What does it mean and how does it work?The NZ law firm, Philips Fox, has reported on a recent House of Lords ruling that clarifies how the term 'Without Prejudice' works.
Lawyers will sometimes state that a letter or discussion is ‘without prejudice’. Such communications are not admissible in court and are intended to encourage litigants to reach an agreed settlement. However, whether a particular communication is protected depends on the intention of the parties. Just adding the words ‘without prejudice’ does not automatically give the communication privileged status. Nor do the words ‘without prejudice’ need to be stated. To be ‘without prejudice’ there must be a dispute and the communication must seek a compromise or have some bearing on the settlement negotiations.
In Bradford & Bingley Plc v Rashid, the House of Lords considered the ‘without prejudice’ rule in the context of a debtor’s acknowledgement of a long overdue debt.
Bradford & Bingley wrote to Mr Rashid about an outstanding loan asking for an offer of repayment. Mr Rashid replied, acknowledging that he owed the debt, but said he could not pay immediately though he might be able to start repayments two or three years later. The bank was not satisfied and issued proceedings to recover the debt. Judgment was sought because of Mr Rashid’s acknowledgement of the debt. However, Mr Rashid argued that the acknowledgement was protected by the ‘without prejudice’ rule and sought to have his letters excluded from evidence.
It was ruled that ‘without prejudice’ did not apply to open communications designed only to discuss the repayment of an admitted debt, rather than to negotiate and compromise a disputed debt. Mr Rashid’s correspondence treated the debt as an undisputed liability and dealt only with whether and when and to what extent he could meet that liability. Since the debt was admitted, there was no dispute and therefore the communications could not be ‘without prejudice’.