Walking a mile in your shoes...

The Without Prejudice Letter – what does it mean?

Where a proposal or offer to settle a dispute is made on a without prejudice basis – what does it really mean?

Can it only be used as between lawyers on behalf of their clients?

Can a client rely on without prejudice communication in responding to a lawyer or the other party directly and enjoy the same rights and protection.

The use of without prejudice communication is used as a means to enable offers to be made to settle claims without fear that those communications would later be used by the other party as an admission of liability.

The underlying policy is that parties should be encouraged as far as possible to settle their disputes without resort to litigation.

So what does without prejudice mean?

Sending communication with the words “without prejudice” means that the communication and its contents cannot be used against the party making the statement in court proceedings. This protection is not restricted to communication between lawyers or between lawyers and their clients. Any party involved in a dispute that might result in litigation can communicate on a without prejudice basis.

It is a well established rule that admissions, concessions or statements made by parties in the process of trying to resolve a dispute cannot be used against that party if the dispute is not resolved and therefore results in litigation.

A party making a without prejudice offer does so on the basis that they reserve the right to assert their original position, if the offer is rejected and litigation proceeds.

That protection also extends to any discussion of the strengths or weaknesses of the parties case in the communication.

The protection is also available as between parties themselves, that is, it is not only lawyers who enjoy the protection and benefit of without prejudice communication. Often however, clients may use the words in circumstances where it is not necessary or appropriate.

The use of the words without prejudice of itself however does not automatically invoke the rule that protects this type of communication. Whilst marking a document without prejudice reflects an intention that the communication is not be disclosed the mere use of the words will not act to automatically confer immunity to the communication. The court will look beyond the label to determine whether or not the correspondence can be used in evidence. For correspondence between parties to be protected it must be made in a genuine attempt to settle a dispute between the parties.

An example of a without prejudice communication is writing to a debtor offering to accept a lesser amount than the amount owed to satisfy the debt. This type of communication should be marked “without prejudice” to ensure that if proceedings are issued at a later date to recover the debt the correspondence could not be used by the debtor as evidence that the party was not owed the full amount claimed.

Marking all communication “without prejudice” is not recommended. Before marking a letter “without prejudice” it is important to consider the true purpose of the communication. A recipient may argue that the communication is not protected if it was not made in an effort to settle the matter. Conversely if a letter is not marked “without prejudice” but contains an offer of settlement the court may still exclude it from evidence.

The circumstances in which the rule may not apply include:

-  when the court has to decide if the parties have reached an agreement

-  where a party is claiming an agreement should be set aside because there has been misrepresentation, fraud or undue influence and the ‘without prejudice’ communication are evidence that conduct,

-  where the ‘without prejudice’ communication is evidence of perjury, blackmail or other wrongdoing,

In summary

As stated the rule allows parties to communicate openly in an effort to settle a dispute however it is important to remember that it only confers immunity to correspondence made in a genuine attempt to settle a dispute.

It cannot be used as a shield for making prejudicial statements in connection with a dispute and it does not protect all communication in relation to a dispute.