The case of General Motors UK Ltd v The Manchester Ship Canal Company Ltd concerned a licence agreement which allowed General Motors to discharge surface water into the canal for a modest annual fee of £50.
'Without Prejudice' - the myth continues
The ability to make a formal offer to settle a dispute, without that offer coming to the attention of the court, is an essential tool in any dispute resolution armoury.
There have however been many examples of the ‘Without Prejudice’ label being misapplied without proper thought being given to the consequences. It is a common misconception that by writing ‘Without Prejudice’ at the top of a letter, you will automatically shield that letter from the eyes of the court or an arbitrator.
The principal purpose of ‘without prejudice’ protection is to encourage parties to settle a dispute and to make offers of settlement without fearing that an unsuccessful offer will be used against them in court and therefore prejudice their case. Put another way, if you know that if you make an offer, your offer is going to be revealed to the judge at the start of the trial, you are going to be much more cautious about making the offer and running the risk of prejudicing your position at trial. You might worry that the offer would be regarded by the judge as an admission of the weakness of your position and influence his decision making.
When a party makes a without prejudice offer, it is literally “without prejudice to” the fact that this party is going to argue for a different result in an open forum.
Simply scribbling ‘Without Prejudice’ on a letter will not automatically make that letter confidential and therefore shield it from the eyes of the court. For without prejudice protection to apply, the following simple criteria need to be met:
1. there needs to be a dispute;
2. the communication must be “without prejudice to” something; and
3. the communication must be part of an attempt to settle.
If these criteria are not met, adding ‘Without Prejudice’ to the letter will not provide you with the protection that is enjoyed by true without prejudice correspondence.
What is often forgotten is that mistakenly adding a ‘Without Prejudice’ label to a letter or to a notice can have serious adverse consequences. There have been cases where rent review notices and even break notices which have been headed ‘Without Prejudice’ have been held to be ineffective because of the ‘Without Prejudice’ label being applied erroneously.
In short, think carefully about the criteria above and consider the purpose of your communication. If you have marked it ‘Without Prejudice’, what is it specifically that you do not wish to prejudice?
For any advice in relation to issues raised in this article, please contact Andrew Turner on 01242 586 841 or email@example.com.