Inappropriate labelling of correspondence can lead to satellite litigation about the admissibility of evidence in subsequent court proceedings. This damages your client’s case, is likely to lead to wasted costs and written-off fees, and can be embarrassing for you and/or your firm.
Understanding the legal basis of the concept is crucial for any lawyer. This is even more important now that the Solicitors Regulation Authority has expressed concern about the improper use of the “without prejudice” tag as part of oppressive litigation behaviour.
1. Without prejudice privilege is a type of legal professional privilege
Both are common law rules based on case law and affect the admissibility of evidence but without prejudice privilege has nothing to do with legal professional privilege – it is often called the without prejudice rule to avoid this confusion. Legal professional privilege is a substantive right which a party can assert or waive as they choose. Without prejudice is a practical rule resulting from the public interest in parties settling disputes and also, in some instances, from an implied agreement between them that neither will refer to settlement negotiations without the other’s consent. One party cannot waive without prejudice privilege without the agreement of the other, and that waiver cannot be limited or partial as it can be with legal professional privilege.
2. You should always put “without prejudice” on a letter before action or a “cease and desist” letter
Lawyers often use the “without prejudice” label when sending an initial letter or email to a potential defendant asking them to pay up or to stop doing something damaging to their client such as making potentially defamatory comments about them online or infringing their intellectual property rights. If there is already a genuine dispute and the letter is intended to open negotiations, the letter will be a without prejudice communication and cannot be referred to in subsequent litigation. But if the letter is just asserting your client’s rights, setting out their case or taking issue with the recipient’s actions, it is not correct to label it “without prejudice”.
In fact, using the term in these circumstances may be in breach of your professional duties. The SRA has confirmed that it is going to give guidance on this issue (see the current guidance here) but improper use of “without prejudice” could infringe the Code of Conduct and show a lack of integrity. If the letter in question makes allegations without merit with the purpose of stifling valid public discourse, this enters SLAPPs (Strategic Lawsuits against Public Participation) territory. To explore this further, see the discussion about tax lawyer Dan Neidle’s complaint to the SRA in connection with letters sent to him by Nadhim Zahawi’s solicitors here).
3. You need to put “without prejudice” at the top of documents for them to qualify
If lawyers correspond with each other and choose not to put “without prejudice” on their communications, that is likely to influence the court, but in general the absence of those words will not prevent the application of the rule if the parties were seeking to compromise an existing dispute. If the letter is written by the party themselves or a foreign lawyer, the absence of “without prejudice” will be much less significant. And even where lawyers use the caption inappropriately (as in Avonwick Holdings Ltd v Webinvest Ltd where there was no dispute) the court will still look at the reality of the situation.
4. “Off the record” means the same as “without prejudice”
Sometimes solicitors ask their opposite number if they can have an “off the record” exchange about a dispute. It’s not always clear what they intend. It may be a without prejudice conversation where the lawyer can discuss what was said with their client. Alternatively, they may be after a conversation which will not be reported on to your client. If the information received “off the record” is material to your client's case, you must be able to disclose it to them. If a solicitor agrees to an “off the record” conversation on the basis that they will not pass on any information disclosed to their client, they will be unable to comply with their professional duties and may have to stop acting for that client.
5. You can refer in court to an admission made at a without prejudice meeting if the maker of the admission may have perjured themselves
Although there are exceptions to the without prejudice rule, an inconsistency between a without prejudice admission and a pleaded case or a stated position is not one of them. This is so even if upholding the rule means there is a serious risk of perjury. It is not an abuse of the privilege to tell the truth, even where the truth is contrary to one's openly stated case. If a party reveals information in without prejudice conversations or correspondence that conflicts with statements they have made publicly, you can try doing one or more of the following to flush out the answer: ask the relevant question in open correspondence, make a Part 18 request for further information or serve a notice to admit facts under CPR 32.18.
6. A communication can be partly without prejudice and partly open
In assessing whether a communication is protected by the rule, the court will consider it as a whole and won’t dissect the communication into parts unless it is clear that one part is dealing with a separate subject (Jones v Lydon). This is in contrast to the approach taken to legal professional privilege where documents are often put in evidence with the privileged passages blanked out (redacted). The courts are even less willing to “salami slice” a meeting into parts that are open and parts that are without prejudice (Suh v Mace).
7. The court should always refuse to hear evidence about what went on at a confidential settlement meeting or mediation
It’s true that a judge will be reluctant to hear evidence about what happened at a without prejudice meeting but where one of the exceptions to the without prejudice rule is raised, the court may have to do so. This happens, for example, when the parties disagree about whether or not a settlement was agreed at the time or about its terms. However, where one party alleges that the other made threats at the meeting that fall within the “unambiguous impropriety” exception to the rule, it will be rare for the court to be able to reach a firm conclusion on the point unless the relevant statement was recorded or put in writing (Motorola Solutions Inc v Hytera Communications Corp Ltd).
8. Without prejudice privilege applies to both negotiations and any resulting settlement agreement
The general rule is that without prejudice negotiations remain privileged even after settlement and cannot be relied on as evidence by other parties to the litigation nor to third parties. Concluded settlement agreements, on the other hand, are not protected by without prejudice privilege although they are likely to be confidential. Exceptionally, justice may require the disclosure of confidential details concerning a settlement with only one defendant in a multi-party case, whether to enable a co-defendant to make a settlement offer or to ensure that there is no excess recovery by the claimant (Gnitrow Ltd v Cape Plc).
9. Settlement offers made at a without prejudice meeting can be referred to on the issue of costs
If a meeting is without prejudice, a party wanting to make an offer which might affect costs should put the offer in a subsequent “without prejudice save as to costs” letter. In Marcura Equities FZE v Nisomar Ventures Ltd the parties had a without prejudice settlement meeting but did not discuss whether any offers made should be “without prejudice save as to costs”. The court was unable to take into account any offers made at the meeting when determining costs. A Part 36 offer is treated as being made “without prejudice except as to costs” (CPR 36.16).
10. A party may put without prejudice evidence before the court where it is making an ex parte application
In general, the existence of the negotiations and relevant dates, but not the content, can be put before the court at an interim application in order to explain delay or apparent acquiescence. Some disclosure of without prejudice communications may be necessary if it is clear that without it the court could be misled but there is no entitlement to do so (Linsen International Ltd v Humpuss Sea Transport PTE Ltd). If a party wants to rely on without prejudice evidence to show a risk of dissipation when applying for a freezing order, they must establish an unambiguous impropriety. The court should not apply a “good arguable case” test even though that test is used in other interim contexts (Motorola Solutions Inc v Hytera Communications Corp Ltd).
Any questions?
If you have any questions relating to this topic and would like more information or some advice, you can contact Miranda Whiteley or one of our lawyers in our litigation and arbitration team.