Practice and procedure – Strike out – Without prejudice rule – Claimant commencing proceedings concerning estate of deceased – Claimant applying to strike out parts of defence and counterclaim as abuse of process for reliance on without prejudice communications – Whether communications falling within exception to rule that without prejudice communications inadmissible in evidence – Application granted
The claimant and the first defendant were the joint administrators of a deceased’s estate. The claimant was one of several children of the deceased and the first defendant.
The second defendant was a granddaughter of the deceased and a niece of the claimant. The main asset of the deceased’s estate was farmland in and around Graig Ddu Farm, Dinas, Rhondda Cynon Taff.
The claimant alleged that she and the first defendant and another of the deceased’s daughters, had carried on the farming business there in partnership together.
The first defendant said that during negotiations aimed at settling her claim under the Inheritance (Provision for Family and Dependants) Act 1975, the claimant had made representations to the effect that the farm was or would be the sole beneficial property of the first defendant.
The first defendant said that she had relied on those representations to her detriment by not pursuing her 1975 Act claim, so that it would be unconscionable for the claimant to deny, and she was estopped from denying, that the farm was held by the estate on trust for her.
The claimant applied for an order striking out parts of the first defendant’s defence and counterclaim on the grounds that they were an abuse of process because they relied on “without prejudice” communications; alternatively, she applied for summary judgment.
The defendants argued that the communications relied on fell within the estoppel exception to the “without prejudice” rule.
Held: The application was granted.
(1) The “without prejudice” rule operated as an exception to the general rule on admissions that the statement or conduct of a party was always admissible against them to prove any fact which was thereby expressly or impliedly asserted or admitted.
It was founded, at least in part, upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish.
The starting point was the nature of the underlying policy 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 said in negotiations might be used to their prejudice in the course of the proceedings.
They should be encouraged fully and frankly to put their cards on the table.
The public policy justification essentially rested on the desirability of preventing statements or offers made during negotiations for settlement being brought before the court of trial as admissions on the question of liability: Rush & Tomkins Ltd v Greater London Council [1989] 1 AC 1280 considered.
The rule applied to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor would always head any negotiating correspondence “without prejudice” to make clear beyond doubt that if the negotiations were unsuccessful, they were not to be referred to at the subsequent trial.
However, the application of the rule was not dependent upon the use of the phrase “without prejudice”.
If it was clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations would generally not be admissible at trial and could not be used to establish an admission or partial admission: Muller v Linsley & Mortimer [1996] PNLR 74 and Cutts v Head [1984] Ch 290 considered.
(2) As a matter of principle, even where a party could in principle rely upon correspondence being “without prejudice” on contractual as well as public policy grounds, the court would not allow them to do so if it would be unconscionable.
So far as public policy was concerned, it was self-evident that, just as it was in the public interest that parties should feel completely free to negotiate under the cloak of “without prejudice”, so it was in the public interest that they should not be able to use the protection of “without prejudice” for the purpose of unambiguous impropriety.
Equally, a contractual right to “without prejudice” privilege should not be upheld or enforced where it was invoked for an improper purpose. However, mere inconsistency, in the absence of dishonesty, would not do.
There was a powerful argument for saying that if a clear and unambiguous statement was made by one party in “without prejudice” correspondence, and the statement was reasonably acted on by the other party, an objection by the first party to the correspondence being put in evidence by the second party to justify the step taken by the second party would be plainly unconscionable and would not be upheld by the court.
“Without prejudice” correspondence could be looked at by the court to see if the negotiations therein contained resulted in a settlement. Although, contract and estoppel were separate concepts, it was logical and consistent that, if “without prejudice” correspondence could be looked at to see if it gave rise to a contract, then such correspondence could also be looked at to see if it gave rise to an estoppel.
However, there was no absolute rule to that effect: Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] FSR 178 considered.
(3) The first defendant had not shown a properly arguable case for reliance on without prejudice communications on the basis of a proprietary estoppel. The basic problem was that the “representations” or “assurances” on which she relied, even if they could be described in those terms, were made in negotiations that did not lead to a settlement.
During unsuccessful settlement negotiations one party might make promises or give assurances that, despite the absence of a concluded agreement, could reasonably be relied on by the other party and thereby give rise to an estoppel.
But the case advanced by the first defendant amounted simply to an effort to make proposals in negotiations binding even though the negotiations did not result in an agreement.
Agreements in principle and settlement proposals were just that: proposals that never advanced beyond agreements in principle to the point of a concluded agreement. Nothing more than that had been identified.
The matters relied on fell squarely within the “without prejudice” rule and not within any exception to it. Accordingly, the claimant’s application succeeded and the first defendant’s counterclaim for a declaration that the entire beneficial interest in the estate and the farm was held on bare trust for her would be dismissed.
Thomas Cockburn (instructed by Edward Harris Solicitors, of Swansea) appeared for the claimant; John Dickinson (instructed by Setfords Solicitors) appeared for the first defendant.
Eileen O’Grady, barrister
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