The effect of marking correspondence ‘without prejudice’ is widely misunderstood, even by those within the legal profession, as was apparent in a recent adjudication.
The privilege that attaches to without prejudice correspondence enables parties to explore the possibilities of settlement. They may put forward proposals or offer concessions going beyond the position they would wish to adopt in formal proceedings in the knowledge that such correspondence cannot be referred to. A party may, for sensible commercial reasons, be willing to compromise a dispute on terms less favourable than the outcome they would argue for before a tribunal. The time, cost and effort involved in contested proceedings is frequently an incentive, in itself, to effect a settlement.
The common misunderstanding is that correspondence marked ‘without prejudice’ by a party can then be made ‘open’ correspondence simply by that party waiving its without prejudice status. It cannot.
In the case of Somatra Ltd v Sinclair Roche and Temperley (2000) the Court of Appeal held that a party to litigation was not entitled to rely upon the contents of without prejudice discussions with another party in order to advance its case at trial, unless subsequent conduct by the other party entitled it so to do. The same applies to correspondence. In short, if one party issues without prejudice correspondence, unless the other party agrees, the party issuing it cannot then refer to it.
The reason is consistent with the policy that parties should be encouraged to look to settle disputes themselves and should be free to make proposals and offers that do not reflect adversely upon their case in the event that the without prejudice negotiations are unsuccessful.
In the recent adjudication, a contractor in dispute with a subcontractor was unwilling to set out anything other than its trenchant denial of the subcontractor’s claims in open correspondence, then sought to introduce without prejudice correspondence of a more conciliatory approach. It was not allowed to do so.
It appears that lawyers, who should be more sophisticated in their understanding, sometimes confuse ‘without prejudice’ privilege with ‘legal privilege’. Legal privilege generally protects correspondence between a party and their lawyers for the purpose of providing legal advice and assistance from being subject to disclosure. Legal privilege can be waived, but beware.
Legal privilege cannot be waived for only part of a document. Further the waiver of legal privilege for certain advice given may give rise to the argument that legal privilege is waived for all of the advice given.
Too often correspondence is marked ‘without prejudice’ when the author may later wish to rely on it. If a party wishes to set out its position in relation to a dispute (absent concessions that it might be willing to make by way of a compromise but not be held to in proceedings), marking correspondence ‘without prejudice’ is rarely appropriate.