"If I stick 'without prejudice' on this email, I can't go wrong". Wrong!
Using the phrase 'without prejudice' on a document or in a conversation does not of itself create magical protection and can lull the user into a false sense of security. However the proper use of the phrase in the right context can lead to great tactical advantages and minimise costs exposure.
Here is a reminder of the basic principles of the rule and some useful hints & tips for its use.
What is the 'without prejudice' rule?
The 'without prejudice' rule governs the admissibility of evidence. It applies to exclude all negotiations aimed at settlement, whether oral or in writing, from subsequently being referred to in evidence at trial should settlement not be achieved.
What is the rationale behind the rule?
The basis of the rule is to encourage parties to settle their differences rather than litigate them to trial. The rule enables parties to negotiate freely while at the same time being in a position to continue to fight the case without fear that any statements made during the course of negotiations will prejudice them at a later trial.
What if I have forgotten to state that the communication is 'without prejudice'?
Using the words 'without prejudice' will not automatically render a communication privileged from production. Equally, the absence of those words will not conclusively mean that the communication fails to attract the privilege. It is the substance of the communication that is all important.
When will 'without prejudice' communications be admissible?
The 'without prejudice' rule is not absolute and is subject to a number of exceptions. Some examples are:
- when there is a dispute as to whether 'without prejudice' communications have in fact resulted in a concluded compromise agreement at all
- to show that an agreement apparently concluded between the parties should be set aside on the grounds of misrepresentation, fraud or undue influence
- where there is no concluded compromise, but where a clear statement is made by one party to negotiations, on which the other party is intended to act and does act
- if the exclusion of the evidence would conceal perjury, blackmail or other wrongdoing
- where correspondence is marked 'without prejudice save as to costs'. Such communications can be referred to the court on the issue of costs following a judgment being given by the court
- if both parties consent, or expressly or by implication, waive their right to object
Some hints & tips to help you
- Consider whether the communication is to commence or continue negotiations. If not, the 'without prejudice' label should not be used. In adjudicating upon the status of a document, the court will concentrate on substance rather than style.
- Remember that the privilege is not confined to settlement communications only once litigation has been threatened or is in progress. Reasonable contemplation of litigation if discussions don't result in a settlement will suffice.
- Where communications are intended to be 'without prejudice', make it clear from the outset that that is what is intended. This will help ensure that in the event of the negotiations being unsuccessful they are not accidentally referred to at trial.
- Settlement letters should be written with an eye on costs from the earliest appropriate time. If you wish to refer the court to 'without prejudice' correspondence on the question of costs, the communication must be headed 'without prejudice save as to costs'. Such correspondence may assist in demonstrating the unreasonableness of your opponent in failing to resolve the matter at an earlier stage.
- If negotiations are proceeding on a 'without prejudice' basis, in order to change them to an open basis, notify the change to your opponent clearly so they are left in no doubt that there has been a change in the basis of negotiations. Simply using the phrase 'this is an open letter' will suffice.
- Don't forget that you can make an offer in open correspondence instead of on a without prejudice basis. Making such proposals in open correspondence can secure a tactical advantage and increase the pressure on your opponent. Open offers may be produced to the court before the issue of costs is determined.