Framlington Group Ltd & Anor v Barnetson

The without prejudice rule may protect genuine settlement negotiations before proceedings have begun or been threatened. The decisive question is not temporal proximity to litigation. The court must determine whether there was a real dispute capable of compromise and whether the parties contemplated, or might reasonably have contemplated, litigation over that same dispute if negotiations failed.

The words “without prejudice” may indicate the parties’ intention but are not determinative. The rule should extend no further than necessary to advance the public policy of encouraging settlement while allowing parties to put their case fairly.

The claimant was employed under a fixed-term contract. Following notification that his employment would end early, the parties discussed the financial terms of his departure, including bonus and restricted shares. The employer later dismissed him, and he brought proceedings for wrongful dismissal and contractual breaches.

Before trial, the employer sought to exclude passages from the claimant’s witness statement describing those discussions. The High Court dismissed the application, holding that the exchanges concerned a proposed variation of the contract before any dispute or potential litigation existed. The employer appealed. The central issue was whether the discussions were protected by the without prejudice rule although litigation had not then begun or been threatened.

1. Appeal allowed unanimously. Auld LJ, with whom Longmore and Toulson LJJ agreed, held that the judge had wrongly treated the absence of commenced or threatened proceedings as decisive. The relevant exchanges were protected by the without prejudice rule.

2. The rule is founded principally on the public policy of encouraging settlement rather than litigation. It applies to communications forming part of genuine negotiations to compromise a real dispute. Proceedings need not have started. Nor is an express or implied threat of proceedings a necessary condition.

3. The question of proximity is one of subject matter, not time. The court should ask whether, during the negotiations, the parties contemplated or might reasonably have contemplated litigation if they could not agree, and whether that litigation would concern the same dispute. The rule must not be extended beyond what is necessary to promote settlement, because it also prevents a party from relying on material that may assist its case.

4. On the facts, the parties were already in dispute about the claimant’s contractual entitlements when the employer announced its intention to dismiss him early. Their subsequent discussions concerned those disputed entitlements and took place against a clear potential for litigation if agreement could not be reached. They were negotiations for compromise, not negotiations merely to vary the contract. The later written threat of proceedings reinforced that conclusion.

5. The court directed amendment and re-service of the claimant’s first witness statement and exhibits to remove the protected material, subject to any detail necessary to formulate the order.

• Court of Appeal (Civil Division): Allowed the employer’s appeal in [2007] EWCA Civ 502 and directed amendment and re-service of the witness statement.
• High Court (Queen’s Bench Division): HHJ Richard Seymour QC, sitting as a High Court judge, dismissed the employer’s application to remove the passages said to be protected by the without prejudice rule.