Practice and procedure – First-tier Tribunal – “Without prejudice” rule – Respondent leaseholder applying to exclude references to text message from evidence in application to vary management order – First-tier Tribunal granting application – Appellant landlords appealing – Whether text message “without prejudice” communication – Whether any relevant dispute existing – Whether privilege being abused to conceal “unambiguous impropriety” – Appeal dismissed
The Canary Riverside Estate was a mixed-use residential and commercial development at Canary Wharf in East London comprising 325 apartments in four towers, together with a hotel, restaurants, a cafe and a health club.
The first appellant owned the freehold of the estate. It granted head leases of both residential and commercial parts of the estate to the second appellant, some of which were later transferred to the third appellant.
On an application by long leaseholders of flats in the towers, the First-tier Tribunal (FTT) made an order under section 24 of the Landlord and Tenant Act 1987, appointing a manager of the estate.
One of the buildings on the estate contained apartment units held on long leases by the respondent which applied under section 24(9) of the 1987 Act, seeking a variation of the management order to remove references to it as a commercial tenant.
The respondent applied to exclude parts of a witness statement filed in response to its variation application and for an order that parts of the statement referring to disputed documents be struck out. In particular, it contended that a text message sent by the respondent was covered by “without prejudice” privilege and could not be relied on in evidence.
The FTT found in the respondent’s favour because the text was clearly conveying an offer to settle a dispute over the respondent’s request to the appellants to vary its sublease and for consent to assign or underlet its property which was an issue in county court proceedings. Although the text was not expressly stated to be “without prejudice”, it was a genuine attempt to compromise a dispute. The appellants appealed.
Held: The appeal was dismissed.
(1) The “without prejudice rule” was that statements made in the course of without prejudice negotiations were not admissible in evidence. Although the rule had initially focussed on the exclusion of admissions made by parties in the course of negotiations, its scope was now much wider. It extended (with exceptions) to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence: Oceanbulk Shipping SA v TMT Ltd [2011] 1 AC 662 considered.
In general, the rule made inadmissible in any subsequent litigation connected with the same subject matter, proof of any admissions made with a genuine intention to reach a settlement. Admissions made to reach a settlement with a different party within the same litigation were also inadmissible, whether or not settlement was reached with that party.
The rule sometimes rested on an express or implied agreement between the parties, but that was not essential. In its absence, public policy would prohibit reference to a genuine offer. The strong policy underlying the principle was that parties should be encouraged as far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that was said in the course of such negotiations might be used to their prejudice in the course of the proceedings: Rush & Tompkins Ltd v Greater London Council [1988] EGCS 145; [1989] AC 1280 and Cutts v Head [1984] Ch 290 considered.
(2) The tribunal did not accept the appellants’ narrow way of looking at the disputed text message. Although the respondent wanted a commercial deal to allow it to develop additional floors on the building, the text also contained an express threat to issue proceedings not only for the for the underletting delay but also the assignment delay if the deed of variation was not forthcoming.
The dispute regarding the refusal of consent was one of the issues in the county court proceedings. It was not possible to suggest that the subject matter of the text did not include the resolution of current or future litigation between the respondent and the appellants.
(3) The tribunal did not accept that the respondent had no interest in the FTT proceedings. It could arguably have joined in the application for the appointment of a manager in its own right, because it was a “tenant of a flat” in the building (as required by section 21 of the 1987 Act). It had an interest in the management of the estate and had gone on to support the residential leaseholders and to seek a variation of the management order.
It was not appropriate to adopt too narrow a focus when considering the subject matter of a wide ranging dispute being contested on a number of different fronts. Read objectively, the proposal which the respondent was foreshadowing in the text could have covered all aspects of the troubled relationship between the respondent and the appellants. As the text referred to a genuine offer of settlement, it was properly within the scope of the without prejudice rule and could not be referred to in evidence unless some exception applied to make it admissible.
(4) One of the recognised exceptions to the without prejudice rule was that it could not be invoked as a cloak for perjury, blackmail or other “unambiguous impropriety”. However, the exception was to be applied only in the clearest case of abuse of a privileged occasion: Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2443 considered.
The only threat in the present case was that if the appellants would not come to the negotiating table, the respondent would support an entirely proper (and ultimately successful) application by its fellow leaseholders to secure the appointment of a manager to carry out obligations which the appellants were already contractually obliged to perform but were failing to undertake. There was no evidence that the price offered by the respondent to vary its sublease was unreasonable but, in any event, the terms of the variation were negotiable, as was the total price if planning permission was eventually obtained: Ferster v Ferster [2016] EWCA (Civ) 717 considered.
There was nothing improper, let alone unambiguously improper, in one property company proposing terms to another for a renegotiation of their relationship. The suggestion that by trying to exclude the disputed text from evidence the respondent was abusing the “without prejudice” privilege was unsustainable.
Timothy Morshead KC and Justin Bates (instructed by Freeths LLP) appeared for the appellants; Philip Rainey KC (instructed by Norton Rose Fulbright LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Octagon Overseas Ltd and others v Circus Apartments Ltd
