Hiscox Syndicates Ltd & Anor v The Pinnacle Ltd & Ors

Without prejudice negotiations are generally inadmissible when the court determines costs. The protection extends beyond offers to communications which may show that a claim was exaggerated or that a party acted unreasonably. A communication marked “without prejudice” is presumed to fall within the rule, subject to rebuttal where its contents clearly show that it was not part of genuine settlement negotiations. The court must assess the communication as a whole and in context.

The unambiguous impropriety exception is narrow. It applies only to clear abuse of the privilege, such as perjury, blackmail or similar misconduct. Aggressive negotiation, inflated settlement demands and inconsistent positions do not by themselves satisfy that threshold.

The underlying nuisance and related claims concerning disturbance from a neighbouring development were compromised for £350,000. The parties agreed that liability for costs would be determined by the Technology and Construction Court.

Before the costs hearing, the defendants sought to rely on emails and mediation materials which they said showed that Hiscox had pursued an exaggerated damages claim. Hiscox applied to prevent reliance on the material, arguing that it was protected by without prejudice privilege.

The issues were whether the communications were genuinely part of settlement negotiations, whether the unambiguous impropriety exception applied, and whether mediation confidentiality created a separate bar.

1. Without prejudice communications and costs. The general rule is that without prejudice negotiations cannot be used to determine costs. That rule covers not only offers but also communications which might bear on party conduct, including alleged exaggeration of a claim. Such material cannot therefore be relied on under CPR 44.3, subject to the separate treatment of “without prejudice save as to costs” communications.

2. Whether communications are protected. The relevant question is whether the document formed part of negotiations genuinely aimed at compromising the dispute. A communication which merely asserts a position and shows no willingness to negotiate may fall outside the privilege. A communication may nevertheless be protected as an opening proposal or as part of the negotiating process, even if it contains no offer. Where a document is expressly marked “without prejudice”, that gives rise to a rebuttable presumption that it has that character.

3. The court must assess the communication as a whole, taking account of its surrounding circumstances. The emails exchanged between the parties from January to April 2008 concerned continuing problems and proposals for resolving the litigation. They were therefore protected, including the emails of 27 and 30 January and 7 and 8 April 2008.

4. Unambiguous impropriety. The exception applies only where privilege would otherwise operate as a cloak for clear misconduct, such as perjury, blackmail or similar impropriety. The defendants’ allegations that Hiscox negotiated on an inflated basis, referred to substantial figures and later denied exaggeration did not approach that high threshold. The emails and mediation appendices contained no improper threat or abuse of the privilege.

5. The court consequently held that the defendants could not rely on the protected communications in submissions concerning the costs order. The issue of mediation confidentiality did not arise, although it was noted that confidentiality was distinct from privilege and would have required consideration of the mediator’s and other parties’ views.

Not stated in the judgment.