Before involving solicitors, parties that are in dispute with each other often try initially to resolve, or at least record, their disputes in writing. On the face of it, this makes a lot of sense. However, quite understandably, those who are not legally trained can unwittingly make mistakes in their correspondence, the consequences of which may or may not be significant.
As a dispute resolution solicitor, once common mistake I see when reviewing inter-party correspondence is the incorrect use of the term “without prejudice”. It is important to know what this term means and when to use it.
The purpose of making statements (either orally or in writing) on a without prejudice basis is to prevent such statements from subsequently being put before a Court as evidence of any admission by the party making the statement which might harm their case. In other words, it is to prevent the statement from causing any prejudice to the party making it.
For example, a party may be prepared to make concessions to try to settle a claim and avoid having to go to Court. They may make those concessions in a letter which contains a settlement offer. However, if the offer is rejected and the matter proceeds to Court, the party that made the concessions is unlikely to want a Judge to treat them as an admission of any weakness in their case. Naturally, they will want to argue their best possible case at trial.
Parties are under an obligation to try to settle their disputes without resorting to Court proceedings and the without prejudice rule can assist them in doing so without fear of compromising their position if they are unable to settle. If used correctly, a without prejudice settlement offer can also potentially protect a party that loses at trial from the usual order that it pays the winning party’s costs of the litigation.
In an attempt to gain maximum protection it might therefore be tempting to mark all communications as being without prejudice (and this is something that I have encountered several times). However, as with any rule, there are exceptions to the without prejudice rule. Moreover, simply stating that a communication is without prejudice (or not) will not necessarily convey that status upon it. It is the substance of the communication which is relevant in determining whether or not it is in fact intended to be without prejudice. Whether or not it is marked as such will, however, be persuasive evidence of the parties’ intentions.
It should now be clear that the without prejudice rule is an extremely helpful and effective tool to be used when trying to settle a dispute. However, parties must use the term carefully to properly benefit from it. If they are in any doubt about whether a statement can or will be treated as being without prejudice, they should seek legal advice.