Supreme Court of Gibraltar determines settlement offer made “without prejudice” amounted to unambiguous impropriety
The legal battle between Mansion Group, a leading Gibraltar-based online gambling operator, and its former CEO, dates back to last year. Back then, the operator filed a claim against the Defendant with the courts in Gibraltar. In its claim, Mansion Group alleged that the former CEO abused his powers and misused company funds.
The Supreme Court of Gibraltar has this week considered and applied the rarely invoked “unambiguous impropriety” exception to without prejudice (“WP”) privilege. In a detailed Judgment, the Court not only dismissed the Defendant’s application to amend his defence and counterclaim on the grounds of illegality but also found that certain threats made within a settlement offer for the parties to ‘drop hands’ were such that the correspondence could not have been protected by WP privilege.
WP privilege is a legal rule designed to encourage parties to settle disputes without the fear that their negotiation communications could be used against them in court. The privilege is not absolute, and one notable exception is when a communication involves “unambiguous impropriety,” such as perjury, blackmail, or other clear abuses.
The Gibraltar Supreme Court applied this rarely invoked exception, finding that certain threats made during settlement negotiations fell within the scope of unambiguous impropriety. The exception was applied because the court determined that the threats made by the defendant in a WP letter were serious enough to warrant exclusion from WP protection. The court also dismissed the Defendant’s underlying allegations of illegality, noting that they were based on unsupported assertions without evidence from contemporaneous documents. The Defendant failed to adequately detail the corporate connections or how the alleged illegal conduct could be attributed to the Claimants.
The Supreme Court of Gibraltar’s ruling serves as a critical reminder that while WP privilege is crucial for fostering settlements, it has its limits. The case underscores that threats or improper conduct in settlement negotiations will not be protected under the guise of WP privilege and may be exposed in court. This ruling serves as a critical precedent and a reminder of the ethical standards expected in legal practice.
The Judgment is available here.
Hodge Malek KC acted for the Claimants, Mansion (Gibraltar) Limited and Onisac Limited, instructed by ISOLAS Litigation Partner James Montado and Associate James Castle.
