Berry Trade Ltd. & Anor v Moussavi & Ors

Factual and Procedural Background

The 7th Defendant applied for permission to appeal an order permitting the Claimants, members of a global oil trading group, to adduce statements made by the Defendant during three without prejudice meetings and a related telephone conversation in 2002. The Claimants sought to use these statements at a forthcoming summary judgment hearing concerning the Defendant's counterclaim. The original proceedings arose from allegations that the First Defendant and others, including the 7th Defendant, conspired to misappropriate oil cargoes. The 7th Defendant was joined after release from imprisonment and after a worldwide freezing order was obtained against him. Multiple meetings were held between the parties to explore settlement, all expressly without prejudice. The Claimants alleged admissions in these meetings that contradicted the Defendant's pleaded case, seeking to rely on this as an exception to the without prejudice rule. The trial judge granted permission to admit the evidence, refusing the Defendant's application to appeal. The Defendant then sought and was granted permission to appeal to this court, which allowed the appeal and set aside the order permitting the evidence.

Legal Issues Presented

1. Whether statements made during without prejudice settlement negotiations can be admitted in evidence as an exception to the without prejudice rule on the basis that exclusion would act as a cloak for perjury or other unambiguous impropriety.
2. What is the appropriate legal test for admitting without prejudice communications where dishonesty is alleged?
3. Whether the evidence in this case established unambiguous impropriety sufficient to lift the without prejudice privilege.
4. Whether disputed factual issues regarding the making of statements in without prejudice negotiations can be resolved at an interlocutory stage or summary judgment hearing.

Arguments of the Parties

7th Defendant's Arguments

• The test applied by the trial judge—requiring only a serious and substantial risk of perjury—is too low and inconsistent with established authority.
• The alleged inconsistency between the Defendant's pleaded case and the statements made during negotiations does not amount to unambiguous impropriety.
• The evidence relied upon by the Claimants is ambiguous, incomplete, and subject to significant factual dispute.
• Allowing disputed without prejudice evidence to be admitted at an interlocutory stage undermines the privilege and public policy behind the without prejudice rule.

Claimants' Arguments

• The statements made by the Defendant during without prejudice meetings demonstrated dishonesty and showed that the Defence and Counterclaim were false.
• The case falls within the well-recognised exception to the without prejudice rule where exclusion would act as a cloak for perjury or unambiguous impropriety.
• Even if the statements were disputed, their admissibility could be decided at a later stage, such as a preliminary hearing or trial.
• Further evidence was sought to demonstrate that the Defendant was using the without prejudice privilege as a cloak for dishonesty.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reviewing the well-established legal principles underpinning the without prejudice rule, emphasizing its public policy purpose to encourage frank settlement negotiations by protecting communications from use as admissions. The court reiterated that exceptions to this privilege are narrowly construed and require unambiguous impropriety such as perjury or threats, not mere inconsistencies or implausibilities.

The trial judge had applied a lower standard—whether there was a serious and substantial risk of perjury—when deciding to admit the evidence. The Court of Appeal found this test too low, as it would erode the protection afforded by the without prejudice rule.

Examining the evidence solely on the Claimants' case, the court found that the alleged inconsistency between the Defendant’s pleaded case and the statements made during negotiations did not amount to unambiguous impropriety. The court noted ambiguities and factual disputes in the Claimants' evidence, including inconsistent notes and recollections, and the absence of clear, unequivocal admissions by the Defendant.

The court emphasized that the without prejudice communications consisted of lengthy, unscripted discussions without detailed transcripts, making it inappropriate to isolate select statements as admissions of perjury. It stressed that allowing such admissions would undermine the rule’s objective and discourage parties from engaging in settlement negotiations without legal representation.

Further, the Defendant denied making the statements, and the court held that the existence of a factual dispute over whether the statements were made made premature admission inappropriate. The court noted that resolving such disputes at interlocutory stages or summary judgment hearings is problematic and could lead to satellite litigation, thereby discouraging settlement discussions.

Consequently, the court concluded that the Claimants had not demonstrated the clear, unambiguous impropriety required to lift the without prejudice privilege in this case.

Holding and Implications

DISPOSED OF

The Court of Appeal allowed the appeal, set aside the trial judge’s order permitting the admission of the without prejudice statements, and refused the Claimants' application to adduce those statements as evidence. The Claimants were ordered to pay the Defendant’s costs in both courts. Permission to appeal further to the House of Lords was refused.

The decision directly affects the parties by excluding the contested without prejudice evidence and maintaining the integrity of the without prejudice privilege. The court reaffirmed the narrow scope of exceptions to this privilege, emphasizing that mere inconsistencies or disputed factual issues do not justify lifting it. No new precedent was established beyond the careful application of existing principles to the facts.