Interactive Technology Corporation Ltd v Ferster & Ors

Without prejudice privilege does not protect communications used as a cloak for blackmail or other unambiguous impropriety. The threshold for admitting such material is high, but a clear threat to use contemplated court or criminal proceedings to obtain a personal financial advantage falls within the exception. The court must assess the nature of the threat for itself, regardless of the status or reputation of the mediator or lawyers involved. Mediation does not attract a separate form of privilege between the parties; the ordinary without prejudice principles apply. Parties may extend protection contractually, but clear and unmistakable wording is required to exclude the public policy exception for unambiguous impropriety. Standard mediation wording will not ordinarily achieve that result.

The applicant sought to amend an unfair prejudice petition under Companies Act 2006, section 994. The proposed amendment relied on an email sent by a mediator after an earlier mediation. The email conveyed a demand that the applicant pay more for his brothers’ shares, coupled with threats of committal proceedings, perjury allegations, imprisonment and consequences for his partner.

The respondents opposed the amendment solely on the ground that the email was protected by without prejudice privilege and by the mediation agreement. The central issues were whether the email fell within the unambiguous impropriety exception and whether the contractual confidentiality and without prejudice provisions extended protection to it.

1. Admissibility and privilege. The court decided the admissibility issue at the amendment stage because the email was undisputed and the parties needed to know whether it could be relied on at trial. The high threshold for overriding without prejudice privilege protects frank negotiations, but the privilege cannot be used as a cloak for blackmail or other unambiguous impropriety.
2. The email contained a clear threat to cause the company to pursue committal proceedings and related allegations unless the applicant paid substantially more for his brothers’ shares. The impropriety arose from the nature and purpose of the threat. It was being used to secure a personal gain for the brothers by exploiting proceedings belonging to the company. Its admissibility did not depend on whether there was a genuine basis for allegations concerning undisclosed assets, nor on whether the mediator or solicitors appreciated the impropriety.
3. The court distinguished cases involving colourful or exaggerated language in disputed discussions. Here the written email was clear, carefully expressed and free from ambiguity. The fact that the email was transmitted by a mediator did not alter the court’s assessment.
4. Mediation privilege. There was no separate species of mediation privilege applicable between the parties. The same exception for unambiguous impropriety applied. A mediation agreement could, in principle, extend the contractual ambit of without prejudice protection, but only clear and unmistakable terms could produce the extreme consequence of protecting communications used as a cloak for blackmail.
5. The standard CEDR agreement did not contain such wording. Its confidentiality and without prejudice clause, read with the obligation to negotiate in good faith, did not override the public policy exception. The amendment was therefore permitted because the email was admissible in evidence.