Without prejudice – what it is and how does it affect you?

The use of the wording ‘without prejudice’ is essential in allowing negotiations to move forward, so that a case can be settled outside of court without fear of accidentally saying the wrong thing or admitting liability. But if you don’t use it correctly, it can do more harm than good, and can even be used against you in court proceedings.

Siân Mullane looks at what it means, when it should be used, and how to use it strategically to be effective in your negotiations for settling a dispute.

What does without prejudice mean?

UK law encourages parties to take steps to resolve any dispute between them and to avoid the need for court intervention where possible.

One of the ways to encourage the spirit of negotiation is to allow parties to have genuinely open discussion where they can explain their position and propose a way forward with a view to reaching an agreement and hopefully avoiding court proceedings.

However, for this type of discussion to be worthwhile, both parties need to be able to speak openly without the fear that what they say could be used against them in evidence if they cannot reach a settlement.

“Without prejudice” is a term that is used by parties to a dispute when they want to be able to talk openly in order to resolve that dispute but without fearing that what they say may later be used against them.

For example, a retailer who owes a debt and is in a commercial dispute with their product supplier approaches them and offers to pay, say, 60 per cent of the claim in order to stop the matter going to court. If that supplier refuses the offer, the supplier cannot then use that early offer to pay as evidence that the retailer admits liability, or even 60 per cent liability.

When and how is without prejudice used?

Without prejudice is most often used by lawyers when wanting to have an off-the-record discussion with their opponent in order to try to settle a dispute.

Without prejudice discussions can cover both written and oral discussions.

While the main reason for using it is to stop any admissions from being used in later court proceedings, for reasons of practicality, once it is agreed by the parties that they are writing or speaking ‘without prejudice’, all communication that fall under that banner cannot be used later. Therefore, any information that sits within an email that is stated without prejudice, is excluded from being used in evidence unless it is clearly already in open correspondence elsewhere.

It is important to ensure that when you wish to speak or write without prejudice, that you clearly state this before starting a dialogue, or in any written communication, to ensure that this information is not used in the future. While it can be inferred from the circumstances that communication is without prejudice, it is far better for it to be clearly stated avoid any confusion later on. Lawyers are used to starting phone calls with ‘can we speak without prejudice?’ when discussing a settlement. Equally any written communication will be headed ‘without prejudice’.

What requirements are necessary for a communication to be without prejudice?

For a communication to be genuinely without prejudice, there needs to be an existing dispute between the parties, and for the without prejudice discussions to be carried out in a serious attempt to find a resolution.

If communication is made in a genuine attempt to settle a dispute without involving the court, then not only will any ‘admissions’ made in the course of such discussions be protected, but so are any statements made that are not in the party’s interests generally.

It should be made very clear before any negotiation that it is to be ‘without prejudice’.

What does ‘without prejudice save as to costs’ mean?

Where a statement is made purely ‘without prejudice’, then it cannot be referred to at all in court proceedings.

However, if it is marked ‘without prejudice save as to costs’, it is possible to be brought to the attention of the court when the court is deciding who is to pay the costs following the court’s decision.

The reason behind this is to ensure that settlement negotiations are conducted reasonably. If you made a reasonable offer to settle a case, but this was rejected and the other party pushed forward with Court proceedings, then The Court will consider that this dispute should not have come to court at all. Then The Judge will be allowed to review that correspondence to decide who should bear the costs of the action and whether the parties have beaten any offers made without prejudice and if they have acted reasonably in pressing on with Court action.

A good example of this is the case of William Roache v The Sun.

William Roache won a libel case against The Sun newspaper, and the court ordered that he be awarded £50,000 damages. However, when considering who should pay the legal costs of the claim, The Sun disclosed certain communications to the costs judge, showing that some time ago William Roache had been offered £50,000 to settle the matter which he had refused. This refusal meant that The Sun had to spend a considerable amount in legal fees in defending their position in court, only to get the same outcome that they offered months before. Consequently, William Roache was ordered to pay £120,000 of The Sun’s legal fees.

 Are there exceptions to Without Prejudice?

There are a number of exceptions so for example where the correspondence is not in relation to a dispute or is not a genuine attempt to settle it cannot be said to be without prejudice. Likewise, a written settlement agreement is not covered since the purpose of the document is to record the settlement rather than negotiate it.

There may also be circumstances where the Court will allow without prejudice communications to be considered as evidence, for example where there is alleged misrepresentation, fraud or undue influence, or as evidence of misrepresentation or fraud.

How can we help

Without prejudice negotiations can be a great tool in dispute resolution and can encourage parties to settle a dispute that would otherwise end up in litigation, saving them a lot of time, effort and money. However, it is important that it is used correctly to ensure you protect your interests if the matter does not resolve.

Our Dispute Resolution Team have many years of experience in all types of commercial and civil disputes. For further information and assistance, please contact the dispute resolution team on 01473 350553 or email [email protected]