‘Without prejudice’ is a principle that has been used by legal professionals since time immemorial in communications with other parties to a dispute. If a letter is marked ‘without prejudice’ the desired effect is to enable parties to speak freely knowing their words cannot be used against them in court if a dispute is not settled before that stage. The same principle can apply to telephone conversations where a party requests that anything said is to be treated as ‘without prejudice’.
Although widely used, particularly in the context of litigation, it is a very misunderstood principle even to those lawyers who use it frequently. Here are a few pointers.
Marking something ‘without prejudice’ doesn’t necessarily give it the desired protection from the eyes of the court. For the communication to benefit from ‘without prejudice’ protection, it must be a genuine negotiation or attempt at settlement. Consequently, something not marked ‘without prejudice’ which is a genuine negotiation or settlement attempt can benefit from protection. However, it is advisable to expressly mark such correspondence so the intended effect is clear.
The principle aim is to encourage parties to negotiate freely without worrying about the effect of making a potentially damaging concession which could be held against them at a later stage in court.
‘Without prejudice save as to costs’ is another commonly used caveat in settlement negotiation communications. This has a slightly different effect to simply ‘without prejudice’ communications. The latter can’t be brought to the court’s attention in any event whereas the former means the correspondence should not affect the court’s judgment on the matter, but should be taken into account when it comes to costs. The context this occurs in is often where one party makes an offer to settle. Say for example the defendant makes an offer to the claimant who fails to beat that offer at court; the ‘without prejudice save as to costs’ correspondence can be used to argue for a different costs order to the effect that the claimant pays the defendant’s costs from the date the offer was made. This can result in a similar outcome to that under CPR Part 36 where a party fails to best an offer to settle.
There are obvious problems with the various forms of ‘without prejudice’ communications, such as how and when it can be used and put before a court. One very obvious issue is where ‘without prejudice’ communications result in a settlement and need to be relied upon to evidence the agreement between the parties, perhaps where one party decides not to honour the settlement. This issue was dealt with in the case of Oceanbulk Shipping & Trading SA v TMT Asia Limited and 3 Others [2010] in which the Supreme Court held that without prejudice negotiations are permissible to evidence the terms of the settlement agreement in cases of dispute.
Lawyers need to be aware of how and when to use ‘without prejudice’ communication and also understand that the protection is not absolute. Thought should be given to whether the communication, whether expressly stated or not, can actually be afforded ‘without prejudice’ protection.
