George Y. C. Mok & Co.

Without Prejudice Negotiations

George Mok examines the usefulness of the ‘without prejudice’ rule in conducting negotiations

Negotiations for the settlement of a dispute should normally be conducted ‘Without Prejudice’, which is a term used so as to attempt to protect the writer of a document against the construing of its content as an admission of liability [see Law Reform Committee, ‘Privilege in Civil Proceedings’ (1967)]. Unless both parties consent, nothing said or done will then be admissible in evidence should the matter come to trial. For the purposes of this rule, it is neither necessary nor sufficient that the letter containing the statement made in the course of negotiations should be marked ‘Without Prejudice’. If the contents of such letter show that it was written with a view to the settlement of a dispute, it will be treated as having been written on without prejudice basis, even though not so marked.

The protection can only apply to bona fide negotiations made in an attempt to settle a dispute; and letters not concerned with the resolution of a dispute or not written in good faith will not be privileged even though they purport to be written on without prejudice basis. Thus, by adding these words to defamatory letter or to an unwarranted demand letter would not prevent its admissibility in a libel action or in blackmail or criminal proceedings. As the words ‘Without Prejudice’ will cover the whole content of a letter, one should not include in such a letter statements one will wish to adduce in evidence.

Without prejudice correspondence which is alleged to have resulted in a binding agreement will be admissible to establish the existence and terms of such agreement in the same way as any other contractual correspondence, as Lindley LJ said in Walker v Wilsher (1889) 23 QBD 335: ‘What is the meaning of the words “Without Prejudice”? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted.’ However, if a letter marked ‘Without Prejudice’ contains a statement which is wholly unconnected with the dispute, then that statement will be admissible. The reason is that such a statement cannot be said to have been made in the course of negotiations for the settlement of the dispute. The rationale behind the without prejudice rule is to encourage litigants to settle their disputes out of Court, and the Judges would therefore give a liberal interpretation to the question of whether statements in a letter marked ‘Without Prejudice’ is connected with the dispute. It would not be in the public interest if the litigants were discouraged from putting forward settlement proposals in the fear that some statements in the letter might be dissected as insufficiently connected with the dispute and proved in evidence against them later.

In case of a dispute about whether a particular statement is covered by the privilege or not, the Judge is entitled (if he sees fit) to examine the letter in order to determine the question. In a civil case, the Judge will normally sit as a Judge and as Jury, although the rules of evidence were evolved on the assumption that the functions of a Judge and Jury would be separated. When the Judge is called upon to rule on a question of admissibility of a letter, he may read the letter in his capacity as Judge in order to decide whether to allow himself to read it in his capacity as Jury. However, most Judges acknowledge that, as they are human beings and might have some difficulty in dismissing from their minds in one capacity what they have just read in another (or at any rate accept that litigants might not credit them with such strength of mind), they would try to avoid reading a letter of questionable admissibility unless this is clearly necessary to decide the issue. In this case, it is the duty of Counsel in propounding such a letter to tell the Judge that its admissibility may be in issue so as to give his opponent time to object before the contents of the letter are actually disclosed.

Without prejudice statements are admissible in evidence, in the following circumstances:

a. In the event of both parties consent, either expressly or by implication, to waive their right to object to disclosure or admissibility, eg, an implied waiver [see Turner v Fenton [1982] 1 All ER 8];

b. As a consequence of ‘Without Prejudice’ negotiations, the parties reach an agreement for settlement or a contract of compromise. In Tomlin v Standard Telephones & Cables Ltd [1969] 3 All ER 201, it was held, inter alia, that without prejudice correspondence was admissible to prove an agreement between the parties to a personal injuries action;

c. Purely on the issue of legal costs, after all the other issues have been resolved if the ‘Without Prejudice’ statement expressly reserved the right to refer to it on the issue of costs, ie, a Calderbank offer. [see Calderbank v Calderbank [1975] 3 All ER 333] Therefore, it is advisable to mark, in these circumstances, ‘Without Prejudice – Save As To Costs’ on letters.

Further, the fact that negotiations without prejudice have been taking place is admissible to rebut a plea of laches or a suggestion that there has been delay in taking proceedings [see Jones v Foxall (1852) 21 Ch 725].

George YC Mok

Senior Partner

George YC Mok & Co