Rush & Tompkins Ltd v Greater London Council
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BALCOMBE |
| Judgment Date | 21 December 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J1221-4 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 87/1316 |
| Date | 21 December 1987 |
and
[1987] EWCA Civ J1221-4
Lord Justice Slade
Lord Justice Balcombe
Lord Justice Stocker
87/1316
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
OFFICIAL REFEREE'S BUSINESS
(JUDGE ESYR LEWIS Q.C.)
Royal Courts of Justice
MR. RICHARD FERNYHOUGH Q.C. (instructed by Messrs. Summers & Co., Beaconsfield, Bucks.) appeared for the Appellants (Second Defendants).
MR. CHARLES HOLLANDER (instructed by Messrs. McKenna & Co.) appeared for the Respondents (Plaintiffs).
This is the judgment of the court.
In December 1971 the Greater London Council entered into a contract with Rush and Tompkins Ltd. for the development of the Hanwell Estate in Ealing by the construction of 639 dwellings. In January 1973 Rush and Tompkins engaged P.J. Carey Plant Hire (Oval) Ltd. (trading as P.J. Carey Contractors and hereinafter called "Carey Contractors") as domestic subcontractors to carry out certain ground works required by the main contract. Between June 1976 and January 1979 Carey Contractors submitted to Rush and Tompkins claims for loss and expense to which they contend they are entitled under the sub-contract. So far, Carey Contractors have only received a very small part of the sum to which they claim to be entitled.
In August 1979 Rush and Tompkins started proceedings to which the GLC and Carey Contractors were defendants. By their statement of claim Rush and Tompkins claimed against the GLC a declaration that the GLC were liable to pay to them any sum which they (Rush and Tompkins) were liable to pay to Carey Contractors in respect of direct loss and expense under the sub-contract, save insofar as such loss and expense had been caused by Rush and Tompkins' default. They also claimed as against both defendants an inquiry as to the amount of the loss and expense which Carey Contractors were entitled to recover from them (which as against Carey Contractors they contended did not exceed £10,000), and certain other heads of consequential relief.
To this statement of claim both defendants put in defences, and the action was in July 1981 transferred to the Official Referee's list. However, on 12th October 1981 Rush and Tompkins entered into a compromise agreement with the GLC, under which the GLC paid the sum of £1,200,000 to Rush and Tompkins, who were to be responsible for meeting all sub-contractors' claims. It is accepted by Rush and Tompkins that that compromise agreement was preceded by correspondence "without prejudice" between themselves and the GLC. In December 1981 Rush and Tompkins discontinued the action against the GLC.
Rush and Tompkins' action as against Carey Contractors then went to sleep for over three years. We were not told why, and for the purposes of this judgment the delay is immaterial. After various interlocutory applications Carey Contractors were given leave to amend their defence by adding a counterclaim for an inquiry as to the amount due to them under the sub-contract and for payment of any amount found due on the inquiry, which they did in February 1986. (Since the hearing at first instance from which this appeal is brought, the counterclaim has been further amended and a defence to counterclaim served, but nothing now turns on this.)
This appeal concerns Carey Contractors' application for specific discovery of the "without prejudice" correspondence between Rush and Tompkins and the GLC leading up to the compromise agreement of October 1981. The compromise agreement itself has been disclosed to Carey Contractors. It is conceded by Rush and Tompkins that the correspondence may be relevant to the issues between themselves and Carey Contractors, in that it may show how the global settlement sum was arrived at and how the parties to that agreement evaluated Carey Contractors' claim, but they claim that the correspondence is privileged from disclosure because it was conducted without prejudice. This claim to privilege was upheld by His Honour Judge Esyr Lewis Q.C. in a judgment delivered on 12th February 1987, and it is from that judgment that this appeal is brought with the leave of the learned judge.
The rule which gives the protection of privilege to "without prejudice" correspondence "depends partly on public policy, namely the need to facilitate compromise, and partly on implied agreement"—per Parker L.J. in South Shropshire District Council v. Amos (1986) 1 WLR 1271, 1277. The nature of the implied agreement must depend on the meaning which is conventionally attached to the phrase "without prejudice". The classic definition of the phrase is contained in the judgment of Lindley L.J. in Walker v. Wilsher (1889) 23 QBD 335 at page 337:
"What is the meaning of the words 'without prejudice'? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one."
Although this definition was not necessary for the facts of that particular case and was therefore strictly obiter, it was expressly approved by this court in Tomlin v. Standard Telephones & Cables Limited (1969) 1 WLR 1378; see per Danckwerts L.J. at page 1383 and per Ormrod J. at page 1385. (Although he dissented in the result, on this point Ormrod J. agreed with the majority.) The definition was further cited with approval by both Oliver L.J. (as he then was) and Fox L.J. in this court in Cutts v. Head (1984) Ch. 290 at pages 303,313. In our judgment, it may be taken as an accurate statement of the meaning of "without prejudice", if that phrase be used without more. It is open to the parties to the correspondence to give the phrase a somewhat different meaning, e.g. where they reserve the right to bring an offer made "without prejudice" to the attention of the court on the question of costs if the offer be not accepted—see Cutts v. Head(supra)—but subject to any such modification as may be agreed between the parties, that is the meaning of the phrase. In particular, subject to any such modification, the parties must be taken to have intended and agreed that the privilege will cease if and when the negotiations "without prejudice" come to fruition in a concluded agreement.
The attribution of such intentions to the parties is, in our judgment, entirely consistent with the considerations of public policy which lead the court to give protection to what has been said in the course of negotiations under the "without prejudice" rule. As Oliver L.J. said in Cutts v. Head (supra) at page 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."
To the like effect was Fox L.J. at page 314:
"As to public policy it obviously is desirable to facilitate compromise rather than forcing the parties to litigate to the end. But to achieve a compromise one of them has to make an offer. He might be apprehensive that his offer might be used against him if the negotiations failed. So he would make his offer without prejudice to his position if the offer was refused. But that was unfair to the other party. It was...
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