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. If that offer is not accepted and the matter proceeds to court, the other party cannot use this letter as evidence that you were prepared to accept the lesser amount.  

‘Without prejudice’ 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, ‘without prejudice’ 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 as ‘without prejudice’. 

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

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 ‘without prejudice’ 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); 
  • 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 ‘without prejudice’ 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. Any unreasonable actions during the settlement communications might be used 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 their comments will later be used 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 lawyers on 1300 544 755 or fill out the form on this page.  

 

 

 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Jodie Thomson

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