Berry Trade Ltd. & Anor v Moussavi & Ors

Communications made in a genuine attempt to compromise a dispute are generally inadmissible. The exception for perjury, blackmail or other unambiguous impropriety applies only in the clearest cases of abuse. A serious and substantial risk of perjury is too low a threshold.

A difference between a party’s position during settlement negotiations and a later pleading or sworn statement does not, without more, establish unambiguous impropriety. The evidence must demonstrate clearly that the party is deliberately committing perjury. Courts should be especially reluctant to extract alleged admissions from lengthy, unscripted negotiations where the parties dispute what was said and no transcript or detailed contemporaneous record exists.

The claimants alleged deceit and conspiracy arising from the misappropriation of oil. The seventh defendant counterclaimed for management fees said to be payable under an oral agreement. The claimants contended that statements made by him during several expressly without prejudice meetings and a related telephone conversation were inconsistent with his pleaded case.

David Steel J permitted the claimants to adduce evidence of those statements in support of an application for summary judgment. He considered that their exclusion created a serious and substantial risk that the privilege would cloak perjury.

The seventh defendant appealed. The central issues were whether that threshold correctly expressed the unambiguous impropriety exception and whether the disputed statements could satisfy the proper threshold.

1. Appeal allowed. The High Court’s order was set aside and the claimants’ application to adduce the without prejudice statements was refused.

2. Written and oral communications made for the purpose of a genuine attempt to compromise a dispute are generally inadmissible. The rule rests partly on public policy and partly on the parties’ implied agreement. It permits parties to speak freely about the factual and legal issues without monitoring every statement for fear that it may later be used as an admission: Cutts v Head [1984] Ch 290, Muller v Linsley & Mortimer [1996] PNLR 74 and Unilever plc v Procter & Gamble Co [2000] 1 WLR 2436 considered.

3. The relevant exception arises where exclusion would cloak perjury, blackmail or other unambiguous impropriety. It is a narrow exception, confined to the clearest cases of abuse of a privileged occasion. The judge’s test of a serious and substantial risk of perjury was unsupported by authority, materially weakened the requirement of unambiguous impropriety and risked serious erosion of the rule. The court must require nothing less than unambiguous impropriety.

4. A mere inconsistency between a position adopted in negotiations and a later pleading or sworn assertion is insufficient. The evidence must show very clearly that the party deliberately committed or intended to commit perjury. Here the absence of a reference during negotiations to the pleaded fee, and the alleged references to a different fee, did not meet that standard.

5. The alleged admissions had been extracted from many hours of unscripted discussions. There was no transcript or detailed record, the available notes required interpretation, important contextual matters were disputed, and some recollections were demonstrably unreliable. The material did not establish unequivocally that the seventh defendant had asserted that his only agreed remuneration was a fixed fee of US$2 per tonne.

6. The court distinguished Dora v Semper, where the statements were not admissions relevant to the earlier action and did not form part of genuine settlement negotiations. It also distinguished Merrill Lynch, Pierce Fenner & Smith Inc v Raffa [2001] 1 LPr 31 and Savings & Investment Bank Ltd v Fincken [2003] EWHC 719 (Ch), where the evidence of the relevant admissions was apparently unchallenged. It was unnecessary to decide whether those two decisions were correct.

7. A separate trial about what had been said in the negotiations was undesirable. Such satellite litigation would require further disclosure of the negotiations and would discourage settlement. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): Permission to appeal was granted. The appeal was allowed, the High Court order was set aside, and the claimants’ application to adduce the without prejudice statements was refused: [2003] EWCA Civ 715.
2. High Court, Queen’s Bench Division, Commercial Court: David Steel J permitted the claimants to adduce evidence of statements allegedly made in without prejudice negotiations. He refused permission to appeal. No citation is stated in the judgment.