Sticking ‘without prejudice’ at the top of your letter means you can say what you like without it being repeated in court, doesn’t it? Actually, it’s not that simple, warns Rob Horne
Without what? “Without prejudice“ – meaning to tell someone something they really won’t like in the belief that they will never be able to tell anyone else about it. An analagy might help: a blockwork wall that may reflect badly on the builder may pass an inspection if it is hidden behind a smooth skim of plaster which cannot be removed to check what is underneath. These common perceptions both consider without prejudice protection as something to hide behind. However, neither is really the purpose or the effect of without prejudice protection.
Without prejudice protection is not the only way to keep documents out of the sight of a judge but it is, perhaps, the method most often used and least understood. Without prejudice protection is a form of privilege intended to allow parties the commercial freedom to negotiate without the fear that those negotiations may be shown to a judge who may draw an inference from them.
It is public policy that the law should allow and assist parties to avoid the need to take their disputes to court. How then does without prejudice protection arise? Is it as simple as writing the words at the top of the page?
Without prejudice protection will arise regardless of whether any communication is stated to be made without prejudice, although using those words does set up a presumption that that is the case. This is particularly important with the reduced formality but increased use of email.
Whether the protection is achieved is a factual matter. The criteria for that test were recently re-examined by the Court of Appeal in Framlington vs Barnetson. The facts of this case were not related to the construction industry but the principles will be familiar, and the judgment gives useful guidance. It also produces a complication with its application to the construction industry.
In Framlington, the Court of Appeal found that discussions about a variation to a contract could not be protected by without prejudice privilege because they arose when there was no litigation, actual or envisaged, and therefore no dispute. The test applied by the Court of Appeal was whether the parties considered that if the negotiations failed, litigation would follow.
As grown-ups who understand the realities of the construction industry, adjudicators should have a free hand. Without prejudice protection in this context may be a moot point
How might that position work if applied to ordinary construction situations? Should the thought of litigation include consideration of adjudication? If the answer to that is yes, would it catch every letter ever generated? And if not, would almost nothing be caught, since litigation is so rarely considered in these days of the Construction Act?
The purpose of the without prejudice rule is, in the widest sense, to reduce the use of formal dispute resolution. This leads to a ready conclusion that without prejudice protection should be given if adjudication is considered. However, where time periods
are so abbreviated and cash flow is central, why should there be any such protection? Does it serve public policy? For instance, if consideration of adjudication were the key, all commercial discussions on valuations or claims at any time are likely to be on a without prejudice basis as adjudication itself incorporates any dispute or difference at any time. It is a fact that these commercial discussions take place. The question is how they should be dealt with.
In Specialist Ceilings vs ZVI Construction it was accepted by both parties that without prejudice documents had been given to an adjudicator. Far from refusing to look at them the adjudicator accepted that those sorts of communication were quite normal and to be expected. He did not use them to reach his decision but he did acknowledge their existence. The Technology & Construction Court upheld that approach in identifying that the adjudicator had not been at all surprised to learn that there had been commercial discussions but that he had quite rightly not relied on them to reach his decision. If he had showed bias as a result of the discussions being sent to him it may have been different, but he hadn’t.
The message from the court seemed to be that adjudicators are grown-ups who are perfectly capable of understanding the realities of the construction industry and should therefore be given a relatively free hand. This being the case, the existence of without prejudice protection in the context of adjudication may well be a moot point.
The law of without prejudice protection is complex. Every factual situation will be different. It may be that there is no absolute exclusion of without prejudice material from adjudication but testing that may lead to a successful challenge to any decision made. One thing is certain though, writing “without prejudice“ on a letter is not enough.
Robert Horne is a partner in Trowers & Hamlins