All too often the term “without prejudice” is used incorrectly – even by lawyers – likely because people tend to believe that there is some sort of magic that attaches to the phrase. The concern is poetically summarized in a 1975 court decision from Australia in Davies v Nyland:

“…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.”

While there are appropriate circumstances to use the phrase, it certainly does not have magical powers and may actually be detrimental to your position if used incorrectly.

What does “without prejudice” even mean?

If a document is marked “without prejudice”, or a verbal communication is made on a “without prejudice” basis, that document or statement will generally not be admissible in any subsequent court, arbitration, or adjudication proceedings. The rationale for this legal principle comes from the public interest associated with encouraging parties to settle their disputes on their own without recourse to the courts, which is something that judges and arbitrators are especially encouraging of in the construction context. The use of the phrase and the meaning given to it by the law allows parties to have free and open settlement discussions and offer compromises to their positions and then renege later if a satisfactory settlement cannot be reached and formal dispute resolution becomes necessary. 

When should we use the term “without prejudice”?

The phrase can and should be used when you wish to communicate or respond to a settlement offer, indicate your willingness to negotiate or reconsider your position, and if you wish to make counter offer or proposal. Stating that such communications are “without prejudice” brings them within the protected realm of “settlement privilege”, keeping them “off the record” and making them inadmissible (in most cases) as noted above.

When should "without prejudice" not be used?

In short, you should not say that something is “without prejudice” if you might want to be able to rely on it in court or any other type of legal proceeding. As a basic guideline, this means that you should not use the phrase in any communication that is not part of a settlement discussion or exchange.

With that in mind, here are some examples of when “without prejudice” should not be used:

• Notice letters or letters of demand where one party is asserting certain rights, such as if you are giving a Notice of Dispute or Notice of Intention to Claim for Delay under a standard form construction contract;
• Correspondence that does not relate to a claim in dispute;
• Any portion or part of any communication that does not relate to settlement negotiations or discussions (so that the settlement privilege would only attach to those portions of the communication dealing with such settlement negotiations).

Lawyers complicating the simple.

As with everything, lawyers have complicated these simple principles and created exceptions to these general rules.

On the one hand, marking a communication “without prejudice” because you do not want it to be admissible in court or other proceedings does not guarantee that it will be protected. Courts and arbitrators might allow the statement in evidence if it is in the interests of justice to do so. As an extreme example, you cannot make a libelous statement against a person or a company in an email and get away with it by marking the communication “without prejudice”.

Less extreme examples of when “without prejudice” might be waived include where the dispute itself is about whether a binding settlement or other agreement was reached, where there are allegations of bad behaviour such as blackmail or fraudulent misrepresentation, and in cases where a limitation period or some other deadline was missed and the affected party wants to argue that the reason they did not act sooner was because of a settlement communication received from their adversary.  The party who marked the communication “without prejudice” may also be able to waive the protection in certain circumstances. 

Conversely, communications that are not marked expressly as “without prejudice” can still be protected by settlement privilege if the communication is part of a genuine settlement discussion. Substance tends to govern over form, but it is obviously safer to mark your communication as “without prejudice” if it is truly part of settlement discussions.

Bottom line

Only use the term “without prejudice” when commenting upon, communicating or responding to a settlement proposal or offer, otherwise you may lead yourself to believe that your communication is “off the record” when it may very well be part of the eventual record. 

This article was written by Meghan Fougere, a construction law associate with Norton Rose Fulbright Canada LLP, in conjunction with Dan Leduc, a partner with the firm and current board member of the Ottawa Construction Association. They can be reached at meghan.fougere@nortonrosefulbright.com and dan.leduc@nortonrosefulbright.com.