In AZ v BY [2023] EWHC 2388 (TCC) the High Court held that the disclosure of materials benefitting from without prejudice privilege (“WPP”) which were adduced in an adjudication resulted in the adjudicator’s decision being unenforceable. The High Court's judgment provides a reminder of the rationale for without prejudice privilege, the rules on when documents attract WPP, the narrow exceptions, and the rules of bias. 

Without Prejudice Privilege 

The without prejudice rule is intended to facilitate settlement discussions; parties to a dispute can communicate freely in a genuine attempt to settle an existing dispute in the knowledge that their communications cannot subsequently be used against them as evidence in civil proceedings. In other words, without prejudice communications cannot generally be put before the Court as evidence of admissions or concessions. Whether or not a communication is truly without prejudice and therefore attracts WPP will involve an objective assessment of the communication in question. It follows that while marking with the words ‘without prejudice’ may be persuasive, the use of the words is not conclusive in determining whether the document is truly ‘without prejudice’ and that it benefits from WPP. 

There are some exceptions to the without prejudice rule. One situation in which without prejudice communications have been admitted in evidence is when there is an issue as to whether the without prejudice communications have resulted in a concluded agreement. In this scenario, the communications are admissible, and not protected by WPP, because they contain the offer and acceptance forming a contract. 

AZ v BY 

This case, heard by Constable J in the Technology and Construction Court ("TCC"), concerned a decision made by an adjudicator.  

An issue in the original adjudication was whether the parties had entered into a contract relating to building works. The adjudicator decided that there was a finalised contract and therefore AZ brought a claim in the TCC seeking to enforce his decision. However, BY issued its own claim and contended that, in the adjudication, AZ had deployed materials (which contained admissions by BY) which were covered by WPP and therefore were inadmissible. Accordingly, BY sought a declaration that the adjudicator’s decision was unenforceable.

The Court found that, on an objective assessment, the relevant communications were without prejudice and therefore subject to WPP. The Court also found (contrary to the finding of the adjudicator) that there was no binding compromise agreement. Further, the without prejudice communications were not legitimately deployed in the adjudication, as AZ were seeking to rely on the content of the communications to expose an alleged inconsistency in BY’s contractual position, rather than relying on the fact of a concluded agreement between the parties. In fact, the Judge found that the without prejudice materials AZ were deploying were actually being relied upon as “collateral, and prejudicial, material seeking to undermine the contractual position which BY had adopted.” The exception referenced above therefore did not apply and the without prejudice material was inadmissible.

The Court then turned to the question of whether the adjudicator’s decision was enforceable or not as a result: “it is for me to consider whether, in all the circumstances, a fair-minded and informed observer would conclude that there was a real possibility that, having seen the without prejudice material, the Adjudicator was biased”. Considering all the circumstances, the Judge considered that it would be concluded that the adjudicator was unconsciously biased. He found that there was an inevitable “question mark” about whether the result of the adjudication, however inadvertently or sub-consciously, was shaped by the adjudicator’s knowledge of the content of the without prejudice material. 

AZ v BY cited Ellis Building Contractors Limited v Vincent Goldstein [2011]EWHC 269 (TCC) where Akenhead J discussed the deployment of without prejudice material in adjudication and in litigation and said, “Whilst if "without prejudice" communications surface in a court, the judge being legally qualified and experienced can usually put it out of his or her mind, it is a more pernicious practice in adjudication because most adjudicators are not legally qualified and there will often be a greater feeling of unease that the “without prejudice” material may have really influenced the adjudicator”. 

Practical points

This decision serves to discourage parties from deploying without prejudice materials in adjudication and is a rare example of the Court declining to enforce an adjudicator’s decision. 

Caution should be exercised when assessing the status of documents before they are relied upon in adjudication or, indeed, any other context. If a counterparty seeks to rely on without prejudice material, swift action should be taken to prevent such documentation from being adduced.

As a general point, labelling a document as without prejudice, although not conclusive, will serve as a flag to the receiving party as to the status of the document and may serve to prevent such material being put forward in the first place.

If you have any queries, please do not hesitate to contact a member of our Dispute Resolution team.

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