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A Threat to Privileged Negotiations – The Limits of Unambiguous Impropriety

Will threats of criminal prosecution or regulatory action always remove privilege for ‘without prejudice’ correspondence? We consider the scope of Unambiguous Impropriety in light of the recent Swiss Re Corporate Solutions Ltd v Sommer tribunal case.

Correspondence that is marked without prejudice is ordinarily inadmissible in evidence. The reasoning behind this rule is a matter of policy, to encourage parties in dispute to settle their matter without fear that any such offer of settlement will later be used against them in proceedings.

This rule is not absolute. For example, the unambiguous impropriety exception will negate the without prejudice status of correspondence where the exclusion of without prejudice evidence would act to conceal perjury, blackmail or other “unambiguous impropriety”. This exception will only apply where the impropriety is truly unambiguous.

S was made redundant from her job at SRCS in April 2021. 3 months earlier, she had brought employment tribunal claims of race, sex, and pregnancy/maternity discrimination and equal pay. SCRS’s solicitors sent a without prejudice letter to S making allegations of breaches of confidentiality and data protection rules that they argued amounted to breaches of the Financial Conduct Authority’s Conduct of Business rules, and could result in her summary dismissal and criminal conviction. The letter included a £37,000 settlement offer to S. Following her dismissal, S brought further employment claims, and sought to include the letter in evidence despite the without prejudice label.

The employment judge held that the letter was admissible in evidence, as it fell within the unambiguous impropriety exception. The judge referred to Ferster v Ferster, in which the Court of Appeal found that a threat made by a party during negotiations amounted to blackmail. The judge reasoned that the allegations of criminal conduct and serious misconduct were “grossly exaggerated”, and that the without prejudice label was therefore being used to shield these improper threats from being admissible.

SRCS’s appeal to the Employment Appeal Tribunal (EAT) was successful, and the letter was therefore inadmissible. The EAT considered that unambiguous impropriety had never been found for exaggerated allegations. To determine whether such allegations were made dishonestly would require the employment judge to thoroughly analyse the merits of what had been said or make a finding on SRCS’s state of mind. The employment judge had reached her conclusion without acknowledging that there was at least some evidence of the misconduct alleged, so it would be wrong to say that the allegations lacked merit entirely. Further, it was unlikely that she could make a ruling on SRCS’s state of mind without hearing oral evidence.

The EAT’s decision is a reminder that the unambiguous impropriety exception will only apply where there is no ambiguity as to the impropriety of the correspondence. In this particular situation there was potentially an arguable case that S may have done what was alleged, the allegations could not be deemed to be unambiguously improper simply because they were exaggerated. However, beware, this does not mean that threats of criminal proceedings or regulatory action can never amount to unambiguous impropriety, and negotiating parties should be cautious not to apply improper pressure or make completely unfounded allegations.

A Threat to Privileged Negotiations – The Limits of Unambiguous Impropriety