The without prejudice fallacy: when words are not enough

It is not uncommon to see the words ‘without prejudice’ at the start of correspondence between negotiating parties. However, just using the words ‘without prejudice’ does not mean the correspondence will actually be without prejudice and subject to non-disclosure.

People often misunderstand exactly how and when without prejudice privilege can be employed. While without prejudice privilege intends to protect the sender by preventing confidential information from being admitted in future proceedings or disclosed to third parties, unless the communications relate directly to negotiations for an out of court settlement, the privilege cannot be claimed.

What is it?

Without prejudice privilege is a rule of evidence that, when certain elements are met, prevents communications and documents provided during the course of negotiations to settle a dispute or a potential dispute, from later being used against a party in court. The original rule has been around for years in case law, but has now been included in various Evidence Acts across Australia.

Claiming privilege

In order to validly invoke the privilege, the following elements must be met:

  1. there must be a dispute between two or more parties;
  2. there must be some form of communication or document;
  3. the communication or document must be a genuine attempt to settle the dispute; and
  4. the communication or document must contain admissions or assertions about the dispute (which could relate to either or both of the factual allegations or legal positions).

Without prejudice privilege can be claimed when there is some form of communication or document produced between parties in dispute who are genuinely trying to settle a dispute. For example, if a lawyer or client is directly making a written or verbal offer to settle a matter with opposing solicitors or parties, they should make it clear that they intend to claim without prejudice privilege. This can either be done by marking the letter or email ‘without prejudice’ or verbally informing the solicitor or other party of the intention to treat the communication as confidential.

However, if the lawyer or client does not make settlement offers or statements of compromise in their correspondence, they should not be claiming without prejudice privilege.

Application of the privilege

It is not always necessary that the communication itself is marked ‘without prejudice’ in order for the privilege to be claimed. Just because a document or communication is not described as ‘without prejudice’, does not mean that the privilege does not apply. As such, if the letter or document is in direct response to a communication marked ‘without prejudice’, the privilege will continue to apply.

Even if the requisite elements are met, the uniform evidence laws provide a number of exceptions to the without prejudice privilege, including but not limited to circumstances where:

  1. the substance of the communication or document has already been disclosed with the consent of both parties;
  2. there is a statement in the communication or document to the effect that it is not to be treated as confidential;
  3. evidence before a court is likely to mislead the court if the communication is not disclosed; and/or
  4. the communication was part of a fraud.
What to avoid

Without prejudice privilege cannot be used to deliberately avoid liability. For instance, illegal or misleading comments made in the course of negotiations to settle will not be protected by without prejudice privilege. Further, the privilege can be waived with the consent of both parties.

It is important that you separate all communications regarding without prejudice material from others that contain open information. If a document contains some without prejudice material but substantially contains material that is not considered protected by the privilege, then it can be admissible for the purposes of court proceedings. This was illustrated in the recent case of Hera Resources Pty Ltd v Gekko Systems Pty Ltd [2019] NSWSC 37, where it was found that a report provided under cover of a letter marked without prejudice was admissible due to the fact the report – along with the bulk of the letter – did not directly correspond to any attempt to negotiate a settlement. Had without prejudice been correctly applied, the decision may have been different. As such, while it might be easy to respond to everything at once, it is better practice to separate these communications.

Summary
  • Without prejudice privilege is a legal rule rendering communications or documents exchanged in the course of negotiating settlement confidential.
  • The words ‘without prejudice’ do not provide a ‘coverall’ protection.
  • Without prejudice privilege is only operative if it relates to a settlement offer or statement of compromise.
  • In some circumstances, without prejudice privilege does not apply either by conduct of the parties or by statutory exceptions.
  • Make sure you keep without prejudice material separate from any open communications that you might want disclosed, for example, in court proceedings.

Authors

This article was written by Radhika Kanhai, Partner, Stephanie Davies, Associate and Brianna Date, Trainee

Disclaimer

This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek legal advice.

Queries

For further information please contact the author or any member of our Litigation team

The Authors

Radhika Kanhai

PARTNER, MELBOURNE

Stephanie Davies

ASSOCIATE, MELBOURNE