The phrase “without prejudice” is commonly used in both written and verbal communications to express one party’s intention for communications to be privileged.
Similar to advice privilege (discussed above), the purpose of “without prejudice” communications is to enable parties to a dispute to have frank, open and honest discussions about the matters in issue between them, in the hopes of bringing about an informal resolution of their dispute. This allows parties to make concessions and negotiate potentials terms for resolution of their dispute privately, without affecting their legal rights.
Test for “without prejudice” privilege
The legal test for “without prejudice” privilege originates at common law. It has since been legislated.
For communications to be privileged in the legal sense they must be made by a party solely in connection with a genuine attempt to negotiate a settlement of a dispute.
Labelling communications “without prejudice” is not determinative of their nature. This conclusion was reached by Wells J in Davies v Nyland (1975) 10 SASR 76, where His Honour stated:
“The practice of stipulating that discussions or correspondence directed towards achieving the settlement of a disputed claim are, or are to be, without prejudice is of respectable antiquity… But 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…”
Communications can still be “without prejudice” despite a party not marking or identifying them as being privileged. Likewise, communications marked or identified as being “without prejudice” are not necessarily privileged. The legal test must be met.
Ultimately, if the parties are unable to agree about the nature of their communications, the question of privilege will be determined by the independent decision-maker presiding over their matter (i.e. magistrate, judge, arbitrator, etc).
Common misuses
Some examples of common misuses of “without prejudice” privilege include:
- marking or identifying communications as “without prejudice” that are unrelated to a dispute – for example in general commercial negotiations;
- marking or identifying communications as “without prejudice” when a party is merely setting out its position or criticising the other party’s position;
- marking a letter of demand “without prejudice” where no concessions or offers are made; and
- marking communications as “without prejudice” which simply set out the agreed terms of settlement of the parties.
Tip
With the legal test for “without prejudice” privilege in mind, it is generally best practice to mark or identify communications as being “without prejudice” when they are intended to be privileged. This is because, where the party’s intention is expressed from the outset, the likelihood of a future disagreement arising between the parties regarding the nature of the communications is reduced.
More information
If you would like more information about this article, please contact:
Lauren Faulkner
Associate
T: (03) 6235 5192
E: lfaulkner@pageseager.com.au
Published: 22 February 2024
