Unambiguous Impropriety May Mean No ‘Without Prejudice’ Privilege

The High Court has recently confirmed that the protection normally afforded by ‘without prejudice’ communications will be lost where the communication is unambiguously improper. Our Commercial Disputes team examines the implications of this decision.

It is well established that communications aimed at resolving disputes may be protected from disclosure. These communications often involve making admissions or offers. The protection arises from the application of ‘without prejudice privilege’. Communications which are expressed or proven to have been made ‘without prejudice’ are not generally admitted in evidence. The rule reflects the public interest in encouraging parties to resolve their disputes without resorting to litigation. Protecting the content of negotiations in this way means that parties should not be discouraged or constrained in pursuing negotiations aimed at settlement.[1] A recent High Court decision has addressed whether, and in what circumstances, this protection could be lost, allowing the communications to become admissible.[2]

Background

The underlying proceedings involved a claim by the plaintiff that the defendant had breached a shareholders’ agreement. It was alleged that the defendant used the plaintiff’s intellectual property to develop a rival product through a Swiss company with which he was associated. The plaintiff sought declaratory relief, as well as damages / disgorgement of profits.

It claimed that the business had lost almost all of its value, quantified at over €106 million. The claim was strenuously rejected by the defendant, including a denial that he copied the relevant computer code. The proceedings had reached the stage where pleadings were closed and motions for discovery were pending.

At that point, the plaintiff’s solicitors issued a letter on a ‘without prejudice save as to costs’ basis.[3] That letter was five pages long and the final section made reference to criminal investigations being pursued in Switzerland. The letter invited the defendant to engage with the plaintiff on a proposal “to deal with” the proceedings and the Swiss criminal complaints.

A sequence of correspondence followed involving seven letters in total which the defendant sought to have admitted. The defendant argued that these letters demonstrated that there was a broader strategy underpinning the claim. The debate around the correspondence essentially centred around whether the initial communication involved “a solicitation for a settlement payment with a view to bringing the Swiss criminal investigation to an end”. The defendant argued that this communication was an ‘unambiguously improper’ use of ‘without prejudice’ privilege. The plaintiff denied that this was the meaning of the communication. Instead, it contended that Swiss criminal proceedings were not within its control. The defendant issued a motion seeking that the seven letters involved be admitted into evidence. Affidavit evidence was exchanged, including an affidavit from a Swiss lawyer on behalf of the defendant, as were legal submissions. Both sides accepted that the resolution of the issue of whether the without prejudice protection should be lifted was for the court to decide based on submissions. Both parties also accepted that the appropriate test was whether the communication was unambiguously improper.

Decision

Mr Justice Sanfey began by looking at the rationale for ‘without prejudice’ privilege. He noted that:

“the rule… although firmly based on considerations of public policy should not be applied in so inflexible a manner as to produce injustice.”[4]

He also cited English case law reflecting the same reasoning: “the rule is not absolute and resort may be had to the ‘without prejudice’ material for a variety of reasons when the justice of the case requires it.”[5] In addition, he noted that instances where the rule might be set aside included:

“clear cases of improper threats, but the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety.”[6]

This principle was further refined in subsequent English case law recognising that “one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other ‘unambiguous impropriety’.”[7] In Ferster v Ferster[8] the English Court of Appeal recognised that threats could be unambiguously improper if, among other things, they:

“went far beyond what was reasonable in pursuit of civil proceedings, by making the threat of criminal action...”

In light of that decision, in particular, Mr Justice Sanfey observed that “what is involved here is an evaluation of whether the threats unambiguously exceeded what was ‘permissible in settlement of hard fought commercial litigation’”. Having reviewed the English case law, and in light of the parties’ agreement that the privilege should be lifted if there was ‘unambiguous impropriety’, he accepted that it was the appropriate test in the present case. He noted that the Court therefore had to assess whether the challenged communication, when viewed from the perspective of the recipient, was objectively improper such that it should not attract ‘without prejudice privilege’. The difficulty in this case, he commented, was that there was nothing in the communication that could clearly, on its own terms and taken in isolation, be characterised as improper.

Ultimately, he accepted that a party to litigation is entitled to write to the opposing party on a ‘without prejudice’ basis to “outline the adverse consequences will ensue for that party if they do not settle the case”. However, in this case he felt the plaintiff had gone further. By virtue of the language used, and the reference to Swiss criminal complaints, “the inference which the defendant draws from this letter is unambiguous and unavoidable.” The “heavy-handed references to the power of the Swiss police… suggest strongly that a failure to advance such a proposal is likely to result in the plaintiff promoting an expansion of the Swiss proceedings to involve the defendant in potential criminal liability and/or personal reputational damage.”

He also observed that for the purposes of the unambiguous impropriety test the actions involved do not need to be unlawful[9]. It is sufficient that they simply be deemed improper. Additionally, he decided that the threat doesn’t need to be explicit and it was not the case that improper pressure could only be exerted expressly or overtly. He warned that “a veiled threat is still a threat”. The defendant here was entitled to draw the inferences he did. Mr Justice Sanfey therefore concluded that the pressure exerted on the defendant was improper and exceeded what was “permissible in settlement of hard fought commercial litigation”.

Conclusion

The decision is important because it confirms that the test for lifting ‘without prejudice’ privilege as a matter of Irish law is that of ‘unambiguous impropriety’. This test has prevailed in England for some time. The recognition that the actions involved only need to be improper, and not unlawful, also means that the bar is not set unrealistically high. That it can arise by implication also means that a party does not need to demonstrate an explicit threat. Overall, the decision is important for practitioners and litigants alike. It makes clear that improper threats can result in the loss of ‘without prejudice’ privilege. Therefore, parties should consider carefully what to include in ‘without prejudice’ communications. It should not be assumed that making ‘offers’ which include criminal threats will be immune from production simply the communication is marked ‘without prejudice’. It is clear there are limits on the privilege and overreach can result in it being lost.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] The rationale was explained in these terms by Keane CJ in Ryan v Connolly [2001] 1 IR 627

[2] QPQ Ltd v Schute [2025] IEHC 474

[3] Although there was a debate between the parties as to whether the correspondence should have been labelled ‘without prejudice’ or ‘without prejudice save as to costs’, Mr Justice Sanfey felt that the application of the latter did not in and of itself deprive the letter of without prejudice protection.

[4] Citing Keane CJ in Ryan v Connolly [2001] 1 IR 627

[5] Rush & Tompkins Ltd v Greater London Council [1989] AC 1280

[6] Forster v Friedland, unreported Court of Appeal, Civil Division, 10 November 1992, per Hoffmann LJ.

[7] Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436

[8] [2016] EWCA Civ 717

[9] Citing Crane World Asia PTE Ltd v Hontrade Engineering Ltd [2016] HKEC 1377