Kings Security Systems Ltd v King & Anor

Without prejudice negotiations are generally inadmissible in their entirety. Recognised exceptions include communications relevant to whether the negotiations produced a concluded agreement and negotiations relevant to mitigation of loss. In a three-party case, the concluded-agreement exception may apply where the court cannot determine the existence or terms of an alleged agreement without seeing the negotiations.

A broader justiciability exception is confined. It requires the party resisting disclosure to have directly put the contents of the negotiations in issue, together with a real risk that the case cannot fairly be determined without them. Pleading a proper purpose without referring to the negotiations does not satisfy that requirement. Unilateral waiver requires clear and unequivocal disclosure by an authorised person.

The claimant brought proceedings against its former director, Mr King, concerning alleged improper arrangements involving fleet vehicles and sought rescission of a settlement agreement. Mr King amended his defence and counterclaim to plead, among other matters, that the claimant had reached an agreement with the fleet supplier or had failed to mitigate its loss, and that the proceedings had been pursued for an improper purpose.

A Deputy Master permitted the amendments on the basis that they were properly arguable. The claimant maintained that negotiations with the supplier were without prejudice and sought directions concerning their admissibility and disclosure before trial. The issues were whether the negotiations were without prejudice and, if so, whether an exception applied.

1. Pre-trial determination. The Deputy Master had decided only that the proposed amendments were arguable. He had not determined the admissibility or disclosure of evidence. It was appropriate to decide those issues before trial to avoid disruption and unnecessary use of trial time.
2. Without prejudice status. The evidence established that the claimant and the supplier had agreed before the meeting that it would be conducted on a without prejudice basis. Viewed objectively, the meeting was intended to resolve a dispute and avoid litigation. The discussions were therefore unarguably without prejudice.
3. Concluded agreement exception. The first exception identified in Unilever plc v Proctor & Gamble applied. It was realistically arguable that the negotiations produced an agreement, and it would be impossible to determine whether an agreement existed, and its terms, without seeing the without prejudice communications. The exception could apply in a three-party case where a non-party to the negotiations had a legitimate interest in their outcome.
4. Mitigation exception. The sixth Unilever exception also applied. The legal issue whether the claimant could have mitigated its loss by negotiating with a solvent co-debtor was arguable and had already been decided against the claimant at the amendment stage. Whether the negotiations were reasonable and what effect they had on loss were matters for trial.
5. Other exceptions. The court declined to follow the broad formulation in Berkeley Square Holdings v Lancer. A justiciability exception requires that the party resisting disclosure has directly put the contents of the negotiations in issue and that there is a real risk of unfair determination without them. The claimant’s general pleading that the proceedings were brought for proper purposes did not do so. The unambiguous-impropriety exception did not apply because there was no abuse of the without prejudice occasion. Nor had privilege been waived: waiver required clear and unequivocal disclosure of the contents by an authorised person.
6. The negotiations were admissible and the claimant was required to disclose the withheld documents. The application to recover document 7912 therefore did not arise.

First-instance decision on a pre-trial application for directions concerning admissibility and disclosure of without prejudice negotiations. The judgment states that an earlier order of Deputy Master Arkush permitted amendments but did not determine admissibility.