Privilege waived in relation to, amongst other things, a deed of settlement

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 that is 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 ³⁾ 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.

… a party to a correspondence within the 'without prejudice' privilege is, generally speaking, protected from being required to disclose it on discovery or at trial in proceedings by or against a third party.

In my opinion the privilege as so often stated, is intended to encourage amicable settlements and to protect parties to negotiations for that purpose. It is in the public interest that it not be given a restrictive interpretation

The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence.

A competent solicitor will always head any negotiating correspondence 'without prejudice' to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial.

However, the application of the rule is not dependent upon the use of the phrase 'without prejudice' and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.

I cannot therefore agree with the Court of Appeal that the problem in the present case should be resolved by a linguistic approach to the meaning of the phrase 'without prejudice'.

I believe that the question has to be looked at more broadly and resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation.

Nearly all the cases in which the scope of the 'without prejudice' rule has been considered concern the admissibility of evidence at trial after negotiations have failed.

In such circumstances no question of discovery arises because the parties are well aware of what passed between them in the negotiations.

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.

Thus the 'without prejudice' material will be admissible if the issue is whether or not the negotiations resulted in an agreed settlement, which is the point that Lindley L.J. was making in Walker v Wilsher ⁵⁾ and which was applied in Tomlin v. Standard Telephones & Cables Ltd. ⁶⁾

The court will not permit the phrase to be used to exclude an act of bankruptcy: ⁷⁾ nor to suppress a threat if an offer is not accepted ⁸⁾

In certain circumstances the 'without prejudice' correspondence may be looked at to determine a question of costs after judgment has been given: ⁹⁾

There is also authority for the proposition that the admission of an 'independent fact' in no way connected with the merits of the cause is admissible even if made in the course of negotiations for a settlement.

Thus an admission that a document was in the handwriting of one of the parties was received in evidence in Waldridge v Kennison ¹⁰⁾.

I regard this as an exceptional case and it should not be allowed to whittle down the protection given to the parties to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.

If the compromise fails the admission of the facts made for the purpose of the compromise should not be held against the maker of the admission and should therefore not be received in evidence.

I cannot accept the view of the Court of Appeal that Walker v Wilsher, ¹¹⁾, is authority for the proposition that if the negotiations succeed and a settlement is concluded the privilege goes, having served its purpose.

In Walker v Wilsher the Court of Appeal held that it was not permissible to receive the contents of a 'without prejudice' offer on the question of costs and no question arose as to the admissibility of admissions made in the negotiations in any possible subsequent proceedings. There are many situations when parties engaged upon some great enterprise such as a large building construction project must anticipate the risk of being involved in disputes with others engaged on the same project.

Suppose the main contractor in an attempt to settle a dispute with one subcontractor made certain admissions it is clear law that those admissions cannot be used against him if there is no settlement.

The reason they are not to be used is because it would discourage settlement if he believed that the admissions might be held against him. But it would surely be equally discouraging if the main contractor knew that if he achieved a settlement those admissions could then be used against him by any other subcontractor with whom he might also be in dispute.

The main contractor might well be prepared to make certain concessions to settle some modest claim which he would never make in the face of another far larger claim.

It seems to me that if those admissions made to achieve settlement of a piece of minor litigation could be held against him in a subsequent major litigation it would actively discourage settlement of the minor litigation and run counter to the whole underlying purpose of the 'without prejudice' rule.

I would therefore hold that as a general rule the 'without prejudice' rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement.

It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was reached with that party.

[m]any of the so-called ‘post-settlement’ documents are examples of fine tuning and amendments to the numerous draft settlement agreements which were being exchanged between the solicitors.

It is inevitable that in such a complex commercial matter there will be numerous alternations and variations before the matter is finally signed off.

So that, whereas the settlement date might be nominated, it would be flying in the case of common sense and reality to have a cut-off point and say that anything that happened beyond that was not covered by the privilege.

Privilege waived in relation to, amongst other things, a deed of settlement