching to the contents of its without prejudice communications with the Claimant. Some relevant material will be excluded from evidence, but that is often the case where legal professional privilege or without prejudice privilege is invoked. Once the fact (rather than the content) of the without prejudice communications is admitted, there is relatively little of any substance that will be excluded.’
Judges:
Fancourt J
Citations:
[2019] EWHC 102 (Ch)
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Avonwick Holdings Ltd v Webinvest Ltd and Another CA 17-Oct-2014
Admissibility in forthcoming trial of correspondence said to be without prejudice: ‘That relates to the without prejudice negotiations that led to the settlement of the arbitration between Webinvest and the third party. The judge held that Mr . .
Cited – EMW Law Llp v Halborg ChD 4-May-2017
The defendant appealed from a decision requiring him to disclose documents which he said were held on a without prejudice basis. Mr Halborg, a solicitor, acted for his parents and a family company under a conditional fee agreement on their claim . .
Cited – Single Buoy Moorings Inc v Aspen Insurance UK Ltd ComC 13-Jul-2018
Teare J considered the without prejudice rule: ‘In my judgment an exception can only be allowed where it is of the same character as one already established or where it is an incremental but principled extension of an existing exception, as was the . .
Lists of cited by and citing cases may be incomplete.
Evidence
Updated: 24 November 2022; Ref: scu.634390