The judgment in AZ v BY [2023] EWHC 2388 (TCC) considered the disclosure of without prejudice documents to an adjudicator and whether this would render the adjudicator's decision unenforceable.
Background
The underlying dispute arose out of works to replace the stair core pressurisation system to a building where the contract for the works was intended to be let to AZ. The key issue in the adjudication was whether a contract was finalised. AZ adduced without prejudice material in the adjudication to rely on an admission by BY, which BY objected to. The adjudicator happened to decide that there was a finalised contract.
AZ issued a Part 7 Claim to enforce the decision of the adjudicator and BY brought Part 8 Proceedings requesting a declaration that materials put before the adjudicator were without prejudice and, because of such inadmissible material, the decision was unenforceable.
Without Prejudice Material
Generally, statements made (orally or in writing) in a genuine attempt to settle an existing dispute are deemed to be made 'without prejudice'. If made by a lawyer they will usually be headed 'without prejudice' to make it clear on the face of the document. However, whether a document is subject to the without prejudice rule will be determined by an objective assessment of the content of the document.
The rules around without prejudice materials usually prevent such documents from being put before the court/ adjudicator as evidence of admissions by the party that made them, so that parties are not discouraged from make such attempts to settle. There is an exception where such materials are required to be disclosed to determine whether a concluded settlement agreement was reached (Muller v Linsley & Mortimer [1996] PNLR 74).
The Decision
The Court held that:
- The nature of the communications and the documents disclosed to the adjudicator were without prejudice and were subject to without prejudice privilege.
- The negotiations did not result in any concluded agreement and thus did not fall within the exception set out above.
- The previous cases showed the Court's strong discouragement to parties from deploying 'without prejudice' communications in adjudication.
- The issue was not whether the 'without prejudice' communications were material to the adjudicator's decision. Rather, it was whether they were material to giving rise of an objective perception of apparent bias of the adjudicator.
- A fair-minded and informed observer would have concluded that there was a real possibility that, having seen the without prejudice material, the adjudicator was unconsciously biased. The without prejudice material was placed "front and centre" within the adjudication by AZ and the material "contained implicit admissions by BY that were plainly inconsistent with its open position". Due to this it was clear that the material was adverse to BY's interests and also related to the central issues in dispute.
Commentary
This judgment is a rare example of the court not enforcing an adjudicator's decision.
If you are involved in an adjudication and the other side submits 'without prejudice' material to the adjudicator, which:
- has not been submitted to evidence a concluded agreement;
- privilege has not been waived over it; and
- there is a real risk that the adjudicator will be influenced by it (consciously or not);
then you should consider immediately notify the other side that this is 'without prejudice' material, that you have not waived privilege over it and object to such material being reviewed by the adjudicator. It would also be prudent to fully reserve your position in respect of it for the remainder of the adjudication.
The court also cautioned that lawyers who put 'without prejudice' material before the adjudicator may also face professional disciplinary action. A cautionary tale indeed!
