Key takeaway points:
- This Rede sets out the general concepts and challenges involved in ensuring that genuine attempts to settle a matter maintain their ‘without prejudice’ privilege and remain immune from production.
- Too often the words ‘without prejudice’ are used mistakenly, or parties later act in a way that removes any protection they thought they had over the discussions.
- Used carefully, without prejudice communications are a frequently used and an extremely effective tool to resolve your disputes.
- This guide to understanding the purpose, effect, and scope of without prejudice communications, and how the protection can be removed, may help to ensure your ‘without prejudice’ communications remain precisely that.
Overview
Parties to a dispute often make statements in the course of settlement negotiations that they express to be ‘without prejudice’. Too often, however, the words ‘without prejudice’ are used mistakenly, or parties later act in a way that removes any protection they thought they had over the discussions.
In this Rede, we explain the purpose, effect, and scope of without prejudice communications, how the protection can be removed, and key tips to ensure your ‘without prejudice’ communications remain precisely that.
Purpose of ‘without prejudice’
When a statement is made ‘without prejudice’, its contents generally cannot later be put into evidence without the consent of all parties. The underlying principle is that parties to a dispute should be able to speak freely and openly to encourage them to reach a settlement, knowing that their words cannot be later used against them in court if settlement negotiations are unsuccessful.
Generally, the without prejudice protection may exclude from evidence statements which:
- contain express or implied admissions or concessions;
- touch upon the strengths or weaknesses of the parties’ cases;
- place a valuation on a party’s rights; and/or
- propose an offer to settle part or all of a dispute.
When does it apply?
The protection afforded to without prejudice statements is not one that applies to any communication bearing a ‘without prejudice’ label. Substance, intent, and purpose matter more than form or labels.
Whether the communication is labelled ‘without prejudice’ is one relevant factor, but it is not necessary that the communication be so labelled.
To be protected, a statement must be made bona fide for the purpose of settling a dispute.
Providing it is made in a genuine attempt to settle a dispute, the protection can therefore extend to ‘opening shots’ aimed at starting the negotiation process. It does not apply where litigation is not contemplated, or where the dispute has already been resolved by a court or tribunal.
Statements made for the genuine purpose of settling a dispute can encompass any number of things. One example is making an offer to accept a lesser sum than what you first claimed, which the offeree could not then tender as evidence that you were prepared to accept the lesser amount. Or, if a party who it is claimed owes money makes an offer less than what was claimed, that offer could not then be tendered as an implied admission of liability.
Letters of demand, or letters which merely amount to an assertion of a party’s rights with no clear indication of a willingness to negotiate (such as a discount in the case of a demand) are not ‘without prejudice’ even if they carry the label.
Scope of the protection
The without prejudice principle is primarily aimed at protecting admissions, however the protection extends not only to admissions forming part of settlement negotiations, but also statements that are reasonably incidental thereto.
Generally, the intent of the party making the statement will be determinative.
When will it be removed?
The protection is not absolute, but as it is a ‘joint’ privilege between negotiating parties, without prejudice communications generally cannot be tendered as evidence unless all parties consent. The courts have recognised a number of exceptions in which removal of the protection is justified, these include:
- consent or waiver – where the parties entitled to claim protection have agreed or consented to the communication being adduced as evidence, or they in some way waive the protection;
- estoppel – where a statement is made by one party on which the other party is intended to act and does in fact act, the statement may be admissible to prove an estoppel;
- delay – where an application to strike out proceedings for want of prosecution is made, without prejudice communications may be admissible to explain the delay;
- concluded agreement – when it is alleged a settlement has concluded as a result of without prejudice communications, the communications are admissible to prove whether it has in fact concluded, and the terms of what was agreed;
- impropriety – without prejudice communications may be admissible where they are used as a cloak for reprehensible behaviour (such as perjury, fraud, misrepresentation, or threats in the nature of blackmail or extortion);
- ‘save as to costs’ – correspondence expressed to be ‘without prejudice except as to costs’ can be relied on for the question of costs only when a court is hearing submissions on costs at the end of a matter or part of a matter.
Waiver
A party’s consent to without prejudice communications being adduced as evidence may be implied from the circumstances and amount to a waiver of the protection, by conduct such as:
- deploying without prejudice material in support of the merits of your case; or
- producing without prejudice correspondence in compulsory discovery.
However, the protection will not occur where one party shows communications to a third party, providing there is a legitimate reason to do so: ‘Were the position otherwise, a litigant might find himself unable to provide relevant documents to say, an expert unless and until the other side agreed, which would be absurd: EMW Law v Halborg [2017] EWHC 1014 (Ch) per Newey J at [45].
Practical guidance
In Davies v Nyland (1975) 10 SASR 76 at 89, Justice Wells said ‘in some quarters of the community there is a belief, amounting almost to a superstitious obsession, that the expression ‘without prejudice’ is possessed of virtually magical qualities, and that anything done or said under its supposed aegis is everlastingly hidden from the prying eyes of a Court’. This is certainly not the case.
The following tips are suggested when engaging in settlement discussions:
- Satisfy yourself that there is a dispute on foot, unresolved by a court or tribunal, which is the subject of litigation or which the parties might reasonably contemplate litigating if a satisfactory resolution is not reached. Strongly consider foreshadowing early that litigation may be commenced if the parties fail to settle in the negotiations, to cover this ground;
- Only use ‘without prejudice’ in communications that are genuinely for the purpose of settling a dispute, and use the phrase in every such communication, even if it is in a chain;
- If you need to communicate matters that are for the purposes of resolving a dispute, and other matters that aren’t, send them via separate correspondence (marked ‘without prejudice’ and not marked ‘without prejudice’, respectively);
- There is no such thing as ‘off the record.’ Before engaging in discussions with another party over the phone, consider whether you will need to communicate that you are making statements on a ‘without prejudice basis’, make sure you agree with the other party that the discussions are without prejudice before they occur, and make a detailed filed note after the discussion recording that the discussions were without prejudice and what was said;
- Never assume that anything said in a settlement conference, or alternative dispute resolution forum such as a mediation, is without prejudice. There are other reasons parties attend such forums, including satisfying court requirements, which aren’t bona fide for the purpose of settling the dispute. If you intend for the discussion to be without prejudice, make it clear and engage genuinely;
- Never engage in behaviour which is improper and assume a judge won’t see it because it is labelled ‘without prejudice’. By all means, assert your or your or your client’s position zealously, but impropriety won’t assist your case;
- Be careful not to waive the privilege over your communications once it is in place.
Closing statements
Used carefully, and within these boundaries, without prejudice communications are a frequently used and an extremely effective tool to resolve your disputes and to avoid the cost and uncertainty of ongoing court proceedings.
If you would like to discuss this topic, or for any assistance on other matters, please get in touch with any member of our Disputes team.
