Prejudice Without Prejudice?

Publication Date27 May 2020
AuthorMs Catherine Simpson
SubjectCorporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Contracts and Commercial Law, Trials & Appeals & Compensation, Construction & Planning
Law FirmFenwick Elliott LLP

By Catherine Simpson, Trainee Solicitor, Fenwick Elliott

Different jurisdictions apply different meanings to the words "without prejudice". A recent Scottish case, Transform Schools (North Lanarkshire) Limited v Balfour Beatty Construction Limited and Balfour Beatty Kilpatrick Limited,1 provides a useful reminder of some key issues that often arise in the course of construction disputes, in particular in the context of enforcement of adjudicator's decisions arising from breach of natural justice. In this case, the focus was the admissibility or otherwise of without prejudice documents.

What was the case about?

Transform Schools (North Lanarkshire) Limited ("Transform") had engaged Balfour Beatty Construction Limited and Balfour Beatty Kilpatrick Limited ("Balfour Beatty") to perform construction work at various schools in North Lanarkshire, Scotland.

A dispute arose between the parties in relation to latent defects at one of the schools. The dispute was submitted for adjudication and found in favour of Transform. In the adjudication, Balfour Beatty's argument that the claim had prescribed (or that it was time barred under the principle equivalent to limitation, for those unfamiliar with the Scottish jargon) was rejected. The adjudicator concluded, with reference to a chain of letters between Balfour Beatty and Transform's solicitors, that the prescriptive period had been extended. Transform subsequently raised an action for enforcement of the adjudicator's decision, after Balfour Beatty refused to pay the award of approximately '4,000,000.

What were the parties' arguments?

Balfour Beatty opposed enforcement on the basis that the adjudicator had referred to certain letters which had been marked "without prejudice". Their argument was, broadly, that: (1) without prejudice correspondence was protected against use in the adjudication; (2) the adjudicator had relied upon the protected correspondence to a material extent in determining prescription; (3) the adjudicator's approach "offended against the public policy" underpinning without prejudice privilege (they argued that if parties could not enter into without prejudice settlement discussions without the risk of these being relied on in an adjudication, the process of adjudication would be "damaged"); (4) the adjudicator was guilty of a material error in admitting, considering and relying on the correspondence; and (5) the adjudicator's error amounted to a material breach of natural justice and/or the adjudicator's reliance on the without prejudice correspondence gave rise to apparent bias.

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