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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:
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.
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.