‘Without prejudice’ is not infallible

A recent decision is a reminder that a court can admit ‘without prejudice’ correspondence in certain circumstances

In the recent decision of Baskerville v Baskerville & Ors [2021] QSC 292, Justice Martin examined the limitations of ‘without prejudice’ privilege, and ultimately admitted ‘without prejudice’ correspondence.

The applicant was the liquidator of Professional Representatives Pty Ltd, who sought an extension of time to recover payments made under allegedly voidable transactions.¹ In order to do so, it was necessary to explain the delay in bringing the proceedings, and address any prejudice to the other parties.

Relevant to this question were the negotiations via email that took place between the solicitor for the applicant and Mr Orth, a director of the subject companies. During the course of these negotiations, and via an email headed ‘without prejudice’, the applicant’s solicitor sought the production of various documents, and the making of a reasonable offer.

Crucially, the solicitor concluded with this paragraph:

“Provide the above this week and we can potentially avoid the need and cost of public examinations and then the unreasonable director-related and/or transfer to defeat creditors transaction court claims against you and Rachel. Otherwise, we already have a good barrister briefed to prepare the claim and that claim should be ready to file against you and Rachel well before 30 June 2021.”

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The respondent sought to have the correspondence admitted, on the basis that there was nothing about it that was without prejudice, and even if the email were privileged the court would be misled without the correspondence being produced.

The applicant resisted the email being put into evidence, on the basis that it was the subject of without prejudice privilege and was properly part of settlement discussions.

The court considered the submissions and determined that the email was a part of a bona fide attempt to settle and thus would ordinarily attract privilege.² The court then discussed some of the exceptions to the general rule.³

A critical part of the applicant’s case in persuading the court to exercise its discretion to extend time was that the applicant was not in a position to proceed and that more work needed to be done to get to that point. The respondent contended that by advising that they were ready to file, the applicant could not later clam that it was not in a position to proceed. Ultimately, the court admitted the without prejudice email, noting (at 38):

“It was an important part of the applicant’s case that he was not in a position to proceed against anyone because further work needed to be done. The admission in Mr Warren’s email is to the contrary. If Mr Warren’s admission had been made in error then it would have been open to the applicant to say, for example, that Mr Warren was mistaken or, for some other reason, the statement about being ready to proceed should not have been taken at face value or that he was just puffing. That did not occur. It is appropriate to admit the statement as evidence going to the truth of the assertion that the applicant was not ready to proceed. The statement is admissible.”

The decision is a timely reminder that merely affixing the label ‘without prejudice’ to correspondence is no guarantee that the court will not admit it, and that care must be taken when negotiating, even if those negotiations are considered privileged.

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Shane Budden is a Special Counsel, Ethics, with the Queensland Law Society Ethics and Practice Centre.

Footnotes
¹ Pursuant to s588FE Corporations Act 2001.
² Baskerville v Baskerville & Ors [2021] QSC 292, [26].
³ Ibid, [27].