Close search
find-partner-btn-inner

Work Matters: 'Without prejudice' privilege

Swiss Re Corporate Solutions Ltd v Sommer

Legal Background

‘Without Prejudice’ Privilege

‘Without prejudice privilege’ is the right to withhold certain communications (written or verbal) from a court or tribunal to allow the parties to have a full and frank discussion to try to resolve a dispute without fear of compromising their chances of success in litigation. Without prejudice privilege is generally treated with respect by the courts as dispute resolution is in the public interest and it is an important tool for achieving this.

For communications to be without prejudice they must be made in a genuine attempt to settle a current dispute between the parties. Where a party considers that a communication (such as a letter) is protected by this type of privilege they will usually mark it ‘without prejudice’ to indicate that (in their opinion) it will not be disclosable in the court or tribunal proceedings.

In light of the public interest in dispute resolution, there are only a small number of exceptions to without prejudice privilege. One of these is that it cannot be used to disguise perjury, blackmail or other ‘unambiguous impropriety’ (i.e. where the communication is used in an obviously improper manner). However, the circumstances need to be ‘truly exceptional’ for unambiguous impropriety to apply, such as dishonesty or fraud.

Facts

Mrs Sommer, was employed by Swiss Re Corporate Solutions Ltd (Swiss Re) as a political risk underwriter. A few months after she returned to work from maternity leave, she was put at risk of redundancy. Mrs Sommer raised several grievances in emails which she openly copied to her personal email address and also blind-copied to her husband’s personal email address.

Mrs Sommer’s grievances were not upheld. A couple of weeks after this decision, the employer informed Mrs Sommer that her actions in copying the emails were a data breach (albeit ‘low level’) because the emails included personal data and matters confidential to Swiss Re and its clients. There was a disciplinary investigation into the breach.

A few days later Mrs Sommer issued various Employment Tribunal claims, including for discrimination and equal pay. On the same day, Swiss Re’s solicitors sent Mrs Sommer a letter which they marked ‘without prejudice’. In this letter Swiss Re proposed the termination of Mrs Sommer’s employment for payment of £37,000 compensation and made a number of allegations about her conduct. Swiss Re said that Mrs Sommer had breached data protection and confidentiality obligations and had been dishonest. It said this could result in:

  • summary dismissal;
  • criminal convictions and fines; and
  • findings of a breach of financial conduct rules (which could make it difficult for her to work again in the regulated sector).

However, when the outcome of the investigation was announced just a few days later, the investigating officer recommended only informal action. They said that although Mrs Sommer was in technical breach of Swiss Re’s code of conduct and her contract, she had only copied the emails to support her grievances and there were no adverse consequences.

The without prejudice letter did not lead to settlement and a couple of months later Mrs Sommer was made redundant. She brought further claims against Swiss Re and asked the Tribunal to rule (as a preliminary issue) that the without prejudice letter was admissible as evidence at the final hearing under the ‘unambiguous impropriety’ exception.

Tribunal decision

The Tribunal decided that the unambiguous impropriety exception applied and that the without prejudice letter was therefore admissible as evidence. The Tribunal said that there was a ‘striking disparity’ between what the employer knew about the alleged misconduct (i.e. that the data breach was ‘low-level’) and what it said about it in the letter.

Further that there was ‘no basis at all’ for the allegations that Mrs Sommer had committed criminal offences and that her misconduct could result in summary dismissal. Rather, the employer had ‘grossly exaggerated’ the seriousness of her actions to put pressure on her to accept their offer of settlement and to leave. The Tribunal said this ‘unambiguously exceeded what was permissible in settlement’.

Swiss Re appealed.

EAT decision

The EAT upheld the appeal and ruled that the unambiguous impropriety exception did not apply. This meant that the without prejudice letter was inadmissible as evidence.

The EAT said that the Tribunal was wrong to say that the allegations had ‘no basis at all’. Although they were ‘grossly exaggerated’, they did have some substance and exaggeration by itself is not enough to meet the high threshold of unambiguous impropriety.

However, the EAT commented that none of this meant that the letter was free of any impropriety and considered that the employer (and/or their solicitors) ‘sail[ed] close to the wind’. On this occasion the employer’s behaviour was (just) acceptable because there was an arguable basis for the allegations, and no evidence available of the employer’s state of mind. However, in other circumstances, baseless or exaggerated allegations could be evidence of dishonesty (which would be obviously improper).

Fladgate comment

This decision confirms the strength of the without prejudice shield and how tightly the exceptions to this are controlled.

However, the EAT was very close to deciding that the employer acted in an ‘unambiguously improper’ manner. Although it held that exaggeration by itself is not enough to amount to ‘unambiguous impropriety’, the EAT has left the door open for something more to tip the balance. For example, if there had been evidence of dishonesty (for example, that the employer in fact agreed with the outcome of the investigation and knew its allegations in the letter were baseless), the letter would have lost its without prejudice protection. In which case, the employer (and its witnesses) would no doubt have faced difficult questions at the hearing about its honesty, attitude towards, and treatment of, the employee.

The key lessons for employers are:

  • Take care and be restrained when communicating in settlement discussions (whether verbal or in writing). Ensure that there is substance to allegations and that supporting examples of the employee's wrongdoing provide a reasonable foundation for these.
  • Letters (or other communications) which are dishonest or unduly (or ‘improperly’) threatening will no doubt end up as evidence before the Tribunal. This will expose the employer (and its witnesses) to very tricky questions about their behaviour towards the employee and their integrity in general.

If you would like our help with any of the issues in this bulletin, please do contact us.

Featured Insights

HOW CAN WE PARTNER WITH YOU?

Contact us
go-to-tot