Without prejudice ("WP") is a form of privilege, allowing parties to discuss settlement matters "off the record". Generally these discussions and correspondence are inadmissible in Court, but there are several exceptions to this rule, highlighted in the recent case of Berkeley Square Holdings v Lancer Property Asset Management .
What is WP?
We have previously discussed what WP could mean in the context of adjudication which has overlap with its meaning in the context of Court proceedings. The aim of WP discussions is to facilitate settlement discussions, allowing parties to make concessions in an attempt to settle a dispute, without weakening their position in the legal proceedings. The effect of WP is that statements made in a genuine settlement discussion cannot be put before the court or tribunal. If a correspondence is marked "without prejudice save as to costs", it can only be shown to the court at the end of a trial once judgment has been given, to assist with determining a costs order.
The (non-exhaustive) list of exceptions in which when WP correspondence may be admissible was set out in the case of Unilever Plc v P&G Co  . They apply where communications:
- Show that a settlement has been concluded;
- Assist as an aid to construing the settlement agreement;
- Provide evidence of grounds to set aside a settlement agreement on the basis of misrepresentation, fraud or undue influence;
- Evidence a statement that is relied on by another party, giving rise to an estoppel;
- Evidence the fact of a delay;
- Evidence perjury or blackmail; or
- Prevent the real risk of the Court being misled
The decision in Berkeley Square Holdings
In this case, the Claimant had engaged the Defendant to manage its portfolio of properties in London. In 2012 a dispute arose in relation to the Defendant's demand for a "capital performance bonus" payable under the Contract and the parties agreed to mediation.
As part of the mediation, each party submitted its position statement which was marked "Without Prejudice". The dispute was settled shortly after mediation and as part of the settlement, the Claimant made a payment of £30million to the Defendant. Several years later, the Claimant issued proceedings after discovering that one of its own representatives had been involved in a substantial fraud, conspiring to increase payments made to the Defendant and pass payments to a company controlled by the representative.
In its Defence, the Defendant sought to rely on parts of its position statement which referred to payments being made in order to show that the Claimant knew about, and approved, the alleged fraudulent transactions. The Claimant applied to strike these sections out on the basis that the position statement was WP and therefore, inadmissible.
The Court held that the relevant passages of the WP position paper were admissible as they were used to rebut allegations of fraud. Roth J commented that there was “a serious risk of the court at trial being misled" if the material in question was not admitted. If the Claimant put a point in issue, it could not rely on WP to exclude key evidence (known as the "Muller" exception).
This case serves as a reminder to parties that the protection of WP is not absolute and statements can be admitted to Court if an exception applies. However, it is unlikely that the Court will in future extend the exceptions or find them applicable in many cases. The purpose of WP is to encourage negotiations so that a settlement to a dispute can be reached without the Court's involvement. Parties can therefore take comfort in the knowledge that the vast majority of WP discussions will never be aired in Court.