Neutral Citation Number: [2009] EWHC 3281 (TCC)
Case No: HT-09-493
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 10/12/2009

Before :

THE HON. MR. JUSTICE RAMSEY
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Between :

	 (1) HISCOX SYNDICATES LIMITED
(2) HISCOX PLC	Claimants	
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	(1) THE PINNACLE LIMITED
(2) THE PINNACLE NO.1 LIMITED
(3) KELTBRAY LIMITED
(4) ARAB INVESTMENTS LIMITED	Defendants	

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Steven Walker (instructed by Allen & Overy) for the Claimants
Simon P Browne (instructed by Davies Arnold Cooper) for the Defendants

Hearing dates: 27 November 2009
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Judgment

The Hon. Mr. Justice Ramsey: 
Introduction

1.	In these proceedings the parties have compromised the underlying claim but seek the court’s decision on liability for costs. Prior to the hearing on costs a preliminary point has arisen as to the admissibility of certain documents at the hearing to decide costs. 

2.	The Claimants (“Hiscox”) say that the relevant documents are without prejudice communications and are inadmissible. The Defendants say that certain documents are not, in fact, without prejudice communications but, in any event, they are admissible under the “unambiguous impropriety” exception to without prejudice privilege. 

Background

3.	Hiscox own or occupy premises at 1 Great St Helen’s, London EC3 which is the headquarters building for the Hiscox Group who provide insurance and related services.

4.	The First, Second and Fourth Defendants have interests in the land and development of a tower block to be known as “the Pinnacle” at a site adjacent to 1 Great St Helen’s (“the Site”). The Third Defendant was employed to carry out demolition work at the Site. For convenience I shall refer to one or more of these parties as “the Defendants” without distinguishing between them.

5.	Work on the development of the Pinnacle started in May 2007 and by September 2007 Hiscox were complaining about severe disturbance caused by noise and vibration from the Site. Matters were not resolved by discussion between the parties and on 5 December 2007 Hiscox commenced proceedings against the Defendants seeking injunctions and damages. 

6.	On 19 December 2007 Hiscox obtained interim injunctions against the First, Second and Fourth Defendants restraining interference with access to 1 Great St. Helen’s. On 25 January 2008, the interim injunctions in relation to access were continued, and further interim injunctions granted in respect of vibration and water ingress.

7.	The case was commenced in the Chancery Division but was transferred to the Technology and Construction Court on 8 April 2008.

8.	Applications were made on a number of occasions to vary the terms of the injunctions. In December 2008 and January 2009 a mediation took place, leading to an agreed moratorium in the proceedings from 29 January 2009 to 16 March 2009 whilst discussions took place.

9.	There was then a Case Management Conference on 8 May 2009 at which directions were given, including a provision that Hiscox should produce a Scott Schedule of the damages claimed by them. The Scott Schedule was produced by Hiscox on 12 June 2009 but it contained no figures for the claimed diminution in value on which the damages for nuisance were to be based.

10.	On 2 July 2009 the Defendants applied for an order that Hiscox should provide those figures and they were ordered to serve an amended Scott Schedule containing those figures, first by 30 July 2009 on a without prejudice save as to costs basis and then subsequently on an open basis.

11.	The Scott Schedule containing the figures was provided on 30 July 2009. On 4 August 2009 Hiscox made a Part 36 offer by which they offered to accept £350,000 as damages on the basis that the Defendants would pay Hiscox their costs. On 13 August 2009 the Defendants wrote a without prejudice save as to costs offer, not under Part 36, in which they offered £350,000 but on the basis that the costs of the proceedings should be referred to a judge in the Technology and Construction Court for a decision under CPR Part 44.3.

12.	The Defendants’ offer was accepted by Hiscox and a Consent Order was drawn up dated 23 September 2009. The Court approved the Consent Order and gave directions leading up to a two day hearing on 12 and 13 January 2010 to deal with the question of liability for costs.

13.	The first stage was for the Defendants’ to file and serve a List of Issues on costs. They did so but the List of Issues referred to negotiations and other matters which raised concerns that the Defendants might be seeking to rely on without prejudice communications. Solicitors instructed by Hiscox, Allen & Overy LLP (“Allen & Overy”) raised these concerns in a letter dated 4 November 2009 and sought amendments to the List of Issues to overcome their concerns.

14.	In response on 5 November 2009 Davies Arnold Cooper, instructed by the Defendants, said that the List of Issues did not contain any express or implied intention to refer to without prejudice communications and they did not agree to make any amendments to it. They added: 

“Notwithstanding the above, we are currently in the process of reviewing material prepared for the mediation and other correspondence and documentation that has been labelled “without prejudice” to determine whether the privilege attaches as a matter of fact or whether it has been waived. We shall write to you in this regard under separate cover, given that if your clients disagree with the admissibility of that material, then it will be necessary for the Court to consider the issue by way of a separate application.” 

15.	In response on 5 November 2009 Allen & Overy continued to seek amendments to the Defendants’ List of Issues.

16.	On 9 November 2009 Davies Arnold Cooper wrote and referred to statements by Allen & Overy that inferences in the Defendant’s List of Issues that Hiscox had pursued damages for nuisance on a inflated basis were incorrect. They then referred to email communications from Charles Dupplin of Hiscox to Khalid Affara of the Defendants of 27 and 30 January 2008 and to financial claims made in the mediation. They said that, on the basis that Hiscox had only recovered £200,000 as damages for nuisance (part of the £350,000 being for remedial work), the Defendant’s position was that Hiscox had pursued damages for nuisance on an inflated basis. The documents relied on were attached.

17.	Allen & Overy also responded on 9 November 2009, confirming that the material relied on was without prejudice and should be redacted from the open correspondence between solicitors. They then took out an application seeking an order that references to without prejudice communications in the List of Issues should be struck out. Directions were then given for the hearing of that application.

18.	At the hearing it became clear that the following issues arose on the application:

(1)	Are the emails dated 27 and 30 January 2008 and 8 April 2008 from Charles Dupplin to Khalid Affara and the email dated 7 April 2008 from Khalid Affara to Charles Dupplin properly without prejudice communications so as to come within without prejudice privilege?

(2)	Are any documents which come within without prejudice privilege excluded from that privilege by the “unambiguous impropriety” exception?

(3)	If so, is without prejudice privilege in the whole or part of the without prejudice communications between the parties lost and, if part, which part?

(4)	If the without prejudice privilege would otherwise be excluded by the “unambiguous impropriety” exception, does that overcome the confidentiality which applies to communications and documents in relation to the mediation?

19.	I first consider the general position on without privilege communications.

Without Prejudice Communications

20.	The substantive proceedings in this case have been settled. It follows that the purpose for which the Defendants wish to rely on the without prejudice communications is so that they can make submissions at the hearing on the appropriate Order for costs under CPR 44.3.

21.	The Defendants wish to argue that, as the final settlement included £200,000 for damages for nuisance, Hiscox had exaggerated their claim prior to the settlement. They seek to rely on the Scott Schedule served on 30 July 2009 which showed a claim based on diminution in values of £818,885. They can clearly refer to that document which was served without prejudice save as to costs.

22.	They also seek to rely on an open  letter of 11 September 2008 in which Allen & Overy had written in the following terms in response to a letter from Davies Arnold Cooper: 

“On reviewing the insurance documentation provided by your clients, we note that the information submitted to the underwriters during the placement of the insurance as listed in that documentation appears to contain no reference to the multi-million pound litigation that existed then and currently exists between our respective clients. We consider this omission could represent material non disclosure to those underwriters and accordingly pose a threat to the insurance coverage upon which your clients are relying in order to meet our clients’ current claim. Accordingly please confirm that the litigation in action no HC07C03309 had been disclosed and that the claim relating to events on 20th August 2008 has been accepted by the underwriters.”

23.	The Defendants rely on the reference to “multi-million pound litigation” and say that this indicates the view of Hiscox that there was a multi-million pound damages claim. This matter was raised in correspondence between the solicitors for the parties. In their letter of 5 November 2009 Allen & Overy said this in relation to the letter of 11 September 2008:  

“Your treatment of the open correspondence, in particular your repeated misquoting of our letter dated 11 September 2008 … as intimating that our clients had a multi-million pound damages claim, when in fact it refers to “multi-million pound litigation”. As explained to you on numerous occasions, the latter is a completely accurate reflection of the litigation, taking into account not only our clients’ damages claim for £818,000 but also your clients’ threatened claim of £12m under the cross-undertaking, Keltbray’s threatened claim under the cross-undertaking and the costs being incurred on all sides”

24.	In response on 9 November 2009 Davies Arnold Cooper referred to passages in the letter of 5 November 2009 and to documents which Hiscox say are without prejudice communications to support their contention that Hiscox had pursued damages for nuisance on an inflated basis. Whilst there obviously can be no objection to reference to the Scott Schedule or the letter of 11 September 2008, Hiscox object to the Defendants’ reliance on documents which are said to be without prejudice communications

25.	The starting point is to consider the law which relates to the use of communications when questions of costs are in issue.

26.	The general rule, as accepted by both sides, is that without prejudice negotiations are inadmissible for the purpose of deciding costs: see Walker v Wilsher (1889) 23 LR 335 cited in Cutts v Head [1984] Ch 290 and approved in Rush & Tompkins v GLC [1989] 1 AC 1280 and as recently considered by the Court of Appeal in Reed Executive plc v Reed Business Information Ltd [2004] 1 WLR 3026.

27.	In Walker v Wilsher and Cutts v Head it was held that without prejudice offers could not be relied on in relation to costs. Generally when the court comes to consider the exercise of the discretion to award costs, admissible offers are one of the considerations which can be taken into account under CPR 44.3(4)(c). Without prejudice offers are not admissible offers. Equally, the conduct of the parties is also something to be taken into account under CPR 44.3(4)(a) and, as part of that conduct, the Court can have regard to whether the claim has been exaggerated: CPR 44.3(5)(d).

28.	In Reed Executive v Reed Business the Court of Appeal held that without prejudice communication could not be used to establish that a party had unreasonably refused alternative dispute resolution. At [34] Jacob LJ said: 

“I therefore conclude that the rule in Walker v Wilsher 23 QBD 335 remains good law and that the Court cannot order disclosure of “without prejudice” negotiations against the wishes of one of the parties to those negotiations.”.

29.	Therefore it is not only offers contained in without prejudice communications which cannot be disclosed to the Court on the question of costs but also any without prejudice communications which might reflect on the conduct of the parties. That includes documents which might show that one party has pursued claims on an exaggerated basis in without prejudice communications.

30.	In this case, the Defendants seek to overcome that position by saying, first, that certain documents including some mentioned  to be “without prejudice” were not in fact properly so described and did not attract without prejudice privilege. Secondly, they say that if those documents are properly described as without prejudice documents then those and other documents accepted to be without prejudice can be considered by the Court on the basis of an exception to the without prejudice rule. They rely on such documents as coming within the “unambiguous impropriety” exception.

31.	I shall consider those two matters.

Were the documents properly “without prejudice”?

32.	The law relating to this question has conveniently been set out recently by Arnold J in Williams v Hull [2009] EWHC 2844 (Ch) in which he had to consider whether a letter marked “without prejudice” was properly described as such. He reviewed the relevant law at [17] to [23].

33.	In the relevant decisions the test has been expressed in slightly different terms but to materially the same effect:

(1)	In Cutts v Head at 306 Oliver, LJ expressed the position as: “The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability”

(2)	In South Shropshire District Council v Amos [1986] 1 WLR 1271 Parker LJ said this at 1277 to 1278: “It attaches to all documents which are marked ‘without prejudice’ and form part of negotiations, whether or not they are themselves offers, unless the privilege is defeated on some other ground….”

(3)	In Rush v Tompkins Lord Griffiths adopted what had been said in Cutts v Head and expressed the scope of such communications in the following passage at 1299: “The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence.” 

(4)	In Buckinghamshire County Council v Moran [1990] Ch 623 Slade LJ said at 635 that the relevant question was whether the document “could properly be regarded as a negotiating document”. In respect of the letter in that case he said: “…the defendant was writing the letter in an attempt to  persuade the council that his case was well founded. As I read the letter, it amounted not to an offer to negotiate, but to an assertion of the defendant’s rights, coupled with an intimation that he contemplated taking his solicitor’s advice unless the council replied in terms recognising his asserted rights. I cannot derive from the letter any indication, or at least any clear indication, of any willingness whatever to negotiate.”

(5)	In Youssef Fazl-Alizadeh v Nikbin (unreported, 25 February 1993) Simon Brown LJ said this : “Accordingly, the basic issue is to be determined essentially by asking the single question: were these discussions genuinely aimed at compromising the action? “Genuinely” here means of course no more than that the discussions were indeed attempting to resolve the parties’ differences; it connotes nothing in the way of good faith generally.”

(6)	In Schering Corp v Cipla Ltd [2005] EWHC 2597 (Ch) Laddie J expressed the approach as follows at [14] : “The court has to determine whether or not a communication is bona fide intended to be part of or to promote negotiations. To determine that, the court has to work out what, on a reasonable basis, the intention of the author was and how it would be understood by a reasonable recipient.”

(7)	In Williams v Hull at [18] Arnold J said that: “…if a letter is expressly stated to be “without prejudice” that gives rise to a rebuttable presumption that the communication is a without prejudice communication within the meaning of the rule unless it is clear that the expression has been used with some other meaning or purpose.” 

34.	In general, therefore, the question is whether the document is part of negotiations which are genuinely aimed at compromising the dispute. If the document merely states a position and indicates no willingness to negotiate then it will not come within without prejudice privilege. If, however, it indicates a willingness to negotiate then it may be the “opening shot” and therefore properly within the privilege. Communications will form part of the negotiations, even if they do not contain, offers if such communications are part of the process of promoting negotiations for settlement.
         
35.	Whilst there is some uncertainty whether evidence of subjective intention is relevant, in this case it is not said that there is anything by way of subjective intention which should affect the objective meaning of the documents. The question of whether subjective intention is admissible, raised in Hollander Documentary Evidence (10th Edn) at 16-06 therefore does not arise.

36.	In considering the question, it is not permissible to dissect the communication but, rather, it is necessary to look at the communication as a whole: see Unilever plc v Proctor & Gamble Co [2004] 1 WLR 2436 at 2448-2449.

37.	In the light of those principles, I now turn to review the relevant documents.

The content of the communications

38.	After the Claim Form was issued on 5 December 2007 an interim injunction was granted on 19 December 2007 and a full hearing then took place on 22, 23, 24 and 25 January 2008, leading to interim injunctions being granted.

39.	Prior to the January hearing Charles Dupplin of Hiscox had written to Khalid Affara of the Defendants on 9 January 2008, as a result of having seen a letter sent by Davies Arnold Cooper to Allen & Overy. The letter was headed “without prejudice” and concluded with the following paragraphs: 

“There is no lack of will to continue with the “abyss” option on our part if necessary, but there is a recognition that you have previously expressed a wish to resolve this amicably and therefore it may just be that this litigation has taken on a life of its own and that you have been, frankly, let down by your professional team.
If you too feel that the litigation may be getting out of control and you would like to discuss possible ways of resolving the problem by agreement, I suggest that we have a meeting between ourselves (without lawyers present) as an initial step towards agreeing that.”

40.	There was then a meeting on 14 January 2008 between Charles Dupplin and Khalid Affara at which they discussed the principle of a compromise solution by which Hiscox would move out of their premises to give the Defendants free rein to demolish as they chose. On 20 January 2008 Charles Dupplin sent an email to Khalid Affara “without prejudice, and continuing our very pleasant chat…” and concluding with the suggestion of a further discussion.

41.	On 21 January 2008 Charles Dupplin sent a further email marked “without prejudice” and setting out a framework for an agreement under which Hiscox would move out of 1Great St Helen’s to other premises, then at a later date move into space in the Pinnacle. There would also be a financial payment to Hiscox which would include moving costs and legal and professional fees.

42.	There was a further discussion of the details of this arrangement at a meeting on 21 January 2008. On 25 January 2008 Charles Dupplin sent an email to Khalid Affara to explain that the Executive Committee of Hiscox had developed their thinking and inviting a further meeting.

43.	Then on 27 January 2008 Charles Dupplin sent the first email which the Defendants say is not properly described as a without prejudice communication. The email said this: 

“Without prejudice and continuing our discussions, I have been in touch with a couple of colleagues on the Executive Committee ( whom I had not been able to speak to post judgment and pre our meeting).                                                                                                               A very influential colleague (for moving) expressed the view that as the wronged party we should “get every penny plus something for our trouble”. On discussion he appeared to mean £20m (to include the £12.46m).                                                                                                                The other colleague who was not for moving out at the start of our discussions last Tuesday (but became part of the consensus to move) felt now that we should stay put in view of the nature of the injunctive protection, but that the access/oversail/overhang permissions you would want from us would cost £12m.
I felt that these views should be brought to your attention straight away. We will not be together for a full debate until Tuesday week.”

44.	Khalid Affara responded less than an hour later to say: “Thanks for this Charles. Re the vibration readings, can you ensure that they are past (sic) to us on a daily basis please.”

45.	On 30 January 2008 Charles Dupplin sent the second email which stated this: 

“The £12.46m is made up of £7.03m to move out and £5.43m to move back in.
What news of your £5.6m email.
… 
Is it worth setting a new date to meet to try to compromise matters as between ourselves. I would covenant to have the Executive Committee unified by then.”

46.	The story then continues with a letter from the Fourth Defendant dated 7 March 2008 to Hiscox. It stated: 

“WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
You have requested a formal proposal from my clients, Pinnacle Limited and Pinnacle No.1 Limited, in relation to 1 Great St Helen’s (GSH). I have been instructed that my clients are willing to consider entering into a settlement agreement incorporating the following principal terms:….”

47.	Khalid Affara then sent Charles Dupplin the email of 7 April 2008, which is the third email which the Defendants say is not properly without prejudice. It was headed up in the subject line “without prejudice” and stated: 

“Thank you for your email. I note what you say, but do not believe that I have ever received a response to my letter of 7th March. I do not accept that the settlement offer was “half hearted”.
But I am not sure why you are linking the water ingress incident last week with our settlement offer. What is the connection?”.

48.	There was then reference to water ingress, noise and access issues before the e-mail concluded: “If you would like to meet to discuss matters further later in the week, I would be more than happy to do so.”

49.	Charles Dupplin replied on 8 April 2008 in the fourth email. It was headed in the subject line “without prejudice” and said: 

“A pity this is a mixture of the frank and the playing to the crowd.                                                                                                              
I fear (and I mean it) that you are often not told bad news because your team is not willing to give it to you.”

50.	He then dealt with noise and access issue and concluded by saying: 

“We currently have no proposal from you as to how the regular, material and permanent disruption would be coped with. Just a flat refusal to pay for our necessarily incurred costs, a denial you must weatherproof our battered building permanently and a denial that this access is a vital right and is one which exists plain and simple. A public company’s actions are driven by professional advice to its directors. The talented Mr Bramhall seems not to understand that the advice to those directors that he well can predict requires addressing. Other members of your legal team you may well find sympathetic to the suggestion that a generous settlement is likely to be advisable. Given the enormous costs of a full action and an aggressive stance with us, they might feel the talented Mr Bramhall has a conflict of interest.
I much enjoy (genuinely) a chat with yourself but I fear that in the absence of a real desire to address our needs it is time we could both use better.”

51.	There was then a further email on 25 April 2008 in which Charles Dupplin forwarded an email about water ingress and said : “In the light of this and the continuing problems which your contractors tell us amount to delay of your project I again suggest you reconsider your settlement position”.

Analysis

52.	In my judgment the process in which Charles Dupplin and Khalid Affara were participating from January to April 2008 involved two things. First, they were exchanging information about continuing problems of water ingress, noise/vibration problems and access difficulties in the context of the continuing litigation. Secondly, in the light of those problems they were seeking to negotiate a way in which they might come to an arrangement to avoid the Court proceedings. Both were experienced and held senior positions in their organisations. Apart from the email on 30 January 2008, they both used the heading “without prejudice” or allowed it to continue to be used as the subject heading of their emails. I respectfully agree with the view expressed by Arnold J in Williams v Hull  at [18] that where a letter is “expressly stated to be “without prejudice” that gives rise to a rebuttable presumption that the communication is a without prejudice communication within the meaning of the rule unless it is clear that the expression has been used with some other meaning or purpose.”.

53.	The presumption may be rebutted by showing that, in fact, the contents of the document is not part of a genuine attempt to negotiate.

54.	In this case I do not consider that the presumption is rebutted. In respect of the communications which the Defendants say are not properly without prejudice communications:

(1)	The email of 27 January 2008: This email was a continuance of the discussion which had started on 9 January 2008. It was aimed at furthering the negotiations on the compromise solution, the framework of which had been set out in the email of 21 January 2008. It was setting out some views of members of the Executive Committee to indicate the level of compensation they were looking for. Those views were then to form part of the “debate” between Charles Dupplin and Khalid Affara. Those views were clearly expressed to put pressure on the Defendants. 

(2)	The email of 30 January 2008: Although not marked “without prejudice”, this email provided a breakdown of the moving costs of £12.46m referred to in the previous email. There were obviously some further emails mentioning figures. This email concluded by saying that a date should be set to try to compromise matters. It was, again, part of the negotiating process.

There was then the formal offer made by Khalid Affara on 7 March 2008 which was marked “without prejudice”.

(3)	The email of 7 April 2008: This was marked “without prejudice” by Khalid Affara as was his offer of 7 March 2008. It obviously followed a further email from Charles Dupplin. Khalid Affara said he had not received a response to his offer and he did not accept that the offer was half hearted, which must refer to a comment by Charles Dupplin. He dealt with complaints which formed the background to these discussions and concluded by offering to discuss matters later in the week. Again this email continued the negotiation process re-started by the “without prejudice” offer on  7 March 2008.
(4)	The email of 8 April 2008: This again dealt with the background to the discussions in terms of complaints of problems. It referred to the items discussed between the parties.

55.	When the documents are reviewed in this way and when the background is taken into account, it is evident that these communications are properly referred to as without prejudice communications. They were part of the process by which the parties were discussing the problems and seeking to come to terms to resolve those problems and the court proceedings.

Unambiguous Impropriety

56.	In Williams v Hull Arnold J also considered the law in relation to this exception to without prejudice privilege which applies in cases of unambiguous impropriety. At [45] to [49] he set out the law.

57.	The exception of unambiguous impropriety derives from the judgment of Hoffmann LJ in Forster v Friedland (unreported, 10 November 1992) where the Court of Appeal was dealing with a case where a party intended to rely on without prejudice negotiations. On appeal the plaintiffs sought, unsuccessfully, to overcome the without prejudice rule by saying that the conversations showed that the other party was threatening to advance what he knew to be a sham defence. Two cases were cited in support of this argument.

58.	The first case cited was the British Columbia case of Greenwood v Fitt [1961] 29 DLR 260 where a party said in a without prejudice communication that if the other party did not withdraw a claim, he would give perjured evidence and bribe other witnesses to perjure themselves. The second case was Hawick Jersey v Caplan (The Times, 11 March 2008) in which a party admitted in negotiations that the claim was bogus and accepted that he was blackmailing the other party. In both these cases the court held that the without prejudice rule did not exclude such evidence. 

59.	In Forster v Friedland Hoffmann LJ said this: 

“These are clear cases of improper threats, but the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety. The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true. ”

60.	In recent cases the scope of this exception has been considered further:

(1)	In Unilever v Proctor & Gamble [2000] 1 WLR 2346 Robert Walker LJ said this at 2444: “Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other ‘unambiguous impropriety’.”

(2)	In Berry Trade Ltd v Moussavi [2003] EWCA 715 Peter Gibson LJ said that the test applied by the judge in assessing “unambiguous impropriety” of a “serious and substantial risk of perjury” was not supported by authority. He added “On the contrary, it seems to us to weaken significantly the requirement of unambiguous impropriety and the need for a very clear case of abuse of a privileged occasion.”

(3)	In Savings & Investment Banks Ltd v Fincken [2003] EWCA Civ 1630 Rix LJ, with whom Carnwath LJ agreed, said at [57] in relation to inconsistent statements in without prejudice communications: 

“It is not the mere inconsistency between an admission and a pleaded case or a stated position, with the mere possibility that such a case or position, if persisted in, may lead to perjury, that loses the admitting party the protection of the privilege: see the first holding in Fazil-Alizadeh v Nikbin 25 February 1993, described in para 47 above. It is the fact that the privilege itself is abused that does so. It is not an abuse of the privilege to tell the truth, even where the truth is contrary to one’s case. That, after all, is what the without prejudice rule is all about, to encourage parties to speak frankly to one another in aid of reaching a settlement: and the public interest in that rule is very great and not to be sacrificed save in truly exceptional and needy circumstances.”

61.	In the present case Mr Simon Browne on behalf of the Defendants sought to argue that the unambiguous impropriety exception applied because Hiscox were negotiating on an inflated and exaggerated basis and that this negotiation amounted to the intended perception of threats and was accompanied by a subsequent denial in open correspondence that the claim was exaggerated and inflated in the without prejudice communications.

62.	In my judgment those contentions do not come near to satisfying the high threshold of abuse of the without prejudice privilege which is required for the “unambiguous impropriety” exception to apply. The cloak of without prejudice privilege will only be lifted where there is misconduct in the form of perjury, blackmail or similar impropriety.

63.	In this case the documents which it is contended contain such conduct were narrowed by Mr Browne during the course of his submissions. In the end it was the emails of 27 and 30 January 2008, together with the appendices to the position statement which Hiscox submitted in the mediation.

64.	The email of 27 January 2008 contains nothing which can be described as a threat which abuses the without prejudice privilege. The arrangement in the email of 27 January 2008 envisaged payment being made to Hiscox, to include moving costs. From the subsequent email it is evident that the £12.46m figure related to moving costs. There are two figures mentioned £20m and £12m both of which are stated to be the views of colleagues on the Executive Committee of Hiscox. Evidently what Charles Dupplin was doing was to make Khalid Affara aware of the views of these people and the seriousness of the position.

65.	In Mr Bramhall’s witness statement he says that this email was discussed with Khalid Affara and that they were “outraged by the suggestion that the Defendants pay the Claimants £20million”. I have no doubt that the size of the potential sum being put forward by Hiscox did cause “outrage”. However the email sent by Khalid Affara shortly afterwards does not suggest that this was in any way perceived to be a threat, let alone the type of threat which amounts to impropriety as being an abuse of without prejudice communications. This was part of the negotiations and doubtless Charles Dupplin was seeking to increase the level of potential payment from the Defendants as part of an agreement by which they moved out. To do this he set out views of members of the Executive Committee on what an agreement to move out would cost the Defendants and what an agreement for rights of access, oversail or overhang would cost the Defendants if Hiscox did not move.

66.	The email of 30 January 2008 merely sets out a breakdown of the figure of £12.46m and refers to an email in which Khalid Affara had referred to £5.6 m. This takes the matter no further.

67.	In any event, it is difficult to see how such sums could be equated to figures which Hiscox might recover by way of damages for nuisance in the period up to 25 January 2008 which forms the basis of sums in the Scott Schedule or the sum of £200,000 which was included in the settlement. The sum being discussed related either to an agreed arrangement by which Hiscox moved out for a period and then moved back or a sum which was paid by the Defendants for various permissions or rights.

68.	The appendix to the position statement prepared by Hiscox for the mediation refers to a claim for diminution in value for the period 20 September 2007 to 5 December 2007 of £854,700 and a claim for the period from 6 December 2007 for 36 months of £1,620.000. That is a total of £2,474,700 which Hiscox claimed for diminution in value for the period of nuisance. I can see no possible way in which this could be said to amount to any impropriety or abuse of the without prejudice privilege. Given that the Scott Schedule disclosed a figure of some £818,885 for the period to 25 January 2008 the figure for the relevant period can be seen as being close to what is contained in the Scott Schedule.

69.	The Defendants also say that Hiscox are seeking to deny that they exaggerated the claim in without prejudice communications. However, this was said as a reaction to what the Defendants said in their letter of 5 November 2009 and the view of Hiscox that the Defendants were seeking to rely on without prejudice communications. Hiscox do not seek to rely on without prejudice communications except to the extent that Hiscox considered that the Defendants sought to rely on them. This gives no grounds for overcoming the without prejudice privilege which applied to the communications either on the basis of unambiguous impropriety or otherwise.     

70.	Accordingly, I find no grounds for applying the unambiguous impropriety exception to the without prejudice privilege in this case. It follows that the Defendants are not entitled to rely on any of the without prejudice communications between the parties in their arguments on costs under CPR 44.3.

Other issues

71.	On that basis the question of what documents can be relied upon under any exception to without prejudice privilege does not arise. Nor is it necessary to consider the position of the other parties to the confidentiality provision in the mediation agreement. I merely note that it is common ground that if I had found that the privilege of without prejudice had been excluded, it would have been necessary to consider the question of confidentiality in relation to documents produced in the mediation. I accept that. If it had been necessary to resolve that question of confidentiality the views of the mediator and the other parties to the mediation agreement would have needed to be sought and considered. The existence of confidentiality in the mediation raises separate issues to the question of privilege: see Farm Assist Ltd v DEFRA (No2) [2009] EWHC 1102 (TCC).

Conclusion

72.	For the reasons set out above I have come to the conclusion that:
(1)	Without prejudice privilege applies to the emails of 27 January 2008, 30 January 2008 and 8 April 2008 from Charles Dupplin to Khalid Affara and the email of 7 April 2008 from Khalid Affara to Charles Dupplin.
(2)	None of the without prejudice communications which the Defendants contend are excluded from without prejudice privilege by the “unambiguous impropriety” exception are so excluded. The Defendants may not therefore rely upon the emails of 27 January 2008  or 30 January 2008 or (for completeness) 8 April 2008 from Charles Dupplin to Khalid Affara or the appendices to the mediation position statement produced by Hiscox or any other without prejudice communications between the parties on the question of the appropriate order for costs under CPR 44.3.  For the avoidance of doubt this does not preclude either party from relying on “without prejudice save as to costs” communications.  
73.	I will now consider submissions of the parties on any necessary amendments to the Defendants’ List of Issues and any ancillary matters which arise from this judgment.