Legal disputes don’t often start out in Court. Prior to trial, parties may want to keep the disclosures they make confidential. To prevent the other party from using this information in Court, these admissions are made on a ‘without prejudice’ basis.
The words ‘Without Prejudice’ can seem ubiquitous throughout the legal landscape, but their precise meaning isn’t always clear. In this article, we’ll explain what the term ‘without prejudice’ means and how to use it.
‘Without prejudice’ by its definition means ‘without detriment to any existing right or claim.’ More specifically, NSW Law Access describes ‘Without Prejudice’ as a statement that is not intended to affect either party’s rights.
By stating that something is ‘without prejudice’, you are saying that your disclosures cannot be used against you or prejudicially.
Why is there a need for ‘Without Prejudice’?
‘Without prejudice’ protects parties from having private (and potentially humiliating or embarrassing) admissions brought to the attention of the Court. These sorts of admissions ordinarily only happen whilst negotiations to resolve the issue are underway.
It’s important to note that ‘Without Prejudice’ is applicable to all stages of proceedings.
Why should I use it in my negotiations?
You may make an offer ‘Without Prejudice’ that is conditional. This means that if an offer is rejected, it can be presented to Court on the question of costs. This may be something you want to do if you make an offer that you believe is fair and reasonable and ought to have been accepted. This can also take the form of a Calderbank Offer.
The Court will likely consider this when determining costs. Determining costs generally can go either way, and depends on a variety of factors. To find out how to reduce your costs whilst in the midst of proceedings, click here.
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When and how to use it
Correspondence can be made on a ‘without prejudice’ basis when:
- Making an offer of settlement
- Negotiating the terms of a contract
- Making a counteroffer
When drafting an offer or counteroffer, include the words ‘Without Prejudice’ in the subject line of the email or at the top of the letter. What is important here is that the term is clearly visible and appears before the content of the letter begins. If you make this clear, then the other party cannot use this information
Example
Sally and Michael are disputing the proceeds of sale from the sale of their joint business. Sally has disclosed to Michael that she is almost bankrupt. She prefaced this with a statement that her admissions were on a ‘without prejudice’ basis. Michael cannot use this information if the matter proceeds to Court.
What should I do if I receive something marked as being ‘Without Prejudice’?
A letter marked as being ‘Without Prejudice’ should be treated as you would treat any other letter. If you intend to respond to the letter, it can also be marked with ‘Without Prejudice’.
However, ‘Without Prejudice’ only comes into effect when a dispute results in legal proceedings. During Court proceedings, ‘without prejudice’ material can’t be used unless:
- Both parties consent
- It falls under a legal exemption
- Upon the order of the Judge
‘Without Prejudice’ allows both parties to be transparent in negotiations without fear of exposure in Court. It’s important for parties to know that they can be honest and provide confidential information without the opposing side using this information against them down the track.
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