• Negotiations Concerning the Reason for Dismissal were Without Prejudice

    In Portnykh v Nomura International plc the EAT has held that negotiations between an employee and an employer over a settlement agreement were inadmissible as evidence in the employee’s whistleblowing dismissal claim under the ‘without prejudice’ rule. The EAT also held that the rule should not be disapplied on the ground of ‘unambiguous impropriety’ simply because the excluded evidence supported the employer’s case that it was the employee who had suggested the structure for his termination. It is not an abuse of the rule for a party simply to be disadvantaged by the exclusion of evidence.

    P brought a claim of automatically unfair dismissal for having made protected disclosures. His case was that he had never been given a reasonable explanation for his dismissal. NI plc’s case was that it had told P on 8 March that he would be dismissed for misconduct but that it would be agreeable to presenting the termination as a resignation. NI plc further asserted that, the next day, P suggested structuring the termination as a redundancy dismissal, which NI plc was prepared to do. Correspondence including a draft compromise agreement was then exchanged between them on a ‘without prejudice’ basis. NI plc later sought to rely on these documents as tending to establish its version of the facts. P argued that they were ‘without prejudice’ and so could not be admitted into evidence.

    An employment judge found that the ‘without prejudice’ rule did not apply because there was no ‘dispute’ in existence at the time the correspondence was entered into. She went on to find that, even if the rule were engaged, it would be an abuse to allow P to rely on it to exclude evidence showing that he requested that his dismissal should be characterised as redundancy. In the judge’s view, this would amount to ‘unambiguous impropriety’, one of the recognised exceptions to the ‘without prejudice’ rule. P appealed to the EAT.

    The EAT allowed the appeal against the judge’s conclusion that there was no extant ‘dispute’ capable of attracting ‘without prejudice’ privilege. Looking at the factual matrix prior to the exchange of correspondence, there clearly was a dispute in existence. Although there is not axiomatically a dispute whenever a compromise agreement is offered and considered, if the employer announces an intention to dismiss the employee for misconduct and there are then discussions about an alternative manner of dismissal, it seems beyond argument that there is either a present dispute or the potential for a future dispute. Even without taking account of the facts prior to the correspondence, the existence of at least a potential dispute was evident from the correspondence itself. It is not necessary for any proceedings to be extant, nor for any specific complaint of, for example, unfair dismissal to have been raised, for there to be a potential dispute.

    In reaching its decision, the EAT undertook an extensive review of the ‘without prejudice’ authorities, and specifically considered whether the existence of negotiations between the parties might be sufficient to engage the rule even in the absence of a recognised ‘dispute’. The EAT acknowledged that an argument could be made for applying the rule to negotiations if the parties have expressly or impliedly agreed that privilege will apply. The EAT did not rule out the possibility that parties may, by agreement, in a factual context unconnected with litigation, decide that conversations or correspondence will not be admissible before a court if litigation should arise, even though litigation is not at the time within their reasonable contemplation. However, it did not need to decide this point in the present case.

    The EAT also overturned the judge’s decision that the ‘unambiguous impropriety’ exception applied. The judge did not appreciate how limited the concept of ‘unambiguous propriety’ truly is and that it means something far more than being disadvantaged by the exclusion of evidence.

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