In recent years the use of the phrase "without prejudice" has seen increasing use, as if it were an incantation to be cast over correspondence by Harry Potter or one of his fellow wizards. It is often applied with little thought as to whether correspondence actually refers to a dispute, in the hope that no part of the correspondence will come back to bite the writer.
The protective effect the spell seeks to cast is to enable parties to speak frankly in an effort to settle a dispute without worrying that what they've said may be used against them. As Lush J noted -
"Unless parties to such negotiations can feel safe in making an offer and stating the facts on which it is based the door to negotiations may be closed. It is for the benefit of litigants and others that statements should be freely made in order to settle litigation".
How then to invoke that protection? In England and Wales the use of the phrase "without prejudice" attracts the protection, and correspondence (and meeting notes) bearing the phrase will generally benefit from the protection and be "privileged", as long as they represent a genuine attempt to discuss settlement for the purposes of avoiding litigation, without the fear that any concessions might later be used against the party making them - this is of course the public policy justification mentioned above.
It is increasingly common for the Courts to hear arguments about whether a document is privileged in cases where the phrase has not been used.
In Scotland, the use of the phrase is now also common, but it lacks any formal meaning and is simply treated as evidence of the spirit in which a particular letter was written, admission made or concession offered. The Scottish Courts have, for example, advised that -
"the words "without prejudice" may not cover with the cloak of confidentiality all portions of a particular letter which does not strictly relate to a proposed settlement."
Indeed in another case a Scottish Court decided that even though the term "without prejudice" had been used it was "necessary to examine the terms of the letter (in question) to discover whether they do or do not truly form part of an offer for negotiation for settlement."
It is therefore important, particularly in Scotland, to note when phrasing any letter in settlement negotiations that "without prejudice" will not magically protect a party who is making a definite admission or concession from it being used against them should the matter proceed to court.
While an adjudicator ought to examine the question of the status of a statement in the same manner as a Judge, the increasing use of mediation raises fresh questions. Mediation usually proceeds upon the basis of a written agreement to mediate, and it is crucially important, in order to enable a frank and full disclosure of the parties' claims, to ensure that anything said at mediation will not be pled in evidence at a later date. Fear of that frank and full disclosure haunting a party at a later date would cut at the very reasons a party mediates.
In conclusion, anyone thinking of using the phrase "without prejudice" will be well advised to consider carefully the content of the letter or other document the phrase is intended to protect. Unfortunately for drafters, it is not possible to teach them a magic phrase which will work in all circumstances. Care must therefore be taken to couch any admissions or concessions in suitable terms, to ensure they can only be viewed as hypothetical positions taken for the purposes of resolving a dispute.
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