What Without Prejudice Means
Without prejudice is a legal concept that protects genuine settlement negotiations from being used as evidence in later proceedings. If you and the other party exchange correspondence marked without prejudice in an attempt to settle a dispute, those communications cannot normally be shown to the court or tribunal.
The purpose is to encourage parties to negotiate freely without fear that a concession made in settlement discussions will be used against them if the settlement fails.
When the Rule Applies
The rule applies when there is a genuine attempt to settle a dispute that is already in existence or clearly contemplated. The communication must be a genuine attempt to resolve the dispute, not a letter designed to prejudice the other party's position while wearing the without prejudice label.
Slapping "without prejudice" on a letter does not automatically make it protected. Equally, a genuine settlement offer may be protected even without the label if the circumstances clearly show it was a settlement communication.
When the Rule Does Not Apply
The without prejudice rule does not apply to protect communications that themselves constitute a wrong -- for example, a without prejudice letter that contains a threat or an act of discrimination. The rule also does not apply to communications relating to costs at the end of proceedings.
In employment proceedings, the "protected conversation" regime under section 111A of the Employment Rights Act 1996 provides additional protection for pre-termination negotiations about settlement, even where no dispute yet exists.
Protected Conversations in Employment
Section 111A allows employers and employees to have a conversation about a settlement agreement without that conversation being admissible in an unfair dismissal claim, even before any dispute arises.
The protection does not apply to automatic unfair dismissal claims or discrimination claims. And it does not protect improper behaviour -- a threat or undue pressure during the conversation can still be raised as evidence.
Practical Guidance
Mark all genuine settlement correspondence "without prejudice" clearly at the top. Keep settlement discussions separate from open correspondence. Do not make admissions in open correspondence and then try to argue they were protected.
The fact that settlement discussions took place -- as distinct from their content -- may be disclosed to the tribunal when arguing about costs.