11 May 2018

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The phrase “without prejudice” regularly appears in communications between parties in a dispute as it is often seen as a blanket protection against all things said, or admitted, to the other side. However, this phrase is easy to use incorrectly, leaving parties with the mistaken belief that their statements are protected by privilege. Some would argue that this is a widely overused yet misunderstood phrase in legal practice.

The key to successfully using “without prejudice” communication is not about ensuring the words are emboldened across the top of a letter, but being able to evidence substantive actions by the parties which demonstrate a genuine need for privilege to be afforded.

In this newsletter update, Emily Jennings of Moulis Legal looks behind the words “without prejudice” and highlights the underlying factors which will give rise to a right of privilege in communications between parties in a dispute.

Protection given by the phrase “without prejudice”

When used correctly, “without prejudice” communications can render a statement or admission made by one party inadmissible as evidence in Court proceedings1. That is, the communications by that party cannot be used against them in a manner that would cause prejudice to that party’s case.

This feature of evidence law has long been recognised as an important means of encouraging parties towards settlement by promoting free and open communication about the issues in dispute. Being able to make concessions in an effort to resolve a dispute, without the fear of the Court becoming aware of such concessions, can be significant when a party is considering negotiations.

Legal privilege requires more than words

Many Courts have considered the meaning and use of the phrase “without prejudice” in both oral and written communications between parties. A common test has emerged for determining whether a party is entitled to privilege in such communications. The test has two requirements2:

  • the parties are genuinely attempting to resolve a dispute which is already the subject of litigation, or will become litigious if no resolution is reached; and
  • the party seeking privilege has made an admission (whether express or implied) as part of the genuine attempt to settle the dispute.

If these two requirements are met, then the statements made by the party will be protected by privilege and cannot be used against that party in any current or subsequent litigation.

If the parties are not communicating to try to genuinely settle a dispute or are not making an admission or concession as part of these communications, then even if the words “without prejudice” appear in a letter, or are said in a phone call, the communication will not attract any right to privilege.

Distinguishing between confidentiality and “without prejudice”

One of the most common misuses of “without prejudice” is when parties are in discussions about something which is not in dispute, or is not related to the dispute they have.

For example, commercial negotiations cannot be “without prejudice” because they do not involve resolving a dispute. These types of negotiations may be confidential, or can be done on a “commercial-in-confidence” basis, but this will not attract any legal privilege or protection in the same way as “without prejudice” communications.

In essence, confidentiality signals the disclosure of private or secret information which the receiving party cannot abuse, whereas the phrase “without prejudice” has a distinct legal meaning in relation to making admissions or concessions in an effort to resolve a dispute.

Don’t forget to add “save as to costs”

Whilst any “without prejudice” communication which meets the above-mentioned test will be afforded privilege, there are circumstances where a party who seeks the privilege will also want to rely on the communication in open Court at the end of a dispute when addressing the question of costs. That is, a party may not want a Court to know about a concession it made about the strength of its case during the dispute, but wants the Court to know that it did make a concession in trying to settle the dispute as that concession may be relevant to question of who should pay costs.

Parties to a dispute can have the benefit of both worlds by marking communication as “without prejudice save as to costs”. This means that the communications are privileged and cannot be disclosed to the Court except in relation to the question of costs.

Consider whether “without prejudice” is necessary and appropriate

Effective use of “without prejudice” communications can help with the swift resolution of disputes as parties can negotiate without the fear of their concessions being used against them before the Court. Using the words “without prejudice” alone will not guarantee privilege. Importantly, use of this phrase in the context of non-disputes will not attract any protection.

In short, be judicious in your use of the phrase “without prejudice” and ensure it is used correctly in order to take advantage of the benefits the oft-used, ill-understood phrase has to offer.

Moulis Legal’s dispute resolution team guides businesses across Australia and Asia in the management and resolution of cross-border and domestic commercial disputes in a way that is commercially focused and business-centric. We represent Australian and international organisations in various domestic and international jurisdictions on matters including contractual disputes, cross-border intellectual property disputes, competition law issues and managing and responding to regulatory investigations.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2018

[1]  This is a principle in both common law, and codified in statute. See for example Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11; Village/Nine Network Restaurants & Bars Pty Ltd v Mercantile Mutual Custodians Pty Ltd [2001] 1 Qd R 276, and section 131 of the Evidence Act 1995 (Cth).

[2]  See Glengallan Investments Pty Ltd v Arthur Andersen [2001] QCA 115 at [28] per Williams JA (McPherson JA and Ambrose J agreeing). See also Insurance Commission of Western Australia v Antony Leslie John Woodings as Liquidator of Bell Group Ltd (in Liq) (No 2) [2017] WASC 372 at [52].