Rush & Tompkins Limited (Appellants)
v.
Greater London Council and others (Respondents)
JUDGMENT
Die Jovis 3° Novembris 1988
Upon Report from the Appellate Committee to whom was
referred the Cause Rush and Tompkins Limited against Greater
London Council and others, That the Committee had heard
Counsel on Tuesday the 26th and Wednesday the 27th days of
July 1988, upon the Petition and Appeal of Rush and Tompkins
Limited of Marlowe House, Station Road, Sidcup, Kent DA15 7BP,
praying that the matter of the Order set forth in the Schedule
thereto, namely an Order of the Court of Appeal of the 21st
day of December 1987, might be reviewed before Her Majesty the
Queen in Her Court of Parliament and that the said Order might
be reversed, varied or altered or that the Petitioners might
have such other relief in the premises as to Her Majesty the
Queen in Her Court of Parliament might seem meet; as upon the
case of P. J. Carey Plant Hire (Oval) Limited (trading as P.
Carey Contractors) lodged in answer to the said Appeal; and
due consideration had this day of what was offered on either
side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty’s Court of
Appeal of the 21st day of December 1987 complained of in the
said Appeal be, and the same is hereby, Set Aside: and That
the Order of His Honour Judge Esyr Lewis Q.C. of the 12th day
of February 1987 be, and the same is hereby, Restored: And it
is further Ordered, That the Respondents do pay or cause to be
paid to the said Appellants the Costs incurred by them in the
Court of Appeal and also the Costs incurred by them in respect
of the said Appeal to this House, the amount of such last-
mentioned Costs to be certified by the Clerk of the
Parliaments if not agreed between the parties: And it is also
further Ordered, That the Cause be, and the same is hereby,
remitted back to the Queen’s Bench Division of the High Court
of Justice to do therein as shall be just and consistent with
this Judgment.
Cler: Parliamentor
Judgment: 3.11.88
HOUSE OF LORDS
RUSH & TOMPKINS LIMITED
(APPELLANTS)
V.
GREATER LONDON COUNCIL AND OTHERS
(RESPONDENTS)
Lord Bridge of Harwich
Lord Brandon of Oakbrook
Lord Griffiths
Lord Oliver of Aylmerton
Lord Goff of Chieveley
LORD BRIDGE OF HARWICH
My Lords,
I have had the advantage of reading in draft the speech of
my noble and learned friend Lord Griffiths. I agree with it and,
for the reasons he gives, I would allow the appeal.
LORD BRANDON OF OAKBROOK
My Lords,
For the reasons given by my noble and learned friend Lord
Griffiths I would allow the appeal.
LORD GRIFFITHS
My Lords,
This appeal raises a novel point on the right to discovery of
documents. It arises out of a dispute under a building contract in
the following circumstances. The appellants, Rush and Tompkins
Ltd., entered into a building contract in December 1971 with the
Greater London Council (G.L.C.) to build 639 dwellings on the
Hanwell Estate in Ealing. In January 1973 Rush and Tompkins
engaged the respondents, P. J. Carey Plant Hire (Oval) Limited, as
sub-contractors to carry out ground works required under the main
contract.
The completion of the contract was subject to much
disruption and delay and between June 1976 and January 1979
Careys put in claims for loss and expense to Rush and Tompkins.
– 1 –
Rush and Tompkins for their part maintained that they were
entitled to be reimbursed by the G.L.C. in respect of these claims
for loss and expense under the sub-contract. It appears that the
G.L.C. would not agree Carey’s claim and consequently Rush and
Tompkins would not pay it. Eventually in order to resolve the
deadlock Rush and Tompkins commenced proceedings in August
1979 against the G.L.C. as first defendant and Careys as second
defendant in which they claimed an inquiry into the loss and
expenses to which Careys were entitled under the sub-contract and
a declaration that they were entitled to be reimbursed that sum
by the G.L.C..
However, before these proceedings came to trial Rush and
Tompkins entered into a compromise with the G.L.C. on 12
October 1981 in which Rush and Tompkins accepted the sum of
£1,200,000 in settlement of all outstanding claims under the main
contract. It was a term of this settlement that Rush and
Tompkins would accept direct responsibility for all the sub-
contractors’ claims. This settlement embraced matters which
ranged far beyond those raised in the action with which this
appeal is concerned. Rush and Tompkins then discontinued the
action against the G.L.C..
The terms of this settlement were disclosed to Careys but
the settlement did not show what valuation had been put upon
Carey’s claim in arriving at the global settlement of £1,200,000.
The action then went to sleep but eventually it awoke and
Careys added a counterclaim to recover their loss and expense
which they quantified at £150,582.86. In their statement of claim
Rush and Tompkins had pleaded that the architect had withheld
consent to the settlement of Carey’s claim and that the G.L.C.
had stated in writing that the claim did not exceed a value of
approximately £10,000. So on the face of it the gap between the
parties was very wide.
Careys, however, believed that in the negotiations between
Rush and Tompkins and the G.L.C. documents must have come into
existence which showed the basis upon which Carey’s claim was
valued for the purpose of the global settlement and they suspected
that they might show that the figure was very much larger than
the sum of £10,000 which had been alleged as the value of the
claim in the statement of claim
Rush and Tompkins admit that there are such documents and
that they relate to the issues in the action, presumably because
they cast light on the value of Carey’s claim, but they maintain
that Careys are not entitled to discovery of these documents
because they came into existence for the purpose of settling the
claim with the G.L.C. and are thus protected from discovery by
the “without prejudice rule.”
Careys took out a summons for the specific discovery of
this without prejudice correspondence but the official referee,
Judge Esyr Lewis Q.C., accepted the argument of the main
contractors and refused discovery. The Court of Appeal reversed
his decision and ordered discovery of the without prejudice
correspondence passing between Rush and Tompkins and the G.L.C.
holding that the protection given by the without prejudice rule
ceased once a settlement had been reached.
– 2 –
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. It is nowhere more clearly expressed than in
the judgment of Oliver L.J. in Cutts v. Head [1984] Ch 290, 306:
“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 R.P.C. 151, 156, be 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 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 any
admission made purely in an attempt to achieve a settlement.
Thus the without prejudice material will be admissible if the issue
is whether or not the negotiations resulted in an agreed
– 3 –
settlement, which is the point that Lindley L.J. was making in
Walker v. Wilsher (1889) 23 Q.B.D. 335 and which was applied in
Tomlin v. Standard Telephones and Cables Ltd. [1969] 1 W.L.R.
1378. The court will not permit the phrase to be used to exclude
an act of bankruptcy: see In re Daintrey, Ex Parte Holt [1893] 2
Q.B. 116 nor to suppress a threat if an offer is not accepted: see
Kitcat v. Sharp (1882) 48 L.T. 64. In certain circumstances the
without prejudice correspondence may be looked at to determine a
question of costs after judgment has been given: see Cutts v. Head
[1904] Ch. 290. 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. Thus an admission that a
document was in the handwriting of one of the parties was
received in evidence in Waldridge v. Kennison (1794) 1 Esp. 142. I
regard this as an exceptional case and it 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. 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.
I cannot accept the view of the Court of Appeal that
Walker v. Wilsher is authority for the proposition that if the
negotiations succeed and a settlement is concluded the privilege
goes, having served its purpose. In Walker v. Wilsher the Court of
Appeal held that it was not permissible to receive the contents of
a without prejudice offer on the question of costs and no question
arose as to the admissibility of admissions made in the
negotiations in any possible subsequent proceedings. There are
many situations when parties engaged upon some great enterprise
such as a large building construction project must anticipate the
risk of being involved in disputes with others engaged on the same
project. Suppose the main contractor in an attempt to settle a
dispute with one sub-contractor made certain admissions it is clear
law that those admissions cannot be used against him if there is
no settlement. The reason they are not to be used is because it
would discourage settlement if he believed that the admissions
might be held against him. But it would surely be equally
discouraging if the main contractor knew that if he achieved a
settlement those admissions could then be used against him by any
other sub-contractor with whom he might also be in dispute. The
main contractor might well be prepared to make certain
concessions to settle some modest claim which he would never
make in the face of another far larger claim. It seems to me
that if those admissions made to achieve settlement of a piece of
minor litigation could be held against him in a subsequent major
litigation it would actively discourage settlement of the minor
litigation and run counter to the whole underlying purpose of the
without prejudice rule. I would therefore hold that 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. It of course goes without saying that admissions made
to reach settlement with a different party within the same
litigation are also inadmissible whether or not settlement was
reached with that party.
– 4 –
In arriving at my opinion on this aspect of the case I have
taken into account the reports of two cases in “The Times”
newspaper around the turn of the century. The first is a decision
of Darling J. in Teign Valley Mining Co. Ltd, v. Woodcock, The
Times 22 July J899 which is cited in both Phipson On Evidence.
13th ed., (1982), Paras. 19-11, 20-04; and Halsbury’s Laws of
England, 4th ed., Vol. 17, (1976), para. 212 as authority for the
proposition that the protection afforded by “without prejudice” does
not extend to third parties. The report is short and unclear, but
it appears that the claim was by a company for money owed upon
calls upon its shares. The defendant, Woodcock, admitted liability
to the company but claimed against a Captain Rising that he held
the shares as his nominee. The judge admitted in evidence terms
of the negotiation between the plaintiffs and Captain Rising in
which Captain Rising admitted ownership of the shares standing in
the name of the nominee. The judge expressed doubts whether he
should have admitted the evidence and said he did so because he
had been pressed to do so by counsel. I agree with the comment
of the Court of Appeal [1988] 2 W.L.R. 533, 538 that “the report
is such that it is not worthy of citation as constituting authority
for any proposition of law.” The other case is Stretton v. Stubbs
Ltd. The Times 28 February 1905, this was an action for libel and
slander arising in the following circumstances. Mr. Stretton was
an artist and judgment had been obtained against him in the sum
of £16 in the City of London Court by a picture frame maker.
That judgment had been entered by consent pursuant to a without
prejudice agreement with the plaintiff’s solicitor that no publicity
should be given to the result of the action. The defendants
published the judgment in Stubbs’ Weekly Gazette and the plaintiff
alleged that their canvaser had gone round to various tradesmen
pointing out the importance of subscribing to the Gazette,
directing their attention to the plaintiff’s name and saying that he
could not be worthy of credit. The jury returned a verdict for
the plaintiff of £25. As part of his case the plaintiff had relied
upon the contract between himself and the solicitor for the
plaintiff in the City of London Court action that the judgment
should not be made public. This contract was contained in two
without prejudice letters. The offer was contained in a letter
from the plaintiff and the acceptance in a letter from the
solicitor. The judge permitted the second letter to be put in
evidence and read but refused to admit the first letter which had
contained admissions by the plaintiff that he was absolutely
insolvent. From a reading of the report it appears that the
ground upon which it was submitted to the Court of Appeal that
the judge had erred in refusing to admit the first letter was that
putting in the second letter as part of the without prejudice
correspondence rendered the first letter admissible. It was also
submitted that it would be wrong for the plaintiff not to be
allowed to be cross-examined on his assertion that he was
insolvent and at the same time to allow him to put himself before
the jury as being quite solvent and of good credit. The Court of
Appeal allowed the first letter to be read to the court. The
report does not say why the Sir Richard Henn Collins M.R.
permitted it but Matthew L.J. is recorded as saying “that in his
opinion a letter written with regard to an action and marked
‘without prejudice’ was only privileged for the purpose of that
particular action.” No citation of authority or reasoning is given
in support of that opinion. There may well have been good
grounds for admitting the first letter in that action on the ground
– 5 –
that it was a part of a correspondence which the plaintiff had
chosen to put in evidence, and possibly also on the ground of
establishing an independent fact, namely, the plaintiff’s insolvency,
which was unconnected with the merits of the dispute about the
amount owed to the frame maker and was obviously of central
importance to the issue of libel or slander. I cannot however
regard it as an authority of any weight for the proposition that
without prejudice negotiations should in all circumstances be
admissible at the suit of a third party.
The only issue that now survives in the present litigation is
the sub-contractors’ counter claim. For the reasons I have given
the contents of the without prejudice correspondence between the
main contractor and the G.L.C. will not be admissible to establish
any admission relating to the sub-contractors’ claim. Nevertheless,
the sub-contractors say they should have discovery of that
correspondence which one must assume will include admissions even
though they cannot make use of them in evidence. They say that
the correspondence is likely to reveal the valuation put upon the
claim by the main contractor and the G.L.C. and that this will
provide a realistic starting point for negotiations and therefore be
likely to promote a settlement. This is somewhat speculative
because for all we know the sub-contractors’ claim may have been
valued in the without prejudice correspondence at no more than
the figure of £10,000 pleaded in the statement of claim leaving
the parties as far apart as ever. However, it is of course a
possibility that it appeared at a much higher figure.
It was only at a late stage in the respondent’s argument
that the distinction between discoverability and admissibility was
taken. In the courts below the question appears to have been
considered solely on the question of admissibility. But the right to
discovery and production of documents does not depend upon the
admissibility of the documents in evidence: see O’Rourke v.
Darbishire [1920] A.C. 581.
The general rule is that a party is entitled to discovery of
all documents that relate to the matters in issue irrespective of
admissibility and here we have the admission of the head
contractors that the without prejudice correspondence would be
discoverable unless protected by the without prejudice rule. There
is little English authority on this question but I think some light
upon the problem is to be gained from a consideration of the
decision in Rabin v. Mendoza & Co. [1954] 1 W.L.R. 271. In that
case the plaintiffs sued the defendants for negligence in surveying
a property. Before the action commenced a meeting had taken
place between the plaintiffs’ solicitor and a partner in the
defendants’ firm of surveyors to see if the matter could be settled
without litigation. The defendants agreed at the meeting to make
enquiries to see if they could obtain insurance cover against
possible risk of damage to the house so that litigation could be
avoided. After the interview the defendants obtained a report
from another surveyor for the purpose of attempting to obtain
insurance cover. No settlement was reached and the action
commenced. The defendants disclosed the existence of the report
in their affidavit of documents but claimed privilege from
production on the ground that it was made in pursuance of a
without prejudice discussion between the plaintiffs’ solicitor and
the defendants’. The master, the judge and the Court of Appeal
– 6 –
all upheld the defendants’ claim to privilege. Denning L.J. after
referring to Whiffen v. Hartwright (1848) ll Beav. lll said, at pp.
273-274:
“the Master of the Rolls there affirms the undoubted
proposition that production can be ordered of documents
even though they may not be admissible in evidence.
Nevertheless, if documents come into being under an
express, or, I would add, a tacit, agreement that they should
not be used to the prejudice of either party, an order for
production will not be made. This case seems to me to fall
within that principle. This report was clearly made as a
result of a ‘without prejudice’ interview and it was made
solely for the purposes of the ‘without prejudice’
negotiations. The solicitor for the plaintiff himself says in
his affidavit that at the time of the interview it was
contemplated that steps such as these should be undertaken.
I find myself, therefore, in agreement with the decision of
Master Burnand and the judge that this is not a case where
production should be ordered.”
Romer L.J. (p. 274) put the matter even more strongly saying:
“It seems to me that it would be monstrous to allow the
plaintiff to make use – as he certainly would make use –
for his own purposes as against the defendants of a
document which is entitled to the protection of ‘without
prejudice’ status.”
This authority shows that even as between the parties to without
prejudice correspondence they are not entitled to discovery against
one another.
In Canada there are conflicting decisions. In Schetky v.
Cochrane and the Union Funding Co. [1918] 1 W.W.R. 821 the Court
of Appeal in British Columbia ordered oral discovery to be given
to a defendant of negotiations between the plaintiff and another
defendant in the action but held that on the trial there would be
no higher right to use the statements or admissions than that
which a party to the negotiations would have who sought to
introduce them in evidence. This decision was followed in British
Columbia in Derco Industries Ltd, v. A. R. Grimwood Ltd.,
Insurance Corporation of British Columbia and P.L.C. Construction
Ltd. [1985] 2 W.W.R. 137 in which Lambert J.A. said, at p. 142;
“to the extent that there is a rule that prevents the
production of documents that were prepared in the course of
negotiations leading to a concluded settlement, it is my
opinion that the rule does not extend to the prevention of
the production of those documents at the instance of a
litigant who was not a party to the settlement and whose
claim for production comes under the rule in the Peruvian
Guano case.” (Compagnie Financiere et Commerciale du
Pacifique v. Peruvian Guano Co. (1882) 11 Q.B.D. 35)
Schetky v. Cochrane and the Union Funding Co. was not followed
by the Court of Appeal of Ontario in I. Waxman & Sons Ltd, v.
Texaco Canada Ltd. [1968] 2 O.R. 452. The Court of Appeal in a
short judgment upheld a long reasoned judgment by Fraser J. who
expressed the following opinion [1968] 1 D.R. 642, 656:
– 7 –
“I am of opinion that in this jurisdiction a party to a
correspondence within the ‘without prejudice’ privilege is,
generally speaking, protected from being required to disclose
it on discovery or at trial in proceedings by or against the
third party.”
I suspect that until the present decision of the Court of
Appeal the general understanding of the profession was that
without prejudice negotiations between parties to litigation would
not be discoverable to other parties and that admissibility and
discoverability went together. For instance in the Annual Practice
(1988) under “Discovery and Inspection of Documents” Note 24/5/17
reads:
“Without prejudice communications – any discussions between
the parties for the purpose of resolving the dispute between
them are not admissible, even if the words ‘without
prejudice’ or their equivalent are not expressly used
(Chocoladefabriken Lindt & Sprungli A. G. v. Nestle Co.
Ltd. [1978] R.P.C. 287). It follows that documents
containing such material are themselves privileged from
production.”
I would refer also to the critical note on this decision of the
Court of Appeal written by one of the Law Commissioners, Mr.
Brian Davenport Q.C., in volume 104 of the Law of Quarterly
Review P. 349 in which he states that the decision will be
received “with surprise and dismay by many practitioners.”
I have come to the conclusion that the wiser course is to
protect without prejudice communications between parties to
litigation from production to other parties in the same litigation.
In multi-party litigation it is not an infrequent experience that one
party takes up an unreasonably intransigent attitude that makes it
extremely difficult to settle with him. In such circumstances it
would, I think, place a serious fetter on negotiations between other
parties if they knew that everything that passed between them
would ultimately have to be revealed to the one obdurate litigant.
What would in fact happen would be that nothing would be put on
paper but this is in itself a recipe for disaster in difficult
negotiations which are far better spelt out with precision in
writing.
If the party who obtains discovery of the without prejudice
correspondence can make no use of it at trial it can be of only
very limited value to him. It may give some insight into his
opponent’s general approach to the issues in the case but in most
cases this is likely to be of marginal significance and will probably
be revealed to him in direct negotiations in any event. In my
view this advantage does not outweigh the damage that would be
done to the conduct of settlement negotiations if solicitors thought
that what was said and written between them would become
common currency available to all other parties to the litigation.
In my view the general public policy that applies to protect
genuine negotiations from being admissible in evidence should also
be extended to protect those negotiations from being discoverable
to third parties. Accordingly I would allow this appeal and restore
the decision of the learned official referee.
– 8 –
LORD OLIVER OF AYLMERTON
My Lords,
I have had the advantage of reading in draft the speech
prepared by my noble and learned friend Lord Griffiths. I agree
with it and would allow the appeal for the reasons which he has
given.
LORD GOFF OF CHIEVELEY
My Lords,
I have had the advantage of reading in draft the speech of
my noble and learned friend Lord Griffiths. I agree with it and.
for the reasons he gives, I would allow the appeal.
– 9 –
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