May 4, 2017

Without Prejudice Privilege - EMW Law v Halborg

Judge rules on various issues relating to without prejudice privilege

A solicitor delegated work to another firm of solicitors. When the underlying litigation between the solicitor's clients and their opponent settled, the agent-solicitors were not paid their costs and they commenced proceedings against the principal solicitor. Of issue in this case was whether the agent-solicitors were entitled to disclosure of without prejudice documents produced when the principal solicitor had conducted settlement negotiations with the solicitors for the opponents in the underlying litigation. Various issues concerning without prejudice privilege were considered by Newey J, including the following:

(1) Can a party which is entitled to claim without prejudice privilege show a privileged document to a third party? It is an accepted principle that without prejudice privilege can be waived only with the consent of both parties. However, the judge said that a voluntary disclosure differs from compulsory disclosure during litigation: "The fact that a party to without prejudice negotiations is entitled to withhold communications within their scope on disclosure cannot mean that he is not free to show them to someone else if he so chooses, at least if there is a legitimate reason for doing so. Were the position otherwise, a litigant might find himself unable to provide relevant documents to, say, an expert unless and until the other side agreed, which would be absurd".

(2) The judge held that the agent-solicitors could not rely on common interest privilege to insist on seeing without prejudice communications: common interest privilege is a shield, not a "sword".

(3) One of the well-established exceptions to the without prejudice rule is if the court needs to look into the issue of whether or not there was an agreed settlement.  Newey J held that that exception could apply here even though no one involved in the without prejudice correspondence was alleging that an agreement had been reached: "On any view, the concluded agreement exception means that [a party to without prejudice negotiations] runs the risk of the correspondence becoming admissible because his opponent alleges that the negotiations resulted in an agreement. The extent of the risk arising from the exception does not seem to me to be significantly increased if it is understood as allowing not merely a party to the negotiations, but someone else with a legitimate interest in their outcome, to rely on it".

(4) A further exception to the without prejudice rule applied here too: where one of the issues is whether a party has acted reasonably to mitigate its loss. Newey J held that this can be a valid exception to the rule, and it did not matter whether the issue had been raised by a party to the without prejudice negotiations or by a third party: "There is a persuasive argument that if, as here, a client authorises his solicitor to employ an agent on the footing that the agent's remuneration depends on what (if any) agreement as to costs is reached with the other side, the client can hardly complain if his negotiations with the opposing party are susceptible to being revealed to and relied on by the solicitor-agent".

Accordingly, the principal solicitor could not rely on the without prejudice rule to decline disclosure of the relevant documents. However, legal professional privilege could be relied on in relation to certain other documents, the judge finding that "the mere fact that a solicitor delegates work to an agent does not mean that the client has waived privilege, so that the agent can demand disclosure of documents other than those provided to him in the course of his agency".

COMMENT: The judge's conclusion that a document protected by without prejudice privilege can be shown by one party to a third party without the consent of the other negotiating party (if for a "legitimate reason") is of interest. In French v Groupama a (probably) privileged (without prejudice) offer was shown by one party (the offeree) to a third party, with the consent of the other party (the offeror). Rix LJ declined to decide whether privilege could be waived unilaterally, without the offeror's agreement and concluded that the matter was "not clear". It may therefore be safer for parties to expressly agree at the outset that documents protected by without prejudice privilege cannot be disclosed to third parties, if this is a concern.

It is also noteworthy that the judge described common interest privilege as a shield and not a sword. He relied on commentary taken from Thanki, The Law of Privilege to reach this conclusion. However, there is other textbook commentary, not referred to in the judgment, which suggests that it can be used as a sword in certain circumstances.