An often-misunderstood concept

During pre-action stages of a civil claim, the interlocutory stages and even during a trial, both sides will often enter into settlement negotiations to try to reach a mutually satisfactory compromise of their dispute. Such negotiations, in a genuine attempt to settle, should always be conducted on a ‘without prejudice’ basis.

When used in a document or letter, the phrase ‘without prejudice’ means the content cannot be used as evidence in court. When a party proposes to settle a dispute ex curia (out-of-court) there must be an actual attempt to negotiate in order to be covered by this protective doctrine. The mere assertion of rights or an attempt to argue one’s side of the case in purportedly ‘without prejudice’ communications will not be protected.

The substance of the communications determines the applicability of the protection and any language or material specified as ‘without prejudice’ must reflect a good faith attempt to negotiate the resolution of a dispute. Oral communications can also be covered by this protection as long as they are also expressly made on a ‘without prejudice’ basis. Communications marked ‘without prejudice’ that do not evince genuine settlement negotiations can end up being admitted as evidence in court and consequently used by a counterparty to ‘prejudice’ the interests of the other party.

A slight variation of the standard ‘without prejudice’ are communications marked as ‘without prejudice save as to costs’. This means when costs are considered at the end of a trial, the protected communications can be considered by the court only to assess costs attributable to the parties.

The rationale for the ‘without prejudice’ principle is straightforward. It is in the public interest to encourage parties to settle disputes and avoid litigation if possible, or avoid litigating a dispute to the finish. Thus in civil proceedings, where a party tries and fails to settle a dispute under the aegis of ‘without prejudice’, such communications cannot usually be used against the party when the matter is heard before the courts.

Essentially any genuine settlement attempts should be prominently marked ‘without prejudice’, otherwise they may be referenced in open court and used substantively by a counterparty as evidence of an admission, which may adversely affect one’s interests in the case.