The Litigator's Toolbox - "Without Prejudice"

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The Litigator's Toolbox - "Without Prejudice"

By Philip Boni*

 

Introduction

 

As professionals, we sometimes find the arcane areas of our practice to be the most interesting. We ignore the basics of the subject; we pass over those important building blocks we learned so many years ago in favour of the “sexy” topics of the day. However, every now and again a problem arises which affects the structure of our practices and we have to revert to the fundamentals. Often, even when we talk about the fundamentals, we must be aware of what Steven Pinker in his book “The Sense of Style” called "the curse of knowledge" which is he says: “a difficulty in imagining what it is like for someone not to know something”. In effect, the recondite writer leaves the reader in a fog of confusion.

 

In the field of litigation, we are often called upon to use a number of different rights and remedies to settle disputes. I have on occasion referred to "the Litigator’s toolbox", which is an imaginary box into which we dip depending upon the circumstances of the case. Much like the toolbox of a carpenter, we have a variety of chisels, measuring instruments, grips and pliers and of course for certain occasions a hammer.  Lawyers have “tools” which can be deployed, depending upon the circumstances of the case. They would range from the more sophisticated tools of the trade, for example, Norwich Pharmacal Orders, to the more deadly Mareva injunctions, which would perhaps equate to the carpenter’s hammer.

 

In this brief article I intend taking from the Toolbox the term "without prejudice," because, in my experience, it is a term which is often misused or employed inappropriately and as such can be misunderstood.

 

What is Without Prejudice?

 

In its most basic form, the without prejudice rule provides an umbrella under which persons involved in a dispute can negotiate without fear of their communications being revealed to a judge. As such, disputants can make admissions or offers to settle without being bound by them if their talks fail to reach a settlement. The policy behind the rule was described in Cutts v. Head[1] where Oliver L.J. said that parties should be "encouraged fully and frankly to put their cards on the table"; this should be done by "preventing statements or offers" being brought before "the court of trial as admissions on the question of liability."

 

The influence of public policy on encouraging persons to settle their disputes without resort to litigation is an important factor in the without prejudice rule, as is the contractual element of the Rule.

 

So, the objective is to allow people to negotiate their disputes in an atmosphere of trust. The implied contract aspect of the rule is the parties’ agreement not to disclose admissions or other matters arising during the negotiations to the Court. Communications between parties, which are "without prejudice," are generally inadmissible as evidence in court and cannot be made the subject of a disclosure order in any proceedings.

 

The support given to the desirability of litigants being able to properly engage in settlement negotiations was illustrated by the case of Suh v Mace (UK) Ltd. [2] The Plaintiffs were commercial tenants who sued the Landlords for unlawful forfeiture. An issue arose regarding the admissibility of two communications between the Plaintiffs and the Defendant Landlord’s solicitor (Ms. Jackson). The Defendant sought to adduce notes of meetings in evidence because they contained admissions by Mrs. Suh that there was unpaid rent. The Landlord succeeded at first instance, however, the Court of Appeal took a different view. The Appeal court held that “the only sensible purpose for such a meeting must have been to seek some kind of solution to the litigation for Mrs. Suh. That is what a settlement is.” Because Mrs. Suh had been ignorant of any potential privilege, and hence could not have acted to positively or negatively affect the privilege, her appeal was allowed. Vos LJ declared all privileged communications inadmissible. This decision could be simply explained and understood in the context of the public policy aspect of the umbrella, namely to reduce costs and legal time by permitting parties to properly engage in negotiations without fear of any admissions being disclosed to the court.

 

For a document to be inadmissible on the grounds that it is ‘without prejudice’, it must form part of a genuine attempt to resolve a dispute. There are two elements which need to be apparent which are (1) a genuine dispute to be resolved and (2) a genuine attempt to resolve it.

 

Once a party has made a without prejudice offer, the privilege will attach not only to the offer, but to the response, whatever that may be; whether it includes a counter offer or not, whether it is a mere request for information, whether it is simply an outright rejection without any further attempt to settle.

 

There are areas of concern where, for example, written correspondence is not marked without prejudice, but it is clear from the contents and the surrounding circumstances that the parties are trying to settle a dispute. Protection can be afforded in these circumstances if there is a genuine attempt to settle, so as to enable parties to speak freely about all issues in the litigation both factual and legal when seeking a compromise.

 

It is not all plain sailing, as with every rule of law, the Without Prejudice Rule has its exceptions. The case of Ofulue[3] is one where communications were rendered as being admissible in evidence. In that case, Lord Hope stated that "the court should be slow to lift the umbrella [of the without prejudice protection] unless the case for doing so is absolutely plain". In the same case Lord Walker stated "as a matter of principle I would not restrict the without prejudice rule unless justice clearly demands it".

 

Any commentary on the without prejudice rule would not be complete without mentioning the role which costs play both in litigation and also in negotiations. In the case of Walker[4], the Court of Appeal held that without prejudice communications could not form part of the court’s costs considerations. However, the Court of Appeal suggested it would be permissible in a matrimonial case which changed this situation and gave rise to the well-known “Calderbank offer”. In Calderbank[5], it became permissible for a party to reserve the question of costs in a without prejudice offer. From this, the practice of writing "without prejudice save as to costs" arose such that negotiations which have taken place expressly on a without prejudice save as to costs basis are admissible on the question of costs as an exception to the general rule which precludes the admission of without prejudice. As a result, Calderbank offers can be a useful tool to settle a dispute and can sometimes provide a more suitable alternative to other methods of dispute resolution.

 

My concern, recorded earlier in this article, relates to lengthy correspondence written in particular by prolix lawyers who often set out a litany of reasons why their client will succeed in litigation all marked without prejudice, but with no genuine attempt to resolve the litigation.  Such letters do little to serve the interests of the clients and do not require the umbrella because there is no offer to settle.

 

Conclusion

 

When entering into the negotiations to settle a dispute, the without prejudice umbrella can be an extremely useful aid, but must be employed carefully, otherwise the documents or other materials may lose the protection of the rule and become admissible in court. 

 

If a party no longer wishes to make offers protected by the umbrella, they can simply mark the documentation “open”. If, however, the negotiation process is to continue, it would be wise for the parties to bear in mind the contractual element of the rule, to make it clear that there communications are subject to the without prejudice umbrella.

 

There will doubtless be further development of the without prejudice rule and refinements in future cases. As matters stand, when properly deployed, the rule is a useful tool in the litigator’s toolbox,especially where rising legal costs are concerned.


 

[1] [1984] Ch 290.

[2] SUH v Mace (UK) Ltd [2016] EWCA C. V4.

[3] Ofulue v. Bossert [2009] 3 All ER 93.

[4] Walker v. Wilsher [1889] 23 QBD 335 (CA).

[5] Calderbank v. Calderbank [1976] FAM 93 (CA).


 

[*] Philip Boni is a partner in Higgs & Johnson and located in the firm’s Cayman Islands office, where he heads the litigation team. Mr. Boni has practiced law in the Cayman Islands for approximately 34 years and can be contacted at pboni@higgsjohnson.com

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Grand Cayman,
Friday, May 4, 2018
Litigation (Civil, Business and Commercial)