By Dan J. Leduc, Partner at Norton Rose Fulbright LLP
All too often, I see many clients and lawyers for that matter, using the term “without prejudice” on communications without due consideration as to when and where to use the term. The concern can be nicely summarized from a 1975 court decision from Australia 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”
If we were to translate the above excerpt, it would likely say: there is no magic that attaches with the use of the term “without prejudice”.
When should we use the term “without prejudice”?
The term is to be used when you wish to communicate or respond to a settlement offer, negotiation, counter offer or proposal. In that regard, it is to be used as part of what is called “settlement privilege”. Judges and arbitrators promote settlement especially in the context of construction claims. In order to allow the parties to have free and open settlement discussions, the notion of settlement privilege is part of our current legal system.
Ultimately, there must be a claim or dispute under way in order to communicate or respond to a settlement. The reason for using the term “without prejudice” lies with not having that communication form part of the record to be presented at the actual hearing or any motion or procedure before the trier of fact, whether it be within the context of arbitration or litigation. Settlement privilege means that the communication is part of a settlement negotiation that should remain “off the record”.
With the foregoing, when should “without prejudice” not be used? The answer is: in any communication that is not part of a settlement discussion or exchange. With that in mind, “without prejudice” should not be used in: notice letters or letters of demand where one party is asserting certain rights, typically, in the construction context, within the confines of the construction contract; correspondence that does not relate to a settlement or claim in dispute; any portion or part of any communication that does not relate to settlement negotiations or discussions (so that the settlement privilege would only attach to those portions of the communication dealing with such settlement negotiations).
Even communications that are not marked expressly as “without prejudice” can still be protected by settlement privilege if the communication is part of a genuine settlement discussion, although it is obviously safer to mark your communication as “without prejudice” if it is such.
Conversely, making a statement that you wish not to be part of the record but yet marked “without prejudice” and having nothing to do with settlement negotiations, could still end up as part of the record. In other words, as an extreme example, do not believe that making a libelous statement against someone or some company can be simply protected by marking the communication “without prejudice”.
Bottom line: only use the term “without prejudice” when commenting upon, communicating or responding to a settlement proposal or offer. Otherwise, you may be leading yourself to believe that your communication is “off the record” when it may very well be part of the eventual record.
Dan J. Leduc is a partner at Norton Rose Fulbright LLP and practises primarily construction law and dispute resolution. He is frequently called upon to advise and represent owners, subcontractors, suppliers and builders in such front-end services as contract review, tender issues and general construction matters, as well as in litigation and arbitration. He is Co-Chair of the firms’ National Construction Law Practice Group. He may be reached at 613 867 7171 or dan.leduc@nortonrosefulbright.com.