(back to preceding text)

23.  The more modern cases, too, treat the protection afforded by without prejudice negotiation as a protection in relation either to the proceedings or to the issues sought to be settled. In Cutts v Head [1984] Ch. 290 the question for decision was whether the content of settlement offers made “without prejudice” could be admitted into evidence for costs purposes. Oliver LJ examined, at 306, the policy justification for the protection afforded by the “without prejudice” label.

“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 as 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 … may be used to their prejudice in the course of the proceedings

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“ (Emphasis added)

He went on at 307

“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.”

Applying these remarks to the present case, the acknowledgement of the title contained in the letter of 14 January 1992 was in no sense “an admission of fact to be determined” in the action. The Ofulues’ title was the basis both of their possession claim and of the Bosserts’ pleaded defence.

24.  Fox LJ, while agreeing with Oliver LJ as to the result, placed the protection to be afforded to the “without prejudice” offers not only on public policy but also on implied agreement between the parties (see 314 B). Insofar as implied agreement is the juridicial basis of protection given to without prejudice offers or negotiations, the protection must, in my opinion, extend as far as but no further than the parties can reasonably be taken to have agreed. And I can see no sensible basis on which it can be supposed that the parties’ implied agreement extended to providing immunity from discovery or admission into evidence of factual statements that were common ground between the parties and the basis on which their respective cases in the litigation rested.

25.  In Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 this House examined the scope of the protection afforded by the “without prejudice” label. The plaintiffs, Rush & Tompkins, having entered into a building contract with the GLC, the first defendants, and engaged the second defendants as sub-contractors, commenced proceedings against the GLC for, inter alia, a declaration that the GLC was liable to re-imburse them the sums for which they might be held liable to pay the second defendant, and against the second defendants for an account and enquiry as to the amount due from them to the second defendants. Without prejudice negotiations between Rush & Tompkins and the GLC led to a compromise under which the GLC paid to Rush & Tompkins £1.2 million and Rush & Tompkins undertook responsibility for all claims made by the second defendants. The second defendants then sought an order against Rush & Tompkins for discovery and production for inspection of the without prejudice documents that had led to the compromise agreement with the GLC. Lord Griffiths, with whose opinion each of the other members of the Appellate Committee agreed, cited, at 1299, with approval, the passages from the judgment of Oliver LJ in Cutts v Head (supra) that I have cited and commented, at 1300 C/D that the “without prejudice” authorities

“… all illustrate the underlying purpose of the rule which is to protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement.”

If that is the underlying purpose of the rule it can hardly apply in the present case to the acknowledgement of title in the 14 January 1992 letter. The Bosserts’ offer to purchase had certainly been made in an attempt to achieve a settlement but the acknowledgement of title implicit in the offer cannot possibly be described as an “admission made purely to achieve a settlement". It was the basis of their own pleaded defence. Be that as it may, Lord Griffiths continued, at 1300 E/F to comment that

“There is also authority for the proposition that the admission of an ‘independent fact’ in no way connected with the merits of the cause is admissible even if made in the course of negotiations for a settlement.”

The Ofulues’ title to 61 Coborn Road was in no way connected with the merits of the cause being litigated. After referring to Waldridge v Kennison (1794) 1 Esp 142 with some lack of enthusiasm Lord Griffiths then said that

“If the compromise fails the admission of the facts made for the purpose of the compromise should not be held against the maker of the admission and should therefore not be received in evidence”

The acknowledgement of the Ofulues’ title to 61 Coborn Road cannot be described as an “admission … for the purpose of the compromise". It had been common ground between the parties throughout. At 1301 Lord Griffiths summed up:

“I would therefore hold as a general rule the ‘without prejudice’ rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement.”

This summary must be read together with the foregoing discussion by Lord Griffiths of the rule and its purposes.

26.  My Lords, Lord Griffiths’ remarks in the Rush v Tompkins case, representing as they do the ratio of the House’s decision in that case, cannot, in my respectful opinion, be taken to permit the extension of the “without prejudice” rule to cover a statement of fact that, far from being an issue in the litigation, is common to the pleaded cases of both parties. Whether or not such a statement can sensibly be regarded as an “admission", it cannot be described as an admission against interest (see Unilever Plc v The Proctor & Gamble Co. [2000] 1 WLR 2436, 2448H-2449A per Robert Walker LJ).

27.  Another authority to which I should refer is the judgment of Hoffmann LJ (as he then was) in Muller v Linsley & Mortimer [1996] PNLR 74. The plaintiff sued solicitors for professional negligence. The damages he sought to recover related to loss he suffered when dismissed as a director of a private company leading to a forced sale of his shares in the company. The plaintiff had sued the other shareholders but the action was settled after without prejudice negotiations. In his action against the solicitors the plaintiff pleaded that the settlement of his action against the other shareholders had represented a reasonable attempt to mitigate his loss. The solicitors then sought discovery of the without prejudice documents that had led to the settlement. The Court of Appeal allowed the solicitors’ appeal and ordered production of the documents. Leggatt and Swinton Thomas LLJ based their decision on the implied waiver by the plaintiff of the protection from discovery that the without prejudice rule might otherwise have provided. But Hoffmann LJ based his decision on an analysis of the public policy that underlay the without prejudice rule and concluded, at 79D, that

“The public policy aspect of the rule is not … concerned with the admissibility of statements which are relevant otherwise than admissions i.e. independently of the truth of the facts alleged to have been admitted.”

He cited In re Daintrey; Ex p Holt [1893] 2 QB 116 as an example

“A without prejudice letter containing a statement which amounted to an act of bankruptcy is admissible to prove that the statement was made” (79F)

and, at 80A, expressed the opinion that

“the public policy rationale is … directed solely to admissions.”

28.  If Hoffmann LJ’s view as expressed in the Muller case is correct, this appeal must be allowed. The acknowledgement of title contained in the 14 January 1992 letter was not an admission by the Bosserts. It was, as I have repeated, I fear ad nauseam, the basis on which their pleaded Defence was based.

29.  The final authority to which I should refer is Bradford & Bingley Plc v Rashid [2006] 1 WLR 2066, in which this House had to consider whether a letter from a debtor containing an offer to pay “as a final settlement” a considerably lesser amount than the outstanding amount due could constitute an acknowledgement of the debt for the purposes of section 29(5) of the 1980 Act. The letter had not been marked “without prejudice". The Appellate Committee were in agreement that the letter constituted a clear acknowledgement. The majority concluded that the without prejudice privilege did not apply to open correspondence that did not form part of compromise negotiations but Lord Hoffmann, repeating the views he had expressed in Muller about the scope of the public policy rationale for the without prejudice rule, said that

“… the without prejudice rule, so far as it is based upon general public policy and not upon some agreement of the parties, does not apply at all to the use of a statement as an acknowledgement for the purposes of section 29(5)…” (2072E)

and that

“All an acknowledgement does under section 29(5) is to allow the creditor to proceed with his case. It lifts the procedural bar on bringing the action” (2072 G).

30.  My Lords, I must now try to draw the threads together. This is not a case in which an issue of discovery arises. The appellant has the 14 January 1992 letter in her possession. The issue is whether that letter can be admitted in evidence as an acknowledgement of title for section 29 purposes. The only basis on which the letter could be excluded would be by the application of the without prejudice rule and there are two alternative bases on which that rule might have to be applied, namely, public policy and implied agreement. Both were discussed by Fox LJ in Cutts v Head (supra) and by Hoffmann LJ in the Muller case.

31.  I would, for my part, rule out implied agreement as a possible basis for applying the without prejudice rule in this case. The extent of the implied agreement between the parties that can be spelled out of the without prejudice label under which the 1991/1992 settlement correspondence was conducted was that the correspondence would not be admissible at the trial of the then pending action, or in any other proceedings in which the issues in that action were live issues. To give any greater extent than that to the agreement than can be implied from the correspondence would surely divorce the application of the rule from any reasonable consensual basis. Why should the parties be thought to have had anything in mind other than that the correspondence was without prejudice to their respective cases in the pending litigation? If the without prejudice rule is to be applied so as to exclude the 14 January 1992 letter from admission into evidence in the present case as an acknowledgement of the appellant’s title, the justification for that application must, in my opinion, be public policy.

32.  The public policy justification for refusing to allow a without prejudice communication in the course of compromise negotiations to be given in evidence is that to do so might inhibit parties to a dispute from settling their dispute without recourse to litigation, or, if litigation were already pending, without recourse to a trial, or, if a trial were in progress, without troubling the judge. These are important public policy considerations, but they are not the only ones. The policy approved by Parliament and enacted in section 29 of the 1980 Act is that title to land should not be lost if, within the twelve year limitation period prescribed by section 15, the person in adverse possession has made a written acknowledgement of the title of the owner of the land. In Cutts v Head Oliver LJ and Fox LJ both came to the conclusion that the public policy underlying the without prejudice rule did not, after the conclusion of the trial, bar the admissibility of without prejudice communications for the purpose of decisions as to what costs orders should be made.

33.  In Matthews & Malek’s Disclosure 3rd Ed. (2007) at paras. 11.127 to 11.132 the authors deal with the extent of the without prejudice evidential rule and, at para. 11.129 are listed a number of situations where without prejudice communications have been admitted into evidence in subsequent litigation for other purposes. These include - constituting an act of bankruptcy (In re Daintrey; Ex p Holt [1893] 2 QB 116), a severance of a joint tenancy (McDowell v Hirschfield Lieson & Rumney, The Times, 13 February 1992), a trigger for a rent review clause (Norwich Union Life Insurance Society v Tony Waller Ltd (1984) 270 EG 42, disapproved on another point in South Shropshire DC v Amos [1986] 1 WLR 1271), seeing whether the negotiations give rise to an estoppel (Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] FSR 178) and for the purpose of explaining delay when resisting a laches defence or a strike out for want of prosecution application. All these examples, and the others referred to at para. 11.128, have in common that the purpose of admitting the without prejudice communication into evidence was not to assist in establishing the case of the party in question on any of the disputed issues that the without prejudice communications had been attempting to settle. The purpose, independent of the issues in dispute, was to establish some independent fact.

34.   In the present case, the fact sought to be established by the admission into evidence of the without prejudice 14 January 1992 letter is that on that date the respondent acknowledged the appellant’s title to 61 Coborn Road. That fact was not only a fact not in dispute in the proceedings sought to be settled but was the common ground basis on which each side had pleaded its case. How can it sensibly be argued that the possibility of admission into evidence, in future litigation that neither party could have had in mind, of letters recording the acknowledgement of common ground facts could act as an inhibitory factor, discouraging attempts to settle the then current action? A public policy rule should not be allowed to extend further than the public policy in question requires and to apply the rule mechanistically, without regard to the limits that the purpose underlying the rule should dictate, cannot, in my respectful opinion, be right.

35.  It may be that Lord Hoffmann is right in the view he expressed in Rashid (para.16) that the without prejudice rule, insofar as it is based on public policy, does not apply to the use as a section 29 acknowledgement of a statement contained in a without prejudice letter. In the present case, however, that result can be justified, more securely and perhaps less contentiously, by the proposition that the public policy rule does not apply where the statement in question is common ground between the parties, is the basis on which they have pleaded their respective cases and where the absence of the protection afforded by the rule cannot sensibly be thought to be apt to inhibit their attempts at compromise. There has been no previous case in which the without prejudice rule has been held to apply to a statement with those characteristics. There is no reason of policy that I can discern why your Lordships should extend the rule so as to cover such a statement and there are, in my opinion, reasons of statutory policy, evident in section 29, why your Lordships should not. I would allow this appeal.

LORD RODGER OF EARSLFERRY

My Lords,

36.  I have had the advantage of considering in draft the speech to be delivered by my noble and learned friend, Lord Neuberger of Abbotsbury. I agree with it and, for the reasons he gives, I too would dismiss the appeal. I add a few observations on the general issue raised by the without prejudice letter of 14 January 1992.

37.  In Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 the plaintiffs, Rush & Tompkins, were the main contractors for a building project. They sued their employers, the Greater London Council, as first defendants, and one of their subcontractors as second defendants. Rush & Tompkins and the Council entered into negotiations which led to the settlement of the claim against the Council. The subcontractors then sought discovery of the pre-settlement correspondence between the plaintiffs and the Council in order to use it in defence of the continuing claim by the plaintiffs against them. This House held that, although the correspondence contained relevant material, the subcontractors were not entitled to recover it. The decision is important because it establishes that not only the parties to the correspondence, but third parties also, are prevented from making use of the contents of without prejudice correspondence. This in turn shows that, while part of the justification for excluding reference to what was said is to be found in the understanding of the parties to the relevant correspondence or negotiations, the rule is actually a privilege which forms part of the general law of evidence and is based on public policy. So, unless the parties make some agreement to narrow or broaden its effect, the scope of the privilege is a matter of general law and is not based on the supposed boundaries of a notional agreement between the parties.

38.  Over the years the courts have recognised certain exceptions to the privilege which are made when the justice of the case requires it. They were helpfully summarised in the judgment of Robert Walker LJ in Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436, 2444-2445. As Lord Griffiths noted in Rush & Tompkins [1989] AC 1280, 1300D-G, there is also some authority to the effect that an admission of an “independent fact", lying outside the area of the offer to compromise, is admissible. That approach has been developed in the Court of Session in cases which were discussed by my noble and learned friend, Lord Hope of Craighead, in Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2075-2077, paras 26-30.

39.  Undoubtedly, it would be possible to carve out an exception along those lines. The question is whether creating such an exception would be consistent with the overall policy behind the rule. Pretty clearly, Lord Griffiths thought not. In Rush & Tompkins [1989] AC 1280, 1300F-G, he went out of his way to emphasise that the exception in Waldridge v Kennison (1794) 1 Esp 142 “should not be allowed to whittle down the protection given to the parties to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.” In my view there must indeed be a significant danger that allowing in evidence of admissions of “independent facts” would undermine the effectiveness of the rule as an encouragement to parties to speak freely when negotiating a compromise of their dispute. As was said many years ago,

“If the proper basis of the rule is privilege, is there any logical theory under which the court can, by methods akin to chemistry, analyze a compromise conversation so as to precipitate one element of it as an offer of settlement and the other as an independent statement of fact? Would not the layman entering into a compromise negotiation be shocked if he were informed that certain sentences of his conversation could be used against him and other sentences could not?”

See J E Tracy, “Evidence - Admissibility of Statements of Fact made during Negotiation for Compromise” (1935-1936) 34 Michigan Law Review 524, 529. In Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2071, para 13, Lord Hoffmann argued along essentially similar lines that the approach in the Scottish decisions should not be followed in England. At the hearing of the present appeal Mr Wilson QC did not rely on the Scottish decisions and so it is unnecessary to come to any concluded view on the point. I accordingly go no further than to say that the approach in the Scottish cases appears to be inconsistent with the general approached endorsed by this House in Rush & Tompkins v Greater London Council [1989] AC 1280.

40.  In much the same way as with admissions of “independent facts", it would be technically possible to say that the exclusion rule should not apply to statements in correspondence or negotiations which were to be treated not as admissions but as “acknowledgments” for the purposes of section 29(2)(a) of the Limitation Act 1980 (“the 1980 Act”). Lord Hoffmann developed an argument to that effect in the Court of Appeal in Muller v Linsley & Mortimer [1996] PNLR 74 and later in Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2072-2073, paras 16-18. No other member of the House adopted his reasoning on that occasion. My noble and learned friend, Lord Walker of Gestingthorpe, now elaborates his concerns about the viability, in this context, of a distinction between admissions and acknowledgments.

41.  The present case illustrates some of the difficulties in applying such a distinction, especially to something like the offer to purchase which no-one at the time would ever have had occasion to see as either an acknowledgment or an admission. In Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2072, para 16, Lord Hoffmann argued that, when a statement is used as an acknowledgment for the purposes of section 29(5) of the 1980 Act, it is not used as evidence of anything: it is not evidence of acknowledgment but the acknowledgment itself. He went on to say that, if the action proceeded, however, it might also be evidence of an indebtedness at trial.

42.  In the present case, it is agreed that, but for the without prejudice point, the offer to purchase would constitute an acknowledgment of the appellant’s title for purposes of section 29(2)(a) of the 1980 Act. And, in one way, Mr Crampin QC was right to say that this was because, by making the offer, the Bosserts were impliedly admitting that Mr and Mrs Ofulue owned the house. So, he said, evidence of the offer should be excluded as being evidence of an admission made in the course of negotiations to settle the earlier action. But it is an unusual kind of admission since, if the present action went ahead, it would not actually assist the claimants in establishing title to the house: the Bosserts’ extrajudicial view on that matter would count for nothing. So, even without the privilege relating to without prejudice correspondence, evidence of the admission would presumably be excluded as being irrelevant.

43.  Despite the difficulties, I would be prepared to assume that the law could make the distinction favoured by Lord Hoffmann. But should it do so? His argument, that it should, really depended on his view that the main purpose of the privilege is “to prevent the use of anything said in negotiations as evidence of anything expressly or impliedly admitted...": Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2072, para 16. While that may well be the commonest application of the rule in practice, its rationale appears to be wider: it is that parties and their representatives who are trying to settle a dispute should be able to negotiate openly, without having to worry that what they say may be used against them subsequently, whether in their current dispute or in some different situation. If that is right, then there is no obvious justification for drawing a line between admissions and acknowledgments. In the words of Robert Walker LJ in Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436, 2448H-2449C, the modern cases

“show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in the Rush & Tompkins case [1989] AC 1280, 1300: ‘to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.’ Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders.”

In my respectful view, these considerations justify the application of the rule so as to exclude reference to the offer to purchase in the present case. There is nothing to suggest that the appellant and her husband failed to press ahead with their original action or delayed in starting the present action because they understood that, by making the offer, the Bosserts had been acknowledging their title. Indeed there is nothing to suggest that, having been promptly rejected, the offer entered into their consideration at all. In these circumstances I do not consider that the justice of the case requires an exception to be made to the privilege.