Caution needed when using ‘without prejudice’

In commercial communications business people will often use the phrase ‘without prejudice’ to try to keep information from being used against them in court proceedings.

A common misconception

Merely using the phrase ‘without prejudice’ does not ‘magically’ mean that the communication cannot be used in court proceedings. The communication must satisfy certain requirements to obtain protection.

The ‘without prejudice’ rule

To obtain protection under the ‘without prejudice’ rule the communication must be a valid and genuine negotiation between parties with an intention to settle a dispute. If this is the case and the negotiations fail the communication cannot be used in any subsequent court proceedings without the consent of both parties.

The purpose of the rule is to facilitate communication between parties to allow parties involved in a dispute to avoid litigation.

‘Without prejudice’ covers admissions by both conduct and verbal communication, however the conduct or communication must have a proper connection with the purpose of settlement of the dispute. The actual words ‘without prejudice’ are desirable, but not essential. The protection can operate where there is no statement of ‘without prejudice’ or any like phrase. The Evidence Act 1995 (Cth) section 131 (1) states that any communications between any of the parties to a dispute that occurs during the negotiation, or any document prepared in connection with the negotiation, can not be adduced as evidence in a court.

Are there any qualifications?

Examples of where the without prejudice privilege does not apply include:

• Communications containing demands or threats where the communication does not suggest settlement
• Communications which include a statement to the effect that the communication is not to be treated as privileged
• If the parties involved in the dispute expressly consent to the disclosure
• The substance of the negotiations has been disclosed with all the parties involved either expressly or impliedly consenting to the disclosure
• If the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute
• Misrepresentations contrary to the Trade Practices Act 1974 (Cth)
• If a party names a witness during the negotiations then it is open to the other party (subject to any professional ethics rule to the contrary) to interview the witness and call the witness at trial
• If the communication was made, or the document was prepared, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty
• If a compromise is reached, evidence of the negotiations may be given to enforce the settlement agreement.

For more information regarding using ‘without prejudice’, please contact a member of our Litigation & Dispute Resolution team on 07 3231 2444.