Thursday 12 March 2015

"Without prejudice" correspondence in Scotland and England: a divergent approach

It makes the sales pitch all but impossible, but you have to be honest. Litigation is costly, time-consuming, stressful and unpredictable in outcome, however clear the facts and law might seem to be. Clients can think that when their lawyer points this out to them it is just a back-covering exercise in case things go wrong later, or that the risk isn't really that great because the facts and the law are so clearly on their side. It can therefore be helpful to put it this way. Most disagreements in life settle without a lawyer being instructed. Most legal disputes are resolved without the need for court action. Most actions that are raised settle before judgment. So, the cases that do end up going to judgment after proof or debate comprise the tiny percentage where both parties have decided that the time, worry, cost and risk of proceeding all the way are worth it because they're going to win in the end. And 100% of the time, one of them loses.

For all those reasons, commercial litigators know that one of their first duties is to try to persuade their client not to use their services at all, at least in the sense of avoiding litigation. Even once action is raised, they must always be thinking about whether an acceptable settlement can be negotiated before the fee explosion that accompanies a proof hearing. 

The law aims at encouraging such extra-judicial settlement, as a matter of policy, and has done so for some time. In Whiffen v Hartwright (1848) 11 Beav 111 Lord Langdale M.R. excluded from evidence letters between the parties' solicitors as written "… with a view to an amicable adjustment of the questions in issue in this suit". In Hoghton v Hoghton (1852) 15 Beav 278  Sir John Romilly M.R. said that he would disregard "admissions made solely for the purpose of compromise". In the same year, in Jones v Foxall (1852) 15 Beav 388, the same Master of the Rolls declared:

"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 Iate - 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 Ietters 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."

You can still feel the fury. There's no clearer summary of the policy than that given by Lord Justice Oliver in Cutts v Head [1984] Ch 290 over a hundred years later:
"It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation."
But encouraged how? There is of course the stick: a refusal to engage with a settlement approach, though short of a formal Minute of Tender and whether before or after action is raised, can leave even a successful party vulnerable in expenses later on. But there's also the carrot: parties should feel free at all stages to discuss at least the possibility of compromise or derogation from the rights they claim they have (because that is what settlement requires) 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 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.” 
The stance adopted in Cutts v Head was approved in 1988 in Rush &Tompkins Ltd. v Greater London Council [1989] AC 1280 :

"The 'without prejudice rule' is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish"

In Unilever v Proctor & Gamble [2000] 1 WLR 2436 Robert Walker LJ found:

"the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They 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 … to speak freely about all issues in the litigation … . Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers … sitting at their shoulders as minders ."

The position was considered in 2009 by the then Appellate Committee of the House of Lords in Ofulue v Bossert [2009] 3 All E.R. 93. The Ofulues owned a property which they said the Booserts were wrongfully occupying and in 1989 they raised an action to eject them. That was struck out so a new action was raised, in 2003. However, the claim was subject to a 12 year limitation period and so, on the face of it, was time-barred. The Ofulues sought to rely on a letter written by the Bosserts' lawyer on 14 January 1992 (that is, within 12 years of commencement of the new action) which contained an offer to buy the property from them. They said that this amounted to an implied admission that they owned it and that this admission interrupted the limitation period in terms of s29(2)(a) of the Limitation Act 1980 which provides:

 "(2) If the person in possession of the land . . . in question acknowledges the title of the person to whom the right of action has accrued -
(a) the right shall be treated as having accrued on and not before the date of the acknowledgement …"

In terms of s30(1) of the Act,  a s29 acknowledgement "must be in writing and signed by the person making it" but subsection (2) allows it to be made "by the agent of the person by whom it is required to be made".

The problem was that, without doubt, the letter was headed “Without Prejudice” and, their Lordships found, “was written in the course of a genuine attempt to settle the proceedings for possession which were then in existence”. So, could it be relied on, admitted into evidence, to the Bosserts' detriment?

Lord Neuberger issued the main opinion and found:
“it is indisputable that the Letter was written with a view to settling the earlier proceedings, and that the Ofulues can have been in no doubt but that the without prejudice rule was intended to apply to it...there is plainly no warrant for overriding the rule simply because many people might think that, in relying on the rule, Ms Bossert is taking an unattractive point, or that, by changing her stance in the two sets of proceedings, she has acted unattractively.”
The appeal was, then, refused.

In Oceanbulk Shipping & Trading SA v TMT Asia Ltd and ors [2010] UKSC 44 , evidence of discussions at a “without prejudice” meeting was admitted for the purpose only of deciding what had been agreed at that meeting.

The approach in England has never been intended to be mechanistic or formulaic. Although in South Shropshire District Council v Amos [1987] 1 All ER 340 Parker LJ said that in England the appearance of the words “without prejudice” in a letter creates a presumption that “prima was intended to be a negotiating document”, in Williams v Hull 2009 EWHC 2844 (Ch), the court noted:
It is well established that a communication which is not expressed to be 'without prejudice' may nevertheless be protected by the rule, and that a communication which is expressed to be 'without prejudice' may nevertheless not be protected by the rule.”
And even in England, there is a counter view that even where some protection is afforded to particular, privileged “without prejudice” correspondence, it is not absolute, or unthinking. In the Ofulue case, Lord Scott dissented and would have allowed the appeal, saying:
"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. ..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."

This heads towards the position in Scotland. That was summarised, in argument (although we think accurately), in the petition of Sovereign Dimensional Survey Ltd in 2008:

"The Scottish and English authorities show two different approaches to this. The English approach is context based and the Scottish approach is content based. In England, protection is given to all privileged communications. In Scotland, even if something bears to be "without prejudice ", the court will still look at it if it constitutes an admission of fact."

The leading authority in Scotland is the decision in Daks Simpson Group plc v Kuiper 1994 SLT 689 where Lord Sutherland said:
"'Without prejudice' means without prejudice to the whole rights and pleas of the person making the statement. If, however, someone makes a clear and unequivocal admission or statement of fact, it is difficult to see what rights or pleas could be attached thereto. I see no objection in principle to a clear admission being used in subsequent proceedings, even though the communication in which it appears is stated to be without prejudice."

The approach in Daks was approved by Lord Prosser in Richardson v Quercus Limited 1999 SC 278:
"The letter is headed " Without prejudice to liability". Counsel for the defenders and reclaimers accepted that a docquet in such terms would not necessarily or always prevent the court from taking the content of the letter into account. The principles set out in Daks Simpson Group plc v. Kuiper 1994 S.L.T. 689 provided the appropriate test. It was accepted that in accordance with that test, if this particular letter itself contained a clear acknowledgement that liability was accepted, the letter could be looked at notwithstanding the 'without prejudice' heading."

In Albyn Realisations v Levenfleet [2007] CSOH 106 the court confirmed that in Scotland, “the addition of the words 'without prejudice' to a letter or other communication will not necessarily prevent an otherwise unequivocal statement of fact in the communication being founded on for the purposes of litigation.

And so, this is another area where the match between the words being considered masks the fact that the approaches of the courts in Scotland and England differ quite markedly. In short, a lawyer in England had better understand how his words might be interpreted in Scotland if the issue is ever likely to be considered by the courts here. He might be surprised.

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