Bradford & Bingley plc (Appellants) v. Rashid (FC) (Respondent)

A written acknowledgment of a liquidated debt need not state its amount. It is sufficient that the debtor clearly admits legal liability and that the amount can be established by extrinsic evidence.

The without prejudice rule does not protect an open communication which merely seeks time, a discount or another indulgence concerning repayment of an admitted and undisputed debt. The rule requires a genuine dispute and an attempt to compromise it. Extending the rule to ordinary repayment discussions would undermine the statutory acknowledgment regime by forcing creditors to issue protective proceedings rather than allowing time to pay.

A mortgage shortfall remained after the lender sold the mortgaged property. More than ten years later, the borrower's Advice Centre wrote that he could not repay the “outstanding balance” and subsequently offered about £500 towards the “outstanding amount” in final settlement. Neither letter was marked without prejudice.

The lender commenced proceedings after the ordinary 12-year limitation period had expired. It contended that the letters acknowledged the debt and restarted time under sections 29(5) and 30 of the Limitation Act 1980. The deputy district judge entered judgment for the lender. A county court judge reversed that decision, and the Court of Appeal dismissed the lender's appeal in [2005] EWCA Civ 1080, holding the correspondence inadmissible under the without prejudice rule.

The issues were whether the letters constituted statutory acknowledgments and whether the without prejudice rule prevented their use for that purpose.

1. The appeal was allowed unanimously. The House set aside the orders of the Court of Appeal and Judge Hawkesworth and restored the deputy district judge's order entering judgment for the lender for £22,127.86.

2. Lord Brown, with whose conclusions on acknowledgment Lord Mance expressly agreed, held that both letters acknowledged the debt for sections 29(5) and 30 of the Limitation Act 1980. Lord Hoffmann and Lord Hope reached the same conclusion. An acknowledgment need not specify an indisputable or calculable sum. A clear admission of legal liability suffices where the amount can be proved by extrinsic evidence. The references to an “outstanding balance” and an “outstanding amount” met that standard.

3. Lord Brown held that an apparently open communication discussing only how an admitted liability is to be paid does not attract without prejudice protection. The rule concerns genuine negotiations to compromise a dispute about liability or its extent. A debtor who requests time, a discount or another indulgence concerning an undisputed debt is not thereby compromising a dispute. Lord Hope and Lord Mance adopted materially similar reasoning, and Lord Walker regarded their position as substantially aligned with Lord Brown's.

4. Lord Brown explained that negotiations over genuinely disputed quantum may still attract the rule, notwithstanding an acknowledgment of some liability. The competing policies must be respected: settlement negotiations should remain protected, but an acknowledged debt should permit the creditor to refrain from immediate proceedings without losing the claim through limitation.

5. Lord Hoffmann agreed in the result but preferred a narrower statutory-use principle. In his view, the public-policy branch of the without prejudice rule does not prevent use of a statement as an acknowledgment under section 29(5), because for that purpose the statement is the operative acknowledgment rather than evidence proving the debt. Lord Walker and Lord Brown did not accept that distinction, and Lord Mance left it open. The majority basis was therefore that these communications did not attract the rule because no liability dispute was being compromised.

6. Lord Mance added that merely marking a communication “without prejudice” cannot create a dispute, concession or privilege. Outside genuine compromise negotiations, the effect of those words depends on construction and substantive law rather than the without prejudice rule governing admissibility and disclosure.

1. House of Lords: Allowed the lender's appeal in [2006] UKHL 37, set aside the orders of the Court of Appeal and Judge Hawkesworth, and restored the deputy district judge's judgment for the lender.

2. Court of Appeal: Dismissed the lender's appeal in [2005] EWCA Civ 1080, holding that both relevant letters were protected by the without prejudice rule and therefore inadmissible as acknowledgments.

3. Bradford County Court, Judge Hawkesworth QC: Allowed the borrower's appeal and held that both letters were inadmissible as impliedly without prejudice, with the result that the claim was statute-barred.

4. Bradford County Court, Deputy District Judge Heaton: Held that the letter of 26 September 2001 was admissible and acknowledged the debt. Entered judgment for the lender for £22,127.86 inclusive of interest.