Practice--Costs--Jurisdiction of Judge to deprive Plaintiff of Costs--"Good Cause"-- Order LXV. r. 1.

Letters or conversations written or declared to be "without prejudice" cannot be taken into consideration in determining whether there is good cause for depriving a successful litigant of costs.

The action was tried with a jury, and resulted in a judgment by consent for the plaintiff for an agreed sum. Application was then made to the learned judge to order that the plaintiff should be deprived of costs. In support of this application, letters, containing proposals for the settlement of the action, which passed between the solicitors, were produced and handed to the learned judge with a view to shew that the plaintiff at an early stage of the litigation could have settled the action for the amount finally accepted, and the defendant's solicitor was called and examined and gave evidence to the same effect. The letters were expressed to be without prejudice, and it was admitted that the suggestions for compromise spoken to by the witness were also made without prejudice. The reception of the letters and evidence was objected to, but the learned judge considered they established misconduct for which the plaintiff ought to be deprived of costs, and he made an order accordingly.

The plaintiff appealed.

July 4. McCall, in support of the appeal. Communications between litigants made without prejudice are excluded as 336evidence on the ground of public policy: Hoghton v. Hoghton [FN1]; Jones v. Foxall [FN2]; and the reason for exclusion applies to a question of costs as much as to issues. In determining whether there is good cause to deprive the plaintiff of costs, the judge must be guided by the facts proved at the trial, and if he was not entitled to look at this evidence there was no evidence of misconduct before him. Williams v. Thomas [FN3] is the only authority for the admission of such evidence, and it is submitted that the view taken by the Vice-Chancellor in that case was incorrect.

FN1 15 Beav. 278.

FN2 15 Beav. 388.

FN3 2 Dr. & Sm. 29.

Crump, Q.C. , and Lewis Thomas, contra. "Without prejudice," means that the matter is not to affect the issues. Here the issues were disposed of, and the only question that remained was the incidence of the costs. To determine whether there was good cause to deprive either party of costs, the judge must look at the conduct of the parties, and is entitled to look at letters written without prejudice to see whether there has been misconduct of any kind. If there has been such misconduct there is good cause on which the judge may exercise his discretion.

McCall, in reply.

Cur. adv. vult.

July 6. LORD ESHER, M.R.

In this case, which was tried before Huddleston, B., with a jury, a verdict was given by consent for the plaintiff for 100l. On the question of costs the learned judge decided that there was good cause for depriving the plaintiff of costs, and he accordingly made an order to that effect. If there was good cause within the meaning of Order LXV. r. 1, the discretion of the judge to deal with the costs as he thought fit is absolute, and cannot be reviewed, but the recent case of Huxley v. West London Extension Railway Co. [FN4], in the House of Lords, has settled that the question whether there is good cause or not is subject matter of appeal. In this case, the cause on which the learned Baron acted was contained in some letters which he read, and also in the evidence of an interview between the parties relating to a compromise. The letters and the interview were without prejudice, and the question is whether under such 337circumstances they could be considered in order to determine whether there was good cause or not for depriving the plaintiff of costs. It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitation would be destroyed. I am, therefore, of opinion that the learned judge should not have taken these matters into consideration in determining whether there was good cause, and, as that was all that was before him on the point, if that is excluded, it follows that there was no good cause, and that the plaintiff should not have been deprived of his costs. It is very rare for us to differ from so accurate and careful a judge as Huddleston, B., but in this case I think he had no materials on which he could properly act, and that therefore his decision must be set aside.

FN4 14 App. Cas. 27.

LINDLEY, L.J.

This appeal raises a question of great importance both as to cases tried with juries and those tried by a judge without a jury. We have to decide whether a judge is entitled to look at letters written without prejudice, in order to determine a question of the existence of good cause for depriving a successful litigant of costs. The authorities do not appear to be uniform on the point. On the one hand there are cases which indicate that the letters should not be looked at, but on the other there is a case before Kindersley, V.C., in which, under very similar circumstances, letters written without prejudice were looked at and acted on by the Vice-Chancellor upon the question of costs. It becomes, therefore, necessary to consider the point with care. What is the meaning of the words "without prejudice"? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one. A contract is constituted in respect of which relief by way of damages or specific performance would be given. Supposing that a letter is written without prejudice then, according both to authority and to good sense, the answer also must be treated as made without prejudice. That was laid down in the case of 338Paddock v. Forrester [FN5]. In my opinion, in the case of Williams v. Thomas [FN6], to which I have referred, Kindersley, V.C., failed to attribute sufficient weight to that case. When the question of costs was raised a letter written without prejudice was referred to. Objection was taken to this, and the Vice-Chancellor said that he considered that the term "without prejudice" contained in the letter meant that the writer of it must not be prejudiced by it, but that he did not think it followed that it was not competent to the writer to use it, although it could not be used against him. I cannot help thinking that the Vice-Chancellor overlooked the fact that the object of putting in the letter was to prejudice the opposite party by putting in the answer to it. That case is the only authority that I know of for the course taken by the learned judge, and, when we come to consider the principle on which it was decided, it does not convince me that a judge is entitled to look at letters written without prejudice unless he has the consent of both parties to his so doing. No doubt there are cases where letters written without prejudice may be taken into consideration, as was done the other day in a case in which a question of laches was raised. The fact that such letters have been written and the dates at which they were written may be regarded, and in so doing the rule to which I have adverted would not be infringed. The facts may, I think, be given in evidence, but the offer made and the mode in which that offer was dealt with--the material matters, that is to say, of the letters-- must not be looked at without consent. I think, therefore, that there was no good cause for depriving the plaintiff of costs, and that the decision should be reversed.

FN5 3 Sc. N. R. 715, 734.

FN6 2 Dr. & Sm. 29.

BOWEN, L.J.

Whether there was good cause or not for depriving the plaintiff of his costs depends entirely on the question whether the learned judge was entitled to look at letters which were written without prejudice and to listen to a witness who detailed an offer, which had also been made without prejudice, to compromise the action. Negotiations which have taken place without prejudice may be material under circumstances which are not present here. The fact of those negotiations may perhaps339 in such circumstances be given in evidence, but the question whether what was said or done at such negotiations is admissible is a very different one. The precise question now before us, as to the admissibility of such evidence for the purpose of deciding as to the costs of an action could not have arisen before the Common Law Procedure Act, 1852. Up to then costs at common law always followed the event, and it naturally follows that there is no authority before that time on the point. Then comes the case before Kindersley, V.C., who did precisely what Huddleston, B., has done here. I think there was a confusion of thought and reasoning in the judgment of the Vice-Chancellor which we ought not to hesitate to point out. The use that the defendant sought in that case to make of the offer which had been made without prejudice was to attract the attention of the Court to the conduct of the plaintiff upon receiving it. In my opinion it would be a bad thing and lead to serious consequences if the Courts allowed the action of litigants, on letters written to them without prejudice, to be given in evidence against them or to be used as material for depriving them of costs. It is most important that the door should not be shut against compromises, as would certainly be the case if letters written without prejudice and suggesting methods of compromise were liable to be read when a question of costs arose. The agreement that the letter is without prejudice ought, I think, to be carried out in its full integrity. I agree, therefore, in thinking that this appeal should be allowed.

Solicitors for plaintiff: H. A. Lovett & Co.

Solicitors for defendant: Aird & Hood

Appeal allowed. (A. M.)

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