Optical Express (Southern) Ltd v Birmingham City Council

Factual and Procedural Background

The claimants were tenants of a shop in the centre of The City, whose premises were compulsorily acquired by The City Council under a compulsory purchase order confirmed in December 1999, with possession taken in April 2000. The Council referred the determination of compensation to the Tribunal in September 2002. Prior to the hearing, the claimants sent a fax marked "without prejudice" in February 2003 containing a draft claim form and trading figures to the Council’s representatives. Expert reports were exchanged in June 2003, with reports assessing the value of the claimants' leasehold interest and business. The Council opposed the claimants' applications concerning the admissibility of evidence and the lodging of a particularised claim. The hearing was conducted in August 2003, resulting in directions regarding the exclusion of certain evidence and permission to lodge a particularised claim out of time on terms of costs.

Legal Issues Presented

1. Whether the fax dated 5 February 2003, including the claim form and Contribution Statement marked "without prejudice," was admissible as evidence or protected by the without prejudice rule.
2. Whether the claimants should be granted leave to lodge a particularised claim out of time with consequential directions.
3. The appropriate allocation of costs related to the interlocutory applications on admissibility and the particularised claim.

Arguments of the Parties

Appellant's Arguments (Claimants)

• Privilege attaches to documents created for settlement negotiations, supported by public policy encouraging dispute resolution without litigation.
• The fax and accompanying documents were part of genuine settlement negotiations and therefore protected by the without prejudice rule.
• The Contribution Statement referred to in expert reports was different from that sent in the February 2003 fax, and a direction was sought to provide a copy of the former.
• The claimants sought leave to lodge a particularised claim because the existing expert report on business value did not fully reflect factual evidence of personal loss, requiring amendment in light of new witness evidence.
• Granting leave to lodge a particularised claim would facilitate a just and fair resolution without materially delaying the hearing.

Respondent's Arguments (Council)

• While the law on privilege was accepted, the fax and documents did not constitute negotiations as the Council had been seeking accounts since March 2000 without success, and no negotiations occurred before February 2003.
• The fax and accompanying documents were factual material rather than part of settlement negotiations and thus not protected by privilege.
• The claimants’ failure to comply with procedural orders caused delays and frustration; the claim was properly set out in expert reports lodged in June 2003.
• The application to lodge a particularised claim was unjustified and should be resisted; expert reports should respond to the claim as presented.
• Privilege should be waived as the Contribution Statement was referenced in an expert report, but the claim form and figures should be deleted from the Council’s expert report.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by affirming the undisputed legal framework underpinning the without prejudice rule, emphasizing its basis in public policy to encourage settlement negotiations without fear of admissions being used in litigation. The court carefully examined the factual sequence leading up to the February 2003 fax and concluded that negotiations had commenced by November 2002, evidenced by telephone calls and correspondence where the Council sought claim information to facilitate settlement offers.

The court rejected the Council's argument that no negotiations were taking place at the time of the fax, finding that the fax and attachments constituted part of a genuine attempt to negotiate compensation, thus attracting the protection of the without prejudice rule. It further held that the entire fax and accompanying documents were privileged and could not be dissected to exclude the Contribution Statement, relying on precedent that forbids partial disclosure of without prejudice communications.

Even if negotiations had not been underway, the court found the fax to be an "opening shot" in negotiations, which is also protected. Consequently, the disputed documents were inadmissible, and the Council's expert report referencing them was ordered to be withdrawn and amended.

Regarding the application to lodge a particularised claim out of time, the court analyzed the evidence and submissions and found the existing expert report on business value was prepared on the correct legal basis of value to owner rather than market value. The claimants’ application was viewed as an attempt to amend the claim and evidence rather than a mere delay in lodging points of claim. Weighing procedural fairness and prejudice, the court granted leave to lodge the particularised claim on terms that the claimants bear the Council’s additional costs caused by the delay.

On costs, the court awarded costs to the claimants for the admissibility application but made no order for costs on the application for the particularised claim, balancing the parties’ conduct and outcomes.

Holding and Implications

The court held that the fax dated 5 February 2003, including the claim form and Contribution Statement marked "without prejudice," was inadmissible as evidence under the without prejudice rule. The Council's expert report referencing this privileged material must be withdrawn and replaced with an amended report excluding such references.

The court also granted leave to the claimants to lodge a particularised claim out of time, subject to the claimants paying the Council’s wasted and additional costs caused by their failure to comply with earlier procedural orders.

The decision directly affects the parties by excluding privileged communications from evidence and allowing amendment of the claim on terms that address procedural delays. No new legal precedent was established; the ruling applies established principles to the facts of this case.