The use of the words “without prejudice” on correspondence or in
a meeting where there is a “dispute” over a finance agreement can
potentially lull the parties into a false sense of security. It may
be assumed that whatever is said, or admitted to, in that
correspondence or meeting cannot be brought to the court’s
attention should the dispute progress that far. Wrong!
The public policy behind the “without prejudice”
rule is to encourage parties to settle their differences rather
than litigate them to trial. The rule enables parties to negotiate
freely while, at the same time, being in a position to continue to
fight the case without fear (subject to specific exceptions) that
any statements or offers made during the course of negotiations to
settle will prejudice them by being placed before the court later
as evidence of admissions of liability.
Go deeper with GlobalData
However, using the words “without prejudice” will
not automatically render a communication privileged. Equally, the
absence of those words will not mean that the communication fails
to attract the privilege. It is the substance of the communication
that is all-important.
Critically, there must be an underlying dispute
between the parties which they are attempting to settle for the
rule to apply in the first place. This was again confirmed in the
case of Midgley v Oakland Glass Ltd, where Midgley sought to
exclude from evidence certain letters written by the parties’
solicitors. That correspondence made reference to a discount being
sought from the judgment debt obtained, an assignment of the
judgment debt once payment had been made in full and a request for
an interest calculation on the indebtedness so the exact amount
outstanding could be ascertained and settlement proposals put
forward. Midgley claimed the correspondence was “without prejudice”
as it referred to negotiations between the parties to settle a
dispute.
The court held that none of the references in the
letters amounted to a dispute over the sum involved but were more
akin to an acknowledgement or admission of the sum or were neutral
in relation to it. The “without prejudice” rule has no application
to communications designed to discuss the repayment of an admitted
liability rather than to negotiate and compromise a disputed
liability.
There must be negotiations genuinely aimed at
settlement of a real dispute or at an attempt to compromise actual
or impending litigation. At the time the letters were written,
there was no dispute as to the judgment sum.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAsking for a discount was not disputing that sum
but merely seeking a concession. The letters were not “without
prejudice” and could be referred to the court.
Comment
The “without prejudice” rule is
fundamental in enabling parties to hold open discussions in an
attempt to settle disputes without the fear of offers made
subsequently being used as evidence of admissions. Without an
underlying dispute however, the rule will not apply. Requests for
time to pay an admitted amount and how payment should be made will
not be covered by the rule and the use of the “without prejudice”
label will not prevent subsequent production.
Greg Standing, a
partner in Wragge & Co LLP’s Finance, Insolvency, Recoveries
and Sales team
