The without prejudice rule ...

The Court of Appeal has recently reached judgment in two cases which offer further insight into how the without prejudice rule applies in employment disputes. The first case deals with the circumstances in which the 'without prejudice' privilege will be triggered. The second case deals with the circumstances in which the 'without prejudice' privilege will be lost.

In Framlington Group Limited v Barnetson [2007] the Court of Appeal overruled the High Court and held that details of discussions relating to the terms of a severance package were 'without prejudice' and therefore could not be used by the claimant in his unfair dismissal claim.

The claimant, Mr Barnetson, believed he was entitled to share options and bonus rights as part of his new contract of employment, but his employer did not agree. After a series of attempts to resolve the matter failed, Mr Barnetson was informed that he was to be dismissed. A number of meetings then took place to finalise a compensation package. These were not expressly made or conducted on a 'without prejudice' basis. When these meetings also did not result in an agreement, Mr Barnetson issued proceedings for wrongful dismissal.

In the Court of Appeal the employer argued that Mr Barnetson should not be able to use these discussions as evidence against them as they were entered into on a 'without prejudice' basis in an attempt to resolve the dispute. The Court of Appeal held in favour of the employer.

In reaching this decision, Lord Justice Auld stated that the 'without prejudice' rule will be engaged where there is a dispute between the parties even though litigation has not yet begun. He held that a dispute occurs when the nature of the exchanges is such that the parties contemplated or could reasonably be expected to have contemplated litigation if they did not agree. This occurred in Framlington when Mr Barnetson was informed by his employer that it intended to terminate his contract early, even though he was not given formal notice until nearly two months later.

This case provides useful guidance for employers on the issue of determining whether negotiations with employees will be admissible in court. Ultimately, although the Court of Appeal held in this case that certain discussions were privileged on the basis that the discussions in question occurred at a time that the parties were in effect negotiating Mr Barnetson's exit terms (and therefore genuinely attempting to settle a dispute) it should be borne in mind that cases such as these are treated on a case by case basis and employers should always be careful with what they say in without prejudice discussions in case it is used against them in subsequent litigation.

In the second case, Brunel University v Vaseghi & Webster [2007], the Court of Appeal reconfirmed the principle that settlement negotiations will be privileged if they are genuine discussions about a settlement of a dispute. The Court of Appeal also held in this case that although the settlement negotiations were privileged, that privilege had been waived by both parties when in the course of a grievance hearing both parties referred to the without prejudice negotiations. The Court of Appeal decided that at the grievance meeting, which was conducted as a mini trial, both parties must have understood that the evidence discussed at the hearings would be disclosed in subsequent legal proceedings and therefore that there must have been an implied bilateral waiver of privilege by both parties.

This case provides a useful reminder that even in circumstances where settlement discussions are without prejudice, this can in certain circumstances be waived expressly or impliedly by one or both parties.