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The use or misuse of the term


"Without Prejudice" in correspondence
03 April 2013

Without prejudice is, without doubt, one of the most overused legal phrases. As stated by Wells J
in Davies v Nyland (1975) 10 SASR 76 at 89:

in some quarters of the community there is a belief, amounting almost to a superstitious


obsession, that the expression without prejudice is possessed of virtually magical qualities,
and that anything done or said under its supposed aegis is everlastingly hidden from the
prying eyes of a Court

Without prejudice privilege exists to facilitate the resolution of disputes by allowing parties to make
concessions or compromises without the risk that their willingness to compromise during
negotiation will be used against them at a later stage if negotiations fail.

So what does it really mean? Without Prejudice refers to the privilege that attaches to written or
verbal statements made by a party to a dispute in a genuine attempt to settle that dispute. This
means that the statements will generally not be admissible in Court as evidence against the
person who made the statement.

Importantly, without prejudice privilege only applies to written or verbal statements made in an
effort to settle a dispute once legal proceedings (or other alternative dispute resolution

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proceedings) have commenced or at the very least considered by the parties to the
communication. It will not protect a document or statement made in the course of negotiations that
are not related to dispute resolution (i.e. commercial negotiations).

As well as being entrenched in common law, the Evidence Act 1995 (Cth) and in particular,
section 131(1) states that any communication between any of the parties to a dispute that occurs
during the negotiation, or any document prepared in connection with the negotiation cannot be
adduced as evidence in Court. Therefore, without prejudice privilege is established not by whether
the words Without prejudice have been used, but rather by the partys intentions which are to be
ascertained from the nature of the communication. However, to avoid a potential argument in
respect of the use of a document in Court, it is still recommended to clearly state on your
correspondence that it is set out on a Without Prejudice basis.

Some examples of documents that ought not to be headed Without Prejudice are:

Letters of Demand - As you are not making any concessions or discounting the debt. If you
are, then it is a letter of offer and ought to be Without Prejudice.
Correspondence which is not related to settling a dispute (i.e. general commercial
correspondence) - As it will not protect or make confidential any communication unless it is a
valid and genuine negotiation with an intention to settle a dispute.
Correspondence for the purpose of finalising the terms of a contract/agreement where the
agreement is not a settlement (i.e. parties entering into a contract) - Whilst there may be
genuine negotiation or compromise between the parties, there is no dispute or litigation
contemplated.
Mere Assertion of rights - Where a letter merely purports to set out your clients rights and
reserves them, it will not be privileged and can be relied on in Court at a later date.

It is also important to remember that without prejudice privilege can be found to apply to part of a
document rather than the whole. Whilst an element of a larger document can be for the purposes
of negotiation, a Court may find that other parts of the document are sufficiently removed from the
negotiation to be able to be adduced in evidence.

Unlike legal professional privilege (which may be waived by the party to whom the privileged
document belongs), without prejudice privilege may only be waived with the consent of both
parties. Therefore, you cannot enter into without prejudice negotiations and then later seek to
adduce your own document or statement in Court without seeking the other partys consent. This
is an important consideration when deciding whether to head a document Without Prejudice. As
considered above, the contents of the document rather than the label attracts the privilege,
however, a document purporting to be Without Privilege that does not fit the criteria may lead to
a fight in Court, with the associated costs, down the track.

Finally, it is important to remember that, when you are negotiating with another party to a dispute
where legal proceedings or ADR are underway or anticipated, and you want to be able to rely on
your communication if the matter proceeds to Court, it is vital to state clearly that the
communication is an Open Communication. This will avoid your communication being caught by

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the Evidence Act and/ or common law and attracting privilege.

Without prejudice privilege is a vital tool in early dispute resolution and countless settlements are
achieved as parties feel free to make admissions or concessions in an environment where it
cannot be held against them. But the misuse of the Without Prejudice label can lead to
complications, legal arguments and potential negative cost implications for clients. Whilst it may
be attractive to use the terms liberally, it may pose a risk of costs and a risk of a red face to the
person drafting the material.

Maria Kerhoulas, Partner


Melbourne

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