WHAT IS THE WITHOUT PREJUDICE PRIVILEGE?

October 9, 2014

This article seeks to provide a very brief synopsis of the without prejudice rule.

Although the without prejudice rule can arise in many different types of dispute, this article focuses on its application to commercial disputes.

THE RULE

The without prejudice rule exists to stop statements made in a genuine attempt to settle an existing dispute, whether made in writing or orally, from being put before the court as evidence of admissions against the interest of the party that made them.

For these purposes, the term “admission” means a statement made by a party against his own interest.

The concept of admissions must be given a wide meaning in the sense that it effectively includes all matters disclosed or discussed in the without prejudice communications. Dissecting out identifiable admissions and withholding protection from the rest of without prejudice communications would create huge practical difficulties, as well as being contrary to the underlying objective of encouraging parties to speak freely when seeking to settle litigation.

RATIONALE FOR THE RULE

There is a recent drive from the bench to encourage the parties to settle their disputes without the need for a court hearing. Many reasons are proffered for this drive. One such reason is that the Courts are incredibly busy and that it can take a substantial amount of time to have a case heard. Another reason is the perceived cost of litigation.

It has therefore been suggested that the without prejudice rule has arisen from public policy, that policy being to encourage parties to seek to settle their disputes out of court. It is acknowledged that the parties will at times have to speak candidly about their positions and be open and frank to resolve disputes. It is clear that settlement discussions will be facilitated if parties can speak freely, secure in the knowledge that what they have said and, in particular, any admissions made to try to settle the matter, may not be used against them should the settlement discussions fail. In essence, parties are more likely to settle if they are free to put all their cards face up on the table.

POTENTIAL CHALLENGES

If a claim to without prejudice privilege is challenged, the court will focus primarily on the substance, rather than the form, of the disputed document to assess whether to uphold the claim to without prejudice privilege.

It is important to note that:

• Labelling a document without prejudice will not bring it within the ambit of the without prejudice privilege if it is not, in substance, a communication made in a genuine attempt to settle an existing dispute.
• Failing to label a document without prejudice will not preclude it from benefiting from without prejudice privilege if it is a communication made in a genuine attempt to settle an existing dispute.

If asked to determine this issue, the court will apply an objective test taking into account all of the facts of the case, i.e. the court will objectively analyse the communication in its context.

EXCEPTIONS TO THE RULE

The rule is not absolute and without prejudice material may be resorted to for a variety of reasons when the justice of the case requires it.

Communications have been admitted in evidence in the following circumstances:

• Where the issue is whether the without prejudice communications have resulted in a concluded settlement agreement, i.e. there is a dispute as to whether settlement was achieved.
• As evidence of misrepresentation, fraud or undue influence.
• Where a statement may have given rise to an estoppel.
• As evidence of perjury, blackmail or other unambiguous impropriety.
• To explain delay.
• As evidence about the reasonableness of a settlement.
• On the question of costs when the parties have written without prejudice save as to costs offers.

WAIVER

The without prejudice privilege belongs, collectively, to the parties to the without prejudice communication. It can only be waived with the consent of all parties. If one party seeks to submit without prejudice communications in evidence unilaterally, the other party can choose whether to apply to strike out the offending material or to treat it as a waiver of the privilege so that the material becomes admissible for the benefit, or detriment, of both parties.

CONCLUSIONS

Employed correctly, the without prejudice privilege can be a useful tool to settlement, allowing parties to openly and candidly discuss their positions with the aim of settling a dispute. Used incorrectly, the privilege can become the subject of future challenge and dispute, resulting in a greater financial and time commitment for the parties.

For more information, contact Aaron Moore at Cleaver Fulton Rankin, telephone 02890 243141, email at info@cfrlaw.co.uk or visit the website at www.cfrlaw.co.uk

*Please note that the content of this article is for information purposes only and further advice should be sought from a professional advisor