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(House of Lords; Lord Hope of Craighead, Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, Lord Neuberger of Abbotsbury; 11 March 2009)
The case concerned a possession dispute between the registered owners and the occupier. The occupier, who had been in actual possession of the property for about 20 years, based her claim on adverse possession for over 12 years. Twice, in previous legal proceedings for possession against the occupier and her father, documents had been produced for the purpose of the proceedings in which the occupier had acknowledged the title of the registered owners. The first of these acknowledgements was more than 12 years old, and not therefore apt to defeat a claim based on the previous 12 years. The second acknowledgement, which took the form of an offer to purchase the property, was marked 'without prejudice'. The judge at first instance did not admit the second acknowledgment as evidence, and amended the register to show that the occupier was the registered proprietor. The principal issue in the appeal to the House of Lords was the extent to which it was permissible for one party to rely on a statement made by another party in 'without prejudice' correspondence, written with a view to settling earlier proceedings between the same parties.
By a majority, Lord Scott of Foscote dissenting, the Lords upheld the original decision to register the occupier as the owner of the property.
The following passage from Unilever plc v The Procter & Gamble Co  1 WLR 2436 was quoted with approval as making a point that should always be borne in mind by any judge considering a contention that a statement made in without prejudice negotiations should be exempted from the normal rule, that such statements were inadmissible and therefore not to be given in evidence.
'The without prejudice rule is founded partly in public policy and partly in the agreement of the parties . . . 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... to speak freely about all issues in the litigation... Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers... sitting at their shoulders as minders.'
Parties and their representatives trying to settle a dispute should be able to negotiate openly, without having to worry that what they said might be used against them subsequently, whether in their current dispute or in some different situation. There was no obvious justification for drawing a distinction between admissions and acknowledgements. It was the ability of parties attempting to negotiate a compromise to speak freely that indicated where the limits of the rule should lie. The rule recognised that unseen dangers might lurk behind what was said or written during negotiations, and removed the inhibiting effect that this might have in the interests of promoting attempts to achieve a settlement.
The fact that the owner's title to the property was not directly in dispute in the earlier proceedings was not a good ground for admitting the without prejudice offer to purchase the property into evidence. A statement in without prejudice negotiations should not be admissible in evidence, save perhaps where it was wholly unconnected with the issues between the parties to the proceedings, other than in exceptional circumstances such as those mentioned in Unilever.
While it was open to the Lords to create further exceptions to the rule, it would be inappropriate to do so, for reasons of legal and practical certainty. To uphold such an exception in this case would severely risk hampering the freedom parties should feel when entering into settlement negotiations.
Lord Scott of Foscote dissented, considering that the acknowledgment of title was admissible as evidence.