England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/11/2010

Mr Justice Walker:

Introduction

1. This action was begun by the claimant, AAG Investments Limited ("AAG"), against the defendant, BAA Airports Limited ("BAA"), by claim form issued on 25 January 2010. Statements of case have been served by each side. The court is now asked by BAA to strike out the whole, or at least parts, of the particulars of claim and the reply pursuant to CPR part 3.4(2)(a). Further or alternatively BAA asks for summary judgment in its favour pursuant to CPR part 24.
2. The case concerns a contract which was admitted in the Defence, but not earlier, to have been made between the parties in November 2007. The contract concerned what it described as "Zetaform". This term was defined in the contract. The background to the contract was that BAA had used a specially designed construction system of this name in the past and in particular when building the Terminal 5 car park at Heathrow Airport, London. AAG was involved in a number of contracts or potential contracts relating to the sale of assets from the Terminal 5 site. These concerned, among other things, the sale of redundant electrical cable and scrap metal.
3. An essential element of the Zetaform system comprised steel moulds. They were used to cast concrete beams that in turn could be used as component parts to form structures such as multi storey car parks. Relevant moulds were at the Terminal 5 site. They had been used a number of times and it had been decided to dispose of them, either as scrap or for use by a third party. A witness statement made by Mr Paul Ross, Chief Executive of AAG, says that he was asked to provide two prices by BAA. One was for clearing the system on a scrap basis, and another was for the purchase of the system on a resale basis. BAA elected the latter as being the more profitable. Mr Ross's statement notes that on this basis AAG would be selling a sophisticated "product", including not only the moulds but also "the intellectual property rights and design concept" in the Zetaform. At paragraph 15 of his statement he asserts:

For our part we were not experts in the field and were not sure whether there would indeed be a market for the system. Accordingly, it was a risk on our part to enter into a contract with BAA to sell the System. We were however reassured by BAA that should we be successful in marketing the product outside the UK, they would offer technical support as part of the deal.

4. Under the contract AAG paid BAA an initial sum of £40,000. AAG further agreed that if it sold to a third party BAA would be entitled to a profit share determined by calculating twenty percent of the onward sale price and deducting from it "the associated removal expenses".
5. In accordance with the contract AAG removed the moulds from the Terminal 5 site and stored them at Port Talbot. Mr Ross states that he then sought to market the system overseas. He describes discussions with an Omani businessman, Mr Alisyabi, culminating in September 2009 with a formal offer by AAG to establish a joint venture. According to Mr Ross the expected return would have been £675,000, consequently entitling BAA to £135,000 less removal expenses. He says that Mr Alisyabi was satisfied with the terms of the offer and requested copies of the drawings so that his engineer could check its efficiencies and technical capabilities. A request had been made to BAA to supply the drawings in July 2009. They were not supplied.
6. What then occurred is asserted by AAG to have amounted to a repudiatory breach by BAA of its obligations under the contract. An account of events is given in a witness statement made by Mr David Ferroussat, the Ombudsman for Capital Programmes for Heathrow Airport Limited ("HAL"). I am told that HAL is a separate entity from BAA, but for present purposes references to HAL in accounts of relevant events can be treated as if they were references to BAA. Mr Ferroussat explains that when AAG made contact in July 2009:

… neither Gary Orchard nor Ian Donald worked for BAA. As they had been the main individuals within the company with personal knowledge of the Contract and the circumstances surrounding it, it was unclear initially who would deal with the matter.

7. Mr Ferroussat states that he agreed with Mr Crowston of AAG that he would meet Mr Crowston and Mr Ross on 22 October 2009 on a without prejudice basis to discuss AAG's request for the drawings and "how we could move this forward".
8. Minutes of the meeting prepared by Mr Ferroussat, and expressly stated to have been "made without prejudice", record him outlining HAL's position in summary as:

a. HAL's view of the sale and purchase agreement was that it was not valid as it has been entered into by "British Airport Authority". This was not a recognised legal entity at the time the agreement was signed.

b. At no time did Gary Orchard have authority to enter into contractual commitments on behalf of any BAA entity. He was an employee of a supplier to BAA, and was not acting as BAA's agent.

c. It is made clear throughout the Agreement that the Zetaform purchase is on an "as is, where is" basis, and envisages the material being scrapped if it cannot be resold. In HAL's view, this confirms that the purchase was simply for lumps of metal, rather than anything more sophisticated such as an assignment or licence of underlying IP. The value of the transaction (40k) is consistent with this.

d. There is no mention of any drawings being included in the sale.

e. HAL do not have the right to assign or licence the underlying IP rights (either in the drawings or the moulds) given the IP is jointly owned with one of HAL's contracting parties, Laing O'Rourke (LOR). As such, AAG should not be marketing the moulds on the basis that they can be used to construct another car park that looked like the T5 MSCP.

f. HAL are still awaiting confirmation that the sale price of £40,000 had been received.

9. Mr Ferroussat explains in his statement at paragraph 28:

I did think that we might need the agreement of Laing O'Rourke to hand over the drawings of the moulds and as those were not covered by the Contract, a new agreement may be needed. I do not recall focussing so much on the intellectual property rights in just the Zetaform moulds themselves as my main concern … was to prevent any claim against the overall car park design. I knew that the design of the car park would be jointly owned by HAL, Laing O'Rourke and Ove Arup and so I was anxious to quash any suggestion that AAG had acquired wider rights than to the Zetaform moulds.

10. Mr Ross in paragraph 49 of his witness statement asserts that following the meeting:

I had to confirm to Mr Alisyabi that I could not proceed with the proposed Joint Venture and as this issue still remains unresolved, I have incurred a substantial loss of profit as a result of BAA's breach of contract, as the Joint Venture had reached the stage whereby a formal offer had been drafted and accepted in principle.

11. Mr Ross adds in paragraph 50:

In any event, even if this Joint Venture had not proceeded, I had also had discussions with other parties which I could have explored further if the deal with Mr Alisyabi had not been successful. In particular, I had been involved in discussions with Mr Steve Jackman of BAE Systems Plc. During our discussions he confirmed that due to the extensive infrastructure and development projects taking place throughout the Middle East over the next ten years, there were other industrial partners who had shown an interest in System as it was a unique product. Further, as AAG is an industrial offset partner of BAE Systems Plc, this product was seen as an ideal industrial offset opportunity.

12. As regards its strike out application BAA says that certain passages in the particulars of claim and reply refer to the without prejudice meeting of 22 October 2009 and cannot be allowed to stand. Once they are struck out, BAA says that there would remain no material facts to support AAG's case and so the action ought to be dismissed.
13. BAA's application for summary judgment assumes that the application to strike out has not resulted in dismissal of the action. In that event BAA contends that, as a matter of Omani law, there can be no loss and damage that flows from the alleged breach of contract, and so for that reason the action ought to be dismissed.
14. I shall consider the application to strike out and the application for summary judgment in turn.

The Strike Out Application

15. In order to set the application in context I shall summarise the statements of case. The "without prejudice rule" and cases concerning it are then examined before summarising the arguments of the parties. I then set out my analysis of BAA's complaint in this regard.
16. AAG's claim form issued on 25 January 2010 included, under the heading "brief details of claim":

The Claimant claims £777,575.72 plus interest being the amount due and owing following the Defendant's repudiatory breach of contract in respect of its failure to transfer the title to the intellectual property rights of the Zetaform moulds in accordance with a contract entered into between the parties in October 2007.

17. Accompanying the claim form were particulars of claim. These had been the subject of a statement of truth made by Mr Stuart McQueen on 21 January 2010. At paragraphs 11 to 14 they made assertions about the contract as follows:

11. Clause 5.1 of the Contract confirms that the title and risk to the Zetaform would pass to AAG on receipt of funds and the purchase price agreed was £40,000 excluding VAT.

12. The Contract defines the Zetaform as "a specially designed construction system for the building of car parks and other multi level building, including design concept intellectual property right and construction moulds are all the object of this Sale and Purchase Agreement."

13. Therefore, the Contract clearly states that the intellectual property and design concept in the Zetaform was included as part of the sale to AAG.

14. Accordingly, it was an implied term of the contract pursuant to Section 12 of the Sale of Goods Act 1979 that BAA had the title to the intellectual property rights of the Zetaform to transfer to AAG.

18. Under the heading "events after the contract" paragraphs 20 to 27 of the particulars of claim stated as follows:

20. On 22 July 2009 Roger Crowston of AAG requested copies of drawings of the Zetaform from Heathrow Airport Limited ("HAL) for the purpose of the onward sale the Zetaform.

21. It was subsequently alleged by HAL that BAA did not have the right to transfer the intellectual property rights in the Zetaform to AAG.

22. In a meeting on 22 October 2009 between HAL and AAG, HAL stated that the Contract between BAA and AAG was not valid as it was entered into by the "British Airport Authority" which was not a recognised legal entity at the time the agreement was signed. They also confirmed that Mr Orchard did not have authority to enter into contractual commitments on behalf of any BAA entity.

23. HAL confirmed that they were also awaiting confirmation that the sale price of £40,000 had been paid by AAG. However, HAL did not manage the sale as all redundant assets were outsourced to GoIndustry (UK) Ltd.

24. Further, they intimated that HAL did not have the right to assign or licence the underlying intellectual property rights either in the drawings or the moulds for the Zetaform, as the intellectual property rights were jointly owned with one of HAL's contracting parties, Laing O'Rourke.

25. Such assertions were clearly unacceptable to AAG who had in good faith entered into an agreement with BAA's agent Mr Orchard for the Zetaform, including the intellectual property rights and in return had paid consideration of £40,000 to BAA.

26. As it appears that BAA does not have title to the intellectual property rights, which is not admitted, AAG has been unable to proceed with the Joint Venture in Oman and has lost the opportunity to complete a full sale to others with whom they have had negotiations.

27. As the proposed Joint Venture reached the stage whereby a formal offer had been drafted and indeed accepted in principle, both AAG and BAA have incurred a substantial loss of profit because of BAA's repudiatory breach of contract.

19. Under the heading "repudiatory breach of contract" paragraphs 29 to 32 of the particulars of claim stated:

29. The Contract between AAG and BAA provided that the intellectual property and design concept in the Zetaform was included as part of the sale to AAG. If BAA does not have title to sell the intellectual property rights in the Zetaform (which is not admitted), there is an express breach of the Contract by BAA.

30. In addition there is an implied breach of the Contract pursuant to Section 12 of the Sale of Goods Act 1979.

31. By BAA representing to AAG that it did not have the title to sell the intellectual property rights to AAG it has rendered a performance of the Contract so significantly different as to make the Contract unenforceable.

32. As BAA has failed to transfer the intellectual property rights in the Zetaform to AAG it has committed a repudiatory breach of contract, which our client has now accepted.

20. BAA's defence was served on 10 March 2010. In paragraph 1 it stated:

In summary BAA's defence is that it had good title to the relevant intellectual property rights and design concept in the Zetaform moulds, and that that title was transferred pursuant to the Contract concluded in 2007, alternatively it transferred such title as it had and section 12(3) of the Sales of Goods Act 1979 applied… Moreover, AAG may not refer to, or rely upon, the facts and matters that formed the subject matter of the without prejudice meeting held on the 22^nd October 2009 or the related without prejudice correspondence, as it has purportedly done here to support its allegation of repudiatory breach…

21. Paragraphs 6 and 7 of the defence stated:

6. It is an implied term of the Contract that only such intellectual property rights and design concept as might subsist were included as part of the sale to AAG. Such a term is to be implied, because it is an obvious term, and would be understood by the parties to the Contract without the need for it to have been expressly mentioned. Save as detailed above, paragraph 13 is admitted. Further, the intellectual property and design concept that formed the subject matter of the Contract was that that subsisted in the moulds themselves. In particular, it did not include any intellectual property rights or design concept that might subsist in the multi-story car parks (or the designs therefore) that had been constructed using the Zetaform moulds. Furthermore, for the avoidance of doubt, the Contract did not include the sale of the drawings of the Zetaform moulds nor any associated intellectual property that might subsist therein.

7. It is clear from the Contract, or further or alternatively it is to be inferred from its circumstances (in particular, the history of these particular Zetaform moulds) that there was an intention that BAA should transfer only such title as it may have had. The Contractual terms upon which BAA rely are:

a) Recital B: "AAG is interested in the purchase of the "Zetaform" on an "as is, where is" basis";

b) clause 2.2: "The Purchaser, after careful valuation and examination of the "Zetaform" is satisfied and considers the equipment and design suitable to their purpose and to be utilised accordingly";

c) clause 7.2: "The Purchaser takes risk and responsibility and relies absolutely on the Purchaser's own opinion and/or independent professional advice concerning the Zetaform the quality, state and condition of the same; their fitness and/or suitability for any purpose; and, the possibility that some or all of them may have defects not apparent on inspection and examination";

d) clause 7.3: "The Purchaser has agreed to purchase the "Zetaform" on an "as is, where is" basis and has taken into account any risk to the Purchaser, the Vendor making it clear that on any other basis it would not have agreed to sell"; and,

e) clause 7.4: "The Purchaser and its advisers have been given every opportunity they may wish to examine and inspect the Zetaform prior to the signing of this Agreement and are satisfied and confident about the design and equipment purchased".

22. AAG's assertion of an implied term that BAA had the title to the intellectual property rights of the Zetaform to transfer to AAG (see paragraph 16 of the particulars of claim) was denied by BAA in paragraph 8 of its defence. BAA added that section 12(3) of the Sale of Goods Act 1979 was applicable to the contract.
23. At paragraph 15 BAA's defence stated:

The facts and matters alleged in paragraphs 21 to 24 inclusive and the purported representation detailed in paragraph 31 formed the subject matter of a without prejudice meeting held on the 22^nd October 2009. As such, those facts and matters should not have been included in the Particulars of Claim, nor can they be relied upon by AAG in purported support of its allegations made in this Action. The Particulars of Claim ought to be amended to delete the references to those facts and matters. As those facts and matters do not form any proper issue in this Action, BAA does not plead to them.

24. AAG's particulars of claim at paragraph 26, quoted above, asserted that because of BAA's apparent lack of title to the intellectual property rights AAG had been unable to proceed with the joint venture or negotiations with others. Paragraph 17 of the defence denied this assertion. It made a number of observations including the following:

BAA had title to the intellectual property rights and design concept and transferred what title it had to AAG pursuant to the Contract.

25. As to what had been said in paragraphs 29 to 32, under the heading "repudiatory breach of contract", paragraph 20 of the defence admitted that the contract between AAG and BAA provided that the intellectual property and design concept in the Zetaform was included as part of the sale to AAG. The remaining assertions under this head in the particulars of claim were denied. Paragraph 20 of the defence added:

BAA had the title to the intellectual property rights and design concept that subsisted in the Zetaform moulds and so there is no express or implied breach as alleged in paragraphs 29 and 30. It is denied that BAA has rendered a performance of the Contract so significantly different as to make the Contract unenforceable as alleged in paragraph 31 or at all. In contrast, BAA has performed the Contract as it was envisaged to be performed, in particular it has transferred such intellectual property rights and design concept as might subsist in the Zetaform moulds, and so there is no breach as alleged in paragraph 32 or at all. Accordingly, AAG is not in a position purportedly to accept the alleged repudiatory breach of BAA.

26. AAG's reply was served on 22 April 2010 and was the subject of a statement of truth by Mr Giles Searby, a partner in the firm of solicitors then acting for AAG. In relation to the contract, paragraphs 2 to 7 of the reply said this:

2. The Claimant purchased the Zetaform system. The Contract defines the Zetaform system at clause 1, "a specially designed construction system for the building of car parks and other multi level building, including design concept, intellectual property right and construction moulds…"

3. The Claimant was not merely purchasing any rights that may happen to subsist. It is denied that it was an implied term of the Contract that only such intellectual property rights and design concept as might subsist were included as part of the sale to the Claimant. Any such implied term goes to the very heart of the Contract and is contrary to the express terms of the Contract as agreed. Such a fundamental point should have taken the form of an express reservation set out within the Contract.

4. However, there is no such express reservation. It was not within the contemplation of the parties that the Defendant was only selling limited property rights and design concept in the Zetaform. The Claimant was certainly never informed of any such limited rights, and the Contract was not negotiated or completed on this basis.

5. The Defendant was fully aware that the Claimant intended to exploit the opportunity to sell the Zetaform system outside the UK.

6. The Defendant has now conceded that it only had good title to the relevant intellectual property rights and design concepts in the Zetaform moulds, but that it did not have the intellectual property rights to the Zetaform system as defined in the Contract and as sold to the Claimant.

7. The Defendant has further admitted that Mr. Orchard was the ostensible agent of BAA.

27. In paragraphs 8 to 13 the reply stated:

8. The Claimant asserts that the Defendant has attempted to shift its position a number of times regarding the rights attached to Zetaform since entering into the Contract.

9. At the meeting of 22 October 2009 the Claimant relied upon representations such as, "the Defendant did not have the right to assign or license the underlying IP rights (either in the drawings or the moulds) given the IP is jointly owned with one of HAL's contracting parties." Further, "at no time did Gary orchard have authority to enter into contractual commitments on behalf of any BAA entity. He was an employee of a supplier to BAA, and was not acting as BAA's agent."

10. The Claimant relied on the statements made by the Defendant at this meeting and has acted upon such representations.

11. The representations made are further evidence of the Defendant's continuing misrepresentation regarding any rights it actually holds.

12. The very fact that the Defendant seeks to set out in its Defence, an all together different version of what is contained in the Contract, added to the different version given at the meeting on 22 October 2009, points to impropriety by the Defendant.

13. For the avoidance of any doubt, the Claimant asserts that it would only have entered into the joint venture in Oman dependant upon having purchased the rights as defined at Clause 1 of the Contract. The Claimant would not jeopardize its reputation by entering into agreements where it was unsure that it had the right to sell the product or service that it was offering.

28. Also on 22 April 2010 AAG served a reply to a request for clarification and further information pursuant to CPR part 18. It, too, was the subject of a statement of truth by Mr Searby. This document responded to requests concerning the precise intellectual property rights alleged to have subsisted in the Zetaform moulds included within the subject matter of the contract, any additional rights alleged to subsist in the "design concept", and the legal basis for alleging that AAG had an entitlement to use the Zetaform system, in contra distinction to its potential right to prevent others from committing acts that might be an infringement of its intellectual property rights. The answers given by AAG were to the effect that the basis of the contract was that BAA held all rights in the "specially designed" system. The "design concept", "intellectual property right" and "construction moulds" were all being sold without any specific reservations as to title or intellectual property right. Express provision in the contract for the sale of the design concept was taken by AAG to mean that all design rights in the Zetaform were being transferred.

Without Prejudice Communications

29. A general account of the law concerning without prejudice communications was given by Robert Walker LJ, with whom Wilson J and Simon Brown LJ agreed, in Unilever PLC v Proctor & Gamble [2000] 1WLR 2436. At page 2441 Robert Walker LJ cited observations by Lord Griffiths in Rush & Tompkins Limited v Greater London Council [1989] AC 1280 at 1299:

The 'without prejudice' rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver L.J. in Cutts v. Head [1984] Ch 290, 306: 'That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J. in Scott Paper Co. v. Drayton Paper Works Ltd. (1927) 44 R.P.C. 151, 156, be encouraged fully and frankly to put their cards on the table… The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability.' The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence.

30. After noting observations by Hoffmann LJ in Muller v Linsley & Mortimer [1996] PNLR 74 concerning the need for analysis of the true foundation and purpose of the rule, Robert Walker LJ continued:

Without in any way underestimating the need for proper analysis of the rule, I have 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. That is particularly true where the "without prejudice" communications in question consist not of letters or other written documents but of wide-ranging unscripted discussions during a meeting which may have lasted several hours. At a meeting of that sort the discussions between the parties' representatives may contain a mixture of admissions and half-admissions against a party's interest, more or less confident assertions of a party's case, offers, counter-offers, and statements (which might be characterised as threats or as thinking aloud) about future plans and possibilities. As Simon Brown L.J. put it in the course of argument, a threat of infringement proceedings may be deeply embedded in negotiations for a compromise solution. Partial disclosure of the minutes of such a meeting may be, as Leggatt L.J. put it in Muller v. Linsley & Mortimer [1996] PNLR 74, 81, a concept as implausible as the curate's egg (which was good in parts).

31. Having noted the prudence of working on the basis that the rule has a wide and compelling effect, Robert Walker LJ went on to make a number of observations at pages 2444 D to 2445 G:

Nevertheless, there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. The following are among the most important instances.

(1) As Hoffmann L.J. noted in Muller's case, 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.

(2) Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence. Underwood v. Cox (1912) 4 D.L.R. 66, a decision from Ontario, is a striking illustration of this.

(3) 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 was the view of Neuberger J. in Hodgkinson & Corby Ltd. v. Wards Mobility Services Ltd. [1997] F.S.R. 178, 191 and his view on that point was not disapproved by this court on appeal.

(4) Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other "unambiguous impropriety" (the expression used by Hoffmann L.J. in Forster v. Friedland (unreported), 10 November 1992; Court of Appeal (Civil Division) Transcript No. 1052 of 1992). Examples (helpfully collected in Foskett's The Law & Practice of Compromise, 4th ed. (1996), para. 9-32) are two first-instance decisions, Finch v. Wilson (unreported), 8 May 1987 and Hawick Jersey International Ltd. v. Caplan, The Times, 11 March 1988. But this court has, in Forster v. Friedland and Fazil-Alizadeh v. Nikbin (unreported), 25 February 1993; Court of Appeal (Civil Division) Transcript No. 205 of 1993 , warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.

(5) Evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence. Lindley L.J. in Walker v. Wilsher, 23 QBD 335, 338 noted this exception but regarded it as limited to "the fact that such letters have been written and the dates at which they were written." But, occasionally, fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay.

(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.

(7) The exception (or apparent exception) for an offer expressly made "without prejudice except as to costs" was clearly recognised by this court in Cutts v. Head , and by the House of Lords in Rush & Tompkins Ltd. v. Greater London Council [1989] AC 1280, as based on an express or implied agreement between the parties. It stands apart from the principle of public policy (a point emphasised by the importance which the new Civil Procedure Rules, Part 44.3(4) , attach to the conduct of the parties in deciding questions of costs). There seems to be no reason in principle why parties to without prejudice negotiations should not expressly or impliedly agree to vary the application of the public policy rule in other respects, either by extending or by limiting its reach. In Cutts v. Head [1984] Ch 290 , 316 Fox L.J. said:

"what meaning is given to the words 'without prejudice' is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after."

(8) In matrimonial cases there has developed what is now a distinct privilege extending to communications received in confidence with a view to matrimonial conciliation: see In re D. (Minors) (Conciliation: Disclosure of Information) [1993] Fam. 231 , 238, where Sir Thomas Bingham M.R. thought it not

" fruitful to debate the relationship of this privilege with the more familiar head of ' without prejudice' privilege. That its underlying rationale is similar, and that it developed by way of analogy with 'without prejudice' privilege, seem clear. But both Lord Hailsham of St. Marylebone and Lord Simon of Glaisdale in D. v. National Society for the Prevention of Cruelty to Children [1978] AC 171, 226, 236 regarded it as having developed into a new category of privilege based on the public interest in the stability of marriage"

32. He added at pages 2445 H to 2446 B:

… my summary is far from exhaustive … It is apparent that none of the exceptions to the public policy rule involves the disclosure of admissions bearing on the subject matter in dispute, at any rate unless the expression " admission" is given a substantially wider meaning than it usually has in the law of evidence. (I disregard the old case of Waldridge v. Kennison (1794) 1 Esp. 143 , which Lord Griffiths in the Rush & Tompkins case [1989] AC 1280, 1300, regarded as exceptional.) Conversely, however, I respectfully doubt whether the large residue of communications which remain protected can all be described as admissions (again, unless that expression is given an unusually wide meaning). One party's advocate should not be able to subject the other party to speculative cross-examination on matters disclosed or discussed in without prejudice negotiations simply because those matters do not amount to admissions.

33. Turning to the issue raised on Unilever's appeal, Robert Walker LJ noted that in Muller's case [1996] PNLR 74, 79, Hoffmann LJ said: "a without prejudice letter containing a threat is admissible to prove that the threat was made." Unilever had relied on that remark, and on two nineteenth century cases. After analysing the cases Robert Walker LJ made some general observations. He noted that there were difficulties in reconciling the leading cases, but those cases nevertheless:

… make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They show that the protection of admissions against interest is the most important practical effect of the rule. 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.

34. Robert Walker LJ then applied those principles to the facts of the case before the Court of Appeal. A meeting had taken place on the express basis that it was "without prejudice". It was said that those present on behalf of Proctor & Gamble had asserted that Unilever was infringing Proctor & Gamble's patent, and threatened to bring an action for infringement. In reliance upon these allegations Unilever sued Proctor & Gamble, asserting a cause of action under the statutory tort created by Section 70 of the Patents Act 1977 for making groundless threats of infringement proceedings. The statutory tort would have enabled the court to decide whether the acts in respect of which infringement proceedings were threatened constituted or would constitute an infringement of a patent, and whether the patent alleged to be infringed was invalid in a relevant respect. Robert Walker LJ said that what had occurred was a high-level meeting between highly skilled professionals representing the interests of multi national groups. He added at 2449 G to 2450 A that the meeting:

… was undoubtedly an occasion covered by the normal rule based on public policy, and the pleading of the threat (or claim of right) has not been shown to come within any recognised exception. The expansion of exceptions should not be encouraged when an important ingredient of Lord Woolf's reforms of civil justice is to encourage those who are in dispute to engage in frank discussions before they resort to litigation. The decision in Kurtz v. Spence should no longer be regarded as good law.

35. The decision in the Unilever case was considered by the Court of Appeal in Savings and Investment Bank Limited v Fincken [2003] EWCA Civ 1630, [2004] 1 WLR 667 ("SIB ").
36. In SIB Patten J held at first instance that an admission made at a without prejudice meeting fell within the unambiguous impropriety exception, and allowed the admission to be pleaded by SIB. The facts leading him to reach that conclusion are set out in this way in the headnote:

The plaintiff company brought proceedings against the defendant for the recovery of a debt. In the course of that litigation three successive, formal settlements of the claim were made. The third settlement deed contained a contractual warranty that all of the defendant's assets worth £5,000 or more had been disclosed in an affidavit of means. The plaintiff subsequently brought an action against the defendant to set aside the third settlement deed on the grounds that the defendant had fraudulently or negligently misrepresented his assets in his affidavit of means. A without prejudice meeting was held between the parties at which the defendant allegedly admitted owning shares in a company which he had not disclosed in his affidavit of means. The plaintiff applied to amend its statement of claim to include that admission on the grounds that since it proved the lie to the defendant's affidavit evidence it was an unambiguous impropriety and accordingly an exception to the doctrine of without prejudice privilege. The defendant did not give any evidence in rebuttal.

37. An appeal by Mr Fincken succeeded. The leading judgment in the Court of Appeal was given by Rix LJ, with whom Carnwath LJ agreed.
38. At paragraphs 38 and 39 Rix LJ summarised the competing arguments. SIB said that Mr Fincken's defence would involve a fundamentally dishonest approach to his earlier affidavit. The public policy which protected without prejudice negotiations did not or should not extend to cover such an approach. The unambiguous impropriety extension should not be tightly constrained, but was wide and flexible. If it were not applied the privilege would be used as a cloak for perjury. By contrast Mr Fincken said that the exception applied only when there would otherwise be an abuse of the privilege itself. That would arise where what had happened could be described in terms of blackmail. The exception should not be so wide as to make claims of dishonesty incapable of being settled by negotiation. Indeed, a wide exception would mean even an admission of negligence would become exposed where the party making the admission had made a previous affidavit or statement of truth denying negligence.
39. Having discussed what he described as "the philosophy of the jurisprudence expressed in the leading authorities", Rix LJ continued at paragraphs 57 to 59:

57. In my judgment that philosophy is antagonistic to treating an admission in without prejudice negotiations as tantamount to an impropriety unless the privilege is itself abused. That, it seems to me, is what Robert Walker LJ meant in the Unilever case [2000] 1 WLR 2436 when he repeatedly spoke in terms of the abuse of a privileged occasion, or of the abuse of the protection of the rule of privilege: see at pp 2444g, 2448a and 2449b. That is why Hoffmann LJ in Forster v Friedland 10 November 1992 emphasised that it was the use of the privileged occasion to make a threat in the nature of blackmail that was, if unequivocally proved, unacceptable under the label of an unambiguous impropriety. And that is why Peter Gibson LJ in Berry Trade Ltd v Moussavi (No 2) [2003] EWCA Civ 715 suggested, without having to decide, that talk of " a cloak for perjury" was itself intended to refer to a blackmailing threat of perjury, as in Greenwood v Fitts 29 DLR (2d) 260, rather than to an admission in itself. It is not the mere inconsistency between an admission and a pleaded case or a stated position, with the mere possibility that such a case or position, if persisted in, may lead to perjury, that loses the admitting party the protection of the privilege: see the first holding in Fazil-Alizadeh v Nikbin 25 February 1993, described in para 47 above. It is the fact that the privilege is itself abused that does so. It is not an abuse of the privilege to tell the truth, even where the truth is contrary to one's case. That, after all, is what the without prejudice rule is all about, to encourage parties to speak frankly to one another in aid of reaching a settlement: and the public interest in that rule is very great and not to be sacrificed save in truly exceptional and needy circumstances.

58. It may be said, as indeed Ms Gloster has powerfully argued, that even if the mere possibility of future perjury does not suffice to destroy the privilege, the admission which demonstrates that perjury has been committed in the past, by reference to an existing affidavit, is or should be different and that no authority suggests otherwise. In this way she seeks to support the judge's decision, which was premised on the prospect of future perjury, as was the decision in the Merrill Lynch case The Times, 14 June 2000 , by the different route of the impropriety of past perjury. There is indeed a substantial case to be made that the courts should not pass by such proof of perjury with indifference. There is a clear public interest in the discouragement of perjury. Nevertheless, on balance I do not think that the courts should adopt such a position. If they did, the very serious and criminal charge of perjury would fall to be debated, without the protection which should be available to the accused party, on an interlocutory outing (as here) or even at trial, with the potential of derailing the trial by the exposure of without prejudice material to the trial judge. Essentially the same problem would arise in connection with statements of truth, which now apply under the CPR to all particulars of claim or defence: although they cannot give rise to the offence of perjury, they can give rise to the only relatively less serious matter of contempt of court.

59. Further considerations point in my judgment in the same direction. A litigant understands in general that he may make admissions for the purpose of settling litigation under the protection of privilege if the negotiations fail. He may go into such a meeting without legal advisors, indeed very often such meetings have better prospects of success if the principals to the dispute meet alone. If the case against him is one of fraud or dishonesty, or if he has made an incautious affidavit in the past whatever be the nature of the case against him, he moves into a situation of peril at the point at which he is most candid. There may be no one present to warn him that the privilege with which the meeting began is in the process of being lost, or of the danger of self-incrimination. In such circumstances cases of fraud or dishonesty become almost impossible to settle. So here, whatever be the motives which led Mr Fincken to admit his ownership of the shares, which are unknown, it is in theory possible that, in seeking a final compromise, Mr Fincken, or someone in an analogous position to his, would be conscious that he might never be able to achieve finality without exposing his own past faults. Alternatively, the less scrupulous who make no admissions are better served by the very rules which are designed to encourage frank exchanges than are the more candid. Moreover, the well advised litigant will be told that if he makes his admission in a hypothetical form, contingent upon settlement, then, as Ms Gloster herself accepted, the privilege cannot be lost. This is a recipe for legalism and has the danger of turning the without prejudice meeting into a potential trap and one which may moreover be exploited by litigants who do not enter into such discussions altogether in good faith, a point which it is common ground does not arise in this case but which was emphasised by Simon Brown LJ in the passage quoted above from the Fazil-Alizadeh case 25 February 1993.

40. At paragraph 62 Rix LJ added:

62. It is of course distasteful for this or any court to avert its eyes from an admission which, subject to any point about value, appears to incriminate Mr Fincken in lying in a sworn document. However, in the tension between two powerful public interests, it seems to me that that in favour of the protection of the privilege of without prejudice discussions holds sway - unless the privilege is itself abused on the occasion of its exercise.

41. Unambiguous impropriety was item number (4) in Robert Walker LJ's list of occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule did not prevent the admission into evidence of what one or both of the parties said or wrote. Item (3) on that list concerned estoppel. Neuberger J in Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] FSR 178, 191 had taken the view that 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. Robert Walker LJ noted that Neuberger J's view on that point was not disapproved on appeal.
42. In the Hodgkinson & Corby case it was alleged that the importation and sale of cushions by the defendant infringed the plaintiffs' trade mark and constituted the tort of passing off. Those allegations ultimately failed. At an early stage in the proceedings the plaintiffs had obtained an interlocutory injunction, giving a cross-undertaking in damages for that purpose. On an inquiry as to damages to be paid pursuant to the undertaking, a question arose whether it was open to the plaintiffs to contend that the defendant should not be awarded any damages because the interlocutory injunction had been justified on the basis of copyright infringement, even though that argument was not raised previously in the proceedings. Another point which arose was the extent to which it was open to the plaintiffs to rely upon "without prejudice" correspondence in order to justify the reliance which they sought to place on copyright. At pages 189 to 190 Neuberger J rejected an initial argument by the plaintiffs. They had asserted that their purpose in referring to the without prejudice correspondence was not to identify or embarrass the defendant in relation to any admission or implied admission. Neuberger J rejected that argument because the parties in the case had agreed that the contents of the correspondence would not be referred to in the proceedings in which they were engaged. At page 190 Neuberger J continued:

The second argument raised by the plaintiffs is that it would be wrong for the defendant to be able to hide behind the cloak of the correspondence being "without prejudice" in circumstances where the defendant put forward suggestions or statements upon which the plaintiffs relied and reasonably relied in acting as they did. As a matter of principle, it seems to me that, even where a party can in principle rely upon correspondence being "without prejudice" on contractual as well as public policy grounds, the court will not allow him to do so if it is satisfied that it would be unconscionable. So far as the public policy ground is concerned, it seems to me self-evident that, just as much as it is in the public interest that parties should feel completely free to negotiate under the cloak of " without prejudice" , so it is in the public interest that they should not be able to use the protection of "without prejudice" for the purpose of "unambiguous impropriety" (an expression to be found in two unreported decisions of the Court of Appeal, Forster v. Friedland and Fazil-Alizadeh v. Nikbin both helpfully summarised in Foskett and Hodge on The Law and Practice of Compromise (4th ed., at 154-56). Equally, so far as the contractual ground is concerned, a contractual right to "without prejudice" privilege should not be upheld or enforced where it is invoked for an improper purpose. However, mere inconsistency, in the absence of dishonesty will not do— see Independent Research Services Ltd v. Catterall [1993] I.C.R. 1.

By analogy with this line of authority, there is, to my mind, a powerful argument for saying that 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 is another reason for reaching that conclusion. In Tomlin v. Standard Telephones & Cables Ltd [1969] 1 W.L.R. 1378 , it was held that " without prejudice" correspondence could be looked at by the court to see if the negotiations therein contained resulted in a settlement. Although, of course, contract and estoppel are quite separate concepts, it appears to me logical and consistent that, if "without prejudice" correspondence can be looked at to see if it gives rise to a contract, then such correspondence can also be looked at to see if it gives rise to an estoppel. However, I do not suggest that there is an absolute rule to that effect.

43. Applying that approach, however, Neuberger J went on to hold that the plaintiffs' second argument failed on the facts. The defendant had made it quite clear in correspondence that it did not accept what had been said by the plaintiffs about copyright. Neuberger J also rejected a third argument by the plaintiffs based upon waiver.
44. The Hodgkinson & Corby case was discussed by the House of Lords in Ofulue v Bossert [2009] UKHL 16, [2009] 1 AC 990. The Ofulue case concerned adverse possession. The judge found that the defendant and her father had taken factual possession in 1987 of land of which the claimants were the registered owners. Under section 17 of the Limitation Act 1980 title to land was extinguished at the expiration of the period prescribed by the Act for a person to bring an action to recover land. That period was twelve years. The proceedings before the House of Lords had originally begun in 2003. In order to answer the adverse possession claim the claimants relied upon special provisions in section 29 of the Act where the person in possession of the land acknowledged the title of the person to whom the right of action had accrued. In that event, time did not start to run until the date of the acknowledgment. Two acknowledgments were asserted, one said to have been made in a defence served in earlier possession proceedings, and the other said to have been made during the course of those earlier proceedings by a letter marked "without prejudice" which offered to buy the land. It is the latter point only that is relevant for present purposes. The Court of Appeal held that while the offer to buy the property was an implied acknowledgment of title it fell within the ambit of the without prejudice rule and was therefore inadmissible in evidence. A majority of the House of Lords (Lord Hope of Craighead, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, and Lord Neuberger of Abbotsbury) agreed. Lord Scott of Foscote dissented. The speeches of the majority contain relevant observations both on the question of estoppel and on the wider aspects of the without prejudice rule. Their general tenor is summarised in the headnote:

…the without prejudice rule, which was based on both the public policy of encouraging the negotiated settlement of actions and the express or implied agreement of the parties that communications in the course of such negotiations should not be admissible in evidence, extended to negotiations concerning earlier proceedings involving an issue which was still unresolved; that, although there were exceptions to the rule where justice required it, as where it was necessary to prevent the rule being used to further impropriety, reasons of legal and practical certainty made it inappropriate to create a further exception to limit the protection to identifiable admissions; that although the acknowledgement implicit in the offer to purchase had, when made, been an agreed fact, the offer had been made with the intention of settling the earlier proceedings and the issue which had given rise to those proceedings remained; and that, accordingly, in the absence of any impropriety on the part of the defendant, the without prejudice rule applied and the letter containing the offer could not be relied on as an acknowledgement of title.

45. Lord Neuberger identified four reasons why the claimants said they were entitled to refer to the offer to purchase despite it being in a letter headed "without prejudice". The first was that the admission of title did not go to any issue in the earlier proceedings (where title was admitted). This failed both because the offer to purchase and the offer to settle formed part of the same sentence, and because – with one possible exception – a statement in without prejudice negotiations should not be admissible in evidence other than in exceptional circumstances such as those mentioned in the Unilever case. Lord Neuberger referred to what had been said by Lord Walker of Gestingthorpe, then Robert Walker LJ at [2000] 1 WLR 2448 to 2449 to the effect that it would create huge practical difficulties and would be contrary to the underlying objective of giving protection to the parties to speak freely about all issues in litigation if it were permissible to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications. Lord Neuberger commented that it would set an unfortunate precedent if it were held that an admission of the claimants' title in a without prejudice letter was sufficiently remote from the issues in a possession action relating to the same land as to be outside the rule. The possible exception, which Lord Neuberger left open, was whether, and if so to what extent, a statement made in without prejudice negotiations would be admissible if it were "in no way connected" with the issues in the case the subject of the negotiations.
46. The second argument relied upon observations by Lord Hoffmann in the Muller case [1996] PNLR 74, 79 that the public policy aspect of the without prejudice rule was not concerned with the admissibility of statements which were relevant otherwise than as admissions, i.e. independently of the truth of the facts alleged to have been admitted. In the present case that would lead to a distinction between relying on the offer as evidence of the fact that the claimants owned the land (not permissible) and relying on it as evidence that there had been an acknowledgment that the claimants owned the land (independent of the truth of whether or not the claimants did own the land, and therefore permissible). This argument failed because the distinction was too subtle to apply in practice, because it was no answer in a case where the without prejudice rule applied by virtue of contract rather than public policy, and because in the context of identifying exceptions to the without prejudice rule the distinction between an acknowledgement and an admission was not one which could be satisfactorily drawn.
47. A third argument was that the public policy embodied in section 29 of the Act trumped the public policy of not admitting in evidence what was said in without prejudice negotiations. In that context reliance had been placed upon some observations by Lord Hope in Bradford & Bingley PLC v Rashid [2006] UKHL 37, [2006] 1 WLR 2066. As to that, Lord Neuberger said those observations were primarily directed to a case where, in without prejudice correspondence, statements were made by the defendant to induce the claimant not to issue the proceedings, as a result of which the claimant desisted from issuing his claim. Lord Neuberger added at paragraph 100:

In agreement with Lord Hope, it seems to me that such statements could be relied on by the claimant in such a case as founding an estoppel— one of the exceptions identified in the Unilever case [2000] 1 WLR 2436 , 2444 e-f .

48. Having rejected the argument that section 29 provided a policy reason for trumping the without prejudice rule, Lord Neuberger turned to the final argument for the claimants, namely that they should be entitled to refer to the acknowledgment in the letter because the justice of the case required it. This argument was rejected by Lord Neuberger in paragraph 103:

I accept that the without prejudice rule cannot be invoked "as a cloak for perjury, blackmail or other 'unambiguous impropriety' " : see the Unilever case [2000] 1 WLR 2436 , 2444f. However, any reliance on that principle in this case is in my view misconceived. There has been no impropriety on the part of Ms Bossert, either generally or in claiming the benefit of the rule. Further, there is plainly no warrant for overriding the rule simply because many people might think that, in relying on the rule, Ms Bossert is taking an unattractive point, or that, by changing her stance in the two sets of proceedings, she has acted unattractively.

49. Lord Hope agreed with Lord Neuberger. He commented in paragraph 2 of his speech:

2. Sometimes letters get headed "without privilege" in the most absurd circumstances, as Ormrod J observed in Tomlin v Standard Telephones & Cables Ltd [1969] 1 WLR 1378 , 1384. But where the letters are not headed "without prejudice" unnecessarily or meaninglessly, as he went on to say at p 1385, the court should be very slow to lift the umbrella unless the case for doing so is absolutely plain. The principle which the court should follow was that expressed by Romilly MR in Jones v Foxall (1852) 15 Beav 388 , 396. If converting offers of compromise into admissions of acts prejudicial to the person making them were to be permitted no attempt to compromise a dispute could ever be made. The basis for the rule has been explained more fully by Oliver LJ in Cutts v Head [1984] Ch 290 , Lord Griffiths in Rush & Tomkins Ltd v Greater London Council [1989] AC 1280 and Robert Walker LJ in Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436. With the benefit of those explanations it may be re-stated in these terms. Where a letter is written "without prejudice" during negotiations with a view to a compromise, the protection that these words claim will be given to it unless the other party can show that there is a good reason for not doing so.

50. At paragraph 12 Lord Hope made additional general observations:

12. I think that the public policy basis for not allowing anything said in the letter to be used later to her prejudice provides Ms Bossert with all she needs to defeat the argument that the implied admission that it contains can be used as an acknowledgement against her in these proceedings. The essence of it lies in the nature of the protection that is given to parties when they are attempting to negotiate a compromise. It is the ability to speak freely that indicates where the limits of the rule should lie. Far from being mechanistic, the rule is generous in its application. It recognises that unseen dangers may lurk behind things said or written during this period, and it removes the inhibiting effect that this may have in the interests of promoting attempts to achieve a settlement. It is not to be defeated by other considerations of public policy which may emerge later, such as those suggested in this case, that would deny them that protection.

51. Lord Walker agreed with Lord Neuberger and Lord Hope. He described the without prejudice issue as "a troublesome point" and added some observations of his own. At paragraph 57 he said:

57. As a matter of principle I would not restrict the without prejudice rule unless justice clearly demands it. In England the rule has developed vigorously (more vigorously, probably, than in other common law jurisdictions, and more vigorously than some overseas scholars, notably J H Wigmore, approved: see Wigmore, Evidence in Trials at Common Law (Chadbourn rev, 1972), vol 4, pp 34– 36). The distinction formerly drawn between conditional and unconditional assertions has largely disappeared. Romilly MR was particularly firm in disapproving of attempts to cut down the scope of the rule: see Jones v Foxall (1852) 15 Beav 388 , 396 and Hoghton v Hoghton (1852) 15 Beav 278 , 321. The Court of Appeal in Walker v Wilsher (1889) 23 QBD 335 was also strongly in favour of upholding the width of the rule: see Lord Esher MR, at pp 336– 337, Lindley LJ, at pp 337– 338 and Bowen LJ, at p 339, all quoted by Oliver LJ in Cutts v Head [1984] Ch 290 , 302– 304.

52. Lord Rodger also agreed with Lord Neuberger. In some additional observations he noted at paragraph 37 that not only the parties to the correspondence, but third parties also, were prevented from making use of the contents of without prejudice correspondence, adding:

This in turn shows that, while part of the justification for excluding reference to what was said is to be found in the understanding of the parties to the relevant correspondence or negotiations, the rule is actually a privilege which forms part of the general law of evidence and is based on public policy. So, unless the parties make some agreement to narrow or broaden its effect, the scope of the privilege is a matter of general law and is not based on the supposed boundaries of a notional agreement between the parties.

53. At paragraph 38 Lord Rodger noted that the Court of Session had developed an approach to the effect that an admission of an "independent fact", lying outside the area of the offer to compromise, was admissible. He commented at paragraph 39:

39. Undoubtedly, it would be possible to carve out an exception along those lines. The question is whether creating such an exception would be consistent with the overall policy behind the rule. Pretty clearly, Lord Griffiths thought not. In Rush & Tompkins [1989] AC 1280, 1300f-g , he went out of his way to emphasise that the exception in Waldridge v Kennison (1794) 1 Esp 143

"should not be allowed to whittle down the protection given to the parties 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."

In my view there must indeed be a significant danger that allowing in evidence of admissions of " independent facts" would undermine the effectiveness of the rule as an encouragement to parties to speak freely when negotiating a compromise of their dispute. As was said many years ago,

"If the proper basis of the rule is privilege, is there any logical theory under which the court can, by methods akin to chemistry, analyze a compromise conversation so as to precipitate one element of it as an offer of settlement and the other as an independent statement of fact? Would not the layman entering into a compromise negotiation be shocked if he were informed that certain sentences of his conversation could be used against him and other sentences could not?"

See John E Tracy, "Evidence— Admissibility of Statements of Fact made During Negotiation for Compromise" (1935– 1936) 34 Michigan Law Review 524, 529. In Bradford & Bingley plc v Rashid [2006] 1 WLR 2066, 2071, para 13, Lord Hoffmann argued along essentially similar lines that the approach in the Scottish decisions should not be followed in England. At the hearing of the present appeal Mr Wilson QC did not rely on the Scottish decisions and so it is unnecessary to come to any concluded view on the point. I accordingly go no further than to say that the approach in the Scottish cases appears to be inconsistent with the general approach endorsed by this House in Rush & Tompkins Ltd v Greater London Council [1989] AC 1280.

54. Lord Scott dissented. At paragraph 20 he commented that the result of the appeal would represent a marked extension of the without prejudice rule that previous judicial authority did not warrant and that public policy did not require. In subsequent paragraphs the analysis advanced by Lord Scott was that the claimants' title to the land was in no way connected with the merits of the cause being litigated at the time of the without prejudice letter. He did not consider that what had been said in previous decisions permitted the extension of the "without prejudice" rule to cover a statement of fact that, far from being an issue in the litigation, was common to the pleaded cases of both parties. At paragraph 31 Lord Scott said that he would rule out implied agreement as a possible basis for applying the without prejudice rule in the case. The implied agreement was merely that the correspondence would not be admissible at the trial of the then pending action, or in any other proceedings in which the issues in that action were live issues. The public policy favouring attempts to settle actions could not in his view require a bar on the admission into evidence in future litigation that neither party could have had in mind of letters recording the acknowledgment of common ground facts.
55. Whether without prejudice communications could be relied upon to create an estoppel was further considered by the Court of Appeal in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] EWCA Civ 79, [2010] 1 WLR 1803. A dispute arose about a settlement agreement. The defendants said in their statement of case that their interpretation was supported by things said in without prejudice negotiations. The claimant applied to strike out passages in that statement of case based upon the negotiations and sought a declaration that, in the absence of a mutual waiver, evidence of the negotiations was inadmissible. The defendants applied to amend to say that representations made by the claimant in the without prejudice negotiations were such as to estop the claimant from disputing the defendants' interpretation. At first instance Andrew Smith J held that without prejudice communications which had resulted in a concluded compromise were admissible for the purpose of construing the compromise agreement and that since such communications could be looked at to see if they had given rise to a contract they could also be looked at to see if they gave rise to an estoppel. Accordingly he refused the claimant's application but granted the defendants' application. An appeal by the claimant was successful. Longmore and Stanley Burnton LJJ struck out passages in the defendants' statement of case based upon the negotiations, holding that while without prejudice communications were admissible in order to identify the terms of a concluded compromise agreement, they were not admissible for the purpose of determining how those terms were to be construed. They accepted that without prejudice negotiations could be admitted to establish an estoppel where no contract had been concluded following the negotiations but one party was or ought to be estopped from denying that there was a contract. However a mere allegation of estoppel would not, without more, be sufficient to override the privilege.
56. Longmore LJ, with whom Stanley Burnton LJ agreed, noted in paragraph 14 that in the Ofulue case the House of Lords had held that the without prejudice rule was not limited merely to the protection of actual admissions. At paragraphs 16 and 17 he noted "firm statements" in that case about the rationale of the rule, citing passages from Lord Hope in paragraphs 2 and 12, Lord Rodger in paragraph 43, and Lord Walker in paragraph 57. Longmore LJ at paragraph 20 of his judgment commented that the citations from the speeches of Lord Hope and Lord Walker would tend to indicate that the policy of the without prejudice rule should trump the more general policy of enabling the court to have the maximum possible assistance in ascertaining the parties' (objective) intentions. At paragraph 22 he said that as a matter of principle it seemed to him to be more important to preserve the without prejudice principle than to allow it to be breached so as to permit the admission of evidence of background facts arguably relevant to construction.
57. Longmore LJ then turned to the defendants' contentions concerning estoppel and said at the outset (paragraph 28) that they were misconceived. The defendants sought merely to rely upon the fact of the representation, and not upon its truth. If they were not permitted to produce evidence of the fact that the representation was made in order to bolster their arguments on construction, it made no sense to say that they could use estoppel to enable them to get in by the back door evidence which could not be got in by the front door.
58. As to the extent to which as a matter of principle estoppel gives rise to an exception to the without prejudice rule, Longmore LJ dealt separately with what was said by Robert Walker LJ in the Unilever case and what was said by Neuberger J in the Hodgkinson & Corby case. His analysis of Robert Walker LJ's observations was set out in paragraph 29:

29. It is true that the third of Robert Walker LJ's exceptions (set out in para 9 above) is where, in the absence of a concluded agreement, a representation is made on which the other party is intended to act and does act. But that is a representation made where no concluded agreement is achieved and the representee suffers loss or takes some action as a result. The final position is thus outside the area in which the without prejudice umbrella is intended to operate.

59. His analysis of what was said by Neuberger J was set out in paragraphs 30 and 31:

30. The authority relied on by Robert Walker LJ is the first instance decision of Neuberger J in Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] FSR 178 . In that case the claimants instituted passing-off proceedings in which they obtained an interim injunction but ultimately failed. The defendants then instituted proceedings pursuant to the undertaking in damages given by the claimants in order to procure the injunction. The claimants then sought to say that the injunction could have been justified on the separate ground that the defendants were in breach of copyright. The defendants said, relying on Henderson v Henderson (1843) 3 Hare 100, that it was too late for the claimants to take the point. The claimants said they had raised the claim in negotiations but had refrained from taking proceedings in relation to the claim because the defendants in those negotiations had asked them to hold fire with respect to that claim. The defendants' riposte was that those negotiations were without prejudice and could not be referred to. Neuberger J said that a without prejudice argument could not be used for the purpose of "unambiguous impropriety". In those circumstances reliance on the privilege would be "plainly unconscionable". No allegation of "impropriety" or "unconscionability" has been made in the present case and, to that extent therefore, the Hodgkinson case [1997] FSR 178 is distinguishable.

31 Neuberger J did, however, also refer to Tomlin's case [1969] 1 WLR 1378 which had decided that without prejudice correspondence could be looked at to determine whether a settlement had been reached and added [1997] FSR 178, 191:

"Although, of course, contract and estoppel are quite separate concepts, it appears to me logical and consistent that if 'without prejudice' correspondence can be looked at to see if it gives rise to a contract, then such correspondence can also be looked at to see if it gives rise to an estoppel. However, I do not suggest that there is an absolute rule to that effect."

I do not think that these cautious remarks were intended to say more than that, if the true position was that, for some reason, there was no contract but that in law one or other party was (or ought to be) estopped from denying that there was a contract, without prejudice communications could be admitted to establish the latter state of affairs just as much as they could be to establish the former. I do not read this passage as suggesting that any allegation of estoppel is sufficient to override the privilege. If it were so suggesting I would respectfully disagree with it.

60. Ward LJ's dissent included observations at paragraph 39:

39. I am not for a moment suggesting that "relevance alone displace[s] privilege": see para 35 above. That would be obviously wrong. It was rejected in Ofulue v Bossert [2009] AC 990 where the offer to purchase was clearly relevant but properly held inadmissible because it was a statement in the course of negotiations which did not result in agreement. If the very purpose of clothing the negotiations with privilege is to facilitate, in the public interest, the settling of disputes by compromise, then once that purpose has been served there seems to me to be no justification for continuing to wrap the negotiations in this cloak of secrecy. Again I do not wish to take this too far. That I would be prepared to lift the cloak as between the parties to the negotiation is no justification for the peeping Toms outside the negotiations, like the subcontractors in the Rush & Tompkins case, to sneak a look at what was happening beneath the cloak. But if one is allowed to lift it at all, it should be lifted high enough to see in all its raw detail the truth of what previously would have remained unseen. That seems consistent with the rationale for this privilege. I take that from Lindley LJ's judgment in Walker v Wilsher (1889) 23 QBD 335, 337:

"What is the meaning of the words 'without prejudice' ? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted, a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one. A contract is constituted in respect of which relief by way of damages or specific performance would be given."

I repeat the limitation I impose on that rule: it applies only where a new order between the negotiating parties has replaced the old. Where compromise has been reached, the purpose has been served and the inhibitions fall away.

61. AAG's submissions before me placed reliance upon the decision of Cox J, sitting in the Employment Appeal Tribunal, in BNP Paribas v Mezzotero [2004] IRLR 508 ("BNP"). An employment tribunal made an interlocutory ruling permitting Ms Mezzotero to refer at a forthcoming hearing of her sex discrimination complaint to the fact that on 7 January 2003 BNP Paribas suggested that her employment should be terminated by mutual agreement. An appeal by BNP Paribas was dealt with urgently so that the matter could be resolved prior to the substantive hearing and without the need for an adjournment of that hearing. After referring to a number of cases, including Unilever and Savings & Investment Bank, Cox J said at paragraph 23:

23. These then are the relevant authorities referred to by both parties. Mr Davies, QC for the Respondents, submits that they show, particularly in recent years, a developing trend towards a stricter application of the rule and an unwillingness to extend the categories or reach of exceptions to it. For my part, however, I consider that the rule and the public policy considerations upon which it is based, remain essentially the same, with particular judicial observations upon it arising in the particular factual contexts in which its application has fallen to be considered, most recently in the Court of Appeal.

62. When these principles were applied to the facts of the case, the result was that the appeal by BNP Paribas was unsuccessful. The main reason was that the statements in question were made at a time when there was no dispute between the parties as to termination.
63. In case this holding was wrong, Cox J went on to make observations about alternative submissions addressed to her on behalf of Ms Mezzotero seeking to rely upon the exception for unambiguous impropriety. Her reasons for accepting those submissions were set out in paragraphs 35 to 39:

35. In my judgment, Mr Galbraith-Marten's submissions are the more persuasive. What lies at the heart of the issue in this case is that this Applicant alleges direct sex discrimination and victimisation against her employers in seeking to terminate her employment after she had raised a grievance concerning discriminatory treatment following maternity leave. The sex and race discrimination legislation seeks to eradicate what the Court of Appeal have referred to as the "very great evil" of discrimination — see Jones -v Tower Boot [1997] IRLR 168 , and I consider that it is very much in the public interest that allegations of unlawful discrimination in the workplace are heard and properly determined by the Employment Tribunal to whom complaint is made, as the appropriate forum under the legislation. Further, it is widely recognised that cases involving allegations of sex and race discrimination are peculiarly fact-sensitive and can only properly be determined after full consideration of all the facts — see Anyanwu -v- South Bank Students Union and South Bank University [2001] IRLR 305 , and in particular the speeches of Lord Hope and Lord Steyn.

36. It is also widely recognised that proving direct discrimination is not an easy task for any complainant. Before the recent changes to the Sex Discrimination Act, following the EC Burden of Proof Directive, the case law had established that a complainant had to prove primary facts showing less favourable treatment, from which Employment Tribunals could, if they considered it appropriate, and without any, or any adequate explanation being advanced by the Respondent, infer that the less favourable treatment was on grounds of sex. The primary facts from which inferences of unlawful discrimination could be drawn were therefore a vital part of any complaint of direct discrimination before an Employment Tribunal. In my judgment, they remain equally important under the Act as amended, where section 63A(2) now provides:

"Where on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent —

(a) has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2,

…

the tribunal shall uphold the complaint unless the respondent proves that he did not commit, or, as the case may be, is not to be treated as having committed, that act."

37. In the present case, as Mr Galbraith-Marten points out, the logical result of Mr Davies' submission is that an employer in dispute with a black employee could say during discussions aimed at settlement in a meeting expressed to be being held without prejudice, "we do not want you here because you are black" and could then seek to argue that the discussions should be excluded from consideration by a Tribunal hearing a complaint of race discrimination.

38. Mr Davies immediately says that such a remark would obviously fall under the umbrella of unambiguous impropriety. I agree. However, Mr Davies is then faced with the unattractive task of attaching different levels of impropriety to fact-sensitive allegations of discrimination, in order to submit that the present remarks do not fall under the same umbrella. I do not regard that as a permissible approach. I would regard the employer's conduct, as alleged in the circumstances of the present case, as falling within that umbrella and as an exception to the "without prejudice" rule within the abuse principle …

39 I do not regard this case as creating an impermissible extension to the categories of the rule, exceptions which will always fall to be considered within the particular factual context of the case and which, in the present case concerns discriminatory conduct by employers towards one of their employees. For all these reasons this appeal must be dismissed.

Without Prejudice: Submissions of the Parties

64. Mr Edenborough QC in oral submissions on behalf of BAA gave an overview of aspects of intellectual property law relevant to the case. The reference to "intellectual property right" in the contract definition of "Zetaform" would not necessarily include drawings. The physical ownership of a thing might be in different hands from the ownership of the intellectual property rights. Just as a person who owned a book would not necessarily own the copyright, similarly a person who owned the physical moulds would not necessarily have ownership of the intellectual property rights. It would be a question in relation to any particular contract whether a sale of intellectual property rights extended to the physical drawings. Turning to the fact that the contract contemplated resale of the Zetaform outside the United Kingdom, Mr Edenborough commented that ownership of UK intellectual property rights was of no use abroad – if the only exploitation were to be outside the UK, what had happened to the UK intellectual property rights would be immaterial. Arguably at least five intellectual property rights might arise for consideration. The first two concerned a registered UK design right and a registered Community design right. They seemed unlikely to arise in the present case as no relevant registrations appear to have been made. A third possible intellectual property right was an unregistered Community design right, but this appeared unlikely to arise in the present case as the moulds had been made before the relevant European legislation came into force. There was a fourth possible intellectual property right in the form of an unregistered UK design right: this was problematic, but even if it had arisen would not be an impediment to exploitation. It could not prevent exploitation in Oman as it was a UK right and there was no reciprocal protection in Oman. Even within the UK such a design right would not prevent exploitation, as there would be a licence of right under sections 257 and 259 of the Copyright Design and Patents Act 1988. The fifth and final intellectual property right was copyright. Under Section 51 of the 1988 Act exploitation in the UK would not be an infringement. Outside the UK, and including in Oman, it was possible that reciprocal protection might arise under the Berne Convention – that would depend on local law in the jurisdiction in question.
65. Commenting generally upon the case advanced by AAG, Mr Edenborough stressed the need for clarity. BAA had sought clarification as to what AAG said had or had not been transferred under the contract. The response from AAG was a complaint that BAA had not clarified what rights it held. Insofar as AAG complained of a failure to transfer what was promised, it was necessary – submitted Mr Edenborough – for AAG to be precise about what was promised and what was transferred.
66. Mr Edenborough identified a number of points demonstrating that the meeting of 22 October 2009 was held on a without prejudice basis. The witness statement of Mr Ross accepted that this was the basis for the meeting. It was designed to try and work out a way forward so as to resolve the issues in dispute between the parties. The note of the meeting was expressly stated to be without prejudice.
67. Turning to the exceptions to the without prejudice rule, Mr Edenborough said that the cases showed that the exception for unambiguous impropriety only arose in the clearest cases of abuse. That was for reasons of public policy which were even stronger today than they had been at the time of the Unilever decision. The civil procedure rules and the review by Lord Justice Jackson of costs in civil proceedings showed an ever increasing keenness to promote settlement. Any lifting of the "without prejudice cloak" would run counter to achieving that aim. The facts of the Savings and Investment Bank case were relied upon by Mr Edenborough as showing that "the impropriety has to be immense." The facts in that case would have shown either historical perjury or that there would be a future perjury. Even with a wrong of that magnitude the court had refused to lift the without prejudice cloak.
68. Mr Edenborough submitted that it would not be right as a matter of general principle for the court to take the approach identified by Cox J in BNP. What Cox J had said was obiter, as her primary finding was that the without prejudice rule did not arise in the circumstances of the case. Second, it related to employment cases and to discrimination cases in particular, and paragraphs 35 to 38 showed that special considerations arose in such cases. The very wrong prohibited by Parliament was purportedly within the without prejudice discussions. The effect of this part of Cox J's judgment was to treat such conduct as an unambiguous impropriety because the great evil of discrimination was on a par with blackmail. Thus BNP was no exception to the general principle that mere inconsistency could not give rise to an exception to the without prejudice rule.
69. The present case, submitted Mr Edenborough, was very far from any such position. There had been a series of statements and negotiations. The case for AAG was that some were right and some were wrong, and that in relation to some AAG did not know whether they were right or wrong. As to the question of whether the contract had been made by individuals authorised to do so on behalf of BAA, Mr Edenborough acknowledged that it was not until service of the defence that BAA admitted that Mr Orchard had had ostensible authority to make the contract. On the question of lack of title to intellectual property rights, Mr Edenborough referred to evidence by Mr Ferroussat that he had not made any unequivocal statements about intellectual property rights. What appeared to emerge from the without prejudice meeting was that AAG mistakenly thought it had acquired intellectual property rights in a particular car park, such as the multi storey car park at Terminal 5 at Heathrow, rather than any intellectual property rights which might exist in the component parts, namely the moulds and arguably any related drawings. It was clear, however, that the contract did not involve sale of any intellectual property rights in any particular completed structure such as the Terminal 5 multi storey car park.
70. This analysis was then relied upon by Mr Edenborough when turning to consider the question of estoppel. Any exception to the rule based on estoppel could only arise if, in Neuberger J's words in the Hodgkinson & Corby case "a clear and unambiguous statement" were made. This contrasted with the lack of clarity identified earlier. More generally, the passages in Ofulue cited above demonstrated an insistence that the without prejudice privilege should not be restricted. Consistently with this, Longmore LJ in the Oceanbulk case had held that not any allegation of estoppel would be sufficient to override the privilege. Mr Edenborough submitted it would be wrong to shine the light of day on an admission, the very thing the without prejudice privilege was designed to exclude. In truth, he submitted, any exception for estoppel involved conduct which would be unconscionable in the sense that it would lead to impropriety, and thus would be no more than a subset of the "unambiguous impropriety" exception.
71. Mr Edenborough concluded his submission on estoppel by noting that as regards lack of title AAG's particulars of claim had not asserted the truth of the admission. What was involved was no more than an equivocation and it was not reasonable to rely on it. There was a further reason why it was unreasonable to rely on anything said at the meeting, for the purpose of the meeting was to discuss how to go forward. The aim was to see what the problems were and what potential solutions might arise. It would be unreasonable to rely on any statement made at such a meeting as indicating that the contract had been breached in a repudiatory way. And it would have been clear to AAG that there could not have been any such intention.
72. On behalf of AAG Mr Perhar at my request clarified AAG's case. AAG said that it had purchased a construction system, which included "design concept, intellectual property rights, and construction moulds" – all were the object of the contract. There had been no express reservation in relation to intellectual property rights and in particular as to drawings. Two important features of the meeting of 22 October were highlighted by Mr Perhar: first that it had been said that the contract had been made without authority on the part of BAA, and second it had been said that the intellectual property rights did not transfer to AAG. Mr Perhar acknowledged, however, that the lawyers then acting for AAG did not raise with BAA the question whether relevant statements at the meeting were made without prejudice.
73. Although Mr Ross had admitted in his statement that the meeting was held on a without prejudice basis, AAG nevertheless contended that the court should hold that this was not a genuine settlement meeting. If there had been a genuine intention to seek to settle then one would have expected BAA's position to have been stated clearly beforehand. Turning to the note of the meeting, it included at paragraph 1c a passage relying on the "value of the transaction" as consistent with the purchase being simply for "lumps of metal rather than anything more sophisticated such as an assignment or licence" of underlying intellectual property rights. What was said there ignored the provision that had been made as regards resale. The notes were unambiguous in stating HAL's position that it did not have the right to assign or licence intellectual property rights either in the drawings or in the moulds, and in saying that Mr Orchard had had no authority to enter into contractual commitments on behalf of any BAA entity. The clear inference was that BAA was saying that AAG had not received any intellectual property rights. Here Mr Perhar clarified that AAG did not say that the intellectual property rights contemplated by the contract extended to intellectual property rights in completed car parks. What the contract envisaged was that the car park would be built, not one identical to Terminal 5, but with the ability to include construction materials manufactured using the Zetaform moulds. The reliance on the part of BAA on what had been said about intellectual property in car parks was slight of hand. The point made on behalf of AAG was that the apparent lack of intellectual property rights in the Zetaform moulds prevented AAG from being able to proceed with the joint venture.
74. Returning to the question whether the meeting on 22 October attracted "without prejudice" status, Mr Perhar asserted that there had been no dispute to clarify at the time of the meeting, for AAG were unaware what BAA's position would be. He relied by analogy on BNP as showing that statements as to BAA's position were not made with a view to settlement. In subsequent emails, AAG had found "that BAA had unresolved problems which might compromise the sale" while AAG's concerns were only about not having been supplied with the drawings. I was referred by Mr Perhar to observations in Foskett on Compromise, paragraph 19-12:

The question has arisen from time to time as to whether an "opening shot" or an intimation of a willingness to negotiate is similarly privileged. It is, perhaps, axiomatic that discussions cannot be treated as being "aimed at settlement" if at the time they take place there is no dispute (or no extant dispute) to settle. The dividing line between that situation and one when the first tentative steps towards negotiations are taken may not always be that easy to determine. Cases on each side of the line are to be found reported.

75. Turning to the scope of the "unambiguous impropriety exception", Mr Perhar noted that Foskett on Compromise at paragraph 19-55 stated that while the authorities had set the parameters new factual situations will almost inevitably arise which will require close consideration and, perhaps, adaptation of the present parameters. The court would doubtless have to adopt a pragmatic approach, balancing the primary consideration of insuring protection for parties involved in true settlement negotiations against the need to ensure that the privilege afforded by the rule is not abused. Mr Perhar submitted that the stance adopted by BAA "smells bad." BAA had said something damaging at the meeting, had not repeated it openly, and was now attempting to eliminate the one piece of evidence it could not argue against. He asserted that BAA was not being truthful, and was attempting to avoid saying anything precisely about what rights existed and who owned them. When considering this exception to the without prejudice rule the court should take into account the manner in which the statement in question had been made.
76. As to the estoppel exception, Mr Perhar submitted that this was a distinct point on its own. Indeed it was the most compelling of the arguments advanced by AAG, for it would clearly be unconscionable for BAA to rely upon the without prejudice privilege. Neuberger J had described estoppel as a "powerful argument". The clear position was that the statements were intended to be relied upon and were in fact relied upon.

Without Prejudice: Analysis

77. I can deal briefly with the assertion that there was no true intention to settle and accordingly that the meeting of 22 October 2009 did not attract the without prejudice privilege. This was a late addition to AAG's case. It is an addition which is inconsistent with AAG's evidence. Mr Ross expressly acknowledged that the meeting had been arranged to take place on a without prejudice basis. He may not have known precisely what BAA's problem was, but it must have been clear to him that there was a problem with differing views of the legal position on each side, and that the aim of the meeting was to start on the process of finding a solution. The notes of the meeting make it clear that possible ways forward were indeed identified as the meeting progressed. The passage in paragraph 19-12 of Foskett on Compromise does not suggest that a meeting of this kind falls outside the without prejudice rule. It was a meeting whose purpose was entirely different from what occurred in BNP.
78. It follows that AAG can only rely on statements made at the meeting if it is able to show that they fall within a relevant exception to the without prejudice rule. I am satisfied that on the material before me there is no seriously arguable basis for asserting that a relevant exception applies. Taking first the "unambiguous impropriety" exception, I reject the assertion that BAA's stance "smells bad". In seeking to justify this assertion Mr Perhar identified precisely what the without prejudice rule is designed to protect. The mere fact – if it be the case – that BAA said something damaging at the meeting and did not repeat it openly can hardly warrant bringing the case within an exception to the without prejudice rule. The passages cited above from the leading authorities (see in particular paragraphs 34, 39 and 45 to 53 above) make it clear that in order to encourage settlement the rule deliberately encourages parties to speak freely, safe in the knowledge that what is said on a without prejudice occasion cannot be relied upon later. Nothing said by Cox J in BNP provides any support in the present case for any different approach. I can find no basis in the evidence before me for an assertion that BAA is not being truthful in its evidence as to the purpose of the meeting, or that there is anything about the manner in which relevant statements were made which can assist AAG.
79. The same reasoning provides a complete answer to the case advanced by AAG on estoppel. In the circumstances described by Mr Ross in his witness statement it was abundantly clear that BAA was setting out its position so that AAG could consider possible ways of arriving at an amicable solution. Reliance upon statements made at the meeting as indicating anything other than a negotiating stance was in my view clearly inconsistent with the whole basis upon which the meeting had been set up. Thus even assuming that there were clear and unambiguous statements by BAA, and even assuming that AAG relied upon those statements, it is in my view abundantly clear that it would not have been reasonable for AAG to rely upon the statements in the way that it now says it did.
80. Accordingly I accept BAA's contention that passages in AAG's statements of case referring to statements at the meeting on 22 October 2009 must be struck out.

Summary Judgment: Omani Law on Ability to Exploit Zetaform

81. This part of BAA's application concerns an alternative way in which it says the action ought to be dismissed. As explained in BAA's skeleton argument, BAA advances a series of propositions which I have numbered for convenience as follows:

1) AAG was free to exploit the Zetaform in Oman. Even if the contract did not transfer title to the intellectual property rights, that purported failure would not stop AAG from using the Zetaform moulds and drawings in constructing a finished building.

2) BAA has produced a report from and Omani lawyer to this effect, while AAG has filed no rebuttal evidence on this issue. Accordingly the court should accept BAA's Omani law evidence.

3) If AAG were free to exploit the Zetaform in Oman, then the purported reason for failure of the Omani joint venture evaporates.

4) If that is so, then there is no causal link between the alleged wrong and the alleged loss and damage, and so BAA cannot be held liable for any purported loss and damage.

5) Accordingly the action fails and judgment ought to be entered in favour of BAA.

82. It must be borne in mind that this argument is advanced by way of alternative in at least three respects. First, BAA has not stated what precise rights in the Zetaform it possessed at the time of the contract. Nevertheless it says that it had good title to relevant intellectual property rights and design concept in the Zetaform moulds, and that the rights it possessed were transferred to AAG by operation of law at the moment the contract was made. BAA makes no admission as to any inadequacy in the rights thus transferred. Second, if BAA did not possess full title to relevant rights then it says the contract only required it to transfer such title as it possessed. Third, and most importantly for present purposes, the argument – on the statements of case as they currently stand – only arises upon the footing that AAG is entitled to refer to what happened at the meeting of 22 October 2009. On that basis it seems to me that this part of BAA's application cannot warrant summary judgment in favour of BAA, for it misconceives the case advanced by AAG.

AAG's Case as to Loss and Damage

83. I have set out earlier in this judgment passages in the particulars of claim concerning what occurred on 22 October 2009. The drafting of this statement of case is not a model of clarity. It is, however, clear from paragraphs 22 to 24 that AAG identifies four assertions by BAA on 22 October 2009. First, there was a statement that the contract was not valid because it had been entered into in the name of a body which was not a recognised legal entity at the time the contract was made. Second, there was an assertion that Mr Orchard did not have authority to enter into contractual commitments on behalf of any BAA entity. Third, there was a query as to whether AAG had paid the purchase price. Fourth, there was an assertion that the relevant BAA entity did not have the right to assign or licence the underlying intellectual property rights either in the drawings or the moulds for the Zetaform, such rights being jointly owned with a third party. Paragraph 25 of the particulars of claim said that these assertions were unacceptable to AAG.
84. Having set out these four assertions, the initial focus of AAG in its particulars of claim concerned the alleged representation by BAA that it did not have title to sell intellectual property rights to AAG: see paragraph 26 of the particulars of claim and the section in the particulars of claim headed "repudiatory breach of contract". However paragraphs 9 and 10 of the reply (quoted above) have relevance to this part of BAA's application. In paragraph 9 AAG returned not only to what was said about inability to assign or licence the underlying intellectual property rights, but also to the alleged representation about Mr Orchard's lack of authority. Paragraph 10 of the reply said in general terms that AAG relied upon the statements made by BAA on 22 October 2009 and acted upon them.
85. Turning to loss and damage, the concluding section of the particulars of claim was in these terms:

THE CLAIM

By reason of the matters stated above, the Defendant is in repudiatory breach of the Contract and the Claimant in reliance on the terms of the Contract has suffered loss and damage as described below.

PARTICULARS OF LOSS

(a) Purchase Price	£40,000.00
(b) Haulage and Lifting Equipment	£26,500.00
(c) Storage for 25 months	£74,675.00
(d) Consultancy	£4,264.00
(e) Travel, subsistence and overhead (Thailand, Oman)	£65,636.72
(f)Transport for return of moulds	£26,500.00
(g) Loss of Profits (80% of £675,000.00)	£540,000.00
	__________
	£777,575.72

AND THE CLAIMANT CLAIMS

(a) £777,575.72 for repudiatory breach of contract; and

(b) Interest pursuant to section 35A of the Senior Court Act 1981 on any sum found due to the Claimant at such rate and for such period as the Court shall think fit; and

(c) Costs.

86. At the same time as serving its reply AAG served answers to requests for further information of the particulars of claim. Request 4, and AAG's answer to that request, were as follows:

Request 4

"Assuming for the sake of this request only that AAG did not acquire good title to those intellectual property rights that might have subsisted in the Zetaform moulds, then please detail precisely the legal basis upon which it is alleged that the lack of that title would have prevented AAG from using those moulds in Oman. In particular, specify precisely the provisions of Omani law that would have so prevented AAG."

Reply

AAG only entered into the Contract with BAA on the basis that it was receiving a unique product that it would be able to sell worldwide without risk of any litigation over the intellectual property of Zetaform. On being informed that intellectual property rights had not been transferred as agreed in the Contract, AAG had every right to accept the repudiatory breach of contract by BAA.

87. Taken as a whole, AAG's statements of case in my view include:

a) An assertion that BAA's conduct on 22 October 2009 was repudiatory of the contract as a whole; and

b) An assertion that a valid purchase of the rights in the Zetaform was fundamental to the joint venture.

BAA's Submissions on Omani Law.

88. BAA's contention in its skeleton argument was, in effect, that it did not matter a jot whether AAG had any intellectual property rights in the Zetaform. As the joint venture was to take place in Oman, and Omani law gave no protection to any such rights, AAG and its joint venture partner could do what they pleased.
89. Mr Edenborough added orally that AAG had "pinned their colours to this particular loss and damage." He noted that the prayer included a claim for a specific sum relating to the Omani joint venture. He went on to add that the real reason that the joint venture in Oman did not go ahead was because AAG could not enable the lawful construction in Oman of a replica of the Terminal 5 car park.

Analysis of BAA's Summary Judgment Application

90. For the purposes of argument I will assume that Omani law is as stated by BAA. I record, however, that BAA has made no application for permission to rely on expert evidence in this regard. Mr Edenborough submitted that no such permission was necessary on an application of this kind. I should not be taken as accepting that he is right in this regard.
91. If AAG's case on loss and damage had merely been that it attempted to exploit the Zetaform moulds in Oman and found that it was prevented from doing so by Omani law, then the unchallenged evidence of BAA's Omani lawyer might well be a complete answer to such a claim. As set out above, it went beyond a claim merely in relation to the joint venture. Moreover as regards the joint venture what BAA focuses upon is not the claim advanced by AAG. AAG's claim is that assertions made by BAA on 22 October 2009 amounted to a repudiatory breach of the contract, a repudiatory breach which AAG has accepted, thereby bringing the contract to an end. BAA's evidence as to Omani law has no bearing upon the question whether what was said by BAA on 22 October 2009 amounted to a repudiation of the contract. If there was such a repudiation, assessment of the loss and damage suffered by AAG in consequence would proceed on normal contractual principles. As to the application of those principles to the present case, it seems to me that if AAG were to succeed on liability at trial, it must at least have an arguable case that it was entitled to conclude that it should cease to attempt to market the Zetaform moulds in any way.

Conclusion

92. For the reasons I have given I shall strike out passages in AAG's statements of case which refer to what happened at the meeting on 22 October 2009. I will adjourn that part of BAA's application which asserts that the action should be dismissed in consequence. Whether that consequence should follow may depend upon whether AAG is able to amend its statements of case to advance a claim which does not depend upon what was said on 22 October 2009. I consider that AAG should be given a relatively short period of time in which to formulate any such amendments. If AAG seek to take this course, the better approach may well be to start afresh, and to produce an entirely new draft of particulars of claim which set out with precision the case sought to be advanced on behalf of AAG, both as to liability and as to quantum. Consideration may also need to be given to whether the claim form requires amendment.

Postscript

93. In paragraphs 55 to 60 above I refer to the decision of the Court of Appeal in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] EWCA Civ 79, [2010] 1 WLR 1803. After this judgment was circulated in draft the Supreme Court allowed an appeal by the defendants: Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44. It has not been suggested by either side that this gives rise to any need for further argument in the present case.