I am helping from afar, an insurance broker who has a claim of their own. I was asked to review a letter of demand that the broker had drafted and I immediately noted that it was headed: Without Prejudice.
This is a common mistake that I see and have corrected countless times. Rather than keep doing this, I thought I would say a few words on the subject here. When I think of the frequency of the issue, I recall the words of Justice Wells from my studies on this subject back in the late 1980’s, which he used in Davies v Nyland (1975) 10 SASR 76 at 89. In that case he stated:
“…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”
I have found that there are many working in the insurance industry that clearly come from the quarter that Justice Wells refers.
My understanding is that the concept of “Without Prejudice” privilege was developed to facilitate the resolution of disputes by allowing parties to make compromises or concessions without the risk that their willingness to concede, typically on quantum (a required or allowed amount, especially an amount of money legally payable in damages) during negotiation will be used against them at a later stage if the negotiations fail. It can apply to both written or verbal statements made in an effort to settle a dispute once legal proceedings, or some alternative dispute resolution proceedings, has commenced or at the very least been 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, such as commercial negotiations.
‘Without Prejudice’ is a long entrenched principle in common law but it is also referred to in the Evidence Act 1995, Act No. 2 of 1995 (Commonwealth). Section 131(1) states that:
1) Evidence is not to be adduced of:
(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
Therefore, the principle of without prejudice privilege is established not by whether the appearance of the words “Without Prejudice” at the top of a document or elsewhere within it, but rather by the party’s intentions which are determined from the nature of the communication. Having said this, to avoid any confusion or potential argument in respect of the use of a document in Court, it is recommended to clearly state on the correspondence that it is being offered on a “Without Prejudice” basis.
To summarise documents that ought not to be headed “Without Prejudice” include:
- Letters of Demand
- Mere Assertion of rights – Where a letter merely purports to set out your client’s rights and reserves them, it will not be privileged and can be relied on in Court at a later date.
- Correspondence which is not related to settling a dispute such as. general commercial correspondence
- Correspondence for the purpose of finalising the terms of a contract/agreement where the agreement is not a settlement
It is also important to always bear in mind that “Without Prejudice” privilege will invariably only be found to apply to part of a document that refers to an offer of compromise rather than the entire document.
Areas where “Without Privilege” will not be accepted by the court includes:
- where the court has to decide if the parties have reached an agreement;
- where a party is claiming an agreement should be set aside because there has been misrepresentation, fraud or undue influence and the ‘without prejudice’ communication are evidence of that conduct; or
- where the ‘Without Prejudice’ communication is evidence of a wrongdoing such as perjury or blackmail.
I hope this provides sufficient guidance for readers moving forward and we all see fewer letters of demand incorrectly headed “Without Prejudice”. As my old lecturer said: “letters of demand should have as much prejudice as you can muster!”