In Poben Consultants Ltd v Clearwater Bay Golf & Country Club  HKCA 107, the Court of Appeal considered the test for determining whether a communication is made "without prejudice". Given the frequency with which parties engage in without prejudice communications the judgment is worth noting. There are some valuable lessons for those who use the label "without prejudice" without sufficient regard to the actual content of the communication.
The underlying dispute concerns ownership to certain subscription rights issued by the defendant country club. Following a disagreement between the plaintiffs and representatives of the defendant regarding entitlement to the subscription rights, a without prejudice meeting took place. There then followed a letter (marked without prejudice) from the defendant's lawyers to one of the plaintiffs. Given the context of the letter, the defendant claimed it was made without prejudice. That claim was rejected by a judge at first instance on the basis that the letter was not made in a genuine attempt to settle one or more of the issues in dispute between the parties – rather, it appeared to be an outright rejection of the plaintiff's case.
It is interesting that an appeal followed given that the letter, while no doubt confidential, does not appear to have been particularly prejudicial to the defendant's case. However, permission to appeal was granted by the Court of Appeal.
Dissatisfied with the judge's reasoning, the Court of Appeal exercised its own assessment of the facts afresh. The principal issue for determination was whether the judge had focused too much on the content of the letter and not enough on the context of the discussions; in particular, that the letter was part of a continuum of negotiations following what was an undoubtedly without prejudice meeting.
The Court of Appeal summarised the relevant legal principles:
- the test for determining whether a communication is without prejudice is an objective test, taking into account such context before the communication is made as is appropriate in the circumstances;
- the actual intention of the author or the maker of the statement is not conclusive;
- the communication must be made in a genuine attempt to settle an issue in dispute; namely, "a bona fide attempt to engage in or continue with negotiation or a genuine desire to reach a compromise" (para. 35 of the judgment).
The Court of Appeal appears to have had little difficulty agreeing with the judge that the letter was not a without prejudice communication. While the letter followed a without prejudice meeting and was marked as such, it does not appear to have evidenced (according to an objective test) any attempt at negotiation.
In these sorts of cases, hard facts sometimes make for unfortunate outcomes. The letter in question appears to have been written and sent in a wider without prejudice context and one can see some force in an argument that it was part of the continuum of the negotiations between the parties. However, in the absence of any evidence of an attempt to negotiate in the content of the letter, the defendant's claim to without prejudice privilege failed and, with it, so did its appeal.
As with all claims to privilege, a without prejudice claim falls to be decided on a document by document (case by case) basis. There may be instances where a letter in similar circumstances is so interwoven with a wider without prejudice context (such as a meeting and prior negotiations) that it will be difficult to consider it in isolation. This was not the case here.
In the meantime, the case serves as another lesson that labels are not determinative and, on a daily basis, practitioners and their clients involved with disputes should give more thought to the substance of their communications (and not just the form).