Transform Schools (North Lanarkshire) Ltd v Balfour Beatty Construction Ltd and Anr

[2020] CSOH 19

BB had been carrying out work at a number of schools in North Lanarkshire. A dispute arose about latent defects at one of the schools. The dispute was submitted for adjudication, where the adjudicator found in favour of Transform. During the adjudication, BB had said that the claim had prescribed (i.e. was time barred). The adjudicator disagreed, considering that a series of letters between the parties’ solicitors showed that the prescriptive period had been extended. 

At an enforcement hearing, BB said that the adjudicator had referred to certain letters which had been marked “without prejudice”. Lord Ericht said that he was only considering that “limited issue” of whether the adjudicator’s decision should be enforced by the court. He was not therefore to be taken as expressing a binding and final view as to whether the adjudicator was correct in his conclusions on prescription or on admissibility of the “without prejudice” letters. He was looking at the case from the point of view of natural justice. The traditional “without prejudice” rule, in the UK, is that based on public policy and the idea that parties should not be discouraged, when negotiating, by the knowledge that anything they may say may be used to their prejudice in the course of any court proceedings.

It is the content that matters. Just using the words “without prejudice” does not automatically mean that correspondence is protected. Here, the  significance of the “without prejudice” letters lay in relation to the question of whether the obligation to make payment had prescribed. Lord Ericht noted that the issue of whether or not he could refer to the letters in question was raised by the adjudicator not the parties. 

The adjudicator decided that the use of the words “without prejudice” was intended to convey that by offering to carry out the works proposed, BB were not admitting liability, not that the correspondence was to be regarded as without prejudice in the sense of not being referable to in subsequent proceedings. The adjudicator looked at the correspondence as a whole over a 23-month period. He took the view that it was possible for a court, and thus an adjudicator, to conclude that words in a letter such as “without prejudice to liability” do not, when considered in the wider relevant context, necessarily mean what they appear to say.

Here, the adjudicator had to decide whether or not the claim was time-barred. To do that he had to make a decision as to whether the “without prejudice” letters were admissible; he decided that they were admissible and took the letters into account in making his decision. 

The current case was not a situation where the adjudicator was improperly made aware of an irrelevant and collateral “without prejudice” offer to settle which might have an influence on his thinking. The question of the admissibility of the “without prejudice” letters was one which the adjudicator had to decide as one of the central issues in the adjudication. Lord Ericht concluded that the adjudicator in this case may or may not have been right to decide they were admissible. But if he was wrong, then that was an error of law, and errors of law on the part of the adjudicator do not justify this court in refusing to enforce the adjudicator’s decision. It could not be said that “the submission of the letters to the adjudicator, or the way in which he dealt with them, was in any way improper or involved any breach of natural justice or apparent bias”. 

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