Without prejudice material relates to negotiations between parties with a genuine aim to settle the dispute. Material that is subject to without prejudice privilege, whether oral or in writing, cannot be admitted in evidence in proceedings. This policy is in the public interest to prevent lengthy and costly litigation by encouraging parties fully and frankly to put their cards on the table in pursuit of a settlement.

Determining the privileged nature of the material is a matter of substance over form. That is to say that even though a competent solicitor may mark material as without prejudice, that in itself is not proof of its being, and on the contrary, unmarked material may have privilege.

Even though the Construction Act is silent as to what extent the strict rules of evidence apply to adjudication, the requirement for the adjudicator to comply with the rules of natural justice necessitate that the adjudicator must tread carefully – even if, as often is the case, the without prejudice material is admissible. As Akenhead J stated in Ellis v Vincent Goldstein [2011]: “without prejudice material being put before the adjudicator … is not wholly uncommon” and this article attempts to provide guidance to the adjudicator facing this challenge.

Legal Framework

In Specialist Ceiling Services Northern v ZVI Construction [2004], the Court said adjudicators are generally commercially aware that there will be without prejudice negotiations, and should they be made aware of this correspondence then they should proceed if they can put the material out of mind.

As HHJ Havelock-Allan’s stated in RWE Npower v Alstom Power [2009]: “There are certain exceptional circumstances where it may be permissible to admit into evidence without prejudice communications which are privileged“. In this case, the material was adduced as evidence that the dispute had crystallised. The content of the material was protected by without prejudice privilege but admissible for the purposes of proving the fact that there was a dispute. More recently in Transform Schools v Balfour Beatty [2020] the Scottish Court agreed that the adjudicator was entitled to look at WP material as proof of fact in respect of a limitation period.

This type of scenario places the adjudicator in the perilous position of considering admissible material for one purpose and consequently opening Pandora’s Box to a potential breach of natural justice. As such, a party relying on the evidence might consider making the effort to redact any information that might lead to a conclusion of bias.

In Ellis v Vincent Goldstein, Akenhead J stated that the parties should be discouraged to put inadmissible WP material before the adjudicator or to risk an unenforceable decision. The Court enforced the decision finding that the adjudicator was not influenced and went on to define a burdensome test of apparent bias relating to WP material: “…[if] on an objective appraisal, the material facts give rise to a legitimate fear that the adjudicator might not have been impartial…The Court…should look at all the facts which may support or undermine a charge of bias, whether such facts were known to the adjudicator or not“.

In AZ v BY [2023] the Court found that the WP material was inadmissible and refused enforcement as the adjudicator had erroneously found the material was not privileged and relied on it in reaching a decision. AZ argued that the communications were not ‘material’ to the decision, but the court stated they gave rise to a legitimate fear of unconscious bias.

Conclusion

Akenhead J commented in Ellis v Vincent Goldstein that, “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“. Although the author would question a correlation between legal qualifications and bias, it is nevertheless a powerful signal from the Courts that the adjudicator must proceed cautiously when presented with without prejudice material.

Furthermore, Peter Coulson wrote in the fourth edition of his magnum opus: “It is thought that, if the adjudicator was told of the amount of a without prejudice offer, it might be very difficult for him to continue with the adjudication, because there would be an inevitable question mark about whether the result of the adjudication, however inadvertently, was shaped by the amount of the offer“. That is the challenge the adjudicator must reconcile when deciding whether to proceed or resign. It is not relevant whether the adjudicator is able to remain impartial, the question is whether a fair-minded and informed observer might think otherwise.

It is submitted, as a belt and braces approach, the adjudicator might ask the parties to agree to a redaction and resubmission. Failing that the adjudicator might request a colleague to undertake the redaction. Following this course of action, the adjudicator might avoid being influenced by any without prejudice material and therefore have no reason to resign.