Without prejudice correspondence — Application by defendants to dismiss plaintiffs’ claim for want of prosecution — Whether without prejudice correspondence relating to attempts to settle admissible in such an application
In 1973 the
plaintiffs employed the first and third defendants, firms of architects, to
design and construct a block of flats. The plaintiffs claimed that by reason of
the negligence of the first and third defendants the floors of the building are
faulty. In the course of an application by the defendants to dismiss the claim
for want of prosecution, affidavit evidence was given on behalf of the
plaintiffs of without prejudice correspondence in which the parties were attempting
to settle the case. The Official Referee dismissed the application and held
that such evidence was admissible. The defendants appealed.
defendants, there is a preponderant public policy consideration in favour of
admitting without prejudice correspondence. The parties’ willingness to talk
frankly, and make offers and admissions, is unlikely to be inhibited by the
knowledge that the negotiations may be referred to in the very narrow field of
applications of the kind made by the defendants for the purpose, not of showing
that such offers or admissions were made, but solely for the purpose of
explaining delay and the conduct of the parties at any relevant period. The
content of the negotiations may be more significant in this context than the
mere fact that they have taken place. In any event a plaintiff in an
application of this kind may rely on an estoppel and on any relevant statements
in without prejudice correspondence to demonstrate either conduct or an implied
intimation by the defendant showing that he is willing for the case to proceed.
The following
cases are referred to in this report.
Allen v McAlpine (Sir Alfred) & Sons Ltd [1968] 2 QB 229;
[1968] 2 WLR 366; [1968] 1 All ER 543
Calderbank v Calderbank [1976] Fam 93; [1975] 3 WLR 586; [1975] 3 All
ER 333, CA
County
& District Properties Ltd v Lyell [1991]
1 WLR 683, CA
Cutts v Head [1984] Ch 290; [1984] 2 WLR 349; [1984] 1 All ER 597,
CA
Jones v Foxall (1852) 15 Beav 388
PCC of
Reading St Matthew v Sir Alexander Gibb &
Partners Unreported October 30 1989
Rush
& Tompkins Ltd v Greater London Council
[1989] AC 1280
Sheffield
City Council v Hodkin & Jones (Sheffield)
Ltd Unreported October 20 1989
Taylor v PCC of St Augustine & St George Bristol Unreported
July 7 1980
Walker v Wilsher (1889) 23 QBD 335
This was an
appeal from the decision of Judge Franks (sitting as an official referee)
dismissing an application by the first and third defendants, Michael Hyde &
Partners and Dry Halasz Dixon Partnership, to dismiss the claim by the
plaintiff, Family Housing Association (Manchester) Ltd, for damages for
negligence.
Stephen Grime
QC (instructed by Elliott & Co, of Manchester) appeared for the
appellant/defendants; Charles Bloom QC and John Phillips (instructed by
Sedgwick Phelan & Partners) represented the respondent/plaintiffs.
Giving
judgment, HIRST LJ said: This is an appeal by the first and third
defendants from the order of Judge Franks, sitting as an official referee
dated, December 18 1991, whereby he dismissed the application made by the first
and third defendants under Ord 41, r6, to strike out parts of the evidence of
the plaintiffs in answer to the first and third defendants’ pending application
that the action be dismissed for want of prosecution.
The action
arises out of the employment by the plaintiffs of the first and third
defendants, both of whom are firms of architects, to design and construct a
block of flats in Manchester, under a contract made as long ago as 1973.
The second
defendants were employed on the same project as builders, but they dropped out
of the action several years ago. The plaintiffs’ complaint relates to defects
in the flooring of the building, which consisted of a ‘sandwich’ on top of a
concrete structure, in the middle of which there is a layer of cement screed,
which proved faulty. The plaintiffs blamed the architects on the ground that
their design specified too thin a layer of cement screed; the architects say
that the blame or at least the substantial proportion thereof attaches to the
builders for bad workmanship and/or defective mixing of the cement.
The question
at present before the court arises as a preliminary issue in the defendants’
application to dismiss the action for want of prosecution. The evidence
objected to consists in part of statements in the affidavit of the plaintiffs’
solicitor, Mr Geoffrey Kenneth Thornley, in answer to the application, and in
part to correspondence exhibited to that affidavit, and focuses in particular
on references to the content of without prejudice negotiations which took place
between the parties. The essence of the objection is that, while it is
permissible to refer to the fact that without prejudice negotiations have taken
place, together with the period of those negotiations, it is not permissible to
refer to the details of what was offered, or conceded for negotiation purposes
only, or said. The defendants therefore object to various passages in Mr
Thornley’s affidavit and in the correspondence including, in particular,
references to settlement offers either precisely quantified or scaled by
reference to the total quantum of the plaintiffs’ damages and concessions on
some of the controversial issues at stake in the proceedings made for the
purpose of the negotiations only. There are also a number of references to
trial dates, in which it seems at any rate at first sight that the plaintiffs
were suggesting the fixing of an early trial date, while the defendants were
demurring to that suggestion pending the completion of the expert evidence and
of further amendments to the pleadings.
The learned
official referee dismissed the application and his
judgment:
It seems to
me, when considering questions of delay and striking out for delay, it is not
sufficient just to know there have been negotiations. If that is all a judge
knows he might well do an injustice either to a plaintiff or to a defendant. To
my mind it is sensible in such cases to see what each party was saying to the
other, and to see if for instance delay was actively encouraged, whether
protests were being made about it, whether both were just letting the action
sleep. Such an inquiry would ensure that a judge, who is deciding whether a
party should be struck out or not because of delay, would have a full picture
before him so that he could meet the full justice of the case without any
blindfold. If it be the case that in any such interlocutory application there
are matters a trial judge should not know of, then of course the judge making
the interlocutory decision sends it over for trial by another judge. That is in
fact what is going to happen in this case in any event because I have already
been told of the sums that have been offered by way of settlement and cannot
try the matter.
It is of
course common ground between the parties that correspondence marked without
prejudice cannot be referred to by either side in the course of a trial, or in
the course of proceedings following a trial such as applications for costs
(subject to the exception of a Calderbank letter).
Mr Stephen
Grime QC, on behalf of the appellants, submits that the reported authorities
establishing that principle, to which I am about to refer, extend on their
proper construction to imposing a general embargo on any reference to without
prejudice correspondence at any stage of the litigation, including applications
of the present kind, apart from a few isolated exceptions which are of no
relevance for present purposes.
Mr Charles
Bloom QC, on behalf of the respondents, submits that the reported authorities
do not on their proper interpretation debar reference to without prejudice
correspondence in an application of the present kind, and he also relies on
three unreported authorities to which I shall also be referring shortly and
which he submits support his argument.
In Jones
v Foxall (1852) 15 Beav 388 at p396 Romilly MR stated as follows in a
breach of trust action:
And here I
should conclude what I have to say, but that I think it proper to add, that I
have paid no attention to the correspondence and negotiations which occurred
between the father of the Plaintiff and the Defendant Foxall, which have been
given in evidence, and commented upon in this case. In the first place, the
Plaintiff, who is an infant, cannot be bound by any admissions made by any one
professing to act on his behalf. But, in addition to this, I find that the
offers were in fact made without prejudice to the rights of the parties;
and I shall, as far as I am able, in all cases, endeavour to repress a practice
which, when I was first acquainted with the profession, was never ventured
upon, but which, according to my experience in this place, has become common of
late — namely, that of attempting to convert offers of compromise into
admissions of acts prejudicial to the person making them. If this were
permitted, the effect would be, that no attempt to compromise a dispute could
ever be made. If no reservation of the person who made an offer of compromise
could prevent that offer, and the letters containing or relating to it, from
being afterwards given in evidence, and made use of against him, it is obvious
that no such letter would be written or offer made. In my opinion, such letters
and offers are admissible for one purpose only, namely, to show that an attempt
has been made to compromise the suit, which may sometimes be necessary; as, for
instance, in order to account for the lapse of time, but never for the purpose
of fixing the person making them with any admissions contained in such letters;
and I shall do all I can to discourage this modern and, as I think, most
injurious practice.
In Walker
v Wilsher (1889) 23 QBD 335, the Court of Appeal (Lord Esher MR, Lindley
and Bowen LJJ), ruled out the use of without prejudice correspondence by the
unsuccessful litigant seeking to deprive his opponent of costs. Lindley LJ,
having referred to a first instance case where such correspondence had been
admitted, stated as follows at p338:
That case is
the only authority that I know of for the course taken by the learned judge,
and, when we come to consider the principle on which it was decided, it does
not convince me that a judge is entitled to look at letters written without
prejudice unless he has the consent of both parties to his so doing. No doubt
there are cases where letters written without prejudice may be taken into
consideration, as was done the other day in a case in which a question of
laches was raised. The fact that such letters have been written and the dates
at which they were written may be regarded, and in so doing the rule to which I
have adverted would not be infringed. The facts may, I think, be given in
evidence, but the offer made and the mode in which that offer was dealt with —
the material matters, that is to say, of the letters — must not be looked at
without consent. I think, therefore, that there was no good cause for depriving
the plaintiff of costs, and that the decision should be reversed.
In Calderbank
v Calderbank [1975] 3 All ER 333, the principle was established in a
matrimonial case that reference could be made in an application for costs to a
without prejudice offer to settle made subject to a clearly expressed
reservation of the right to refer to it on the costs issue.
In Cutts
v Head [1984] Ch 290, the Court of Appeal had to consider whether the Calderbank
principle extended across the whole spectrum of civil litigation. Oliver LJ
stated as follows at p306 in relation to the well established meaning of
‘without prejudice’:
The answer to
the question whether, accepting that meaning, it is yet open to a party taking
advantage of the protection afforded by the use of the formula to qualify its
operation must, I think, therefore be sought in an analysis of the underlying
basis for the protection and the practice of the courts generally in relation
to its application. As to this Mr Mark’s argument may, I think, be summarised
conveniently in three propositions. (1) The protection from disclosure of
without prejudice negotiations rests in part upon public policy and in part
upon convention (ie an express or implied agreement that the negotiations shall
be so protected). (2) There is no public policy which precludes a conventional
modification of the protection to the extent suggested in Calderbank v Calderbank
[1976] Fam 93, 106. (3) The actual practice adopted in all divisions of the
High Court shows that this conventional modification has been generally
accepted and is recognised by the courts and to that extent at least public
policy has been modified.
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 RPC 151, 156, be encouraged fully and frankly to
put their cards on the table. If, however, the protection against disclosure
rested solely upon a public policy to encourage out-of-court settlement of
disputes, Walker v Wilsher, 23 QBD 335 is not readily
intelligible, for, although the court — and in particular Bowen LJ — seem to
have been prepared to assume that an inability to refer to the correspondence
on a question of costs, after judgment, would encourage settlement, it is
difficult to see, if one thinks about it practically, how that could do so. As
a practical matter, a consciousness of a risk as to costs if reasonable offers
are refused can only encourage settlement whilst, on the other hand, it is hard
to imagine anything more calculated to encourage obstinacy and unreasonableness
than the comfortable knowledge that a litigant can refuse with impunity
whatever may be offered to him even if it is as much as or more than everything
to which he is entitled in the action. 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.
It was
expressed thus by Romilly MR in Jones v Foxall (1852) 15 Beav
388, 396:
‘. . . I find
that the offers were in fact made without prejudice to the rights of the
parties; and I shall, as far as I am able, in all cases, endeavour to repress a
practice which, when I was first acquainted with the profession, was never
ventured upon, but which, according to my experience in this place, has become
common of late — namely, that of attempting to convert offers of compromise
into admissions of acts prejudicial to the person making them. If this were
permitted, the effect would be, that no attempt to compromise a dispute could
ever be made.’
Once,
however, the trial of the issues in the action is at an end and the
matter of costs comes to be argued, this can have no further application for
there are no further issues of fact to be determined upon which admissions
could be relevant. One is, therefore, compelled to seek some additional basis
for the decision in Walker v Wilsher (1889) 23 QBD 335 and it is,
as it seems to me, to be found in an implied agreement imported from the
marking of a letter ‘without prejudice’ that it shall not be referred to at
all.
Fox LJ
delivered the concurring judgment.
This passage
was approved in the House of Lords on an application for discovery of without
prejudice correspondence in Rush & Tompkins Ltd v Greater London
Council [1989] AC 1280 at p1299 by Lord Griffiths giving the leading
speech, with which the other members of the Appellate Committee agreed. Lord
Griffiths proceeded as follows:
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 Nearly
all the cases in which the scope of the ‘without prejudice’ rule has been
considered concern the admissibility of evidence at trial after negotiations
have failed. In such circumstances no question of discovery arises because the
parties are well aware of what passed between them in the negotiations. These
cases show that the rule is not absolute and resort may be had to the ‘without
prejudice’ material for a variety of reasons when the justice of the case
requires it. It is unnecessary to make any deep examination of these
authorities to resolve the present appeal but they all illustrate the
underlying purpose of the rule which is to protect a litigant from being
embarrassed by an admission made purely in an attempt to achieve a settlement.
In all three
unreported Court of Appeal cases reference was made to the contents of without
prejudice correspondence in applications to dismiss for want of prosecution,
though it seems clear that in none of them was there any objection, as in the
present case, to the admissibility of such evidence. These cases are Taylor
v PCC of St Augustine & St George Bristol (July 7 1980), Sheffield
City Council v Hodkin & Jones (Sheffield) Ltd (October 20 1989),
and PCC of Reading St Matthew v Sir Alexander Gibb & Partners
(October 30 1989). In Taylor’s case Megaw LJ stated as follows at p16:
Negotiations
in progress are not necessarily an excuse for delay which will prevail. Whether
or not they should prevail, what weight they should have in the balancing
process, depends, in my judgment, upon all the circumstances of the case, the
nature of the negotiations, how urgently they are pursued, how they are left
and what has been said by one side or another in relation to their effect upon
the urgent proceeding with the action. They may well be of importance. The fact
that there have been negotiations may be of smaller importance.
Eveleigh LJ
delivered a concurring judgment and Watkins LJ agreed.
The law is
stated as follows in the current 14th ed of Phipson on Evidence at p554:
It is
certainly the case that without prejudice communications are admissible for the
purpose of showing that they have been made. It is long established that they
may be adduced in evidence as explaining delay. Though there is little
authority on this topic, in practice without prejudice correspondence is
regularly exhibited to affidavits without objection from the court or counsel
on interlocutory applications, for example to strike out for want of
prosecution, or for discovery. In some cases this is because the
correspondence, though headed without prejudice, is in reality nothing of the
sort. In others, however, it genuinely falls within the protection accorded to
without prejudice correspondence, but is admissible because the purpose for
which it is tendered does not infringe the policy of the rules.
Mr Grime, on
behalf of the appellants, accepts that the content of without prejudice
correspondence may be of relevance in relation to applications of this kind,
particularly on the question of whether the plaintiff is guilty of unreasonable
and inexcusable delay (and also possibly on the question of whether such delay,
if established, has caused substantial prejudice to the defendant). However, he
submits that as a matter of principle, in the light of the reported
authorities, such evidence is inadmissible. He submits that the juridical basis
of the rule is founded on public policy in encouraging negotiations and
compromises, coupled with an implied or tacit agreement or convention binding
upon those who negotiate with a view to compromise.
So far as
public policy is concerned, he submits that it is impossible to have a system
which encourages compromise if there are loopholes which may lead to discovery
of what is said in negotiations. The aim is to permit parties to litigation to
talk frankly about the strengths and weaknesses of their case on both liability
and quantum, in the knowledge that any concession which they make cannot be
held against them later; thus the true purpose of the rule is not merely to
ensure that admissions or statements made should not be used to the
disadvantage of a party at trial, but to put a complete shield round without
prejudice communications in order to encourage negotiation and to enable
complete freedom of expression to parties while negotiating. The parties must,
he suggests, be able to have confidence that nothing which they say can be turned
against them at any stage or in any circumstances, and that there is in
consequence no distinction between evidence in interlocutory matters and
evidence at trial.
So far as
implied agreement or convention is concerned, he submits that it is not open to
one party to choose to disregard such an agreement without the consent of the
other, thereby breaking the agreement, unless a new convention is developed as
in the Calderbank case. Mr Bloom, on behalf of the respondents, relied
on the following basic propositions:
(i) The admission in an application of this kind
of the contents of without prejudice correspondence for the limited purpose of
explaining the passage of time, and the conduct of the parties during
negotiations, does not infringe the policy which lies behind the exclusion of
such correspondence for other purposes and on other issues. The policy is only
infringed if admissions etc are opened up on issues which will be before the
trial judge.
(ii) Wider considerations of public policy require
the disclosure of without prejudice correspondence in so far as it explains
what has been going on between the parties, so far as such activity is relevant
to the issues arising on an application to strike out, especially alleged
inordinate and inexcusable delay.
(iii) In so far as the exclusion is founded on
agreement between the parties, such agreements should by implication be
confined to the opening up of admissions and concessions on the merits of the
issues likely to be raised at the trial, and should not extend to exclusion of
material explaining delay and the conduct of the parties.
(iv) While public policy dictates that, in the
majority of cases and in relation to the majority of issues, the details of
without prejudice to discussions cannot be disclosed, there is in a residuum of
cases, including the present, a stronger public policy which dictates
disclosure. In the present case the prevailing public policy consideration is
that of enabling a party to lay all relevant facts before the court so that the
court has sufficient information to reach a just conclusion in accordance with
established precedent.
Mr Bloom also
made it clear that he intends to submit on the application that the defendants
are in effect estopped from making the present application by reason of their
conduct in inducing the plaintiff to believe that the action would proceed to
settlement or trial notwithstanding any delay by the plaintiffs, and that the
plaintiffs subsequently incurred further expense relying on that inducement.
This submission is based on the decision of the Court of Appeal in County
& District Properties Ltd v Lyell, a 1977 case decided by
Stephenson, Roskill and Bridge LJJ, and reported as a note at [1991] 1 WLR 683.
In that case the Court of Appeal, basing themselves on passages from the
classic judgments of Diplock and Salmon LJJ in Allen v Sir Alfred
McAlpine & Sons Ltd [1968] 2 QB 229, held that where a defendant has
induced in the plaintiff a belief that the action is to be allowed to go on,
and the plaintiff has his detriment, the defendant is debarred from relying
upon inordinate and inexcusable delay in order to secure the dismissal of the
action for want of prosecution: see particularly per Bridge LJ at p690G.
Mr Bloom
submits that, if he is debarred from referring to the defendants’ conduct in
the without prejudice negotiations on which he relies for this purpose to show
that the defendants so conducted themselves, he will be deprived of the
opportunity of presenting his case on this issue. Mr Grime submitted that on
this issue also the without prejudice negotiations are a closed book.
In reaching my
conclusion it seems to me important to stress at the outset that I can find
nothing in any of the reported authorities which excluded the use of without
prejudice correspondence in applications of the present kind. Those authorities
are concerned with the use of such correspondence at a trial or during its
aftermath and do not in my judgment, extend to an application of the present
kind, which essentially determines whether there should be a trial at all. I am
therefore unable to accept Mr Grime’s basic premise as to the wide ambit of
those authorities. The unreported authorities, on the other hand, while not determinative
of the issue since, as Mr Grime rightly stresses, the point at issue was not
expressly debated, do certainly, in my view, demonstrate the recognition of a
practice allowing admission of without prejudice correspondence in applications
of the present kind. This is consistent with the statement in Phipson and
suggests that there has developed a convention permitting the use of such
documents for this special purpose. If, as I think, such a convention exists,
any agreements between the parties would be subject to it (as in the case of
the conventional modification of the general rule established by the Calderbank
case). In any event, it seems to me somewhat unreal to treat such an agreement
as to be in either party’s mind at the time of the without prejudice agreement.
So far as public policy is concerned, I fully recognise the strength of the
considerations in favour of an embargo as a general rule, as established by the
reported cases, but it seems to me that there is a preponderant public policy
consideration in favour of admitting the evidence in applications of the
present kind.
The main
considerations of public policy in favour of the general rule excluding the
reference to without prejudice correspondence, on which Mr Grime so strongly
relies, seem to me to have little or no application in the present context,
seeing that I do not think the parties’ willingness to talk frankly about the
strengths and weaknesses of their case and to make provisional offers or
admissions for the purposes of negotiation only, will be to any significant
extent inhibited by the knowledge that the negotiations may be referred to in
this very narrow field, not for the purpose of showing that such provisional
offers or admissions were made, but solely for the purpose of explaining delay
and the conduct of the parties at any relevant period. On the other hand the
content of the negotiations may well be of much more significance in this
context than the mere fact that they have taken place, for the reasons given by
Megaw LJ in the Taylor case; indeed, the present case is a very good
example in view of the references in the correspondence which may show which
side was anxious to move ahead to trial and which side was favouring delay.
Moreover, the admission of such material is by no means a one-sided advantage,
since the defendant may well wish to refer to it to show that the plaintiff was
not negotiating sincerely or was dragging his feet. Consequently, I am unable
to see how exposure of the course of negotiations in this narrow context is in
any way harmful to either side. If the application succeeds, the action will be
at an end. If it fails, and the case proceeds to trial, the material will not
be available to the trial judge and he will not be in any way embarrassed.
For the above
reasons I accept Mr Bloom’s submissions, which seem to me to have particular
force in relation to reliance on an alleged estoppel, which is undoubtedly open
to a plaintiff in an application of this kind, having regard to the decision of
the Court of Appeal in the County & District Properties case. It
seems to me manifest that a plaintiff must be entitled to rely for this purpose
on any relevant statements in the without prejudice correspondence, to
demonstrate either conduct or an implied intimation by the defendant showing
that he is willing for the case to proceed.
As a parting
shot, Mr Grime submitted that the court can sever parts of without prejudice
correspondence which do not directly form part of the actual negotiations,
disregarding or covering up the remainder. This suggestion seems to me to be
unsound in principle, since the without prejudice label attaches to the letters
as a whole. Furthermore, in practice it would often be difficult to obtain the
flavour of the severed part without reference to its context in the letter as a
whole, and severance would often lead to controversy between the two sides as
to where the line should be drawn.
For all the
above reasons I would uphold the learned official referee’s order and dismiss
this appeal.
MANN and BALCOMBE LJJ agreed and did not add anything.
Appeal
dismissed with costs to be paid by first and third defendants.
