Without prejudice: Traps and tips

14th November 2017

Walker Morris explains without prejudice privilege; a recent case which extends exceptions to the principle; and offers his practical advice.

Rules and traps

If a communication between negotiating parties has without prejudice privilege it will not be admissible in court and therefore cannot be adduced against the party that made it. The rationale is that it is in the public interest that disputing parties should be able to negotiate freely, without fear of future prejudice in court, with a view to settling their disputes wherever possible.

For a communication to attract without prejudice privilege, there must be a real issue between the parties and the communication in question must be, or form part of, a genuine attempt to negotiate a resolution. Crucially, it is the substance of the communication that matters – not whether or not the document, meeting or phone call has been labelled or stated to be ‘without prejudice’.

There can be significant traps for those who negotiate without fully understanding the nature of without prejudice privilege.

For example, parties often use the phrases ‘without prejudice’ and ‘off the record’ interchangeably when they want to engage in written or oral correspondence privately and without facing potential comeback in any subsequent legal proceedings. The difficulty with this is that, unless the correspondence specifically pertains to a settlement effort, it simply will not be privileged as a matter of law. Communications cannot be designated ‘without prejudice’ by a heading or statement to that effect; and ‘off the record’ is not a legally recognised concept in any event.

Another danger is that without prejudice privilege can be waived – even inadvertently. In some instances parties expressly choose to waive privilege in a communication, often because it contains some information which one or both parties actually wish to place before the court. However, it is not generally possible for parties to cherry pick items or admissions within any one communication without waiving privilege overall. In some instances, attempting to waive privilege of part of one communication can even result in the waiver of privilege in respect of an entire negotiation or suite of documents because it is important that a partial picture should not be presented to a court.

Parties should also be aware that communications marked ‘without prejudice save as to costs’ may be shown to the court following judgment of the main dispute. Such communications can reveal how reasonably (or not!) a party has acted, and can be highly influential as to the determination of any costs award.

A recent case – Extending WP exceptions

There are some exceptions to the without prejudice privilege rules. One of those provides that, where there is an issue as to whether or not without prejudice communication has resulted in a concluded compromise, the communication can be disclosed.  The recent case of EMW Law LLP v Halborg [1] has confirmed that exception, and even seemingly extended it.

The claimant sought specific disclosure of documentation produced during settlement negotiations that had taken place, not between the parties to the litigation, but between the defendant and another person. The High Court held that justice demanded that the concluded compromise exception applied, regardless of whether the without prejudice communications were between the parties or with any other person, because the court could not determine whether there was a concluded settlement without them.  (The judge placed some emphasis on the fact that, just because a party to without prejudice negotiations is entitled to withhold them from disclosure in litigation between those parties, does not mean that the party is not free to show them to someone else if there is a legitimate reason for doing so.)

The High Court also endorsed an exception founded in an earlier, much criticised, decision [2], holding that without prejudice privilege might not apply where there is an issue as to a party’s conduct in concluding a settlement.

Other (less contentious) exceptions to the without prejudice rules include where parties choose to negotiate openly, perhaps because this is preferable tactically or perhaps because this is necessary for a party to demonstrate its position to a third party; and where it would be manifestly unjust to allow the privilege to apply because a communication amounts to evidence of fraud, misrepresentation, undue influence, perjury, blackmail or other impropriety.

Practical tips

Anyone considering negotiating with the other party to a dispute should bear in mind the following practical advice:

• Remember that, whilst without prejudice privilege exists to encourage free negotiations and to facilitate settlement, it will only arise to protect parties in particular circumstances.
• Note that if discussions or documents do not amount to genuine attempts to settle a dispute, they will not be protected from disclosure to the court, regardless of any attempt to label them ‘without prejudice’.
• The question of whether or not privilege exists primarily relates to a communication as a whole. Generally, unless specific items of content within a communication are very clearly separable, it is not possible for a party to argue that some aspects of a communication can be disclosed to a court, but not others.
• Consider every communication individually and ask whether it should be wholly without prejudice, or without prejudice save as to costs. In case of the latter, ensure that the communication is endorsed accordingly.
• Beware inadvertent waiver. Speak to your solicitor immediately if you are ever unsure.
• In light of the EMW Law v Halborg case, if it is important for parties to ensure that documents protected by without prejudice privilege should also be protected from disclosure to third parties, it may be sensible to agree that expressly from the start.

If you would like any further advice or assistance in relation to the negotiation and settlement of a dispute, please do not hesitate to contact any member of Walker Morris’ Commercial Dispute Resolution team.

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[1] [2017] EWHC 1014
[2] i.e. that in Muller & Anor v Linsley & Anor [1994] EWCA Civ 39