Clydesdale Bank Plc v Duffy

The Court of Appeal held that an appellate court reviews, rather than retries, a trial judge’s factual and evaluative conclusions. Interference is justified only for legal error or where the conclusion is one the judge could not reasonably reach. Whether negotiations are without prejudice must be assessed across the communications as a whole. An expressly without prejudice meeting does not automatically bring later negotiations within the privilege. The privilege protects attempts to compromise a genuine legal dispute, not every communication concerning disputed liabilities. The appeal was dismissed because the negotiations remained a continuous course, there was no January sea change, and no genuine legal dispute was shown. The alternative privilege issue therefore did not arise.

The Bank claimed sums under guarantees signed by Mr Duffy. He defended the claim in part on an alleged agreement releasing him from liability. Before trial, Master Bragge directed preliminary issues on whether negotiations at a meeting on 30 January 2009 and subsequent communications were without prejudice and, if so, whether an exception permitted their admission.

His Honour Judge Kaye QC held that only the 30 January meeting was without prejudice, and alternatively that the evidence was admissible. On appeal, the issues were whether the negotiations formed a continuous course, whether a genuine legal dispute existed, and whether the exception applied.

1. Disposition. The Court of Appeal dismissed the appeal on grounds 1 and 2. Ground 3 was conditional on success on either of those grounds and therefore did not arise.
2. Appellate restraint. Lord Justice Lewison, with whom Elias and Kitchin LJJ agreed, applied the established appellate approach, identified as culminating in McGraddie v McGraddie [2013] UKSC 58 [2013] 1 WLR 2477. An appeal court reviews the trial judge’s decision and should not interfere with findings of primary fact, evaluations or inferences unless there is an error of law or the conclusion compels intervention.
3. Continuous negotiations. The trial judge was entitled to regard the negotiations from summer 2008 to summer 2009 as a seamless whole. The alleged threats to appoint receivers, the expressly without prejudice meeting on 30 January 2009, the change towards a managed exit, and the completion of works did not establish a January sea change. The appeal arguments relied on selected evidence, whereas the evaluation had to be made from the evidence taken as a whole.
4. Scope of the express designation. The 30 January meeting was properly treated as a one-off event. The parties knew how to designate negotiations as without prejudice, but did not expressly designate the later communications, and the evidence did not establish an implied extension.
5. Legal dispute and privilege. The judge was entitled to find no genuine legal dispute capable of attracting the privilege. The negotiations concerned a commercial workout and satisfaction of existing liabilities. The Court further observed that, even if a dispute existed, its mere existence would not make every communication about it privileged; only attempts to compromise the dispute would attract the protection. This alternative analysis was unnecessary to the result.
6. The principle that the whole series of communications must be considered when deciding whether a binding agreement was reached was applied from Hussey v Horne-Payne [1878] 4 Appeal Cases 311. Accordingly, relevant open communications after the alleged agreement could be considered at trial.

• Court of Appeal (Civil Division): On 29 January 2014, dismissed the appeal on grounds 1 and 2. Ground 3 did not arise.
• High Court of Justice: His Honour Judge Kaye QC held that, apart from the meeting on 30 January 2009, the negotiations were not without prejudice. He further held that, even if they were, an exception justified admitting the evidence at trial.
• High Court of Justice: On 19 April 2012, Master Bragge ordered the trial of preliminary issues concerning the admissibility of the negotiations.