Berkeley Square Holdings & Ors v Lancer Property Asset Management Ltd & Ors

Without prejudice material may be admitted where justice clearly demands it and the material falls within an established exception, or a small and principled extension of one. This includes material necessary to test a party’s case that it was unaware of facts disclosed during the negotiations, particularly where excluding it would create a serious risk of an unfair trial. The exception concerning estoppel does not generally permit reliance on one party’s statements to establish an estoppel based on the other party’s later silence or conduct outside the negotiations. The so-called Muller exception applies where the evidence is so central to an issue raised by a party that the issue cannot fairly be tried without it. The protection is not lost merely because the material is relevant, or because it may expose inconsistency in a pleaded case.

The claimants, companies owning a substantial London property portfolio, alleged that their former asset manager and its directors had participated in a fraud involving payments to a company beneficially owned by the claimants’ former representative. The defendants relied on statements in the asset manager’s without prejudice mediation position statements to plead that the claimants knew of those payments before entering into settlement documents in 2012.

The claimants applied to strike out the relevant parts of the Defence as an abuse of process. The defendants applied to amend their Defence to rely further on the same material, including by pleading estoppel. The central issue was whether the material was protected by the without prejudice rule or admissible under one or more exceptions.

1. Disposition. The passages from the defendant’s mediation position statements were admissible under exceptions to the without prejudice rule. The application to strike out was dismissed and the application to amend the Defence was allowed.
2. The rule is founded on the public policy of encouraging settlement and is generous in scope. It is not absolute, but exceptions should be recognised only where justice clearly demands it. A new exception must be of the same character as an established exception or a small and principled extension of one.
3. The misrepresentation or fraud exception was applicable, or should be extended in a small and principled way. If without prejudice negotiations may be used to show that an agreement was procured by misrepresentation and should be set aside, it is unjustified and illogical to prevent their use to disprove the alleged misrepresentation and uphold the agreement. The material consisted solely of statements made by the defendant seeking to rely on them and was peripheral to the mediated dispute.
4. The estoppel exception did not apply. The defendants relied on the defendant’s own statements in the mediation, while the alleged estoppel arose from the claimants’ later silence and conduct outside the mediation. That differed from the unconscionable use of a clear and unambiguous representation made in without prejudice correspondence and relied on to the representee’s detriment. Silence within the mediation would not, in any event, satisfy that standard.
5. The Muller exception should be understood as applying where the evidence is so central to an issue introduced by the party resisting disclosure that there is a serious risk of an unfair trial if it is excluded. It is not confined to three-party cases. Here, the claimants’ case depended on their alleged ignorance of key facts until 2017. That issue could not fairly be tried while excluding evidence that the facts had been disclosed to their authorised solicitors in 2012. Admission also posed little threat to settlement policy because the evidence concerned the defendant’s own statements and information largely unrelated to the issues being mediated.
6. The court did not need to decide whether there was a separate narrow exception for an independent fact unconnected with the merits of the mediated dispute.