In general, a party’s admission to something can be used against them in court. The without prejudice (WP) rule means that statements which are made in a genuine attempt to settle a dispute cannot be used in court as evidence of admissions against the party that made them.
The reason for this rule is to encourage parties engaged in litigation to attempt to settle their disputes out of court by offering them an opportunity to speak freely without the worry that what they say can be used against them if the matter does not settle. There must be a dispute ongoing at the time between the parties and the WP rule only applies to negotiations which are genuine attempts to settle the dispute.
A WP offer can be made orally or in writing but is most often contained in a letter or email to the opposing party. WP correspondence can be sent by any party at any time and does not need to be via a lawyer but it is important to make it clear to the other party that the correspondence you are sending is on a WP basis by clearly marking it as such, otherwise it will most likely be considered to be “open” correspondence.
There are some exceptions to the WP rule which means that on those occasions, the WP correspondence can be referred to in court. However, in these limited circumstances, the correspondence in question can only be admitted for that specific purpose.
The exceptions include:
- Where there is a dispute as to whether a WP letter has resulted in a concluded settlement agreement or not, for example if one party is denying the fact that an agreement was reached in WP letters, the court will want to see the correspondence in question in order to conclude whether or not the parties did agree settlement terms.
- Where the WP letter is evidence of the reasonableness of a settlement, this may also come under an exception to the WP rule if the court decides that the letter goes to the issue of the reasonableness of the settlement, for example where one party queries whether the settlement sum that is agreed is an appropriate one.
- Where a statement made in the WP letter may have given rise to an estoppel. Estoppel means that a person cannot assert something which is contrary to what is implied by a previous statement that they have made. If during the course of negotiations, one party made a clear statement giving rise to an estoppel, that statement may be admissible.
- Where the WP letter is evidence of misrepresentation, fraud or undue influence if the WP letter shows that the agreement was concluded on the basis of a misrepresentation, fraud or undue influence.
The same applies if the WP letter is evidence of perjury, blackmail or other impropriety in instances where if the WP correspondence is not deemed admissible, this would act as a cloak for perjury, blackmail or other unambiguous impropriety. Examples of unambiguous impropriety are if a claimant admits that their claim is a sham but proceeds with it, even if that effectively means blackmailing the defendant. Other examples include if a defendant tells a claimant that they will commit perjury if the claimant continues their claim and that they will flee the jurisdiction if the claimant wins, or if a defendant unambiguously implies that they would make certain assets judgment-proof if the claimant wins. However, the unambiguous impropriety exception will only apply in clear-cut cases and would need to demonstrate more than simply a risk of perjury.
- To explain or excuse a delay, but this is very limited, such as the court allowing the admission of WP letters simply to show that they were actually sent and the dates on which they were sent. In such situations it may be that the content of the letters is not actually looked at. It is important to note that if WP correspondence is admitted at an interim stage of a case, it may be that this automatically makes it admissible at trial if the reason for it being admitted relates to the merits of the case. This is because it may arguably mean that privilege relating to the WP correspondence has been waived.
There is also a distinction between a WP letter and a Without Prejudice Save as to Costs (WPSATC) letter. The rules mentioned above also apply to WPSATC letters except that WPSATC letters can be put before the court when deciding costs matters. When a WP letter is marked as WPSATC, it is implied that both sides have agreed that the correspondence can be referred to by the court when costs are being decided. Again, it is important to clearly mark the correspondence as WPSATC.
Our dispute resolution team has a significant amount of experience in dealing with a wide variety of claims such as intellectual property disputes, commercial agency claims, shareholder disputes, professional negligence claims, injunctions, contract disputes, corporate recovery and insolvency, franchise disputes and banking litigation. Part of our expertise is advising clients on when it might be appropriate to try and settle a claim and what tactics can be used. Utilising without prejudice correspondence is part of this. Please do not hesitate to contact a member of the team today if you need assistance in resolving a dispute.