What Is The Meaning Of “Without Prejudice” In The Context Of A Commercial Dispute?

During most legal disputes or negotiations, some written and oral communication passing between the parties may be considered to be “Without Prejudice”, whether that be simply “Without Prejudice”, “Without Prejudice Save as to Costs”, or “Without Prejudice Subject to Contract”.

Usually, such correspondence is used when dealing with sensitive issues or where settlement discussions are ongoing between the parties. This is all well and good, but what does “Without Prejudice” actually mean?

Very briefly they mean as follows:

We deal with each of the above in more detail but to understand them we need to first understand what “Without Prejudice” means in a commercial context.

What is the Without Prejudice rule?

In relation to all three of the above when communications between parties are considered “Without Prejudice”, this means that the content of the communication usually cannot be used as evidence or made the subject of a disclosure. The main purpose of this is to allow parties to negotiate a settlement and discuss certain aspects of any given case, in particular their client’s respective strengths and weaknesses, without the risk of this information being disclosed at Court and relied upon by the other party.

Essentially, this gives the parties confidence that their respective positions will not be weakened in any formal dispute or negotiation.

How does communication qualify as Without Prejudice?

For communication to qualify as Without Prejudice, it must form part of a genuine attempt to resolve a dispute. Therefore, there are two aspects that must be present, namely:

Does Without Prejudice communication need to be marked as “Without Prejudice”?

It’s best practice to ensure that any “Without Prejudice” correspondence is marked as such, usually at the top of the correspondence/document, or in the subject header of an email.

However, that being said if communication is not marked “Without Prejudice” it can still be considered as such, and “Without Prejudice” privilege can be implied. However, to avoid any arguments on this point it is always best to label up any “Without Prejudice” correspondence correctly.

If the “Without Prejudice” is being used for oral communication, i.e. over a phone call or a meeting, then it is worth acknowledging this at the outset and confirming that everyone partaking in the discussion agrees.

Can “Without Prejudice” communication ever be admissible?

Yes, it can although it must be clearly shown why the communication is not Without Prejudice (even though it may be marked as such) or that the Without Prejudice privilege should not apply.

The exemptions to “Without Prejudice” are as follows (this is not an exhaustive list):

It is worth noting that parties can, if they wish waive privilege on any “Without Correspondence” that they have sent, however, you need to be careful that you do not disclose any “Without Prejudice” correspondence sent by the other side. The usual culprit for this is when parties disclose whole email trails – so it is something to watch out for.

“Without Prejudice Save as to Costs”

Whilst “Without Prejudice” communication usually cannot be taken into consideration for costs there is an exception, which is if any correspondence marked “Without Prejudice Save as Costs” then it can be used when costs are decided.

Practically this means that if negotiations or discussions occur on a “Without Prejudice Save as to Costs” basis they will become admissible when the Court considers costs, which will usually happen after the main trailable issue has been dealt with, in other words, once Judgment has been handed down.

It is important to recognise that though the Without Prejudice Save as to Costs communication can be considered on costs, prior to such, it will still enjoy the benefit of Without Prejudice privilege.

“Without Prejudice Subject to Contract”

This is a term that is usually used when there are discussions surrounding settlement agreements and contracts i.e. after a settlement proposal has been agreed in principle.

The purpose of marking such correspondence in this way is to make all parties aware that nothing communicated when discussing a settlement agreement and negotiations will give rise to a legally binding contract until all the terms have been agreed and the agreement/contract has been signed by all parties.