Vestergaard Frandsen A/S & Ors v Bestnet Europe Ltd & Ors

Without prejudice communications remain inadmissible when the court assesses costs, including where the communications are relied on to show an allegedly unreasonable negotiating attitude. The privilege rests on both the policy of encouraging settlement and the parties’ implied agreement that negotiations will remain confidential. It protects the whole negotiating exchange, including offers, refusals, counter-offers and failures to respond. A party cannot unilaterally waive the privilege attaching to an offer or its response. A claim for indemnity costs, or an assertion that a party’s conduct was not open to criticism, does not impliedly waive privilege unless the party relies on conduct in the negotiations.

The claimants applied to strike out passages in the defendants’ 22nd witness statement which referred to correspondence marked without prejudice, including correspondence marked without prejudice save as to the costs of detailed assessment. The correspondence arose during negotiations concerning the costs of the liability proceedings and a possible global settlement involving the subsequent damages inquiry.

The defendants wished to rely on the correspondence at the forthcoming costs hearing to show that the claimants had maintained an excessively high damages claim and had refused to engage in settlement discussions. They argued that the claimants’ responses were not genuinely aimed at settlement and that privilege had been waived by the claimants’ claim for indemnity costs and assertion that their conduct was not to be criticised. The central issues were whether the correspondence was protected and whether privilege had been waived.

1. Application granted. The passages referring to the without prejudice correspondence, and the exhibits containing it, were struck out. The court declined to grant the additional injunctive relief sought.
2. The modern rule protects without prejudice negotiations because of both the public policy of encouraging settlement and the parties’ express or implied agreement that negotiations will not be used in evidence if litigation continues. The protection extends to the assessment of costs. The broader modern approach confirmed in Ofulue v Bossert [2009] AC 990 and Oceanbulk Shipping [2011] 1 AC 662 rejects a narrow conception of the public policy basis.
3. A recipient of a without prejudice offer may respond by counter-offer, request information, reject it, or fail to respond. Each is protected. The response cannot be admitted in isolation because the offer and the surrounding chain of negotiations would also have to be disclosed.
4. The privilege is joint. One party cannot waive it unilaterally. The defendants’ proposed distinction between unilateral privilege in the initial offer and joint privilege arising only after a counter-offer was unsupported and inconsistent with Walker v Wilsher (1889) 23 QBD 335 and Cutts v Head.
5. The defendants already had admissible Part 36 and without prejudice save as to costs material showing that the claimants had made no offers or responses. The additional correspondence was unnecessary for that purpose and was sought mainly to expose the claimants’ alleged attitude in negotiations. That did not justify admitting it.
6. There was no waiver. Seeking indemnity costs was not inconsistent with maintaining privilege, because the claim did not rely on the defendants’ conduct in the privileged negotiations. The statement that the claimants’ conduct was not to be criticised was counsel’s submission based on the evidence actually before the court, not an assertion about privileged negotiations.