Receiving a communication headed with the words “Without Prejudice” can be disconcerting, particularly when parties are trying to resolve a dispute with another party. The reality is that many people use the term “without prejudice” to imply the threat of litigation without fully understanding what it means.
So what does it mean? Introduced more than 100 years ago, the rule aims to encourage parties involved in a dispute to reach an out of court settlement. By stating “Without Prejudice,” negotiations can be entered into openly and potentially without the fear of anything that is said during the negotiations being used in evidence at a trial, should the negotiations fail.
However, just having “Without Prejudice” on a communication is not sufficient for this rule to apply. There are two elements that must be present. Firstly, there must be a dispute. Legal proceedings need not have commenced for ‘Without Prejudice’ to apply, there need only be a case that could result in litigation, if settlement is not reached. Secondly the content of the communication must be a genuine attempt to settle the dispute.
Simply including the words ‘Without Prejudice’ in a communication will not prevent the content from being admissible in Court if the document is not a genuine attempt to resolve the dispute. Also the Court will often take into consideration ‘Without Prejudice’ communications when assessing an award for costs against a party or where there is a dispute as to the terms of any settlement agreement which was agreed on a without prejudice basis.
If used correctly the term ‘Without Prejudice’ can be an effective way for parties to protect themselves and their businesses whilst saving time and costs by settling disputes. However it should never be far from the mind of any author of any ‘Without Prejudice’ communication that the content of such documents could eventually end up before a Court to consider.
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