For the "without prejudice" rule to apply to correspondence between parties, so as to precluded that correspondence from being put before the court in evidence, there has to be an underlying dispute between the parties.
In Midgley v Oakland Glass Ltd, Midgley sought to have certain letters passing between the parties' solicitors removed from the documentation to be placed before the judge at trial on the basis that they had been written "without prejudice," albeit they had not been marked as such.
The existence of a dispute and an attempt to compromise it are at the heart of the rule whereby evidence may be excluded as "without prejudice". The rule is founded on the public policy of encouraging litigants to settle their differences rather than litigate them to the finish. There does however have to be a "dispute" or "difference" that the parties are attempting to negotiate upon to bring the rule into play.
The court found that the correspondence in this case did not disclose a dispute between the parties although a dispute did subsequently arise. The correspondence between the parties referred to a discount from the judgement sum, or an assignment of the judgment debt once payment was made in full, or a request for an interest calculation on the indebtedness. The court held that none of these references amounted to a dispute over the sum involved but could be characterised as either an admission of the debt or as being neutral in relation to it. As such, the "without prejudice" rule did not apply and the correspondence could be referred to the trial judge.
Things to consider
The "without prejudice" rule is available to encourage parties, whether in correspondence or meetings, to enter into discussions as to how disputes between them can be settled without fear of those communications subsequently being placed before the court. Litigation does not have to have been commenced for the rule to apply but it does need to be in reasonable contemplation. The rule has no application to communications designed simply to discuss repayment of an admitted liability.