AZ v by
| Jurisdiction | England & Wales |
| Judge | Mr Justice Constable |
| Judgment Date | 27 September 2023 |
| Neutral Citation | [2023] EWHC 2388 (TCC) |
| Court | King's Bench Division (Technology and Construction Court) |
| Docket Number | Case No:[REDACTED](‘Part 7 Claim’) |
[2023] EWHC 2388 (TCC)
Mr Justice Constable
Case No:[REDACTED](‘Part 7 Claim’)
Case No [REDACTED](‘Part 8 Claim’)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Mr Thomas Crangle (instructed by FG(sols) LLP) for the Part 7 Claimant/Part 8 Defendant
Mr Carlo Taczalski (instructed by SH(sols) LLP) for the Part 7 Defendants/Part 8 Claimants
Hearing date: 6 September 2023
This judgment was handed down on 27 September 2023 at 2pm. This is an anonymised and redacted version of a judgment which remains to the parties as set out in paragraph 129 below, until further Order of the Court.
AZ brings a Part 7 Claim to enforce the decision of an adjudicator, Mr Derek Pye (‘the Adjudicator’) issued on 7 June 2023 (‘the Decision’). During the adjudication, AZ deployed material which BY contended at the time, and before this Court, was subject to without prejudice privilege. By Part 8 Proceedings brought by BY, it seeks declarations relating to the status of the allegedly without prejudice material, and a declaration that as a result of the inadmissible material, the Decision is unenforceable. By Order of Mrs Justice O'Farrell the two claims were heard together.
In order to determine the matters in dispute, I have had regard to the witness statements served by AZ from Mr DH, a partner at FG(sols) LLP, Mr AS and Mr MS, both of AZ, and the statements served by BY from Mr RN, a partner at SH(sols), Mr CL and Mr NOD, both directors at THE EA, the Employer's Agent, and from Ms RG and Mr RP, both of SAM, BY's asset manager. Whilst account has been taken of the views expressed in the witness statements, the task of determining the nature of the communications has, of course, depended principally upon a review of the material itself, construed objectively. It is for this reason that neither Party sought to cross-examine any of the witnesses.
The underlying dispute arises out of works (the “Works”) to replace the stair core pressurisation systems to a Building (“The Building”). The contract for the Works (the “Contract”) was intended to be let to AZ. An issue in the adjudication, and which may be subject to further substantive proceedings, is whether a contract was finalised between the parties. The Adjudicator happened to determine that there was a finalised contract. Nothing in this judgment, when referring to ‘the Contract’, is intended to indicate any determination of that issue by me.
The following issues fall to be decided across the determination of the Part 7 and Part 8 Claims:
(1) What was the nature of the communications taking place during 2022?
(2) Were the particular documents submitted to the Adjudicator about which complaint is made subject to without prejudice privilege?
(3) Were the documents, as a result, inadmissible?
(4) Is the Decision, as a result, unenforceable?
(5) Should I make, as a matter of principle, any determination about the other documents about which complaint is made, but which are not relevant to issues (3) and (4) above?
(6) If so, what is that determination?
Issues (1) and (2) turn on considering the chronological sweep of interaction between AZ and BY and/or its agents, from the evolution of a dispute in 2021 to the indications in 2023 that negotiations were over. Before conducting this, however, it is necessary to consider the legal framework as it applies to without prejudice communications, the limited circumstances in which they are admissible and the extent to which, if submitted to a decision-maker, it may make the decision unenforceable.
B. The Law: Without Prejudice Privilege
Both Mr Taczalski and Mr Crangle agreed that the starting point is the authoritative statement in the House of Lords' decision in Rush v Tompkins [1989] AC 1280:
“ The “without prejudice” rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver L.J. in Cutts v. Head [1984] Ch. 290, 306:
“ That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J. in Scott Paper Co. v. Drayton Paper Works Ltd. (1927) 44 R.P.C. 151, 156, be encouraged fully and frankly to put their cards on the table…. The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability.”
The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence “without prejudice” to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase “without prejudice” and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission. I cannot therefore agree with the Court of Appeal that the problem in the present case should be resolved by a linguistic approach to the meaning of the phrase “without prejudice.” I believe that the question has to be looked at more broadly and resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation.” (Emphasis added).”
I am also guided by the helpful summary appearing in HHJ Havelock-Allan's judgment in RWE Npower Plc v Alstom Power Limited:
‘ (1) The justification for the privilege attaching to without prejudice communications is not only the public policy of encouraging the negotiated settlement of disputes but also the express or implied agreement of the parties that such communications should be treated as confidential. (2) The fact that a document is marked “without prejudice” is not conclusive as to its status, although it is often a strong pointer. As a general rule a document marked “without prejudice” is privileged unless it was not written as part of a process of negotiation or with the intention of promoting compromise. The test for determining whether the privilege applies is an objective one. As Laddie J held in Schering v CIPLA: “The court has to determine whether or not a communication is bona fide intended to be part of or to promote negotiations. To determine that, the court has to work out what, on a reasonable basis, the intention of the author was and how it would be understood by a reasonable recipient”. (3) Once a communication is covered by without prejudice privilege, the court is slow to lift the cloak of that privilege unless the case for doing so is absolutely plain. There are certain exceptional circumstances where it may be permissible to admit into evidence without prejudice communications which are privileged.’
In Muller v Linsley & Mortimer [1996] PNLR 74, 77 Hoffman LJ, identified one such exception, relevant to the submissions advanced by AZ. He said:
“… Many of the alleged exceptions to the rule will be found on analysis to be cases in which the relevance of the communication lies not in the truth of any fact which it asserts or admits, but simply in the fact that it was made. Thus, when the issue is whether without prejudice letters have resulted in an agreed settlement, the correspondence is admissible because the relevance of the letters has nothing to do with the truth of any facts which the writers may have expressly or impliedly admitted. They are relevant because they contain the offer and acceptance forming a contract which has replaced the cause of action previously in dispute.”
The existence of this exception was reiterated in Unilever Plc v The Proctor & Gamble Co. [2000] WLR 2436, in which Robert Walker LJ said:
‘ Nevertheless, there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. The following are among the most important instances.
(1) As Hoffmann L.J. noted in Muller's case, when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible….
…
(2) Even if there is no concluded compromise, a clear statement which is made by one Party to negotiations, and on which the other Party is intended to act and does in fact act, may be admissible as giving rise to an estoppel. That was the view of Neuberger J in Hodgkinson & Corby v Wards Mobility Services [1997] FSR 178, 191, and his view on that point was not disapproved by this court on appeal.’
These exceptions potentially give rise to the following practical issue. A Party may claim that certain communications are required to be considered in the context of a claim...
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