Ever been confused about the term ‘without prejudice’ stamped across the top of legal correspondence? If the answer if yes then you are not alone, as although recent case law has attempted to clarify the phrase ‘without prejudice’, the law is still far from straightforward!
The main rule to remember is that written or oral communications, which are made as part of negotiations genuinely aimed at, but not resulting in, the settlement of a dispute are not generally admissible in evidence in litigation cases. The justification for this rule is cited as being ‘to encourage litigants to settle their differences rather than litigate them to a finish.’
To ensure admissions are ‘privileged’ (in other words they cannot be relied on in legal proceedings to the detriment of the party making the admission,) express agreement of the other party to the dispute that the negotiations are ‘without prejudice’ should be obtained. All correspondence should be marked ‘without prejudice’ and the other party should confirm that this is the case.
However, just because a document is marked ‘without prejudice’, does not mean it is determinative on the point. By the same token, just because a document is not marked ‘without prejudice’ does not mean it will not acquire privilege. The test as to whether it acquires privilege is whether or not the communication was a genuine attempt at a settlement.
The application of the rule above does not depend on the parties already being engaged in litigation. There must be, however, a real dispute capable of being settled by way of a compromise (rather than in the sense of simple payment or satisfaction). When acquiring privilege, the key consideration seems to be not the length of time exchanges between the parties before litigation, but whether the subject matter of the negotiations is the same as that being litigated and litigation was in contemplation of the parties at the time.
The label ‘without prejudice’ will not by itself protect those documents which deal with the surrounding circumstances where there is no genuine attempt to reach further settlement. Therefore, whilst a court will continue to enquire as to the subject matter of a document, parties should label correspondence ‘without prejudice’ and include where possible clear reference to litigation being in contemplation.