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The phrase ‘without prejudice’ is commonly used where parties in a dispute wish to keep communications relating to its settlement from being admissible as evidence should negotiations fail and the matter end up in court.

The principal use of without prejudice communications is to encourage parties to settle their dispute out of court, whether it be a dispute between neighbours or over a commercial contract. It provides a useful way for them to discuss the issues and to see if an agreement can be reached. If this does not prove possible and the case proceeds to court, the parties to the dispute will want to know that the earlier without prejudice discussions cannot be relied on as evidence in court. In many cases, without prejudice communications will not be admissible but a recent case has highlighted the need to be careful not to assume that the phrase will provide blanket cover that will always prevent such communications being admissible.

The case in point concerned two companies involved in a dispute over an invoice. They had undertaken extensive without prejudice negotiations prior to agreeing to a settlement in writing. However, one of the companies subsequently claimed that the other had defaulted on the agreement and the matter went to court. The High Court ruled that whilst without prejudice negotiations that do not lead to agreement will not normally be admissible as evidence in court, where a settlement is reached but there is subsequent litigation, adducing the communications between the parties as evidence in court, as if they had not been made on a without prejudice basis, may be appropriate in order to ascertain the true intentions of the parties concerned.

The judge said that the principle that without prejudice communications aimed at settling a dispute cannot be used in evidence in any subsequent legal proceedings is not an absolute rule but a matter of public policy. Where legal action is taken after a settlement has been reached and it would assist the court in reaching its decision, the court has the discretion to decide whether without prejudice communications should be admissible, depending upon the facts of the individual case.

If you are involved in a dispute of any kind, we can assist you in negotiating a settlement.

Says John Lennon, “In this case the young man had insufficient assets with which to pay the legal costs of the school. However, the third party costs order made against his parents meant that the school would have its legal costs met.”

In the British system of justice, the loser normally pays the costs of the winner and third party costs orders, although fairly rare, are a protection for litigants to help ensure that if they are successful in court, they do not find they are still out of pocket when victorious against someone who has no means themselves but whose own costs are being funded by a third party.