BRUNSFIELD METROPOLITAN SDN BHD v 1. ) SIME DARBY PROPERTY BERHAD 2. ) PACIFIC TRUSTEES BERHAD

Case Significance

Restates the unambiguous-impropriety exception to without-prejudice privilege under section 23 of the Evidence Act 1950 as a high threshold: the impropriety must be clear on the face of the communication itself, so that a non-response or an impropriety appreciable only with hindsight from later conduct does not defeat the privilege.

This High Court decision concerns the admissibility of "without prejudice" communications and the narrow exception for "unambiguous impropriety". The dispute is between Brunsfield Metropolitan Sdn Bhd and Sime Darby Property Berhad, with Pacific Trustees Berhad as escrow agent, arising from a Share Sale Agreement under which the plaintiff sold its shares in a joint-venture company to the first defendant, and under which a RM5 million stakeholder sum was held as security. The defendants applied to expunge parts of three affidavits and to strike out paragraphs of the statement of claim on the ground that they disclosed privileged "without prejudice" settlement communications.

It was largely accepted that the impugned material comprised communications made to settle an ongoing dispute that did not lead to a settlement. The general rule, reflected in section 23 of the Evidence Act 1950 and in authorities such as Malayan Banking Bhd v Foo See Moi, is that such communications are inadmissible for strong policy reasons — to encourage parties to negotiate freely. The plaintiff sought to rely on the exception that privilege will not cloak an "unambiguous impropriety", contending that the first defendant had strung it along in negotiations before submitting an allegedly fraudulent eleventh-hour claim on the stakeholder sum.

The court held that the high threshold for the exception was not met. The impropriety "must be clear on [the] face of the communication"; a "non-response" was "insufficient". What could be seen from the communications was only that the parties had asserted their respective rights and that the first defendant had not responded to a request to propose a retention amount. The reason for that non-response "was not apparent on the face of the communications"; its alleged effect "depended upon subsequent conduct and the alleged impropriety [could] only be appreciated with hindsight" — which was "fatal to the concept of 'unambiguous' impropriety". Privilege was therefore maintained.

Accordingly the court allowed the applications, expunging the privileged material and striking out the offending paragraphs, with costs, while noting that the plaintiff's central assertion that the claim was fraudulent or made in bad faith was not affected by the ruling. The judgment is a valuable restatement that the unambiguous-impropriety exception to without-prejudice privilege is a high threshold, satisfied only where the impropriety is clear on the face of the communication itself.