Mornington 2000 LLP (t/a Sterilab Services) v The Secretary of State for Health and Social Care

[2025] EWHC 540 (TCC)

This is a long running dispute arising out of a contract for the supply of COVID-19 lateral flow test kits. We considered some questions about disclosure in Dispatch, Issue 290. Here, Smith J had to decide whether an audit report commissioned by the defendant when the parties were engaged in without prejudice negotiations had to be disclosed. Following a mediation, the Parties discussed conducting an audit and the scope of that audit. The audit  was then carried out on behalf of, and funded by, the defendant, who refused to disclose the report because it had been: “produced as part of the confidential and without prejudice process and any documents disclosed in that process, including the Intertek audit report, are covered by without prejudice privilege." 

Smith J, having reviewed the authorities summarised the key principles in this way:

1. The [Without Prejudice Rule (‘WP Rule’)] is a rule governing the admissibility of evidence and is founded in the public policy of encouraging litigants to settle their differences rather than litigate them to a finish (Rush & Tompkins Ltd v GLC [1989] 1 AC 1280 … In Ofulue v Bossert [2009] 1 AC 990 …, Lord Hope put it thus at [12]: ‘[t]he 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’.
2. The WP Rule therefore applies ‘to exclude all negotiations genuinely aimed at settlement whether orally or in writing from being given in evidence’ and its underlying purpose is ‘to protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement’ (Rush & Tompkins) … The WP Rule is not limited to admissions made against a party's interest, although the protection of admissions against interest is its most important practical effect …:
3. In addition to finding its justification in public policy, the WP Rule may also be founded in the agreement of the parties … one party cannot unilaterally impose an extension of the ambit of the WP Rule on another – there must be agreement.
4. … unless the parties make some agreement to narrow or broaden its effect (as they are entitled to do … 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 (Ofulue …).
5. Over the years, the courts have recognised certain exceptions to the WP Rule which are made when the justice of the case requires it … none is said to apply in this case).
6. The WP Rule is an important one whose boundaries should not be lightly eroded. The protection afforded by the rule should be enforced unless it can be shown that there is a good reason for not doing so …
7. The question of whether a document is truly ‘without prejudice’ is an objective question for the court, subject to consideration where appropriate of the factual matrix and other matters that are properly and normally admissible in connection with the construction of a written document … The label ‘without prejudice’ is not conclusive …
8. Without prejudice privilege is a joint privilege which cannot be waived unilaterally by one party to the negotiations … However, without prejudice discussions may become open by the parties' consent. If one party to negotiations wishes to change the basis thenceforth to an open one, the burden is on that party to bring the change to the attention of the other party and to establish on an objective basis that the recipient would have realised that a change in the basis of negotiation was being made.”

It was common ground that, but for the defendant's assertion of without prejudice privilege, the audit report would be relevant to the issues arising in the claims and, therefore, disclosable. The only issue was whether the report was "without prejudice".

The judge noted that the mere fact that negotiations which have referred to the procurement of a third-party report are covered by the umbrella of without prejudice privilege does not mean that there is an express agreement that the report itself will also be "without prejudice". Here, the defendant was suggesting that: “against the background of the ongoing without prejudice process, the claimants' failure to object to the audit taking place at the end of February 2022 had the effect of ‘crystallising’ an implied agreement as to the status of the report”. Whilst it was potentially possible to identify an implied agreement from the existence of the without prejudice negotiations and/or correspondence, this argument was not made out on the facts and was rejected by the judge.

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