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Case No: QBCMI 2000/0055/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT (Mr Justice Timothy Walker)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date 26 July 2000
B e f o r e :
LORD JUSTICE WALLER
and
LORD JUSTICE CLARKE
BETWEEN
SOMATRA
LIMITED
Claimant/Appellant
|
-
and -
|
SINCLAIR
ROCHE & TEMPERLEY
(a firm)
Defendants/Respondents
|
AND
BETWEEN:
|
|
SINCLAIR
ROCHE & TEMPERLEY
Claimants by Counterclaim/
Respondents
|
-
and -
(1) SOMATRA LIMITED
(2) ARABIAN BULK TRADE LIMITED
(3) ABT INTERNATIONAL LIMITED
Defendants to Counterclaim/
Appellants
|
-
- - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - -
Mr Mark Cran QC, and Miss Rebecca Sabben-Clare (instructed by Ince &
Co, London EC3) appeared for the Defendants/Claimants by
Counterclaim/Respondents ).
Mr Christopher Symons QC and Mr Mark Cannon, (instructed by Herbert
Smith, London EC3) appeared for the Claimants/Defendants to
Counterclaim/Appellants
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE CLARKE:
Introduction.
1. On the 29th May 1991 the ABT SUMMER sank. As a result her owner,
("Somatra"), which is the claimant in this action and the principal appellant
on this appeal, made a substantial claim against its hull underwriters. The
claim led to an action in the Commercial Court, which was settled in April
1994. The respondents ("Sinclairs") were acting as Somatra's solicitors in
connection with the claim and the action. Somatra's case in this action is
that when Sinclairs were acting as its solicitors they were negligent and thus
in breach of duty and contract and that as a result it has suffered loss. The
claim against underwriters was settled for some US$40 million, which was about
66 per cent of the full amount of the claim including interest. Somatra's case
is that but for Sinclairs' negligence it would or might have recovered 85 per
cent of the claim. The claim against Sinclairs is of the order of US$10
million. Sinclairs counterclaim for their unpaid fees in the sum of
£577,137.54 plus interest. Their claim is against both Somatra and the
other two defendants to the counterclaim. They are also appellants, but need
not be considered separately from Somatra in order to resolve the issues which
arise on this appeal.
Meetings and Telephone Conversations.
2. Some time after the action was settled in April 1994 a dispute arose between
Somatra and Sinclairs as to Sinclairs' unpaid fees, during which Somatra made a
number of complaints about the way Sinclairs had represented it. It was agreed
that the parties should meet in Jeddah in order to try to resolve the
situation. Accordingly meetings took place in Jeddah over two days, the
24th and 25th September 1994. Somatra had by this time
consulted Herbert Smith, but it was represented at the meetings, not by anyone
from Herbert Smith, but by Mr Hisham Alireza and by Mr Tariq Mustafa.
Sinclairs were represented by Mr Ben Leach, assisted by Mr Joachim Atkinson.
Mr Leach, who was the managing partner of Sinclairs at the time, had played no
part in the original action. The partner principally involved when Sinclairs
were acting for Somatra had been Mr Harvey Williams. He had been assisted by
Mr Atkinson, who was an assistant solicitor.
3. It is common ground that the meetings were without prejudice. As I
understand it, that is on the basis that, although they were not expressed to
be without prejudice, the nature of them was such that they should be so
treated. For the same reasons, it is also common ground that two subsequent
telephone conversations were also without prejudice. Those telephone
conversations were between the same representatives of Somatra and Mr Leach.
The first took place on the 8th October 1994 and the second at the
end of October or the beginning of November 1994. As the judge said, the
meetings and telephone calls covered a large number of matters which are in
issue in this action and Mr Leach engaged on behalf of his partners in a full
and uninhibited discussion of the conduct of the original action by Sinclairs.
4. Unknown to Mr Leach, Somatra covertly recorded the meetings with both audio
and video equipment. It also covertly recorded the two telephone
conversations. As a result there are now available transcripts of both the
meetings and the telephone conversations, except for one period of about two
hours during the course of one of the meetings. The judge inferred, in my view
correctly, that it is in the highest degree unlikely that Mr Leach would have
participated if he had known that the conversations were being recorded. The
judge also described Somatra's behaviour in making the recordings as
unattractive. I see the force of that, but it is not to my mind relevant to
the correct resolution of any of the issues in this appeal. It seems to me
that either the contents of the conversations are admissible at the trial or
they are not. If they are, no-one suggests that the court should not have the
best evidence of what was said, namely the recordings.
The Issues.
5. Somatra wishes to adduce in evidence at the trial of this action the
contents of the conversations (by which I mean what was said both at the
meetings and in the telephone conversations) on the basis that Sinclairs are no
longer entitled to rely upon the fact that they were without prejudice because
of the use which Sinclairs made of them on an ex parte application for a Mareva
injunction. To that end Somatra listed the recordings in a supplemental list
of documents. Sinclairs say that the contents remain inadmissible because the
conversations were without prejudice and that nothing that has happened since
entitles Somatra to rely upon them. The judge accepted Sinclairs' submissions
and in effect declared that Somatra (and the other appellants) are not entitled
to refer to the contents of the conversations. He also ordered them to serve
an amended supplemental list deleting reference to the recordings. The
principal issue on this appeal is whether the judge was right to hold that the
contents of the conversations are inadmissible.
6. The judge gave permission to appeal because of the lack of authority on the
issues raised, although he added that he had no doubt as to the correct result.
I shall consider what may be called the without prejudice issue first, before
turning to the second issue, which relates to the question whether certain
documents relating to or arising from the meetings should be disclosed by
Sinclairs. That question turns in part upon the way in which the first issue
is resolved.
Without Prejudice.
The Issue.
7. It is common ground that it follows from the fact that the conversations
were without prejudice that Somatra cannot adduce in evidence any admission
made in the course of them by or on behalf of Sinclairs unless
subsequent conduct on Sinclairs' behalf entitles Somatra to do so. The conduct
relied upon is reliance upon an affidavit in support of an ex parte application
for a Mareva injunction made on the 16th October 1998. The
application was granted by Colman J. The question is simply whether reliance
upon that affidavit entitles Somatra to rely upon the contents of the
conversations at the trial.
The Affidavit.
8. The affidavit was sworn on the 14th October 1998 by Mr Weir as a
partner in Ince & Co, who were and are acting for Sinclairs. It was sworn
in support of an application for a Mareva injunction to secure Sinclairs' claim
for a total of about £824,000 in respect of unpaid fees, interest and
costs. In paragraph 2 Mr Weir said that the facts and matters deposed to
were either personally known to him or had been made known to him by Mr Leach,
Mr Williams and Mr Atkinson, among others. The structure of the affidavit was
as follows. Paragraphs 1 to 10 introduced the case and the parties; paragraphs
11 to 21 described Sinclairs' counterclaim for unpaid fees; paragraphs 22 to 29
discussed the allegations of breach of duty and paragraphs 26 to 37 set out the
nature of the application and asserted the risk of dissipation of assets. The
remaining paragraphs do not seem to me to be relevant.
9. Somatra relies upon two particular paragraphs in the affidavit. The first
is paragraph 29.4, which must be considered in its context. As just stated, it
is in the part of the affidavit which discussed the allegations of breach of
duty against Sinclairs. In paragraph 26 Mr Weir asserted that there were a
number of manifest weaknesses in those allegations. He then, in paragraphs 26
to 28, discussed three particular heads of loss alleged by Somatra, namely loss
on settlement, White & Case fees and bank claims. There followed paragraph
29, in which he said that in addition he would draw the court's attention to a
number of what he described as general points. There were four such points.
It is correctly conceded by Mr Mark Cran QC on behalf of Sinclairs that the
first three of them were all aimed at exposing the weakness of Somatra's case
on breach of duty.
10. The fourth point was in these terms:
4. I would draw to the Court's attention that there are some references in
correspondence between the parties in the second half of 1994 and 1995 to Mr
Leach having offered an apology on behalf of Mr Williams (see eg p 102 of AHWM
5). I am told by Mr Leach, and I believe, that it appeared to him, especially
from the two meetings which he had with Mr Alireza and Mr Mustafa in Jeddah on
24th and 25th September 1994 that these two gentlemen
harboured great personal hostility concerning Mr Williams, such that, so it
seemed from what they said, there had been some sort of severe personality
clash. In the circumstances, he formed the view that there might be room for a
very limited apology from Mr Williams to ABTI, with a view to resolving matters
between them. The idea was put to Mr Alireza and Mr Mustafa by Mr Leach, but
the former misinterpreted it as an admission of fault, which it was not, nor
was it ever intended to be.
Two faxes were exhibited to the affidavit. The first, which is at page 102 of
AHWM 5 and was thus expressly referred to in the above paragraph, was a letter
dated the 12th October 1994 from Mr Alireza to Mr Leach. It
included the following:
I recognize with gratitude your advice that HARVEY has agreed to accompany you
to Jeddah to offer an apology in person. The recognition by you that both he
and the firm have something to answer for and were lacking in their service to
us as clients should bring us closer to resolving the issues.
Your personal attitude encourages me to attempt to reach an amicable solution
in this matter.
The second fax was dated the 27th November 1995. It too was from Mr
Alireza to Mr Leach, but with a copy to Herbert Smith. It was written both
before the letter before action and before the writ was issued (which was on
the 14th November 1996). It included the following:
During your Managing Partner, Mr Ben Leach's visit to Jeddah and in a
subsequent telephone conversation, he had admitted that it appeared to him that
his firm had made mistakes in handling the SUMMER case and that he was
therefore prepared to travel down to Jeddah once again, with the Partner
responsible Mr Harvey Williams, so as to allow the latter to apologize in
person. Mr Leach had clearly stated that he would not want to take fees that
his firm was not entitled to and did not deserve, and that he would want an
amicable solution to the dispute.
We had carefully considered your request and informed you that we did not see
the resolution of the dispute through a personal apology from your Mr Williams
and that we had appointed Herbert Smith to fully investigate the matter, and
define the basis for an amicable resolution of the dispute. We had
subsequently informed you that Herbert Smith were of the opinion that there was
a case to be answered by your firm and whether you would like to put the case
against your firm to arbitration, as had been suggested by you during your
visit to Jeddah. ....
.... We do not wish that the matter of your fees entitlement, if this is
proven, now or at a later date, or the matter for which your Mr Williams had
wanted to come to Jeddah to apologize for, should be left unresolved or subject
to any delays. You will of course in due course hear from Herbert Smith on
this matter and on the issues involved in respect of the injunction you now
seek.
11. Mr Cran submits that Mr Weir included paragraph 29.4 only because he
regarded it as his duty to do so in order to discharge the obligation to make
full and frank disclosure of all relevant matters on an ex parte application of
the kind which was being made. He submits that Mr Weir thought that the
correspondence to which he referred was open correspondence, that both the
letters which were exhibited asserted in effect that Mr Leach indicated at the
meetings that Mr Williams was willing to apologise because he had something to
apologise for in the handling of the case and that he therefore thought that he
had a duty to refer to what was said at the meeting. However, there is
unfortunately no evidence from Mr Weir as to what he in fact believed.
12. There is thus no evidence as to whether he thought that either the
conversations or the correspondence were open or without prejudice. The only
evidence on the point is contained in an affidavit which was not sworn by Mr
Weir but by Mr Rutherford, who is (and was at the time Mr Weir swore his
affidavit) the partner in Ince & Co in charge of the firm's professional
indemnity team. The affidavit was Mr Rutherford's fourth affidavit. In it he
made certain comments on the suggestion that the effect of reliance on Mr
Weir's affidavit waived the without prejudice nature of the conversations.
Those comments are not, however, said to be based on anything he had been told
by Mr Weir. Indeed there is no suggestion in the affidavit that he had
discussed the matter with Mr Weir.
13. In the course of his comments Mr Rutherford observed that there is no
doctrine of waiver of the without prejudice nature of without prejudice
discussions. However, more importantly, he asserted that the correspondence
referred to in paragraph 29.4 and exhibited to Mr Weir's affidavit, namely the
two letters from which I have quoted, were part of open correspondence and that
if they had not been referred to in the affidavit, Somatra would have
complained that they should have been. Mr Cran submits that they were indeed
open correspondence and that reference had to be made to them. Alternatively
he submits that, if they were not, Mr Weir thought that they were and made a
mistake in referring to them.
14. In my judgment, it is not possible to say whether Mr Weir thought either
that the conversations or the letters were open or that they were without
prejudice because there is no evidence from him one way or the other. However,
it does not seem to me to be likely that he thought that the conversations were
without prejudice but that the letters were not. If he thought that the
conversations were open, he probably also thought that the letters were open
and that may indeed have been the reason why he referred to both. On the other
hand, if he thought that the conversations were without prejudice, I do not see
how he could have thought that the parts of the letters which I have quoted
were open because, in my judgment, they were plainly part of the same
process.
15. This can most clearly be seen from the letter of the 12th
October 1994, which was only four days after the first of the two without
prejudice telephone conversations which followed the meetings in Jeddah. The
letter refers to `your advice', which is a reference back to what Mr Leach said
during the without prejudice telephone conversation on the 8th
October, just four days earlier. There can in my view be no doubt that that
part of the letter was part of the exchanges which began at the meetings and
continued in the telephone conversations. If the meetings and the telephone
conversations were without prejudice (as it is common ground that they were),
so too was the letter of the 12th October. Indeed, the contrary
does not seem to me to be seriously arguable. There is more scope for debate
about the letter of the 27th November 1995 because it was written
more than a year later, but it nevertheless seems to me to be part of the same
process and to be without prejudice for the same reasons.
16. In these circumstances I do not think that Sinclairs (or Ince & Co on
their behalf) were under any duty to refer to the contents of the letters any
more than they would have been under a duty to refer to what was said at the
meetings or during the telephone conversations if the letters had not been
written. In any event, in my judgment, even if Mr Weir thought that the
letters were part of open correspondence and that he was under a duty to make
some reference to the contents of the without prejudice meetings, I accept Mr
Symons QC's submission on behalf of Somatra that he went much further than was
necessary to discharge that duty.
17. In paragraph 29.4 Mr Weir did not simply refer to the contents of the
correspondence without further comment, but to my mind put forward an account
of part of the meetings in the context of his assertion that Somatra's case on
breach of duty was weak. He said that he had been told by Mr Leach that it
appeared to him that Mr Alireza and Mr Mustafa harboured great personal
hostility concerning Mr Williams, that it was for that reason that there might
be room for a limited apology and that Mr Alireza and Mr Mustafa misinterpreted
the suggestion as an admission of fault, "which it was not, nor was it ever
intended to be". Mr Weir thus gave an account of the meeting which supported
the argument that Somatra's case was weak by asserting that the apology was
only suggested because of personal animosity and not in connection with any
admission of fault.
18. It is now conceded by Mr Cran that the contents of paragraph 29.4 are not
entirely accurate and that in all these circumstances (and whether Mr Weir was
mistaken or not) the way in which paragraph 29.4 was ed and relied upon as part
of the : APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORAL
CORRECTIONS)evidence in support of the application for a Mareva injunction
entitled Somatra to introduce evidence of admissions at the meetings as part of
any challenge which it might mount to the granting of the injunction. He made
no such concession before the judge, but in my judgment it is both an important
concession and one which is correctly made.
19. There are at least two reasons why, to my mind, the concession is correctly
made. The first is that there is material in the transcripts which contradicts
or appears to contradict the assertion that Mr Alireza and Mr Mustafa
misinterpreted the suggestion that Sinclairs might apologise as an admission of
fault. There is some such material in the transcript of the meetings, but I
need refer only to the telephone conversation of the 8th October, in
which Mr Leach is recorded as saying that Mr Williams would like to apologise
personally "for some of the things which he acknowledges went wrong in the
case", that "he agrees with my assessment and in some respects I'm sorry we
perhaps didn't give our very best in this litigation", that it was not a case
of a "token apology" and that "I think I've convinced him that he does have
something to apologise for". I recognise that those are only very small
extracts from wide ranging discussions about the case at the meetings and on
the telephone and that the answer to the question whether Sinclairs were in any
way negligent would depend upon a close examination of all the facts in issue.
However those quotations do show that the picture given in paragraph 29.4 of
the affidavit is misleading or potentially misleading.
20. I have already mentioned the second reason, namely that Mr Weir went
further than was necessary to discharge any duty to refer to the conversations
in the light of the correspondence. The first reason is, however, by far the
more important because it would be unjust to allow Sinclairs to rely upon the
assertion in paragraph 29.4 that the proposed apology was not intended as an
admission of fault and that the proposal had been misinterpreted at the
meetings without allowing Somatra to adduce evidence to the contrary from the
records of the conversations.
21. In the event Somatra did not apply for the injunction to be discharged, but
provided security for Sinclairs' counterclaim. Mr Cran submits that in these
circumstances, although Somatra would have been entitled to rely upon such
admissions on such an application it is not entitled to do so at the trial of
the action. I turn therefore to the relevant legal principles and their
application to that question. There is scope for debate as to the true legal
analysis, but I have reached the conclusion that, whatever the true analysis,
whether it is contractual or expressed in terms of public policy, the answer is
the same, namely that where a party deploys evidence of what was said on a
without prejudice occasion in support of its case on the underlying merits on
an application for a Mareva injunction, or, as it is now called a freezing
order, that party loses the right it would otherwise have had to object to the
admissibility of any admissions made in the course of the same without
prejudice discussions.
Legal Principles and Application to Facts.
22. The underlying principle is not in dispute. It is that where discussions
are held without prejudice, neither party is entitled to rely upon the contents
of those discussions to prove an admission or admissions made by the other
party in order to advance its case at the trial. It has recently been made
clear by Robert Walker LJ (with whom Simon Brown LJ and Wilson J agreed), in
the course of a detailed analysis of this area of the law in the unreported
decision of this court in Unilever PLC v The Proctor and Gamble Company
on the 29th October 1999 (at page 6), that, although the
underlying basis of the rule is to exclude evidence of admissions, the
concept of admissions must be given a wide meaning in this context so as in
effect to include all matters disclosed or discussed in the without prejudice
discussions concerned.
23. The reason for that approach can clearly be seen from what is now the
classic statement of the relevant principle by Lord Griffiths in Rush &
Tompkins v Greater London Council [1989] AC 1280 at 1299:
The "without prejudice" rule is a rule governing the admissibility of evidence
and is founded upon the public policy of encouraging litigants to settle their
differences rather then litigate them to a finish. It is nowhere more clearly
expressed than in the judgment of Oliver LJ in Cutts v Head [1984] Ch 290, 306:
That the rule rests, at least in part, upon public policy is clear from many
authorities, and the convenient starting point of the inquiry is the nature of
the underlying policy. It is that parties should be encouraged so far as
possible to settle their disputes without resort to litigation and should not
be discouraged by the knowledge that anything said in the course of such
negotiations (and that includes, of course, as much the failure to reply to an
offer as an actual reply) may be used to their prejudice in the course of the
proceedings. They, should, as it was expressed by Clauson J in Scott Paper
Co v Drayton Paper Works Ltd (1927) 44 RPC 151, 156, be encouraged fully
and frankly to put their cards on the table. ... The public policy
justification, in truth, essentially rests on the desirability of preventing
statements or offers made in the course of negotiations for settlement being
brought before the court of trial as admissions on the question of
liability.
The rule applies to exclude all negotiations genuinely aimed at settlement
whether oral or in writing from being given in evidence.
24. After quoting that passage, Robert Walker LJ said in the Unilever
case (at page 4):
This well-known passage recognises the rule as being based at least in part on
public policy. Its other basis or foundation is in the express or implied
agreement of the parties themselves that communications in the course of their
negotiations should not be admissible in evidence if, despite the negotiations,
a contested hearing ensues.
See also Muller v Lindsay, which is another unreported decision of this
court, dated the 30th November 1994, (to which Robert Walker LJ made
extensive reference). The cases recognise that the rationale of the rule
cannot be entirely based upon contract because, as the decision of the House of
Lords in Rush v Tomkins shows, it may apply not only as between the
parties to the negotiations but as between one of those parties and others. In
that case it was held that an admission by A in without prejudice discussions
with B was not admissible at the instance of C, which was another party to the
litigation.
25. In so far as the rule is based on public policy, Lord Griffiths said this
in the course of a consideration of the cases in which the courts have
permitted reference to be made to the contents of without prejudice
communications for various purposes (at p 1300):
These cases show that the rule is not absolute and resort may be had to the
"without prejudice" material for a variety of reasons when the justice of the
case requires it. It is unnecessary to make any deep examination of these
authorities to resolve the present appeal but they all illustrate the
underlying purpose of the rule which is to protect a litigant from being
embarrassed by any admission made purely in an attempt to achieve a
settlement.
In the Unilever case (at pages 5 to 6) Robert Walker LJ gave eight
examples of circumstances in which one or both parties have been permitted to
put in evidence something said or written without prejudice. None of them is
of direct relevance to the issue raised here.
26. The judge described Somatra's submission as being that Sinclairs
voluntarily chose to deploy without prejudice material before the court and
were therefore taken to have waived for all purposes the "without prejudice
privilege which would otherwise attach to the contents of the meetings and the
telephone conversations". Mr Symons put the submission in much the same way
before us, although it is accepted by both sides that the question is not the
same as in the case of waiver of legal professional privilege. As I see it,
the question can most accurately be posed as being whether Sinclairs lost their
right to object to the admissibility of the contents of the without prejudice
conversations at the trial by their reliance upon paragraphs 29.4 and/or 36(4)
of the affidavit.
27. In so far as it is appropriate to have regard to the considerations of
public policy underlying the rule, the answer seems to me to depend upon what
justice requires. Would it be fair to permit Sinclairs to rely upon the
contents of the conversations for the purposes of advancing their case on the
merits in order to obtain a Mareva injunction without also permitting Somatra
to rely upon the contents of the same conversations in order to resist
Sinclairs' case on the merits at the trial? The authorities in my opinion help
both to formulate and to answer that question, even though none of them
resolves the precise point which we have to decide.
28. There is no doubt that if Sinclairs had deployed the material in paragraph
29.4 at a trial their right to rely upon the without prejudice nature of the
conversations would have been lost. That is essentially for the same reason
that Mr Cran correctly concedes that Somatra could have relied upon the
contents of the conversations on an application to discharge the Mareva
injunction. In Great Atlantic Insurance Co v Home Insurance Co [1981] 1
WLR 529 it was held that where part of a privileged document was read in the
course of the opening of counsel for the plaintiff at a trial, privilege was
waived for the whole of the document. Templeman LJ (with whom Dunn LJ agreed)
said (at 537G):
In interlocutory proceedings and before trial it is possible to allow a party
to disclose a document or part of a document by mistake to correct an error in
certain circumstances. ... But in my judgment the plaintiffs deliberately chose
to read part of a document which dealt with one subject matter to the trial
judge, and must disclose the whole. The deliberate introduction by the
plaintiffs of part of the memorandum into the trial record as a result of a
mistake made by the plaintiffs waives privilege with regard to the whole
document. I can see no principle whereby the court could claim to exercise or
could fairly and effectively exercise any discretion to put the clock back and
undo what has been done.
29. In an earlier part of his judgment (at p 538) Templeman LJ approved this
statement of principle by Mustill J in Nea Karteria Maritime Co Ltd v
Atlantic and Great Lakes Steamship Corporation, a decision made on the
11th December 1978 and only reported at [1981] Com LR 138 at 139:
I believe that the principle underlying the rule of practice exemplified in
Burnell v British Transport Commission [1956] 1 QB 187 is that where a
party is deploying in court material which would otherwise be privileged, the
opposite party and the court must have an opportunity of satisfying themselves
that what the party has chosen to release from privilege represents the whole
of the material relevant to the issue in question. To allow an individual item
to be plucked out of context would be to risk injustice through its real weight
or meaning being misunderstood.
30. I recognise that in those cases the court was considering waiver of
privilege and not the use of without prejudice communications, but I do not
think that the principle can be any different in such a case. Fairness
requires that where a party deploys privileged or without prejudice material as
part of its case at a trial the other party should be entitled, in the one
case, to see the whole of the privileged document and, in the other case, to
rely upon the other without prejudice material which came into existence as
part of the same without prejudice process. The question here is whether the
same is true where the without prejudice material is deployed, not at the
trial, but at an interlocutory application.
31. The authorities show that the mere fact that without prejudice material is
deployed on an interlocutory application does not entitle the other party to
deploy it at the trial before a different trial judge. An example of such a
case is Family Housing Association (Manchester) Ltd v Michael Hyde &
Partners [1993] 1 WLR 354. In that case the plaintiffs filed evidence of
the contents of without prejudice negotiations in order to resist an
application by the defendants to strike the action out for want of prosecution.
The question was whether they were entitled to rely on such evidence or whether
they were precluded from doing by reason of the fact that the negotiations were
without prejudice. It was held by this court that they were entitled to rely
on it. Hirst LJ, with whom Mann and Balcombe LJJ agreed, recognised the public
policy in favour of excluding such evidence but held that there was what he
called (at page 363) a preponderant public policy in favour of admitting the
evidence on applications of that kind. He expressed the view that to admit it
would not infringe the public policy in favour of exclusion. He concluded in
this way (at p 363):
Consequently I am unable to see how exposure to the course of negotiations in
this narrow context is in any way harmful to either side. If the application
succeeds, the action will be at an end. If it fails, and the case proceeds to
trial, the material will not be available to the trial judge and he will not be
in any way embarrassed.
For the above reasons I accept Mr Bloom's submissions, which seem to me to have
particular force in relation to reliance upon an alleged estoppel ... It seems
to me to be manifest that a plaintiff must be entitled to rely for this purpose
on any relevant statements in the without prejudice correspondence to
demonstrate either conduct or an implied intimation by the defendant that he is
willing for the case to proceed.
32. Mr Cran submits that the same is true here. While justice requires that
Somatra should be entitled to rely upon the contents of the without prejudice
conversations at an application to set aside the Mareva injunction, the same is
not true at a trial. Somatra did not in fact apply to vary or discharge the
injunction, and, even if it had, the injunction would have been maintained,
varied or discharged and, in each such event the material would not be
available at the trial, which could and should take place before a different
judge. I see the force of that submission, but I do not think that it is
supported by the decision in the Family Housing Association case. Nor
do I think that it represents the just result.
33. In the above passage Hirst LJ said that he accepted Mr Bloom's submissions.
He had earlier summarised Mr Bloom's propositions as follows (at pp 361-2):
Mr Bloom on behalf of the plaintiffs relied on the following basic
propositions. (i) The admission in an application of this kind of the contents
of without prejudice correspondence for the limited purpose of explaining the
passage of time, and the conduct of the parties during negotiations, does not
infringe the policy which lies behind the exclusion of such correspondence for
other purposes and on other issues. The policy is only infringed if
admissions etc are opened up on issues which will be before the trial
judge. (ii) Wider considerations of public policy require the disclosure
of without prejudice correspondence in so far as it explains what has been
going on between the parties, so far as such activity is relevant to the issues
arising on an application to strike out, especially alleged inordinate and
inexcusable delay. (iii) In so far as the exclusion is founded on agreement
between the parties, such agreements should by implication be confined to the
opening up of admissions and concessions on the merits of the issues likely to
be raised at the trial, and should not extend to exclusion of material
explaining delay and the conduct of the parties. (iv) Whilst public policy
dictates that, in the majority of cases and in relation to the majority of
issues, the details of without prejudice discussions cannot be disclosed, there
is, in a residuum of cases, including the present, a stronger public policy
which dictates disclosure.
The emphasis in the above passage is mine. As I read Hirst LJ's judgment he
accepted those submissions including the italicised portions.
34. He thus accepted the distinction between a case like that, where there was
no infringement of the rule against the admissibility of the contents of
without prejudice discussions and a case like this, where there is. The
infringement in the present case is that Sinclairs opened up issues on the
merits which will be the very questions to be determined by the trial judge.
It seems to me that no party which has taken part in without prejudice
discussions should be entitled use them to his advantage on the merits of the
case in one context, but then assert a right to prevent its opponent from doing
so on the merits at the trial.
35. The remaining case to which I should refer is Derby & Co Ltd v
Weldon (No 10) [1991] 1 WLR 660, where Vinelott J considered the effect of
deploying privileged material on an interlocutory application. He said (at pp
667-8):
Mr Purle QC submitted that there is no general rule that when, adopting the
word used by Mustill J in Nea Karteria ..., material has been `deployed'
in court in an interlocutory application privilege that could otherwise be
claimed in relation to that and associated material has been waived. In the
instant case, he submitted, if the plaintiffs waived any privilege in the
course of the application for the Mareva injunction they did so in discharge of
their duty to make full disclosure and should not be taken to have waived
privilege altogether; they can assert privilege at the trial. I reject that
submission. There are, of course clearly contexts where a party who refers in
interlocutory proceedings to the fact that he has obtained legal advice and who
states the effect of that advice does not thereby waive privilege. ... In the
instant, case the plaintiffs deployed Mr Baker's and Mr Di Donna's evidence in
answer to the claims by Mr Comer and Mr Price as to the knowledge of the
plaintiffs and the ambit of Network's retainer. Moreover those matters have
been brought into issue by Mr Lyndford-Stanford.
Vinelott J held that privilege had been waived. It is true that Mr
Lynford-Stanford was opening the case at the trial, but it seems to me that one
of the bases of the decision was that the material had been deployed in a
significant way on the application for the Mareva injunction. As I see it, the
decision affords Mr Symons' argument at least some, if not decisive,
support.
36. My conclusion as a matter of principle and policy is that where, in support
of its case on the merits of an action, a party deploys material which would
not be admissible because it forms part of without prejudice communications the
other party is entitled to refer to the contents of those same communications
in order to advance its own case on the merits. It does not seem to me to be
just to allow the first party to obtain an advantage by relying on the without
prejudice material in one part of the litigation, as here on an application for
Mareva relief, where the merits are relevant, and to rely upon the without
prejudice nature of the communications when the other party wished to rely
upon, say, an admission made in the same without prejudice discussions at the
trial, where the merits are of course also relevant.
37. The same conclusion is reached if the matter is viewed as one of implied
contract between the parties. The implied contract has been variously stated
in the cases. For example, in paragraph 24 above I quoted Robert Walker LJ's
formulation as being an agreement that communications in the course of the
parties' negotiations should not be admissible in evidence if, despite the
negotiations a contested hearing ensues. Put another way, it can I think be
said to be an agreement by each party not to rely upon anything said or written
by the other party in the course of without prejudice communications in order
to advance the first party's case on the merits.
38. As I see it, Mr Cran in effect concedes that there was a breach of whatever
implied contract there was when Mr Weir relied upon the contents of the
conversations in paragraph 29.4 of Mr Weir's affidavit. He submits, however,
that in doing so, Sinclairs cannot be taken to have consented to Somatra's
reliance upon Sinclairs' admissions in the conversations at the trial. I am
unable to accept that submission. The position can perhaps be analysed in this
way. The use of the without prejudice material which was made by or on behalf
of Sinclairs in support of the application for a Mareva injunction was a
repudiatory breach of the agreement that the material would not be admissible
and/or that they would not rely upon it in order to advance their case on the
merits. In accordance with ordinary contractual principles Somatra was
entitled to affirm the contract and hold Sinclairs to its terms or to accept
the repudiatory breach as bringing the contract to an end leaving it free to
adduce the contents of the conversations in evidence. Somatra either has or is
entitled to take the latter course and to put the contents (or such parts as
are relevant to the issues on the merits) before the judge at the trial.
39. As I see it, however, the matter cannot be analysed in wholly contractual
terms because of the element of public policy recognised in the cases. The
essential point in a case like the present case is, in my judgment, that it
would be unjust to allow one party to deploy the material for its benefit on
the merits in one part of the litigation without allowing the other to do so
too in another. For example, if there is an application to discharge a Mareva
injunction the court may have to reach preliminary conclusions on the merits.
Thus it is accepted here that an application to discharge the injunction would
be likely to have involved at least some consideration of the admissions
offered during the conversations in order to examine whether the assertions in
paragraph 29.4 of the affidavit were sustainable. In these circumstances I do
not see how it could be just thereafter to exclude the same evidence when the
merits came to be considered in detail at a trial. Moreover, that seems to me
to be so, even if no application is made to discharge the injunction. Any
advantage gained by the applicants is gained when the affidavit is relied upon
in the first place. They should not be allowed to seek that advantage on the
merits by infringing the without prejudice status of the conversations without
Somatra being allowed to rely upon the same without prejudice material to its
advantage on the merits at the trial, without requiring it first to apply to
discharge the injunction.
40. In all the circumstances, I have reached a different conclusion from the
judge. I would hold that the contents of the conversations are admissible at
the trial because Sinclairs relied upon them in paragraph 29.4 of Mr Weir's
affidavit. I should add in this regard that (subject to any discrete point
that may arise at the trial) I do not think that it is possible to limit the
admissibility to some of the contents of the conversations. In these
circumstances it is not necessary to give any separate consideration to
paragraph 36(4). I would allow the appeal on the main point.
Privilege.
41. This point was not considered by the judge. By a respondents' notice
Sinclairs claim privilege for all documents in their possession, custody and
power relating to or arising from the meetings and telephone conversations.
They make the claim under two heads, which I shall consider in turn, namely
legal professional privilege and litigation privilege.
Legal Professional Privilege.
42. In Mr Rutherford's third affidavit he says that there are in existence
certain documents in the above categories, namely written communications and
records of oral communications between Mr Leach and other partners of
Sinclairs. In paragraph 25 of his affidavit he says that he has reviewed those
documents and that they are protected by legal professional privilege as
follows:
All were confidential communications which formed part of a continuum of
communications aimed at keeping Mr Leach and other partners informed so that Mr
Leach could advise and act on behalf of the firm as required. Mr Leach was
throughout exercising professional skill and judgment as a Solicitor, on behalf
of his firm. He was effectively acting as "in-house counsel" to SRT.
43. Against that, Mr Symons submits that the contemporary documents from 1994
show that Mr Leach was acting as managing partner dealing with a disgruntled
client who was querying the size of the firm's bill and raising issues as to
the way in which Sinclairs had acted. Mr Leach was not advising Sinclairs as
to its rights against Somatra and the other ABT companies. Reliance is placed
upon part of what Mr Leach said at the meetings. It is submitted that if
Sinclairs were a firm of accountants Mr Leach's role as managing partner would
have been the same, but there would have been no question of a claim for
privilege.
44. I was at one time attracted by Mr Symons' submissions on this point. A
consideration of the recordings shows that Mr Leach was in important respects
acting as Sinclairs' managing partner and in that capacity trying to settle
Somatra's claim against them. However, I do not think that the analogy with
the position of the managing partner of a firm of accountants is apt because,
as Mr Cran points out, Mr Leach is in fact a lawyer and thus in a position to
give legal advice to the partnership. Mr Rutherford has deposed to having
considered the relevant documents and to the fact that Mr Leach was throughout
exercising professional skill and judgment as a solicitor on behalf of
Sinclairs. If that evidence is accepted, even if Mr Leach was at the same time
acting as managing partner, Sinclairs are I think entitled to claim privilege
for the classes of document referred to by Mr Rutherford. On balance, I have
reached the conclusion that it would not be appropriate to go behind Mr
Rutherford's affidavit and that his evidence should be accepted. In these
circumstances, not without hesitation, I would uphold the claim for privilege
on this ground.
Litigation Privilege.
45. So far as I am aware, the conclusion just reached makes it unnecessary to
consider this head of privilege separately.
Waiver of Privilege.
46. There is a suggestion in Somatra's skeleton argument that there has been a
waiver of the right to privilege, but the point was not pursued in argument and
I say no more about it.
Conclusion.
47. For the reasons which I have given I would allow the appeal and hold that
Sinclairs are not entitled to rely upon the without prejudice nature of the
conversations at the trial because they themselves relied upon them in support
of their application for a Mareva injunction. On the other hand, I would
uphold Sinclairs' claim for privilege for the documents referred to in
paragraphs 42 and 43 above.
Lord Justice Waller:
48. I agree. On the main point argued on the appeal, the question whether the
contents of "without prejudice" meetings and conversations may now be referred
to, I would just add one point by way of emphasis.
49. Where a mareva or freezing injunction is being sought, the merits of the
underlying dispute will be relevant. If that injunction is obtained, a
cross-undertaking in damages will invariably be required. That is a factor
which to my mind makes it clear beyond per-adventure that it would be unjust to
allow a party to deploy without prejudice material to support the merits of his
case in order to obtain such an injunction, but be entitled to prevent the
other party deploying part of the same material to attempt to defeat the case
on the merits at a trial. A party who is attempting to defeat a case at trial
is also seeking to demonstrate thereby that the injunction granted on an
interlocutory basis should not have been granted in the first place and will be
seeking an order for an enquiry as to damage which flows from the undertaking
given to the court.
50. I agree with my lord that the material in paragraph 29.4 of the affidavit
of Mr Weir was being deployed on the merits in order to assist in the obtaining
of the mareva or freezing injunction. Once that conclusion is reached I agree
with my lord that it will be unjust if Somatra are not entitled to deploy part
of that same material at the trial.
Order:
1. Appeal allowed in part; dimissed in part; respondent to pay 80% of the
claimant's (appellant's) costs of the appeal, such costs to be paid within 28
days.
2. The respondent to pay 70% of the costs of the application;
3. There to be an interim award of £27, 500
4. Application for permission to appeal to the House of Lords
refused.
(Order does not form part of approved judgment.)
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