The phrase “without prejudice” is commonly used by lawyers and non-lawyers during commercial verbal negotiations or seen on legal correspondence. The phrase indicates that the discussion or document is not be used against that person in any subsequent or current court proceedings.
How does it work:
The “without prejudice” privilege enables parties to make concessions or compromises and to actively engage in frank and open discussion with a view of settling a civil dispute. If settlement negotiations break down, the communication cannot be used in any subsequent court proceeding without the consent of both parties, or without a ruling by a court.
The purpose of the privilege is to encourage valid and genuine negotiations between the parties involved and to avoid litigation. When a communication or document is made on a without prejudice basis, it generally cannot be entered into evidence or disclosed in court except in limited circumstances.
An exception to the rule, is if the phrase is expanded to “without prejudice except as to costs”. This means that ‘without prejudice’ protection applies until the court hands down a judgment. At this point, the court determines the issue of costs, usually awarded to the successful party and in doing so the court is entitled to review and consider without prejudice communication. In those circumstances where:
- The offeror (the person making the settlement offer) makes an offer which is subsequently rejected by the offeree;
- The matter does not settle; and
- The court ultimately makes a decision which has better consequences to the offeror than the consequences that would have flowed had the offeree accepted the offeror’s offer;
the court may make an order that the offeree must pay the offeror’s legal costs, provided that the offer contained a genuine compromise on the part of the offeror.
In conclusion, “without prejudice” communication allows parties to speak freely and so long as it is connected to the settlement of a dispute, the communication is generally protected and cannot be used later against them in court.
If you are considering entering into settlement negotiations or about to commence legal proceedings but require legal advice as to your options and obligations, contact Steven Dangerfield, Angela Catanzariti, Bojana Balen or Lynda Lim of Dangerfield Exley Lawyers for a frank discussion on your legal rights.
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