If you run a business, then at some point you are going to get a letter (or send one) with the words “without prejudice” at the top.
But what does “without prejudice” actually mean, and how should you use it in real life?
Without Prejudice in a Nutshell
Despite what some people think, “without prejudice” does not mean “off the record”. And, truthfully, there’s no such thing as “off the record” anyway unless you’re talking to a journalist.
Nor is “without prejudice” a phrase you use when you want to send something insulting or derogatory to the other party.
Without prejudice is a phrase used as part of negotiations. It means you’re about to extend some compromise, but in doing so, the other party can’t use that against you as an admission of liability.
In practical terms, this means that nobody is allowed to put evidence before a Court of without prejudice communications, except in limited circumstances (which we talk about below). That way, the Court doesn’t read my offer to pay you $100k and get influenced to think that I must be liable to you for something.
Much like the advice you receive from your lawyer, without prejudice communications are a form of privilege. In this case, the privilege is “owned” by both the sender and the receiver – they would both need to agree before a “without prejudice” letter was shown to the Court if it was otherwise not allowed to be.
… Save as to Costs
The short phrase “without prejudice” is a shortened version of “without prejudice, save as to costs”.
We’ve discussed the first half of that above. The second half, “save as to costs”, means that you ARE allowed to show without prejudice communications to the Court when the time comes to talk about who should pay whose costs in Court proceedings.
Why is this?
Well, the general policy is that parties should attempt to resolve their disputes by negotiation rather than litigation. Parties who have made reasonable offers to compromise can sometimes benefit from that, even if they do not completely win their case.
So, let’s say I offer to pay you $100k to make you stop suing me. You reject that but then go on only to “win” $75k in the Court proceedings. I’m going to say to the Court “well, Court, I offered these people $100k six months ago, and here we are having spent a tonne of money in the meantime only to find that they did worse than what I was prepared to pay them”.
After that I’m going to make a submission that you should pay my costs, even though in theory you won, because you rejected an offer that would have put you in a better position than the litigation did.
Without Prejudice in the Real World – 6 Tips
So that’s the theory of without prejudice, but how do you “use” it?
Don’t just put Without Prejudice on Things you Shouldn’t Say
Big mistake number one is thinking that whacking “without prejudice” on top of a letter gives you carte blanche to write something awful, insulting and crass in the hope that it will never see the light of day.
This doesn’t work. It’s not a without prejudice letter just because you wrote the words at the top.
Demands Aren’t Without Prejudice
Unless your letter contains some element of compromise (that is, an actual attempt to negotiate) then it’s not really without prejudice – it’s just a demand or an argument.
There’s also little practical point in making a demand on a without prejudice basis anyway, since if you’re not giving something away then there’s no prejudice that you need to avoid…
With Phone Calls and Meetings – Get Agreement
If you’re going to attempt a “without prejudice” phone call or meeting to try and resolve a matter, then you need to actually agree up front that the discussion is “without prejudice”.
This is as simple as saying “can we have this conversation on a without prejudice basis?” and them saying “yeah ok”.
If they say no, you might like to regroup and communicate in writing instead.
Responding to Without Prejudice Offers
Much like writing “without prejudice” on an email doesn’t automatically protect it, the reverse is also sometimes true.
If you are responding or referring in detail to “without prejudice” communications but forget to write “without prejudice” on the top, there’s a good chance that what you say will also be treated as without prejudice.
Most of the time that’s fine, since it’s rare you want to “open” negotiations to be on the record in the middle of a string of replies.
Finalising the Deal
So you’ve negotiated on a without prejudice basis, and now you are close to reaching a concluded deal. How does it work?
Most of the communications will have been without prejudice along the way, however the final deal will not be.
So if you send a without prejudice email saying “we’ll pay you $50k in full and final satisfaction of the claims” and they respond saying “yep done” (not generally a recommended way of finalising something), this exchange will not be covered by the privilege.
The reason, of course, if that if you don’t pay they need to be able to sue you for breaching the deal – and it would be odd if they couldn’t put evidence of the deal forward to support their case.
Just Because it’s Without Prejudice, Doesn’t Mean you Say Whatever you Want
While it’s true that your without prejudice statements can’t be used against you in Court, that doesn’t mean that you should take every without prejudice meeting as a chance to speak freely. Strategically they still have the information you give them, and they will still be making decisions on the basis of that information, so you need to exercise common sense before oversharing, even on a without prejudice basis. If in doubt, don’t say it.
Be Alert but not Alarmed
There’s no real magic in the phrase “without prejudice”.
Provided you use it as a way of attempting a genuine negotiation, it’s a valuable way of being able to say things in the interests of compromise without having them thrown back at you in the Courtroom.
As a general rule though, if you’re finalising a dispute through negotiations we obviously recommend getting your lawyers involved along the way. They can help protect your interests and ensure the final outcome wraps up all the loose ends.