You may have seen the words “without prejudice” appear on legal correspondence. In this article we look at what those words mean and how they can help you in settlement negotiations.
At common law, communications between parties (both oral and written) made in the context of genuine negotiations to resolve a dispute, cannot be used against the other party if the dispute is not settled.
The protection has been codified in most states and at a federal level. For example, section 131(1) of the Evidence Act 1995 (Cth) provides that any communication between parties to a dispute which occur during negotiations, or any document prepared in connection with negotiations, cannot be adduced as evidence in Court.
The purpose of “without prejudice” privilege is to allow parties to explore settlement, and make admissions in the course of negotiations, without concern that those admissions might be used against them later in Court, if discussions break down.
Many legal advisors use the words “without prejudice” liberally on correspondence, in the misconstrued belief that this will make a communication privileged. As noted by Justice Wells in Davies v Nyland (1975) 10 SASR 76 at 89:
“…there is a belief, amounting to almost a superstitious obsession, that the expression “without prejudice” is possessed of virtually magic qualities, and that anything done or said under its supposed aegis is everlastingly hidden from the prying eyes of a Court”.
In fact, what determines whether without prejudice privilege attaches to a communication is the party’s intention (which is ascertained from the nature of the communication) rather than the use of the words “without prejudice”. That is, the test is one of substance rather than form.
Nonetheless, the use of the words are seen as a relevant factor in determining the parties intention, so it is recommended that without prejudice communication continue to be clearly be labelled as such.
Without prejudice privilege is a joint protection. As such, all associated parties must consent to waive the privilege. This differs from other types of privileges, such as legal professional privilege, which can be waived by the party to whom the privileged document belongs.
There are a number of exceptions to the applicability of without prejudice privilege and certain circumstances where the privilege will not apply.
The privilege only applies to communication made in an attempt to settle legal proceedings, or where other dispute resolution avenues have commenced.
The privilege does not attach to commercial negotiations or communications unrelated to settling a dispute. Similarly, letters of demand where no concessions are made and/or no settlement is suggested will not attract the protection.
The legislation governing without prejudice privilege also codifies a number of exceptions. For example, the Evidence Act provides that the privilege will not prevent the adducing of communications or documents:
Without prejudice privilege is a key tool in dispute resolution and facilitates early settlement of disputes by allowing parties to freely make admissions or concessions in negotiations.
However, it is important that the words “without prejudice” only be used in the correct context to avoid unnecessary legal arguments and costs.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9274 8820 or email email@example.com.