BNP PARIBAS v MS A MEZZOTERO [2004] UKEAT 0218_04_3003

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2004] UKEAT 0218_04_3003

Case No Appeal No. UKEAT/0218/04

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

BNP PARIBASAPPELLANT

MS A MEZZOTERORESPONDENT

Before

Mrs Justice Cox

Date 30 March 2004

[1]APPEARANCES For the Appellants MR J DAVIES (One of Her Majesty's Counsel) MR D MARTIN (of Counsel) Instructed by: Messrs Clyde & Co Solicitors 51 Eastcheap London EC3M 1JP For the Respondent MR J GALBRAITH-MARTEN (of Counsel) Instructed by: Messrs Hammonds Solicitors 7 Devonshire Square London EC2M 4YH SUMMARY Practice and Procedure Inadmissibility of Evidence Appeal from ET's decision, at directions hearing, permitting evidence to be adduced, at the forthcoming hearing of a direct sex discrimination and victimisation complaint, of the Applicant's allegation that, at a meeting expressed to be "without prejudice", her employers sought to terminate her employment following a grievance raised by her about her treatment on return from maternity leave. Appeal dismissed. The applicability of and exceptions to the "without prejudice" rule in such circumstances. Was there an extant dispute as to termination of her employment? Did the employers' conduct fall within the "abuse" exception to the rule? THE HONOURABLE MRS JUSTICE COX This is an appeal by BNP Paribas, the Respondents below, from the Decision of an Employment Tribunal at London Central, the Chairman sitting alone, promulgated on 4 February 2004, permitting the Applicant to refer at the forthcoming hearing of her sex discrimination complaint to the fact that on 7 January 2003 the Respondents suggested that her employment should be terminated by mutual agreement. The matter is urgent because the Tribunal hearing of the Applicant's complaint is fixed for fifteen days, beginning on 5 April next. Neither party wishes to lose the hearing date and the appeal has therefore been expedited.

[2]The short but important point raised by the appeal concerns the applicability of, and exceptions to, the "without prejudice" rule,(a) in the context of discussions at a meeting between an employee and representatives of her employers, following the raising of a grievance by that employee in respect of her treatment following her return to work from periods of maternity leave; and

(b) when the Applicant seeks to rely upon what was said to her in support of her pleaded complaints of sex discrimination and victimisation. The Respondents contend that the Chairman misdirected himself in law in concluding that the Applicant should be permitted to give evidence of what was said to her concerning her employment during those discussions, which were expressly stated by Paul Hearn and Tim Doyle of the Respondents to be "without prejudice".

[3]The relevant facts are these, though it is important to emphasise at the outset that there is considerable factual dispute between the parties, and as yet the Tribunal has heard no evidence. No witnesses were called before the Chairman, who had the benefit only of some relevant documents, which are now before me, together with the written and oral submissions of Counsel. The facts set out by the Chairman, and in this judgment, are therefore the facts only for the purpose of determining this issue of admissibility.

[4]The Applicant has been employed by the Respondents since 1996. In her Originating Application she describes herself as a "Marketer, Financial Institutions, Debt Capital Markets". She had the title of "Vice President, Debt Origination" and she was promoted to First Vice President in 1997. She was first absent on maternity leave between February and May 2000, and she subsequently had a second period of maternity leave between March and November 2002. She returned to work on 11 November 2002, but after just two weeks back at work she raised a grievance with Human Resources, pursuant to the Respondent's grievance procedure. Her grievance was set out in a letter dated 27 November 2002 and is page 66a of the bundle. She expressed her grievance as:

"…. the way I have been treated prior to and on my return from maternity leave on 11 November 2002. I was actively discouraged from returning to work by Paul Hearn and Kimberley McKenzie-McIntyre. I have been prevented from returning to my old job on my return. I am not even doing a similar job. My terms and conditions are now considerably less favourable than they would have been if I hadn't gone on maternity leave. This is unfair and wrong - all the more so because I was also demoted by the Bank on my return after my first maternity leave..... On 15 October 2002 I had a pre-return to work meeting at the Bank with Paul Hearn and Kimberley McKenzie McIntyre. Hearn told me that the market was difficult and questioned whether I really wanted to return to work. He said there was no job for me in DCM. When I said I wanted to come back to my job in DCM he called Personnel and that is when McKenzie McIntyre joined us. She then questioned me 2 or 3 times more about whether I really wanted to come back to work. Hearn explained that there had been "issues" between me and Michael Blanning and Anthony Fane, and that two juniors - Chris Babington and Edward Stevenson - had been looking after my clients while I was on maternity leave. Hearn told me I couldn't expect to get my old job back because it would be unfair to Babington and Stevenson if the clients were taken off them now that I was coming back because they had been doing a good job. I said I still wanted to come back. Hearn then said I could come back to my desk for a few weeks to find myself another job within the Bank. He said there was no place for me now in DCM."

[5]She then set out on the following pages her concerns at, for example, no longer being permitted to contact clients directly, being excluded from meetings, being publicly insulted and humiliated at her place of work, and being singled out for demotion. She concluded the grievance as follows:

"The only explanation I can come up with for this demotion and public humiliation is that I am being discriminated against on the grounds of either: 1 the fact that I have been on maternity leave; or 2 because I am a woman"

I hope we can resolve these issues through the Bank's Grievance Procedure. Because my grievance concerns the actions of both Fane and Hearn I have written to you and have copied in the Global co-heads. I am not sure, under the circumstances, how this grievance will be handled under the Bank's Grievance Procedure. Could you explain to me what the next steps in this grievance procedure will be and their likely timeframe? In the meanwhile, rest assured the Bank can count on my full support and co-operation including with those colleagues I refer to in this letter."

[6]After the Applicant invoked this grievance she was told, on or about 16 December 2002 by Tim Doyle and Paul Hearn to stay at home whilst it was being processed. Subsequently, following correspondence between the Applicant's solicitors and the Respondents, she was invited to return to work, and did so on 7 January 2003. The bundle contains, at page 67, a note taken for the Applicant by her notetaker of some of the events of that day. In the notes she refers first to returning to her desk during the afternoon, but finding that her account was "locked out" and that the Helpdesk needed to talk to IT Security in order to enable her to regain access to her computer. She was later supplied with a new password and was able to log on again.

[7]Later on, during the afternoon, according to the note, she was told that Paul Hearn was waiting for her in a meeting room on the ground floor. The part of the note concerning the discussions between the Applicant, Paul Hearn and Tim Doyle is important. It states as follows:

"As I enter the room I am "greeted" by Hearn and Tim Doyle. Tim apologises as he says the grievance procedure is not over yet, he still has to meet two people, one later this afternoon and the other one, actually Paul Hearn himself, tomorrow. He says they want to talk to me without prejudice and this means I cannot use what they are going to say for legal reasons. They say in this way they can talk freely. I say ok, let's see what they have to say."

[8]A discussion then takes place about the Applicants' clients, her relationships with other employees, her work performance and bonus. The note then continues as follows:

"Doyle then says that my FIG job is not viable any more, they (meaning Blanning and co) now work as a team, the Italian job is also vanishing. I ask why, if it is because of the critics of sales and trading. Hearn says yes, people don't see me suited for that spot. Doyle says they have looked for another job within the bank, but there is nothing available, therefore Hearn says it is best for the business and for me that I terminate my job with the bank. Hearn says this is independent from the grievance, which will still go on, as the bank takes it seriously. Doyle says technically [it] is not a redundancy but just a job termination, but they will pay me their standard redundancy package which will be near 100k, i.e one month for each year of service (6 complete years), plus 6 weeks notice plus one month non-consultation period. I should go and talk to my lawyer about this and decide if I accept or go ahead with the lawyers (I don't recall exactly the wording, but this is what he meant). Doyle says I will still be on the payroll and be paid until the matter is solved. I ask Doyle if, in order to avoid misunderstandings, he can confirm in writing what he just said, Doyle says that because of what he said at the beginning about the without prejudice, of course he can't, I say it's just for me, he says he can only send me an e-mail where he says he invited me to stay at home while the matter is unresolved. Doyle then asks me to hand him my cards to access the building and says he will refund me what is still in my canteen card. I say there are only a couple of pounds as I was just going to charge it with 20 pounds when I had been called in the meeting. Hearn says I should take all my personal effects from my desk with me. Doyle invites me to talk to my lawyer and seems eager to be contacted. I leave the room quite shocked and of course I realise that I cannot go back to my desk on the trading floor as I don't have my pass card anymore."

The Applicant records finally that she was allowed to collect her personal effects and leave. However it is common ground between the parties that the Applicant was not then, and still has not been, dismissed from her employment.

[9]On the following day, 8 January, the Applicant wrote to Mr Doyle an e-mail which reads so far as is relevant as follows:

"On Monday of this week, you confirmed that I was no longer suspended and that I was free to come to work. You also requested that, notwithstanding that the grievance procedure had not been completed, I meet with you on Tuesday afternoon."

The Applicant then refers to what had happened at her desk and continues:

"It was clear to me that the Bank had already decided to terminate my employment, which was subsequently confirmed by you at the meeting with Paul Hearn and yourself. As suggested by you at our meeting, I will be seeking legal advice in respect of the matters that occurred yesterday afternoon. All my rights are reserved."

There was a reply to that e-mail from Mr Doyle in an e-mail of 10 January 2003 in which he said, so far as is relevant, as follows:

" a) It would be wrong to describe your period away from the office as suspension. We invited you to spend a few days either side of your leave period at home whilst we investigated your Grievance. Similarly we have again invited you to spend some time at home to give you an opportunity to consult your lawyers. This is something you have agreed and therefore we have an agreed position on this. ….. c) In respect of our meeting yesterday on the basis of 'without prejudice' I did explain that for the reasons outlined by Paul Hearn that we needed to consider your future employment with the company. It was considered that having reviewed all the circumstances the option of a mutually agreed termination would be best for all parties concerned. For the record I confirm that you remain for the moment on payroll and that your benefits remain in place. d) I should also like to confirm that the Grievance Process is continuing and I will be in a position over the next few days to let you have the notes of the meetings that I have had with the relevant employees."

[10]On 14 March 2003 the Applicant presented an Originating Application to the Tribunal, claiming equal pay and complaining, in addition, of sex discrimination, victimisation, and unauthorised deductions from wages. Under the heading "Victimisation" a number of Particulars, relevant to her treatment since raising the grievance in November, were set out and were said to be incidents of victimisation or direct sex discrimination. These included the manner in which her grievance was handled, the delay in resolving it, and, at subparagraph (iv):

"being locked out of her computer from or before 7 January 2003 and in a formal meeting on that date and without any notice being told that the Bank wanted to terminate her employment without good reason being given (but that it would "be made to look like redundancy)"

In their Notice of Appearance the Respondents' response to that sub-paragraph was as follows:

"The matter discussed at sub-paragraph 2(iv) of the Applicant's IT1 is subject to legal privilege and the Respondent does not consent to waiving that privilege."

[11]A directions hearing was then ordered to determine that issue. The Chairman referred extensively to the authorities to which he had been referred before setting out his conclusions at paragraph 16, at subparagraphs (1) to (9) as follows:

"16. The guidance and the arguments in relation to both that guidance and the putative facts lead me to the following conclusions. (1) The Applicant's complaint is that the Respondent sought to bring her employment to an end and that that was an act of direct sex discrimination or discrimination by way of victimisation. If no reference to the meeting of 7 January 2003 were permitted to be made, and Mr Martin, without any reticence on his part, argues for that complete position, then in deciding the Applicant's claim as a whole the Tribunal would of necessity be prevented from considering that fact and that part of the Applicant's claim. (2) The logical consequence of that analysis on those two premises is the result that the Applicant, being the recipient of a 'without prejudice' offer to terminate her employment on that day, would be prejudiced in these Proceedings. (3) The Applicant's primary argument, however, is that the termination of her employment was not a matter that was an extant dispute at the time of the meeting. Mr Galbraith-Marten points to the absence of the attempt to dismiss the Applicant as a ground of the grievance. He refers to the specific exclusion of the grievance from the proposed agreement, twice referred to in the meeting itself and clearly separately treated in Mr Doyle's e-mail of 10 January 2003. He therefore says that that was either not an extant agreement or, in the alternative, that it was an agreement about something that was ancillary to the matter in dispute, namely the grievance relating to sex discrimination that existed at that time. (4) Mr Martin suggests that this is artificial. He says that the Respondent must have been offering an entire, as one might call it, walk-away or hands-down agreement or deal to the Applicant that day. (5) The difficulty with that argument is that whilst one might, as a lawyer looking back, assume that in a commercial situation that is how people would be expected to behave, experience tells one that the reason there is so much resort to litigation, especially in the employment field, is precisely because people do not act as expected when resolving employment disputes or do not always act, I should say, as expected. (6) Moreover, there is no note by the Respondent of the meeting before me and due to Mr Doyle's decision not to put the proposal in writing whereby one would see clear evidence, as no doubt all parties wish there were, for the basis of the conclusion contended for by Mr Martin, the conclusion that he asks me to reach is in fact unsupported by evidence or by putative fact, rather the contrary conclusion is supported . (7) I therefore accept Mr Galbraith-Marten's primary argument that there was no extant dispute or that as to such dispute as there was, this matter was ancillary to it. I relate those matters back to the words of Lord Griffiths in Rush & Tompkins where at page 1299, as quoted in Foskett, he says: "

The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence." (8) These negotiations, such as they were, were not genuinely aimed at settlement of the Applicant's discrimination claim on the material before me. I derive assistance both from the analysis of Hoffman LJ in Muller J and Muller and reassurance from paragraph 27 -44 of Foskett, that clearly the approach to be taken is a pragmatic one. (9) In my judgment the conclusion is that this would be an abuse of the without prejudice rule because whilst 1t might be proper, and Mr Galbraith- Marten I think accepts this, to exclude details of the financial proposals made to the Applicant on 7 January 2003, primarily I think on the grounds of relevance to any issue between the parties at this stage, I do not accept that the Respondent can maintain the veil of privilege so far as to prevent any reference to the fact that it sought, albeit by a proposed agreement, to achieve the termination of the Applicant's employment on 7 January 2003." The Law

[12]It is common ground that the "without prejudice" rule is that written or oral communications, which are made for the purpose of a genuine attempt to compromise a dispute between the parties may generally not be admitted in evidence. The policy behind the rule was described by Oliver LJ in the case of Cutts -v- Head

[1984] Ch 290

at 306 as follows:

"It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of that negotiation (and that includes, of course, as much a failure to reply to an offer as an actual reply) may be used to their prejudice in the course of proceedings. They should…. be encouraged fully and frankly to put their cards on the table ……" "

The public policy justification, in truth, essentially rests with the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the Court or of trial as admissions on the question of liability." The rule is of long standing and is well recognised, and I have been referred in this hearing to a number of recent decisions of the Court of Appeal, where the nature and extent of the rule have been considered in the context of commercial disputes.

[13]It is common ground, nevertheless, that the rule applies equally to proceedings in Employment Tribunals. Following a decision of this Appeal Tribunal to that effect, in Independent Research Services -v- Catterall

[1993] ICR 1

. In that case the applicant, who was a director of the employer's company, claimed that the relationship of trust and confidence between himself and his employers had been undermined to an extent which amounted to a repudiatory breach of his contract of employment. In the course of correspondence between the parties, prior to his complaint of unfair dismissal, the applicant wrote a letter to the employers headed "without prejudice" which included in its terms an offer to remain a full time employee with a financial consideration for his ceasing to act as a director. At an interlocutory hearing an Industrial Tribunal Chairman refused to admit the letter in evidence. The employers appealed on the grounds that the "without prejudice" letter, being evidence which was inconsistent with the applicant's assertion that the relationship of trust and confidence had been undermined, should be admitted as an exception to the general principle of exclusion.

[14]The EAT held, dismissing the appeal, that the principles for excluding "without prejudice" correspondence in a Court applied equally to proceedings in Industrial Tribunals; that the letter would only be admissible if it came within a recognised exception to the general principle, namely that there would be an abuse of the rule if it was applied to exclude the "without prejudice" correspondence; that the appropriate test in such cases was whether, if the "without prejudice" material were suppressed, something amounting to a dishonest case would be prosecuted, and that since there was no such dishonesty in the present case, the privilege should remain. Knox J, giving the judgment of the Tribunal, said at page 2G:

"It is common ground that industrial tribunals as a result of rule 8 of Schedule 1 to the Industrial Tribunals (Rules of Procedure) Regulations 1985 (S.I 1985 NO 16) are not bound to apply the strict rules of evidence as they apply in court. Equally it is common ground that that does not mean that they may not apply the rules of evidence. The "without prejudice" privilege, if it is correctly so described, is one that is founded on a very clear public policy that it is desirable that parties should be free to try to settle their differences without the fear of everything that they say in the course of negotiations being used in evidence thereafter. That seems to us to be something which applies just as much, if not more, to proceedings under the Employment Protection (Consolidation) Act 1978 before industrial tribunals regarding unfair dismissals and similar matters, as it does to proceedings in court. We see no reason in principle why an industrial tribunal should adopt a different attitude with regard to the admissibility of "without prejudice" material from the proper attitude to be adopted by a court."

[15]Later, at page 6B, after referring to Foskett, The Law and Practice of Compromise, he said this: "In our view, this is a case where the point is whether or not there would be an abuse of the rule if it was applied to exclude this "without prejudice" correspondence. As often happens in difficult cases two well established and valuable legal principles collide. One is that it is desirable that courts and tribunals should have all the available material before them with which to arrive at a just conclusion in accordance with law. The other is that it is desirable that parties should be in a position freely to negotiate a compromise of their disputes without having what they say in the course of those negotiations revealed subsequently and used against them in litigation or proceedings before a tribunal. There is inevitably going to be a contradiction or conflict where an admission, or a statement of present intention, is made which conflicts with the parties' pleaded case and we quite see that in the present circumstances there is going to be a difficult conflict between the proposition that the applicant's trust and confidence was destroyed in late April 1991 and remained destroyed to 13 May and on the other hand his willingness to continue as an employee if certain financial inducements were forthcoming. But the existence of the conflict is not of itself, in our view, sufficient to warrant our giving priority to the first of the two principles, namely, that the courts should have all available material before them, over the other, namely, protection for "without prejudice" correspondence. It seems to us, particularly having regard to the authorities that are collected in Mr Foskett's book, that the yardstick that should be applied in this category of cases is whether the "without prejudice" material involves, if it is suppressed, something amounting to a dishonest case being prosecuted if the pleaded case continues. …… Other more extreme examples are given of threats in the nature of blackmail and other wholly undesirable and, indeed, criminal activities which cannot be indulged in cloaked under the privilege of "without prejudice".

[16]Looked at on that basis, the Tribunal found no dishonesty, or anything like it, on the facts of that particular case and concluded that the material should remain hidden from the Employment Tribunal. As Mr Galbraith-Marten, appearing for the Applicant, points out, the factual context for the exclusion of the "without prejudice" correspondence in that case was the inconsistency between the Applicant's letter and his pleaded assertion that the relationship of trust and confidence had been undermined. Without the element of dishonesty, this inconsistency was regarded as insufficient to permit the material to be adduced. He contrasts that situation with the situation in the present case, where the rule is sought to be applied to words used by employers in a meeting with their employee, upon which she relies, for the purposes of substantiating her complaint of unlawful discrimination. I shall return to this point when dealing with the parties' contentions and my conclusions.

[17]In In re Daintrey , a case reported in

(1893) 2 QB 116

, a written notice sent by a debtor to one of his creditors that he has suspended, or is about to suspend payment of his debts, though expressed to be written "without prejudice" was held to be admissible in evidence to prove an act of bankruptcy upon the hearing of a bankruptcy petition. Giving the judgment of the Court, Vaughan Williams J stated at page 119:

"In our opinion the rule which excludes documents marked "without prejudice" has no application unless some person is in dispute or negotiation with another, and terms are offered for the settlement of the dispute or negotiation, and it seems to us that the judge must necessarily be entitled to look at the document in order to determine whether the conditions, under which the rule applies, exist. The rule is a rule adopted to enable disputants without prejudice to engage in discussion for the purpose of arriving at terms of peace, and unless there is a dispute or negotiations and an offer the rule has no application. It seems to us that the judge must be entitled to look at the document to determine whether the document does contain an offer of terms. Moreover we think that the rule has no application to a document which, in its nature, may prejudice the person to whom it is addressed. It may be that the words "without prejudice" are intended to mean without prejudice to the writer if the offer is rejected; but, in our opinion, the writer is not entitled to make this reservation in respect of a document which, from its character, may prejudice the person to whom it is addressed if he should reject the offer, and for this reason also we think the judge is entitled to look at the document to determine its character."

[18]I was also referred to the well known passage in the speech of Lord Griffiths in Rush & Tompkins Ltd -v- GLC

[1989] 1 AC 1299

where, at 1299G to 1300G he said as follows:

"The "without prejudice" rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver LJ in Cutts -v- Head [1984] Ch 290 , 306: "

That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as was expressed by Clauson J in Scott Paper Co v Drayton Paper Works Ltd

(1927) 44 RPC 151

, 156, be encouraged fully and frankly to put their cards on the table …….The public policy and justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability." The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence "without prejudice" to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase "without prejudice" and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission. I cannot therefore agree with the Court of Appeal that the problem in the present case should be resolved by a linguistic approach to the meaning of the phrase "without prejudice". I believe that the question has to be looked at more broadly and resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation. Nearly all the cases in which the scope of the "without prejudice" rule has been considered concern the admissibility of evidence at trial after negotiations have failed. In such circumstances no question of discovery arises because the parties are well aware of what passed between them in the negotiations. These cases show that the rule is not absolute and resort may be had to the "without prejudice" material for a variety of reasons when the justice of the case requires it. It is unnecessary to make any deep examination of these authorities to resolve the present appeal but they all illustrate the underlying purpose of the rule which is to protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement. Thus the "without prejudice" material will be admissible if the issue is whether or not the negotiations resulted in an agreed settlement, which is the point that Lindley LJ was making in Walker -v- Wilsher

(1889) 23 QBD 335

and which was applied in Tomalin -v- Standard Telephones & Cables Ltd [

[1969] 1 WLR 1378

. The court will not permit the phrase to be used to exclude an act of bankruptcy: see In re Daintrey, Ex parte Holt

[1893] 2QB 116

nor to suppress a threat if an offer is not accepted: see Kitcat v Sharp

(1882) 48 LT 64

. In certain circumstances the "without prejudice" correspondence may be looked at to determine a question of costs after judgment has been given: see Cutts v Head

[1984] Ch 290

. There is also authority for the proposition that the admission of an "independent fact" in no way connected with the merits of the cause is admissible even if made in the course of negotiations for a settlement. Thus an admission that a document was in the handwriting of one of the parties was received in evidence in Waldridge v Kennison (1794) 1 Esp 142. I regard this as an exceptional case and it should not be allowed to whittle down the protection given to the parties to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts. If the compromise fails the admission of the facts made for the purpose of the compromise should not be held against the maker of the admission and should therefore not be received in evidence."

[19]The first of the three recent Court of Appeal decisions referred to in submissions by the parties was Unilever PLC -v- The Proctor & Gamble Co

[2000] 1 WLR 2436

. In this case representatives of the defendant company were said to have asserted, during a meeting expressly said to have been "without prejudice", that the plaintiff's marketing of its product infringed the defendant's patent and threatened to bring an action for infringement. The plaintiff, relying on the statements made at the meeting, brought proceedings against the defendant under section 70 of the Patents Act 1977 for threatening the plaintiff with proceedings for infringement of the patent. The judge granted the defendant's application to strike out the action as an abuse of the process of the Court. Dismissing the plaintiff's appeal, the Court of Appeal held that: the meeting was intended to be an occasion for both sides to speak freely; that there was nothing to suggest that the defendant's representatives acted in any way that was oppressive, dishonest or dishonourable; and that, therefore, it would be an abuse of process for the plaintiff to be allowed to plead anything that was said at the meeting either as a threat or a claim of right. At page 2443H, after reviewing the authorities, Robert Walker LJ said:

"Without in any way underestimating the need for proper analysis of the rule, I have no doubt that busy practitioners are acting prudently in making the general working assumption that the rule, if not "sacred" (Hoghton v Hoghton), has a wide and compelling effect. That is particularly true where the "without prejudice" communications in question consist not of letters or other written documents but of wide-ranging unscripted discussions during a meeting which may have lasted several hours. At a meeting of that sort the discussions between the parties' representatives may contain a mixture of admissions and half-admissions against a party's interest, more or less confident assertions of a party's case, offers, counter-offers, and statements (which might be characterised as threats or as thinking aloud) about future plans and possibilities."

At 2444C he identified a number of examples of exceptions when the "without prejudice" rule did not prevent the admission into evidence of what one or both of the parties said or wrote.

[20]The fourth example is of relevance in the present appeal, where, at 2444F he said as follows:

"(4) Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other "unambiguous impropriety" (the expression used by Hoffman LJ in Forster v Friedland (unreported), 10 November 1992; Court of Appeal. Examples helpfully collected in Foskett's, The Law and Practice of Compromise, 4 th ed, are two first instance decisions, Finch v Wilson and Hawick Jersey International Ltd v Caplan. But this court has in Forster v Friedland and Fazil-Alizadeh v Nikbin , (unreported) 25 February 1993; Court of Appeal, …. warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion."

At 2448A, referring to the case of re Daintrey and the passage that I have referred to above, he stated that:

"Apart from the last sentence this passage spells out the uncontroversial point that "without prejudice" is not a label which can be used indiscriminately so as to immunise an act from its normal legal consequences, where there is no genuine dispute or negotiation. The obscurity of the last sentence has been commented on by Professor Vaver but it may contain the germ of the notion of abuse of a privileged occasion which has developed in later cases. In re Daintrey was not cited below and Mr Hobbs relied on it in this court as an example of the court lifting the "without prejudice" veil so as to expose wrongdoing. But the real point of the decision was that the veil was never there in the first place."

[21]In conclusion, at 2448H to 2449B he stated:

"Whatever difficulties there are in a complete reconciliation of those cases, they make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in the Rush & Tompkins case "to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, submitting certain facts."

Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders. Lord Griffiths in the Rush v Tompkins case noted, at p 1300 c, and more recent decisions illustrate, that even in situations to which the without prejudice rule undoubtedly applies, the veil imposed by public policy may have to be pulled aside, even so as to disclose admissions, in cases where the protection afforded by the rule has been unequivocally abused." On the facts of the case he contrasted the unilateral communication in re Daintrey with the meeting that had taken place in the Unilever case. They stated at 2449F that this was:

"a high level meeting between highly skilled professionals representing the interest of multinational groups which are household names. The meeting was, in the judge's words held "in the context of ongoing discussions with a view to settling a number of issues between the two organisations."

It was an occasion for both sides to speak freely. There is nothing (beyond the bare and unembroidered pleading of a threat) to suggest that Procter & Gamble's representatives at the meeting acted in any way that was oppressive, or dishonest, or dishonourable."

[22]Finally, the authorities concerning the "unambiguous impropriety" exception to the privilege of "without prejudice" communications have recently been referred to again in the judgment of the Court of Appeal in Berry Trade Ltd-v- Moussavi & Others

[2003] EWCA Civ 715

. and were referred to again in the more recent Court of Appeal decision in Savings & Investment Bank Ltd (In Liquidation) -v- Fincken

[2004] 1 WLR 667

. In the latter case, Rix LJ referred, at paragraph 46, to the case of Forster -v- Friedland (Unreported) 10 November 1992, in which Hoffmann LJ observed:

"the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety."

At paragraph 47 he referred to the judgment of the Court of Appeal in Fazil-Alizadeh -v- Nikbin (unreported) and to the observations of Simon-Brown LJ that:

"I add only this. There are in my judgment powerful policy reasons for admitting in evidence as exceptions to the without prejudice rule only the very clearest of cases. Unless this highly beneficial rule is most scrupulously and jealously protected, it will all too readily become eroded."

Rix LJ himself expressed the view, at paragraph 57 that the purpose of the rule was:

"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."

[23]These then are the relevant authorities referred to by both parties. Mr Davies, QC for the Respondents, submits that they show, particularly in recent years, a developing trend towards a stricter application of the rule and an unwillingness to extend the categories or reach of exceptions to it. For my part, however, I consider that the rule and the public policy considerations upon which it is based, remain essentially the same, with particular judicial observations upon it arising in the particular factual contexts in which its application has fallen to be considered, most recently in the Court of Appeal. The parties' contentions

[24]It is clear that for the rule to have any application at all, there must be a dispute between the parties and the written or oral communications to which the rule is said to attach must be made for the purpose of a genuine attempt to compromise it. Mr Davies' first challenge to the Chairman's Decision is that he erred in finding that there was no extant dispute between the parties as to termination of the Applicant's employment; or, alternatively, that termination was ancillary to the matter in dispute. He submits that on the material before the Chairman, there was only one permissible conclusion, namely that by 7 January 2003 there was a dispute between the parties as to termination of the Applicant's employment. He relies on the following factors in support of this submission.

[25]Firstly, he submits that the entirety of the meeting was expressly agreed by the parties at the outset to be "without prejudice", on the basis that the Respondents' representatives would be able to talk freely. Further, he submits that in her grievance letter of 27 November, the Applicant had complained about being told that there was no job for her in the Debt Capital Markets team, about being asked by a number of people on a number of occasions whether she truly wanted to return to work, and about being told that she could only return to her desk in DCM for a few weeks to see if she could find another job with the Respondents. Further, he relies on the e-mail from the Applicant on 8 January 2003 in which she complained that on her arrival at the premises on 7 January it was clear to her that the Respondents had already decided to terminate her employment, which was subsequently confirmed at the meeting later on in the afternoon. He also refers to the fact that the Applicant, in her Originating Application, seeks to rely upon events occurring in the meeting as part of her complaints of sex discrimination and victimisation; and to the fact that the proposal in the meeting did not lead to any concluded agreement for termination. In these circumstances, the Chairman's Decision, he submits, was perverse, or alternatively he must be taken to have misdirected himself as to the proper exercise of his discretion.

[26]It is agreed between the parties that termination of the Applicant's employment had been raised by the Respondents by 16 December 2002, and certainly before 7 January 2003. Mr Galbraith-Marten submits, however, that the Chairman was entitled to conclude as he did on the material before him. He submits that the grievance lodged by the Applicant on 27 November did not relate to the perceived or threatened termination of her employment with the Respondents. On the contrary, it related to the continuing employment relationship between the Applicant and her employers, and the way in which she considered she had been treated, following her return to work after two periods of maternity leave. Her complaint was essentially one of sex discrimination in the way that she had been treated. She considered that she had been allowed to return to work, but not to her previous job, and that in that sense there had been a demotion. Although initially being asked to stay at home after raising her grievance, it was then agreed that she could return to work. She did so on 7 January and was asked to attend the meeting where the remarks were made. Mr Galbraith-Marten points out that before the Chairman, as is apparent from paragraph 16(iv) of the Reasons, Junior Counsel, appearing for the Respondents, contended that there was a deal offered at the 7 January meeting which must have been an entire or walk-away package encompassing all the matters raised in the grievance. However, the Respondents called no evidence to support that proposition and the Chairman clearly rejected it. Further, the Applicant's note of the meeting undermined it, referring to Mr Hearn's statement that termination was independent of the grievance, which would "still go on". This was confirmed in the Respondents' e-mail of 10 January, to which I have already referred.

[27]Having myself considered the material, and the parties' submissions, I am not persuaded that there was only one permissible interpretation of the limited material before the Chairman, and that the Chairman erred in concluding, as at 7 January 2003, that there was no extant dispute between the parties as to termination of this Applicant's employment, which the Respondents' remarks were a genuine attempt to compromise. On the material, it seems to me that it can reasonably be concluded that the Applicant was unhappy about her treatment on her return from maternity leave and decided to complain about it; that she wanted her grievance to be dealt with promptly and fairly, and that she wanted the relationship between herself and her employers to continue and to improve.

[28]I do not consider that the act of raising a grievance by itself means that parties to an employment relationship are necessarily in dispute. Grievance procedures are well recognised and well used in the workplace. They provide a mechanism whereby an employee who is aggrieved about a particular matter can raise it through appropriate internal channels. It may be upheld, or alternatively dismissed for reasons which the employee finds acceptable, so that the parties never reach the stage where they could properly be said to be "in dispute".

[29]Certainly, one can read into the material that the Applicant was concerned about her employment position generally, and that would have been particularly so when, initially, on her return to work on 7 January, she found that she was unable to access her computer. Mr Davies places considerable reliance on the Applicant's e-mail of 8 January in support of his submission that by the time of the meeting on 7 January there was an extant dispute between the parties as to termination. This document was, however, written only after that meeting had taken place, when her employers had made the relevant remarks and had made their position very clear. It can legitimately be regarded as a document written with the benefit of hindsight, reconstructing the events of the previous day, in the certain knowledge at the time it was written, that termination of her employment was her employer's clear wish and intention.

[30]Thus, in my judgment, it can legitimately be concluded on the material that before the Chairman that the grievance did not raise any complaint that a decision had been taken to terminate her employment rather than a move from the DCM Department; that the complaint was not that she had no job at all to return to, rather than that she did not have her old job; that at the meeting on 7 January it was made clear that the grievance was going to continue and was independent of any termination; and that there was no walk-away package being offered. It is unrealistic in my judgment to refer to the parties as expressly agreeing at this meeting to speak without prejudice, given the unequal relationship of the parties, the vulnerable position of the Applicant in such a meeting as this, and the fact that the suggestion was made by the Respondents only once that meeting had begun.

[31]The Chairman was not, therefore, obliged on the material before him to conclude that by the time of the meeting on 7 January there was an extant dispute between the parties as to termination and that the employer's statements were made in a genuine attempt at compromise of that dispute. The material, in my judgment, did not lead inexorably to that conclusion, and in fact I agree with the Decision that the Chairman reached. That being so, the "without prejudice" rule does not apply to prevent the statements made at the meeting being admissible in evidence before the Tribunal. That finding is sufficient to dispose of this appeal, but if I am wrong about that and, in deference to the skilful arguments of Counsel on the alternative and interesting points which arose in this appeal, I shall deal with those in addition, although more shortly than would otherwise be necessary.

[32]If there had been a dispute as to termination Mr Davies challenges(a) the Chairman's finding at paragraphs 16(1) and 16(2) that the Applicant would be prejudiced in the proceedings if she were unable to refer to the acts and statements of her employers at the meeting, upon which she relies, as constituting unlawful direct sex discrimination or victimisation; and

(b) the Chairman's alternative finding at paragraph 16(9), after directing himself that a pragmatic approach was required, that it would be an abuse of the rule to permit the employers, in the circumstances of this case, to maintain the veil of privilege to prevent any reference to the fact that they sought to terminate the Applicant's employment on 7 January. He submits that the pragmatic approach improperly allowed the Chairman to impose far too low a test for prejudice or abuse of a privileged occasion. The authorities, to which I have referred, make it clear that the "without prejudice" rule has a wide and compelling effect, in particular where the communications consist not of letters but of wide ranging, unscripted discussions during the course of a meeting, such as the one in the present case.

[33]Further, he submits that there must be a very clear case of abuse of a privileged occasion amounting to an unambiguous impropriety before the "without prejudice" privilege can be lost or overridden in the public interest. This, he submits, was not such a case. The Chairman therefore carried out an inappropriate balancing exercise, not in accordance with the authorities, in concluding that there could be any abuse of the rule in this case and in attributing any weight to supposed prejudice to the Applicant. He contends that the Chairman lost sight of the nature and width of the rule in what was a plain and obvious case, well within the central orthodoxies of the privilege.

[34]Mr Galbraith-Marten makes essentially two submissions in response:(1) He relies on the dicta in re Daintrey that the rule has no application to a communication which in its nature may prejudice the person to whom it is addressed. These dicta, he contends, apply generally and are not restricted to the special factual circumstances of bankruptcy; and Daintrey remains good law on the authorities. In the present case, since the employer's statements found, in part, the Applicant's cause of action under the Sex Discrimination Act 1975 she would be severely prejudiced and disadvantaged if she could not refer to them. The rule should therefore be held not to apply.

(2) In the alternative, if, as Robert Walker LJ observed in the Unilever case, these dicta are now to be seen as somewhat obscure, but yet may contain the germ of the notion of abuse of a privileged occasion which has developed in later cases, he relies on the employer's conduct as falling within the concept of unambiguous impropriety, in the context of a genuine and legitimate complaint of sex discrimination, and thus as amounting to an exception to the rule.

[35]In my judgment, Mr Galbraith-Marten's submissions are the more persuasive. What lies at the heart of the issue in this case is that this Applicant alleges direct sex discrimination and victimisation against her employers in seeking to terminate her employment after she had raised a grievance concerning discriminatory treatment following maternity leave. The sex and race discrimination legislation seeks to eradicate what the Court of Appeal have referred to as the "very great evil" of discrimination - see Jones -v Tower Boot

[1997] IRLR 168

, and I consider that it is very much in the public interest that allegations of unlawful discrimination in the workplace are heard and properly determined by the Employment Tribunal to whom complaint is made, as the appropriate forum under the legislation. Further, it is widely recognised that cases involving allegations of sex and race discrimination are peculiarly fact-sensitive and can only properly be determined after full consideration of all the facts - see Anyanwu -v- South Bank Students Union and South Bank University

[2001] IRLR 305

, and in particular the speeches of Lord Hope and Lord Steyn.

[36]It is also widely recognised that proving direct discrimination is not an easy task for any complainant. Before the recent changes to the Sex Discrimination Act, following the EC Burden of Proof Directive, the case law had established that a complainant had to prove primary facts showing less favourable treatment, from which Employment Tribunals could, if they considered it appropriate, and without any, or any adequate explanation being advanced by the Respondent, infer that the less favourable treatment was on grounds of sex. The primary facts from which inferences of unlawful discrimination could be drawn were therefore a vital part of any complaint of direct discrimination before an Employment Tribunal. In my judgment, they remain equally important under the Act as amended, where section 63A(2) now provides:

"Where on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent - (a) has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2, ……. the tribunal shall uphold the complaint unless the respondent proves that he did not commit, or, as the case may be, is not to be treated as having committed, that act."

[37]In the present case, as Mr Galbraith-Marten points out, the logical result of Mr Davies' submission is that an employer in dispute with a black employee could say during discussions aimed at settlement in a meeting expressed to be being held without prejudice, "we do not want you here because you are black" and could then seek to argue that the discussions should be excluded from consideration by a Tribunal hearing a complaint of race discrimination.

[38]Mr Davies immediately says that such a remark would obviously fall under the umbrella of unambiguous impropriety. I agree. However, Mr Davies is then faced with the unattractive task of attaching different levels of impropriety to fact-sensitive allegations of discrimination, in order to submit that the present remarks do not fall under the same umbrella. I do not regard that as a permissible approach. I would regard the employer's conduct, as alleged in the circumstances of the present case, as falling within that umbrella and as an exception to the "without prejudice" rule within the abuse principle, rather than it was as previously described, in terms of prejudice in the case of re Daintrey .

[39]I do not regard this case as creating an impermissible extension to the categories of the rule, exceptions which will always fall to be considered within the particular factual context of the case and which, in the present case concerns discriminatory conduct by employers towards one of their employees. For all these reasons this appeal must be dismissed.