"Opening shot" protected by without prejudice privilege

The High Court has held that a draft Complaint in New York proceedings sent to the other party marked as a "preliminary draft" and "for settlement purposes only" was protected by without prejudice privilege in proceedings before the English court seeking an anti-suit injunction: Rochester Resources Limited v Lebedev [2014] EWHC 2185 (Comm).

Difficulties arise in practice in deciding whether an opening shot in proposed negotiations will be protected by without prejudice privilege. While it will always depend on the substance of the communication and the facts of the case, a letter before action with a general expression of willingness to negotiate is unlikely to be protected; more is required. Here the court held that sending the draft Complaint fell within the scope of the privilege as it was part of negotiations genuinely aimed at settlement.

Given the uncertainties, parties should seek to agree that communications will be on a without prejudice basis before sharing any substantive materials such as a draft claim. While this does not prevent a court from considering the status of the documents, it is unlikely to look behind the parties' agreement. If this is not possible, then clear labelling of material, whilst still not determinative, may assist.

Background

The case concerned an application before the English courts for an anti-suit injunction to restrain proceedings in New York. The claimants wished to rely in support of their application on a draft of the Complaint in the New York proceedings sent to them by the defendants, which they said was inconsistent with the proceedings as ultimately commenced. (A complaint is the equivalent of particulars of claim in the English courts). The defendants sought to exclude the draft Complaint on the basis it was protected by without prejudice privilege. The claimants sought permission to adduce expert evidence to the effect that the draft Complaint was not protected under New York law.

The draft Complaint had been sent by the first defendant to one of the claimants and later by his New York lawyers to the claimants' English and Russian lawyers. The words "PRELIMINARY DRAFT; FOR SETTLEMENT PURPOSES ONLY; SUBJECT TO CPLR § 4547 AND FED. R. EVID. 408" appeared at the top of each page of the draft Complaint. The lawyers' letter stated the draft Complaint was provided "….in advance of initiating litigation in order to provide an opportunity for the parties to engage in settlement discussions that may resolve the dispute without the need for judicial intervention". The claimants declined to enter into any discussions.

Decision

The judge (Blair J) held that there was no need for expert evidence of New York law. When the question of privilege arises in English proceedings, whether or not a document is privileged is to be determined by English law; the fact that under a foreign law the document is not privileged or that the privilege that existed is deemed to have been waived is irrelevant.

The judge then looked at all the circumstances and concluded that, viewed objectively, the draft Complaint and the communication sending it could not be regarded as just a letter before action; they were sent as the "first shot" in settlement discussions. He took into account in particular the heading on each page of the Complaint and the content of the lawyers' subsequent letter.

The facts were very different from Best Buy Co Inc v Worldwide Sales Corpn [2011] Bus LR 1166 which was relied on strongly by the claimants. In that case, on the facts, the real purpose of the relevant letter was to serve as a letter before action.