Octagon Overseas Limited & Ors v Circus Apartments Limited

Without prejudice privilege applies to genuine settlement negotiations concerning a dispute, even where a proposed commercial arrangement would resolve only part of a wider and multi-faceted dispute. The court must assess the communication objectively and should not adopt an unduly narrow view of the dispute or its subject matter.

The unambiguous impropriety exception is confined to the clearest cases of abuse. Commercial pressure, including a proposal to support an otherwise proper claim if negotiations fail, does not by itself amount to blackmail or unambiguous impropriety.

Circus Apartments Limited applied to vary an FTT management order concerning the Canary Riverside Estate. In response, the Landlords relied on a 2016 text message from a director of Circus Apartments proposing a deed of variation and threatening proceedings concerning consent to assign or underlet, and support for the residential leaseholders’ management application if agreement was not reached.

The FTT held that the text was protected by without prejudice privilege and excluded it from evidence. The Landlords appealed. The surviving issue was whether the text concerned a relevant dispute and, if so, whether it fell within the exception for unambiguous impropriety.

1. Appeal dismissed. The Tribunal made no order on the first, conceded ground. It dismissed the challenge to the FTT’s exclusion of the text message.

2. The without prejudice rule excludes statements made in genuine settlement negotiations. Its scope is not confined to a narrow two-party dispute or to negotiations resolving every issue between the parties. The relevant question is whether, objectively, the communication included a genuine offer to settle a dispute.

3. The text proposed a commercial variation of the respondent’s sublease, but it also expressly threatened proceedings concerning delays in consent to assign or underlet. Those matters were connected with extant County Court proceedings and with the parties’ wider troubled relationship. The proposal could also encompass the management-order proceedings in which the respondent had a real interest. It was therefore a genuine settlement proposal within the rule.

4. The exception for communications used as a cloak for perjury, blackmail or other unambiguous impropriety applies only in the clearest case. The text did not approach the exceptional facts of Ferster v Ferster [2016] EWCA 717. It proposed negotiable commercial terms and threatened only to support a proper application by fellow leaseholders for the appointment of a manager. That was not improper, still less unambiguously improper.

• Upper Tribunal (Lands Chamber): dismissed the Landlords’ appeal from the FTT’s decision of 9 March 2022 excluding the disputed text message from evidence. The FTT decision is not reported or neutrally cited in the judgment.
• First-tier Tribunal (Property Chamber): held that the text message was protected by without prejudice privilege and could not be relied upon in the variation proceedings.