High Court bats away challenge to privilege of ‘without prejudice’ costs letters

High Court: imaginative suggestion

High Court: imaginative suggestion

‘Without prejudice’ correspondence between law firms on the costs of a complex dispute between mosquito net manufacturers was protected by privilege and not admissible in court, the High Court has ruled in a case with combined costs of £4.6m.

Iain Purvis QC, sitting as a deputy judge of the Chancery Division, commented that given the “vast sums at stake”, the issue of costs was “obviously of great importance to both sides”.

However, he rejected an “imaginative suggestion” by the defendant company, Bestnet Europe, that an initial ‘without prejudice’ offer was subject not to joint privilege, but to a “unilateral privilege belonging to the writer of the letter”.

Judge Purvis said, even without case law, it was “plain from first principles that a rejection of a without prejudice offer (without making a counter-offer) is not admissible in evidence.

“No such rejection could be given in evidence in isolation, that is to say without also providing the initial offer as well (indeed the entire chain of correspondence).”

The judge rejected a further argument by Bestnet that the claimants had waived their privilege by claiming indemnity costs, which raised the issue of the conduct of the parties and asserting in their skeleton argument on costs that their own conduct was “not to be criticised”.

Judge Purvis said he could not see how claiming indemnity costs was inconsistent with the claimants continuing to assert privilege.

“The position would obviously be different if the claimants were seeking to rely on some aspect of the defendants’ conduct in the ‘without prejudice’ discussions, but they are not”.

The judge added that the claimant’s comment that their own conduct was “simply counsel’s summary of the finding he would like the court to make based on the evidence it has heard and seen”.

Judge Purvis said: “Since the court has heard and seen no evidence about the ‘without prejudice’ negotiations, this statement therefore cannot be taken as making any assertion about the claimants’ conduct in those negotiations.

“It is thus impossible to see how it can have implicitly waived the privilege attaching to those negotiations.”

The court heard in Vestergaard Frandsen and others v Bestnet Europe and others [2014] EWHC 4047 (Ch) that the claimants applied to strike out paragraphs in a witness statement filed by the defendants referring to ‘without prejudice’ communications.

The claimants originally claimed $48m in damages for misuse of confidential information in a case which went all the way to the Supreme Court, before the High Court, in October last year, awarded $600,000, around £385,000, in damages.

Judge Purvis said the claimants’ bill for costs came to £3.2m and the defendants’ bill to £1.4m. During ‘without prejudice’ negotiations the defendants offered to pay £3m in costs and damages or £2.9m just for costs. The second offer was later withdrawn.

The judge granted the claimants’ application for an order striking out references to the ‘without prejudice’ correspondence.

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