In Forster v Friedland (10th November 1992), an unreported decision of the Court of Appeal, Hoffmann L.J. said,

‘In a respondent’s notice [Counsel] advanced two other grounds for upholding the judge’s ruling. The first was that the conversation showed that Friedland was threatening to advance what he knew to be a sham defence, namely, that there had been no agreement whether legally binding or not. I accept that a party, whether plaintiff or defendant, cannot use the without prejudice rule as a cloak for blackmail.

[Counsel] cited two cases which illustrate this proposition.

The first was the British Colombia case of Greenwood v. Fitt [1961] 29 DLR 1…in which the blackmailer was the defendant. He told the plaintiffs in the course of without prejudice negotiations that unless they withdrew their claim for fraudulent misrepresentation he would give perjured evidence and bribe other witnesses to perjure themselves, and, if the plaintiffs nevertheless succeeded, he would leave Canada rather than pay damages. The Judge of Appeal said the without prejudice rule “was never intended to give protection to this sort of thing” .
In Hawick Jersey International Limited v. Caplan, which is reported in The Times Newspaper of 11th March 1988,…the blackmailer was the plaintiff. He admitted during the negotiations that his claim for money lent was bogus and intended to put pressure on the defendant to negotiate over another matter. When the defendant “You are not going to force my hand by blackmailing me, the plaintiff replied, with disarming candour: “But I have got to. What would you do if you had been me?”

These are clear cases of improper threats, but the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety. The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true.’

Text edited for ease of reading. See also Ferster v Ferster [2016] EWCA Civ 717 here.