Wilkinson v West Coast Capital & Ors

At a pre-trial stage, witness evidence should be struck out for irrelevance or disproportionality only where it is quite plain that it could never be relevant or sufficiently helpful at trial. The trial judge will usually be better placed to assess its value and proportionality.

The without prejudice rule protects the general freedom to negotiate, not merely identifiable admissions against interest. Parties cannot dissect negotiations by retaining favourable facts, such as an agreement in principle or its abandonment, while excluding the surrounding material. An exception based on bad faith or unambiguous impropriety requires strong evidence and applies only in clear cases.

Peter Wilkinson presented a petition under section 459 of the Companies Act 1986 concerning alleged diversion of business opportunities and deprivation of corporate benefits. At a pre-trial review, the respondents sought to strike out parts of his witness statements.

The applications concerned, first, evidence said to be irrelevant or disproportionate and, secondly, evidence relating to without prejudice settlement negotiations. The petitioner relied on the negotiations to establish distrust of a respondent and argued alternatively that bad faith removed the without prejudice protection.

1. Evidence alleged to be irrelevant or disproportionate. The court declined to strike out the challenged passages. Although case-management powers are important, an interlocutory judge has less complete knowledge of the issues and evidence than the trial judge. The appropriate threshold was whether it was quite plain that the evidence could never be relevant or, if relevant, sufficiently helpful to justify its admission. That burden was not discharged. The respondents remained free to renew their objections before the trial judge.
2. Scope of the without prejudice rule. The rule must be applied with restraint and only where the public interests supporting it require protection. The principal practical effect identified in Unilever plc v Procter and Gamble [2000] 1 WLR 2437 is protection against admissions against interest, but the rule also protects a wider freedom to negotiate. It was therefore impermissible to separate the fact of an agreement in principle and its abandonment from the negotiations which produced them.
3. The fact that one party broke off negotiations could itself form part of the protected subject matter, particularly in an unfair prejudice petition where alleged unreasonableness may be significant. Any attempt to justify the conduct would likely require disclosure of the terms and history of the negotiations, which the protection covered.
4. An exception for bad faith, perjury, blackmail or other unambiguous impropriety requires strong evidence and is confined to the clearest cases. General expressions of distrust did not establish bad faith. The available evidence contained no proper basis for the allegation, and the relevant witness-statement passages were struck out.
5. The court also observed that the asserted relevance of distrust had not been pleaded. The petitioner could make further submissions on whether additional material should be served, but the existing evidence was not admissible.