The English High Court's recent decision in FW Aviation (Holdings) 1 Ltd v VietJet Aviation Joint Stock Company is a useful reminder to parties that, unless they can show that unambiguously improper statements have been made by their opponent in the course of settlement negotiations, they are unlikely to be able to refer to those statements in subsequent litigation.
Facts
The case concerned four aircraft that were leased to VietJet under a structured leasing arrangement financed by two banks. In 2021, following the Covid-19 pandemic, VietJet defaulted on rent payments. It attempted to restructure its rental obligations but in October 2021, the banks agreed to sell their respective positions to FitzWalter Capital, a fund based in London. FitzWalter then sought to exercise the lessors' alleged rights to terminate the leases, demand the return of the aircraft, and claim various alleged debts and indemnities from VietJet. VietJet denied the leases had been validly terminated or that FitzWalter had validly acquired the rights on which it relied for its claim. In the alternative, VietJet claimed relief from forfeiture.
In contending that relief from forfeiture should be refused, FitzWalter sought to rely on alleged threats said to have been made by VietJet's Vice-Chairman, Mr Donal Boylan, at a without prejudice meeting. However, VietJet applied to strike out the material on the basis it was inadmissible because it was subject to without prejudice privilege.
Without prejudice privilege
Unlike legal professional privilege, without prejudice privilege is a rule of admissibility – communications which are entered into as part of a genuine attempt to settle an existing dispute will generally not be admissible as evidence of admissions. The rule exists to encourage litigants to settle their differences by speaking freely during settlement negotiations, without risk that anything they say will be used against them.
However, there are various exceptions to the rule, including where the issue is whether without prejudice communications have resulted in a concluded settlement, as evidence of fraud, misrepresentation or undue influence, or as evidence of perjury, blackmail or other unambiguous impropriety. The latter exception only applies in the clearest cases of abuse of a privileged occasion, such as where a claimant makes baseless accusations in an attempt to reach a settlement.
The remarks
According to a contemporaneous note made by FitzWalter's representative during the call, Mr Boylan allegedly remarked:
"You can wait till you go to court and get an English judgement and then go to Singapore too and Vietnam and get another judgement. I cannot speak for the Vietnamese Government but my sense is they are not going to collaborate with anyone from the UK or Singapore or anywhere else, and this could go on for years, but that's not a threat, that's just an observation, a Donal Boylan observation."
He allegedly acknowledged later in the same conversation that "you have terminated the leases and you have the right to demand the aircraft be [returned]", but warned that "you can go through a court process in the UK to obtain that and you will probably fairly quickly get a judgement in your favour, then you will have to go through a process in Vietnam and you will soon discover how Vietnam works".
FitzWalter submitted that these words constituted threats that if it did not accept some form of offer from VietJet, VietJet and the Vietnamese Government would frustrate enforcement and/or the export of the aircraft.
FitzWalter also submitted that VietJet had waived its right to claim privilege in respect of the without prejudice communications as it delayed in objecting to the use of such material, and it served a witness statement from Mr Boylan on the footing that the material would be relied on at trial.
The decision
The judge held that here there was no unambiguous impropriety which led to a loss of privilege in what was clearly a without prejudice conversation.
In coming to this conclusion, the judge emphasised that in order for the exception to apply and for the material to be admitted, it was necessary to show:
- That the words were "unambiguously spoken" (the evidential test). However, as the Court of Appeal noted in Motorola Solutions v Hytera Communications (2021), it will be rare to satisfy this element of the test in a case that does not involve statements made in documents or recorded on tape. Here, although the note was made shortly after the without prejudice conversation took place, Mr Boylan denied that it was accurate and so the judge concluded that there was real room for doubt as to what was in fact said.
- That the pleaded words conveyed an "unambiguously improper" meaning (the qualitative test). However, in this case, it was not even arguable that the words constituted the alleged threats, still less that they carried that meaning unambiguously. The words were more naturally interpreted as a warning as to difficulties of enforcement in Vietnam. The judge added that such a warning was not to be equated with blackmail.
The judge also rejected the suggestion that VietJet had waived the right to claim privilege in respect of the without prejudice communications. VietJet's silence did not amount to consent, a waiver was not to be lightly inferred, and VietJet had consistently objected to the use of the material. The judge noted that unlike legal professional privilege, without prejudice privilege is a bilateral or joint privilege, and both parties must agree to a waiver, which was not the case here.
Concluding remarks
The unambiguous impropriety exception is a narrow one, and one which will only apply in truly exceptional cases. The court certainly has no desire to deter parties from entering into negotiations for fear of being drawn into satellite litigation on whether their remarks are covered by without prejudice privilege.
However, parties should always remember the limits of the rule, and in particular the fact that it will only apply to communications that are part of a genuine attempt at settlement. Attaching a "without prejudice" label to a meeting or statement will not necessarily be determinative, and parties should, therefore, exercise care if they are concerned that their statements may end up before a court.