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The purpose of without prejudice privilege is to encourage parties to communicate openly without fear that things said in mediation will be used against them in court, however there are cases when this can be taken away, where the communication ‘would act as a cloak for perjury or other unambiguous impropriety”.

Ferster v Ferster and ors [2016] EWCA Civ 717 is one such case.

In this case there was a dispute between three brothers (Jonathan, Warren and Stuart) regarding their respective interests in an online gaming business.

A mediation took place during which Warren and Stuart offered to sell their shares to Jonathan. No agreement was reached at the mediation, but the mediator continued to stay in touch with the parties with the aim of reaching a negotiated settlement.

Solicitors sent, via the mediator, on behalf of Warren and Stuart, an email in which they claimed they had discovered that Jonathan had failed to disclose the existence of certain overseas bank accounts pursuant to the freezing order.  It also went on to say, that unless Jonathan agreed, within 48 hours, to pay an increased sum for Warren and Stuart’s shares, allegations would be made public and acceptance of the offer would alleviate “the need of further steps such as committal proceedings.”

Jonathan applied to the court to amend his claim alleging that his brothers who had made the offer had sought to extort a ransom price from him for his shares by making improper and unwarranted threats to cause the company to commit him for contempt and cause criminal proceedings to be brought against him unless he agreed to purchase their shares at an inflated price.

A party may be allowed to give evidence of what another 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”.  The first instance judge held that the email was an attempt at blackmail which fell firmly within the exception and permitted reliance on the email.  That judgment was upheld unanimously by the three Court of Appeal judges.

In the course of their judgment the Court of Appeal agreed with the first instance judge that the threats made by the brothers unambiguously exceeded what was proper, and held that it is not necessary for threats to fall within any formal definition of blackmail for them to be regarded as “unambiguously improper”.

Comment: The opportunity to rely on an argument of “unambiguous impropriety” to defeat a without prejudice offer will not be common but this case provides a reminder that the without prejudice cloak can be overridden, and that it is not appropriate to make allegations which could amount to blackmail.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.