“Without prejudice” letter admissible if no dispute when writtenOctober 2014

The High Court has reconfirmed that letters and emails can be relied upon at trialregardless of their containing the heading “without prejudice” if at the time they were written there was no dispute between the parties.

Avonwick Holdings v Webinvest (2014) concerned a loan agreement. Two years after it took the initial loan, the borrower sought to renegotiate the loan agreement. Those discussions proceeded slowly. In early 2014, the lender served on the borrower demands under the loan agreement and Statutory Demands. The borrower did not dispute the validity of the demands or its liability to repay the loan. At about the same time, the lender’s accountants and solicitors sent to the borrower “without prejudice”communications which set out the terms on which the lender was prepared to restructure the loan, and the borrower responded in communications that were similarly headed.

On no agreement being reached on restructuring, the borrower sought to restrain the insolvency proceedings threatened by the lender. It was only at that point that the borrower alleged that its obligation to repay the loan was subject to an oral condition that had not been satisfied. The lender denied that the alleged condition had even be agreed or discussed. It sought to put forward the early-2014 “without prejudice” communications in support of its denial. The borrower objected to those communications being put before the Court on the basis that they were privileged due to their heading.

The Court said that, for a document to be inadmissible on the ground that it was “without prejudice”, it had to form part of a genuine attempt to resolve a dispute. There needed to be both a genuine dispute to be resolved and a genuine attempt to resolve it. If there was no dispute about a liability, but only a negotiation as to how and when it should be discharged, the negotiations and documents produced in the course of them were not covered by the “without prejudice” exception to the admissibility of relevant evidence. The express marking of documents as “without prejudice” was a highly material factor in determining their status and was a strong indicator that there was a genuine dispute and a genuine attempt to settle, but it was not conclusive. This was so even if experienced litigators were involved as, on the evidence, it might be seen that they made a mistake.

The Court found that, at the time of the early-2014 communications, there was no dispute about the liability of the borrower which dispute had only arisen later. It said that communications made at a time when there was no dispute could not, with retrospective effect, be made subject to the without prejudice privilege by subsequently raising a dispute. The Court therefore held that the early-2014 communications were admissible.

Milton McIntosh MRICS MCIArb Solicitor, Barrister (not in practice)Tel: 0845 257 9449 Mobile: 07891 901 686Fax: 020 3043 8889E-mail: mmcintosh@excellolaw.co.uk www.excellolaw.co.uk

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