Without Prejudice ...
These two words are often used when parties are discussing their respective positions, especially if a claim has arisen, or may arise, yet their actual legal meaning may not always be fully appreciated.
English law position
Pursuant to English law and practice, the phrase "Without Prejudice" is intended to prevent statements made in pursuit of a genuine attempt to settle a dispute from being placed before a court or arbitral tribunal as evidence of admissions made by the party which issued them.
Misunderstanding the legal effect of the phrase 'Without Prejudice'
Parties regularly begin messages to one another with the words Without Prejudice. This is often because it is mistakenly believed that titling a message Without Prejudice will mean that it is cloaked in impenetrable confidentiality.
This misunderstanding can lead to a party disclosing information in a message titled Without Prejudice which is then used as evidence against them, much to the sender's surprise and annoyance.
As a matter of English law, simply titling a message with the phrase Without Prejudice will not stop that message being used by the recipient as evidence.
Background to the English legal position
Courts and tribunals recognise that it is preferable for commercial parties to resolve disputes between themselves. For parties to be able to resolve disputes they need to be able to negotiate settlement. Effective settlement negotiations would be hampered if offer(s) made in those negations could be used to impugn the legal position of the party which made them.
To encourage settlement, genuine offers to settle disputes or correspondence which forms part of genuine offers to settle a dispute cannot be used by the recipient as evidence in that dispute.
Documents which cannot be used as evidence are referred to as 'privileged' documents. There are several forms of legal privilege. The form of privilege which applies to offers to settle and related correspondence is Without Prejudice privilege.
Correspondence which attracts Without Prejudice privilege is often titled with that phrase. The title draws attention to the fact that the recipient is prohibited from using the message as evidence in the dispute. The title is, however, simply a label, it does not impute special legal status upon a message.
It is the substance of a message (i.e. that it is or forms part of a genuine offer to settle), not its label (i.e. the words Without Prejudice), that determines whether a message is privileged and so whether it can or cannot be used as evidence in a dispute.
Without Prejudice privilege only applies to the dispute which the offer relates to
Without Prejudice privilege only applies to the dispute which the Without Prejudice message relates to. For this reason a message which attracts Without Prejudice privilege in one dispute might not be privileged in a separate dispute and so could be used as evidence in that second dispute.
What if the words Without Prejudice are omitted from a message?
The recipient of a genuinely Without Prejudice message will be prohibited from using that message as evidence in that dispute whether the message is titled Without Prejudice or not. Omitting the words Without Prejudice will not affect the protection which applies to the message, although it may increase the possibility that it is disclosed as open correspondence or result in an argument as to the status of the correspondence.
It is therefore the recommendation of the Association that where matters of settlement and compromise of disputes are discussed, such messages are labelled clearly with the words Without Prejudice in order to signal to the recipient the intended status of the message.
Waiving privilege
It is the sender of a Without Prejudice message that benefits from the message being privileged. The sender can unilaterally choose to waive that protection if the sender's message does not refer to the Without Prejudice correspondence of another party (e.g. refer to an opponent's Without Prejudice offer).
If a message refers to an opponent's Without Prejudice correspondence then the opponent's permission will be required before the message can be used as evidence.
Privilege is waived by disclosing the document to the court or tribunal. Once a Without Prejudice message has been disclosed by the sender it will lose its status as a privileged document.
The recipient of a Without Prejudice message cannot waive the privilege which attaches to that document. Therefore, unless the party that has made an offer elects to disclose it, a tribunal or judge will be unaware that a without prejudice offer has been made and rejected. This allows a party to make a genuine offer secure in the knowledge that the offer cannot be shown to a judge or tribunal without their consent.
Save as to costs
More formal offers to settle are sometimes titled 'Without Prejudice save as to costs'. The words 'save as to costs' are essentially a threat that the party making the offer intends to disclose the offer to the court or tribunal once the dispute has been decided but before the court or tribunal has apportioned the associated legal costs.
Judges and tribunals frown upon parties needlessly litigating or arbitrating disputes. A party that fails to accept a settlement offer which is more generous than the court or tribunal's award may therefore be penalised by the court or tribunal requiring them to pay a larger proportion of the legal costs than they would otherwise have been required to pay.
A 'Without Prejudice' offer can therefore be used to pressure a party into agreeing to settle a matter.
Essential Advice
The words Without Prejudice do not, in themselves, have a special legal effect under English law. It is the substance of the message which determines whether the message is privileged or admissible as evidence.
To rely on the Without Prejudice rule there must be a dispute, the Without Prejudice statement must be a genuine attempt to settle that dispute and confidentiality is waived if the party making the Without Prejudice proposal reveals its contents to a 3rd party such as a court or arbitral tribunal.
If a party suspects that a message which they intend to send to their opponent may prejudice their legal position then legal advice should be sought before the message is sent.
The Association's claims handlers are well experienced in guiding members when considering such issues for their cases.
For further information members are asked to contact the Association.