One Unique LLC v Kambiz Babaee & Ors

Without prejudice privilege requires negotiations genuinely aimed at settlement of a dispute. A party’s use of the without prejudice label cannot create privilege where the correspondence objectively shows a demand for payment rather than a common negotiation.

A stay of civil proceedings pending criminal proceedings requires a real risk of serious prejudice leading to injustice. The applicant must provide sufficient evidence to identify the prejudice and expected duration of the stay. Bankruptcy does not justify a stay where the claim is a complex fraud claim unlikely to be provable in the bankruptcy and any fraud judgment would survive discharge.

The claimant alleged that the first defendant and companies associated with him had misappropriated rental income from a London apartment and claimed more than £2.3 million.

The first defendant made three applications: to strike out references to communications said to be protected by without prejudice privilege; to stay the civil proceedings pending a private criminal prosecution; and to stay them under section 285 of the Insolvency Act 1986 because he was bankrupt.

The court had to determine whether the communications formed part of genuine settlement negotiations and whether either criminal proceedings or bankruptcy made a stay necessary in the interests of justice.

1. Strike out. The communications were not protected by without prejudice privilege. The governing policy protects negotiations genuinely aimed at settlement, which requires a dispute and an objective common intention to negotiate. The claimant’s correspondence sought repayment of sums alleged to have been stolen. It did not propose compromise or negotiation. The defendant’s repeated use of the without prejudice label and references to agreeing a way forward could not alter the objective character of the exchanges (paras [14]-[16]).
2. The pleaded references to the communications therefore did not offend privilege. Had privilege applied, the appropriate and proportionate response would have been to remove the offending references, rather than strike out the entire claim (para [17]).
3. Criminal proceedings. A stay should be granted only where it is in the interests of justice. The applicant bears the burden of showing that interference with the claimant’s right to have its civil claim heard is justified. Under para 9 of PD 23A, evidence in support must estimate the stay’s duration and identify how continuation may prejudice the criminal trial. The court must exercise the power with great care and require a real, not merely notional, risk of serious prejudice leading to injustice (paras [19], [22]).
4. The defendant’s concerns about adverse civil findings, publicity, disclosure of his defence and litigation funding did not establish that risk. A fair criminal trial could still take place, and the civil proceedings were likely to precede the criminal trial by several years. The stay application was refused (paras [20]-[22]).
5. Bankruptcy. The discretion under section 285 of the Insolvency Act 1986 did not justify a stay. There was no realistic prospect that the alleged debt could be proved in the bankruptcy. The claim was a complex fraud claim best determined in legal proceedings, the trustee had raised no concern about its effect on creditors, and a fraud judgment against the defendant would survive bankruptcy. That application was dismissed (paras [23]-[24]).
6. All three applications failed (para [25]).

Not stated in the judgment.