The phrase without prejudice has been used in legal correspondence for centuries. Its purpose is to allow parties to negotiate freely in an attempt to settle a dispute, without the risk that their settlement discussions will be disclosed in court or arbitration at a later date, if negotiations fail.

Over time, however, the label has been used far more widely. Many parties assume that marking correspondence “without prejudice” will automatically protect their communications from being relied upon later in legal proceedings. In reality, the legal position is far more complex.

A Brief History

The English courts have been considering the effect of the words without prejudice since at least 1889. In the nineteenth century the approach was simple. A letter marked “WP” was treated as absolutely privileged. If settlement negotiations broke down, the communications could not be disclosed under any circumstances.

The modern position has evolved considerably and has become much less clear cut.

The Guiding Principles

In 1986, the Court of Appeal set out some important principles in South Shropshire District Council v Amos:

Using the heading “without prejudice” does not automatically mean that the communication is privileged.
If privilege is claimed and challenged, the court may review the document to determine its true nature.
If one party considers it useful for disputed WP correspondence to be disclosed, it may challenge the privilege claim and invite the court to inspect the documents.

Between 2004 and 2016, both the High Court and the Court of Appeal revisited the WP rule, thereby diluting some of its original strength. In Reed Executive PLC v Reed Business Information (2004), the Court of Appeal confirmed that WP exchanges could not be disclosed in the context of costs. Later, in Ravenscroft v Canal & River Trust, the court acknowledged that the boundaries of the WP rule were far from clear.

Where Does This Leave Us?

The courts have moved toward a more nuanced and intention-based approach. The key points can be summarised as follows:

A document marked “without prejudice” is not automatically privileged. The existence of an actual dispute at the time of the communication is crucial. Many parties attach the label out of habit long before any dispute has crystallised, meaning the protection does not apply.
Discussions about mediation or other forms of Alternative Dispute Resolution are not automatically privileged, even if marked “without prejudice”.
Correspondence that is not marked “without prejudice” may still be privileged if, viewed objectively, it forms part of a genuine attempt to settle a dispute.
The courts have justified this approach on grounds of public policy and implied agreement between the parties.
The focus is now on the intention and context of the communication rather than the use of the label itself.

A useful example is the High Court decision in Schering Corp v Cipla (2004). The court accepted that the use of the WP label demonstrates an intention to negotiate but decided that it must also consider the author’s intention and how a reasonable recipient would interpret the exchange. The courts will therefore treat communications as privileged even if the WP label has not been used.

However, if privileged settlement communications are not labelled WP, the courts may still allow them to be referred to when assessing costs after the dispute has concluded. This is a significant departure from earlier case law.

Practical Takeaways

Once a dispute has arisen, settlement communications do not need to be labelled “without prejudice” in order to attract protection. Following the decision in Rush & Tompkins, genuine settlement correspondence will generally be privileged.
Privileged settlement discussions cannot be used during the dispute, but they may be referred to when the court is determining costs.
Using the WP label before a dispute has arisen will not protect the communications. These exchanges can be disclosed and relied upon.
Simply marking a document “without prejudice” does not create privilege.
If a communication is genuinely privileged, the court cannot compel its disclosure.

A Changing Landscape

The law surrounding the use of “without prejudice” is now complex and at times inconsistent. The modern focus is on the parties’ intentions and the context in which the communication takes place, rather than on the application of the WP label itself.

Given the significant risks associated with wrongly assuming that WP protection applies, parties might want to seek legal advice embarking on discussions ahead of a possible legal action.