Despite being in use in British courts for more than a 100 years, the ‘without prejudice’ rule is well known but not necessarily well understood.
Opinions and case law on it have changed, so perhaps this is not surprising. However, it is worth knowing the logic and the basics behind the rule.
The chief goal is to encourage parties in dispute to settle out of court — the idea being that one party can make concessions safe in the knowledge that they cannot be relied on as evidence by the other side should the dispute end up in court.
Which concessions are protected depends on a number of things but the overall legal requirement is that there must be a dispute and the without prejudice communication (which can be anything from written and oral negotiation to e-mails) must be genuinely related to settling the dispute.
To ascertain what constitutes a dispute, ask if the case would be likely to have progressed to litigation if agreement was not reached? It is by no means essential that litigation has started, or even been considered, for without prejudice to apply. There have been cases where communications predating litigation by more than two years have been afforded without prejudice protection.
Whether or not the communication genuinely relates to the settlement of a dispute and so falls within the scope of the rule is more complex. An objective review of the case will determine the intention of the author and how the communication would be understood by a reasonable recipient.
Simply labelling a document or communication ‘without prejudice’ does not of itself attract the legal privilege. Conversely, a communication can attract without prejudice privilege despite not having been labelled as such.
Despite its wide scope, the without prejudice rule is not absolute and even communications made in an attempt to settle a dispute may be admissible if the case requires it. For example, the court may look at without prejudice communications if one party says a settlement agreement has been reached and the other party disagrees. Similarly, if there is a claim that an agreement has been compromised by fraud or other deception, the without prejudice rule may be overturned. The rule may not apply when assessing legal costs after litigation and there is a risk that it does not apply to all admissions of fact.
There is also the right to waive without prejudice privilege but the parties must be in agreement.
While invoking the rule can help to reduce time and money spent taking cases through the courts, anyone seeking to rely on it should be aware that a careful approach is essential.