The recent Privy Council1 case of A&A Mechanical Contractors and Company Ltd v Petroleum Company of Trinidad and Tobago (Trinidad and Tobago)2 provides guidance on without prejudice privilege.

Under most common law jurisdictions, the without prejudice rule prevents communications from being put before court as evidence if there is a genuine attempt to settle a dispute3. It can be useful as it encourages parties to engage in settlements out of court. The purpose behind the rule is to enable parties to speak openly knowing that any admissions they may have made to settle the matter may not be used against them if the settlement discussions do not go ahead. However, it is important to remember that whether a document is considered without prejudice or not is a matter of its substance rather than form, and by merely including the words "without prejudice" alone will not mean the communication is within the ambit of without prejudice privilege. Further, as the parties learned in this case, the context (in this case contractual) within which the document was produced will also be relevant.

The Appellant, A&A Mechanical Contractors and Company Ltd ("A&A"), is an engineering and construction firm working primarily in the oil and gas industry. The respondent was Petroleum Company of Trinidad and Tobago ("Petroleum"), a state-owned oil company in Trinidad and Tobago.

In October 2003, by way of an Invitation to Bid ("ITB"), Petroleum invited various contractors to bid to perform steelworks relating to the strengthening of Petroleum's platform. In December 2003, A&A submitted its tender to carry out the work stipulated in the ITB for TT$26,800,000. A&A was the successful bidder and entered into a contract with Petroleum in September 2004.

Importantly, Clause 7 of section 5.1 of the ITB provided in relation to alterations and variations:

"[The respondent] may at any time during the progress of the Work make alterations in or additions to or omissions from the Work or any alterations in the kind or quality of the materials to be used therein and if [the respondent] shall give notice thereof in writing to the [appellant] and the [appellant] shall alter, add to or omit as the case may require and the value of such extras, alterations, additions or omissions shall in all cases be agreed between [the respondent] and the [appellant] the amount thereof shall be added to or deducted from the Contract price as appropriate. No variation shall be made to the Work stipulated without prior written approval of [the respondent's] authorised representative. Failure to observe this condition may at the sole discretion of [the respondent] result in non-payment for the unauthorised Work."

The works were completed by A&A in early 2006 and Petroleum paid the original contract price. However, the parties disputed the amount and value of additional work carried out. As a result, a meeting took place in May 2008, where A&A contended that, "it was agreed that various items of additional works were variations and that agreed valuations were attributed to each of them." After this meeting, Petroleum sent a letter in June 2008 ("the June 2008 letter"), which noted the matters that the parties had agreed. In respect of each variation, it also included the amount claimed, the agreed amount and a description of the variation. In November 2008, A&A replied and then in April 2009 Petroleum sent a further reply, by a letter headed "without prejudice". There were several variations that had not been agreed on; therefore, it was suggested there should be a further meeting to resolve this. However, both parties did not agree on the remaining variations, and, by April 2009, A&A wrote to Petroleum stating that they retracted all previous offers and concessions. A&A then started proceedings and claimed the amount agreed in the June 2008 letter.

Petroleum's counsel put the June 2008 letter before the High Court and used it in their cross examination but later objected to the use of it during the cross examination of Petroleum's project manager by A&A's counsel on the basis that letter was part of without prejudice correspondence.

At first instance, the judge came to the decision that the June 2008 letter was not subject to without prejudice privilege. They reached this decision stating:

"The meetings which led to the [respondent's] letter of 23 June 2008 and the letter are important for setting out what was agreed between the parties as additions or variations. It was a necessary process to finalise the payments due. The purpose of the meetings was exactly for the purpose of agreeing what was to be paid. No without prejudice designation could therefore be attached to the 23 June 2008 letter. These were not negotiations being undertaken for the settlement of a disputed claim but rather an integral step in the process of finalising the payments. Without these meetings and process final payments could not be met."

However, the Court of Appeal (Republic of Trinidad and Tobago) disagreed with the High Court and submitted that the June 2008 letter did attract privilege. They extracted serval statements from authorities and based on this reached the conclusion:

"... that differences had arisen between the parties in relation to the variations claimed by the [appellant] and counterclaims of [the respondent]. There were meetings between the parties genuinely aimed at a settlement or compromise of their differences ... In those circumstances the June letter, in my judgment, is a without prejudice communication and accordingly is privileged and inadmissible. The Trial Judge therefore should not have relied on it to arrive at his award in respect of all the other variations."

A&A then appealed this decision and the Privy Council had to decide whether the Court of Appeal was correct to find that the June 2008 letter was without prejudice and inadmissible.

The Privy Council ruled that the June 2008 letter was not subject to without prejudice privilege and, therefore, admissible because the agreements determined in a meeting was part of the process under clause 7. The Board came to this decision for the reasons set out in paragraphs 67 to 74 for the following reasons:

  • The contractual obligation under clause 7 imposed an obligation on the parties to be involved in a process so they could reach an agreement on the value of the variation. As opposed to seeking to settle, this was an ongoing process and, therefore, different from negotiations.
  • The agreements that were reached in the May 2008 meeting, which were accordingly recorded in the June 2008 letter, were part of the process to conclude the value of work under clause 7 of the contract.
  • A reasonable person would appreciate that the parties' joint intention of reaching an agreement is an open process.
  • They also considered that the use of the letter during cross examination amounted to an unequivocal waiver of any without prejudice qualification.

This case shows that a document being "without prejudice" is a matter of substance over form. If correspondence is, indeed, for the purposes of settlement, it is best to include "without prejudice" and be consistent with it. However, it is important to ensure that the correspondence is, in fact, made in a genuine attempt to settle with the other party, otherwise a party may risk that communication becoming admissible before the court. Simply using the words "without prejudice" may not always be enough.

Footnotes

1. The Judicial Committee of the Privy Council is the highest court of appeal for a number of Commonwealth countries, crown dependencies and United Kingdom oversea territories.

2. A&A Mechanical Contractors and Company Ltd v Petroleum Company of Trinidad and Tobago (Trinidad and Tobago) [2022] UKPC 39

3. Some civil law countries do not recognise the without prejudice rule at all, and special care may need to be taken, for example entering into a formal agreement to ensure that negotiations remain confidential and that any without prejudice negotiations are not to be referred to in future court or arbitral proceedings.

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