Holyoake & Anor v Candy & Ors [2016] EWHC 2119 (Ch)

Claim No. HC-2015-003369

[2016] EWHC 2119 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Rolls Building, Fetter Lane

Date Wednesday, 27 th July 2016

London

EC4A 1NL

Before

HIS HONOUR JUDGE HODGE QC

Sitting as a Judge of the High Court

In Private

Between

MARK ALAN HOLYOAKERespondent

HOTBLACK HOLDINGS LIMITEDRespondent

-v-

Between

NICHOLAS ANTHONY CANDYApplicant

CHRISTIAN PETER CANDYApplicant

RICHARD STEVEN WILLIAMSApplicant

STEVEN MILES SMITHApplicant

TIMOTHY JAMES DEANApplicant

CPC GROUP LIMITEDApplicant

Transcribed from the Official Tape Recording by

Apple Transcription Limited

Suite 204, Kingfisher Business Centre, Burnley Road, Rawtenstall, Lancashire BB4 8ES

DX: 26258 Rawtenstall – Telephone: 0845 604 5642 – Fax: 01706 870838

Counsel for Claimants/Respondents: MR ROGER STEWART QC and

MR RICHARD FOWLER

Instructed by Gunnercooke LLP

Counsel for Defendants/Applicants: MR TOM ADAM QC and

MR ALEXANDER POLLEY

Instructed by Gowling WLG (UK) LLP

JUDGMENT

REDACTED JUDGMENT

APPROVED FOR PUBLICATION ON MONDAY 24 TH OCTOBER 2016

HIS HONOUR JUDGE HODGE QC:

[1]This is my extemporary judgment on yet another interim skirmish in this hard-fought and weighty commercial litigation between Mark Alan Holyoake and Hotblack Holdings Limited (as claimants) and Nicholas Anthony Candy, Christian Peter Candy, CPC Group Limited and the third to fifth defendants, Mr Richard Steven Williams, Mr Steven Miles Smith, and Mr Timothy James Dean (who were directors of the sixth defendant company at times material to this claim). On this occasion, the applicants (and defendants) are represented by Mr Tom Adam QC leading Mr Alexander Polley, instructed by Gowling WLG, and the respondents (and claimants) are represented by Mr Roger Stewart QC leading Mr Richard Fowler, instructed by Gunnercooke.

[2]The substantive claim was issued on 12th August 2015 and seeks to recover damages in excess of £132 million. In their written skeleton argument, counsel for the claimants summarised the claim as follows. In October 2011, the second claimant was seeking to complete the purchase of a property known as Grosvenor Gardens House and situated at Grosvenor Gardens, London, SW1, for £42.85 million. The intention was that planning permission would be applied for and the property would be redeveloped. The claimants considered that the value of the property would be in excess of £300 million following redevelopment and that the profit from the redevelopment would be in excess of £100 million. In this context, the first-named claimant, Mr Holyoake, approached Mr Nicholas Candy for a loan of £12 million to help to complete the purchase. Mr Holyoake had been talking to other potential backers as well but Mr Candy, the first defendant, was an old friend of his from university days. The Candy brothers (the first and second defendants) were prominent developers of high-value developments of the kind envisaged at the property and in general Mr Holyoake was led to believe that working with them would be both enjoyable and mutually beneficial.

[3]On 12th October 2011, Mr Holyoake entered into a loan agreement. The lender was the sixth defendant company, CPC Group Limited, and the loan was in the sum of £12 million repayable after two years together with a redemption amount. Shortly after the first claimant and the sixth defendant entered into the loan agreement, the second claimant completed the purchase of the property. Very soon thereafter, Mr Holyoake claims that he started to suffer very severe threats, duress, and intimidation from the second defendant and from three directors of the sixth defendant company, namely the third to fifth defendants. It is said that ultimately the first defendant also joined in the threats, duress, and intimidation.

[4]As a result of the threats, duress, and intimidation, Mr Holyoake says that he felt himself coerced into signing further agreements and procuring the second claimant also to enter into some of them, including a supplemental loan agreement dated 10th February 2012 and a suite of further agreements described in the particulars of claim as “the first schedule agreements”.

[5]The defining characteristic of the supplemental loan agreement and the first schedule agreements is said to be that they were extremely disadvantageous and oppressive to the claimants and highly advantageous to the sixth defendant company. The claimants’ case is that a sophisticated businessman would never have entered into such disadvantageous and oppressive agreements without the alleged coercion. In addition, it is said that the second defendant threatened to bankrupt the first claimant and that the sixth defendant commenced four separate sets of legal proceedings against him. The claimants believe that the predominant purpose of these proceeding, or at least a major purpose of them, was to compel the claimants to enter into further agreements with the sixth defendant company on what are said to be highly disadvantageous terms.

[6]Ultimately, the first claimant was compelled, so he says, to make huge interest and penalty payments to the sixth defendant for alleged defaults under the various loans. Further, the claimants were compelled to sell the property in February 2014 at what is said to have been a substantial loss to themselves. Thus, it is claimed that the defendants’ conduct ultimately rendered the claimants unable to carry out the redevelopment of the property that they had planned and also unable to realise the very substantial profits that they had expected that the second claimant would receive from the project.

[7]The claimants’ case is that these matters give rise to a number of causes of action, primarily that they have been the victims of a tortious conspiracy, specifically an unlawful means conspiracy, by the defendants. The unlawful means used as pleaded in the particulars of claim are said to have been:(1) Fraudulent misrepresentation;

(2) Duress;

(3) Actual undue influence;

(4) Intimidation;

(5) Extortion under cover of due process;

(6) Unlawful interference with business interests;

(7) Extortion simpliciter; and

(8) Blackmail.

[8]Further, the first six unlawful means are said to give rise to separate causes of action in their own right which the claimants also pursue, namely:(1) Fraudulent misrepresentation;

(2) Duress;

(3) Actual undue influence;

(4) Intimidation;

(5) Extortion under cover of due process; and

(6) Unlawful interference with business interests. Lastly, the claimants plead a further free-standing claim for relief under section 140A and 140B of the Consumer Credit Act 1974.

[9]The defendants deny that there is any truth in these claims whatsoever. They say that the first claimant obtained the original loan by lying about his financial position and the availability of re-financing and then voluntarily entered into the various extensions in order to put off the sale of the property he had used the sixth defendant company’s money to acquire. The defendants say that these proceedings are simply what they refer to as a “shakedown” in which the claimants hope to extract a settlement payment from the defendants in order to be rid of the aggravation of the litigation. The litigation is accordingly hard-fought and the parties have, it is fair to say, minimal trust in each other. It is against this background that the defendants’ instant application must be understood.

[10]Since February 2016 there have been a series of hard-fought interim applications which are summarised at paragraph 17 of the claimants’ skeleton argument and which the claimants say are highly relevant to an understanding of the context and the motives of the instant application. That application was issued by the defendants on 1st July 2016 following an order made by Mr Justice Nugee at a hearing held in private on 27th June 2016. Mr Justice Nugee’s order records that an issue had arisen as to the admissibility in these proceedings of certain materials, being a witness statement of Daniel Morrison dated 21st June 2016, the defendants’ skeleton argument also dated 21st June 2016, and a second letter dated 21st June 2016 from the defendants’ solicitors to the claimants’ solicitors. In the order, those documents are together referred to as “the disputed materials.”

[11]By paragraph 1 of his order, Mr Justice Nugee directed the defendants to issue an application for a declaration that the disputed materials were admissible, with supporting evidence, if so advised. He gave further directions for evidence and, by paragraph 4 of his order, he directed that the admissibility application was to be listed before a Chancery Division judge other than Mr Justice Nugee, with a time estimate of half a day, on the first available date after 17th July 2016. By paragraph 5 of his order, Mr Justice Nugee directed that pending the determination of the admissibility application, the disputed materials should not be open to inspection. He reserved the costs. It is that admissibility application which came before me on Monday 25th July 2016.

[12]At the outset of that hearing, I made an order pursuant to CPR 39.2(3) (a) and (g) on the footing that publicity would defeat the object of the hearing and that a private hearing was necessary in the interests of justice. Both parties were agreed that the hearing should take place in private. However, such a decision is not one for the parties but is one for the court. Since the hearing concerned the admissibility in evidence of material which the claimants say are subject to the protective veil accorded to without prejudice communications, and witnesses for both opposing parties had exhibited unredacted versions of those without prejudice communications, I was entirely satisfied that a public hearing would effectively prejudge the outcome of the admissibility application, and so defeat its purpose, contrary to the interests of justice. I also noted that the relevant parts of the hearing before Mr Justice Nugee had been conducted in private and that paragraph 5 of his order had stated that pending the determination of this application, the disputed materials should not be open to inspection.

[13]In a hearing estimated to last only half a day - which it in fact did - and where frequent and unrestricted reference was to be made to allegedly inadmissible material, it would not have been sensible, nor indeed practicable, for any part of the hearing to be conducted in public. In order to ensure that as much of this judgment as possible can be released into the public domain, however, I will include in my eventual order a provision to the following effect: Subsequent to the delivery to the parties of any approved transcript of the judgment in this application, and prior to any publication of the judgment, the parties shall file written submissions as to the extent to which the judgment should incorporate redactions of its text prior to its publication.

[14]The defendants also seek an order that whatever the outcome of the admissibility application, the unredacted notes of the 14th June discussions, which even include the precise figures which were being bandied about between the parties, should not be made available to non-parties, or indeed admitted in evidence at the trial, in unredacted form. If the application fails, this material is all properly without prejudice and should be kept confidential. If it succeeds, only as much of the notes as establish the improper threats should be admitted in evidence. I will incorporate such a term in my eventual order.

[15]In support of the instant applications, the defendants rely, in addition to Mr Morrison’s first witness statement of 21st June 2016, upon his second witness statement dated 1st July 2016 and also two witnesses of Mr Daniel Philip Astaire dated 1st and 6th July 2016 and the respective exhibits to all of those witness statements. Messrs Morrison and Astaire are both solicitors and partners in Grosvenor Law Limited. Although not formally instructed as the defendants’ solicitors for the purposes of the present litigation, they have been advising the defendants on certain issues, and they have also been involved in without prejudice settlement discussions on behalf of the defendants.

[16]In opposition to the application, the claimants rely on the eleventh and twelfth witness statements of Mr Harvey Francis Stringfellow dated 8th and 20th July 2016 and upon the third witness statement of Ms Claire Elizabeth Jones dated 8th July 2016 and the respective exhibits to those witness statements. Mr Stringfellow and Ms Jones are solicitors with the firm of solicitors on the record for the claimants in these proceedings who are Gunnercooke.

[17]Counsel for both opposing parties had prepared detailed written skeleton argument which I had pre-read before the hearing. Each leading counsel addressed me for about an hour. Mr Adam then replied; and there was then a dialogue between both leading counsel and the court. The hearing concluded at about ten past one on the afternoon of Monday and (because of Mr Stewart’s prior court commitments in Manchester on the following day, Tuesday) I reserved judgment until today, Wednesday 27th July. Over that adjournment, both teams of counsel lodged supplemental written submissions which I have taken into account.

[18]It is, I think, common ground that since this application was issued, further material has come into existence, or to light, which also relates to the underlying communications between the parties and which will also need to be covered by my ruling. It is also common ground that the discussions which are the subject-matter of this application were clearly properly “without prejudice” and understood to be so by the participants. They are therefore privileged and inadmissible in evidence unless they can be said to fall within the exception which applies in cases of “unambiguous impropriety”. Again, there is no difference between the parties as to the applicable rule, which is well-established and uncontroversial.

[19]The without prejudice rule applies to exclude all negotiations genuinely aimed at settlement, whether oral or in writing, from being given in evidence. The rule is based in part on public policy. Its other basis or foundation is in the express or implied agreement of the parties themselves. However, the rule admits of exceptions which were analysed by Lord Justice Robert Walker in the case of Unilever PLC v The Procter & Gamble Company

[2000] 1 WLR 2436

. I was taken to the passage at page 2444 between letters F and H:

“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’... But this court has ... warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.”

[20]I was also referred to Hollander on Documentary Evidence (12th Edition) at paragraph 20-28:

“The Court of Appeal has warned that the exception should only be applied in the clearest cases of abuse of a privileged occasion. The boundary between over enthusiastic negotiation and unambiguous impropriety is a thin one.”

[21]I was also taken by Mr Stewart to passages from the leading judgment of Lord Justice Rix in the case Savings & Investment Bank Limited v Fincken

[2003] EWCA Civ 1630

reported at

[2004] 1 WLR 667

. In that case, the defendant had made admissions during the course of a without prejudice meeting. The admission was inconsistent with a prior affidavit. The plaintiff applied to amend the statement of claim to include reference to the admission. The issue was whether the admission fell within the unambiguous impropriety exception to the without prejudice rule and whether the amendment was to be allowed.

[22]The Court of Appeal held that although cases of unambiguous impropriety were an exception to the general rule that without prejudice communications were inadmissible in evidence, that exception was not to be applied too readily in view of the public interest in encouraging parties to speak frankly to one another in aid of reaching a settlement. It was also held that absence of challenge might make it easier to establish that an admission was unequivocal but, nevertheless, the absence of challenge was not the same thing as an unequivocal or unambiguous impropriety. It was not the mere inconsistency between an admission and a pleaded or stated position, with the mere possibility that such a case or position, if persisted in, might lead to perjury, that led to the admitting party losing the protection of the privilege. Rather, it was the fact that the privilege was itself abused. In the circumstances, the judge in the lower court was held to have been wrong to have found that the admission in question fell within the unambiguous impropriety exception. Exercising the discretion afresh, the Court of Appeal held it to be commensurate with the overriding objective that the plaintiff’s application to amend its statement of claim should be dismissed.

[23]At paragraph 47 of his leading judgment,

Lord Justice Rix quoted from an earlier series of observations by Lord Justice Simon Brown:

“There are in my judgment powerful policy reasons for admitting in evidence as exceptions to the without prejudice rule only the very clearest cases. Unless this highly beneficial rule is most scrupulously and jealously protected, it will all too readily become eroded. Not least requiring of rigorous scrutiny will be claims for admissibility of evidence advanced by those (such as the first defendant here) who have procured their evidence by clandestine methods and who are likely to have participated in discussions with half a mind at least to their litigious rather than settlement advantages. That distorted approach to negotiation to my mind is itself to be discouraged, militating, as inevitably it must, against the prospects of successful settlement.”

[24]At paragraphs 56 to 57, also cited by Mr Stewart, Lord Justice Rix considered the importance of the fact that the claimants’ evidence had gone unchallenged. Lord Justice Rix posed the question: how important was that factor in the present context? He continued:

“56 ...In my judgment, the courts ought to treat it with considerable caution, for otherwise there is a danger of the exception to the rule displacing the rule by a process of begging the question. If the exception applies, then Mr Fincken is obliged to explain himself or face the consequences, for his admission is in the public domain. The absence of challenge may therefore be critical. If, however, the exception does not apply, then the admission is not in the public domain, the court ought not to know about it, and the absence of challenge is irrelevant. Moreover, there may be many reasons why someone in Mr Fincken’s position may at the stage of SIB’s application be cautious about responding to an issue (his ownership of the shares) which was not yet even part of the litigation. He is accused of perjury, but not on any formal charge and not on a matter even formally in issue. I can see that the absence of challenge may enable an applicant to establish more easily that an alleged admission is unequivocal. That, however, is not the same thing as an unequivocal or unambiguous impropriety. I would therefore be reluctant to find in the circumstances that an absence of challenge is a critical factor taking this case outside the philosophy of the jurisprudence expressed in the leading authorities cited above. 57 In my judgment that philosophy is antagonistic to treating an admission in without prejudice negotiations as tantamount to an impropriety unless the privilege is itself abused. That, it seems to me, is what Robert Walker LJ meant in the Unilever case when he repeatedly spoke in terms of the abuse of a privileged occasion, or of the abuse of the protection of the rule of privilege... That is why Hoffmann LJ in Forster v Friedland emphasised that it was the use of the privileged occasion to make a threat in the nature of blackmail that was, if unequivocally proved, unacceptable under the label of an unambiguous impropriety. And that is why Peter Gibson LJ in Berry Trade Ltd v Moussavi (No. 2) suggested, without having to decide, that talk of ‘a cloak for perjury’ was itself intended to refer to a blackmailing threat of perjury, as in Greenwood v Fitts, rather than to an admission in itself. It is not the mere inconsistency between an admission and a pleaded case or a stated position, with the mere possibility that such a case or position, if persisted in, may lead to perjury, that loses the admitting party the protection of the privilege... It is the fact that the privilege is itself abused that does so. It is not an abuse of the privilege to tell the truth, even where the truth is contrary to one’s case. That, after all, is what the without prejudice rule is all about, to encourage parties to speak frankly to one another in aid of reaching a settlement: and the public interest in that rule is very great and not to be sacrificed save in truly exceptional and needy circumstances.”

[25]Most pertinently, I was taken at length through the recent decision of the Court of Appeal, affirming the first instance decision of Mrs Justice Rose, in the case of Ferster v Ferster & Ors

[2016] EWCA Civ 717

. This was said by Mr Adam to be the key authority for the purposes of this application. Ferster v Ferster concerned a dispute between siblings over shares in a private company. One side (the respondents to an unfair prejudice petition) informed the other side (the petitioner) that they had discovered evidence of perjury in relation to an affirmation of means. They accordingly demanded a higher settlement price, sought settlement within 48 hours, and referred to the possibility, if there was no settlement, of charges of perjury, perverting the course of justice, and contempt of court, as well as damage to credibility and reputation. These threats were made via a mediator in the course of without prejudice negotiations. The carefully worded email making them can be found at paragraph 3 of the Court of Appeal’s judgment. Both the judge at first instance and the Court of Appeal robustly held that making threats of that nature was improper conduct. The only reasoned judgment was delivered by Lord Justice Floyd, with whom both Lord Justice Patten and Mr Justice Baker simply agreed. At paragraph 11 of his judgment, Lord Justice Floyd said that:

“...the critical question is whether the privileged occasion is itself abused. Although the test remains that of unambiguous impropriety, it may be easier to show that there is unambiguous impropriety where there is an improper threat than where there is simply an unambiguous admission of the truth. In either case, as Hoffmann LJ pointed out in Forster v Friedland (unrep) 10 November 1992: ‘The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape-recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true’.” ‘The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape-recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true’.”

[26]At paragraph 12, Lord Justice Floyd quoted extensively from the first instance judgment of Mrs Justice Rose at paragraphs 17 onwards. There Mrs Justice Rose had said that she was in no doubt that this was an attempt at blackmail which fell firmly within the exception and that the email was admissible. The applicant was not trying to bring into evidence any discussions that had genuinely taken place in the mediation. The impropriety consisted in threatening to pursue contempt proceedings, including a committal to prison, unless the petitioner paid the respondents a much higher price for the two thirds share, an extra 25 percent on the price previously considered. It was on the basis of the supposed discovery of wrongdoing by the petitioner, and it also threatened not only him but also his partner. There was said by Mrs Justice Rose to be no lack of clarity in what was being said. This was not an instance where a party was trying to pick up exaggerated or colourful verbal statements made during a long heated meeting between lay clients. The email in question appeared to have been drafted by lawyers and to have been forwarded to Herbert Smith by the mediator. There was said to be no ambiguity in the purpose of the threat, namely to pressure the petitioner into paying more for the respondents’ shares.

[27]It was quite clear that the increase in price was nothing to do with any increase in the value of the shares, or of the company’s business, but rather was the price being exacted for the brothers, who were then in control of the company, not causing it to take action to deal with the supposed wrongdoing which they claimed to have uncovered. There was said to be no disguising what was going on, namely that the respondent brothers were using the threat of causing the company to instigate committal proceedings in the other litigation in order to make a personal gain for themselves by increasing the payment for their shares.

[28]At paragraph 14, Lord Justice Floyd referred to a submission by leading counsel for the appellant (Mr Charles Hollander QC) to the effect that it had not been in any way improper for the respondents to indicate that, by accepting their offer for the shares, the result would be that the petitioner could cause the company to refrain from pursuing those monies. Lord Justice Floyd indicated that he could not accept that submission. He said:

“The impropriety in the threat identified by [Mrs Justice Rose] was not concerned with what would happen if [the petitioner] accepted the increased offer: it was concerned with what would happen if he did not... What the judge understandably regarded as improper was the use of the threat of committal proceedings in the company’s action to place increased pressure on [the petitioner] to pay [the respondents] personally more for the shares. [The respondents] were making it clear that, if the offer was not accepted, they would use their control of [the company] to take the steps identified in the email. Whilst those steps might be steps which it might be proper for [the company] to take if it had a genuine belief in some basis for them, it was wrong for them to be used as a lever to enable [the respondents] to get more for their shares.”

[29]At paragraph 21,

Lord Justice Floyd said:

“The impropriety arisesfrom the fact that the increase in price is tied, and tied only, to the threats affecting [the petitioner’s] liberty, family and reputation. The impropriety does not depend on the quantum of the price increase. The redaction of the amount involved is an adequate means of protecting details of the negotiations. [The case was not one] of the type referred to by Hoffmann LJ, where there is a need to pick through many hours of recorded negotiations in order to make out a case of impropriety. The impropriety is apparent from the email itself, a single and carefully formulated document.”

[30]Paragraph 23 is really the nub of

Lord Justice Floyd’s leading judgment:

“In the end, as Mr Hollander accepted, what is involved here is an evaluation of whether the threats unambiguously exceeded what was ‘permissible in settlement of hard fought commercial litigation’... In the absence of any error of principle by the judge I should be extremely cautious before coming to the conclusion that the judge’s evaluation was wrong. However, I agree with the judge that the threats here did unambiguously exceed what was proper, essentially for the reasons she gave. Firstly, 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). Secondly, the threats were said to have serious implications for Jonathan’s family because of Jonathan’s wrongdoings. Thirdly, the threats were of immediate publicity being given to the allegations. It is nothing to the point in this connection that Warren and Stuart may have believed the allegations to be true. The threat to publicise allegations of extreme severity against Jonathan and his partner, and within such a short timescale, placed quite improper pressure on Jonathan. Fourthly, the purpose of the threats was to obtain for the brothers an immediate financial advantage arising out of circumstances which should accrue, if they had basis in fact, to the benefit of the company. Finally, there was no attempt to make any connection between the alleged wrong and the increased demand.”

At paragraph 24, Lord Justice Floyd stated, in terms, that it was not necessary for the threats to fall within any formal legal definition of blackmail for them to be regarded as unambiguously improper. The defendants say that a parallel is to be drawn between Ferster v Ferster and the instant case: [REDACTED TEXT]

[31]The communications which are said to fall within the unambiguous impropriety exception are(1) oral and

(2) written communications on Thursday 9th June 2016 from an intermediary who uses the pseudonym ‘Paulo Browne’ and also oral statements made by Mr Holyoake himself during the course of an expressly without prejudice multi-party telephone discussion lasting about 45 minutes between about 12.45 and 1.30 on the afternoon of Tuesday 14th June. Mr Adam emphasises the timing of these communications which he says is of importance. On Tuesday 7th June, the claimants had had a bad day in court before Sir Terence Etherton, the Chancellor. The Chancellor had dismissed the claimants’ application for a world-wide freezing order, describing it as an abuse of process. He had refused the claimants’ permission to appeal. The Chancellor had also held that an insurance policy was not an adequate fortification of a £5 million cross-undertaking in damages, and he had made a seven day “unless” order in that regard. The Chancellor had also ordered the claimants to pay £115,000 in total on account of costs by 4.00pm on 21st June.

[32]The communications of the 9th June are set out at paragraphs 11 to 15 of Mr Morrison’s first witness statement. The discussions of 14th June are related at paragraph 18 of that witness statement. Unredacted versions of the entire discussion are to be found at exhibits DPA2 and CEJ3. Mr Adam has set out the particular passages from the two transcripts which are said to constitute evidence of improper threats in a table at paragraph 18 of his written skeleton, although it is fair to say that he supplemented this orally by the addition of a passage towards the top of page 3 of exhibit CEJ3, immediately after reference to “a crossroads … on this litigation.” In an attempt to render a transcript of this judgment more readily susceptible to publication, I will not reproduce the terms of those communications; but I have borne them firmly in mind. The defendants characterised them as a crude attempt to frighten the defendants by menaces into settling the claim under extreme time pressure. The defendants submit that such improper behaviour cannot be hidden from proper forensic scrutiny by labelling it as “without prejudice”.

[33]Mr Stewart submits that Mr Morrison’s admitted omission to refer to the earlier alleged threats communicated by Mr Browne during the course of the telephone discussions on 14th June is inexplicable if there was any real belief on Mr Morrison’s part that those threats had been authorised by Mr Holyoake. Mr Stewart also describes the defendants’ conduct in serving the disputed materials (disclosing privileged material and alleging, in terms, that the first claimant had attempted to blackmail the defendants into settling the litigation … [REDACTED TEXT]) upon the claimants, and also upon The Guardian newspaper, on 21st June, without any advance notice, as constituting a ham-fisted attempt to smear Mr Holyoake, and thus to divert attention away from the serious allegations of tax evasion on the part of the Candy brothers and the sixth defendant company that had emerged in the claimants’ evidence in support of their application for a world-wide freezing order, and which were the subject of pending applications by The Times and The Guardian newspapers for permission to inspect and obtain relevant court documents. It is against that background that I now turn to the parties’ submissions.

[34]For the defendants, Mr Adam submits that this is a plain case and that their application should be granted. The factors identified by the Court of Appeal in Ferster are said to be almost all in play here and to apply with equal force (perhaps even greater force, given the fact that the threats by Mr Browne at least are far less veiled than those in Ferster). Mr Adam makes the following points: First, the communications collectively made threats … [REDACTED TEXT] As the Court of Appeal observed, this is said to be “far beyond” what is reasonable in civil proceedings.

[35]Secondly, those threats were specifically designed to place extreme negotiating pressure on the defendants. [REDACTED TEXT]

[36]Thirdly, the timing of the application of this pressure within the broader context of the litigation should be noted. The threats from Mr Browne on 9th June came two days after the claimants’ application for a world-wide freezing order had been dismissed as an abuse of process and £5 million-worth of fortification had been ordered, within seven days and on an “unless” basis. The continuation of those threats in the call on 14th June 2016 came only two days before the “unless” order expired.

[37]Fourthly, the purpose of the threats was said to be plainly to gain an immediate and inadmissible financial advantage for the claimants. There was said to be no ambiguity here. [REDACTED TEXT]

[38]Fifthly, there was no attempt to make any link between the demand for a settlement and the threatened reports. They were wholly unconnected. There was no better case on the merits as a result of the threats. The threat to throw (unspecified and unconnected) mud at the defendants was simply being used to as a lever to force them to agree a deal. That is said to have been an important factor in Ferster, where there was a similar disconnection, and where the Court of Appeal stated that the impropriety arose from the fact that the increase in price was tied, and tied only, to the threats affecting the petitioner’s liberty, family, and reputation. The same is said to apply here. This was not a situation in which the claimants had discovered a new point on the merits of the case and were saying, “Settle now before we amend.” The demand for settlement is said to have been based, and based only, on a threat to let a supposed cat out of the bag.

[39]In essence, this is said by Mr Adam to be a crude attempt at blackmail and should be treated as such. Having got into a disadvantageous position in the litigation, the claimants are said to have been trying to frighten high-profile defendants … [REDACTED TEXT] The law is said to be clear that “without prejudice” privilege cannot be abused in this manner. It does not exist to serve as a screen behind which such behaviour can be concealed from public view.

[40]The defendants wish to make it quite clear that the suggestion made by the claimants that there was anything to report was totally unfounded. They are said to have nothing to hide and nothing to fear which is why they are now proactively seeking to put these threats out into the open. But even if there had been something in them (which the defendants say there was not), these threats would still have been a completely improper way for the claimants to proceed. As the Court of Appeal pointed out in Ferster, it does not avail the blackmailer to have a genuine belief that there is some basis for making the threats. Even if this were so, it was wrong for them to be used as a lever to enable one side (in that case the respondents to the petition) to get more. Mr Adam also relies upon observations of Lord Atkin in the case of Thorne v The Motor Trade Association

[1937] AC 797

at pages 806 to 807:

“The ordinary blackmailer normally threatens to do what he has a perfect right to do – namely, communicate some compromising conduct to a person whose knowledge is likely to affect the person threatened. Often indeed he has not only the right but also the duty to make the disclosure, as of a felony, to the competent authorities. What he has to justify is not the threat, but the demand of money. The gravamen of the charge is the demand without reasonable or probable cause: and I cannot think that the mere fact that the threat is to do something a person is entitled to do either causes the threat not to be a ‘menace’ within the Act or in itself provides a reasonable or probable cause for the demand.”

[41]For these reasons, Mr Adam submits that the declaration sought should be granted. He says that this is not an abstract remedy. The defendants intend, if the admissibility application is successful, to deploy this evidence as appropriate and as advised. Their current intentions are said to be:(1) To amend their defence so as to plead these exchanges as evidence of the true nature of this claim;

(2) To inform the Court of Appeal about them at the forthcoming expedited hearing of the defendants’ appeal (in October) against a “notification injunction” granted by Mr Justice Nugee on 8th April and continued in modified form on 29th April;

(3) To inform the Court of Appeal about them in the event that the defendants are granted permission to appeal the finding of the Chancellor on 16th June that an insurance policy proffered by the claimants is sufficient fortification in accordance with Mr Justice Nugee’s 29th April order; and

(4) To rely on these exchanges in support of their application (renewed on 15th July) for security for their costs of this litigation. Mr Adam indicates that there may be other uses as well.

[42]Mr Adam then proceeds to consider the claimants’ original response to this application. He points out that originally the claimants served two statements by way of evidence in response to this application, both made by solicitors representing them (Mr Stringfellow and his assistant, Ms Jones). Those statements are said to be more notable for what they do not say than for their actual contents. In particular:(1) The original statements did not challenge Mr Morrison’s detailed evidence that Mr Browne was acting for Mr Holyoake in making these communications even though the possibility that he had not been so acting had been ventilated in correspondence at one point on what were said to be instructions from Mr Holyoake. That challenge has only just been made, in what are said to be bare and unsatisfactory terms, by a further witness statement from Mr Stringfellow served on 20th July;

(2) Those statements do not say anything at all about the threats by Mr Browne … [REDACTED TEXT] In fact, they do not so much as refer to those threats. There is said to be no attempt to defend them, or to suggest that they were not threats, or to suggest that Mr Browne’s actions were proper. Instead, the evidence of the two solicitors is only (in summary) that they themselves did not perceive there to be any improper threat being made during the 14th June telephone discussions. It is said that the solicitors’ evidence has entirely ignored what preceded those discussions on 14th June. There is said to be no real attempt to engage with what is said to be the impropriety.

[43]Mr Adam submits that the alleged failure by Mr Holyoake’s solicitors to perceive a threat does not assist him. That is because they do not give evidence that they had been aware of the pre-existing threats made on 9th June. Without that background, it is said that the solicitors could easily not have understood what Mr Holyoake is said to have been intending to convey by the words which he actually used. It is said to be clear from Ms Jones’s own attendance note that there is ample support for Mr Morrison’s evidence that on 14th June Mr Holyoake was himself referring back to, and renewing, the threats made earlier on 9th June. Unless Mr Stringfellow and Ms Jones had been aware of those threats, which had been conveyed (it is said) on Mr Holyoake’s behalf by Mr Browne a few days before the telephone discussions on 14th June, they would not have understood that when Mr Holyoake said what Ms Jones records him as saying, Mr Holyoake was, in fact, reiterating those same threats. It is said that Mr Holyoake’s words could only properly be understood by someone who knew what Mr Holyoake had already been threatening through Mr Browne. With the benefit of the whole picture, it is said to be clear what Mr Holyoake was trying to achieve by statements such as, for example, … [REDACTED TEXT] It is said that to anyone who knew of the earlier communications, this was a clear threat below the surface of what was actually said to the effect of, … [REDACTED TEXT] Thus, when seen in context, Mr Adams submits that Mr Holyoake’s words are a continuation of the threats made through Mr Browne only five days earlier.

[44]Mr Adam then proceeds to address the claimants’ new response to the application, as contained within Mr Stringfellow’s twelfth witness statement served only last Wednesday, 20th July. In it, Mr Stringfellow says that he had just noticed that he had not confirmed, in his earlier evidence, the position which had been stated in a letter from his firm dated 23rd June 2016. In particular, Mr Stringfellow now puts in evidence that his instructions from Mr Holyoake are that Mr Browne:

“...was not, and has never been, an agent of Mr Holyoake with any general authority to act on his behalf (still less an agent with authority to make threats on his behalf).”

[45]Mr Adam submits that it is extraordinary that evidence denying authority should have been served so late given that large parts of both of Mr Morrison’s two witness statements are devoted to a detailed account of why it is apparent that Mr Browne was acting for Mr Holyoake. It is also said to be extraordinary that the denial should take the form of a one page statement from a solicitor affirming instructions from a month earlier rather than being(1) from Mr Holyoake himself and

(2) actually responding to the evidence and detail given by Mr Morrison, rather than being a bare denial.

[46]Be that as it may, however, the defendants respond to the new stance as follows: First, it is said that if Mr Browne had no authority at all to negotiate on behalf of Mr Holyoake as alleged, and if he was just a conduit or channel for negotiations, then it is impossible to see how these communications from him could be covered by without prejudice privilege in any event. The privilege exists to protect genuine settlement negotiations. If Mr Browne was not authorised by Mr Holyoake to negotiate, then there were no genuine settlement negotiations in being from his side and these threats cannot have been made without prejudice. Mr Browne was simply an unauthorised non-party. As soon as he stepped out of his role, he was no longer communicating anything within a without prejudice dialogue and so his threats cannot properly fall within the ambit of without prejudice protection. Moreover, it is said that the claimants have given no explanation of what Mr Browne was in fact doing if he was not negotiating on their behalf. The unanswered evidence of Mr Morrison is said to show clearly that he was.

[47]Assuming, however, for present purposes that Mr Browne was not an authorised negotiator but was simply a neutral third party who had been interposed by the parties in their negotiations so that they could have a without prejudice dialogue with his assistance, and making the further assumption that Mr Browne invented and conveyed these threats for some unimaginable reason of his own rather than because he had been told to convey them by the claimants (which is what he said was the case when he used the words, … [REDACTED TEXT]) what then? Even on those charitable assumptions, Mr Adam submits that the answer is that there is no without prejudice privilege. If Mr Browne was merely facilitating a without prejudice dialogue, being authorised by both sides to receive, discuss, and relay their positions, but not authorised by either side to negotiate, then communications from him genuinely relaying one side’s position would be properly without prejudice; but if he has then decided simply to invent and communicate a threat from one side to the other (which is what the claimants presumably say happened here since it is said that they cannot deny the fact of the threat), then that invented threat would not, it is said, be within the privilege. It would not be covered either by the public policy protecting without prejudice communications or by the implied agreement existing between the parties (in both cases because it was not in fact a communication from either of the negotiating parties).

[48]It is said that the claimants cannot have this both ways. They cannot simultaneously say(1) that Mr Browne, and his threats, have nothing to do with the claimants and yet

(2) Mr Browne’s communications are somehow covered by the without prejudice privilege protecting the dialogue between the parties. The authority point is therefore said to be a red herring for the purposes of this application (although Mr Adam recognises that obviously it would be a live issue at trial).

[49]Secondly, it is said that the evidence is, in any event, clear that Mr Browne was acting for the claimants as an authorised negotiator. It is said that the alternative is simply implausible. Mr Adam relies on the following points of Mr Morrison’s evidence, not one of which is said to have been answered by the claimants in any way:(1) [REDACTED TEXT];

(2) Mr Browne was able to set up a without prejudice meeting between Mr Holyoake, his solicitors and the defendants’ solicitors on 6th June;

(3) [REDACTED TEXT];

(4) [REDACTED TEXT];

(5) Mr Browne set up the without prejudice telephone call of 14th June;

(6) [REDACTED TEXT];

(7) [REDACTED TEXT]

[50]Mr Adam submits that one would naturally expect this detailed account to have been responded to in evidence from Mr Holyoake himself. Not only had that not been done but the response, on instructions, has been the barest denial, with no detail supplied. That, it is said, speaks volumes. So too does the fact that Mr Holyoake has chosen not to put in any evidence denying that he uttered the threats passed on to Mr Morrison in the text message of 9th June. Mr Adam emphasises that Mr Holyoake has not said that he did not do so.

[51]Drawing these threads together, Mr Adam summarises his submissions as follows. In relation to the communications from Mr Browne:(1) These threatened the defendants with … [REDACTED TEXT] They were designed to frighten the defendants into settlement in order to profit the claimants and to avoid them having to provide the £5 million in fortification which had just been ordered on an “unless” basis;

(2) The evidence shows that Mr Browne was authorised to negotiate on behalf of the claimants despite what is said in Mr Stringfellow’s twelfth witness statement. However, Mr Browne’s authority to make these threats does not affect the outcome of the application;

(3) If Mr Browne was authorised by the claimants to make these threats, then they form part of a settlement negotiation but are not covered by without prejudice privilege because it does not exist to screen such conduct;

(4) If Mr Browne was not authorised to make them (on the basis that he was not Mr Holyoake’s agent at all), then they were never covered by the privilege in the first place;

(5) The communications evidencing the threats made by Mr Browne on 9th June are therefore not covered by without prejudice privileged, whether authorised by Mr Holyoake or not, and may be pleaded and put in evidence.

(6) As for the communications with Mr Holyoake during the telephone call on 14th June, it is said that his words referenced the earlier threats by Mr Browne, of which he was obviously aware, and reinforced them. Properly understood therefore, they also are not covered by the privilege because they reiterated the same threats. Those are the defendants’ submissions.

[52]For the claimants, Mr Stewart submits that this application is quite hopeless. The claimants’ case is that:(1) Mr Morrison’s first witness statement purports to describe what were, and were understood to be, without prejudice discussions, the purpose of which was to explore the possibly of settlement of the dispute between the parties;

(2) Both the skeleton argument and the letter which formed the other elements of the disputed material make detailed reference to the same matters;

(3) The defendants have alleged that, in the context of those discussions, both Mr Holyoake and an alleged agent of his known as ‘Paolo Browne’ made improper and unlawful threats which amounted to blackmail and, as a result, without prejudice privilege has been lost. However: (a) No improper or unlawful threats were made and no blackmail was attempted. At no stage did the discussions cross the line from the proper commercial negotiations to be expected in a hard-fought and high-value piece of litigation to improper and unlawful conduct; (b) Further, Mr Browne was never the claimant’s agent. He was never authorised by them to make any improper or unlawful threats or to attempt to blackmail the defendants and the defendants can never reasonably have supposed that he was; and (c) Accordingly, no circumstances have arisen in which the without prejudice privilege relating to the discussions could be said to have been lost or waived.

(4) Accordingly, the defendants’ application should be dismissed;

(5) Further, the disputed materials, together with the evidence and skeleton arguments filed for the purposes of the application, should either be sealed in the court file and not be open to inspection, or removed from it and destroyed.

[53]By way of contrast with Ferster v Ferster, Mr Stewart submits that the facts of the instant case are very far from the sort of clearest case of “unambiguous impropriety” that is identified in the authorities as necessary before without prejudice privilege can be taken as lost. The claimants’ case is that:(1) Mr Browne was not their agent and was not authorised to make threats on behalf of their behalf. His only role was as an intermediary;

(2) Further, the defendants cannot reasonably have thought otherwise. In particular, they cannot reasonably have thought that Mr Browne was the claimants’ agent, duly authorised, following the telephone conversation on 14th June when Mr Holyoake made it abundantly clear that he did not trust Mr Browne and was not sure whose side he was on and referred to him as an” intermediary”; and

(3) Yet further, the evidence adduced by the defendants of Mr Browne’s purported threats is thin and very far from the unambiguous evidence of impropriety that is required before privilege is lost.

[54]As to the role of Mr Browne, the claimants refer to Mr Stringfellow’s twelfth witness statement, which confirms, on instructions, that Mr Browne was never an agent of Mr Holyoake with either general authority or authority to make threats. Mr Stringfellow’s evidence confirms comments in a letter of 23rd June 2016 to the like effect.

[55]As to the defendants’ state of knowledge of Mr Browne’s role, it is said that Mr Holyoake made it abundantly clear to Mr Morrison and Mr Astaire on 14th June that Mr Browne was not his agent. The claimants refer in that regard to specific comments in the solicitors’ notes which are set out at paragraph 29 of Mr Stewart’s skeleton argument. Moreover, Mr Stewart emphasises that Mr Morrison accepts that he did not seek to challenge Mr Holyoake as to the conduct of his alleged agent or the threats said to have been made. Given that Mr Morrison also asserts that he had “hoped that the conversation would allay any fears about the previous threats which had been made and reiterated by the text messages received”, it is said that the fact that Mr Morrison did not refer to the texts is inexplicable if there was any real belief that Mr Holyoake had authorised them.

[56]As to the allegation of unambiguous impropriety, the sum total of the threats on which the defendants appear to rely is said to be:(1) The un-noted conversation at paragraph 11 of Mr Morrison’s first witness statement on 9th June;

(2) A photograph sent on 9th June by an intermediary, a Mr Johnstone, to Mr Morrison which purports to come from Mr Browne and appears to show… [REDACTED TEXT]; and

(3) A further message sent that same day by Mr Johnstone to Mr Morrison and purporting again to come from Mr Browne which refers to a meeting … [REDACTED TEXT] the next day but does not say who is to attend the meeting or to what purpose.

[57]Mr Stewart emphasises that unlike the email in Ferster, there is no written record of the 9th June alleged threats which, on the evidence, are said to be wholly ambiguous. The evidence advanced by the defendants is said to fall far short of that which could possibly establish an unambiguous impropriety even if, contrary to the claimants’ case, the defendants could show that Mr Browne was their agent. By the time the first of the threats were made, counsel on behalf of Mr Holyoake had already alleged that the defendants were guilty of tax evasion in open court in the course of the claimants’ application for a world-wide freezing order before the Chancellor on 7th June 2016; and, according to paragraph 11 of Mr Morrison’s first witness statement, it was possible that Mr Holyoake had already met with the tax authorities.

[58]Mr Adam objects that the threats of 9th June are of an entirely different order of magnitude to what had previously been said in court on 7th June. All that the Chancellor had said at paragraph 32 of his judgment of 7th June (the neutral citation number of which is

[2016] EWHC 1718 (Ch)

) was this:

“Mr Trace [leading counsel then appearing for the claimants] further says that it is clear that various matters relied upon by the relevant defendants before Mr Justice Nugee and, in particular, the deeds of the Regent’s Park property owned by Mr Christian Candy and one or more of his companies, are designed to achieve some tax evasion and if there is tax evasion then Her Majesty’s Revenue and Customs will be a competing creditor. I cannot see why this factor should in any way entitle the claimants to an upgrade in their injunctive relief.”

[59]Thus, Mr Adam submits(1) the purpose of the evidence had been to promote HMRC as a rival creditor, and

(2) the Chancellor had been totally uninterested in it. Mr Adam submits that it was just a damp squib, a feeble attempt at prejudice. This is said to have been wholly different from threatening, ... [REDACTED TEXT] .

[60]So far as the telephone discussions of 14th June are concerned, Mr Stewart submits that there is nothing in either party’s solicitors’ notes that would even remotely found an allegation of unambiguous impropriety. Mr Holyoake’s comments are perfectly innocent and proper, particularly when read in the context of a forceful negotiation in hard-fought and bitter commercial litigation. The passages relied on by the defendants are said to be entirely consistent with the parties expressing their understanding of what was likely to happen if the litigation were to proceed to a contested trial. The notes are, in Mr Stewart’s phrase, “littered with ambiguity”. To get anything unambiguous by way of threats on the part of Mr Holyoake out of the 14th June discussions would, Mr Stewart says, be a nonsense. Further, Mr Stewart points out that Mr Morrison chose to engage in the without prejudice discussions on 14th June, even beginning (according to Ms Jones’s note) by saying, “Just for good order, this is a without prejudice phone call.”

[61]Mr Morrison said nothing about the earlier threats whatsoever, even though there were ample occasions and opportunities for him to do so during the course of the reported discussions. Mr Morrison’s explanation is at paragraph 21 of his second witness statement. There he says this:

“I can confirm that I did not make reference during the telephone call on 14th June to the texts received from Mr Browne through James Johnstone. I considered that if I had mentioned them, the call would have come to an abrupt end and I did not see the sense in this. I do believe that Mr Holyoake’s comments in the call were further veiled threats and gave weight to the threats which had been passed through Mr Browne earlier and indeed were a reference back to them.”

[62]This, Mr Stewart submits, makes no sense unless either(1) Mr Morrison did not regard the earlier communications as threats, or

(2) he did not take them seriously, or

(3) he was intending later to seek some forensic tactical advantage from them. If Mr Morrison had genuinely regarded Mr Holyoake as making threats during the course of the 14th June discussions, he would be bound to have said so, and the discussions would not have continued in the way that they did.

[63]Mr Stewart submits that it is noteworthy that neither Mr Morrison nor Mr Astaire thought fit to mention that they considered that Mr Browne had overstepped the line and had engaged in an unambiguous impropriety or had made improper and unlawful threats during the course of the telephone discussions on 14th June; nor did Mr Morrison – or, for that matter, Gowling - seek to raise the allegation in correspondence, or seek clarification in correspondence thereafter. Instead, the defendants’ solicitors simply served Mr Morrison’s first witness statement on 21st June, without any advance warning, and in an entirely unrelated context, namely in the course of applications by The Times and The Guardian newspapers for copies and inspection of documents relating to the Candy brothers’ affairs. Further, Gowling is said to have asserted in their letter of 21st June, entirely wrongly, that Mr Holyoake had made unwarranted demands with menaces and that this was a serious criminal offence that they had reported to the authorities.

[64]The evidence actually produced by Gowling is said to be so tenuous as to come nowhere near bearing out the grave allegations that they have made. The claimants consider that the context in which Mr Morrison’s first witness statement was served, and the way in which the defendants have pursued this application, make its true purpose clear. It is said to be no more than a rather obvious and clumsy attempt to divert attention away from the very grave allegations made against the defendants by throwing mud at Mr Holyoake. For those reasons, the claimants invite the court to dismiss the defendants’ application. It is said to be unmeritorious and should not be allowed to succeed.

[65]In the course of his oral reply, Mr Adam made the following points: First, the submission on the part of Mr Stewart that on 14th June Mr Morrison did not say that he had been threatened is said to be unrealistic and naïve. That is because on 14th June Mr Morrison was in the middle of a delicate negotiation, directed at seeking to settle the whole of the case. It is said to have been a matter for Mr Morrison’s tactical judgment, when speaking to Mr Holyoake himself, whether or not Mr Morrison should drop into the discussions the fact that Mr Holyoake had been threatening Mr Morrison. Mr Adam referred back to what was said in paragraph 21 of Mr Morrison’s second witness statement (previously cited). There Mr Morrison said that his perception was that had he mentioned the earlier threats, the discussions would have been brought to an abrupt end. Mr Adam submits that a solicitor may make a tactical judgment as to whether or not he should raise the temperature of without prejudice discussions by referring to earlier threats.

[66]Secondly, to focus, as Mr Stewart did, upon whether Mr Morrison had felt threatened was to invert the relevant principles. It was to look at the matter through the wrong end of the forensic telescope. It focused upon the victim and not upon the perpetrator of the threats. It is irrelevant whether the threat was effective. The focus should not be on the reaction to the threat but on the threatening conduct itself.

[67]Thirdly, Mr Adam accepts that Mr Stewart is absolutely right to say that there is nothing wrong in principle in reporting misconduct to the appropriate authorities; but what is wrong is threatening not to report the matter to the appropriate authorities. Mr Adam reiterated what he had had to say about Lord Atkins’s observations in the case of Thorne v The Motor Trade Association. The threats were a statement as to the future and not as to the past. The text message sent by Mr Browne was said to be future-facing. It told Mr Morrison that … [REDACTED TEXT].

[68]Fourthly, so far as Mr Stewart’s point that Mr Morrison had admittedly not made any notes of the earlier without prejudice telephone discussions is concerned, that was said to be unsurprising if Mr Morrison was on holiday overseas at the time. The important point is that one has got written evidence, in the form of the text message, of the threat made on 9th June.

[69]Fifthly, it is said that Ms Jones’s notes of the 14th June telephone discussions show that Mr Browne was presenting a negotiation on behalf of Mr Holyoake. Mr Adam pointed out that Mr Stewart had not even sought to answer Mr Adam’s point that if Mr Browne had no authority to negotiate on the claimants’ behalf, then anything said by him would not be without prejudice in any event. The considerations of without prejudice privilege did not enter into the equation if Mr Browne had no authority to negotiate on the claimants’ behalf at all.

[70]Sixthly, Mr Adam made the point that Mr Morrison had gone into the 14th June telephone discussions not knowing that there would be any repetition of the earlier threats. The fact that Mr Morrison had prefaced the discussions by making it clear that they were without prejudice was of no assistance to the claimants because the invocation of without prejudice privilege necessarily incorporated the entire rubric of rules governing without prejudice communications, including the unambiguous impropriety exception. It was also said that there was nothing unambiguous about the threat in the text message.

[71]Seventhly, Mr Adam accepted that, on its own, the 14th June discussion was merely sabre-rattling; but sifting through it against the background knowledge of the earlier threats, one was entitled to make connections. They resulted in what was described as an “umbilical cord” between Mr Browne’s earlier threats and Mr Holyoake’s adoption of them during the course of the 14th June discussions.

[72]Those were the submissions that were presented to me on Monday, both in writing and orally. Over the course of the adjournment, on the afternoon of Monday 25th July, I received supplementary written submissions from the claimants. They were served in order to seek to assist the court in relation to two questions raised during the course of Mr Adam’s reply: first, as to the proper approach to deciding on an interim basis whether Mr Browne was authorised to make threats; secondly, as to what was referred to as the “Morton’s fork”, namely that if Mr Browne was not authorised there could be no privilege attaching to text messages sent by him whilst if he was authorised, then threats were made on behalf of Mr Holyoake.

[73]In relation to the proper approach to deciding whether Mr Browne was authorised to make threats, the claimants’ position was said to be as follows:(1) It is common ground that an agent cannot clothe himself with authority;

(2) The only matters relied on by the defendants arise from the evidence of Mr Morrison which consists either: (i) of statements made by Mr Browne himself which cannot assist; or (ii) of inferences to be drawn from the telephone discussions of 14th June.

(3) No statement made during the telephone discussions of 14th June could have authorised or ratified a threat to which no reference was made by Mr Morrison;

(4) Searching through what was said at the 14th June discussion in any event infringes the purpose and rationale behind the without prejudice rule, particularly in circumstances where there was no hint of any kind of concern by Mr Morrison at Mr Browne’s earlier behaviour and a deliberate decision made by Mr Morrison not to raise any such concerns;

(5) There is accordingly no basis upon which the court can properly conclude, let alone finally determine, that Mr Holyoake was party to any threats;

(6) If the court cannot finally determine that question, it cannot determine that there has been any unambiguous impropriety on the part of Mr Holyoake and there is therefore no basis for lifting the without prejudice veil.

[74]In relation to the Morton’s fork, Mr Stewart submits that if Mr Browne was not authorised to make threats, there was no impropriety, let alone an unambiguous one. Mr Browne was not, and could not have been, threatening anything. It follows that the most he could have been doing was telling the defendants that … [REDACTED TEXT] which is scarcely surprising given that they had been accused in open court of tax evasion. The provision of information by an intermediary or honest broker to a person who understands that his conversations are without prejudice (as Mr Morrison did) is said accordingly to fall within, and not without, the without prejudice exception.

[75]Yesterday, 26th July, Mr Adam and Mr Polley responded in writing to the claimants’ further written submissions. They took the two points in reverse order. Dealing first with Morton’s fork, it is said that the claimants’ submission that if Mr Browne was not authorised to make threats, there was no impropriety, let alone an unambiguous one, is tilting at the wrong forensic windmill. If Mr Browne was not authorised to communicate threats from Mr Holyoake, then the concept of unambiguous impropriety is simply not relevant. This is because that concept arises only as an exception to a without prejudice communication. If Mr Browne’s threats were not, in fact, a communication from Mr Holyoake, then they were a frolic of his own, were not part of a genuine settlement negotiation between the parties, and thus they can never have been privileged in the first place.

[76]The claimants’ submissions then tried to characterise Mr Browne’s threats as merely the provision of information, the information in question being that the defendants were being informed upon, and thus somehow without prejudice even if unauthorised. That is said by Mr Adam to be a desperate point. Mr Browne’s text cannot possibly be read in that manner. [REDACTED TEXT] That cannot conceivably be interpreted as the provision of factual information. It therefore follows, Mr Adam submits, that Mr Browne’s threatening communications are admissible either way. If authorised, they were a communication from Mr Holyoake and the unambiguous impropriety exception applies. If unauthorised, they were not a communication from Mr Holyoake at all and so were never without prejudice.

[77]Turing to the issue of authority, it is said to follow that it is not necessary for the court to decide for the purposes of this application whether Mr Browne was actually authorised by Mr Holyoake to communicate these threats or not. That can safely be left to the trial judge. If he concludes that Mr Holyoake was not using Mr Browne to threaten the defendants, then the fact that Mr Browne did so will become irrelevant. If, on the other hand. the trial judge concludes that Mr Holyoake was using Mr Browne to threaten the defendants, then that finding will go into the mix in reaching the court’s decision overall. In neither event will the trial judge have received inadmissible evidence, for the reasons previously explained. However, and to the extent necessary, Mr Adam submits that the evidence before the court shows that, on the balance of probabilities, Mr Browne was authorised by the claimants to act at the very least as a conduit for messages from Mr Holyoake. The history, in particular, of the course of the 14th June conversation, and Mr Holyoake’s description of Mr Browne as an “intermediary”, is otherwise inexplicable.

[78]Mr Adam submits that the defendants have made out at least a good arguable case that Mr Browne was authorised to communicate those threats. If the claimants had wanted the court to conclude definitively that Mr Browne was not so authorised, it was incumbent on the claimants to serve evidence which addressed and answered the defendants’ evidence on the point. The claimants chose not to do so, instead serving last minute evidence denying Mr Browne’s authority in the barest terms. Accordingly, if it is necessary to decide the point for the purpose of the instant application, the defendants submit that it is capable of only one answer on the evidence, even if only expressed provisionally, namely that Mr Browne was an agent authorised to carry messages from one side to the other, including the threats relied upon.

[79]In the light of these competing submissions, I can express my conclusions quite shortly. In doing so, I bear firmly in mind that the unambiguous impropriety exception to the without prejudice rule should be applied only in the clearest case of abuse of a privileged occasion. I have to undertake a qualitative evaluation of whether any threats have been proved which unambiguously exceeded what was permissible in the attempted settlement of hard-fought commercial litigation. The context of the present case is very different from that of Ferster where there was no lack of clarity in what was being said in a professionally drafted email, which was rightly held to amount to an attempt at blackmail falling firmly within the unambiguous impropriety exception, and thereby rendering the email admissible in evidence. The email in Ferster unambiguously, and without any justification, required the petitioner to pay an extra 25 percent for the respondents’ shares than the amount previously requested. In the present case, the text message from Mr Browne threatened … [REDACTED TEXT]

[80]In the context of hard-fought commercial negotiations in which the gloves were quite clearly off on both sides, I do not regard that threat as amounting to the abuse of a privileged occasion. I regard it as no more than the sort of negotiating tactic that the defendants would expect the claimants to employ. That view is, to my mind, demonstrated by the facts that Mr Morrison and the defendants were in no way intimidated by the threat, and that they elected to enter into further without prejudice negotiations on 14th June without even mentioning the matter when, had it been perceived as a real and illegitimate threat, they would have been sure to have raised the matter in the course of the negotiations.

[81]Had I taken a different view, then, for the reasons advanced by the defendants in their written response submissions, I would have concluded that it was not necessary for the court to decide, for the purposes of the present application, whether Mr Browne was actually authorised by Mr Holyoake to communicate the threat made on 9th June or not. That is a matter which, in my judgment, could safely be left to the trial judge. If he were to conclude that Mr Holyoake was not using Mr Browne to threaten the defendants, then the fact that Mr Browne did so would become irrelevant. If, on the other hand, the judge were to conclude that Mr Holyoake was using Mr Browne to threaten the defendants, then that finding would go into the mix in reaching the court’s decision overall. In neither event would the trial judge have received inadmissible evidence.

[82]Had it been necessary for me to resolve the issue of Mr Browne’s authority, then, for the reasons given by the defendants, I would have reached the provisional conclusion - provisional only in the sense that it was not intended to bind the trial judge, who would be free to revisit the matter on the totality of the evidence to be adduced at the trial - that the evidence presently before the court showed, on the balance of probabilities, that Mr Browne was authorised by the claimants to act, at the very least, as a conduit for messages from Mr Holyoake. The history … [REDACTED TEXT] is otherwise inexplicable.

[83]The defendants have made out at least a good arguable case that Mr Browne was authorised to communicate these threats. If the claimants had wanted the court to conclude definitively that he was not, in my judgment it was incumbent upon them to serve evidence which addressed and answered the defendants’ evidence on the point. They chose not to, instead serving last-minute evidence from the claimants’ solicitor denying Mr Browne’s authority in the barest terms. Accordingly, if it had been necessary to decide the point for the purposes of the application, I would have found that it was capable of only one answer on the evidence, even if only expressed provisionally, namely that Mr Browne was an agent authorised to carry messages from one side to the other, including any threats.

[84]So far as the telephone discussions of 14th June are concerned, Mr Adam realistically accepted that in the absence of the earlier communications of 9th June, these discussions would not engage the unambiguous impropriety exception. His submission was that they could not be viewed on their own. In the light of my decision on the communications of 9th June, I hold that the unambiguous impropriety exception does not apply to the 14th June discussions; but had I taken a different view as to the applicability of the unambiguous impropriety exception to the 9th June communications, I would still have held that the exception did not apply to the 14th June discussions, which remained entirely, and properly, without prejudice. I would have accepted Mr Stewart’s submission that there was nothing in either party’s solicitors’ notes that would even remotely have founded an allegation of unambiguous impropriety.

[85]In my judgment, Mr Holyoake’s comments were perfectly innocent and proper, particularly when read in the context of a forceful negotiation in hard-fought and bitter commercial litigation. I find that the passages relied on by the defendants are entirely consistent with the parties on both sides expressing their understanding of what was likely to happen if the litigation were to proceed to a contested trial. The notes were “littered with ambiguity”, to adopt Mr Stewart’s phrase. In my judgment, there were no veiled threats. To get anything unambiguous by way of threats on the part of Mr Holyoake out of the 14th June discussions would, in my judgment, be, as Mr Stewart put it, “a nonsense.”

[86]For those reasons, therefore, I dismiss the defendants’ application. I make it clear that I reach that result with no sadness because it avoids an unfortunate piece of satellite litigation and enables the parties to focus upon the real issues in the claim and defence. That concludes this extemporary judgment.

[Discussions followed on costs and the form of the court’s order]

[87]Dealing with the costs, I do not consider that it is an appropriate case to assess the costs of the 27th June hearing on the indemnity basis. I do not consider that the conduct relied upon by Mr Stewart in disclosing the material which I have now found to be privileged to The Guardian in the circumstances was such as to justify departing from the normal principles that costs should be assessed on the standard basis. So I approach both assessments on the basis of the standard basis. Inevitably, any summary assessment is a rough and ready exercise doing the best one can on the available materials. I am entitled to make a broad-brush assessment, without attempting any mathematical accuracy, which is only likely to be spurious. Comparing the hourly rates of the various fee earners on both sides of the litigation, it does not seem to me that any real objection can be taken to the hourly rates applied by the claimants’ fee earners. Mr Adam does make the point that there has been considerable reliance upon the services of higher grade fee earners, without much use being made of lower grade fee earners; but in the context of this litigation, and, in particular, the urgency with which the matter had to be brought on before Mr Justice Nugee on 27th June, I can understand why that should have been the case. Nevertheless, it does seem to me that the costs of 27th June are rather on the high side, particularly when I contrast them with the costs of the defendants, although I acknowledge that the costs of the party taking the initiative are inevitably going to be higher than the costs of a party responding.

[88]Without any attempt at mathematical accuracy, and doing the best I can, it seems to me that the appropriate amount at which to assess the costs of 27th June, reserved by Mr Justice Nugee’s order of that date, is the sum of £25,000 plus VAT. So far as the costs of the hearing on 25th July are concerned, it seems to me that the appropriate course is to assess the costs applying a smaller rateable discount; and, to some extent plucking a figure from the air, I would propose to assess the costs at £43,000 plus VAT. So that will make a total of £68,000 in all. [Further discussions followed] [Hearing ends] POST-JUDGMENT DECISION: 24th October 2016

[Further discussions followed]

[1]On 19th August 2016 I returned the approved transcript of my judgment to Chancery Listing, directing them to draw the parties’ attention to paragraph 13 thereof, and inviting submissions from the parties on any redactions that might need to be made to the transcript before the judgment was published. Having heard nothing more, on 14th October 2016 I directed Chancery Listing to inform the parties that I proposed to release my judgment for publication on 24th October 2016 unless I was notified that there was any objection to my doing so. This provoked email responses from Mr Adam QC (for the defendants) on 17th and 21st October and from Mr Fowler (for the claimants) on 21st October. On 21st October I was helpfully presented with a copy of the judgment showing an agreed number of redactions together with seven further redactions proposed by the claimants which were disputed by the defendants. There was also a dispute about the inclusion of post-judgment discussions about costs and other matters. In addition I was provided with(1) a schedule setting out some brief prefatory general submissions followed by specific submissions on the seven disputed passages; and

(2) certain further documents which the claimants’ counsel had asked to be passed on to me. I was invited to deal with the submissions on paper and without any oral submissions.

[2]It is common ground that the guiding principle should be that the court’s published judgment should not reveal material which the court has held to be covered by the without prejudice principle. The issue between the parties is whether or not the terms of the relatively few disputed passages, especially when read in the wider context of the judgment, impliedly refer with sufficient specificity to the contents of without prejudice material that they fall on the non-disclosable side of the line.

[3]Generally, the claimants submit that the disputed passages are all sufficiently specific that it is necessary and desirable for them to be redacted; and, in particular, the court is asked to bear in mind that: (1). the case has not yet been tried; (2). it has attracted very significant publicity in the national press; (3) the claimants have already had to apply for, and have obtained at short notice before Norris J on 28 July 2016, an injunction against The Times which had threatened to publish an article based on the defendants’ unsubstantiated allegations of blackmail and criminal activity, and notwithstanding that at the time it threatened to publish them the court’s private judgment had already been handed down (on 27 July 2016) and The Times had been informed of the result of that private judgment; (4) it is likely that a copy of the open judgment will also attract the attention of the national press; (5) the material referred to by the defendants did not fall within any exception to without prejudice privilege, and is therefore inadmissible as evidence at trial (as the judgment finds), but is also confidential (see Toulson & Phipps on Confidentiality, at paragraph 17-015, as was relied upon by Norris J in granting the injunction against The Times); and (6) the extent of the redactions proposed does not infringe the principle of open justice.

[4]Generally, the defendants submit that the disputed passages do not reveal the contents of without prejudice material but merely indicate the nature of the arguments and submissions advanced by them on the admissibility of the material.

[5]I have borne the detailed nature of the parties’ submissions in mind. I bear in mind that it is for the court, and not for the parties, to decide what parts of the judgment should be released for publication. I also bear in mind that the reader of the published judgment should be trusted to read the judgment as a whole; and that any press report of the published judgment can be expected to present a balanced picture of its contents, and should be trusted to distinguish between matters of submission and matters of evidence, and also to bear in mind, and accurately represent, the findings made by the court. I expect the allegations made against the individual claimant to be viewed accordingly, and in the context of the allegations and counter-allegations that have been openly ventilated in the substantive litigation. In the light of those considerations, I have made the redactions indicated in the foregoing judgment.

[6]I have excised post-judgment discussions because these took place in private and form no part of the published judgment. I have, however, included the transcript of my judgment on costs.

[7]I will give the parties a further seven days (until 4.00 pm on Monday 31st October) to reflect upon this redacted version of the judgment before I publish it.