Without prejudice: extent of unambiguous impropriety exception clarified

In Williams v Hull [2009] EWHC 2844 (Ch) Arnold J upheld the 'without prejudice' status of a letter, deciding also that the 'unambiguous impropriety' exception did not apply notwithstanding a serious risk of perjury. Key points arising from the decision include:

• Marking a document 'without prejudice' is likely to be regarded by the court as a strong indication that it was intended to be 'without prejudice', particularly when the parties are experienced in litigation
• Recipient of 'without prejudice' communications should contest its status contemporaneously if they do not agree that they are properly 'without prejudice'
• 'Without prejudice' negotiations do not require parties to have formulated an open position
• Parties can assert the strength of their case as part of negotiations towards settlement, without jeopardising 'without prejudice' privilege
• A serious and substantial risk of perjury is not enough to render 'without prejudice' communications admissible, at least not prior to cross-examination of the potential perjurer

Facts

Ms Williams (W), a solicitor, and Mr Hull (H), financial consultant, purchased a house in 2000. Their relationship broke down and H moved out in 2007. They disputed their shares in the house, amongst other matters, and attempted to settle their differences. H sent a letter to W dated 19 October 2007 headed 'Subject to contract and Without Prejudice' (H's letter), to which W responded 'without prejudice'. Proceedings followed. W sought to rely on H's letter in evidence, arguing that it contained no more than an assertion of H's rights and that it was evidence against an implicit accusation of fraud against her. Although not expressly pleaded, her Honour Judge Marshall QC proceeded on the basis that H was alleging fraud and held that H's letter was admissible since (1) it was not a 'without prejudice' communication; or (2) even if it was 'without prejudice', it was admissible on the ground of 'unambiguous impropriety'. H appealed.

High Court appeal

Arnold J allowed H's appeal, deciding that H's letter was properly 'without prejudice' and as such inadmissible in evidence. Unambiguous propriety did not apply to render H's letter admissible.

Without prejudice nature of the letter

Arnold J reiterated key principles in relation to the 'without prejudice' rule. In the judge's view, there was a 'rebuttable presumption' which attached to letters such as H's that were expressly stated to be 'without prejudice', namely that they were within the meaning of the rule, unless it was clear that the expression has been used with some other meaning or purpose. In this case, H was a person with some experience of litigation and W was a solicitor. W had marked her reply 'without prejudice', without contesting H's use of 'without prejudice' for his letter. It was obvious that both parties had been trying to negotiate, knowing that if there was no settlement, litigation was likely to follow. The judge rejected W's arguments, observing also that:

• 'without prejudice' communications which include assertions of the strength of a party's case as part of a negotiation with a view to settlement are still 'without prejudice';
• it is not necessary for a party to have formulated an open position for it to be able to invoke the 'without prejudice' rule. If parties had to state their open positions before they could claim 'without prejudice' protection, that might inflame the negotiations, which would be contrary to the public policy imperative of the rule.

Unambiguous impropriety

As the judge identified, the case law on 'unambiguous propriety' is clear that this exception should be applied only in the clearest cases of abuse of privilege.

W argued that the exclusion of H's letter would act as a 'cloak for perjury', since it was contrary to H's open story. H accepted that there was an apparent inconsistency. However, Arnold J accepted H's submissions, namely that H had an explanation for the inconsistency which was not so incredible that the court could reject it without H being cross-examined on it. Accordingly, at worst there was no more than a serious risk of perjury and that was not enough.

Comment

This case helpfully reiterates that parties engaged in a genuine attempt to settle a dispute should be able to negotiate freely, including by reference to the strength of their position, without concern that their good faith efforts will come back to haunt them. Arnold J's view that a 'rebuttable presumption' attaches to documents marked 'without prejudice' also indicates that the courts ought not disregard lightly the use of the 'without prejudice' label.

Arnold J's decision on unambiguous impropriety also emphasises the importance of the public policy foundation for the 'without prejudice' rule and the balance to be managed particularly where dishonesty might be involved.