If a proposal or offer to settle a dispute is made on a ‘without prejudice’ basis-what does it really mean?

The purpose of ‘without prejudice’ communication is to enable parties to communicate and so parties can settle claims without fear that the offers made along the way cannot later be used as an admission of liability.

The aim of the policy is to encourage people to settle disputes without resort to litigation.

Without prejudice – avoiding litigation

It is a well-established rule that admissions, concessions or statements used to try and resolve a dispute cannot later be used in litigation.

Someone who makes a ‘without prejudice’ offer does so on the basis that they reserve their right to assert their original position if the offer is rejected and litigation proceeds.

A party may respond to a lawyer’s ‘without prejudice’ letter with an open letter without stating the response is on a ‘without prejudice’ basis

That open letter to the lawyer may contain admissions which the lawyer may then rely on in Court to that party’s detriment.

Stop and seek legal advice

So, if you receive a letter with the words “without Prejudice “or “without prejudice save as to costs “ stop! Seek advice and be careful how you respond, otherwise you may be making matters worse.

There can be legal and strategic considerations best discussed with a lawyer before you respond to a without prejudice letter you may receive.

There are circumstances where it may be appropriate to respond in an open letter. For example, simply denying an allegation would be no issue if later produced to Court.

Parties can use and rely on “without prejudice “correspondence between them to flag that the matters contained in it are an offer to settle.

It is not just for the use of lawyers.

You don’t have to be a lawyer to send a “without prejudice” response to the other party’s lawyer.

Sending a communication whether by letter, email or even in a text with the words “without prejudice” flags that the content cannot later be used in a court action by the other party.

However, clients often use the words where it is not necessary or appropriate.

Using the words does not automatically invoke the rule and give the protection sought.

How to use the without prejudice rule

The communication must be made in a genuine attempt to settle a dispute, for it to be effective. For example, writing to a debtor offering to accept an amount less than the amount owed to satisfy the debt should be marked ‘without prejudice’ to ensure if the offer is not accepted it cannot be used as evidence should the issue end up in court.

Before marking a letter ‘without prejudice’ consider the true purpose of the communication.

It can still be argued before a court that despite using the words 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 a court may still exclude it from evidence.

The rule may not apply:

• When a Court is to decide whther parties have reached an agreement
• Where a party seeks to set aside an agreement due to misrepresentation, fraud or undue influence and the ‘without prejudice’ communication evidences that conduct
• Where the ‘without prejudice’ communication is evidence of perjury, blackmail or other wrong doing,

In summary and please do not rely on this later in Court

Consider when to use the words and if the protection it gives is necessary and legitimate.

If in doubt seek legal advice before your start sending that letter, email or text.

The rule 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 and it will not protect all communications in relation to a dispute.