England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM MASTER CLARK
HC-2014-001191

		Rolls Building, Royal Courts of Justice 7 Rolls Buildings, Fetter Lane London, EC4A 1NL
		04/05/2017

Mr Justice Newey :

1. This is an appeal by the defendant, Mr Scott Halborg, against an order for disclosure that Master Clark made in favour of the claimant, EMW Law LLP ("EMW"), on 28 October 2016. Among other things, the appeal raises issues as to the applicability of the without prejudice rule.

Basic facts

2. Mr Halborg is a solicitor. Until 14 March 2013, he was a sole practitioner practising under the name "Halborg & Co". Since then, he has practised through a limited liability partnership now known as "Deals & Disputes Solicitors LLP".
3. During the period he was practising on his own account, Mr Halborg was instructed to act for his parents and a family company, Halborg Limited, in a claim against some architects referred to as "Savage Hayward". On 19 December 2008, Mr Halborg and his clients ("the Halborg Claimants") entered into a conditional fee agreement ("the Client CFA") in respect of the claim. By March of the following year, Mr Halborg had decided to engage EMW to assist him with it.
4. On 24 March 2009, EMW sent Mr Halborg a letter "to formally set out the terms of [their] engagement". The letter referred both to a document headed "The Small Print" containing terms of engagement and to a conditional fee agreement ("the Agency CFA") which was described as a binding legal contract between Mr Halborg and EMW and was signed by or on behalf of those parties. The Agency CFA said the following under the heading "Paying us":

"If the clients [i.e. the Halborg Claimants] win their claim, the Solicitors' agents [i.e. EMW] will be entitled to be paid by the Solicitors [i.e. Mr Halborg] our basic charges, our disbursements and a success fee provided the same have first been recovered in full from the Opponents [i.e. Savage Hayward] by the clients and/or the Solicitors; and without limitation it is a condition precedent to our receiving any payment to this Agreement that the clients and/or the Solicitors have first received payment in full from the Opponents in respect of any specific fees and/or disbursements of the Solicitors' agents (the 'pre-eminent condition precedent to this agreement'). The clients are entitled to seek recovery from the Opponents of part or all of the Solicitors' agents basic charges, disbursements, and success fee and insurance premium as set out in the document 'What the Solicitors need to know about a CFA'.

…

If the Solicitors end this agreement before the case is won or lost other than where it is reasonable to do so and/or they are entitled to do so due to our breach, subject to pre-eminent condition precedent to this agreement, we shall also claim the success fee.

We may end this agreement before the case is won or lost, provided that we shall not do so unreasonably and we shall forfeit all our entitlement to fees and/or disbursements should we do so without the clients' and the Solicitors' agreement."

5. Although named in the Agency CFA, the Halborg Claimants were not, it seems clear, true parties to it. On the other hand, they were evidently aware of Mr Halborg's use of EMW. In witness statements of 10 August 2016, Mr Halborg's parents each explained that they "agreed to 'Halborg & Co. Solicitors' using the subcontracting services of a third party, [EMW], on a purely conditional basis, as set out in a Conditional Fee Agreement to which we were not parties …."
6. On 15 September 2009, the Halborg Claimants issued proceedings against Savage Hayward. On 19 July 2010, Savage Hayward made a Part 36 offer of £350,000, and the offer was accepted by the Halborg Claimants on 6 August 2010. As a result, Savage Hayward became liable to pay the Halborg Claimants' costs of the claim they had brought.
7. EMW had worked on the case between 7 April 2009 and 6 August 2010. According to EMW, it spent a total of 179.8 hours on the matter, as a result of which it stood to become entitled to £53,940 plus a success fee of 95% and VAT.
8. Mr Halborg entered into negotiations about costs with Savage Hayward's solicitors, Berrymans Lace Mawer ("BLM"). A bill of costs was prepared and served on BLM. This sought a total of £1,357,714.39, £123,590 of which was accounted for by a claim for EMW's "agency charges".
9. BLM served points of dispute on 16 September 2011. These included the following:

i) Under the heading "Proportionality, conduct/ liability costs & costs estimate":

"It is evident that the principal lawyer in this matter, SH, and his firm, Halborg & Co, are not experienced in this kind of litigation. The inexperience of the solicitors increased the costs substantially and disproportionally in that assistance was required from a solicitor agent and five different counsel. The fact is that the only reason that the solicitors were instructed was because SH is son of the first and second claimants and sole shareholder of the third claimant";

ii) Under the heading "Hourly Rate":

"The inexperience of the solicitors in these kind of matters and the heavy reliance on others (counsel and solicitor agent) does not justify hourly rates in excess of the guidelines for Leicester.

The only reason that a grade A had conduct of this matter was that the solicitor involved was the son of the first and second claimants and had an interest in the third defendant company. The principal lawyer had no specialist experience …"; and

iii) Under the heading "Solicitor Agent":

"The work of the solicitor agent appears to be no more than 'handholding' no doubt due to the inexperience of the solicitors in these kinds of matters. The agent, also a grade A lawyer, has claimed 179.8 hours @ £300 per hour which is no more than duplication of effort by the principal solicitor. In any event, the principal solicitor has also claimed all his time for liaising with the agent which is also clear duplication between the two lawyers.

The agents' fees, inclusive of success fee, amount to £105,183 plus VAT which was a highly disproportionate step to take by a grade A lawyer charging rates up to £295 per hour who had already had the assistance of various counsel, including a senior junior ….

The defendants offer nothing for time spent by the solicitor agent and the subsequent time of principal solicitor on the same issues."

10. Not having been paid anything for their work, EMW said the following in a letter to BLM of 21 November 2011:

"We hereby give you notice that under CPR Part 47, particularly by reference to paragraph 32.10, that we, EMW Solicitors, consider ourselves to be a relevant person under CPR 47.5(2) as we have a financial interest in the outcome of the assessment in this matter.

Our fees are those with the Claimants, not Halborg and Co, see Pomeroy & Tanner [1897] 1 Ch 287 and so this firm will be dealing with its own negotiations in relation to the part of the Bill of Costs that relates to this firm's fees. Please be clear that only this firm has authority to negotiate in relation to our fees and so should you enter any agreement with anyone else it will not affect our fees."

On the next day, EMW sent Mr Halborg an email that read:

"Take this as written notice under CPR Part 47, Para 32.10, that EMW is a relevant person under 47.5(2) and has a financial interest in the outcome of the assessment and wishes to be a party to the assessment process and retains all its rights to negotiate its own fees with the Defendants."

11. On 22 October 2013, having still not recovered any payment from anybody, EMW issued proceedings in the Senior Courts Costs Office to which the defendants came to be the Halborg Claimants and Mr Halborg. The proceedings were brought under CPR Part 67 and sought an assessment of costs under section 70 of the Solicitors Act 1974. On 24 October 2014, Master Campbell struck the proceedings out as against the Halborg Claimants, taking the view that there was no solicitor/client relationship between them and EMW. In contrast, Master Campbell declined to grant summary judgment in favour of Mr Halborg and, on appeal, Judge Purle QC, sitting as a Judge of the High Court, concluded that Master Campbell had been "right (or at least entitled) not to" strike out the claim as against Mr Halborg (see EMW Law LLP v Halborg [2015] EWHC 2005 (Ch), [2015] 4 Costs LO 427, at paragraph 10). Mr Halborg has appealed to the Court of Appeal against a finding by Master Campbell, on 24 November 2014, that EMW is not a litigant in person for the purposes of CPR 46.5.
12. The present proceedings were issued on 16 September 2014. They seek damages for breach of contract. More specifically, EMW alleges that Mr Halborg has breached various terms which, it says, were implied in the Agency CFA and that it has failed to recover its fees in consequence. In his defence, Mr Halborg states, among other things, as follows:

"It is admitted and averred that since 21 November 2011 [Mr Halborg] has declined to provide to [EMW] particulars in respect of the costs position between the Halborg Claimants and the defendants to their claim, and has refused to give [EMW] authority to negotiate with the defendants to the substantive claim. [EMW] has no entitlement to the said particulars and/or to demand the said authority."

13. In an email of 16 September 2014, EMW told Mr Halborg that it was instructing him "to pursue the costs of the parts of the bill involving EMW, and to send all [BLM's] responses to [it] to instruct [him] on how [it wished] to proceed". In a further email of 29 October 2014, EMW said:

"Finally, in anticipation of receiving the defence of Mr Scott Halborg in the chancery claim, we wish to make clear that whilst we withdrew authority for Mr Halborg to negotiate this firm's costs (i.e. the amount), it is still the obligation of Mr Halborg that he will take all reasonable measures to recover our costs which as a matter of law are his costs. The only caveat to Mr Halborg's duty was and is that he does not have our authority to offer to accept any figure, or agree to accept any figure that is offered by the original defendants (Savage and Hayward and/or their insurers) and so this firm retains the final say in whether or not a figure is offered or is accepted as being acceptable. Other than that Mr Halborg is fully obligated to pursue EMW's cost and has our authority to do so. Given also that in law Mr Halborg is simply seeking to recover his costs from the other side, there is no obligation on EMW to pay anything for that and it Mr Halborg's cost to do so."

14. On 18 December 2014, Mr Halborg's limited liability partnership, which is now called "Deals & Disputes Solicitors LLP", sent BLM a letter in which it said:

"As we believe you know, we remain in dispute with the solicitor agent, EMW.

As discussed with you, it may hence be quite some time until we can proceed to detailed assessment if there is no settlement of the costs in due course, but we will of course let you know once the position with the solicitor agent is resolved so that correspondence and/or discussions can recommence."

15. When Mr Halborg came to give disclosure in these proceedings, he withheld various categories of documents on the basis that they were irrelevant and/or privileged. EMW, however, made an application for specific disclosure which for the most part succeeded before Master Clark. On 28 October 2016, Master Clark ordered Mr Halborg to disclose the following classes of documents:

"(a) All correspondence (including for the avoidance of doubt emails or faxes), attendance notes or meeting notes, relating to communications between the Defendant [i.e. Mr Halborg] and Berrymans Lace Mawer (now BLM) from 22 July 2011 to date, relating to any discussion, negotiation or settlement of the Halborg Claimants' costs in claim no. HQ 07 X04098 ('the substantive claim') ["the Class A Documents"];

(b) Documents evidencing any payments including payments on account or in part settlement of costs made by Berrymans Lace Mawer (now BLM) or their clients to the Defendant in relation to the Halborg Claimants' costs in the substantive claim ["the Class B Documents"];

(c) Any correspondence, files notes, attendance notes, documents or other memoranda that substantiate the work done by the Claimant [i.e. EMW] for the Defendant ["the Class C Documents"];

(d) Any correspondence, notes, emails, advices or other communications passing between the Defendant and his costs draftsman in the substantive claim ["the Class D Documents"]."

16. In a written judgment, Master Clark explained why she considered that (i) the classes of documents in respect of which she was ordering disclosure were relevant and (ii) Mr Halborg was not entitled to withhold them as within the scope of the without prejudice rule (as regards the Class A Documents) or on the basis of legal professional privilege (as regards the Class C and D Documents).
17. So far as the application of the without prejudice rule is concerned, the Master:

i) was persuaded by an analogy that counsel for EMW drew with common interest privilege. The Master said (at paragraph 47 of the judgment):

"I agree that in the negotiations as to assessment of costs, the Halborg claimants, the defendant and the claimant all shared a common interest, and that this entitled the defendant to see otherwise privileged documents";

ii) considered that the documents were disclosable because there is a dispute as to whether without prejudice communications have resulted in a settlement. The Master said (at paragraph 48 of the judgment):

"[T]he claimant's counsel submitted that where, as here, there is a dispute as to whether without prejudice communications have resulted in a settlement, without prejudice material is admissible as to that issue …. I agree that there is an issue in the proceedings as to whether and if so, when a settlement was reached with Berrymans and that the correspondence of which disclosure is sought is relevant to that issue. In my judgment, therefore, it falls within an established exception to the without prejudice rule and is disclosable";

iii) considered that the principle in Muller v Linsley & Mortimer [1996] 1 PNLR 74 applied to render other relevant without prejudice material disclosable (see paragraph 49 of the judgment). The Master said (in paragraph 58 of the judgment):

"I do not consider that there is any public policy justification for withholding disclosure of these documents provided safeguards are put in place to prevent their release into the public domain."

In the previous paragraph of the judgment, the Master had said:

"There is in my judgment only one way in which the Halborg claimants (and the architects) could be prejudiced by the disclosure of this material. This could occur if (as the defendant asserts) there has been no settlement of the costs of the substantive claim; and the privileged material was put into the public domain by being referred to in open court. It would then be available for use in any assessment of costs of the substantive claim. However, this could be prevented by the court making directions under CPR 31.22 preventing further use of documents referred to in open court; or, if necessary, directing that the public are excluded from the relevant part of the hearing. So far as use by the claimant himself is concerned, he would be subject to the implied undertaking provided for by CPR 31.22(1)."

18. In contrast, the Master was unpersuaded by two of the arguments that EMW had put forward:

i) With regard to a submission to the effect that "in law the claimant and defendant are treated as one person, with the solicitor having no separate legal personality" (see paragraph 43 of the judgment), the Master said (in paragraph 44):

"In my judgment this argument overlooks the fact that the privilege is that of the Halborg claimants (and [BLM]), not that of the defendant. The defendant is not asserting the privilege on his own behalf, but arguing that the privilege to which the Halborg claimants are entitled precludes disclosure of the documents in question";

ii) As for a contention that EMW was "entitled to the documents by reason of an implied term in the agency CFA that he was to be kept informed of negotiations with [BLM] and entitled to see any correspondence passing between [BLM] in real time", the Master said (in paragraph 45 of the judgment):

"The difficulty with this argument [is] that it is based not on the defendant's disclosure obligations, but on a substantive entitlement that has not been established by the claimant, and which I cannot determine in this application."

19. Mr Halborg now appeals against the Master's decision. The issues that arise from the appeal and a Respondent's Notice served by EMW can, I think, be conveniently considered under the following headings:

i) Relevance;

ii) The without prejudice rule;

iii) Legal professional privilege; and

iv) Other matters.

Most of the argument was focused on the Class A Documents.

20. Before, however, addressing the issues raised by the appeal and Respondent's Notice, I should say something about the position of a solicitor-agent such as EMW was. In this connection, I was taken to In re Pomeroy & Tanner [1897] 1 Ch 284 and Sharratt v London Central Bus Co Ltd [2005] EWHC 3018 (QB), [2006] 4 Costs LR 584. These cases show that, where a solicitor uses a solicitor-agent, the solicitor-agent's work is treated as the solicitor's work and charges for it must be included in the solicitor's own bill. In the Pomeroy & Tanner case, where Bristol solicitors had employed a London agent, Stirling J said (at 287):

"It is well settled that between the client and the London agent of the country solicitor there is no privity. The relationship of solicitor and client does not exist between the client and the London agent. What is done by the London agent is part of the work done by the country solicitor for the client. The country solicitor does or may do part of the work personally. He does or may do part of his work through clerks whom he employs in the country. Or, if necessary - and the necessity occurred in this case - he may do part of his work through a London agent. But as between the country solicitor and the client the whole of the work is done by the country solicitor. It follows, therefore, that the items which make up the London agent's bill are not mere disbursements, but are items taxable in the strictest sense as between the client and the country solicitor, just as much as items in respect of work done by the country solicitor personally, or by the clerk whom he employs in the country."

In the Sharratt case, Ramsey J observed (at paragraph 44) that "the fees of the solicitor-agent are treated by convention as being fees of the solicitor-principal as if he carried out the work himself".

Relevance

The Class A Documents

21. The amended particulars of claim include this:

"21. On or around the end of November 2011 [Mr Halborg] settled the costs of the Substantive Claim [i.e. that against Savage Hayward] ('the Settlement').

22. Since that date [Mr Halborg] has refused to provide details of the Settlement. [Mr Halborg] has also refused [EMW] authority to negotiate its costs claim with the Defendant to the Substantive Claim. As a result the solicitors to the Defendants to the Substantive Claim have refused to deal with [EMW].

23. In breach of the implied terms pleaded at paragraph 14 above [Mr Halborg] has:

a. Failed to use all reasonable efforts to negotiate recovery of [EMW's] costs from the Defendants to the Substantive Claim.

b. Prevented [EMW] from recovering its costs from the Defendants to the Substantive Claim

c. Preferred his own costs recovery over that of [EMW].

d. Failed to ascribe to [EMW] a fair proportion of any global costs settlement.

e. (If, contrary to the above, all costs apart from those attributable to [EMW's] work had been settled) failed to pursue a costs settlement on behalf of [EMW], having apparently accepted at face value the ascription of [EMW's] work as being worth nothing.

f. Failed to keep [EMW] informed of all relevant developments in the recovery of [EMW's] costs.

g. Failed to disclose to [EMW] all documents relevant to the recovery of [EMW's] costs (including, in particular, negotiations over costs, and details of the settlement agreement over costs)."

22. It was submitted to the Master on behalf of Mr Halborg that, since EMW alleges that he "settled the costs of the Substantive Claim" "[o]n or around the end of November 2011", no later correspondence could be relevant. Mr Halborg maintained that the allegations of breach of implied terms are all premised on the proposition that a settlement occurred in November 2011 and that the amended particulars of claim do not contain any complaints about Mr Halborg's subsequent conduct.
23. The Master did not agree. She said the following in the judgment:

"30. In my judgment, the allegations in paras 23a, b and c are not premised on the existence of the settlement alleged by the claimant. They are allegations that can still be made even if no settlement agreement had been entered into; and in such a case would be equally referable to the period after November 2011 as before.

31. Para 23d refers to 'any' global costs settlement and is thus expressly not confined to the November 2011 settlement alleged by the claimant; and is an allegation that extends in time beyond November 2011.

32. Para 23e is an express counterfactual, which is sufficient of itself to render post November 2011 correspondence relevant. Paras f and g are also referable to the post November 2011 period.

33. Finally, since whether a settlement agreement was ever entered into is an issue in the claim, in my judgment this also renders all correspondence with [BLM] relevant."

24. Before me, Mr Halborg, through Mr Robert Marven, who appears for him, once again contended that paragraph 23 of the amended particulars of claim has to be read as meaning that the alleged settlement in November 2011, or possibly events surrounding the alleged settlement, constituted the alleged breach of the implied terms. To my mind, however, the Master's reasoning is convincing. I have not, therefore, been persuaded that the Class A Documents are not relevant.

The Class B Documents

25. The Master also considered the Class B Documents to be relevant. She said in paragraph 60 of the judgment:

"As noted, [Mr Halborg's] evidence is that there has been no settlement of any costs of the substantive claim. He does not address the issue of whether any payments on account have been made by [BLM] to him, and as [EMW] points out, has not denied that payments have made. If any such payments have been made, then they are relevant to the issue of breach of the agency CFA, and the loss occasioned to [EMW] by the breach."

26. Mr Marven once again disputed relevance, but I see no reason to differ from the Master on the point. As I see it, information as to what, if any, payments on account have been made might well bolster or impair the respective parties' cases.
27. Since Mr Halborg does not challenge the Master's order in respect of the Class B Documents on any other ground, the appeal must fail in so far as it concerns those documents. Of themselves, however, the Class B Documents are unlikely to reveal fully (if at all) what any payments were made in respect of or how they came to be made on that basis.

The Class C Documents

28. With regard to the Class C Documents, the Master said this in paragraph 62 of the judgment:

"Although [Mr Halborg's] counsel sought to argue that this material is irrelevant, the Defence makes no admission as to the extent of the work carried out by [EMW]; and in my judgment the material is relevant to that issue."

29. Challenging the Master's view, Mr Marven submitted that she was mistaken in thinking that Mr Halborg's pleaded case puts in issue alleged failings in EMW's work. The issue, he said, is the amount which is recovered inter partes, and that can only be ascertained at an inter partes assessment.
30. To my mind, however, the Master was justified in taking the view she did. Relevance falls to be determined by reference to the pleadings. Here, since the defence expressly makes no admissions as to the extent of the work carried out by EMW and denies that EMW "worked always to, or in accordance with, [Mr Halborg's] instructions", the Class C Documents are relevant to pleaded issues.

The Class D Documents

31. As for the Class D Documents, the Master said this in paragraph 63 of the judgment:

"Such correspondence would also be relevant to the issue of the extent and value of the work carried out by [EMW], and I agree with [EMW's] counsel's submission that the costs draftsman's perspective on the views of [Mr Halborg] and [BLM] as to the value of [EMW's] work would be useful to the trial judge."

32. Mr Marven criticised the Master's conclusion on the basis that the costs draftsman's perspective on the views of EMW and/or Mr Halborg are not relevant to any of the issues pleaded. In my view, Mr Marven is right about this. I do not think that the costs draftsman's views can matter.

The without prejudice rule

33. As mentioned above, the Master rejected a submission that Mr Halborg could withhold the Class A Documents on the strength of the without prejudice rule. Mr Halborg maintains that the Master was mistaken and that the without prejudice rule is applicable.

Some principles

34. The "without prejudice" rule operates to render evidence inadmissible. In general, "[t]he rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence" (Lord Griffiths in Rush & Tompkins Ltd v GLC [1989] 1 AC 1280, at 1299).
35. One justification for the rule can be found in "the express or implied agreement of the parties themselves that communications in the course of their negotiations should not be admissible in evidence if, despite the negotiations, a contested hearing ensues" (Robert Walker LJ in Unilever plc v Procter & Gamble Co [2000] 1 WLR 2436, at 2442). The rule is also "founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish" (Lord Griffiths in the Rush & Tompkins case, at 1299).
36. Without prejudice negotiations will normally be inadmissible in their entirety. In the Unilever case, Robert Walker LJ said (at 2448-2449):

"But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in the Rush & Tompkins case [1989] AC 1280, 1300: 'to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.' Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders."

37. The without prejudice rule can continue to apply even after a compromise has been agreed. In the Rush & Tompkins case, Lord Griffiths said (at 1301):

"as a general rule the 'without prejudice' rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement."

In Avonwick Holdings Ltd v Webinvest Ltd [2014] EWCA Civ 1436, Lewison LJ (with whom Sharp and Burnett LJJ agreed) said (at paragraph 22):

"The general rule however is still that stated in Rush & Tompkins Ltd v Greater London Council & Another …, namely that without prejudice negotiations once privileged remain privileged even after settlement."

38. The implications of the without prejudice rule are, moreover, capable of extending beyond the parties to the relevant negotiations. In the Rush & Tompkins case, Lord Griffiths said (at 1301):

"It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was reached with that party."

In Ofulue v Bossert [2009] UKHL 16, [2009] 1 AC 990, Lord Rodger observed of the Rush & Tompkins case (at paragraph 37):

"The decision is important because it establishes that not only the parties to the correspondence, but third parties also, are prevented from making use of the contents of without prejudice correspondence."

39. It is not open to one party to without prejudice negotiations to waive the privilege unilaterally. The privilege is a joint one and so can be waived only with the consent of both parties: see Avonwick Holdings Ltd v Webinvest Ltd, at paragraph 21.
40. There are, however, exceptions to the without prejudice rule. Robert Walker LJ provided a list of some of "the most important instances" in the Unilever case, at 2444-2445. Two of those he identified are particularly relevant to the present appeal:

"(1) As Hoffmann L.J. noted in [Muller v Linsley & Mortimer], when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. Tomlin v. Standard Telephones and Cables Ltd. [1969] 1 W.L.R. 1378 is an example.

…

(6) In Muller's case (which was a decision on discovery, not admissibility) one of the issues between the claimant and the defendants, his former solicitors, was whether the claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a software company and its other shareholders. Hoffmann L.J. treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications. The other members of the court agreed but would also have based their decision on waiver …."

41. The basis and extent of the latter exception (Robert Walker LJ's exception (6)) are controversial. I shall have to return to them later in this judgment.
42. The list of exceptions to the without prejudice rule is not closed. In Ofulue v Bossert, Lord Neuberger (with whom Lords Hope, Rodger and Walker expressed agreement) said (at paragraph 98) that it was open to the House of Lords to create further exceptions to the rule, while also expressing the view that it would be inappropriate to do so on the facts of that case. In Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] 1 AC 662, the Supreme Court concluded that there should be an exception under which:

"facts identified during without prejudice negotiations which lead to a settlement agreement of the dispute between the parties are admissible in evidence in order to ascertain the true construction of the agreement as part of its factual matrix or surrounding circumstances".

Lord Clarke (with whom the other members of the Court agreed) said (at paragraph 46):

"I would hold that the interpretation exception should be recognised as an exception to the without prejudice rule. I would do so because I am persuaded that, in the words of Lord Walker in the Ofulue case [2009] AC 990, para 57, justice clearly demands it. In doing so I would however stress that I am not seeking either to underplay the importance of the without prejudice rule …."

43. While "[n]early all the cases in which the scope of the 'without prejudice' rule has been considered concern the admissibility of evidence at trial after negotiations have failed" (Lord Griffiths in the Rush & Tompkins case, at 1300), it can also render documents immune from disclosure. In the Rush & Tompkins case, Lord Griffiths noted (at 1304) that Rabin v. Mendoza & Co [1954] 1 W.L.R. 271 "shows that even as between the parties to 'without prejudice' correspondence they are not entitled to discovery against one another" and went on to explain (at 1305):

"I have come to the conclusion that the wiser course is to protect 'without prejudice' communications between parties to litigation from production to other parties in the same litigation. In multi-party litigation it is not an infrequent experience that one party takes up an unreasonably intransigent attitude that makes it extremely difficult to settle with him. In such circumstances it would, I think, place a serious fetter on negotiations between other parties if they knew that everything that passed between them would ultimately have to be revealed to the one obdurate litigant. What would in fact happen would be that nothing would be put on paper but this is in itself a recipe for disaster in difficult negotiations which are far better spelt out with precision in writing."

A little later, Lord Griffiths said (at 1305):

"In my view the general public policy that applies to protect genuine negotiations from being admissible in evidence should also be extended to protect those negotiations from being discoverable to third parties."

44. In the course of the hearing before me, there was some debate as to whether a party to without prejudice negotiations can properly show a third party documents relating to the negotiations without obtaining the consent of his counterparty. The authorities show both that the without prejudice rule can be waived only with the consent of both parties and that the rule protects communications within its scope from disclosure. Does it follow that relevant documents can be shown to a third party only if both parties to the negotiations agree?
45. The answer, I think, must be "No". The voluntary provision of a document has, as it seems to me, to be distinguished from compulsory disclosure. The fact that a party to without prejudice negotiations is entitled to withhold communications within their scope on disclosure cannot mean that he is not free to show them to someone else if he so chooses, at least if there is a legitimate reason for doing so. Were the position otherwise, a litigant might find himself unable to provide relevant documents to, say, an expert unless and until the other side agreed, which would be absurd.

The analogy with common interest privilege

46. Thanki, "The Law of Privilege", 2^nd ed. summarises the law relating to common interest privilege in these terms (at paragraph 6.16):

"[C]ommon interest privilege arises where one party (party A) voluntarily discloses a document which is privileged in its hands to another party (party B) who has a common interest in the subject matter of the communication or in litigation in connection with which the document was brought into being. In such circumstances, provided disclosure is given in recognition that the parties share a common interest, the document will also be privileged in the hands of party B."

47. Although he placed little emphasis on the point, Mr Vikram Sachdeva QC, who appeared for EMW, maintained that an analogy with common interest privilege is to be drawn in the present case. The Halborg Claimants can, he suggested, share documents covered by the without prejudice rule with both Mr Halborg and EMW without losing their ability to assert the rule against the world in general.
48. Mr Marven, on the other hand, argued that common interest privilege can be of no relevance. He both disputed that a common interest can be said to arise between a litigant and his lawyers and said that, even if it did, it could not confer a right to demand disclosure.
49. I agree with Mr Marven that reference to common interest privilege is not of any assistance. Since the without prejudice rule confers a joint privilege, I find it hard to see how common interest privilege could normally have any application. Common interest privilege enables a document protected by legal professional privilege to be provided to a third party without privilege being lost: a litigant with the benefit of privilege can continue to withhold the document from his opponent, and the third party can also assert privilege. In the case, however, of without prejudice communications, both sides will already know of them and neither can dispense with privilege without the assent of the other. No question of without prejudice protection being lost could thus, it seems, arise from one side unilaterally disclosing communications to a person with a common interest.
50. Even supposing, however, both that there can be scope for drawing an analogy with common interest privilege in the context of the without prejudice rule and that a relevant common interest could be said to exist between a litigant and his lawyers, I do not think that reference to common interest privilege could help EMW in the present case. The analogy would suggest that the clients had not lost their right to rely on the without prejudice rule, not that lawyers working on the case could insist on seeing without prejudice communications. Another passage from Thanki, "The Law of Privilege", (at paragraph 6.17) is apposite here:

"It is worth noting at the outset that common interest privilege properly so-called does not give party B the right to obtain disclosure of otherwise privileged documents from party A and … it is misconceived to refer to common interest privilege as a 'sword' (over and above it acting as a 'shield'). The effect of common interest privilege is that, notwithstanding that he is not obliged to do so, in circumstances where party A voluntarily discloses an otherwise privileged document to party B, privilege will not be lost provided that a common interest exists between them at the time of disclosure."

51. Unlike the Master, therefore, I do not consider that EMW can claim to see otherwise privileged documents on the strength of an analogy with common interest privilege.

The concluded agreement exception

52. One of the well-established exceptions to the without prejudice rule relates to disputes about whether an agreement has been concluded. In the Unilever case, Robert Walker LJ noted that without prejudice communications are admissible where the issue is whether they have resulted in a concluded compromise agreement (see paragraph 40 above). In an earlier case, Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378, Danckwerts J (at 1382) held some letters to be admissible:

"because the point was whether there had been a concluded agreement of any kind between the parties in accordance with that correspondence and it would be impossible to decide whether there was a concluded agreement or not unless one looked at the correspondence".

53. Mr Sachdeva argued, and the Master accepted, that the exception is applicable in the present case. The amended particulars of claim allege that "[o]n or around the end of November 2011 [Mr Halborg] settled the costs of the Substantive Claim" and that allegation is denied in the defence. It follows, Mr Sachdeva said, that there is an issue as to whether an agreement was concluded and the without prejudice material is needed to determine it.
54. Mr Marven pointed out that Mr Halborg is adamant that no agreement has been reached. I do not think that that can matter, however. Mr Halborg has not applied for, let alone obtained, an order striking out the allegation of settlement found in the amended particulars of claim. Whether or not, therefore, Mr Halborg is confident that there has been no agreement, there is as matters stand an issue between the parties on the point.
55. The more serious objection to applying the concluded agreement exception is, I think, that no one involved in the without prejudice correspondence is alleging that an agreement has been reached. In Tomlin v Standard Telephones and Cables Ltd, the parties to the negotiations were at odds on whether an agreement had been arrived at, and Robert Walker LJ will presumably have had such a case in mind when identifying the relevant exception to the without prejudice rule. Here, in contrast, it is the agent of one side's solicitor who is contending for an agreement; neither the Halborg Claimants nor Savage Hayward are doing so even though it is their privilege that is at stake. The Master's approach, Mr Marven submitted, would have remarkable consequences: it would mean that a stranger to without prejudice negotiations could, by asserting that there had been a settlement, obtain communications which the parties themselves were entitled to assume enjoyed the protection of privilege.
56. On balance, however, I agree with the Master that the concluded agreement exception applies. In the Tomlin case, Danckwerts LJ observed that "it would be impossible to decide whether there was a concluded agreement or not unless one looked at the correspondence". The same could be said in the present case. Moreover, while a party to without prejudice negotiations is entitled to assume that the negotiations will not generally be capable of being deployed in Court proceedings without his consent, he can have no absolute assurance of that. On any view, the concluded agreement exception means that he runs the risk of the correspondence becoming admissible because his opponent alleges that the negotiations resulted in an agreement. The extent of the risk arising from the exception does not seem to me to be significantly increased if it is understood as allowing not merely a party to the negotiations, but someone else with a legitimate interest in their outcome, to rely on it.

The implications of the Muller case

57. Muller v Linsley & Mortimer involved a claim against solicitors in which the plaintiffs alleged that they had brought and compromised some proceedings against other parties in a reasonable attempt to mitigate their loss. The solicitors disputed this and sought discovery of documents relating to the settlement. The plaintiffs disclosed the letter before action and final settlement agreement, but maintained that the without prejudice rule allowed them to withhold letters and other documents leading up to the settlement. The Court of Appeal decided otherwise and ordered production of the documents.
58. Hoffmann LJ approached matters on the basis that, since the solicitors were not parties to the relevant negotiations, the without prejudice rule must depend only on its public policy rationale, which he took to be directed solely to admissions (see 80). He explained (at 79):

"If one analyses the relationship between the without prejudice rule and the other rules of evidence, it seems to me that the privilege operates as an exception to the general rule on admissions (which can itself be regarded as an exception to the rule against hearsay) that the statement or conduct of a party is always admissible against him to prove any fact which is thereby expressly or impliedly asserted or admitted. The public policy aspect of the rule is not in my judgment concerned with the admissibility of statements which are relevant otherwise than as admissions, i.e. independently of the truth of the facts alleged to have been admitted."

It followed, in Hoffmann LJ's view, that the without prejudice rule did not apply. He said (at 80):

"If this is a correct analysis of the rule, then it seems to me that the without prejudice correspondence in this case falls outside its scope. The issue raised by paragraph 17 of the statement of claim is whether the conduct of the Mullers in settling the claim was reasonable mitigation of damage. That conduct consisted in the prosecution and settlement of the earlier action.

The without prejudice correspondence forms part of that conduct and its relevance lies in the light it may throw on whether the Mullers acted reasonably in concluding the ultimate settlement and not in its admissibility to establish the truth of any express or implied admissions it may contain. On the contrary, any use which the defendants may wish to make of such admissions is likely to take the form of asserting that they were not true and that it was therefore unreasonable to make them.

I do not think that interpreting the rule in this way infringes the policy of encouraging settlements. It may of course be said that a party may be inhibited from reaching a settlement by the thought that his negotiations will be exposed to examination in order to decide whether he acted reasonably. But this is a consequence of the rule that a party entitled to an indemnity must act reasonably to mitigate his loss. It would, in my judgment, be inconsistent to give the indemnifier the benefit of this rule but to deny him the material necessary to make it effective."

59. The other members of the Court, Leggatt and Swinton Thomas LJJ, expressed agreement with Hoffmann LJ, while also saying that the Court's decision could be justified on the basis of waiver. Swinton Thomas LJ, for instance, said (at 81):

"By bringing their conduct into the arena, and putting it in issue, the plaintiffs have, in my judgment, waived any privilege attached to without prejudice negotiations and correspondence."

60. Hoffmann LJ's reasoning has not, however, been endorsed in subsequent cases. In the Unilever case, Robert Walker LJ said (at 2443) that, "[w]ithout in any way underestimating the need for proper analysis of the [without prejudice] rule", he had "no doubt that busy practitioners are acting prudently in making the general working assumption that the rule, if not 'sacred' (Hoghton v. Hoghton (1852) 15 Beav. 278, 321), has a wide and compelling effect". In Ofulue v Bossert, Lord Walker, having referred to views expressed by Lord Hoffmann in Muller v Linsley & Mortimer (as Hoffmann LJ) and Bradford & Bingley plc v Rashid [2006] 1 WLR 2066 (as Lord Hoffmann), said (at paragraph 57):

"As a matter of principle I would not restrict the without prejudice rule unless justice clearly demands it."

In the same case, Lord Neuberger, having quoted from the first of the passages from Hoffmann LJ's judgment in Muller set out in paragraph 58 above, said (at paragraph 95):

"Despite the very great respect I have for any view expressed by Lord Hoffmann, and the intellectual attraction of the distinction which he draws, I am inclined to think that it is a distinction which is too subtle to apply in practice …. In any event, the observation appears to be limited to the public policy reason for the rule, and says nothing about the contractual reason, which plainly applies here."

61. On the other hand, I was not referred to any criticism of the actual decision in the Muller case. To the contrary, Lewison LJ observed in Avonwick Holdings Ltd v Webinvest Ltd (at paragraph 22) that it was "hardly surprising that … the court ordered disclosure of the negotiations leading to the settlement". Thanki, "The Law of Privilege", 2^nd ed., states (at paragraph 7.22):

"Whilst the result in the Muller case was undoubtedly correct, it is best analysed as another exception to the without prejudice rule."

62. In the circumstances, I ought, as it seems to me, to proceed on the basis that Muller v Linsley & Mortimer was correctly decided on its facts. Further, I do not think that the case can be satisfactorily explained as one of waiver. Although Leggatt and Swinton Thomas LJJ suggested that the decision could be justified in that way, (a) they also both agreed with Hoffmann LJ and (b) it is hard to see how there can have been waiver since the authorities indicate that the benefit of the without prejudice rule cannot be waived by just one party to the negotiations. The correct inference must, in my view, be that (as is suggested in Thanki, "The Law of Privilege") there is an exception to the without prejudice rule that encompasses the facts of the Muller case.
63. Mr Sachdeva submitted that the relevant exception (or a modified version of it) should be understood to extend to the present case as well. Mr Marven, however, maintained that that could not be appropriate. The Muller decision, he said, must be confined to cases where the content of without prejudice communications is put in issue by one of its owners. Here, in contrast, Mr Halborg (so Mr Marven pointed out) is not advancing a positive case about his negotiations with BLM and none of the parties entitled to the protection of the without prejudice rule is even a party to the present proceedings. On top of that, Mr Marven said, EMW is seeking disclosure with a view to advancing a case which could be to the detriment of the Halborg Claimants, who are owners of the privilege, since a payment to EMW could potentially trigger shortfall provisions in the Client CFA under which the Halborg Claimants could be liable to pay Mr Halborg sums not recovered from Savage Hayward. In that connection, Mr Halborg's parents each observed in a witness statement that "it seems that any costs wrongfully paid to EMW rather than to our former solicitor 'Halborg & Co. (Solicitors)' potentially would affect us in that the same may trigger the 'shortfall' provisions in our CFA with 'Halborg & Co. (Solicitors)'".
64. In the end, however, Mr Marven has not persuaded me that the result in the present case should be different from that in Muller. On the contrary, I have concluded that, to echo Lord Walker in Ofulue v Bossert and Lord Clarke in the Oceanbulk case, justice clearly demands that an exception to the without prejudice rule (whether that encompassing the facts of the Muller case or another, comparable, exception) should apply even aside from the question of whether an agreement has been reached with Savage Hayward. My reasons include these:

i) Although not parties to the Agency CFA, the Halborg Claimants agreed to Mr Halborg using EMW on a conditional fee basis (see paragraph 5 above). There is a persuasive argument that if, as here, a client authorises his solicitor to employ an agent on the footing that the agent's remuneration depends on what (if any) agreement as to costs is reached with the other side, the client can hardly complain if his negotiations with the opposing party are susceptible to being revealed to and relied on by the solicitor-agent;

ii) While the Halborg Claimants are not parties to the present proceedings, the stance that Mr Halborg has taken must reflect their wishes. In fact, Mr Halborg's parents have explained in their witness statements that they "do not consent in any manner to the release of any documents or information at all to EMW", that they "do not waive any privilege … in any documents or correspondence (or anything else)" and that they "respectfully ask the High Court not to order the release of any privileged or confidential information or documents to EMW";

iii) Mr Halborg has himself made reference in his defence to the negotiations with BLM. Paragraph 19(a) of the defence explains that he informed EMW that BLM "ascribed no value at all to [EMW's] work";

iv) It is hard to see how EMW's claim would be justiciable without disclosure of Class A Documents. EMW and the Court would both, on the face of it, be in the dark as to, for example, what any payments Savage Hayward have made related to, how they came to be made on that basis, why nothing has been paid in respect of other items of costs and, should it prove to be the case that no settlement has been concluded, why not;

v) I see no likelihood that recognising that an exception to the without prejudice rule applies would deter parties from seeking to settle. Those undertaking negotiations will, if well informed, already be aware that the without prejudice rule will not apply if there is a dispute about whether they have reached agreement and that the facts of the Muller case have been held to fall within another exception. The existence of the Muller exception, moreover, means that communications otherwise protected by the without prejudice rule may become disclosable and admissible because the other party to negotiations unilaterally chooses, for reasons of his own, to put forward a case about the negotiations in litigation with a third party;

vi) Some of the reasoning on which Mr Halborg's case is based might suggest, not merely that a solicitor-agent could be prevented from seeing and using without prejudice communications, but that the same could be true of a solicitor whom a client had himself instructed on a conditional fee basis. That would be an even odder result; and

vii) Were there to be a need, the Court could consider making an order (as the Master did) under CPR 31.22(2) to prohibit or restrict the use of documents relating to the negotiations with BLM and/or excluding the public from part of a hearing.

Conclusion

65. In all the circumstances, I agree with the Master that the without prejudice rule does not entitle Mr Halborg to decline to disclose the Class A Documents.

Legal professional privilege

66. It is Mr Halborg's case that the Class C and D Documents can be withheld on the strength of legal professional privilege. The Master took a different view, stating as regards the Class C Documents (in paragraph 62 of the judgment):

"To the extent that the material is subject to litigation/legal advice privilege, such privilege has plainly been waived by the Halborg claimants by reason of their agreement to or knowledge of [EMW] carrying out the work on their behalf."

67. Mr Halborg disputes the Master's conclusion on this point. His grounds of appeal include the assertion that there had in fact been no waiver.
68. This aspect of the case received relatively little attention in the parties' skeleton arguments or oral submissions. Mr Marven, however, contended that, contrary to the Master's view, the mere fact that a solicitor delegates work to an agent does not mean that the client has waived privilege, so that the agent can demand disclosure of documents other than those provided to him in the course of his agency. In contrast, Mr Sachdeva suggested that, when a contract is made with a solicitor-agent, the presumption is that any litigation and/or advice privilege is generally waived with regard to the solicitor-agent unless there is an express exclusion, which there was not here.
69. On balance, I prefer Mr Marven's submissions. I agree with him that the mere fact that the Halborg Claimants may have known of and agreed to EMW carrying out work for them cannot justify the conclusion that they waived legal professional privilege. There can, of course, have been no objection to Mr Halborg showing EMW privileged material with the Halborg Claimants' express or implied consent. It is quite another matter to say that EMW can insist on seeing documents that it did not see in the course of its work and which the Halborg Claimants do not wish it to be provided with now.
70. It follows, I think, that Mr Halborg's appeal should be allowed as regards the Class C and D Documents.

Other matters

71. My conclusions thus far make it unnecessary for me to consider the point advanced in the Respondent's Notice.

Overall conclusion

72. I shall dismiss the appeal so far as it concerns the most important category, the Class A Documents, and also the Class B Documents. In contrast, I shall allow the appeal as regards the Class C and D Documents.