Without Prejudice - Property Litigation

Without Prejudice

The purpose of this article is to examine how without prejudice privilege (“W/P”) should be used in lease renewal proceedings.

What is ‘without prejudice’?

W/P allows the parties to maintain an official ‘open’ position whilst conducting negotiations behind the scenes which, if they were admissible as evidence before the court, would compromise the parties.  It also allows the parties to explore other avenues of settlement beyond that which a Court could order.  It can include any written or verbal communication.

What does it mean?

Correspondence attracting without prejudice privilege is still disclosable, meaning that its existence must be included in the lists of documents during any disclosure exercise.  However, it is not admissible as evidence unless the parties agree otherwise.  Therefore the judge will only know only of its existence rather than the content and the parties will not be able to rely on it.

Example:  a tenant (T) has issued lease renewal proceedings stating that it wants a 5yr term with a break at 3yrs and rent at £100k p.a.  The Landlord has responded in its Acknowledgment stating that it wants a 10yr term with no break and rent at £150k p.a.  The parties are negotiating in tandem with the proceedings.  T suggests a term of 10yrs with a break at 5yrs by way of compromise.  If T’s communication was not W/P then the court could see it.  This would compromise T’s argument that it could only take a 5yr term or required a break at 3yrs.

Common pitfalls

W/P is no magic bullet!

  • Labelling a communication W/P does not automatically make it inadmissible.
  • Not labelling a communication W/P does not automatically make it admissible
  • A dispute must be on foot for W/P to arise
  • A W/P communication must be a genuine attempt to settle a dispute.

Example: During the term (and before lease renewal notices are served) both parties’ surveyors start negotiations for a new lease.  They mark these ‘subject to contract and without prejudice’.  Subsequently, L starts stonewalling and T issues lease renewal proceedings.  T wants to rely on the correspondence from L’s surveyor.  The question is whether a dispute existed at the time of the negotiations.  If not, the correspondence is likely admissible.

Example:  L seeks to oppose a lease renewal on the basis that it will redevelop.  L engages in correspondence with a 3rd party developer and marks this W/P.  It subsequently transpires that there are a number of insurmountable hurdles to redevelopment.  T can demand disclosure of such documents.  W/P is ineffective since the dispute is between L and T not between L and the 3rd party.

Example: The surveyors pick up the phone for a quick W/P chat.  L’s surveyor admits that T’s proposed rent is perfectly reasonable but states that L is just looking to drag out the dispute for its own ends.  Such a communication is potentially admissible.

Example: L and T agree various disputed points by email (marked W/P).  Unless the agreement of certain points is conditional on others being agreed, such correspondence is potentially admissible as regards the agreed points since, by definition, they are not in dispute.

WPSATC

‘Without prejudice save as to costs’, or ‘WPSATC’ for short, is best viewed as a separate layer of W/P.  Correspondence so labelled becomes admissible only when addressing the question of costs at the end of the proceedings.

Since CPR Part 36 offers are of limited use in lease renewal proceedings, WPSATC is useful way of applying costs pressure to the other side.  Such offers seek to prompt the Court to use its discretionary powers to award costs against a party who fails to beat such an offer, or indeed in favour of a party who betters its own, regardless of the substantive outcome of the proceedings.