Without prejudice rule: High Court considers the estoppel exception

The High Court has struck out parts of a defence and a counterclaim as an abuse of process on the grounds that they expressly relied on communications protected under the "without prejudice" rule, which provides that evidence of negotiations genuinely aimed at settlement is not admissible in legal proceedings. The court rejected an argument that the case fell within an exception that allows without prejudice communications to be admitted for the purpose of establishing an estoppel: West v Churchill & Anor [2024] EWHC 940 (Ch).

The judgment provides a useful summary of the rationale and scope of the estoppel exception. The court acknowledged that it is possible for a party to without prejudice negotiations to make promises or give assurances that, despite the absence of a concluded agreement, can reasonably be relied on by the other party and give rise to an estoppel. In this case, however, the matters relied on were no more than proposals put forward in the course of negotiations, and so could not form the basis of an estoppel claim.

The decision illustrates that the court will not allow the estoppel exception to be used in an attempt to make settlement proposals or "agreements in principle" binding even though the negotiations did not result in a concluded agreement. 

Background

The claim concerned a dispute between family members regarding the ownership of land in the estate of the deceased. The claimant was one of several children of the deceased and the first defendant was the deceased's widow. 

There had been negotiations in the lead up to proceedings being issued, but no binding agreement was achieved. 

The claimant alleged that she, the first defendant and another of the deceased's daughters, had carried on a farming business in partnership together on various parcels of farmland belonging to the estate. The widow denied this, asserting that the farm and farming business were beneficially hers alone and that the claimant had merely been her agent.

The widow's defence and counterclaim expressly referred to without prejudice discussions that had taken place between the parties. Her case was based at least in part upon an alleged proprietary estoppel, arguing that: 

•  in the course of negotiations aimed at settling a claim that she (the widow) had brought in 2003 under the Inheritance (Provision for Family and Dependants) Act 1975 ("Inheritance Act"), the claimant, acting on behalf of herself and all her siblings, made a number of representations to the effect that the widow was or would be the sole beneficial owner of the property;
•  she had relied on those representations to her detriment by not pursuing her claim under the Act (which was stayed in light of ongoing settlement discussions); and
•  the claimant was estopped from denying that the farm was held by the estate on a bare trust for the widow.

The claimant applied to strike out those parts of the defence and counterclaim that referred to or relied on the negotiations. 

The widow accepted that, subject to any exception that might apply, the pleaded matters fell within the scope of the without prejudice rule – being communications evidencing the content of negotiations made in a genuine attempt to settle the claim under the Inheritance Act.

The widow, however, submitted that the without prejudice communications relied on in her defence and counterclaim fell within the estoppel exception to the without prejudice rule.

Decision

The High Court (HHJ Keyser KC) granted the claimant's application, striking out the relevant parts of the defence and dismissing the counterclaim. 

Existence of the estoppel exception

The claimant's argument included a submission that the estoppel exception to the without prejudice rule did not exist. The judge considered that suggestion to be hopeless, observing that:

• Neuberger J's reasoning in Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] F.S.R. 178 was compelling: "… if a clear and unambiguous statement is made by one party in 'without prejudice' correspondence, and the statement is acted on, and reasonably acted on, by the other party, an objection by the first party to the correspondence being put in evidence by the second party in order to justify the step taken by the second party would be plainly unconscionable and would not be upheld by the court". 
• There was no basis for the claimant's suggestion the reasoning in Hodgkinson was only obiter. Neuberger J held that there was an estoppel exception but that the matters relied on did not fall within it.
• In any event, Neuberger J's observations had been cited with approval by Robert Walker LJ in Unilever Plc v The Proctor & Gamble Co [2000] 1 WLR 2436, which confirmed the estoppel exception in the following terms: "Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel."

That has in turn had been cited with approval by the House of Lords in Ofulue v Bossert [2009] UKHL 16 (referring to "the well-established exception of estoppel, as explained in Unilever..."  and by the Supreme Court in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44.

Application of the estoppel exception

Having held that the exception existed, however, the judge concluded that the widow had failed to establish an arguable case for its application in the present dispute. He noted that a party seeking a remedy on the grounds of proprietary estoppel must establish:

• that a sufficiently clear and unequivocal representation or promise was made, or assurance given, by the promisor in relation to relevant property;
• that the promisee relied on the representation, promise or assurance and did so reasonably; and
• that the promisee suffered detriment in consequence of the reliance. 

Given that the remedy is concerned with preventing unconscionable conduct, the Court is required to take a holistic approach rather than "divide the elements of proprietary estoppel into watertight compartments".

In the present case, the judge considered that a basic problem with the widow's estoppel case was that the “representations” or “assurances” pleaded, even if they could be described in those terms, were no more than positions in the course of negotiations that did not lead to a settlement.

He accepted that a party to negotiations may make promises or give assurances that, despite the absence of a concluded agreement, can reasonably be relied on by the other party and thereby give rise to an estoppel. However, the widow's pleadings identified nothing of the sort. Nothing had been identified beyond proposals and agreements "in principle" which never advanced to a concluded agreement.

Accordingly, nothing relied on by the widow constituted a clear and unequivocal representation, promise or assurance, and it was not arguable that the widow reasonably acted in reliance on the matters she referred to. The fact of the matter was that a concluded settlement was never reached and the widow could not be said to have reasonably relied on proposals that never resulted in agreement. 

The case advanced amounted simply to an effort to make proposals binding even though the negotiations did not result in an agreement. Those proposals fell squarely within the without prejudice rule and not within any exception to it.