Introduction

Recent experience in practice shows that there remains at times some real misunderstanding within the profession as to when before the court it is permissible to refer to a ‘without prejudice’ offer made between parties and when it is not.

The ‘without prejudice rule’

Obviously, when an offer is made ‘without prejudice’, then it is trite law that it cannot, subject to certain exceptions set out below, be referred to or admitted in evidence – see Walker v Wilsher [1889] 23 QBD 335 at 337 and the more modern explanation of the rule as set out in Unilever plc v The Procter and Gamble Co [2000] 1 WLR 2436.

First and foremost, however, this begs the question when is an offer to be taken as made ‘without prejudice’. Some would answer – ‘when the offer communication is marked ‘without prejudice’ – stupid’. However, that response is only part of the answer and taken alone may itself be misleading.

The ‘without prejudice’ rule was reviewed in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44 and with reference to the speech of Lord Griffiths in Rush & Tompkins v Greater London Council [1989] AC 1280, Lord Clarke stated :

‘22. … Rush & Tompkins is important because it shows that the without prejudice rule is not limited to two party situations or to cases where the negotiations do not produce a settlement agreement. It was held that in general the rule makes inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made with a genuine intention to reach a settlement and that admissions made to reach a settlement with a different party within the same litigation are also inadmissible, whether or not settlement is reached with that party’.

It is not infrequently misunderstood that an offer to be ‘without prejudice’ does not require the words ‘without prejudice’ to appear on the communication of the offer to attract the protection from admissibility. On the contrary, the communication of the offer will attract the ‘without prejudice’ protection where its contents refer to matters over which the parties in dispute are seeking a compromise. Again in Lord Griffith’s speech in Rush & Tompkins (at 1299D) it was stated:

‘The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence 'without prejudice' to make clear beyond doubt that in the event of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase 'without prejudice' and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.’

Exceptions to the ‘rule’

The exceptions to the ‘without prejudice’ rule permitting the contents of a ‘without prejudice’ communication to be admitted are, currently, as follows:-

• As the ‘without prejudice’ privilege is a joint privilege, when the same is waived by the agreement of both parties (ie not just one) – see Robert Walker in Unilever plc v The Procter & Gamble Co case above.
• When the dispute is as to whether there has been an agreement or compromise – see the Unilever case above and Xydhias v Xydhias [1999] 1 FLR 683.
• When an application is made for rectification where it is claimed an order made does not truly reflect the real agreement upon which it is based – see Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 and Daventry DC v Daventry & District Housing Ltd [2011] EWCA 1153).
• When following ‘without prejudice’ negotiations, there is a dispute as to the interpretation of the agreement or order reached in consequence and the ‘without prejudice’ material contains otherwise admissible facts assisting such interpretation – see again the Oceanbulk Shipping case above.
• When an application seeks to set aside an agreement or order by reason of a vitiating factor ie fraud, misrepresentation, non-disclosure etc and a ‘without prejudice’ communication contains evidence material to the application – see again the Unilever case above.
• When the fact of ‘without prejudice’ communications having been made is material to an explanation for delay or suggested acquiescence – see again the Unilever case above.
• When the ‘without prejudice’ rule would act as a cover ‘for perjury, blackmail or other unambiguous impropriety’ – see again the Unilever case above.

‘Open Offers’

It also follows from what is stated above that:-

• ‘Open’ as opposed to ‘without prejudice’ offers are admissible at any stage of the court proceedings.
• It will be necessary if a party wishes a communication of what would otherwise be deemed a ‘without prejudice’ offer, on the principles outlined above, to be ‘open’ as opposed to being ‘without prejudice,’ for the communication to state plainly that it is an ‘open’ offer communication.
• When a party has already made a ‘without prejudice’ offer and, subsequently, wishes to make that offer ‘open’ – then, as the ‘without prejudice’ privilege attaching remains a joint one, unless the other party agrees, this can only be achieved by re-sending that same offer afresh marked ‘open’.