Lawyers routinely head correspondence with the phrase “without prejudice” but is it being used correctly and are the communications really privileged?

What is without prejudice?

Without prejudice refers to the privilege applying to communications that shields those communications from being admissible, so as to encourage the parties to resolve and settle their dispute quickly and efficiently.  The privilege grants the parties an ability to speak freely, without concern that the other party may use those comments against them in the proceedings at a later date.  By adding “save as to costs” a party is indicating that the correspondence, as the phrase suggests, may only be relied upon in the determination of who should pay the costs.

The privilege of “without prejudice” is codified in section 131 of the Evidence Act 1995 (Cth).

When does it apply?

For the privilege to apply, the correspondence must satisfy the prerequisite that the statements or admissions being made are made in good faith with a view to negotiate a genuine settlement of the dispute.  

A prime example of a misguided application is the frequent labelling of a letter of demand as “without prejudice”.  By its very nature, a letter of demand is the antithesis of negotiating a settlement.  It is simply a demand for payment, without concession of a debt due and payable or willingness to enter into a negotiation.  The exception to this, is where the letter of demand provides a reduction on the amount owing if terms of payment are complied with.

Simply marking a document “without prejudice” will not automatically grant the writer some ethereal blanket of protection that the comments made in the communication will not be admissible.  This extends to correspondence that merely asserts rights, results in an agreement but not settlement of the dispute, or simply provides an update on the dispute and willingness of the parties to settle.

In the case of Hera Resources Pty Ltd v Gekko Systems Pty Ltd [2019] NSWSC37, his Honour, Justice Ball, was tasked with determining whether a letter, sent by Gekko, marked “without prejudice” in response to an earlier letter marked “without prejudice” would be able to invoke the protections of section 131, in circumstances where the letter simply provided an update on Gekko’s insurer’s position and discussed a report relating to the dispute but ended with “…Gekko is prepared to conduct a without prejudice meeting with Hera to discuss the possible resolution…of the dispute”.

Ultimately, his Honour found that the correspondence and the report were admissible and could be relied upon by Hera, as neither document were prepared or provided for the purposes of negotiating a settlement of the dispute. 

I forgot to mark my correspondence with “without prejudice”

While prudent, it is not always necessary to mark correspondence as “without prejudice”. The privilege and protection of the phrase may still apply in circumstances where it is omitted.

For example, a continuous chain of emails or correspondence that was, at the commencement stage, marked “without prejudice”, will result in the entire communication being protected – so long as the negotiation and attempts to settle are sustained. 

However, where the chain of correspondence interlaces “open” correspondence with “without prejudice” correspondence, or introduces correspondence that does not satisfy the necessary elements, then that specific correspondence may not be granted the protections of privilege.  

Key points to take away

It is important to understand that when attempting to rely on “without prejudice” you satisfy the necessary elements.  

Avoid terms like “off the record”, “confidential”, or “unofficial” as they create ambiguity and may ultimately cause significant prejudice if subsequent communication is relied upon by the receiving party. 

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*