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Ferster v Ferster

12th Jul 2016

Court of Appeal agrees that email sent in context of mediation was not protected by without prejudice privilege as it fell within unambiguous impropriety exception.

This appeal concerned whether a without prejudice communication sent in the context of a mediation fell within the exception to the “unambiguous impropriety” exception to without prejudice privilege. The appellants appealed against a first instance decision of Rose J allowing the respondent to amend his unfair prejudice petition to refer to the contents of an email that would normally have attracted without prejudice privilege. Christopher Butcher QC and Sushma Ananda represented the successful respondent in the Court of Appeal.

The relevant email, whichwas sent by the mediator, passing on messages from the appellants, contained a revised offer to settle from the appellants at a higher price. The justification for that revised offer was stated to be that the appellants had discovered “wrongdoing” by the respondent, namely the alleged existence of overseas bank accounts held by the respondent or on his behalf which the respondent had allegedly failed to disclose as part of the asset disclosures made by the respondent in the context of a freezing injunction granted against him. Significantly, the email did not stop there, it went on to make a number of threats: (a) threats that unless the respondent accepted the revised offer, his “wrongdoing” would be disclosed within 48 hours; (b) threats that the respondent was likely to face criminal action including committal proceedings and was likely to be imprisoned; (c) a threat that unless the respondent accepted the revised offer, his livelihood would be destroyed; (d) threats directed against the respondent’s life partner, including that he too might be investigated and/or charged.

The judge at first instance had no hesitation in finding that the email was an attempt at blackmail which fell firmly within the unambiguous impropriety exception. The Court of Appeal agreed.

It held that the critical question in determining whether the exception applied was whether the privileged occasion was itself abused (Savings & Investment Bank Ltd v Fincken [2004] 1 WLR 667 at [56]-[57] per Rix LJ). The Court of Appeal distinguished between cases of improper threats in the nature of blackmail and cases of admissions made by a party in without prejudice negotiations which are inconsistent with pleaded cases or evidence relied upon in the proceedings, so as potentially to give rise to allegations of perjury. While the test remains one of unambiguous impropriety, the Court of Appeal held that it might be easier to establish such impropriety where there is an improper threat, rather than where there is simply an unambiguous admission of truth – after all, the very purpose of the without prejudice rule is to encourage parties to speak frankly so as to facilitate settlement.

The without prejudice privilege was held by the Court of Appeal to have been clearly abused in the present case as the threats made unambiguously exceeded what was proper:
•    The threats went far beyond what was reasonable in pursuit of civil proceedings, by making the threat of criminal action (not limited to civil contempt proceedings).
•    The threats extended to the respondent’s family.
•    The threats were of immediate publicity being given to the allegations of wrongdoing. The fact that the appellants may have believed in the truth of the allegations mattered not as the threat to publicise allegations of extreme severity against the respondent and his life partner, within a very short timescale, placed improper pressure on the respondent.
•    There was no attempt to make any connection between the alleged wrong and the increased demand.

This case is of significant interest. It follows a series of Court of Appeal decisions where the unambiguous impropriety exception has been held not to apply. Those decisions were all  ‘admission’ as opposed to ‘threat’ cases, and it is clear from the Court of Appeal decision in Ferster v Ferster that the same reluctance for the exception to be applied in the ‘admission’ cases, may not apply in the ‘threat’ cases.

Please click here for the full judgment.