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In QPQ Limited v Schute [2025] IEHC 474, the High Court (Court) considered the defendant's application to admit into evidence certain correspondence exchanged between the parties' solicitors.
After careful consideration, the Court ruled that the letters marked "without prejudice save as to costs" were admissible, finding that they contained an implicit threat amounting to "unambiguous impropriety".
Background to the Commercial Dispute
The plaintiff, QPQ Limited (QPQ), initiated proceedings (Proceedings) before the Court in 2024, alleging that the defendant, Mr Schute, had breached a shareholders' agreement and infringed intellectual property rights by establishing a competing Swiss company that utilised the plaintiff's intellectual property. Mr Schute was also accused of reneging on a funding commitment and soliciting key members of QPQ's research and development team. QPQ claimed a loss in enterprise value of €106m, which the defendant denied.
Mr Schute sought to have a series of letters exchanged between the parties' solicitors admitted into evidence. The central issue was whether correspondence from QPQ's solicitors, marked "without prejudice save as to costs", should lose its privileged status due to the nature of its contents, which the defendant argued amounted to an implicit threat linking the Proceedings to ongoing related Swiss criminal complaints. The defendant was not a party to the Swiss complaints.
The correspondence in question began after the plaintiff's solicitors invited the defendant to consider mediation. The defendant's solicitors declined, indicating their client's intention to defend his reputation through the Proceedings. In response, the plaintiff's solicitors sent a detailed letter on 24 October 2024, referencing both the Proceedings and the related criminal proceedings in Switzerland. The letter highlighted the potential reputational risks for the defendant if the dispute were to proceed in open court. It also suggested that the defendant should "consider his position to these matters holistically" and engage with the plaintiff on a proposal to "deal with" the civil proceedings and the Swiss criminal complaints, which could be beneficial for both parties.
This letter, and the subsequent exchange of correspondence, became the focus of the defendant's application. The defendant argued that the plaintiff's letters were designed to pressure the defendant into settling civil proceedings by implicitly threatening to involve the defendant in criminal proceedings to which he was not a party. The plaintiff denied any improper intent, maintaining that the letter was a legitimate attempt to resolve the dispute and that the criminal proceedings in Switzerland were outside of their control.
The defendant also questioned the appropriateness of the "without prejudice save as to costs" label, as the letter did not contain a settlement offer. He argued that the letter was mischaracterised, as this wording is normally reserved for communicating a Calderbank offer (an offer of settlement that is to remain unseen by a court until the issue of costs is being decided). The Court noted that, while the letter was incorrectly labelled as "without prejudice save as to costs" rather than "without prejudice", this did not deprive the letter of without prejudice protection.
Legal Principles
The Court reviewed the well-established principles of "without prejudice" privilege. It applies when a communication is made:
- in a genuine attempt to settle a dispute; and
- with the intention that, if negotiations fail, it would not be used against them in the course of proceedings.
The Court noted that the protection afforded to without prejudice correspondence is founded on public policy encouraging litigants to settle their disputes outside court. However, the rule only covers communications made in a genuine attempt to resolve differences and ultimately avoid litigation. While labelling communications as "without prejudice" is an indication that the communication is in furtherance of settlement negotiations, the words are not conclusive, and privilege is not absolute. Exceptions exist, including where there is evidence of illegality or where the communication amounts to "unambiguous impropriety".
Decision
The Court noted the importance of protecting the integrity of the without prejudice rule. The Court was conscious that such communications should not be "picked apart" and that the protection afforded to "without prejudice" correspondence should only be lifted in exceptional circumstances.
The Court was satisfied that elements of the correspondence were unambiguously improper. It noted that while parties are entitled to outline potential adverse consequences of not settling, the plaintiff's letters went further by implicitly linking the resolution of the civil proceedings to the handling of criminal complaints in Switzerland. The Court was satisfied that the correspondence exerted improper pressure on the defendant by suggesting that failure to settle could result in reputational harm and the possible expansion of criminal proceedings. Although the threat was not explicit, the Court held that the inference was clear and unambiguous. As a result, the letter lost its protection under the "without prejudice" privilege and could be admitted into evidence.
Impact
The decision illustrates when the "unambiguous impropriety" exception can override without prejudice privilege, namely, where settlement communications cross the line into coercion. The Court observed that "a veiled threat is still a threat", ultimately concluding that the pressure exerted in the letter went beyond what is permissible in the context of commercial litigation.
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