Without prejudice and Without prejudice save as to costs

“Without prejudice” and “Without prejudice save as to costs” – what does it really mean?

In this series of blogs Roanna Cooling, solicitor in our Dispute Resolution team, will be explaining some of the issues and principles that you can expect to come across when trying to steer a dispute towards an agreed settlement. She will be covering the pros and cons of mediation, why working hard to compromise and to achieve an early settlement is not the same as waving the white surrender flag, and other quirks of the litigation and dispute resolution process.

But first up. Legal jargon. What do some of these legal terms really mean and how can or should they be used?

Legal jargon explained – the meaning of “without prejudice”

It is no secret that litigation is costly, but all too often parties are scared to enter into sensible negotiations that may facilitate an early resolution of the dispute and therefore a very substantial legal cost saving. Why is this?

In the first of this three-part series Roanna considers how parties can have a side conversation, away from the judgmental eyes of the Court, in a way that encourages open and honest dialogue and that may encourage the early settlement of a dispute.

Let’s start with the basics. Generally, any communications between the parties, which are relevant to the dispute in question, are disclosable. This means a Judge will be able to take that correspondence into account when deciding the case. What that means of course is that in any communications, a party is going to be reluctant to put anything other than their best foot forward in correspondence. The reliance upon smoke and mirrors is all too common, and invariably unhelpful.

Cue “without prejudice” correspondence

The rule surrounding “without prejudice” communications is that if they represent a genuine attempt to settle an existing dispute, they cannot be shown to the Court. The rationale being that this rule allows a party to make statements, which would otherwise be used against them, in an open and frank manner which may facilitate the settlement of a dispute, without the obvious disincentive of knowing that a Judge might see that statement and use it to make a ruling against them if the negotiations fail. It is a rule that paves the way for compromise, and frank conversations, all of which are essential if a dispute is to be resolved early. 

But what if one party is being reasonable, and the other isn’t? What recourse might the reasonable party have against the unreasonable party?

Cue “without prejudice save as to costs” correspondence

This is an extension of the general without prejudice rule above, and arguably of more use to parties in dispute.

It allows parties to correspond on the basis that the communications cannot be shown to a Judge on the question of liability (i.e., when determining who is to win or to lose) but can be shown to the Judge on the question of costs (once liability has been decided). So a party may be successful at trial but, if the losing party can point to something that was said in “without prejudice save as to costs” correspondence that was unreasonable, the Judge can consider that communication and potentially penalise the successful party by not allowing that party some or all of their costs. So, parties should think twice before being unreasonable as they may be penalised in costs at a later date.

Benefits

These forms of correspondence allow parties to maintain two parallel lines of communication: -

1. one on an “open” basis, which can be shown to the Court; and
2. one on a “without prejudice” or “without prejudice save as to costs” basis which will not be seen by the Court until after liability has been determined.

Pitfalls

If a party wishes to rely on correspondence being without prejudice or without prejudice save as to costs, it is essential that the correspondence is clearly labelled as such. Failure to do so may mean that the correspondence becomes disclosable, with potentially very unfortunate consequences.

Parties should tread carefully. It is not a blanket rule that can be used for spurious attempts to negotiate or used to simply insult another party. The essential elements of without prejudice correspondence are that they represent a genuine attempt to settle an existing dispute.

If you have any queries in relation to the issues raised in this blog, please contact Roanna Cooling, litigation specialist at Hughes Paddison Solicitors, on RCO@hughes-paddison.co.uk or 01242 574244.

Next up in the series will be The advantages of an early settlement which will cover some of the less obvious aspects of settling early and address some of the misconceptions about settlement.