Employer Could Not Rely on “Without Prejudice” Correspondence

An employer was not entitled to rely on correspondence marked “without prejudice” as evidence of its reason for dismissal. 

In Portnykh v Nomura International plc, P claimed automatic unfair dismissal on whistleblowing grounds, alleging that he had not been given any reasonable explanation for his dismissal. His employer argued that it informed him he was being dismissed for misconduct but P asked that it be treated as redundancy and his employer agreed. Six weeks later when negotiations around a compromise agreement broke down, P claimed that he had been dismissed on whistleblowing grounds and issued tribunal proceedings. 

During the negotiations the parties had exchanged correspondence, including a draft compromise agreement, headed “without prejudice”. This included correspondence from P’s solicitor advising on the compromise agreement and requesting that the reason for dismissal be recorded as redundancy. Nomura wished to rely on this “without prejudice” material to support its version of events. 

The without prejudice rule generally prevents statements made in a genuine attempt to settle an existing dispute being used in legal proceedings. There is an exception where there has been “unambiguous impropriety” by one of the parties. 

At a pre-hearing review the employment judge ruled that the correspondence could be relied on. It did not attract without prejudice protection as it was not made in a genuine attempt to settle an existing dispute. In addition, excluding relevant correspondence "would be an abuse" of privilege. It therefore fell into the “unambiguous impropriety” exception to the without prejudice rule.

The EAT upheld P’s appeal, deciding that the without prejudice rule applied and so the correspondence was not admissible in evidence in the tribunal proceedings. 

There was clearly a dispute between the parties. If an employer announces an intention to dismiss an employee for misconduct, and there are then discussions about categorising the dismissal as a redundancy, it was beyond argument that there was either an actual or a potential dispute no matter how amicable the negotiations seemed to be. It was not necessary for proceedings to be issued, or for an allegation of unfair dismissal to have been made. The dispute did not need to be as sharply defined as that. There was a dispute about money and the reason for termination and this was sufficiently specific for the without prejudice rule to apply.

In addition, the employment judge had failed to understand how limited the concept of unambiguous impropriety is and simply being disadvantaged by the exclusion of evidence was not sufficient. 

This case was a little unusual as normally it is the employer who wants to prevent details of “without prejudice” discussions being referred to in legal proceedings and it is the employee who is seeking to argue that the without prejudice rule does not apply. A concern for employers in this regard is the question of whether there is a pre-existing dispute at the time a settlement offer is made. If there is not, it cannot rely on the without prejudice rule and the negotiations can be referred to in evidence. Interestingly, the EAT said that whilst it would not go as far as to suggest that in every case where the parties reach the stage of proffering and considering a settlement agreement there is a “dispute” or “potential dispute”, it considered that that will very often be the case.

On 29 July 2013, a new concept of a “protected conversation” was introduced which allows employers and employees to negotiate an agreed termination, irrespective of whether there is already a dispute between them. Those discussions cannot be referred to in subsequent unfair dismissal proceedings. However, this would not have helped the employee in this case as protected conversations are only inadmissible in ordinary unfair dismissal claims and not claims for automatic unfair dismissal, such as unfair dismissal on whistleblowing grounds. He would therefore have needed to rely on the without prejudice rule in any event.