High Court confirms need for clear indication if shifting from "without prejudice" to "open" communications

The High Court has held that the protection attached to a chain of emails marked "without prejudice" extended to a subsequent email even though it was not so labelled. The last email plainly followed on from the prior emails seeking to resolve a dispute and there had been no clear indication that the sender wished to shift to "open" communications. As a result, the recipient's non-response to that email was similarly protected and could not be relied on: Jones v Lydon [2021] EWHC 2322 (Ch).

The court also rejected an argument that certain portions of the without prejudice emails fell outside the privilege because the issue they dealt with was separate to the dispute being negotiated. Just as the court will generally not dissect settlement communications to distinguish between actual admissions/offers and other material, it will only be in the clearest of cases that it will permit dissection to sever portions as unrelated to the settlement negotiations.

The decision is a useful reminder to those engaged in settlement discussions of the need to make clear if they wish their stated position on an issue to be "open" and able to be relied on subsequently. Ideally that would be set out in a separate "open" communication which does not refer to earlier protected discussions.

Background

The underlying dispute turned on the question of whether an agreement reached in 1998 between the band members of The Sex Pistols was still effective so as to bind the first defendant, Mr Lydon (Johnny Rotten), to accept a majority vote of the other members as to whether to permit the use of the band's music in an upcoming television series. The other band members, and Mr Button, the legal trustee of Sid Vicious's estate, wished to permit such use.

The band member agreement (BMA) included an express provision allowing a majority of the members to bind the minority as to whether to agree to any proposal for exploitation of the band's intellectual property rights. The claimants sought declaratory and injunctive relief to enforce the BMA to that effect.

Mr Lydon asserted that the parties had always acted on the basis that any exploitation proposal required unanimous agreement and that the BMA had no operative effect to the contrary.

He sought to rely on a chain of emails between the parties and their representatives, in the context of a 2014 dispute between them regarding the division of proceeds from a T-Mobile advert, and Mr Button's failure to respond to the last email in the chain, as the basis for an estoppel argument. All of the emails were marked "without prejudice" except the last in the chain ("the unmarked email").

The other parties maintained that the entirety of the email chain, as well as the non-response to the unmarked email, formed part of the settlement discussions and were without prejudice and inadmissible.

As the case had been listed for a speedy trial, the dispute as to the without prejudice status of the material was determined during the course of the trial by the trial judge, with the decision delivered in a discrete judgment. This post deals with that admissibility issue only.

Decision

The High Court (Sir Anthony Mann) found that all of the material was protected by the without prejudice rule and could not be relied on.

Dissection

Mr Lydon argued that certain portions of the emails marked without prejudice could not properly be covered by that protection because they dealt with a topic that was not part of the dispute being negotiated. He submitted that discussion of how the parties should consult with each other going forward on any future commercial proposals was separate to the disputed issue of how the proceeds from the T-Mobile advert (and associated costs) should be allocated.

The judge was prepared to assume for the purpose of this argument that it is possible for part of an otherwise protected document to be carved out from the protection on the basis that it had nothing to do with the settlement negotiations. However, that would only be in a special case, where it was clear that a separate subject was being dealt with. The court in Unilever plc v Proctor and Gamble Co [2000] 1 WLR 2436 warned that courts should not readily and without a special reason seek to dissect a without prejudice document into privileged and non-privileged parts. It would undermine one of the key purposes of the without prejudice rule (to allow parties to speak freely in trying to resolve their disputes) if they needed to monitor their every sentence.

Here, the court was satisfied that the question of a future consultation regime was not a separate topic but an offshoot of the initial complaint and part of the overall dispute the parties were trying to resolve. This content was therefore included in the protection.

The unmarked email

The unmarked final email in the chain was from My Lydon's legal representative, Mr Grower, to Mr Button. It was a response to an earlier (marked) email from Mr Button in which he had enclosed a copy of the BMA and asserted that it conclusively established the correctness of the majority-rules argument. Mr Grower in reply raised a number of questions challenging the status of the BMA, stated his opinion that "the agreement is of no relevance to this matter as in the past it has always been the case that consents are given unanimously", and asserted that the other parties were legally estopped from now challenging that procedure.

The court noted that it is well established that once a properly constituted without prejudice negotiation has commenced (which was not in dispute here), it continues on that basis until an intention to depart from it is clearly marked. It is not open to one party suddenly to change the negotiation to an open negotiation without making that quite clear.

The judge found that the unmarked email plainly followed on from the prior email chain and was part of the same discussion. It was expressly stated as a response to Mr Button's email and dealt with some of the same subject matter as the earlier discussion.

The only reason to suppose that the email might be an open response would be the absence of "the magic words" from the subject line. In the court's view that was "nothing like enough to take this letter outside the without prejudice line bearing in mind the clarity that has to be demonstrated in order to achieve that. If Mr Grower truly wanted to make the letter open he should have done more to flag the point."

Without prejudice and silence

The claimants argued that Mr Button's non-response to Mr Grower's unmarked email was similarly protected and could not be relied on.

The judge referred to judicial dicta confirming that the protection given to anything said in the course of settlement negotiations includes as much the failure to reply to an offer as an actual reply. He considered that, although Mr Grower's email was not an offer to settle the dispute, it was a firm position adopted within the negotiations and was analagous to an offer for these purposes. The non-response to it was therefore similarly protected: "… there is no reason for a silence to be treated differently in relation to an offer from anything else".

Estoppel exception

There are a number of exceptions to the without prejudice rule, including where a clear and unambiguous statement is made by one party during the discussions on which the other party is intended to act, and does in fact act to their detriment. Such statement may be admissible as giving rise to an estoppel. The court considered whether Mr Button's non-response to the unmarked email could be relied on under this exception.

The judge referred to Berkeley Square Holdings v Lancer Property Asset Management [2020] EWHC 1015 (Ch), in which Roth J found that a party's silence in the face of statements made at a without prejudice mediation was a very far cry from the "clear and unambiguous statement" needed to found an estoppel. He said: "To extend this exception to an implied representation by silence would in my view impair the policy served by the WP rule, since parties seeking to compromise a dispute would then have to take care to controvert in the negotiations any statements made by the other side, which is not an approach conducive to open and constructive discussion."

Similarly, in the present case, the judge found that Mr Button's silence was not a clear unambiguous statement at all, much less was it one on which Mr Grower and his client My Lydon were intended to rely. Accordingly, the estoppel exception did not apply.