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Framlington Group Ltd v Ian Barnetson, Court of Appeal, 24 May 2007

18 June 2007
The issues

Procedure – witness statements -whether certain matters contained in witness statements should be struck out in that they referred to without prejudice matters prior to proceedings having been commenced.

The facts

Mr Barnetson began an action for wrongful dismissal on the 31st December 2005 as the chief operating officer of Framlington and for other alleged breaches of his contract of employment. He began the action in April 2006. Mr Barnetson’s engagement by Framlington had been in early March 2005. Over the next few months there had been a number of exchanges between himself and Lord Douro, the Chairman of Framlington, and other acting for the company. The exchanges hardened into a dispute threatening litigation and then litigation itself. In the action that Mr Barnetson started he served a witness statement. Framlington sought to strike out passages from the witness statement on the basis that they referred to meetings aimed at resolving claims which Mr Barnetson may have had and therefore settling the dispute between him and the company without the need of going to Court. The company therefore argued that they were entitled to “without prejudice” privilege. The Judge dismissed the company’s Application, holding that the passages to which it objected did not offend the “without prejudice” rule because the exchanges to which they referred took place before litigation had been commenced or before any basis for potential litigation and therefore at a time when there was no dispute. The company appealed.

The decision

Written or oral communications made as part of negotiations generally aimed at, but not resulting in, settlement of a dispute were not generally admissible in evidence in litigation between parties over that dispute. The were 2 bases for the rule. The second, of limited application and doubtful legal respectability was contractual; i.e. the parties had agreed expressly or impliedly that it should apply. The first and more commonly advanced basis was one of public policy, namely to encourage those in dispute to settle their differences without recourse to or continuation of litigation. In Bradford & Bingley Plc v Rashid, the House of Lords proceeded on the basis that exchanges 21 months before the start of litigation could attract the rule in the same way as exchanges after the start of litigation.

The question remained therefore how proximate, if at all, had unsuccessful negotiations in a dispute, which led to litigation, be to the start of that litigation to attract the “without prejudice” rule. It had been argued for Mr Barnetson that there had to be an express or implied threat of litigation underlying the negotiations or, failing any such threat, some proximity in time to the litigation which was eventually begun.

The claim to privilege could not however turn on purely temporal considerations. The critical feature of proximity is what is the subject matter of the dispute rather than how long before the threat or start of litigation it was aired in negotiations between the parties. The crucial consideration should be whether, in the course of negotiations, the parties contemplated or might reasonably have contemplated litigation if they did not agree. Confining the operation of the rule to negotiations of a dispute in the course of or after threat of litigation or by reference to some time limit set close before limitation, did not fully serve the public policy interest underlying it of discouraging litigation and of encouraging genuine attempts to settle.

In the light of these considerations the Judge was wrong to reject the claim for privilege. Both parties were clearly conscious of the potential for litigation if they could not resolve the dispute without it. The exchanges, which were the subject of the company’s Application, were covered by the “without prejudice” rule and the appeal would be allowed.

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