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Savings and Investment Bank Limited v Fincken (No.2), Court of Appeal, 14 November 2003

24 November 2003
The issues

Without Prejudice Negotiations – amendment – “unambiguous impropriety” – admission.

The facts

This matter involved the compromise of a debt owed by Mr Fincken to the Bank. In October 1988 Mr Fincken entered into a Deed of Settlement agreeing to pay £250,000.00 within the year and also to deliver a Bill of Exchange within a month in the sum of over £19,000,000.00. If he paid the £250,000.00, the Bank would return the Bill of Exchange to him unpresented and unnegotiated. He did not pay all of the £250,000.00. Subsequently, a second Deed of Settlement was entered into whereby Mr Fincken agreed to pay certain sums at 6 monthly intervals in return for delivering 5 Bills of Exchange. No payments were made and the Bill of Exchange which was presented by the Bank was dishonoured. In December 1991, he swore an Affidavit of Means, stating what his assets, liabilities and business interests were. He disclosed his residence in Chalfont St Giles and two shotguns but no other assets or investments. He also disclosed certain liabilities. The Bank argued that Mr Fincken misrepresented his assets and did so fraudulently. Subsequent to the disclosure of Mr Fincken’s means in the Affidavit, a third Deed of Settlement was entered into which effectively concluded the matter in respect of the Bank and Mr Fincken. In effect, the Liquidators had accepted that there was nothing more to be got out of him. Proceedings were issued in 1998 in respect of Mr Fincken’s non-disclosure. By 2002, there were movements towards settlement and there was a without prejudice meeting in December 2002. During the course of those negotiations, Mr Fincken confirmed that he owned certain shares held in the name of Hallam. In February 2003, the Bank sought to amend, relying on that disclosure. The High Court Judge allowed the amendment on the basis of the decision in Unilever -v- Proctor and Gamble and to the effect that a party may be allowed to give evidence of what the other said in without prejudice negotiations if the exclusion of that evidence would act as a claim for perjury, blackmail or unambiguous impropriety. The amendment was therefore allowed.

Mr Fincken appealed.

The decision

1. Did the admission fall within the “unambiguous impropriety” exception to the privilege of without prejudice communications?

2. The Authorities, whilst allowing the existence of an exceptional rule to cover cases of unambiguous impropriety, have stressed the importance of the public interest, which has created the general rule of privilege. They have generally been cautious in regard of their application of the exception.

3. In this particular case, no evidence had been submitted by the Defendant. The evidence therefore had gone unchallenged. The absence of challenge might assist an applicant in establishing more easily that an alleged admission was unequivocal. That was not the same thing however as finding that an alleged admission was tainted with unambiguous impropriety. It was not a mere inconsistency between an admission and a pleaded case which if persisted in might lead to perjury that would lose an admitting party the protection of privilege. Rather, it was the fact that the privilege itself was abused that did so. It was not an abuse of privilege to tell the truth, even where the truth was contrary to a party’s case. There was a tension between two powerful public interests – the importance of parties being able to negotiate freely under the cloak of without prejudice discussions, and the discouragement of perjury. However, the Court could not agree with the view of Counsel for the Bank that the mere possibility of the future perjury was sufficient to destroy the privilege. If that were not the case, a very serious charge of perjury would have to be debated at an interlocutory stage or even at Trial with the potential of de-railing the Trial by the exposure of without prejudice material to the Trial Judge. Although it was distasteful for the Court to avert its eyes from an admission which appeared to incriminate Mr Fincken in lying in a sworn document, the public interest in favour of the protection of privilege over the public interest in the discouragement of perjury.

4. Could the Judge’s discretion be faulted? Since now in the light of the decision above, there could be no reference to the without prejudice meeting, the basis of the Judge’s approach to the exercise of discretion, and discretion fell, and it was for the Court to exercise its discretion anew.

5. How should the Court exercise its discretion? The amendments proposed relating to the case in respect of ownership of the shares had come shortly before Trial and would involve the loss of a Trial date.

6. There was prejudice to the Defendant in having to deal with such long lasting litigation. Were the amendments to be allowed, the litigation would be extended into entirely new areas 12 years or so after the events which formed their subject matter. Taking into account the overriding objective, the application for amendment should fail. The Bank had had every opportunity given to it in the past to formulate its case. The Appeal would be allowed.

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