What follows is a series of typical questions arising from the use of the term “Without Prejudice”, and a brief look at the interpretation both legally and factually of such questions.
Q What is the effect of the words “Without Prejudice”?
A Statements which are made under the heading “Without Prejudice” represent a genuine attempt to settle a dispute and will (generally) be prevented from being presented to the court to prove facts which might have been admitted by the person or business which made the statement.
Q Does this rule only apply to words which are written and marked “Without Prejudice”?
A No. If a conversation is expressly stated to be “Without Prejudice” then the words spoken during that conversation will have the same effect as if they were written. Lawyers will frequently start a conversation with another lawyer asking for confirmation that the verbal exchange about to take place is “Without Prejudice”. It enables negotiations to take place more freely.
Q Can you give an example of a typical conversation?
A Imagine a contractual dispute where one party is seeking payment of its invoices for goods which the other ordered and had received but had yet to pay for. The buyer complains that the goods are not of the required standard and refuses to pay. Both sides decide that the dispute needs to be resolved and consult their respective lawyers. During the correspondence the seller’s lawyer may in a “Without Prejudice” letter acknowledge that the goods may not be perfect because of issues with his client’s supplier and indicates that his client is willing to accept less than the full amount of the invoice because of the imperfections. The dispute cannot be resolved and a trial takes place. The buyer could not rely on the comments made in the “Without Prejudice” letter as proof that the seller knew that the goods were faulty.
Q Is it only lawyers who can use the phrase “Without Prejudice”?
A No. Any person or organisation can do so when making genuine attempts to settle a dispute.
Q Are there any exceptions to the rule that “Without Prejudice” cannot be presented to the court?
A Yes. There are a number of exceptions, which arise when the justice of a case requires it. It is important to remember that where an exception to the rule applies then the statement can only be used in the context of that particular exception and not for any other purpose.
Q What are the exceptions?
A “Without” Prejudice statements have been admitted in court in the following circumstances:
- As evidence of a concluded settlement
- As evidence of an agreement following without prejudice exchanges to be set aside on the basis of misrepresentation, fraud or undue influence
- As evidence of perjury, blackmail or other unambiguous impropriety
- To explain delay in the conduct of a claim
- As evidence about the reasonableness of a settlement
Q Can you give me an example of when it might apply in the context of a concluded settlement?
A Imagine that the parties to a dispute have negotiations in which exchanges are expressed to be “Without Prejudice”. One party considers that those communications have resulted in a settlement agreement but the other does not. The court could be invited to consider the exchanges notwithstanding that they are “Without Prejudice” to determine whether there was a final agreement.
Q I have been told that mediations are without prejudice. Is that right?
A The standard mediation agreement which would be signed by the parties prior to the commencement of a mediation states that exchanges during the mediation are “Without Prejudice” unless and until a written settlement is signed by all parties to the mediation.
Q I am in dispute with my supplier over the quality of its goods and am aware that it had a mediation with one of its other customers which resulted in a concluded written settlement. Surely I must be able to see the “Without Prejudice” exchanges if a concluded settlement was reached.
A No. You cannot unless both parties to the mediation agreement agree. It is not sufficient for one of the parties to agree if the other does not waive its rights to the protection afforded by “Without Prejudice”.
Q What about perjury and blackmail? That sounds an interesting exception?
A This exception applies in circumstances in which evidence provided under the “Without Prejudice” banner would, if excluded from the court, serve to allow perjury, blackmail or other unambiguous impropriety.
Q Can you give me some examples?
A A person admitted that his claim was not genuine, but would proceed with it even if that amounted to blackmailing the defendant. Another is an instance in which one party said to the other that he would make his assets judgment proof if the claimant pursued the claim against him.
Q What about the situation in which a person’s case as presented to the court is inconsistent with an admission made in “Without Prejudice” exchanges?
A This is a tricky area. The court has said that it is not the inconsistency between an admission made in “Without Prejudices” communications and a party’s formal pleaded case in court proceedings that loses a party the protection afforded by “Without Prejudice”. It is the fact that that privilege itself is being abused that does so. Each case needs to be looked at individually when such a possible exception to the rule applies.
Q What is the position if court proceedings are delayed but there have been ongoing “Without Prejudice” negotiations and one party tries to apply to strike out the claim because of delay?
A If a party were to make such an application in such circumstances then the other party would be entitled to explain to the court the history of the “Without Prejudice” negotiations to explain the apparent delay. However, care must be taken as to how much one tells the court as to the exact content of those exchanges. One could inadvertently lose the protection of “Without Prejudice” if too much is said about who has said what to whom.
Q One final question. When might one want to show “Without Prejudice” communications as evidence of the reasonableness of an offer?
A A common scenario arises when a party, party ‘A’, settles his dispute with another party, party ‘B’, by paying B a sum of money. Party A tells a further party, party ‘C’, that C was responsible for some or all of B’s loss. Party A will often be looking to recover from C some or all of the sum by which he is out of pocket. As is often the case, C may argue that A should not have paid B so much money. In such circumstances, the “Without Prejudice” exchanges between A and B should be produced as they are relevant to the issue as to whether the settlement was reasonable or not.
We trust the above question and answer scenario deals with your various queries in relation to the meaning and interpretation of the “Without Prejudice” rule, but if we have not covered something that you have had to deal with or is of interest to you, please contact Peter Taylor.