Court of Appeal has no appetite for salami slicing
25 January 2016
Without prejudice privilege is founded upon public policy. It serves to encourage litigants to settle their differences. Its effect is to exclude all negotiations genuinely aimed at settlement (whether oral or in writing) from being referred to at trial. Solicitors will often head negotiating correspondence “without prejudice” yet protection is not dependent upon use of the label. It is often misused and arises automatically in appropriate circumstances. So what happens when no label is used and attendees of a meeting later disagree as to its status?
In Suh and Suh -v- Mace (UK) Limited  EWCA Civ 4, Mrs Suh was said to have admitted the opponent’s counterclaim during a meeting with its solicitor. A question arose: did the discussion take place in the context of a without prejudice meeting? If so, was it inadmissible or was the protection waived by her later conduct? The Court of Appeal adopted a broad approach, determining that privilege did arise and was not lost. As the trial judge had relied on these inadmissible admissions in deciding crucial questions of fact, there was no choice but to order a re-trial. The case underlines the need for caution when dealing with parties who are unrepresented and the importance of agreeing the status of discussions at the outset.
Mr and Mrs Suh were Mace’s tenant. Mace alleged rent arrears and purported to forfeit the lease. The Suhs issued proceedings, claiming damages for wrongful forfeiture. Shortly before trial, Mrs Suh visited Mace’s solicitors. She attended without representation, accompanied by an interpreter. During the meeting it was said that she admitted rent arrears at the date of forfeiture. A question arose as to the admissibility of those discussions at the start of trial. Mrs Suh denied the admissions and also sought to rely on the protection of without prejudice privilege.
Outcome at trial
Things went badly for the Suhs at trial. The Judge rejected the claim for without prejudice protection: the discussions were not in the nature of settlement discussions, since they were not for the purpose of a genuine attempt to compromise the dispute. Whilst Mace’s solicitor was “an impressive witness”, Mrs Suh’s attempts to deny the admission led a finding of dishonesty against her. The Suhs’ claim was dismissed with judgment given for Mace on its counterclaim for the rent arrears.
The broad view
It was common ground that the circumstances of the communications had to be approached from an objective standpoint to determine whether or not the without prejudice rule was invoked. Faced with an objective test, the Court of Appeal noted it was in as good a position as the trial Judge to determine the matter. Lord Justice Vos held a broad view as to what might be regarded as “negotiations genuinely aimed at settlement” was required. Since there was no question of Mrs Suh attending to obtain advice from Mace’s lawyer, the question arose as to why she had attended at all. Examining the content of the discussions he noted that her first unprompted comment at the meeting was to say that she no longer wanted any part in the proceedings. This led Vos LJ to conclude that the only sensible purpose of the meeting must have been to seek some kind of solution to the litigation. The privilege was invoked.
Counsel for the landlord noted that the admissions were made early in the meeting, before the topic of settlement seemed to arise. However, Vos LJ concluded there was “no justification for salami slicing” the meeting into open and without prejudice parts: the entire meeting was protected.
Without prejudice as a cloak for fraud?
Mace then contended that protection should be lost since Mrs Suh was effectively using without prejudice protection to cloak lies contained in her own statement concerning the nature of the discussions. This was rejected. Mrs Suh had not done anything dishonest in the discussions and a distinction was to be drawn between the content of the discussions and a later denial by Mrs Suh about admissions she had allegedly made. The denial was not itself an attempt to use the exclusion as a cloak for perjury.
This left waiver. Was protection lost by subsequent conduct? Without prejudice privilege is jointly owned, requiring waiver by both parties. An objective evaluation of the Suhs’ conduct and a detailed review of the course of the relevant events was undertaken. Vos LJ concluded it would be unjust to deny protection. Furthermore, it did not seem to him that they had waived their right by any of the particular documents relied upon by Mace.
The decision confirms the need for an objective and sometimes detailed analysis in order to determine the status of discussions. On a practical level, it underlines heavily the importance of labelling (and agreeing) the status of discussions at the outset - particularly when faced with an unrepresented opponent.
Whether you are meeting face to face or writing in relation to settlement, always consider carefully whether you wish the exchange to have a without prejudice or open status. It may signal confidence to discuss one’s position openly. On the other hand, if concessions are proposed, it may be prudent to invoke the protection of without prejudice privilege. In either case raise the question and record the position.
Suh serves as a stark warning to practitioners and would be litigants alike. It is almost 6 years since the forfeiture and 4 years since proceedings were commenced. Faced with the prospect of a re-trial, it must feel like a long and expensive journey, particularly in the context of a rent arrears claim of less than £6,000. Perhaps then it is also a reminder to consider commercial goals dispassionately and explore settlement at an early stage - before legal spend becomes an impediment to compromise. Although this was Mrs Suh’s claimed objective in attending the meeting in the first place, clarity over the status of those discussions may well have avoided the need for an appeal and, ultimately, a re-trial.