1. And "without prejudice" protection from disclosure applies when?
Without prejudice privilege is a legal rule protecting genuine negotiation discussions from disclosure, the object being to encourage negotiations that may lead to a commercial settlement. But just how far does that protection extend? Does it, for instance, extend to an audit report (and associated correspondence) created when parties were involved in without prejudice discussions?
In just this situation, in Mornington 2000 LLP v Secretary of State for Health and Social Care, ruling that without prejudice protection did not apply, the court set out the applicable legal principles. In summary the without prejudice rule:
- is founded in the public policy of encouraging litigants to settle their differences rather than litigate them to a finish, and ensuring that parties are not discouraged by the knowledge that anything that is said in the course of negotiations may be used to their prejudice in the proceedings;
- excludes all negotiations genuinely aimed at settlement, whether oral or in writing, from being given in evidence, to protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement; essential to this public policy justification is a dispute (objectively determined by the court);
- is not limited to admissions made against a party's interest (although it is its most important practical effect); "without prejudice" negotiations will normally be inadmissible in their entirety;
- in addition to its public policy justification, may also be founded in the parties' agreement (express or implied) but one party cannot unilaterally impose an extension of the ambit of the rule;
- both justifications may be present or just one, but, unless the parties agree to narrow or broaden its effect, the scope of the privilege is a matter of general law and not based on the supposed boundaries of a notional agreement between the parties;
- the courts have recognised certain exceptions to the rule when the justice of the case requires it;
- the rule is important and its boundaries should not be lightly eroded; its protection should be enforced unless there is good reason for not doing so;
- 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 properly and normally admissible in connection with the construction of a written document;the label "without prejudice" is not conclusive;
- it is a joint privilege which cannot be waived unilaterally by one party but without prejudice discussions may become open by the parties' consent. If one party wishes to change the basis to an open one, the burden is on them to bring the change to the attention of the other party and to establish, objectively, that the recipient would have realised that a change in the basis of negotiation was being made.
2. How do the courts assess damages for defective construction work?
Presented with a claim in respect of defective construction work, the court's first challenge is usually to rule on liability. If there is liability, the next challenge is to assess quantum, the amount of damages that the defendant must pay. How does a court do that?
In Southern Electricity Power Distribution PLC v OCU Modus Ltd the court set out the courts' approach to assessing the appropriate measure of loss, causation, breaking the chain of causation and the duty to mitigate, in respect of defective construction work (so far as relevant to the case). In summary:
- the normal position is that the measure of loss is the cost of reinstatement;
- this is subject to reinstatement being a proportionate and reasonable course of action.If it is unreasonable to reinstate, the loss does not extend to reinstatement and the loss would generally be the diminution in value;
- in assessing what is reasonable the correct approach is an objective one;
- it is for the claimant to prove causation, and if they rely on a decision which they say was reasonable, it is for them to prove its reasonableness;
- expert advice may be a material factor when determining what was a reasonable course of action;
- once a course of action is established as reasonable, the starting point for recovery will usually mean the actual costs incurred if work has been done, from which there should be a reason to depart;
- once causation is established, it is for the defendant to allege and prove a break in the chain of causation, for example by establishing a failure to mitigate;
- the claimant has a duty (which is not exacting) to mitigate loss.It is not enough for the wrongdoer to show that it would have been reasonable to take the steps they proposed; they must show that it was unreasonable of the innocent party not to take them. This is a real distinction, reflecting the fact that, if there is more than one reasonable response open to the wronged party, the wrongdoer has no right to determine their choice. It is where, and only where, the wrongdoer can show affirmatively that the other party has acted unreasonably in relation to their duty to mitigate that the defence will succeed;
- there is no requirement for a party to be satisfied with reinstatement of an article to an inferior quality to that stipulated in the contract merely because it is cheaper for a contract breaker to supply that;
- reasonable costs do not mean the minimum amount which, with hindsight, it could be held would have sufficed;
- if, however, there are two equally efficacious alternative remedial schemes and one is cheaper than the other, then prima facie the claimant is obliged to adopt the cheaper scheme; if they choose a more expensive option in this scenario, this does not mean that they are acting unreasonably; but the additional cost is regarded as a consequence of their choice and not of the defendant's wrong.
Southern Electricity Power Distribution PLC v OCU Modus Ltd [2025] EWHC 723
3. Renunciation, acceptance and affirmation
Lord Wilberforce once warned that "Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations." In Chugga Chugg Pty Ltd v Privinvest Holding SAL the court revisited the important legal principles governing renunciation, acceptance and affirmation.
Renunciation
- Renunciation occurs where one party, by words or conduct, clearly and unequivocally evinces an intention not to perform its obligations under the contract in some essential respect;
- inability to perform is equated with a refusal for this purpose;
- the test is objective, namely whether a reasonable person in the position of the innocent party would conclude that there was a clear, unequivocal and absolute refusal or inability to perform.
Acceptance and affirmation
To bring further performance of a contract to an end, however, renunciation requires acceptance. An unaccepted renunciation has no effect and may be overtaken by subsequent events, whether a change of heart by the renouncing party or supervening external events. Alternatively the innocent party may have affirmed the contract, choosing not to accept the repudiation. The court also set out the legal principles governing affirmation:
- Where a party becomes entitled to terminate a contract on grounds of repudiatory or renunciatory breach, it must elect whether to exercise that right, or not;
- in order to make this election, it must have knowledge both of the facts giving rise to the right and of the right itself;
- if, with the requisite knowledge, it acts in a manner consistent only with one or other of two inconsistent courses, it will be held to have elected accordingly;
- election may be made by any words or conduct communicating an intention to choose one or other course of action, but it must be conveyed in clear and unequivocal terms;
- the test is objective and looks at the impact of the innocent party's conduct on a reasonable person in the position of the defaulting party who has a general understanding of the possibility of the innocent party making a choice.
An innocent party faced with a repudiatory or renunciatory breach has a reasonable time to make up its mind whether to accept it or not. What is reasonable depends on the facts, including any degree of urgency or prejudice to the defaulting party. The courts are reluctant to find that an innocent party which is still making up its mind within the reasonable period allowed has (in the absence of an estoppel) affirmed merely by continuing to comply with its contractual obligations or calling upon the defaulting party to change its mind. Similarly, the presence or absence of a reservation of rights may be more or less significant depending on the circumstances. Ultimately it is a fact-dependent enquiry and it is dangerous to attempt to analogise from other cases, however superficially similar.
Chugga Chugg Pty Ltd v Privinvest Holding SAL [2025] EWHC 585
4. Building Safety Levy postponed to autumn 2026
The government has postponed the launch of the New Building Safety Levy to autumn 2026, with the levy regulations to be laid in Parliament later this year.
The levy will be charged on all new dwellings and purpose-built student accommodation in England (with certain exemptions) which require a building control application. Local authorities will act as the collecting authority on behalf of central government and revenue will be returned to central government on a quarterly basis. Councils will receive new burdens grant funding before the levy becomes operational in order to cover their preparation costs, and, going forward, will retain revenue to cover the costs incurred in administering and collecting the levy. The levy rates are included as an annex to the government's technical consultation response (see link below).
The levy charge will depend on the floorspace of the development. Rates per square metre will be set per local authority area to capture the geographical variation in house prices, so that levy rates will be highest in those areas with the highest house prices, and lowest in low-house-price areas, in order to protect the viability of house building across England. There will be a discounted levy rate of 50% for developments built on previously developed land (PDL), also known as ‘brownfield’ land.
Certain residential buildings which provide important community facilities and certain types of communal accommodation will be exempt from the levy charge, so as not to deter their development. These include affordable housing, non-social homes built by not-for-profit registered providers, NHS hospitals, care homes, supported housing, children’s homes, domestic abuse shelters, accommodation for armed services personnel, criminal justice accommodation, and developments of fewer than 10 units (as a protection for small and medium-sized sites and enterprises).
The sanction for non-payment of the levy will be the withholding of a building control completion certificate, or rejection of a final certificate. As completion certificates are a legal requirement for buildings over 18m in height, and are required by many mortgage lenders, this means that the developer will struggle to sell and occupy that building upon completion if the levy is not paid.
See: Building Safety Levy: Technical consultation response - GOV.UK
5. CLC issues HRB summary process map and HRB approval application advice
As part of its work with the Building Safety Regulator to address priority areas and maximise communication to the industry on building control approval for higher-risk building, the Construction Leadership Council intends to provide information and greater clarity to applicants to help achieve successful projects and occupied buildings.
Initial outputs include the publication of a summary process map (Building-Safety-Act-HRB-Process-Map-Issue-3.4-24th-March-2025.pdf) of the current building control application process for a new HRB. This document brings together for the first time a clear summary of the whole process from planning gateway one to gateway three and will evolve as required.
The CLC intends to publish more detailed information and advisory notes on specific elements of the process over the coming weeks, to build on and complement information and guidance by other stakeholder groups including Build UK.
See for further HRB application advice:
6. BS 9991: 2024 – CLC Advisory Note
The Construction Leadership Council, in conjunction with the Building Safety Regulator, the British Standards Institution, National Fire Chiefs Council and Local Authority Building Control, has published an Advisory Note on BS 9991:2024 – Fire safety in the design, management and use of residential buildings. Code of Practice.
The CLC says that the BSR does not expect schemes sufficiently progressed in design, currently under construction or sufficiently progressed on site, having to undertake a fundamental redesign on the basis of the updated publication and inclusion of additional measures. The CLC Advisory Note and accompanying BSR letter provide the current position following the publication of BS 9991:2024 and supersede any previous advice.
7. Updated HRB guidance
The HSE has issued updated HRB guidance:
- Building control approval for higher-risk buildings - GOV.UK
- Preparing information for a building control approval application - GOV.UK
- Manage a building control application for a higher-risk building - GOV.UK
- Making changes to a higher-risk building project - GOV.UK
- Applying for a completion certificate - GOV.UK
The Building Safety Regulator has indicated that, where applicants are submitting several applications for related projects, the applicant should cross-reference all application numbers. This is to allow the BSR to ensure coordination and support multi-disciplinary teams.
This latest guidance complements the wider work of the Construction Leadership Council and the BSR.
8. NEC conflict avoidance clauses
An NEC Practice Note now provides a conflict avoidance procedure for NEC4, using a conflict avoidance panel. Versions are provided for contracts incorporating dispute resolution Options W1 and Option W2 and the clauses can be used in any of the main forms of contract or subcontract.
As an alternative, Option W3 provides an equivalent procedure by using a Dispute Avoidance Board. For contracts in the UK subject to the Construction Act, NEC Practice Note 5 provides a clause to use a Dispute Avoidance Board with option W2.
9. Developer Remediation Contract: dispute resolution guidance
The government has issued guidance to support participant developers and third parties, when using mediation to help resolve any disputes that may arise under the Developer Remediation Contract, before signing a works contract.
See: Developer Remediation Contract Guidance: Dispute Resolution - GOV.UK
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