A whispered threat still shouts in Court: Consideration of lifting the veil of without prejudice privilege

Parties have long relied and utilised the term ‘without prejudice’ in seeking to discuss and/or resolve a claim. In the absence of such protection claims would unlikely be dealt with in advance of hearing and any lifting of the veil of privilege is one which the Courts are reluctant to take. In a recent High Court judgment, the Court was asked to so lift the veil where the communications were found not to have been drafted as an inducement to settle but to threaten and intimidate.

Background of Without Prejudice privilege 

Without prejudice privilege applies to communications which have the purpose of furtherance of settlement. In order for a claim of privilege to succeed, the party claiming it must establish that the communication was made in a bona fide attempt to settle the dispute. The intention of such communications are that same could not be disclosed  or relied upon without the consent of the parties. However, this privilege is not absolute and one that cannot always be assumed to have effect - the privilege may be lifted for a variety of reasons (Rush & Tompkins Ltd. v. Greater London Council [1989] A.C. 1280). 

QPQ v Schute

There are exceptions where the court will pierce the veil of without prejudice privilege and to include, in particular where it is used for “unambiguous impropriety”.  This exception was considered in the recent High Court case of QPQ Limited v Gerardus Henricus Michel Maria Schute [2025] IEHC 474. 

In this case the Plaintiff alleged, amongst other things, that the Defendant breached a shareholders agreement, solicitated employees and misused technology, claiming losses of €106.7 million. The Defendant sought to have “without prejudice save as to costs” (‘WPSATC’) correspondence admitted to evidence. They contended that this correspondence contained implicit threats, including references to Swiss criminal proceedings, possible expansion of criminal investigations and reputational damage, which were being used to pressure the Defendant into settling. 

In a judgement relied heavily on Forster v. Friedland (Unreported, Court of Appeal, Civil Division, 10 November 1992)wherein the Court warned that the exception of unambiguous impropriety “should be applied only in the clearest cases of abuse of a privileged occasion”, the Court found that the plaintiff went beyond merely outlining the adverse consequences of not settling:

“A party to litigation is entitled to write to the opposing party without prejudice, and outline the adverse consequences which will ensue for that party if they do not settle the case. However, in the present case, the plaintiff goes further. It suggests that the defendant “ought to consider his position [in relation] to these matters holistically…””

Mr Justice Sanfey held that:

“I do not think it can be the case that improper pressure can only be exerted expressly or overtly. A veiled threat is still a threat.”

However, the judgement cautioned that without prejudice communications should not be “picked apart” and should only be lifted in exceptional circumstances. Highlighting that:

“To do otherwise would have a chilling effect on negotiations, whereby parties might be more circumspect in what they share in a negotiation, to the detriment generally of the public policy of encouraging settlement of litigation.”

In this case, the Court found that it was satisfied that the WPSATC letter exerted pressure on the defendant which was improper, and exceeded what was “permissible in settlement of hard fought commercial litigation” allowing for the WPSATC Letters to be admitted to evidence and treated as open correspondence. 

Conclusion

Overall, parties ought to proceed with caution when using ‘without prejudice’ or ‘WPSATC’ correspondence. This case confirms that if the content of such communications are objectively improper, protection can be lost. It is important to ensure drafting is precise, circumspect and to avoid placing the other side under duress in an attempt to coerce them into settling.