Konczak v BAE Systems (Operations) Ltd (Practice and Procedure : Compromise)

A party who deliberately deploys material referring to a without-prejudice settlement offer waives the privilege attaching to that offer. The opposing party may then rely on the negotiations to the extent relevant to remedy.

However, a claimant’s refusal of a settlement offer ends loss flowing from dismissal only where it is so unreasonable that it breaks the chain of causation. That is a high threshold. A tribunal must give adequate reasons for such a finding and must address the medical evidence on the likely duration of the claimant’s condition.

The claimant succeeded in substantial parts of claims for unfair dismissal and discrimination. At the remedy stage, an Employment Judge held that she had waived without-prejudice privilege by including in the tribunal bundle a note referring to a settlement offer. The remedy tribunal then held that her refusal of a £75,000 offer ended her recoverable loss from 11 July 2008.

She brought two appeals: one against the privilege ruling and one against the remedy judgment. The central questions were whether privilege had been waived and whether refusal of the offer could lawfully terminate her continuing loss.

1. The privilege appeal was dismissed. The claimant deliberately relied on the note of her meeting with the medical expert in support of her allegation that he had acted improperly. Its reference to the respondent’s settlement offer was therefore part of the case she chose to advance. She waived privilege in relation to that offer, and the respondent could rely on the relevant negotiations at the remedy hearing. The finding that disclosure was deliberate, rather than an obvious mistake, was open to the Employment Judge.
2. The remedy appeal was allowed. The remedy tribunal gave no adequate explanation for finding that refusal of the £75,000 offer was so unreasonable as to break the chain of causation and terminate all loss. That conclusion was legally impermissible in light of the scale of the pleaded loss, the claimant’s £85,000 counter-offer, and the subsequent negotiations.
3. Even if refusal had been unreasonable, the tribunal failed to explain why it would have produced an immediate recovery. Medical evidence indicated that complete resolution of the case would be followed by a significant recovery only after two to three years. The tribunal also failed to determine whether later events would end liability and made unclear findings about a possible voluntary departure to become a ballet teacher.
4. The erroneous cut-off date was fundamental. Following the guidance in Sinclair Roche & Temperley v Heard, the calculation of earnings and pension loss was remitted to a fresh Employment Tribunal. Although privilege had been waived, the fresh tribunal was directed to disregard the negotiations, which were irrelevant to determining pecuniary loss. The liability judgment and specified unaffected parts of the remedy judgment remained in force.

• Employment Appeal Tribunal: The privilege appeal was dismissed. The remedy appeal was allowed and the assessment of pecuniary loss was remitted to a fresh Employment Tribunal.
• Employment Tribunal: The liability judgment of 8 October 2008 upheld parts of the claimant’s unfair dismissal and discrimination claims. A separate ruling dated 24 May 2011 found waiver of without-prejudice privilege. The remedy judgment dated 20 June 2011 awarded compensation of approximately £45,000 and treated loss as ending on 11 July 2008.