Williams v Hull

In Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 1299 Lord Griffiths, with whom the other members of the House of Lords agreed, said:

“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.”

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. In South Shropshire District Council v Amos [1986] 1 WLR 1271 at 1277 Parker LJ said that, where a letter was marked “without prejudice”:

“This prima facie means that it was intended to be a negotiating document.”

He went on to make it clear that that did not mean that the marking was conclusive. It may be, in the light of the observations of Lord Mance in Bradford & Bingley plc v Rashid [2006] UKHL 37, [2006] 1 WLR 2066 at [84]-[87], that this slightly overstates the position. Nevertheless, I think it is correct to say that, if a letter is expressly stated to be “without prejudice”, that gives rise to a rebuttable presumption that the communication is a without prejudice communication within the meaning of the rule unless it is clear that the expression has been used with some other meaning or purpose.

It was common ground between counsel that the question whether a particular communication is a without prejudice communication is a question which must be assessed objectively as at the date of the communication having regard to the relevant factual circumstances. In Schering Corp v Cipla Ltd [2005] EWHC 2597 (Ch), [2005] FSR 25 at [14] Laddie J held that:

“The court has to determine whether or not a communication is bona fide intended to be part of or to promote negotiations. To determine that, the court has to work out what, on a reasonable basis, the intention of the author was and how it would be understood by a reasonable recipient.”

This is largely a question of construction of the communication in question, but it may not be exclusively so. Thus it is not clear whether evidence of subjective intention is admissible on this question (see the discussion in Hollander, Documentary Evidence (10^th ed) at 16-06), although in the present case neither side relied upon evidence of subjective intention. More importantly, it appears that evidence of subsequent events, and in particular the response of the recipient to the communication, is admissible (in the same way as, for example, the response of the recipient is admissible in determining whether a communication is a threat of patent infringement proceedings within the meaning of section 70 of the Patents Act 1977).

In the South Shropshire case the Court of Appeal held that (i) a communication may be protected by the without prejudice rule even if it is the “opening shot” in negotiations and (ii) the rule is not limited to offers, but extends to all documents “which form part of negotiations, whether or not they are themselves offers”: see Parker LJ delivering the judgment of the Court at 1277-1278.

On the other hand, in Buckinghamshire County Council v Moran [1990] Ch 623 the Court of Appeal held that a communication which is not a negotiating document, but is merely an assertion of a party’s rights, is not protected by the without prejudice rule. That case concerned a claim to adverse possession by the defendant to a plot of land owned by the council adjacent to his garden which he had treated as part of the garden. On 18 December 1975 the council wrote to the defendant asking him on what basis he was exercising rights over the plot. On 20 January 1976 the defendant replied in a letter marked “without prejudice” as follows:

“I enclose herewith a copy of the sale agreement between myself and Mr. G. Wall dated 28 July 1971, upon which I have marked the relevant part which I believe relates to the piece of land in question. I also enclose herewith, a copy of a signed statement regarding the piece of land, which I obtained from the vendor at the time of the sale. You will notice from the documents, that the previous owner laid the land to grass in April 1967 and ever since then either the previous owner or myself have occupied the land and it has therefore, been kept as part of the garden for the last 11 years. It was my understanding with Mr. Wall, that he had the right to this ground and that he only lost this right, if and when the Little Chalfont by-pass was built, so much so that as you can see I went to the trouble to get an extra declaration document from him. I notice your enclosed plan is to do with an underground cable and I believe that Mr. Wall was asked for and had given permission for this to be put under the land concerned.

I do not know whether you know the property itself, but the piece of land concerned forms an integral part of the garden and the whole situation of the house itself, in fact, without it, the house I think, would be unbearable to live in. I would reiterate, that it has always been my firm understanding that the land should be kept by the owner of Dolphin Place, if and until the proposed Little Chalfont by-pass was built. Since the owner of Dolphin Place has been the occupier of the land for the last 11 years, I have never had any doubt as to the situation indeed many local functions, mainly Conservative Party ones, which local councillors have attended, have been held there. I have not discussed this matter with my solicitor as yet and I await your reply before doing so.”

Slade LJ, with whom the other members of the Court agreed, held at 635:

“I think the judge was right to regard the relevant question as being whether or not the letter of 20 January 1976 could properly be regarded as a negotiating document. But I respectfully disagree with his conclusion that it could. As the judge himself said, and as the letter itself indicated, the defendant was writing the letter in an attempt to persuade the council that his case was well founded. As I read the letter, it amounted not to an offer to negotiate, but to an assertion of the defendant's rights, coupled with an intimation that he contemplated taking his solicitor's advice unless the council replied in terms recognising his asserted rights. I cannot derive from the letter any indication, or at least any clear indication, of any willingness whatever to negotiate.”

It was also common ground between counsel that, in assessing whether a communication is protected by the rule, it is necessary to consider the communication as a whole. Counsel for Mr Hull submitted, and I agree, that it follows that it is not correct to dissect the communication into parts unless it is concerned with clearly distinct subjects. As Robert Walker LJ (as he then was) said in Unilever plc v Procter & Gamble Co [2004] 1 WLR 2436 at 2448-2449:

“In those circumstances I consider that this court should, in determining this appeal, give effect to the principles stated in the modern cases, especially Cutts v. Head , Rush & Tompkins Ltd. v. Greater London Council and Muller v. Linsley & Mortimer. Whatever difficulties there are in a complete reconciliation of those cases, they make clear that 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, in the words of Lord Griffiths in the Rush & Tompkins case [1989] A.C. 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.”

This passage was cited with approval by Lord Mance in Bradford & Bingley at [91] and by Lord Neuberger of Abbotsbury in Ofulue v Bossert [2009] UKHL 16, [2009] 1 AC 990 at [89]. See also Lord Hoffmann in Bradford & Bingley at [13].

It appears from the Letter that the parties had begun discussing the value of Mr Hull’s share of the Property by 17 September 2007. In the first passage from Ms Williams’ email of that dated quoted in the letter, Ms Williams says:

“I offered you £15K, and I told you up front it was a rough and ready calculation, but you never came back with a counter offer.”

It appears that Mr Hull had still not come back with a counter offer by 10 October 2007. In her letter of that date Ms Williams say in the third paragraph that she “would like to resolve matters between us as quickly and as amicably … as possible”. She re-iterates in the final paragraph that she wants “to settle matters between us quickly and as amicably as possible”. In the letter she offers Mr Hull a cheque of £20,000 together with “the sums referred to below” “in full and final settlement” to transfer ownership of the Property into her sole name. She also makes proposals with regard to various other matters, and in particular the household chattels. It is clear that she is seeking to reach a comprehensive agreement on all these matters.

It is in this context that the Letter must be read. The first point to note is that it is expressly stated to be “without prejudice”. As explained above, that gives rise to a presumption that it was intended to be a without prejudice communication, since this is not a case where it is clear that the words “without prejudice” were being used with some other meaning or purpose. That is particularly so given that the author of the letter was a person with some experience of litigation and the recipient was a solicitor.

The second point to note is that, when Mr Hull turns to Ms Williams’ letter dated 10 October 2007, he says he would like to “reciprocate the desire to resolve matters between us as quickly and as amicably as possible”. He goes on to say that he is willing to accept Ms Williams’ cheque “in part payment of my share and as a sign of willingness, on your part, to settle this matter”. In the final paragraph of the Letter he says that he is looking forward to her reply “so that we can resolve these outstanding issues”. Three things emerge from this. First, both parties are saying that there are matters to resolve. Secondly, both parties are talking the language of negotiation. Thirdly, both parties are expressing the desire for a settlement.

The third point to note is that, like the 10 October 2007 letter, the Letter is not just concerned with the value of Mr Hull’s share in the Property, it is also concerned with other matters. It addresses four main matters other than the value of Mr Hull’s share in the Property. These are (i) the disposition of the chattels, (ii) payment of utilities bills, (iii) the £7,000 loan and (iv) the original acquisition costs. Like Ms Williams in her 10 October 2007 letter, it is clear that Mr Hull is saying that he wants to reach agreement on all these matters. Although Mr Hull does not say so in terms, I think it is a fair reading of the Letter that he may be willing to give ground on some of these matters if Ms Williams is prepared to give ground on others.

The fourth point to note is that, when comes to the value of Mr Hull’s share in the Property, it can be seen by comparing the Letter with Ms Williams’ earlier communications that there are two differences between the parties. The first is that Ms Williams is proceeding on the basis that Mr Hull is entitled to a 7% share, whereas Mr Hull says that he is entitled to a 12% share. The second is that Ms Williams is proceeding on the basis that the Property is worth about £400,000 whereas Mr Hull is saying that it is worth £530,000.

It is instructive to consider Ms Williams’ reply dated 26 October 1997. The first point to note about this is that Ms Williams does not contest Mr Hull’s marking of the Letter as “without prejudice”, which as a solicitor she might be expected to do if she did not think it was properly so marked. More importantly, her reply is also marked “without prejudice”. To my mind this reinforces the presumption arising from the marking of the Letter as “without prejudice”, because it shows that the recipient of the Letter understood that communications had moved into the without prejudice realm and was content to proceed on that basis.

The second point to note is that Ms Williams makes an offer of £38,380 “in full and final settlement of all outstanding liabilities”. She concludes the letter by saying that this is “a fair and considered offer … in order that we can draw a line under this and get on with our lives”. Again, therefore, she is talking the language of negotiation and expressing the desire for settlement. Furthermore, she is again looking for an overall agreement on all matters.

The third point to note is that it can be seen that the Letter has had the effect of persuading Ms Williams to increase her offer substantially from that contained in her letter dated 10 October 2007. This confirms that the parties were in a process of negotiation.

The fourth point to note is that Ms Williams does not take issue with Mr Hull’s share of the Property being 12%, but does take issue with the value of house, which she now says is £485,000.

Counsel for Mr Hull submitted that the Letter was a negotiating document and therefore was protected by the without prejudice rule.

Counsel for Ms Williams submitted that the Letter, and in particular the part relating to the value of Mr Hull’s share in the Property, was not a negotiating document, but merely an assertion of Mr Hull’s rights. In support of this submission he advanced three arguments. First, he argued that the Letter did not contain any concession or offer of compromise on the part of Mr Hull. Secondly, he argued that, particularly when the Letter was read in the context of the first and third letters, there was no dispute between the parties as to the formula to be applied in ascertaining Mr Hull’s share of the Property, but merely a dispute as to the value of the Property which could have been mechanically determined by a third party. Thirdly, he argued that “without prejudice” meant “without prejudice to my open position”, but Mr Hull had no open position other than set out in the Letter. Furthermore, he argued that “without prejudice” could not mean “without prejudice to whatever I may later argue”, since that would have the effect of widening the ambit of disputes and make the rule unworkable.

In my judgment the Letter is a negotiating document protected by the without prejudice rule. Each of the points I have noted in paragraphs 25-33 above supports that conclusion. It is clear that, as at the date of the Letter, there was a dispute between the parties as to the value of Mr Hull’s share in the Property and they were negotiating to resolve that dispute. As at that date there were two aspects of the dispute. The first was Mr Hull’s interest in the Property, since Ms Williams had not yet accepted that this was 12%. The second was the value of the Property. It is also clear that there were a number of other disputes between the parties that they were negotiating to resolve, and that they were both seeking an overall settlement of all matters in dispute. It is obvious that both parties appreciated that, unless there was a settlement, there was likely to be litigation between them and were attempting to avoid that happening. In those circumstances the public policy justification for the without prejudice rule articulated in Oliver LJ in Cutts v Head, which was endorsed by the House of Lords in Rush & Tompkins and has been re-iterated in numerous subsequent Court of Appeal and House of Lords authorities, firmly supports the conclusion that the Letter is protected by that rule.

I do not agree that the Letter is simply an assertion of Mr Hull’s rights. It is quite true that the Letter argues Mr Hull’s position, particularly with regard to the value of his share in the Property. As Laddie J pointed out in Schering at [19]-[21], however, it is commonplace for without prejudice communications to include assertions of the strength of that party’s case. The question is whether the communication merely asserts rights or whether it asserts rights as part of a negotiation with a view to settlement. In my view the Letter falls into the latter category.

Nor do I accept any of the three arguments advanced by counsel for Ms Williams. As to the first, I do not consider that it is necessary for a communication to constitute a negotiating document that it contain a concession or offer of compromise. As Parker LJ said in South Shropshire, the rule applies to documents which form part of negotiations, whether or not they are themselves offers. It is sufficient that the communication evinces a genuine desire to negotiate a settlement of an actual or potential dispute, as in the Schering case.

As for the second argument, I do not agree that the only difference between the parties at the date of the Letter was as to the valuation of the Property. Furthermore, even if that had been the only disagreement, that would have been enough. In Bradford & Bingley Lord Brown of Eaton-under-Heywood expressed the opinion at [75] that negotiations to resolve issues of quantum would qualify for without prejudice protection even though an acknowledgement of indebtedness would not.

So far as the third argument is concerned, I do not agree that “without prejudice” means “without prejudice to my open position”. In my view it means “without prejudice to my position in any subsequent proceedings”. It is not necessary for a party to have formulated an open position for it to be able to invoke the without prejudice rule, which is why an “opening shot” in negotiations may be protected. Furthermore, imposing such a requirement would be contrary to the public policy behind the rule of encouraging settlement negotiations, since if parties had to state their open positions before they could claim the protection of the rule, that might inflame the negotiations. Finally, this argument is inconsistent with the House of Lords’ ruling in Rush & Tompkins that without prejudice communications are inadmissible in any subsequent litigation connected with the same subject matter whether between the same or different parties.

In reaching her conclusion that the Letter was not a without prejudice communication, I consider that the Judge made a number of errors. First, she does not appear to have attached any weight to the fact that the Letter was expressed to be “without prejudice”. Nor did she attach any weight to the fact that Ms Williams’ reply was also marked “without prejudice”.

Secondly, the Judge dissected the Letter, with the result that she accepted that parts of it were without prejudice. The parts which she accepted were without prejudice related to the valuation of the Property. As a result, she redacted from the Letter the entire passage from “In an email dated 17 September 2007 you said” to “my subsequent emails of the same date”. In addition, she redacted the references to the value of the Property later in the Letter, including the figures in the right hand column of Mr Hull’s calculation. In my view it is not correct to dissect the Letter in this way. It is a single communication to be assessed as a whole. Although it addresses a number of matters, they are all related to the parties’ cohabitation in the Property. Furthermore, it seeks to reach an overall agreement on all of them. These include both aspects of the dispute over the value of Mr Hull’s share in the Property.

Thirdly, the Judge proceeded on the basis that there was no dispute between the parties as to the formula to be applied in determining Mr Hull’s interest in the Property and only as to the application of that formula: see her judgment at [59]. I do not think this is correct: as noted above, it was only in her reply to the Letter that Ms Williams accepted that Mr Hull’s share was 12% and thus implicitly accepted the formula he had used to calculate that figure.

Fourthly, the Judge held that the passage concerning the application of the formula was a mere assertion of right because it contained no admission or concession by Mr Hull. For the reasons given above, I do not think that that is the right test.

It is well established that there are a number of situations in which a without prejudice communication may be given in evidence. A list of eight such situations was given by Robert Walker LJ in Unilever. Issue 2 concerns the applicability of the fourth in this list, which Robert Walker LJ expressed at 2444 as follows:

“Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other ‘unambiguous impropriety’ (the expression used by Hoffmann L.J. in Forster v. Friedland (unreported), 10 November 1992; Court of Appeal (Civil Division) Transcript No. 1052 of 1992) . Examples (helpfully collected in Foskett's The Law & Practice of Compromise, 4th ed. (1996), para. 9–32) are two first-instance decisions, Finch v. Wilson (unreported), 8 May 1987 and Hawick Jersey International Ltd. v. Caplan, The Times, 11 March 1988. But this court has, in Forster v. Friedland and Fazil-Alizadeh v. Nikbin (unreported), 25 February 1993; Court of Appeal (Civil Division) Transcript No. 205 of 1993, warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.”

He added at 2445-2446:

“It is apparent that none of the exceptions to the public policy rule involves the disclosure of admissions bearing on the subject matter in dispute….”

In Berry Trade Ltd v Moussavi [2003] EWCA 715 the Court of Appeal held that statements alleged to have been made by the seventh defendant Mr Ghadimi orally during settlement discussions were not admissible to contradict the defendants’ pleaded case. Peter Gibson LJ giving the judgment of the Court considered the unambiguous impropriety exception in some detail. He explained the origin of the expression “unambiguous impropriety” at [35]:

“The term ‘unambiguous impropriety’ was used by Hoffmann L.J. in Forster v Friedland 10 November 1992 (unreported). That Lord Justice, with whom Neill and Butler-Sloss L.JJ. agreed, referred to two cases, Greenwood v Fitt [1961] 29 DLR 1 and Hawick Jersey International Ltd. v Caplan, The Times, 11 March 1998, which were cases of threats, the impropriety of which was unambiguously admitted in without prejudice negotiations. Thus the British Columbia case of Greenwood v Fitt involved the defendant threatening in those negotiations that he would give perjured evidence and bribe other witnesses to perjure themselves unless the claimants withdrew their claim. Hoffmann L.J. said:

‘These are clear cases of improper threats, but the value of the without prejudice rule would be seriously impaired if its protection could be removed from anything less than unambiguous impropriety. The rule is designed to encourage parties to express themselves freely and without inhibition. I think it is quite wrong for the tape recorded words of a layman, who has used colourful or even exaggerated language, to be picked over in order to support an argument that he intends to raise defences which he does not really believe to be true.’”

Having noted that the narrowness of the exception had often been emphasised, he said at [37]:

“This court in Fazil-Aziladeh said that the taped without prejudice conversation might be taken to contain an admission by the claimant of the payment of £10,000 although he continued in his pleadings to deny such payment, but that did not come within the exception to the rule. The exception does not apply to a mere inconsistency (see Kristjansson v R Verney & Co. Ltd., 18 June 1998, and WH Smith Ltd. v Colman, 20 March 2000, both unreported decisions of this court).”

He went to consider three cases relied upon by the counsel for the defendants, namely Dora v Semper (an unreported decision of the Court of Appeal dated 15 March 1999), Merrill Lynch, Pierce Fenner & Smith Inc v Raffa [2001] ILPr 31 and Savings & Investment Bank Ltd v Fincken [2003] EWHC 719 (Ch). In relation to the latter two cases, he said:

“46.

We do not see that either the Merrill Lynch case or the Savings & Investment Bank case provides much assistance in the determination of the present case because of their different circumstances. In the Merrill Lynch case on the only evidence before the court the defendant admitted in the without prejudice negotiations his involvement in fraud. In the Savings & Investment Bank case again there appears to have been no challenge to the evidence that the relevant simple admission of fact was made by the defendant. Further, Patten J. had distinguished the circumstances of his case from those of other cases, by saying (in para. 39) that the concerns of Lord Griffiths in Rush & Tompkins, of Hoffmann L.J. in Forster and of Robert Walker L.J. in Unilever were:

‘largely concerned with ensuring that what may be complicated without prejudice negotiations should not subsequently be scrutinised with a view to constructing admissions which when made, and particularly in the context in which they were made, were never intended to be and were not in truth unequivocal and unambiguous admissions of liability.’

47.

We will come back shortly to the circumstances of the alleged admission in the present case. Mr. Zacaroli criticised the decisions in both cases as eroding the protection afforded to admissions made in without prejudice negotiations. It may be doubted whether Robert Walker L.J.'s reference to ‘a cloak for perjury’ was intended to cover such admissions rather than the threatened perjury in a case like Greenwood v Fitt. However it is unnecessary for us to decide in this case the correctness of the decisions in Merrill Lynch and Savings & Investment Bank in view of their different circumstances.”

He then turned to the instant case and said:

“48.

We start with the judge's self-direction that the court, when considering whether statements made in without prejudice discussions may be admitted in evidence, applies the test of whether there is a serious and substantial risk of perjury. Mr. Marshall does not suggest that that test has been applied before and we can see nothing in the authorities to support it. On the contrary, it seems to us to weaken significantly the requirement of unambiguous impropriety and of the need for a very clear case of abuse of a privileged occasion. Although the judge in the final paragraph of his judgment says that he bears in mind the need to restrict applications to admit without prejudice statements to the clearest cases of abuse, he then applies the test of a serious and substantial risk of perjury. In our judgment that is too low a test and one which would seriously erode the without prejudice rule. The judge should have looked for nothing less than unambiguous impropriety.

49.

Does the evidence establish such unambiguous impropriety? We shall consider that question first having regard to the Claimants' evidence, leaving aside the evidence of and for Mr. Ghadimi. The judge was impressed by two points on which heavy emphasis was laid in the Claimants' evidence.

50.

One is the absence from what Mr. Ghadimi said in the without prejudice discussions of any reference to an agreement between Mr. Ghadimi and Mr. Moussavi based on the fixed commission of $9 per metric tonne which was later pleaded in the Defence and Counterclaim. There is a plain inconsistency between that omission from the discussions and the pleadings; but a mere inconsistency, as the cases show, is not sufficient to amount to unambiguous impropriety. What has to appear very clearly from the evidence is that Mr. Ghadimi was guilty of perjury in signing the statement of truth as to his belief in the truth of the pleaded facts and in deposing to the sum claimed in the counterclaim as owed to him. We do not see how it can be said that that is shown, still less if account is taken of the explanation by Mr. Ghadimi, supported as it is by Mr. Buss, to which we have referred in paras. 23 and 24 above.

51.

The second point is what the judge said in para. 31 of his judgment was ‘unambiguously the position adopted by Mr. Ghadimi throughout’, viz. ‘that the only agreed fee as regards tonnage delivered was $2 per tonne’. We have to say that we respectfully disagree with the judge's assessment that this was the position unambiguously adopted by Mr. Ghadimi throughout. …”

Subsequently, in Savings & Investment Bank Ltd v Fincken [2003] EWCA Civ 1630, [2004] 1 WLR 667 the Court of Appeal allowed an appeal against the first instance decision discussed in Berry. In that case the plaintiff sought to rely upon an alleged admission by the defendant during a without prejudice meeting that he owned shares which he had not disclosed in an affidavit of means in earlier proceedings the settlement of which the plaintiff was seeking to set aside for misrepresentation. Rix LJ, with whom Carnwath LJ agreed, having reviewed the earlier authorities, concluded as follows:

“53.

It seems to me that there is nothing in these authorities, with the exception of Merrill Lynch, Pierce Fenner & Smith Inc v Raffa, The Times, 14 June 2002, to support the judgment below. All four authorities in this court, while allowing the existence of an exceptional rule to cover cases of unambiguous impropriety, have stressed the importance of the public interest which has created the general rule of privilege and have cautioned against the too ready application of the exception. It is true that in each of those four cases the court was assisted in its proper appreciation of the alleged admissions either by evidence from the party claiming privilege (as in Fazil-Alizadeh v Nikbin 25 February 1993, Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436 and Berry Trade Ltd v Moussavi (No 2) [2003] EWCA Civ 715), or by full recordings and transcripts of the discussions (as in Forster v Friedland 10 November 1992), or even by both. Only in the Merrill Lynch case and in this case have the defendants submitted no evidence on the issue, so that the evidence against them has gone unchallenged. It was on this very point that in the Berry Trade case Peter Gibson LJ was able to say that these two cases concerned different circumstances which made it unnecessary for him to rule on the correctness of the decisions to be found in them. It may also be that Peter Gibson LJ was told that Patten J had himself given permission to appeal from his judgment in this case, and this too might have made him cautious in its treatment.

…

56.

These considerations throw into relief the fact that SIB's evidence has gone unchallenged. How important is that factor in the present context? In my judgment, the courts ought to treat it with considerable caution, for otherwise there is a danger of the exception to the rule displacing the rule by a process of begging the question. If the exception applies, then Mr Fincken is obliged to explain himself or face the consequences, for his admission is in the public domain. The absence of challenge may therefore be critical. If, however, the exception does not apply, then the admission is not in the public domain, the court ought not to know about it, and the absence of challenge is irrelevant. Moreover, there may be many reasons why someone in Mr Fincken's position may at the stage of SIB's application be cautious about responding to an issue (his ownership of the shares) which was not yet even part of the litigation. He is accused of perjury, but not on any formal charge and not on a matter even formally in issue. I can see that the absence of challenge may enable an applicant to establish more easily that an alleged admission is unequivocal. That, however, is not the same thing as an unequivocal or unambiguous impropriety. I would therefore be reluctant to find in the circumstances that an absence of challenge is a critical factor taking this case outside the philosophy of the jurisprudence expressed in the leading authorities cited above.

57.

In my judgment that philosophy is antagonistic to treating an admission in without prejudice negotiations as tantamount to an impropriety unless the privilege is itself abused. That, it seems to me, is what Robert Walker LJ meant in the Unilever case [2000] 1 WLR 2436 when he repeatedly spoke in terms of the abuse of a privileged occasion, or of the abuse of the protection of the rule of privilege: see at pp 2444g, 2448a and 2449b. That is why Hoffmann LJ in Forster v Friedland 10 November 1992 emphasised that it was the use of the privileged occasion to make a threat in the nature of blackmail that was, if unequivocally proved, unacceptable under the label of an unambiguous impropriety. And that is why Peter Gibson LJ in Berry Trade Ltd v Moussavi (No 2) [2003] EWCA Civ 715 suggested, without having to decide, that talk of ‘a cloak for perjury’ was itself intended to refer to a blackmailing threat of perjury, as in Greenwood v Fitts 29 DLR (2d) 260 , rather than to an admission in itself. It is not the mere inconsistency between an admission and a pleaded case or a stated position, with the mere possibility that such a case or position, if persisted in, may lead to perjury, that loses the admitting party the protection of the privilege: see the first holding in Fazil-Alizadeh v Nikbin 25 February 1993, described in para 47 above. It is the fact that the privilege is itself abused that does so. It is not an abuse of the privilege to tell the truth, even where the truth is contrary to one's case. That, after all, is what the without prejudice rule is all about, to encourage parties to speak frankly to one another in aid of reaching a settlement: and the public interest in that rule is very great and not to be sacrificed save in truly exceptional and needy circumstances.

58.

It may be said, as indeed Ms Gloster has powerfully argued, that even if the mere possibility of future perjury does not suffice to destroy the privilege, the admission which demonstrates that perjury has been committed in the past, by reference to an existing affidavit, is or should be different and that no authority suggests otherwise. In this way she seeks to support the judge's decision, which was premised on the prospect of future perjury, as was the decision in the Merrill Lynch case The Times, 14 June 2000, by the different route of the impropriety of past perjury. There is indeed a substantial case to be made that the courts should not pass by such proof of perjury with indifference. There is a clear public interest in the discouragement of perjury. Nevertheless, on balance I do not think that the courts should adopt such a position. If they did, the very serious and criminal charge of perjury would fall to be debated, without the protection which should be available to the accused party, on an interlocutory outing (as here) or even at trial, with the potential of derailing the trial by the exposure of without prejudice material to the trial judge. Essentially the same problem would arise in connection with statements of truth, which now apply under the CPR to all particulars of claim or defence: although they cannot give rise to the offence of perjury, they can give rise to the only relatively less serious matter of contempt of court.”

Counsel for Ms Williams submitted that Rix LJ had been wrong to say at [57] that it was not an abuse of the without prejudice rule to tell the truth, even where the truth is contrary to one’s case. I do not accept that submission. First, Savings & Investment Bank is binding upon me. Secondly, I note that in Bradford & Bingley that paragraph of Rix LJ’s judgment was cited with approval by Lord Brown, within whom Lord Walker of Gestingthorpe agreed, at [65] and was referred to with apparent approval by Lord Hope of Craighead at [24]. Thirdly, in my judgment Rix LJ’s reasoning is supported by earlier authority, in particular Forster, Fazil-Aziladeh, Unilever and Berry.

Counsel for Ms Williams also sought to distinguish the present case from authorities such as Berry and Savings & Investments on the ground that this case concerns a written statement, whereas they concerned disputed, or at least not clearly recorded, oral statements. I agree that the fact that the statements were oral statements was an additional factor in those cases, since it potentially gave rise to issues as to precisely what was said, but I do not consider that it was determinative.

Counsel for Ms Williams submitted that to allow the exclusion of the Letter would act as a “cloak for perjury”. This was because the statements in the Letter that “you were certainly in possession of the documents we used to form the financial agreement of our cohabitation at the outset” and “using the OCI, ACI and TCI calculations as originally set out in the documentation mentioned above, the correct calculation of my share of the house is as follows” were flat contrary to Mr Hull’s case that there was no such agreement. Accordingly, if Mr Hull gave evidence in accordance with that case, he would be committing perjury.

Counsel for Mr Hull accepted, I think, that there was an apparent inconsistency between those statements and Mr Hull’s pleaded case. He submitted, however, that that did not mean that Mr Hull would be guilty of unambiguous impropriety for two reasons. First, Mr Hull had an explanation for the inconsistency. This was that, at the time he wrote the Letter, he had been led by Ms Williams to believe, and did believe, that the draft Deed was binding even though it was unsigned. Counsel submitted that it was not possible for the court to conclude that that explanation was false without Mr Hull being cross-examined, since it was not obviously incredible. Accordingly, at worst there was no more than a serious risk of perjury and that was not enough. Secondly, and more fundamentally, counsel submitted that, even if that explanation was not true and so Mr Hull would commit perjury by giving evidence contrary to the statements contained in the Letter, the authorities showed that that would not amount to unambiguous impropriety since it would not involve an abuse of the privileged occasion, that is to say, the sending of the Letter.

I accept both those submissions. So far as the first is concerned, I agree that Mr Hull’s explanation is not so obviously incredible that it is possible for the court to reject it without him being cross-examined on it. At worst, therefore, there is a serious risk of perjury. Berry is clear authority that that is not enough. As to the second, for the reasons given above I accept that analysis of the law.

Counsel for Ms Williams also submitted that Mr Hull should not be able to exclude the Letter from evidence given that he was alleging fraud against her. I have some difficulty in seeing why an allegation by Mr Hull that Ms Williams had acted fraudulently with regard to the TR1 would justify the admission of the Letter in evidence in any event given that the Letter says nothing at all about the TR1. Be that as it may, for the reasons I have explained above I do not accept that Mr Hull is alleging fraud against Ms Williams.

Again, I consider that in concluding that the exclusion of the Letter would be a cloak for unambiguous impropriety the Judge made a number of errors. First, even though she accepted that a serious and substantial risk of perjury was not enough, her reasoning shows that that was in fact the test she applied, since she merely held at [64] that there was “a potential abuse” if the Letter was excluded. Furthermore, she did not conclude that Mr Hull’s explanation was obviously incredible, but instead held at [65] that it should be tested in cross-examination and accepted that it might be believed.

Secondly, she again fell into the error of dissecting the Letter. Thus she held at [69]-[71] that Mr Hull’s statements in relation to the £7,000 loan were not sufficiently clearly inconsistent with his case as to justify its admission even though it was an admission against interest. It seems to me that this reasoning is inconsistent with her reasons for admitting the parts of the Letter she did admit.

Thirdly and most importantly, she held at [68] in reliance upon the first instance decision in Savings & Investment Bank that inconsistency between the Letter and Mr Hull’s pleaded case was sufficient to amount to unambiguous impropriety. So far as I can see, she was not referred to the decision of the Court of Appeal in that case. Nor was she referred to the decision of the House of Lords in Bradford & Bingley. For the reasons given above, I consider that those authorities make it clear, if it was not clear before, that such inconsistency is not enough to justify the admission in evidence of a without prejudice communication.

Finally, she held at [66]-[67] that the fact that, on her analysis, Mr Hull was alleging fraud against Ms Williams supported the conclusion that the exclusion of the Letter would be a cloak for unambiguous impropriety. I disagree for the reasons stated above.

I conclude that the Letter is a without prejudice communication and its admission in evidence is not justified by the unambiguous impropriety exception to the without prejudice rule. The appeal is allowed.