‘Without Prejudice’. What does it mean?

‘Without Prejudice’. What does it mean?

15:34 27 February in Blog, Commercial & Business Contracts, Keith Hardington articles, Walker Foster

The term and its effect are confusing to many lay clients and apparently to some solicitors.

I had issued proceedings and the Defendant’s solicitor, after some persuasion, agreed to meet with our respective clients so that we could explore potential settlement. It was expressly agreed in correspondence before the meeting that the meeting would be ‘Without Prejudice’. I assumed that my opponent would understand the rule and act accordingly. This is an assumption expected by and acknowledged by the courts.  The meeting failed to achieve a settlement and the matter went to trial. Between the meeting and trial the Defendant’s solicitor referred in open correspondence and witness statement evidence to comments made by my client during the meeting. I felt that this constituted a breach of the letter and spirit of the ‘Without Prejudice’ rule. Was this a breach of the rule?

The ‘ Without Prejudice ‘ rule is a rule governing the admissibility of evidence. It is founded partly in public policy and partly in contract law (the agreement of the parties).The essential purpose of the original ‘Without Prejudice’ rule was that, if the negotiations failed and the dispute continued, neither party should be able to rely upon admissions made by the other in the course of the negotiations. It is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a trial. The rationale is that the parties are more likely to speak frankly if nothing they say can subsequently be relied upon and that, as a result, they are more likely to settle the dispute.  Its application is not limited to litigation.

The use of the phrase ‘Without prejudice save as to costs’ provides the ‘Without Prejudice’ protection until the court delivers judgment. Only then will the court consider such communication when making a decision on the appropriate costs order to be made. Such offers might be more appropriately put as offers under Part 36 of the Civil Procedure Rules.

The term ‘Without Prejudice’ is often contained in letters. It is not the label that is important to establish that a communication is ‘Without Prejudice’ but the circumstances. It follows that even if you forget to include the words ‘Without Prejudice’ in your communication it can still be ‘Without Prejudice’. Equally a communication that is not in fact ‘Without Prejudice’ does not become so simply because it is expressed to be ‘Without Prejudice’. For the ‘Without Prejudice’ rule to apply the communication must be part of a genuine settlement negotiation. For example this might include an offer, a concession or an admission for the purpose of achieving settlement but which would not be openly expressed.

In Walker v Wilsher (1889) 23 QBD 335 at 337 Lindley LJ asked what was the meaning of the words ‘Without Prejudice’ in a letter written ‘Without Prejudice’ and answered the question in this way:

“I think they mean ‘Without Prejudice’ to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written ‘Without Prejudice’, operates to alter the old state of things and to establish a new one.”

However, the rule is not limited to letters and other written communication. It applies to oral communication including discussions in meetings where such negotiations are genuinely aimed at settlement.Its application is not limited to offers and counter offers.2

So what was the effect of our agreement that the ‘Without Prejudice’ rule should apply to our meeting? It is clear that the ‘Without Prejudice’ rule can apply to such a meeting and did so because we had agreed that it would in this case. The rule applied to the statements made by the parties during the meeting which was a genuine attempt to reach settlement. Our meeting did not cease to be ‘Without Prejudice’ simply because offers and counter offers were not made during the meeting.

Is a party entitled to select parts of the meeting as ‘Without Prejudice’ and others open (open being the opposite of ‘Without Prejudice’) as suggested by my opponent when I challenged his behaviour? The courts reject such ‘cherry picking’. To dissect out identifiable admissions would create huge practical difficulties and would be contrary to the objective of giving protection to the parties. “Parties cannot speak freely at a ‘Without Prejudice’ meeting if they must constantly monitor every sentence, with lawyers…….sitting at their shoulders as minders.”  It follows that the rule applied to the entire meeting.

‘Without Prejudice’ communications can be referred to if all parties to the communication agree to waive the protection. The protection will not apply if the communication is part of dishonest, fraudulent or criminal acts. The communications might also lose protection if after a settlement has been reached it is necessary to consider those communications to establish whether settlement has actually been concluded and its basis and reasonableness or to explain a delay in proceedings. This can assist the court’s deliberations on the issue of costs. None of these circumstances applied in this case and the protection of the rule should have continued. My conclusion in this case is that my opponent did breach the letter and spirit of the rule by openly referring to statements made in our ‘Without Prejudice’ meeting. My Client could have applied to the Court for an order that the ‘Without Prejudice’ evidence contained in the letters and witness statements be declared inadmissible evidence. In the circumstances of this case we decided that the potential damage did not justify the application. I have since this experience been very careful to spell out and agree the understanding and application of the ‘Without Prejudice’ rule with my opposite number in other cases where a ‘Without Prejudice’ meeting takes place.

The case Oceanbulk Shipping & Trading SA (Respondent) v TMT Asia Limited and others (Appellants) [2010] UKSC 44 is worth reading as it contains a succinct analysis of the Without Prejudice rule referring to case law from the nineteenth century to present.

Keith Hardington

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