In Bradford & Bingley Plc v Rashid [2006] 1WLR 2066, Lord Brown stated: «The communications in question were expressly made without prejudice, and generally such communications would have the privilege of encouraging the parties to negotiate and settle their dispute amicably, even without public policy grounds.» Lord Mance disagreed, however, distinguishing between a situation where there was a real dispute and the expression appeared unprejudiced, as opposed to a context where there was no dispute and that sometimes «the term may be used thoughtlessly or superfluously, in which case it may simply be ignored. One or more parties are not free to extend the scope of the rule at will without prejudice to the privilege it confers as to admissibility or disclosure. I see no reason why the ordinary principles governing the interpretation of a settlement agreement should be different, regardless of whether the negotiations leading to it were not affected or not. The wording should be interpreted in the same way, and the question posed by Lord Hoffmann should be the same, namely what a reasonable person who had all the basic knowledge available to the parties would have understood [i.e. the parties] to use the wording of the contract. This background may well include objective facts communicated by one party to the other during negotiations. In my view, the interpretive process should in principle be the same whether the negotiations were impartial or not. In both cases, evidence is admitted so that the court can objectively assess the intentions of the parties. If a document is marked «without prejudice» or an oral communication is made «without prejudice», that document or statement is generally inadmissible in any subsequent judicial, arbitral or adjudicative proceedings. The rationale for this legal principle stems from the public interest associated with encouraging parties to resolve their own disputes without going to court, which is particularly encouraging for judges and arbitrators in the context of construction.
The use of the term and its legal meaning allows the parties to conduct free and open settlement discussions and propose compromises for their positions, and then subsequently reject if no satisfactory agreement can be reached and a formal settlement of disputes becomes necessary. Adding «without prejudice» to communication as part of a settlement negotiation can help achieve a timely and effective resolution. It allows parties to express themselves freely in a trial without fear that the other party will later use their comments against them in court. However, it is often abused. If not used properly, it will not provide you with the protection you need if the dispute ends up in court. If you have any questions, please contact LegalVision`s dispute resolution lawyers on 1300 544 755 or fill out the form on this page. Too often, the term «unbiased» is misused — even by lawyers — probably because people tend to believe that there is some kind of magic associated with the expression. This concern is poetically summed up in a 1975 Australian court decision in Davies v. Nyland: His Honour further confirmed that «it is clear from the evolution of jurisprudence that certain exceptions to the rule have been established without prejudice». In October 2010, in Oceanbulk Shipping & Trading SA v. TMT Asia Ltd and Others [2010] 3 WLR 1424, the Supreme Court considered the admissibility of negotiations without prejudice to the subsequent interpretation of the meaning of a settlement agreement.
Answering the question: should the exception to interpretation be recognized as an exception to the absence of prejudice? Lord Clarke said in the main judgment at paragraph 40: In any discussion or meeting where this is relevant, it is preferable to mention it at the outset – see also the next section on this subject – and to obtain confirmation from the other party that it agrees that the communication is without prejudice. A situation in which protection was lost without prejudice arose from the failure of mediation.10 The defendants brought a second action on the grounds that the first plaintiff had informed a third party that threats had been made against him during or after mediation. The question was: could the threats be mentioned primarily or did they fall under protection without prejudice? The court held that protection generally applies without prejudice to allegations of threats in mediation. In those circumstances, however, it would be assumed that both parties agreed to waive without prejudice the protection normally afforded to mediation because the defendants denied in their pleadings that they had made threats. This is of particular importance to the defendant, as any reaction to public allegations arising from protected subject matter may be construed as consent to the waiver of that privilege. If they had merely argued that everything said in mediation is protection without prejudice, they would not have waived protection without prejudice. Manx Staniforth & Otr v. Dukes Diner & Otrs 2011 Civil Summary Procedure (unreported) cited the English Court of Appeal`s Rush & Tompkins – v – GLC [1989] AC 1280, p. 1301, which stated, inter alia, that communication in subsequent litigation should in principle be inadmissible without prejudice.
His Honour the Grand Bailiff stated: «The rule is not absolute and this material may be inspected if the justice of the case so requires.» The rule without prejudice is a common protection. This means that only by all parties to the communication concerned can it be waived together without prejudice. Without prejudice to this, it is not an absolute cover to prevent recipients from relying on the content of a communication. Care must be taken to ensure that the content does not cause serious harm if this reality is neglected. Parties involved in a dispute generally add «without prejudice» to communications when negotiating a settlement. These communications cannot be used by the other party as evidence in court. Allegedly impartial communications that, if discovered, would show that a party is clearly asserting or making false statements of fact are not protected. If the words used indicate that the party is pursuing a dishonest matter or committing a criminal or fraudulent act, disclosure is admissible as evidence.11 Evidence of negotiations without prejudice could be presented to explain the delay in the progress of the dispute or the apparent acquiescence, for example: in the defence of a request for referral for failure to prosecute.15 Without prejudice to protection, it is generally accepted that it extends to any dispute, whether it is the subject of litigation, arbitration, dispute5 or alternative dispute resolution (ADR).