Without Prejudice Defined
Generally speaking, "without prejudice" refers to the act of not prejudicing or harming someone’s legal rights. In practical terms it can refer to something being offered to a litigant or drafted in correspondence in such a way that it cannot be referred to in Court without the prior permission of the other side. So, for example if a party (be they a Defendant or Claimant) writes to another party with an offer to settle having headed the correspondence "Without Prejudice" it means that the correspondence cannot be used against that party if the matter goes to trial unless in exceptional circumstances.
The term "without prejudice" has a well established meaning in English law . The doctrine was enunciated in the case of Cutts v Head [1984] 1 W.L.R. 523 where a dispute existed between a wife and husband in relation to the occupation of their matrimonial home. The husband wrote a letter to his wife proposing a settlement of the matter in such a way that the wife would have to vacate the house and saying that if she did not accept by a set date then the letter could be used as a basis of a claim for possession of the house. The Court decided that the letter could not be relied upon as an admission against the wife without the leave of the Court and that the husband’s fear that the letter would be put into evidence was unreasonable.
Purpose and Significance
The phrase "without prejudice" has its origins in English law, specifically Section 23, 24 of the English Civil Evidence Act 1968. In the UK, the use of "without prejudice" or its close cousin "with prejudice" (which has a vary similar but different meaning) is a common feature in most legal disputes. In Ireland – and despite its very strong links to English law in all areas of law – the reference to this phrase is much more limited in use.
The purpose behind the inclusion of the phrase is quite simple: in effect it allows parties to hide certain documents or knowledge from the other party (or parties) in order to have a sensible and frank discussion on the issues, without worrying that any of what has been said (in writing, conventionally) will be used against the author in any future court case if negotiations fail and they end up in a court case – hence the use of the phrase "without prejudice"
Simply put, the exclusive use of the phrase "without prejudice" means that in the event of the person receiving such string being also subject to legal proceedings down the line, the information cannot be disclosed to the other party (e.g. in court) until the time comes and the court orders that disclosure should occur.
The reasoning behind the use of the phrase is to allow parties to discuss issues in a free and full manner without the concern that anything they may say may be used against them at a later date. Of course, this is subject to a raft of exceptions which are dealt with below.
If both of the parties to the document in question are represented by lawyers, then generally there is little concern of a disclosure occurring (deliberate or otherwise). A disclosure may, however, occur if for example an unrepresented party fails to copy out the restrictions on the document before sending.
If only the author is represented by a lawyer and the party at the other end is unrepresented, then a disclosure may take place if the unrepresented person does not know about the application of the phrase, and the receiving party has not taken sufficient care to hide the protected evidence by transforming it (i.e. removing confidential headings, or replacing in place of the original form a statement akin to the following: "This document was marked without prejudice when created by XYZ Solicitors on the XXth day of XXXX, 2007. The document was prepared to allow a negotiation with Party B, and for no other reason. I do not accept the contents of this document and do not, by the release of it, wish to imply acceptance of any, all or any part of the document. Take notice of this statement"
The importance of the use of the phrase without prejudice is twofold: first, the sending party knows that the other party cannot reference the without prejudice material at court and therefore affords them a certain expectation of confidentiality.
Secondly, the recipient knows that the information is confidential to the settlement process, providing (in effect) an assurance to the sender that the contents of the letter are not going to be referenced as evidence in the matter unless, and at the same time as that evidence is deemed necessary by the court to resolve the matter.
The use of the phrase "without prejudice" provides protection to the parties in the context of the inadmissibility of the evidence being linked to this particular correspondence only – it does not provide comfort to the sender that the document is in any way invulnerable as to its admissibility in the court case where he or she is involved. In other words, in the absence of some overriding statute or other issue, the court cannot order disclosure of the document, but if the court orders for the disclosure of the document generally, then the person seeking the disclosure of the document (applicant) can approach the court with an issue as to the time period to which the disclosure goes; to extend or reduce the time period downwards to the date of that document, so that the court can reconsider the position of its admissibility at the outset of the litigation.
Usage in Legal Correspondence
The application of the "without prejudice" concept is commonly applied regardless of the nature of the document being drafted. For example, in any settlement correspondence it is common to describe the same as "without prejudice." All correspondence and communications stemming from any appraisal or mediation process should likewise be marked "without prejudice" to maintain the confidentiality of the appraisal or mediation process. Many litigation agreements are also marked for the record and for sure, drafted in the settlement agreement language as "without prejudice" to keep the document private and confidential.
Restrictions and Misunderstandings
The term "without prejudice" is not an all-purpose solution to every problem in the law. Its application is limited to situations in which a genuine settlement proposal is made and, even then, only to the extent that you seek to prevent the recipient from later playing back against you what has been said.
It is an unfortunate fact of life that some people will take whatever steps they can to gain an advantage, including usually honourable persons seeking for themselves some litigation advantage. They could bluff your client into a worse position than they are in, or worse still into settling a case for less than it is worth.
Our client may want to come out of negotiations with a sense of closure and certainty. The failure of negotiations can be more stressful, as well as expensive, than court proceedings. Court proceedings can drag on for many months. In contrast, an offer with the "without prejudice" label on it might, if accepted, bring the matter to a quick and low-cost end.
But not always. "Without prejudice" doesn’t protect every statement not made in front of the Judge in proceedings which the recipient and the author both know about. The protection of the rule extends only to statements genuinely intended to be part of a settlement process. The mere fact that an offer has been labelled "without prejudice" cannot create that intention if it is absent when the offer is made . It does not apply to statements made to put the recipient on notice of the other side’s legal or factual position in a way which cannot be misunderstood, so that the document or statement would have needed no explanation and the recipient would have appreciated the risk of his or her case at any rate in broad terms.
Just because a letter has been labelled "without prejudice" will not mean the other side cannot rely upon it. For example, it may be possible to set the settlement offer aside if the receiving party can show that he or she actually had no intention of entering into negotiations at all or to show that the nature of the offer made it impossible to ascertain what it was about. Without prejudice cannot be invoked to get a "legitimate advantage" whereby one side makes a sensible settlement offer on a good legal basis to which it adds a demand for a silly sum purely to increase leverage against the other side. Abusive use of the without prejudice rule renders what should be withheld as privileged, something which the courts look upon with disapproval: see the case of Fage UK Ltd v Chobani UK Ltd (2014) where one party had made an inflated claim to the Value Added Tax (VAT) refund in the absence of a Without Prejudice Protection.
In other words, "without prejudice" can be important but it can also be overstated by clients.
Case Studies and Examples
Case studies of ‘Without Prejudice’ from the UK:
Armonhene v Standard Chartered Bank Plc (2016)
[2016] EWHC 2295 (Ch) – In this case, the claimant was seeking employment for his son as a trader, and wrote to the defendant bank requesting an introduction to the head of its trading department. The subsequent correspondence, containing a written offer of employment which the claimant’s son accepted, was held to be without prejudice and as such not admissible in court.
Keith v Wagg & Anor [2017] EWHC 1866 (QB) – In this case, the claimant was a successful horse trainer who brought a successful claim against the defendants for libel after they posted a Facebook status about her stating that "we can now reveal that this woman has a brain of a pigeon and no morals".
Upon winning her claim, the claimant applied to recover her damages and costs following which the judgment was sent to the defendants in a ‘without prejudice save as to the formal judgment terms’ order in light of the fact that there had been settlement proposals made throughout the proceedings.
Spiritual Healing Group Limited v Hayward Farms Ltd and Another [2019] EW Misc 2 (CC) – In this case, the claimant’s director had gone to the debtors business premises and threatened them with a baseball bat in an attempt to recover a debt allegedly owed by them to the claimant. The claimant wrote to the debtor’s landlord seeking a voluntary surrender of the tenancy to the landlords as the claimant claimed that the tenant no longer required the premises, nor did they want to carry out works to the premises in order for the tenant to resume business at the premises.
However, it was held that the landlord was under no obligation to take such tenants back, and following this admission it was also held that the landlord was not obliged to forgo his right under the head lease to terminate the tenancy of the debtors, as, notwithstanding the arrangements of the parties between themselves, the head landlord had a right to terminate the lease when due rent was payable and the tenant was in arrears.
The claimant’s failure to seek to recover their losses under the guarantee meant that they could not recover the losses.
Case studies of ‘Without Prejudice’ from Australia:
Health Work Ltd v Yarmirr [2019] VSC 590 – In this case, it was held that the exclusion of "without prejudice" documents in statutory underpinning settlement offers did not extend to these in circumstances where its exclusion would defeat the purpose of the statutory provisions under Australian legislation.
Corke & Ors v Maidment & Ors [2013] QCA 244 – In this case, the Court of Appeal of Queensland considered the co-mingling of "without prejudice" settlement material with documents that were not privileged which resulted in the material being admissible for the purpose of deducing the impugned material.
Case studies of ‘Without Prejudice’ from Canada:
Drake Restaurant Group Inc v Hyde Park Fine Wines Ltd [2016] ONSC 1092 – In this case the judge held that letters were made "without prejudice" not to be used in evidence but came down to "without prejudice save as to cost" so that the admissions of the transacting party could be used in evidence where the other party had suffered prejudice by that party’s apparent intent in denying the offers to settle were genuine.
Cases where ‘Without Prejudice’ did not apply
Founder Trust v Savin [2000] Ch 179 (a trustee had been removed and the court was asked to determine the way forward regarding the trust. A letter from a potential trustee was ruled inadmissible because it was marked ‘without prejudice’.)
Turner & 2 Ors v Workman [2012] EWHC 266 (Ch) (an application to strike out the defendant’s defence was unsuccessfully made due to the plaintiff having failed to take all reasonable steps to resolve the dispute which was referred to ADR.)
Rhodes v OPO [2014] UKSC 25 (a claim against the publishing of a book by a disabled author was rejected as being without legal merit).
Australian Broadcasting Corporation v Lenah Game Meats Limited [2001] HCA 63 (the High Court of Australia held that public interest justified publishing private footage).
Jacomb v Redrow Group Ltd 2011 BLGR 95 (a request by a new owner of a property to a landlord to cease certain activities on his land was not held as being without prejudice as it was seen as an unequivocal refusal to allow the incumbent owners to enter the property for a period of seven months).
Best Practices
The objective of the letter is often to come to a settlement and to minimize the risk that the letter might jeopardize that objective. The following guidelines might be helpful in that regard:
Precedent
It is good practice to incorporate the words without prejudice in a title at the very beginning of the letter.
Who
It is best practice to frame the letter to the actual recipient, rather than the party’s legal representative if the purpose is for meaningful negotiation. If the correspondence is with the party’s legal representative, that person may be bound to make full and frank disclosure to the client, which may make the reference "without prejudice" futile.
How
The letter should refer to a claim or dispute and to the circumstances that has given rise to the dispute. For example: "We have reviewed with our client the particulars of the damage suffered as a result of the fault of your insured. We have had the opportunity to assess vehicle to review of the statement of claim. [We have been advised that your client does not dispute liability.]. [We understand that your client has incurred damages in the amount of $6 , 000.00 in relation to damage to the vehicle]. [We understand that your client has incurred damages in the amount of $10,000.00 in relation to injury suffered.]" In this scenario, the letter mostly would be plain language rather than technical legal language.
The letter should then detail the offer of settlement or request for further details.
Be aware
You should be aware that sometimes, despite the best intentions of the parties, references to "without prejudice" correspondence and phrases like "as per our discussion", "as per our telephone conversation" will be overruled by the Court as being a "sham" negotiation and/or settlement offer.
If a legitimate settlement or negotiations are to occur there should be a real offer with room for negotiation or compromise. In most cases, this will require a "two step process" – that is, an offer of settlement is made, and once agreed or not, it should then be recorded in a second letter as being final.
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