Legal correspondence often contains the term “without prejudice”. The term is one of the most used legal phrases, however it is often misunderstood.
The term “without prejudice” is most familiar to litigation lawyers, but it is also frequently used by lawyers in transactional matters, and also by lay persons.
The rationale behind the “without prejudice” rule is that, as a matter of public policy, parties should be encouraged to settle their disputes without going to Court. The term “without prejudice” refers to the legal privilege attached to a communication that is specifically used for the purpose of negotiating a settlement. It restricts any such communication from being relied upon in Court proceedings.
A “without prejudice” communication is a communication, either written or oral, made in the context of genuine settlement negotiations. Whether a communication is actually “without prejudice” requires a consideration of the circumstances in which it was made, and whether it was in the context of genuine settlement negotiations. Simply labelling the communication “without prejudice” will not suffice. Mediations or settlement conferences are often forums which are conducted “without prejudice”, as are written offers of settlement.
It is not a requirement that a communication be labelled “without prejudice” in order to gain the protection of the rule. However, it is recommended that all communications made in the context of genuine settlement be labelled “without prejudice” if that is the intention of the party.
It is not necessary for there to be Court or Tribunal proceedings on foot at the time the communication is made. Parties may engage in without prejudice negotiations prior to the commencement of the proceedings, and negotiations cannot later be adduced as evidence in Court if Court proceedings are commenced.
The “without prejudice” rule applies until the Court delivers judgment. Once the Court delivers judgment, the Court will then turn to the question of awarding legal costs. There are Court rules which govern producing evidence of “without prejudice save as to costs” communication in relation to costs arguments.