The Pursuers – Transform Schools (North Lanarkshire) Ltd (“Transform Schools”), engaged the Defenders - Balfour Beatty Construction Ltd and Anor (“Balfour Beatty”) to undertake works at a variety of schools in North Lanarkshire. A dispute arose concerning latent defects in the drainage system at one of the schools. The parties entered into correspondence about the defects and works required to correct them. Following the breakdown of negotiations, Transform Schools referred the issue to adjudication. The adjudicator found the defenders liable and ordered an award of £4,029,574.58. Balfour Beatty sought a reduction of the adjudicator’s decision in the Court of Session on the basis that the adjudicator’s reliance on inadmissible “without prejudice” correspondence made the decision unenforceable. 

During the adjudication, the adjudicator invited submissions from both parties on the question of admissibility of a letter dated January 2017 headed “without prejudice”. Transform Schools submitted that the letter was admissible. They noted that it referenced an earlier letter dated November 2016, which in turn referenced another letter dated October 2016. As the October and November 2016 letters discussed Balfour Beatty’s settlement proposals, it followed that the January 2017 correspondence formed part of a chain of admissible correspondence.

Balfour Beatty submitted that the settlement proposals in the letters were a legitimate attempt to resolve the issue on a without prejudice basis. As such, all the letters in the chain of correspondence were inadmissible and the adjudicator could not rely on them.   

In reaching a decision, the adjudicator took a holistic approach to the correspondence. As most of the correspondence between 2016 and 2018 were not labelled “without prejudice”, the adjudicator concluded that the use of “without prejudice” in the main body of the correspondence pertained specifically to the remedial works being done on a without prejudice basis.  By making the document “without prejudice” the intention was to indicate that Balfour Beatty was not admitting liability. The intention was not, as Balfour Beatty claimed, that the letters were not to be referenced in any subsequent proceedings. As such, the adjudicator found in favour of the Pursuers.

In the Court of Session, Balfour Beatty argued that adjudicator’s reliance on the correspondence was a material error that amounted to a breach of natural justice that displayed bias against them. 

Lord Enrich was not persuaded that the adjudicator had breached natural justice or shown bias against Balfour Beatty. Lord Enrich specifically noted that the adjudicator had invited both parties to submit on the question of admissibility and considered their submissions in reaching a decision. The judgment explains that without prejudice rules did not exclude all consideration of documents marked “without prejudice” and that in a dispute on the admissibility of a “without prejudice document”, the court is entitled to look at the document to decide whether or not the document was admissible. It was held that an adjudicator is likewise entitled and legally qualified to look at documents marked “without prejudice”.  

The key takeaway is that the words “without prejudice” themselves are not enough to bring a document within the scope of the “without prejudice” doctrine. The document must express genuine admission or settlement proposals to warrant legal protection.