Scheldebouw B.V v M Evanson

Without prejudice privilege depends on the objective question whether, during negotiations, the parties contemplated or might reasonably have contemplated litigation if agreement could not be reached. The inquiry is intensely fact-sensitive. It does not depend on how near negotiations were to proceedings, on the use of the words without prejudice, or simply on offers and counter-offers.

The background and subject matter of the discussions may show that the parties expected an amicable resolution rather than litigation. A proposal to record agreed terms in a settlement agreement may be prudent commercial practice and is not, by itself, evidence that litigation was reasonably contemplated.

The claimant, a former senior employee, brought an Employment Tribunal claim for unpaid accrued holiday pay. He pleaded that the employer had offered payment for 168 days’ holiday. The employer sought to redact that allegation, contending that the offer formed part of without prejudice negotiations.

Employment Judge Norris held that the parties were not in dispute before December 2018. She ruled that the October discussions, including the employer’s offer, were not privileged, although a later counter-offer was to be redacted. The employer appealed, alleging misdirection, perversity and inconsistency in the Tribunal’s reasoning.

The central issue was when the parties’ discussions became protected by without prejudice privilege.

1. Appeal dismissed. The Employment Judge correctly directed herself by reference to the test in Barnetson v Framlington Group, namely whether the parties, in the course of negotiations, contemplated or might reasonably have contemplated litigation if they could not agree.

2. The test is objective and fact-sensitive. The Tribunal was entitled to consider the amicable context of the proposed termination, the absence of an alleged fault-based dismissal or stigma, the narrow scope of the unresolved holiday-pay issue, the progress towards agreement, and the absence of any indication in the October communications that either party regarded litigation as a realistic possibility.

3. Offers and counter-offers, including an initial negotiating position, do not conclusively establish privilege. The so-called opening-shot principle is subordinate to the central Framlington inquiry. Similarly, the preparation of a settlement agreement may reflect ordinary commercial caution rather than a reasonable contemplation of litigation.

4. The Tribunal did not impose a requirement of hostility or an actual concluded dispute. It permissibly treated the absence of hostility as relevant context. It found that litigation became a realistic possibility only when the parties’ positions hardened after draft settlement terms were exchanged in December 2018.

5. Read fairly and as a whole, the Tribunal’s reasons disclosed no material inconsistency. In any event, even if privilege had arisen on 24 October, it would not have covered the 12 October discussion containing the offer challenged on appeal. The Tribunal made no error of law and its conclusion was not perverse.

• Employment Appeal Tribunal: appeal dismissed; the Employment Tribunal’s ruling that pre-December 2018 discussions were not without prejudice was upheld.
• Employment Tribunal: Employment Judge Norris ruled on 14 December 2020 that the relevant pre-December discussions and correspondence were not privileged, subject to the claimant’s proposed redaction of a later counter-offer.