The law encourages such ‘without prejudice’ discussions and will protect genuine negotiations aimed at settlement from disclosure in subsequent legal proceedings. The rule does not even depend upon the express use of the phrase ‘without prejudice’ if it is clear that the parties are seeking to compromise their dispute.
However, if satellite litigation is to be avoided, it is important that thought is given as to the status of any negotiations. The recent case of Pavilion Property Trustees Limited, Pavilion Trustees Limited v Urban & Civic Projects Limited  EWHC 1759 (Ch) is a good example of this. Here the court had to consider whether a meeting and the communications between the parties preceding and after the meeting were without prejudice or not.
It is worth bearing in mind the following points when faced with a commercial dispute:
- Be clear. If you are engaged in negotiations seeking to settle a dispute and wish to take advantage of the rule, use the words ‘without prejudice’ rather than rely upon the implication that the negotiations were without prejudice.
- Consider if you are actually engaged in negotiations with a view to the settlement of a dispute. Simply applying the words ‘without prejudice’ to general correspondence can lead to arguments as to whether the content attracts the protection of the rule. It can also be counterproductive, making it difficult to refer to certain matters in subsequent litigation.
- Ask yourself if certain discussions or matters need to be explicitly on the record so they can be referred to in subsequent court proceedings. In certain disputes, it may be beneficial to a party to make an open proposal so this can be shown to the court. On the other hand, a settlement offer can be seen as an admission of liability so careful thought should be given to the status of any proposal and how this is framed.
- Avoid writing correspondence containing both ‘without prejudice’ and open material. Write two letters or emails if necessary making it clear which is ‘without prejudice’.
- If a ‘without prejudice’ offer is accepted, the communications between the parties will be admissible to prove the existence of the settlement. If the intention is that any agreement reached should be set out in a formal contract or other document, also use the words ‘subject to contract’ in the offer letter. Remember that even email exchanges or oral discussions can lead to a binding settlement.
- If attending a meeting or making a phone call, be clear whether the meeting or call is to be ‘without prejudice’. Make a record of all oral discussions and their status.
- The protection given to ‘without prejudice’ communications can be removed if it is being misused for the purposes of blackmail or other impropriety. For example, a defendant employee accused his employer of criminal conduct and threatened to make public confidential information in breach of an injunction. The court admitted the ‘without prejudice’ email containing the threat in evidence as this was an abuse of the protection afforded to ‘without prejudice’ communications. The dividing line between applying legitimate commercial pressure and blackmail / impropriety should be obvious and not crossed.
- Be careful not to inadvertently waive the privilege that attaches to ‘without prejudice’ communication by subsequent conduct or communications.
Understanding the fundamentals of how the ‘without prejudice’ rule operates is of real practical and commercial value to any business. On the other hand, getting it wrong carries significant risks and can seriously damage or undermine an otherwise good case in subsequent litigation.
Our specialist Business Dispute Solicitors are very experienced in helping our business clients take a practical, commercial approach to managing disputes. We help them to minimise the impact of disputes on their business.
For further information relating to the points raised in this article, please contact Simon Lockley, Partner in our Dispute Management Department.