The House of Lords has provided some useful guidance on the status of 'without prejudice' communications, in the recent Ofulue v Bossert case.

Mr and Mrs O owned a house and let it out over a number of years. One of the tenants allowed Mr B and his daughter (Ms B) to live there. In 1992, the Os took legal action to regain possession of the property. During these proceedings the Bs sent a 'without prejudice' letter to the Os stating that the Bs were prepared to purchase the property and offering a price. However, this offer was rejected. The action then stalled for nearly ten years, Mr B died, and the proceedings were struck out in 2002.

New proceedings for possession were commenced in 2003. This time, Ms B now contended that she had gained ownership of the property due to twelve years of uninterrupted possession. However the Os asserted that the B's letter in the previous action – although 'without prejudice' - should be relied on to defeat Ms B's claim for adverse possession as it implicitly acknowledged the Os' freehold title.

The Lords decided that the Os could not use the 1992 'without prejudice' letter as evidence in these subsequent proceedings, despite the Os' freehold title not being disputed in the earlier case. They also summarised the rules on admissibility of 'without prejudice' correspondence:

  • The general rule is that statements made in negotiations between parties to litigation with a view to settling the case cannot be given in evidence. This should encourage litigants to try and settle differences rather than "litigate them to the finish";
  • Except where "wholly unconnected" with the issues between the parties, the Lords' stated that without prejudice statements should not be admissible as evidence, other than in "exceptional circumstances". These "exceptional circumstances" included the following:
    • when the issue is whether 'without prejudice' communications have resulted in a concluded compromise agreement;
    • to show that an agreement apparently concluded should be set aside on the grounds of misrepresentation, fraud or undue influence;
    • where the exclusion of the evidence would act as a cloak for perjury, blackmail or other impropriety;
    • in order to explain delay or apparent acquiescence;
    • to show the reasonableness of settlement conduct in attempting to mitigate loss; and
    • even if there is no concluded compromise, to illustrate a clear statement which is made by one party to negotiations and on which the other party is intended to act (and does in fact act).

The Lords ruled that none of the exceptional circumstances applied here. Although Ms B's use of the 'without prejudice' rule to permit a change of stance on ownership may appear unattractive, there was no impropriety on her part. In addition, the 'without prejudice' letter and this subsequent action related to the same land so the issues in each of the cases could not be regarded as "wholly unconnected".

As the House of Lords decision indicates, it is a well-established legal principle that 'without prejudice' communications are inadmissible in court. This is so that parties can speak freely to resolve their differences in settlement meetings without lawyers "sitting at their shoulders as minders", monitoring every sentence. However, the case also illustrates there are complex exceptions to this general rule. Accordingly "without prejudice" should not simply be dropped into in correspondence or used in discussions without carefully considering the context and potential legal consequences.