DISCUSSIONS TO SELL LAND WERE WITHOUT PREJUDICE AND COULD NOT BE RELIED UPON AT HEARING: THE WITHOUT PREJUDICE RULE EXAMINED

September 12, 2021 · by · in Appeals, Civil evidence

In  Windmill Holdings SPV Ltd v Adams & Anor (LAND REGISTRATION – ADVERSE POSSESSION – evidence) [2021] UKUT 228 (LC)  The Upper Tribunal (Lands Chamber), Judge Elizabeth Cooke, upheld the decision of the First-tier tribunal excluding certain evidence on the grounds that it was without prejudice.

THE CASE

The respondents purchased property in 1993. It was a strip of land that used to be a railway siding. The appellant company brought the remainder of the title in 2018. An issue arose as to whether the respondents had possessory title to two strips of land which they had used for 10 years.  The FTT decided that the respondents had been adverse possession  of the land for ten years and found in their favour.  The appellant appealed on the basis that the FTT had been wrong to exclude notes of a telephone conversation and certain emails relating to the appellant’s proposed sale of the strip to the defendants.

THE DISPUTED EVIDENCE

The excluded evidence related to the appellant telling the respondents that the strips were for sale and their responses.
11.          I can summarise the content of the excluded correspondence as follows. First, on 12 April 2018 Mr Peter Whitehead, the director of the appellant, emailed Mr and Mrs Adams (whom he had known and with whom he had had dealings for some years) saying:
“Tony, as part of ongoing negotiations of land at Ribchester Road, we’ve acquired two parcels which I understand are adjacent to your house. If you and Maria would like to purchase these from us, would you let me know fairly quickly please?”
12.          Mr Adams replied asking Mr Whitehead to call, and Mr Whitehead emailed again on the same day saying that they could have the two parcels for £25,000 if they moved forward quickly,
13.          There follows Mr Whitehead’s note, which he says he made at the time:
“Note of a telephone conversation with Tony Adams on 18th April 2018.
Tony stated that the family had encroached on to the two parcels in question knowing that they were not in his and Maria’s ownership.
In a previous conversation on 13th April, Tony had said that the Land Registry had “cocked up” in not recording the two parcels in his and Maria’s names when they were originally purchased.
During this conversation (on 18th April), Tony Adams acknowledged that the previous statement (above) was a lie and having spoken to their solicitor they wanted to acquire the two plots.
The sum of £10k was offered and I said that the asking price was £25k. Tony then asked what ‘the bottom line’ was.
I stated that I would consider and revert.”
14.          The emails then re-commence in the morning of 19 April with Mr Whitehead indicating a bottom line of £19,375; Mr Adams replied that afternoon suggesting “£18k subject to contract” and asking when he wanted to complete. That evening Mr Whitehead replied to say that the bottom line remained £19,375 but that he would discount it to £18,750 if completion occurred on or before 18 May; and he asked who Mr and Mrs Adams’ solicitor would be. On 20 April 2018 Mr Adams replied with his solicitor’s details. On 23 April Mr Whitehead email to say that the solicitor seemed unaware of the transaction and warning that the price would go up if the purchase did not occur by 15 May; Mrs Adams replied on the same day asking him to use a different email address.
15.          That is the end of the excluded correspondence. On the 10th May 2018 the Respondent emailed claiming to have found proof of purchase of the two plots, and on 18 May 2018 Mr and Mrs Adams’ solicitors, Napthens, wrote to the appellant’s solicitors stating that their clients had bought the south strip and the north plot in 1993, and their clients only became aware that they did not have a registered title to them when the appellant “demanded ransom monies”, that their clients were horrified, and that they had honestly believed all along that they owned the south strip and the north plot as well as the plot for number 34.

THE WITHOUT PREJUDICE RULE

The judgment considered the without prejudice rule, in particular at what stage in a dispute it could be said to apply.

18.          There is no dispute between the parties as to the purpose of the “without prejudice” rule or its extent. It is trite law that without prejudice material, with some exceptions which are not relevant here, must not be put in evidence, in order to encourage settlement and to enable the parties to speak freely and frankly in their attempts to settle; both Mr Newman and Mr Habteslasie quote Phipson on Evidence, 19th edition, paragraph 24.13. Without prejudice material need not be labelled as such. It is not necessary for the parties to be already engaged in litigation, and they may be in a contractual or other relationship (such as employer and employee as in Barnetson v Framlington Group Ltd [2007] EWCA Civ 502). What is critical is the proximity of the subject matter of the negotiations to the subject of the litigation. At paragraph 34 in Framlington the Court of Appeal (Auld LJ) said:
“the crucial consideration [is] whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree.”
19.          In Bradford & Bingley Plc v Rashid [2006] 1 WLR 2006 Lord Mance said at paragraph 81]:
“The existence of a dispute and of an attempt to compromise it are at the heart of the rule whereby evidence may be excluded (or disclosure of material precluded)… The rule does not of course depend upon disputants already being engaged in litigation. But there must as a matter of law be a real dispute capable of settlement in the sense of compromise (rather than in the sense of simple payment or satisfaction).”

 

THE DECISION IN THE CURRENT CASE: THESE WERE WITHOUT PREJUDICE DISCUSSIONS

The decision of the FTT judge was upheld.  These discussions fell within the without prejudice rule.

20.          For the appellant Mr Newman argues that the dispute only began on 10 May 2018. Before that there was no dispute and therefore the correspondence was not without prejudice and should not have been excluded (nor should the references to it in Mr Whitehead’s witness statement and the appellant’s statement of case in the FTT). The emails are simply a negotiation about the sale and purchase of land, which is not something about which the parties might reasonably litigate if they could not agree; the discussion falls within the bracketed words at the end of the passage just quoted from Bradford & Bingley Plc v Rashid, being simply a negotiation of price.
21.          I asked Mr Newman if the telephone attendance note might have a different status from the emails; he was resistant to the material being “salami sliced” and argued that the telephone conversations indicate precisely that there was no attempt to compromise a dispute since Mr Adams acknowledged that he did not own the land and that the only way he could continue possession was by buying it.
22.          By themselves the emails look like a sale and purchase negotiation that starts from cold. But the respondents’ position is that it did not do so; Mr Habteslasie argued that the correspondence starts at a point when Mr Whitehead knew that Mr and Mrs Adams had encroached on the two plots. This was a case where someone has purchased land knowing there is a squatter on it and, in order to avoid litigation, offers to sell.
23.          Mr Habteslasie’s argument depends upon the premise not only that Mr Whitehead knew when the appellant purchased that Mr and Mrs Adams’ were in occupation of the two parcels, but also that must have been clear to the FTT before any findings of fact were made. The Tribunal is hampered by the absence both of written reasons for the judge’s decision and of a transcript. Mr Newman was not instructed before the FTT and so cannot assist.
24.          It is clear from the appellant’s statement of case in the FTT that it did not at that point deny that Mr and Mrs Adams had encroached on the land, although its case was that the encroachment did not amount to adverse possession. There is in the bundle a draft of particulars of claim for in a possession action intended to be issued by the appellant in the county court which of course pleads that Mr and Mrs Adams are in possession of the land. But none of that shows that the appellant was aware, not only at the start of the litigation but also when it purchased in April 2018, that they were occupying the land.
25.          Mr Habteslasie points to the letter from Napthens on 10 May 2018 which said:
“Your client purchased the land from the Duchy of Lancaster with no title guarantee, and were fully aware when they purchased this land that our clients were in possession of the [south strip]. Our clients and your client have been involved in business together for a long time and he has been to our clients’ property prior to purchasing this area of land.”
26.          That, he says, has never been denied by the appellant. Moreover, a letter from Farrers, the solicitors for the Duchy of Lancaster, to the appellant referred to the valuer instructed on sale to the appellant who had advised that there was encroachment on the north plot.
27.          Those two letters support Mr Habteslasie’s argument. I bear in mind also that the encroachment at least on the north plot was long-standing and probably obvious since the plot had been used as Mr and Mrs Adams’ drive. Even more significant, however, is Mr Whitehead’s note of the telephone conversations on 13 and 18 April 2018, quoted above at paragraph 15. Two things stand out:
28.          First, the two conversations are squarely concerned with the very dispute that the parties eventually litigated, namely whether Mr and Mrs Adams contracted to purchase the disputed plots when they bought the plot for their house. The conversations are redolent with controversy. There was, on the appellant’s case, both an allegation by Mr Adams that he and Mrs Adams had bought the land, and later a retraction of that claim. The potential for litigation is obvious, and is the background to Mr Adams’ expressed willingness to purchase the plot; it forms the background to the emails that followed, either to be put to bed by a congenial purchase or to re-ignite into litigation – as indeed it did.
29.          Second, the appellant’s report of the conversation has Mr Adams beginning by referring to his family’s encroachment. The encroachment does not seem to be mentioned as a new idea, but as something that was known and needed explanation. Even if I am wrong about that and even if Mr Whitehead did not know of the encroachment when he sent his email on 12th April, he certainly knew on 18th and in the course of the negotiations beyond.
30.          Taken together those two points indicate that there was a problem that formed the context for the excluded correspondence. These were not simply negotiations about a purchase where the only issue was price; if the problem of encroachment could not be resolved by a sale and purchase then conflict was inevitable and litigation was possible if the problem. The conflict was not, at that stage, so acrimonious as that in Framlington. But it is there and it explains why the offer for sale was made and why Mr Whitehead was keen to sell quickly.
31.          Accordingly I conclude that the excluded correspondence together with the references to it in the appellant’s statement of case in the FTT and in Mr Whitehead’s witness statements were correctly excluded by the judge.
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