What does without prejudice mean?

Without prejudice is commonly used in legal correspondence. It is engaged to enable parties to negotiate freely with a view to reaching settlement, without fear that what is said or written will be used against them later in court.

It protects all negotiations genuinely aimed at settlement of litigation, whether oral or in writing, from being produced to the court.

There is a clear public policy advantage in allowing parties to place their cards on the table without fear of negative consequences.

However, without prejudice is sometimes seen as a magical incantation which, if written or said, will forever prevent any and all forms of communication from being looked at by a court. Some use it indiscriminately on all correspondence to seek to imbue it with that protection.

But is that really the case? And if not, what are the limits?

In the recent case of Lujo Properties Ltd V Gruve Ltd [2023], Sheriff Reid, gave a helpful overview of the current law of without prejudice.

He then went on to highlight the following limits to the rule of without prejudice: 

1. It can only protect negotiations genuinely aimed at settling or avoiding litigation.
2. Where a deal has been concluded, without prejudice correspondence can be used to prove the existence of the contract.
3. Where a deal has been entered into nefariously, the without prejudice correspondence can be looked at to prove that to be the case.
4. It can potentially be used in personal bar arguments. To give an example, if the other side says something in without prejudice correspondence which is intended to make you act in a certain way and you then carry out that act, the without prejudice correspondence can be looked at if the other side then claims you shouldn't have acted in that way.
5. If there has been a long delay and or apparent agreement to a certain act because without prejudice negotiation has been ongoing, evidence of the negotiation can be used to prove that was the reason for the delay.
6. Evidence of an offer which has been expressly stated as without prejudice except as to costs may be relied upon.
7. Perhaps most importantly, there is also a unique willingness of the Scottish courts to carve out an exception to the rule of without prejudice where "clear admissions or statements of fact which, although contained in the same communication, did not form part of the offer to compromise…” This can have significant consequences for dilapidations negotiations.

The use of without prejudice is not the panacea it is often hoped to be, and anyone looking to protect their communication should be careful to consider these limits.