#MEDIATION: WHEN WITHOUT PREJUDICE IMMUNITY BITES?

Without prejudice rule immunity: and is there a different rule for family cases?

Where parties to a dispute attempt to settle a dispute, but fail and later end up in court, when does the without prejudice rule apply? When does their immunity from production in court of information as the content of negotiations start? And, whatever the answer to those questions: is there a different without prejudice rule immunity (WPRI) for family cases and for commercial negotiations (till now commercial cases have created much the case law)?

Whether WPRI applies to documents produced by one party has been considered in the Family Division in a couple of recent cases. The applicable law was helpfully reviewed in the Employment Appeal Tribunal by HHJ Hand QC in Portnykh v Nomura International plc [2013] UKEAT 0448-13-0511 (obtainable via http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/In_house_counsel_ebrief/UK_HR_IHC_ebriefing_Termination_negotiations_and_the_without_prejudice_rule). Portnykh provides a modern summary of WPRI and how it operates in connection with negotiations (and see my https://dbfamilylaw.wordpress.com/2014/04/28/portnykhs-complaint/).

Common law divergence: personal v commercial disputes?

To what extent is the common law the same for commercial and employment disputes, and for disputes on family breakdown? The easy factual answer is that the judges in the employment cases went in the opposite direction on WPRI to the family judges; but to accept that as the answer would be jejune. As will be seen proximity to the real dispute seems to be the criterion; but what is the dispute? How – where need be – is it to be defined that a dispute is truly incipient. To say the relationships in the family cases below were ‘troubled’, both couples would have agreed, would be an understatement; yet neither Family Division judge say it as enough to perceive litigation to be ‘proximate’.

The commercial arena first: Judge Hand develops his judgement from the authoritative Framlington Group Ltd & Anor v Barnetson [2007] EWCA Civ 502. These two cases and their definition (alongside Robert Walker’s judgement in the seminal Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436) of WPRI in commercial cases seen alongside BE v DE [2014] EWHC 2318 (## is difficult similarly to categorise since Roberts J refused permission to appeal) may

In Framlington Auld LJ took as his starting point the following definition of the rule, which he had said ‘may have two bases’:

[24] The first and more commonly advanced basis is one of public policy, namely, to encourage those in dispute to settle their differences without recourse to or continuation of litigation. It is on this basis for the rule that Framlington mainly rely. The second, albeit of limited application and of doubtful legal respectability (David Vaver, ‘“Without Prejudice” Communications – Their Admissibility And Effect’ [1974] U Br Col LR 85, at 97-101, an article commended in Phipson, para 24-14, n 47) is contractual, that is, where the parties agree expressly or impliedly that it should apply

However, from what date can it be said that the immunity applies if litigation battle lines have not yet clearly been drawn (eg one party, or neither, have yet instructed lawyers; or no court claim has yet been filed)? Does attendance by both parties for mediation, where they become reconciled for a period, guarantee immunity for the earlier mediation? Or what about a private meeting where one part wants to propose settlement, the other wants reconciliation?

And are matrimonial cases different from other financial disputes?

General propositions: ‘how proximate’

This question matters; and it surely matters a lot to mediators? If WPRI applies parties can admit that they have cash available to buy the other out, or that they really are content with staying contact only once per month (yes, WPRI applies to children cases: see eg the first Court of Appeal (Bingham MR and Butler-Sloss LJ) mediation case: Re D (Minors)(Conciliation: Privilege) [1993] 1 FLR 932, CA). These admissions against interest cannot be reported back to the court if without prejudice immunity applies.

By contrast if a mediator permits discussions to take place at a time long before proceedings ultimately commence, and those discussions are held not to be subject to WPRI – whatever everyone may have assumed – then unguarded admissions may be referred to the court. An agreement between the parties and the mediator that without prejudice confidentiality applies may suffice; but, in law, the point is at large.

Framlington v Barnetson and Portnykh were both employment cases, and in both it was held that the rule applied: information exhibited in the first by the employee should be redacted from his statement; and in the later case employer’s statements (where a former employee made concessions in relation to his employment and redundancy) were to be removed from their case.

Portnykh relies closely on Framlington where Auld LJ explained his view of when WPRI applies as follows:

[32] The question remains, how proximate, if at all, must unsuccessful negotiations in a dispute leading to litigation, be to the start of that litigation, to attract the “without prejudice” rule. Must there be… an express or implied threat of litigation underlying the negotiations, or, failing any such threat, some proximity in time to the litigation eventually begun?… If the privilege were confined to settlement communications once litigation had been threatened or shortly before it is begun, there would be an incentive on both sides to escalate their dispute with threats of litigation and/or to move quickly to it, before they could safely start talking sensibly to each other. That would be a slippery slope to mutual hardening of positions and commencement of litigation – hardly the encouragement to settle their disputes without resort to litigation that Oliver J had in mind in Cutts v Head.

So, asked Auld LJ (para [33]), where should the line be drawn between ‘to promote the public policy interest’ in settlement, whilst not ‘wrongly preventing one or other party to litigation when it comes from putting his case at its best’ (the side of the line chosen in in both family cases below). He has been taken to no cases which assisted him: ‘The various judicial pronouncements in the leading cases to which I have referred do not provide any precise pointers, and there are seemingly no other authorities directly in point.’ But, he concluded: it was not only a question of how proximate was litigation but rather of a definition of ‘subject matter of the dispute’. Was potential for dispute inherent in the parties respective circumstances (and this note will say that this point is critical in the family context). Would the ‘parties [have] contemplated or might reasonably have contemplated litigation if they could not agree’?

[34] However, the claim to privilege cannot, in my view, turn on purely temporal considerations. The critical feature of proximity for this purpose, it seems to me, is one of the subject matter of the dispute rather than how long before the threat, or start, of litigation it was aired in negotiations between the parties. Would they have respectively lowered their guards at that time and in the circumstances if they had not thought or hoped or contemplated that, by doing so, they could avoid the need to go to court over the very same dispute? On that approach, which I would commend, the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree….

Family breakdown cases

The proximity – or contemplated proceedings – question has recently cropped up in two family money cases (one MCA 1973 and the other TLATA 1996, but nothing turned on that as far as the Family Division judges were concerned). In BE v DE [2014] EWHC 2318 (Fam) Bodey J the issue was whether a ‘post-pre-nuptial’ (the husband’s term) agreement (‘the document’) was part of a negotiation for settlement of an incipient matrimonial dispute (where both parties – unknown to each other: yes, really – had filed ‘protective’ divorce petitions in different jurisdictions); but where the wife said the document was presented to her at a dinner where she thought she was to be discussing reconciliation. (She wanted to be able to use the document as evidence that she was resident in England.)

SC v YD [2014] EWHC 2446 (Fam) was an appeal, where Roberts J refused permission to appeal (oddly, given the important debate she conducted on law), but in so doing made a series of what might otherwise have been findings. What she said is only persuasive. (It is unclear to me why she did not give permission but dismiss the appeal.) Again, this case related to a document produced by SC/SD (the man) to YD as a proposal to settle; though neither was at that stage involved in litigation. The status of the document arose in Children Act 1989 Sch 1and later linked TLATA 1996 proceedings issued by YD (the woman)).

In contrast (it might be said) with the employment cases in neither of the family cases was WPRI said to apply. A cynic might observe that a state of incipient litigation is such a component of any male/female relationship that it would be impossible to define at what point the Auld LJ dividing line (‘[33]…It is undoubtedly a highly case sensitive question, or put another way, the dividing line may not always be clear’) is reached. Secret ‘protective’ petitions is not enough (perhaps the subjective element of consensuality was lacking); though an agreement to attend jointly for discussion with a mediator must surely be generally sufficient agreement that parties are on the WPRI side of the line. We’ll see….

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