In Berkeley Square Holdings Ltd & Ors v Lancer Property Asset Management Ltd & Ors [2021] EWCA Civ 551 the Court of Appeal upheld an order directing that statements made in  without prejudice  in mediation were disclosable and could be referred to in the defence.



The claimant brings proceedings against the defendant.   There had been an  mediation in 2012 between the parties which led to a resolution of some of the issues between them.  Position statements had been exchanged in that mediation.  When the current proceedings were issued the defendant pleaded some of the matters that had been disclosed in that mediation.


The date that the claimant had knowledge of certain key facts was important for limitation purposes.  The claimant asserted it first knew these facts in 2016. The  defendant’s response was that knew about the matters in the mediation IN 2012, not least they were set out in the defendant’s position statement.   The defendant therefore certain key matters that were set out in the position statements in the mediation.

    1. In their defence, the defendants allege that Sheikh Khalifa approved the payments to Becker in a document which pre-dated the 2005 agreement. They further plead as follows:
“Further and in any event, the Claimants knew (and, insofar as necessary ratified or affirmed) independently of Sheikh Khalifa more than 6 years ago (a) that Lancer had paid millions of pounds to Becker by reason of the payment of sums to Lancer; and (b) of the terms set out in, and the contractual nature of, the Side Letter, the March 2011 Amendment, and the two 2012 Deeds. In particular:
(1) Representatives of each Claimant (including at least Eversheds LLP, a Dr [Elgaili Abbas], the personal lawyer to Sheikh Khalifa, [Dr Al Ahbabi and Mr Ismail]) knew, because Lancer informed them of these facts in its mediation position papers prepared in connection with the negotiation and settlement of Lancer’s Capital Performance Bonus Claim:

(a) by not later than 5 September 2012, that Lancer had made payments to “HE Mubarak’s [Dr Al Ahbabi’s] company, Becker Services Limited” in the sum of the “difference between the fees in the 2005 Agreement and the Side Letter“, and

(2) Subsequently, with the knowledge and (as admitted in the [Part 18 Response] at 13) following the receipt of legal advice from Eversheds LLP (the same or predecessor limited liability partnership as the Claimant’s current solicitors), the Claimants proceeded to enter into the November 2012 Deed of Settlement.
(3) Accordingly, those two 2012 Deeds were duly executed by the Claimants with knowledge of the facts which they assert, at paragraph 7 of the Particulars of Claim and in the [Part 18 Response] at 3-4, they first learned of only after the termination of Lancer’s engagement.”
    1. The defendants plead as a conclusion that “the fundamental premise for this substantial claim – the allegation of fraud that lay undiscovered until recently – is, as the Claimants must know, misplaced and wrong”.
  1. It is these and similar allegations in the defence that the claimants applied to strike out on the grounds that the position papers for the mediation and the proceedings at the mediation (the mediation statements) were, as a matter of both the general law and contract, privileged as being without prejudice and inadmissible in evidence.
The Court of Appeal held that the defendant was allowed to plead the facts in the mediation and that this came within one of the exceptions of the without prejudice rule.
    1. Exceptions to the without prejudice rule have developed over the years in a piecemeal fashion, not reflecting any single underlying principle. In a passage subsequently approved by the Supreme Court, Robert Walker LJ stated the position in his judgment in Unilever, reflecting the exceptions which had at that time been established. He said ([2000] 1 WLR 2436 at 2444-45):
“Nevertheless, there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. The following are among the most important instances.
(1) As Hoffmann LJ noted in Muller’s case, when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. Tomlin v Standard Telephones and Cables [1969] 1 WLR 1378 is an example.
(2) Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence. Underwood v Cox (1912) 4 DLR 66, a decision from Ontario, is a striking illustration of this.
(3) Even if there is no concluded compromise, a clear statement which is made by one party to negotiations, and on which the other party is intended to act and does in fact act, may be admissible as giving rise to an estoppel. That was the view of Neuberger J in Hodgkinson & Corby v Wards Mobility Services [1997] FSR 178, 191, and his view on that point was not disapproved by this court on appeal.
(4) 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” (the expression used by Hoffmann LJ in Foster v Friedland, 10 November 1992, CAT 1052). … But this court has, in Foster v Friedland and Fazil-Alizadeh v Nikbin, 1993 CAT 205, warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.
(5) Evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence. Lindley LJ in Walker v Wilsher (1889) 23 QBD 335, 338, noted this exception but regarded it as limited to “the fact that such letters have been written and the dates at which they were written”. But occasionally fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay.
(6) In Muller’s case (which was a decision on discovery, not admissibility) one of the issues between the claimant and the defendants, his former solicitors, was whether the claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a software company and its other shareholders. Hoffmann LJ treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications. The other members of the court agreed but would also have based their decision on waiver.”
  1. Robert Walker LJ listed two further exceptions, concerning communications made “without prejudice save as to costs” and communications received in confidence with a view to matrimonial conciliation.


Exception (2)
    1. The judge dealt with this exception in his judgment at [49]-[54]. He correctly noted at [49] that, while it does not appear that the exception has been applied in any reported English case, its formulation has been repeatedly approved by the appellate courts. Neither side suggested before the judge, or before us, that the exception does not exist. The judge gave his reasons for concluding that it applied in the present case as follows:
“52. In my judgment, the statements here are admissible either under this exception, properly interpreted, or by reason of a small and principled extension of it to serve the interests of justice. If Lancer had misled the Claimants by misrepresentation in the mediation, then the Claimants could rely on that in challenging the 2012 Deeds. It seems to me contrary to principle to hold that where Lancer was truthful in the mediation, their statement cannot be admitted to rebut a case that the Claimants were deceived by Lancer as to the true state of affairs. In their skeleton argument, counsel for the Claimants submitted that this is unjustified as a radical innovation which

“turns an existing exception (permitting a party to rely on without prejudice communications to set aside an agreement) on its head: the evidence would be adduced to defend a fraud claim rather than pursue it”.

In my view, it is the maintenance of such a distinction in the present circumstances which is unjustified. To paraphrase Ward LJ’s observation in Oceanbulk in the Court of Appeal [2010] EWCA Civ 79 at [37], if you can use the antecedent negotiations to prove a misrepresentation and thereby rescind an agreement, it is illogical to say that you cannot use them to disprove a misrepresentation and thereby uphold an agreement.
53. Moreover, I think this approach is consistent with the rectification exception and the extension of the first exception established by the Supreme Court in Oceanbulk. In a rectification dispute, the WP negotiations are admissible to determine what was the true agreement reached by the parties and whether that is properly reflected in the resulting contract. In a dispute as to interpretation of a contract, Oceanbulk held that the negotiations are admissible to determine the facts of which the parties were aware which constituted the relevant surrounding circumstances of the agreement which they concluded. In the present case, the mediation papers are being looked at to determine what were the facts of which both parties were aware, on a dispute as to whether the contracts they concluded were made in ignorance by one party of certain key facts. Furthermore, there is no conflict here with the fundamental principle that parties should be encouraged to speak freely in negotiations, without concern that what they say may be used against them in litigation. The Defendants are seeking to adduce evidence of what was said by the 1st Defendant, not of anything said by the Claimants.”
    1. In challenging this conclusion, Mr Quest QC on behalf of the claimants first submitted that this was, as the judge accepted it might be, an extension of exception (2). The defendants are not seeking to set aside the settlement deeds, but are seeking to uphold them, by reference to the mediation statements which, they say, show that the claimants knew before those deeds were made that the excess sums payable under the side letter had been routed via Lancer to Dr Al Ahbabi’s companies. Mr Quest pointed out that while the categories of exception are not closed, and that they had indeed been extended by the Supreme Court in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44[2011] 1 AC 662 (Oceanbulk), the courts must be cautious in doing so. The House of Lords declined to do so in Ofulue v Bossert, considering that it was inappropriate for reasons of legal and practical certainty: see Lord Neuberger at [98].
    1. Mr Quest submitted that an extension must represent a principled, incremental development by reference to existing exceptions. It is not a question of asking whether an extension is justified on the facts of a particular case. Regard must be had to its wider legal and commercial consequences. In particular, any exception must be sufficiently certain to be readily applied by practitioners engaged in without prejudice communications and discussions: see Robert Walker LJ in Unilever at pp. 2443-44 and Lord Hope in Ofulue v Bossert at [12] in the passage quoted above. Mr Quest further submitted that, because exception (2) has not been applied in any English case and there is therefore no factual frame of reference available for it, the court should be especially slow to extend it and should do so only if it is truly analogous to an existing (different) category which has been recognised in an English case.
    1. I pause here to say that I agree with much of these submissions. In two respects, however, I consider that Mr Quest seeks to set boundaries to the court’s approach which are too narrow. First, although it has no relevance in the present case, I do not accept that any extension must be an incremental development by reference to existing exceptions. New factual circumstances may arise, or conditions or attitudes may change, and the common law must retain the ability to meet them. Second, I cannot see any principled basis for saying that an extension to exception (2), because it has not apparently been applied to date in an English case, must be analogous to an existing but different category of exception. Mr Quest’s further qualification that it must be analogous to a different category which has been recognised in an English case is, in my judgment, too parochial an approach.
    1. Moving to the substance of his challenge to the judge’s reasons, Mr Quest made five principal criticisms.
    1. First, the judge was wrong to say that the defendants were seeking to “disprove a misrepresentation”. The claimants do not allege any misrepresentation by the defendants. Their case is that the side letter and the settlement deeds were unauthorised and made in breach of fiduciary duty, and it is the defendants who seek to rebut these allegations by reference to knowledge which they say was acquired by the claimants from the mediation statements.
    1. Second, it is not illogical to limit the exception, as it is formulated by Robert Walker LJ, to cases of rescission of a settlement agreement on the basis of a misrepresentation, fraud or undue influence in the antecedent without prejudice negotiations. Mr Quest submitted that the rationale for the exception is that it is an abuse for a party to make a wrongful or actionable statement under the cloak of without prejudice privilege in order to induce a settlement. This is illustrated by the case cited in this context by Robert Walker LJ, Underwood v Cox [1912] 4 DLR 66, a decision of the Ontario Divisional Court in which a letter, marked “without prejudice” and containing a threat to disclose a “family secret” if the recipient did not sign a settlement agreement, was not covered by without prejudice privilege. In the present case, it is not alleged that anything wrongful or actionable was said or done in the mediation. Instead, this is simply a case where the claimants’ assertion of a lack of knowledge is said to be contradicted by the mediation statements. This is a commonplace occurrence which has never been held to justify an exception to the exclusionary rule, as was made clear in Savings & Investment Bank Ltd v Fincken.
    1. Third, the extension of the exceptions to include evidence of the factual matrix for the purposes of construction of a settlement agreement and to include evidence relevant to a claim for rectification of a settlement agreement, both approved by the Supreme Court in Oceanbulk, are principled extensions of the exception (1).
    1. Fourth, the judge’s reliance on the fact that the defendants were seeking to adduce evidence of what they had said, not of anything said by the claimants, was misplaced. The exclusion of without prejudice material is not confined to particular categories of statements but applies to everything that is communicated in the course of without prejudice communications or negotiations. It is a joint privilege which can be waived only with the consent of all parties.
    1. Fifth, the judge’s approach leaves an unprincipled and undesirable asymmetry in the rule. Lancer chose to make statements, without prejudice, about payments to Dr Al Ahbabi’s companies. Those are statements which the claimants are not permitted to use against the defendants, and it cannot be right that the defendants should be free to use them when they choose.
    1. I should say at once that I accept the fourth of these criticisms, for the reasons that Mr Quest gave. In many cases, it is very difficult to extract particular statements from their context and much more than the particular statements may need to be admitted in evidence to ensure that those statements do not give a misleading impression. This is especially true of oral discussions, but it is true also of documents. It would introduce the practical difficulties for participants in without prejudice negotiations and undermine the underlying objective of without prejudice privilege, as discussed by Robert Walker LJ in Unilever at pp.2448-49. The distinction drawn by the judge is redolent of the approach of Hoffmann LJ in Muller v Linsley and Mortimer [1996] PNLR 74 that the without prejudice rule applies only to admissions, which was rejected by the House of Lords in Ofulue v Bossert.
    1. I am not, however, persuaded by Mr Quest’s second submission, that the purpose of exception (2) is to prevent a party from abusing the cloak of without prejudice privilege by making a wrongful or actionable statement so as to induce a settlement. This would make exception (2) indistinguishable from exception (4), which permits evidence of without prejudice negotiations to be given “if the exclusion of the evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety””. It is fair to observe, as Mr Quest does, that the example of Underwood v Cox given by Robert Walker LJ as an instance of exception (2) involved a grossly improper letter, which appears to have been a form of blackmail. The Ontario Divisional Court, on appeal, held that the trial judge would have been bound to find that the defendant had been overborne by her brother, the plaintiff, into agreeing to the supposed compromise agreement which he was seeking to enforce, if the judge had not excluded the brother’s letter which had been marked “without prejudice”. The letter should not have been excluded because it contained only “threats not written for the purpose of a bona fide offer of compromise” (per Boyd C. at p.75).
    1. Exception (2) is directed not to the abuse of the cloak of privilege but in terms to setting aside “an agreement apparently concluded between the parties during the negotiations”.
    1. Exceptions (1) and (2), unlike the other exceptions, are directed to the contract concluded during or as a result of without prejudice negotiations. Taken together, they are concerned with whether a contract has been made, its terms, its construction and whether, although apparently made, the contract should be set aside.
    1. Exception (1) is expressed in terms which are limited to the question whether a compromise agreement has been made at all. However, even if it is common ground that an agreement has been made, evidence of the without prejudice negotiations will be admissible to determine the terms of the agreement, if any of them are disputed. Further, as the Supreme Court held in Oceanbulk at [33], evidence of the negotiations will be admissible to determine a claim for rectification of a written agreement. It was, Lord Clarke said, “scarcely distinguishable from the first exception”. He explained: “No sensible line can be drawn between admitting without prejudice communications in order to resolve the issue of whether they have resulted in a concluded compromise agreement and admitting them to resolve the issue of what that agreement was”.
    1. The issue in Oceanbulk was whether evidence of without prejudice negotiations was admissible not to determine the terms of the agreement but to interpret them. While evidence of any negotiations, whether or not without prejudice, leading to a contract are not generally admissible for the purpose of construction of the contract, they are generally admissible for the purpose of establishing the factual matrix known to the parties against which the contract falls to be construed: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38[2009] AC 1101. The Supreme Court concluded that there was no reason why an agreement resulting from without prejudice negotiations should, in this respect, be in any different position from any other agreement. Lord Clarke said:
“40. In these circumstances, I see no reason why the ordinary principles governing the interpretation of a settlement agreement should be any different regardless of whether the negotiations which led to it were without prejudice. The language should be construed in the same way and the question posed by Lord Hoffmann should be the same, namely what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. That background knowledge may well include objective facts communicated by one party to the other in the course of the negotiations. As I see it, the process of interpretation should in principle be the same, whether the negotiations were without prejudice or not. In both cases the evidence is admitted in order to enable the court to make an objective assessment of the parties’ intentions.
41. The parties entering into such negotiations would surely expect the agreement to mean the same in both cases. I would not accept the submission that to hold that the process of interpretation should be the same in both cases would be to offend against the principle underlying the without prejudice rule. The underlying principle, whether based in public policy or contract, is to encourage parties to speak frankly and thus to promote settlement. As I see it, the application in both cases of the same principle, namely to admit evidence of objective facts, Page 17 albeit based on what was said in the course of negotiations, is likely to engender settlement and not the reverse. I would accept the submission made on behalf of TMT that, if a party to negotiations knows that, in the event of a dispute about what a settlement contract means, objective facts which emerge during negotiations will be admitted in order to assist the court to interpret the agreement in accordance with the parties’ true intentions, settlement is likely to be encouraged not discouraged. Moreover this approach is the only way in which the modern principles of construction of contracts can properly be respected.”
    1. At [46], Lord Clarke said that he would hold that this should be recognised as an exception to the without prejudice rule “because I am persuaded that, in the words of Robert Walker LJ in the Ofulue case [2009] AC 990, para 57, justice clearly demands it”.”
    1. While exception (1) is directed to the existence, terms and meaning of an agreement, allowing the admission of evidence of without prejudice negotiations in order to resolve any of those issues, exception (2) is directed to the related issue as to whether an apparent agreement has been made with the necessary consent of the parties to it. The particular matters referred to by Robert Walker LJ all go to whether the consent of a party may be vitiated by “misrepresentation, fraud or undue influence”. Mr Quest accepted that this is not an exhaustive list; duress would certainly also qualify. There was discussion as to whether Simon J was right in Jefferies Group Inc v Kvaerner International Ltd [2007] EWHC 87 (Comm) to hold that exception (2) did not extend to a negligent misrepresentation. I am far from sure that Simon J was correct, given that, subject to section 2 of the Misrepresentation Act 1967, rescission is as much a remedy for non-fraudulent misrepresentation as for deceit and given also that Robert Walker LJ distinguishes between misrepresentation and fraud. However, as was agreed in submissions, this is not an issue which requires decision in the present case.
    1. Lack of consent to an apparent contract may arise in other ways. In particular, it may arise because one party asserts that its agent lacked authority to make the contract. This is the claimants’ case in the present proceedings. I have earlier summarised the relevant parts of their particulars of claim. They assert that because Dr Al Ahbabi had his own very substantial personal interest in the side letter and the settlement deeds, which he had not disclosed to the claimants, he had no authority to commit the claimants to the settlement deeds. On that ground, they seek to set aside the settlement deeds. Their knowledge, or lack of it, is central to this issue.
    1. The without prejudice mediation statements are directly relevant to this issue. If they disclosed facts which showed that Dr Al Ahbabi lacked authority to make the deeds on behalf of the claimants, and the claimants applied to set aside the deeds, evidence of those statements would be admissible. The claimants contend, however, that the statements are not admissible because they would be relied on, not to set aside the deeds, but to defeat a claim to set them aside.
    1. I am unable to see any principled ground for this distinction, which appears to me to be contrary to the principle underlying exception (2). Mr Quest did not advance any principled ground, relying instead on the precise terms in which Robert Walker LJ had expressed exception (2) and on an argument that the courts have only very circumscribed power to move outside the precise terms of the exceptions as stated in Unilever. It was this approach that led Mr Quest to submit that where A sought to set aside a compromise agreement on the grounds of misrepresentation, B was prevented by the without prejudice rule from adducing evidence of without prejudice negotiations to disprove the alleged misrepresentation. So, if in open negotiations B made a misrepresentation but the negotiations were continued on a without prejudice basis and in the course of those negotiations B corrected the misrepresentation, Mr Quest submitted that B would not be permitted to adduce evidence of the correction. If all the negotiations were without prejudice, and at the first meeting B made a misrepresentation which was corrected at a subsequent meeting before the compromise agreement was made, the logic of the claimants’ position would seem to be that A could adduce evidence of the first meeting, but B could not adduce evidence of the subsequent meeting.
    1. The error, as I see it, in this approach is in failing to give full weight to the nature and purpose of exception (2). Just as exception (1) is expressly directed to whether a contract has been made at all, and has been expanded as discussed above, so exception (2) is directed to the closely-linked question as to whether the contract as made is binding on the parties. It will not be binding if it was made without authority (as the claimants allege in this case) or if it is liable to be set aside on well-established legal grounds.
    1. There is nothing surprising about this. The purpose of without prejudice negotiations is to arrive at a compromise of the dispute. If a compromise is reached, a contract will be made. It is no different from any other contract. All the familiar issues as to its terms, meaning and validity may arise. Where without prejudice negotiations have achieved their purpose, there is no principled basis for excluding the content of those negotiations in resolving those issues. It would put such contracts into a special category. This was the result rejected by the Supreme Court in Oceanbulk for the reasons explained by Lord Clarke in the passage quoted above.
    1. This is not to undermine the without prejudice rule. Exceptions (1) and (2) do not affect the principle that, outside very limited exceptions, evidence of without prejudice negotiations may not be adduced in existing or future proceedings, even if such evidence undermines a case run by one of the parties. It does not affect the position as stated in Savings & Investment Bank Ltd v Fincken.
    1. Mr Quest submitted that the decision in Oceanbulk was a principled extension of exception (1). If it was an extension, rather than an elucidation, then I agree it was a principled one. Likewise, in my judgment, if the present case amounts to an extension of exception (2), it is a principled extension. Contrary to Mr Quest’s fifth submission, it does not leave an unprincipled and undesirable asymmetry in the rule. The purpose for which the defendants may adduce evidence of the mediation statements is to determine the authority of Dr Al Ahbabi, which goes to the validity of the settlement deeds put in issue by the claimants. Just as the claimants could adduce such evidence for that purpose, so can the defendants. It is the claimants’ submission which would lead to an unprincipled asymmetry.
  1. For these reasons, I would dismiss the appeal and hold that evidence of the mediation statements is admissible.