Barnetson v Framlington Group Limited

The Court of Appeal held that the "without prejudice" rule can protect communications made before litigation provided there was a dispute capable of settlement and the parties contemplated litigation if negotiations failed. The judge at first instance was wrong to treat the negotiations as mere discussions about a contractual variation rather than attempts to compromise an existing dispute about entitlement to restricted shares and bonus. The court emphasised the rule's public policy basis of encouraging settlement and applied authorities including Rush v Tompkins and Bradford & Bingley v Rashid. The appeal was allowed and the Court directed amendment and re-service of the claimant's first witness statement omitting the privileged passages.

This is an appeal from a High Court judge's refusal to require re-service of a witness statement with deletions of passages said to be "without prejudice". The claimant, Mr Barnetson, brought proceedings for wrongful dismissal and other breaches of his written employment contract after his employment ended on 31 December 2005. The disputed passages described pre-termination discussions about his entitlement to restricted shares and bonus and negotiations about terms for his early departure.

Nature of the claim: damages for wrongful dismissal and alleged contractual breaches, and associated claims to restricted shares and bonus.

Procedural posture: appeal from HHJ Seymour QC (Queen's Bench Division, HQ06X02307) who declined to require re-service omitting the passages; the Court of Appeal heard the appeal.

Issues framed:

• whether communications before the commencement of litigation may attract the "without prejudice" rule, and how proximate to litigation such communications must be;
• whether the particular pre-termination exchanges between the parties were negotiations to vary the contract or negotiations aimed at settling a dispute about contractual entitlements;
• whether any express or implied agreement to treat the communications as "without prejudice" existed.

Court's reasoning: The court explained that the public policy underlying the rule — encouraging settlement without resort to litigation — supports protecting pre-litigation settlement negotiations where there is a real dispute capable of compromise and the parties might reasonably have contemplated litigation if they failed to agree. The court rejected a rigid temporal test requiring litigation to be threatened or imminent. Applying the parties' factual narrative accepted by the High Court (including Framlington's communication on 28 October 2005 that there would be no role for the claimant in the new structure) the Court of Appeal concluded the exchanges were part of negotiations arising out of an existing dispute about entitlements and conducted against a background where litigation was a realistic possibility. The court therefore allowed the appeal, concluding the contested passages were covered by the "without prejudice" rule and directing amendment and re-service of the witness statement.

The court also noted the need for caution in employment cases but held that employment-context considerations do not displace the ordinary operation of the rule where its policy rationale applies. The court referred to Civil Procedure Rules Part 36 as reflecting the desirability of pre-action settlement.

Appeal allowed. The Court of Appeal concluded that the contested pre-termination exchanges were negotiations arising out of a dispute about the claimant's contractual entitlements and were conducted against the background of potential litigation, so the "without prejudice" rule applied. The Court directed amendment and re-service of the claimant's first witness statement omitting the privileged material.

Appeal from the decision of HHJ Seymour QC sitting as a High Court Judge (Queen's Bench Division), HQ06X02307, 19 January 2007, in which the judge refused the defendants' application to excise passages from the claimant's first witness statement on grounds of "without prejudice" privilege. The Court of Appeal ([2007] EWCA Civ 502) allowed the appeal and directed amendment and re-service.