Interactive Technology Corporation Ltd v Ferster & Ors

The court permitted an amendment to a petition under s.994 of the Companies Act 2006 after holding that an email sent by a mediator was admissible despite being described as "without prejudice". The key legal principle applied was the established exception to without prejudice privilege for "unambiguous impropriety" (including blackmail), which permits disclosure where the without prejudice occasion has been used as a cloak for improper threats. The judge found the mediator's email contained a clear threat to cause committal and criminal proceedings unless the petitioner paid an increased ransom-like price for his brothers' shares and that this constituted unambiguous impropriety. The court also held that the standard CEDR mediation agreement did not contain sufficiently clear and unmistakeable words to exclude the public policy exception for such impropriety and so did not render the email inadmissible.

Background and parties: The petitioner, Jonathan Ferster, brought a petition under s.994 of the Companies Act 2006 alleging unfairly prejudicial conduct by his brothers Stuart and Warren who, together with him, each held one-third of Interactive Technology Corporation Limited (ITC). Parallel to that petition there were acrimonious company proceedings brought by ITC against Jonathan for alleged breaches of fiduciary duty, in which a freezing order (including disclosure directions) had been made and continued.

Nature of application: Jonathan applied to amend his petition to plead that, in April 2015, Stuart and Warren sought to extort an inflated price for their shares by threatening to cause ITC to institute committal and criminal proceedings against him unless he paid more. The amendment relied upon an email sent on 29 April 2015 by the mediator to Jonathan's solicitors setting out threats and pressure points said to have been communicated by the brothers.

Issues for decision:

• Whether the mediator's email was protected by without prejudice/mediation privilege and therefore inadmissible, or whether it fell within the exception for unambiguous impropriety (including blackmail) and was therefore admissible;
• Whether the mediation agreement between the parties extended without prejudice protection so as to exclude the exception for unambiguous impropriety.

Court's reasoning: The judge reviewed the authorities establishing that without prejudice protection is important but that it cannot be used to shield blackmail or other unambiguous impropriety. Although the threshold for defeating privilege is high, the email in question was drafted and conveyed in clear terms and threatened committal and criminal charges unless the petitioner paid a substantially increased price for the shares. That, in the judge's view, was a straightforward instance of improper pressure and fell within the exception. The fact the message was conveyed by a mediator or supported by solicitors did not prevent the court forming its own view of the content and effect of the communication. The standard CEDR mediation agreement used for the January mediation did not contain clear and unmistakeable terms capable of removing the public policy exception to without prejudice privilege; paragraph 4.2 did not override the exception for unambiguous impropriety. The judge also addressed potential consequences as to waiver and the need for the respondents to decide whether to justify the communication, but allowed the amendment on the basis that the email is admissible evidence.

Relief sought and outcome: The application sought permission to amend the unfair prejudice petition to include allegations based on the mediator's email; the amendment was permitted and the court directed that the pleading timetable accommodate the amendment.

Amendment permitted. The mediator's email was admissible because it fell within the exception to without prejudice privilege for unambiguous impropriety (effectively an attempt at blackmail by threatening committal and criminal proceedings to extract a higher price for shares). The standard CEDR mediation agreement did not contain clear and unmistakeable wording sufficient to override that public policy exception.