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David Wolfson QC and Richard Mott win significant hearing on the scope of without prejudice privilege and its exceptions, in a judgment of general importance to practitioners

In his judgment in Berkeley Square Holdings & Ors v Lancer Property Asset Management Ltd & Ors, Roth J has provided important clarification of the scope of three separate exceptions to without prejudice privilege, including one which has never previously been applied in England, and another for which the legal basis has been notoriously unclear.

The underlying facts concern a London property portfolio worth c.£5 billion. At the relevant time the properties were almost all owned by Sheikh Khalifa bin Zayed Al Nahyan – the Emir of Abu Dhabi and President of the United Arab Emirates – through a number of offshore corporate vehicles (the Claimants). The Defendants were the managers of this property portfolio. They dealt with Dr Mubarak Al Ahbabi, who represented the Claimants. The Defendants made regular payments to Dr Al Ahbabi’s offshore company, Becker. They understood that this arrangement was known to, and initiated by, Sheikh Khalifa.

In 2012, a dispute arose between the Claimants and the First Defendant in relation to an aspect of the management fees. That dispute was submitted to mediation. The First Defendant’s mediation papers openly referred to the payments being made to Dr Al Ahbabi as part of the factual background to the dispute. The dispute was settled following the mediation. Years later, Sheikh Khalifa suffered a stroke, Dr Al Ahbabi was replaced, and the management agreement was terminated. In 2018 the Claimants commenced proceedings against the Defendants, alleging bribery and fraud and contending that until 2017 they had been unaware of the payments being made to Becker and of Dr Al Ahbabi’s ownership of Becker. The Claimants asserted that various agreements were void or voidable (including the 2012 settlement), and claimed over £70m.

The Defendants’ main defence is that the Claimants and Sheikh Khalifa had always known and approved of the payments to Becker and Dr Al Ahbabi. In particular, the Defendants wished to rely on their own without prejudice statements made in 2012. The Claimants opposed this and sought to strike out all references to the 2012 statements from the pleadings.

The Defendants relied on three separate exceptions to the without privilege rule, as formulated by Robert Walker LJ in Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436 at 2444:

“…(2) Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence…;

(3) Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel…;

(6) [The principle in Muller v Linsley & Mortimer [1996] PNLR 74]”

Roth J held that the Defendants were able to rely on exceptions (2) and (6):

On exception (2), he acknowledged that this exception has never been applied in any reported English authority. Nevertheless, he held that the Defendants could rely on the exception or on “a small and principled extension of it” (paragraph 51). If a party can rely on without prejudice statements to vitiate a settlement, it would be illogical to hold that it cannot rely on such statements to uphold an apparently valid settlement.

As for exception (6), he began by saying “the so-called Muller exception is problematic” (paragraph 62). The difficulty is that Muller has been held to be correctly decided, but much of the reasoning of all three judges in Muller cannot stand (paragraph 70). Roth J held that, if a prior privileged statement has some independent relevance to subsequent proceedings apart from its truth or falsity, the key question is whether the subsequent proceedings are “fairly justiciable” without admitting the privileged statement into evidence (paragraph 82). He rejected the Claimants’ submission that this question should be approached narrowly, and held that the Claimants’ claim was not fairly justiciable if the Defendants’ statements in 2012 were excluded from evidence.  

The Judgment is available here .