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The art of law - settlement negotiations are 'without prejudice'

Under what circumstances is a communication 'without prejudice' and what does this mean?

If parties are engaged in a dispute, their communications with each other (or the communications between their attorneys or other professional advisers) may be without prejudice, which means that those communications are not to be construed as an admission of any aspect of that dispute and are merely an attempt at settlement.

Consequently, if the dispute ends in litigation, those without prejudice communications are privileged, and cannot be laid before the court to prove either party's case.

If, however, the communications were not 'without prejudice', then they can be laid before the court as evidence.

The effect of heading a letter 'without prejudice'

Does the fact that a letter or e-mail is headed 'without prejudice' automatically mean that its contents are privileged and cannot be disclosed in later litigation?

Can a communication between persons, at a time when they are not in dispute, be retrospectively categorised as 'without prejudice' if the parties later become involved in a dispute?

The law on these and other issues is usefully set out in the English High Court decision in Avonwick Holdings Ltd v Webinvest Ltd [2014] EWHC 3322 (Ch); [2014] WLR (D) 424, in which judgment was delivered on 10 October 2014.

Unless and until a South African court takes a different view, it can be assumed that the principles set out in this judgment apply in South African law.

A communication cannot be without prejudice unless there was a dispute

In his judgment, Richards J said that for a document to be inadmissible on the grounds that it was 'without prejudice', it had to form part of a genuine attempt to resolve a dispute. If there was no dispute about a liability, but only a negotiation as to how and when a liability should be discharged (for example, as to the manner in which an admitted debt is to be paid) documents exchanged in the course of those negotiations are not 'without prejudice' and will be admissible as evidence in any litigation.

Thus, for example, if a person who admits owing a debt enters into correspondence with his creditor to try to arrange for the debt to be payable by instalments, this correspondence will not be 'without prejudice' - even if the debtor's letter claims that it is.

Richards J went on to say that heading a letter 'without prejudice' is an important consideration in determining whether it formed part of negotiations in a dispute, but is not of itself decisive.

Richards J said that, in the case before him, no dispute had existed between the parties as to the liability of the defendant. The negotiations between the plaintiff and the defendant had been directed entirely at attempting to agree a restructuring of an admitted liability. From this it followed that the communications between them were not 'without prejudice', even though the correspondence bore the heading 'without prejudice', and the correspondence would thus be admissible in evidence at the forthcoming trial.

Moreover, said Richards J, communications between persons at a time when there was no dispute between them do not retrospectively become 'without prejudice' if a dispute later arises.

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