‘Without Prejudice’: Principles and Myths

This article sets out the principles behind the concept of ‘without prejudice’ communications.

One Day in Court ...

I remember a particular case some years ago in the High Court, in which several parties were engaged, very intensively in a hotly disputed and substantial application for the continuance of an injunction. It was that stage of the hearing, when the facts and law were very finely and evenly balanced, when the case could go either way, and the parties’ counsel were looking for and quoting every obscure Irish and Australian case that could help them and when reference to any relevant admission in recent correspondence could have helped to tip the balance one way or the other.

In the midst of the fine tooth-combing for evidence, in arch-files of correspondence, that was then going on during one of the evening breaks, I came across a letter emanating from the other side sent to my clients, which said a few things very useful to my clients’ case, including a couple of disastrous admissions. However, that letter was carefully labelled ‘without prejudice’ (in bold, in upper case and underlined for effect), which meant that, prima facie, it was not admissible and perhaps could not be used to advance my clients’ case.

I knew that if I exhibited that letter in court, I would (1) incur the wrath of the opposing counsel for doing the unspeakable act of disclosing a ‘without prejudice’ letter, and (2) open up a new can of legal issues in the already intense battle. Yet, if I did not use it, what a pity that would be. Because, that letter was truly illuminating and ground-breaking, and indeed very useful for resolving some issues of fact. I studied the letter carefully, together with my intelligent and cynical assistant. After a careful analysis of the letter and the background facts, I was convinced that the letter was certainly not ‘without prejudice’ in the true sense of the word — it was an ‘open’ letter, but labelled and cloaked with those words for some protection (‘just in case’).

So, the next morning, having made the decision to put the letter in issue, I introduced the document in court very matter-of-factly, incurring visibly red-faced wrath and resistance from the other side, cautions from the already laboured judge and another half-day of a new can of legal submissions. After several hours of legal wrangling, the Honourable Judge did see the light and agreed that the document was indeed an ‘open’ document and not ‘without prejudice’. I could thenceforth happily refer to that letter every now and then in court to resolve the issues of fact, and in my view at least, justice prevailed. (Epilogue: that matter was settled in due course and the opposing counsel and I are still good friends, thank goodness.)

For one thing, that case taught me (and all the teams of lawyers in court that day) a lesson I try to remember. The words ‘without prejudice’ do not, in themselves, offer any protection per se. Likewise, the omission or absence of those words do not automatically convert truly ‘without prejudice’ correspondence into ‘open’ letters. There is certainly no mystical protection when one uses these words. As in everything else in life, it is the substance, not the label, that matters.

The above anecdote is just one example of the kind of situations that can arise in relation to ‘without prejudice’ communications or seemingly ‘without prejudice’ communications in the course of litigation and arbitrations.

There are many other such situations that arise day to day in court in relation to this subject, as negotiations and correspondence between parties, some ‘open’ and some ‘without prejudice’, and some being a mixture of both, are part and parcel of the process of claims and communications between parties to commercial disputes (increasingly, nowadays, this of course also includes admissions made in the course of mediations).

In this article, I have attempted to set out the principles (and dispel some myths) regarding the concept of ‘without prejudice’ communications. We will also examine some of the practical and procedural difficulties of dealing with this subject in courts and arbitrations, particularly in connection with disclosure and admissibility.

Definition, Policy and Extent of ‘Without Prejudice’ Protection

‘Without prejudice’ means ‘without prejudice to the maker of the statement’.

In most, if not all, common law countries, what this means is that negotiations by parties and letters sent to each other labelled ‘without prejudice’ are privileged, inadmissible as evidence and should not be considered by the judge or arbitrator for deciding the factual issues.

They can be disclosed during the proceedings only if both parties consent to their disclosure and are admissible either when there is a waiver by the maker or if the communication falls into the several categories of exceptions (both of these aspects will be covered later in this article).

In Singapore, s 23 of the Evidence Act (‘Act’) (Cap 97), states: ‘In civil cases, no admission is relevant if it is made either upon express condition that evidence of it is not to be given, or under circumstances from which the court can infer that the parties agreed together that evidence of it should not be given’.

The policy of the courts and legislation in common law countries in recognising the ‘without prejudice’ rule is to encourage parties engaged in disputes to try to settle their disputes as far as possible without resorting to litigation. Conversely, the parties should not be discouraged in genuine attempts at peaceful resolution by any trepidation that their communications during negotiations may be used to their prejudice in due course during legal proceedings.

The other policy and rationale for the rule is that there is an implied agreement between the parties to not refer to settlement negotiations during proceedings.

There are many cases that have examined, analyzed and confirmed these principles. It is not the purpose of this article to go into any elaborate and historical examination of the authorities. However, if you would like to do any detailed reading on this subject, the following are some of the well known common law authorities: Cutts v Head [1984] 1 All ER 597; Re Daintrey ex p Holt [1893] 2 QB 116; Norwich Union Life Insurance Society v Tony Waller (1984) 270 EG 42; Rush & Tompkins v Greater London Council & Anor [1988] WLR 939; Unilever v The Procter & Gamble [2000] FSR 344; Lim Tjoen Kong v A-B Chew Investments [1991] SLR 188.

The general principle as restated by Lord Griffiths in Rush & Tompkins, is that the rule applies ‘to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence’.

The converse is that certain limitations and exceptions must govern the protection afforded to ‘without prejudice’ communications, or communications bearing this label, or else the privilege will become the subject of abuse. These limitations and exceptions will be dealt with further in this article.

Discovery and Admissibility

As to whether such privileged documents are subject to discovery, the House of Lords in Rush & Tompkins summarised as follows: (1) the right to discovery and production of documents does not depend upon the admissibility of documents in evidence. To put it another way, a party is entitled to discovery of all documents that relate to the matters in issue irrespective of admissibility. (2) However, as a distinct exception, privileged documents are protected from discovery and production, between the parties to the communications, and also to other parties in a multi-party litigation (see page 947 B to H of this case for Lord Griffiths’ explanation of the rationale for this).

Notwithstanding this, on the question of discovery, from a practical day-to-day litigation point of view, we must remember that, in the absence of a ‘without prejudice’ marking on the document in question, and in the absence of evidence of an intention that the documents in question were written ‘without prejudice’, the documents are not protected from discovery (note: ‘Admissibility’ in evidence is a different matter, for example the case of Panjacharam Raveentheran v Mookka Pillai Rajagopal [1998] 1 SLR 28, where the documents were not marked ‘without prejudice’ and subject to discovery, and later on ruled to be admissible).

If any party to a proceedings seeks to adduce in evidence any ‘without prejudice’ communications with the other party, the other party is entitled to object to such evidence being admitted or allow it to be admitted and/or give his own version of the negotiations.

Upon objection to the production of any document, on the grounds of privilege or otherwise, as stated in Re Daintrey ex p Holt, ‘the judge is entitled to look at the document to determine its character’, that is, to see if it really is ‘without prejudice’, whether any exceptions apply to it or whether it should be admissible in evidence.

Where a party chooses to waive the privilege, either expressly, or by implication (eg if he chooses to give his own version of events in relation to the document or admission in question) it is worthwhile for him to remember that there is no such thing as a ‘temporary waiver’ and that the waiver of privilege cannot be retracted (A-B Chew).

If the documents in question are ruled to be part of a continuous course of ‘without prejudice’ negotiations, all the documents in the series will be treated as being written ‘without prejudice’, even if some of the documents in the series are not marked ‘without prejudice’ (eg Info-communications Development Authority of Singapore v Singapore Telecommunications [2002] 3 SLR 289; Soon Peng Yam & Anor (trustees of the Chinese Swimming Club) v Maimon bte Ahmad (administratrix of Sukinah bte Haji Hassan, deceased); South Shropshire District Council v Amos [1987] 1 AER 340). However, this principle is not absolute and subject to the facts of the case (eg Re Sunshine Securities [1975–1977] 1 SLR 282).

A common occurrence in practice is where a party inadvertently allows a privileged document to be inspected.

In Dato’ Au Ba Chi & Ors v Koh Keng Kheng & Ors [1989] 3 MLJ 445, a privileged document was inadvertently included in a bundle of documents at a trial of an action. There was an application for expungement of the document from the bundle. The court allowed the application, as the document in question was clearly privileged and there was no consent or waiver by the party concerned.

In any case, we have O24 r19 of the Rules of Court, which provides: ‘Where a party inadvertently allows a privileged document to be inspected, the party who inspected it may use it or its contents only if the leave of the Court to do so is first obtained.’

Third Parties

The House of Lords in Rush & Tompkins decided that ‘without prejudice’ communications were also inadmissible in any subsequent litigation in connection with the same subject matter; that admissions made to reach a settlement with a different party in the same litigation were also inadmissible, whether or not settlement was reached with that party; and that the general policy that applied to protect genuine negotiations from being admissible in evidence also applied to protect those negotiations from being disclosed to third parties.

However, the Court of Appeal in Singapore in Lim Tjoen Kong v A-B Chew Investments referred to the abovementioned s 23 of the Act and stated that ‘A literal reading of s 23 suggests that the privilege from disclosure of “without prejudice” negotiations is confined to the parties to the action (and their solicitors or agents)’. The court went on to say that s 23 has to be read subject to s 2(2) of the Act which provides that: ‘All rules of evidence not contained in any written law, so far as such rules are inconsistent with any of the provisions of this Act, are repealed’.

Were the comments in A-B Chew inconsistent with Rush & Tompkins? This was left as an open question, as the Court of Appeal in A-B Chew went on to say ‘The rule of evidence in Rush & Tompkins may or may not be inconsistent with s 23. There is room for argument that it may not be.’ However, as this point was not argued by both parties and was not directly relevant to the case before it, the court did not decide this point (see also Halsbury’s Laws of Singapore Vol 4 para 50–328).

However, the High Court in Yeo Hiap Seng v Australian Food Corp [1991] SLR 573 decided categorically that a third party who did not take part in the ‘without prejudice’ negotiations cannot claim the privilege, stating that ‘what is privileged between A and B is privileged between them only to that extent and for purposes of proceedings between A and B only. The fact that there are “without prejudice” negotiations between A and B does not mean that B would be in a position to say that the information cannot be used against C’.

Whether a Communication is Really ‘Without Prejudice’

Sometimes, it is not clear on the face of the document if the communication is really ‘without prejudice’. The court or tribunal will then have to look at the surrounding circumstances and evidence before making a ruling on the admissibility of such evidence. In doing so, the following aspects are considered.

Sometimes, there is a clear stipulation by the maker of the document that the document is ‘without prejudice’. The stipulation situation occurs when a party makes any communication on the condition that the admission or communication concerned will be irrelevant and inadmissible in civil proceedings. The consent of the other party is immaterial.

If it is obvious from the contents and background that the communication is privileged, the stipulation is genuine and ought to be respected (in view of the abovementioned policy and rationale for protecting such documents), then that is the end of the matter and the document is not admissible, unless there is some distinct exception to make it admissible.

The tribunal will also have to consider whether there is a compelling context for the document in question to be considered to be ‘without prejudice’, in the sense that there is a bona fide dispute and the communication was made in the course of negotiations or attempts to resolve that dispute, or during a mediation (Wong Nget Thau & Anor v Tay Choo Foo [1994] 3 MLJ 723; Halsbury’s Laws of Singapore Vol 10, para 120–428).

An example of a case in which there was neither a stipulation nor a compelling context was Ted Bates v Balbir Singh Jholl [1979] 2 MLJ 257, in which the respondent admitted in a letter that he owed $250,000 to the appellant, but he asked for an extension of time to repay the monies. His letter was not marked ‘without prejudice’. The Court of Appeal held that the letter was not privileged. As stated by Lee Hun Hoe CJ: ‘This has no application to a case where a man says he owes another a certain sum but merely asks for time to repay the sum...The question of prejudice has no application unless a person is in dispute or negotiation with another at the time.’

In this connection, we must remember that a mere assertion or ‘reservation of rights’ is not enough.

For example, in Buckinghamshire County Council v Moran [1990] 1 Ch 623, the plaintiff was a council which had acquired a plot of land for a future road diversion. The land was left undeveloped for some time. The defendant had unimpeded access to and across the land as his home and garden were adjacent to the land. The defendant began to maintain the plot by mowing grass and trimming the hedges, using it for his own purposes. The council in due course became aware of the defendant’s use of the land and sought re-possession of the land. The defendant wrote a letter to the plaintiffs marked ‘without prejudice’, stating he had the right to the land until the proposed road diversion was constructed at least and that he was in the process of seeking legal advice. The Court of Appeal decided that the letter was merely an assertion of the defendant’s rights. It was not an offer to negotiate, it was not entitled to privilege and was admissible as evidence.

As stated by Hoffman J in this case:

As I read the letter, it amounted not to an offer to negotiate but to an assertion of a defendant’s rights, coupled with an intimation that he contemplated taking his solicitor’s advice unless the council replied in terms recognising his rights...the attribution of the protection of ‘without prejudice’ privilege to it would in my opinion go beyond the bounds of that privilege established by existing authority and would not in my opinion be justifiable.

As another example, a party in a recent construction dispute arbitration stated in their Statement of Case that all their prior claims, positions and demands (including what was stated in their Notice of Arbitration) were ‘without prejudice’ and they then introduced completely new claims and radically different claim quantifications in their Statement of Case. Can prior claims (including those in contractual change order claims, open correspondence and the claim advanced in the Notice of Arbitration) be dismissed as ‘without prejudice’, inadmissible in evidence and irrelevant, thus precluding the other party from referring to those prior claims to establish conduct, estoppel and relevant matters of fact? To answer such questions, the tribunal will have to examine the parties’ stipulations as well as the surrounding circumstances, to consider if there is a compelling context for the prior communications to be considered ‘without prejudice’ in the true sense of the word.

In relation to negotiations, a common difficulty is where discussions between parties on an ‘open’ basis evolve or change at some point into ‘without prejudice’ discussions; or vice versa. It is no easy task to resolve such a situation, and an examination of the facts and surrounding circumstances is called for (eg Cheddar Valley Engineering Ltd v Chaddlewood Homes [1992] 4 AER 942).

Incidentally, ‘confidentiality’ must not be confused with ‘without prejudice’ privilege. A ‘without prejudice’ document may be confidential. However, not all confidential documents are ‘without prejudice’. Where ‘without prejudice’ refers to the protection of rights of the maker of the statement or writer of a letter, confidentiality refers to the protection awarded to a special relationship, for example, between a lawyer and his client or the circumstances in which the communications are conducted.

Use or Failure to Use the Words ‘Without Prejudice’

As a practical and prudent measure, if the intention is to communicate on a ‘without prejudice’ basis, the communication (be it a letter or draft or minutes of meeting) should be labelled ‘without prejudice’. This should be done at least to protect against disclosure during discovery (in particular, inadvertent disclosure). That is one of the lessons to be learnt from the facts in the case of Panjacharam Raveentheran v Mookka Pillai Rajagopal.

Aside from the question of practical prudence (which recommends the use of the ‘without prejudice’ marking in case of doubt), it must be remembered however that the absence of this marking is not necessarily fatal. Ultimately, it will be the substance that counts and this is clear from various judicial pronouncements. Similarly, it is obviously not necessary to use the words ‘without prejudice’. The court or tribunal may find a similar inference from the use of other words to like effect or from a compelling context (Wong Nget Thau v Tay Choo Foo; Sinojaya Sdn Bhd v Metal Component Engineering (Hoyo Crosstec Sdn Bhd, third party) [2003] 1 SLR 281).

As Parker LJ in South Shropshire District Council summed it up aptly, ‘the use of the words “without prejudice” prima facie meant that the letter was intended to be a part of negotiation. It would not of course be conclusive because it might be plain from the contents of the letter that it was not so intended.’

In Rush v Tompkins, Lord Griffiths said:

…the application of the rule is not dependent upon the use of the phrase ‘without prejudice’ and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.

Chocoladefabriken Lindt v Nestle [1978] RPC 287 were proceedings for interlocutory relief relating to an alleged passing off and infringement of a registered trade mark. One of the issues was whether evidence comprising of a telephone conversation and two telexes without the words ‘without prejudice’ were inadmissible. The High Court held that the evidence was inadmissible. This was because ‘it is perfectly plain that the disputed telephone conversation and the disputed telexes related to a proposed settlement of the dispute between the parties, though in none of them was the term “without prejudice” or its equivalent used’.

In Chocoladefabriken Lindt, Sir Robert Megarry said:

The mere failure to use the expression ‘without prejudice’ does not conclude the matter. The question is whether there is an attempt to compromise actual or impending litigation, and whether from the circumstances the court can infer that the attempt was in fact to be covered by the ‘without prejudice’ doctrine.

Exceptions and Limitations

In certain situations, the court may decide to admit evidence even if it was part of a ‘without prejudice’ communication.

As stated by Lord Griffiths in Rush & Tompkins (page 740E), ‘the rule is not absolute and resort may be had to the without prejudice material for a variety of reasons when the justice of the case requires it’.

These exceptions are set out in various authorities, but it is useful to look at Unilever v The Procter & Gamble, and Rush & Tompkins (page 943A) in which lists of the exceptions are conveniently set out.

It must be borne in mind that in certain situations where these exceptions kick in, it is not the content of ‘without prejudice’ negotiations but the fact that they took place which is admissible and material.

The notable exceptions include:

  1. Where the issue is whether the ‘without prejudice’ communications had resulted in a concluded compromise settlement (Walker v Wilsher (1889) 23 QBD 335; Tomlin v Standard Telephones and Cables [1969] 1 WLR 1378; Malayan Banking Bhd v Foo See Moi [1981] 2 MLJ 17).
  2. Where it was admissible to show that an agreement apparently concluded between the parties during negotiations should be set aside on the ground of misrepresentation, fraud or undue influence (Underwood v Cox (1912) 4 DLR 66; Chocoladefabriken Lindt).
  3. Where a statement might be admissible as giving rise to an estoppel (Hodgkinson & Corby v Wards Mobility Services [1997] FSR 178).
  4. Where the exclusion of the evidence would act as a cloak for perjury, blackmail, threat or other unambiguous impropriety (Kitkat v Sharp (1882) 48 LT 64; Kurtz & Co v Spence & Sons (1888) 58 LT 438).
  5. Where the evidence is admissible in order to explain delay or apparent acquiescence, for instance, in applications to strike out proceedings for want of prosecution (Walker v Wilsher; Family Housing Association (Manchester) v Michael Hyde & partners (a firm) & Ors [1993] AER 567).
    (In relation to this, note that, it has been held that, evidence of ‘without prejudice’ negotiations was not admissible in applications for security for costs — Simaan General Contracting v Pilkington Glass [1987] AER 345).
  6. Where in an action for negligence, the evidence was admissible to show that the Claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a third party (Muller v Linsley & Mortimer [1994] 139 SJLB 43).
  7. Where the evidence was admissible as being an offer made ‘without prejudice save as to costs’ (Cutts v Head).
  8. In matrimonial cases, a distinct privilege extending to communications received in confidence with a view to matrimonial conciliation.
  9. ‘Without prejudice’ communications which are an election between two mutually inconsistent alternative courses of action (Haynes v Hirst (1927) 27 SR (NSW) 480).
  10. Where the communication is an act of bankruptcy (Re Daintrey ex p Holt).
  11. For handwriting authentication (Waldridge v Kennison (1794) 1 Esp 142).

‘Without Prejudice Save as to Costs’

This discussion would not be complete if one does not consider the now common phenomenon of letters and offers sent ‘without prejudice save as to costs’ in modern litigation and arbitrations. There has been an increasing use of such letters in recent years, as costs are a major factor in proceedings. These missives are also known commonly as ‘Sealed Offers’ or ‘Calderbank Offers’ (the latter term is interesting, because, as stated by Fox LJ in Cutts v Head, ‘In fact, one thing that was quite absent from Calderbank v Calderbank was a Calderbank offer’).

If a letter is ‘without prejudice save as to costs’, it only enjoys privilege or is ‘sealed’ up to the appropriate time when the court or arbitrator is asked to consider the question of costs (after the award or decision) in relation to the subject of the ‘Sealed Offer’. The court or arbitrator is not divested of, but maintains the discretion on the question of costs. However, such ‘sealed offers’ can be very effective devices for a party to put forward a case that costs in his case do not necessarily ‘follow the event’ and that the special terms as to costs in the ‘sealed offer’ should prevail.

Upon an eventual award of damages being less than the sum stated in the ‘Sealed Offer’, the usual argument put forward in relation to cost is that, at least from the date the offer was made, the legal costs incurred were totally unnecessary, since the plaintiff/claimant could have then got everything he wanted without a contest.

A concise treatment of this subject, in relation to arbitrations at least, can be found in the judgment of Donaldson J in Tramountana Armadera SA v Atlantic Shipping [1978] 2 AER 870:

Although the respondents’ offer of settlement has been referred to as an ‘open offer’, this is a misnomer. Offers of settlement in arbitral proceedings can be of three kinds, namely ‘without prejudice’, ‘sealed’ and ‘open’. A ‘without prejudice’ offer can never be referred to by either party at any stage of the proceedings, because it is in the public interest that there should be a procedure whereby the parties can discuss their differences freely and frankly and make offers of settlement without fear of being embarrassed by these exchanges if, unhappily, they do not lead to a settlement. A ‘sealed offer’ is the arbitral equivalent of making a payment into court in settlement of the litigation or of particular causes of action in that litigation. Neither the fact, nor the amount, of such a payment into court can be revealed to the judge trying the case until he has given judgment on all matters other than costs. As it is customary for an award to deal at one and the same time both with the parties’ claims and with the question of costs, the existence of a sealed offer has to be brought to the attention of the arbitrator before he has reached a decision. However, it should remain sealed at that stage and it would be wholly improper for the arbitrator to look at it before he has reached a final decision on the matters in dispute other than as to costs, or to revise that decision in the light of the terms of the sealed offer when he sees them.

(Written ‘Without Prejudice’!)

Naresh Mahtani & Melissa Chen
UniLegal LLC

E-mail: [email protected]