The outcome of Swiss Re Corporate Solutions v Sommer  EAT 78, (which we reported in this month’s newsletter) provides an interesting illustration of the scope of the ‘without prejudice’ privilege rules in the context of settling an employment tribunal claim.
The ‘without prejudice’ rule (the “Rule”) allows parties to have a full and frank exchange of views about a dispute or litigation, and even to make concessions about weaknesses in their own case, when discussing settlement. The parties can do this safe in the knowledge that anything said or done will be “without prejudice” and therefore cannot be relied on and would not be disclosable if settlement is not achieved and the matter goes to court/tribunal. The courts recognise that without prejudice privilege is important for the efficient operation of the legal system, as it facilitates parties to resolving disputes outside of court/tribunal.
There are only a small number of narrow exceptions to this Rule and the Sommer case is a good illustration of that. One exception is that the Rule cannot be abused or weaponised as a disguise or excuse for “perjury, blackmail or other unambiguous impropriety”. Case law has established that this ‘unambiguous impropriety’ exception should be construed narrowly – it should only be applied in the clearest cases of abuse. In 2021 the Court of Appeal ruled it would only be lost in “truly exceptional” circumstances.
In Sommer, the tribunal had found that the employer’s actions amounted to unambiguous impropriety when, in proposing the settlement of a tribunal claim, its solicitors sent a letter to Mrs Sommer containing “exaggerated allegations” of serious misconduct with potential criminal and/or regulatory consequences. The tribunal found in doing so the employer forfeited the protection of without prejudice privilege rendering the employer’s settlement proposal admissible as evidence. The employer appealed and the EAT overturned the tribunal’s decision, finding that although the employer had “sailed close to the wind”, its actions had not amounted to ‘unambiguous impropriety’. In the EAT’s view, although the allegations were exaggerated, they were not completely unfounded and therefore without prejudice privilege had not been lost.
The threshold for losing without prejudice privilege is high and there are only a few examples of cases where the threshold of ‘unambiguous impropriety’ was held to have been met. Typically, they involve some conscious fraud, dishonesty or outright perjury in order to seek personal gain. For instance, where the defendant told the claimant that unless the claim was discontinued he would commit and procure perjury, and would flee the jurisdiction should he still lose the claim. In another case, without prejudice privilege was lost where the claimant admitted that his claim was a sham but that he was prepared to blackmail the defendant to progress it. More recently, in 2016 the Court of Appeal found that the threshold had been met in circumstances where one party had threatened criminal action with the purpose of obtaining financial advantage, having made no attempt to make any connection between the alleged wrongdoing and the increased financial demand at the heart of the threat.
The key takeaway from Sommer is that while the threshold of ‘unambiguous impropriety’ is a very high one, there are circumstances in which without prejudice privilege can be challenged and ultimately could be lost. Further, an allegation of ‘unambiguous impropriety’ can be embarrassing to defend in public. Employers are reminded to tread carefully when making allegations against employees as part of settlement discussions, and to stay clearly on the right side of the line by not doing anything that would allow a Claimant to allege the employer had acted improperly.