Archive for October, 2014

‘Without prejudice’

In February we considered three little words ‘subject to contract’.  The High Court has recently returned to a two word much used and misused phrase: ‘without prejudice’.

The existence of all documents relevant to a dispute must be disclosed in any ensuing litigation, whether they assist or harm a party’s case.  Some documents are, however, protected from disclosure and are inadmissible.  Examples include correspondence with a party’s legal (but not other) advisers which contains legal advice.  Additionally, in order for parties to conduct settlement negotiations which may contain certain admissions, documents marked ‘without prejudice’ are not seen by the courts.  Examining the law, Mr Justice David Richards said in Avonwick Holdings Ltd v Webinvest Ltd and another [2014] EWHC 2322 (Ch) “For a document to be inadmissible on the grounds that it is “without prejudice”, it must form part of a genuine attempt to resolve a dispute.  There needs to be both a genuine dispute to be resolved and a genuine attempt to resolve it.  If there is no dispute about a liability, but only a negotiation as to how and when it should be discharged, the negotiations, and documents produced in the course of them, are not covered by the “without prejudice” exception to the admissiblity of relevant evidence.”

Avonwick loaned Webinvest US$200M to be repaid in accordance with a loan agreement.  Webinvest defaulted and communications opened re a restructuring of the admitted liability.  These communications were marked ‘without prejudice’.  At that time, there was no evidence that Avonwick believed or had reason to believe there was a dispute about liability although a dispute on liability subsequently arose.  The judge held “Communications made a a time when there is no dispute cannot, with retrospective effect, be made subject to the without prejudice privilege by subsequently raising a dispute.”  Even if the phrase was used by an experienced legal adviser, the judge held that if, on the evidence, the court is satisfied there was no genuine dispute at the time communications were conducted “the only conclusion, itself not an impossible one, is that the solicitor made a mistake”.

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