Whether an offer of settlement necessarily attracts "without prejudice" privilege

18/01/2007

The Commercial Court was recently asked to determine whether an offer of settlement by the defendant, which was set out in a letter not marked "without prejudice" attracted privilege.
The court held that "it was settled law that in determining whether correspondence attracted the without prejudice privilege, notwithstanding the fact that the correspondence in issue had not been headed without prejudice, the key issue that fell to be determined was whether it was clear from the surrounding circumstances that the relevant correspondence or discussion had been part of negotiations genuinely aimed at settlement.
In the instant case, it had not been appropriate for the correspondence in issue to have been characterised as without prejudice. On a true construction the letters had been open offers, albeit hedged with conditions and constraints. Accordingly, they had not attracted the privilege and the defendant's application would be dismissed."
Shortly after a without prejudice meeting had taken place between representatives of the parties, the defendant confirmed its position in a letter not headed "without prejudice" but in the text of the letter, the defendant stated that without prejudice to its right to deny liability they supported a settlement up to the present value of what its share of liability. Following receipt of that letter, the claimant acknowledged its liability to its insured and entered into an interim settlement. The claimant sought to recover the interim settlement from the defendant. In a letter, again not headed without prejudice, the defendant refuted its liability in respect of the insured's claims but offered to pay the claimant a sum in full and final settlement of all claims arising from the Dow breast implant litigation. The claimant issued proceedings and sought summary judgment against the defendant for its share of the interim settlement payment. The defendant applied to have parts of the claimant's supporting evidence struck out on the grounds that it referred to without prejudice correspondence.
([i]English and American Insurance Co Ltd v. Axa Re SA [2006] EWHC 3323 (Comm))

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