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

The without prejudice exception governing the validity of a settlement permits communications from the negotiations to be admitted whenever they bear on whether the resulting agreement is binding. It extends to a contention that an agent lacked authority and operates symmetrically: either party may use the material to establish or defeat a challenge to validity.

The broader without prejudice rule remains generous and protects all communications, not merely admissions. The fact that privileged material contradicts a party’s case does not itself justify admission. The rule is a joint privilege and does not permit a party to isolate and deploy only its own statements.

The Muller exception concerns waiver where a party directly puts the negotiations in issue. It does not create a general exception whenever privileged evidence is central to the fair determination of an issue.

The claimant property-owning companies alleged that their former representative had acted without authority and in breach of fiduciary duty when committing them to fee arrangements and two settlement deeds. They sought restitution from their former asset manager and associated defendants.

The defendants pleaded that statements made in a 2012 mediation showed that the claimants knew about payments to companies owned by their representative before executing the settlement deeds. The claimants applied to strike out those parts of the defence because the mediation statements were without prejudice.

Roth J dismissed the application in [2020] EWHC 1015 (Ch). He held that the statements fell within the exceptions concerning the validity of a settlement agreement and the fair justiciability of an issue. The claimants appealed. The central question was whether the defendants could rely on the mediation statements to defeat the claim that the settlement deeds were unauthorised and invalid.

1. Appeal dismissed. The mediation statements were admissible under the second exception to the without prejudice rule identified in Unilever plc v The Proctor & Gamble Co [2000] 1 WLR 2436. That exception concerns whether an apparent agreement resulting from without prejudice negotiations is binding.

2. The first and second Unilever exceptions together address the contract produced by the negotiations. They permit the court to determine whether a contract was made, its terms and meaning, and whether it is invalid or liable to be set aside. Lack of an agent’s authority is another form of defective consent and falls within the same principle as misrepresentation, fraud, undue influence and duress.

3. The exception operates symmetrically. Where without prejudice communications are admissible to support a challenge to the validity of a settlement, they are also admissible to defeat that challenge. The defendants could therefore rely on statements demonstrating the claimants’ knowledge when answering the allegation that their representative lacked authority. This was a principled application or extension of the exception and did not undermine the general protection for settlement negotiations.

4. The judge was wrong to rely on the fact that the defendants wished to adduce their own statements rather than statements made by the claimants. Without prejudice protection applies to everything communicated during the negotiations. It is jointly held, and extracting particular statements from their context could undermine the protection and produce a misleading impression.

5. The sixth Unilever exception, derived from Muller v Linsley and Mortimer [1996] PNLR 74, was inapplicable. Muller proceeds on waiver where a party directly puts the negotiations in issue. In a two-party case the other party may elect whether to treat the privilege as waived. The broader exceptions developed in Briggs v Clay [2019] EWHC 102 (Ch) and by Roth J, based on evidence being needed for fair adjudication, could not be attributed to Muller.

6. The court left open whether a separate justiciability exception exists. Its limits, application to two-party and three-party cases, and compatibility with the public policy supporting without prejudice privilege required decision in a case where the issue was dispositive. The suggested broader estoppel and independent-facts exceptions were likewise unnecessary to decide.

Henderson and Popplewell LJJ agreed with David Richards LJ.

1. Court of Appeal (Civil Division): The appeal was dismissed in [2021] EWCA Civ 551. The mediation statements were admissible under the exception concerning the validity and binding effect of a settlement agreement.
2. High Court, Business List (ChD): Roth J dismissed the claimants’ strike-out application in [2020] EWHC 1015 (Ch). He held that the mediation statements fell within the second and sixth Unilever exceptions and granted permission to appeal.