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If you have heard or read the term ‘without prejudice’, you may wonder what it means and when you might need it. ‘Without prejudice’ is a term used in legal negotiations to help parties reach a settlement without going to court. This article will explain exactly what it means and show how using ‘without prejudice’ can help you when negotiating a legal settlement. 

What Does ‘Without Prejudice’ Mean?

Parties involved in a dispute commonly add ‘without prejudice’ to communications when negotiating a settlement. Communications marked as ‘without prejudice’ cannot be used by the other party as evidence in court. This means that parties can speak openly about the matters in dispute without the risk of the other party using that information against them later. 

For example, you might add ‘without prejudice’ to a letter that includes an offer to accept half the amount you first claimed in hopes of reaching a settlement agreement. Suppose that offer is not accepted and the matter proceeds to court. In that case, the other party cannot use this letter as evidence that you were prepared to accept the lesser amount.

Furthermore, it can apply to both written or oral communications between parties. You should clearly state when you intend it to apply. On the other hand, if you want to be able to use communications in court, you need to label them as ‘open’ communications.

How Do I Use It?

If you want a settlement communication to be ‘without prejudice’, you should:

  • write the term clearly at the top of any written correspondence; or
  • state it at the start of any oral communication.

It is important to note that this may not always give the communication protection for a number of reasons. ‘Without prejudice’ only applies to: 

  • genuine settlement negotiations; and 
  • dispute resolution options such as mediation or court proceedings

This means that ‘without prejudice’ will not apply in general commercial negotiations. 

On the other hand, the protection may apply in some situations even if you do not expressly add it to a letter or state it at the start of a conversation. When determining whether a communication is ‘without prejudice’, a court will look at the surrounding circumstances. 

For example, the court may look at whether it seems that the parties intended to resolve their dispute by reaching a settlement. The protection may also apply to an entire chain of correspondence even if you fail to mark some pieces. 

So, if you forget to write it on one email in a chain of emails marked ‘without prejudice’, the protection may still apply to that email.

Does Without Prejudice Always Apply?

In some cases, even when you mark a legal correspondence as ‘without prejudice’, the privilege will not apply. These cases include when the communication: 

  • includes any illegal or misleading comments made in the course of negotiations; 
  • contains material that has already been disclosed with the parties’ consent; and
  • includes an express statement that the communication is not to be treated as confidential. 

The privilege will also be removed if both parties consent to it being waived in relation to a particular communication marked ‘without prejudice’. 

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Can a Communication Be Part ‘Without Prejudice’?

You can mark a select part of a written or oral communication ‘without prejudice’. This means the remainder is open and can therefore be used in evidence.

For example, a letter may start as an open correspondence but includes a ‘without prejudice’ section containing a settlement offer. This is useful in cases where it is persuasive to include open statements about a party’s legal position before making a settlement offer. However, there is a risk that the ‘without prejudice’ portion of the communication may be missed. As a result, it could end up in court. Therefore, it is generally safer to keep these communications separate from other open communications that may be used as evidence.

When Should I Avoid Using ‘Without Prejudice’?

People often use ‘without prejudice’ where they may not need to or where it does not apply. For example, people misuse it by adding it to: 

  • correspondence that is unrelated to settling a dispute; 
  • a letter of demand (i.e. a letter where you are not making any concessions or discounting the amount you are demanding); or
  • correspondence where you are merely trying to finalise the terms of an agreement. 

What Does ‘Without Prejudice Save as to Costs’ Mean?

Another commonly used term is ‘without prejudice save as to costs’. This term means that the protection only applies in court until the court hands down a judgment. After the court makes a judgment, it decides how to award costs. Typically, the unsuccessful party must pay the other party’s legal costs, and the court may use communications marked ‘without prejudice save as to costs’ to determine exactly what those costs should be. 

The court will consider whether the parties made any attempts to reach a settlement before going to court. This means that ‘without prejudice save as to costs’ can apply pressure to the other side during negotiations. The court may use any unreasonable actions during the settlement communications to determine how much they pay in costs.

Key Takeaways

Adding ‘without prejudice’ to communications in a settlement negotiation can help to reach a quick and efficient resolution. It lets parties speak freely in a negotiation without worrying that the other party will later use their comments against them in court. However, it is commonly misused. If not used correctly, it will not provide the protection you may need if the dispute ends up in court. If you have any questions, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.  

Frequently Asked Questions

When will documents be ‘without prejudice’?

Parties involved in a dispute commonly add ‘without prejudice’ to communications when negotiating a settlement. These communications cannot be used by the other party as evidence in court.

What does ‘without prejudice save as to costs’ mean?

This term means that the protection only applies in court until the court hands down a judgment.

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