A Practice Insight into “Without Prejudice”

Oxford University Press (Reference – Online): “Without Prejudice” – “A phrase used to enable parties to negotiate settlement of a claim without implying any admission of liability. Letters and communications used in such negotiation and headed ‘without prejudice’ cannot be adduced as evidence in any court action without the consent of both parties.”

Introduction

As a working definition this has the benefit of simplicity. Given the prevalent use of “without prejudice” communications by both legal practitioners and their clients it pays to keep up with recent developments and adapt to them as part of good practice.

Wide-ranging Negotiations and the “Continuum”

The recent case of Poon v Poon [2019] HKCFI 3003 is a good summary of the general principles that underpin the exclusionary rule and the protection given to without prejudice communications.

For a communication to attract without prejudice protection the party claiming the protection (privilege) must be able to show objectively that at the time it was created: (i) there was a dispute in existence between the parties; (ii) related legal proceedings had been commenced or were in reasonable contemplation; (iii) the communication was made for a legitimate purpose in a genuine attempt to settle one or more issues in dispute; and (iv) the communication was made with the intention that it be without prejudice (Re Jinro (HK) International Ltd [2002] 4 HKC 90; Re Crane World Asia Pte Ltd [2016] 3 HKLRD 640; Fester v Fester & Ors [2016] EWCA Civ 717).

In Poon v Poon, adopting a traditional approach to without prejudice, the court disallowed a party’s attempt to refer to parts of wide-ranging without prejudice discussions in some witness statements and, in doing so, also expunged references to transcripts of related meetings in that party’s list of documents.

Takeaway points for practitioners and their clients include:

  • given the public policy that underpins without prejudice protection and its fundamental importance, the courts are reluctant to allow parties to “cherry pick” from wide-ranging without prejudice negotiations and discussions;
  • the without prejudice nature of negotiations can extend to post- meeting communications (including, WhatsApp messages) between the relevant parties, where they are a continuation of the negotiations (as was the case in Poon v Poon). What constitutes the continuum of the negotiating process is fact dependent in each case – however, as an example, Poben Consultants Ltd v Clearwater Bay Golf & Country Club [2019] HKCA 107 appears to be a hard case which is best explained on it facts (a letter marked “without prejudice” that, in effect, was held not to be part of the without prejudice negotiations); and
  • a court will disallow a without prejudice claim because of impropriety only in the clearest case of abuse – a high threshold to overcome for a party seeking disclosure. A mere inconsistency between a party’s negotiating position and their position in court proceedings does not, of itself, amount to impropriety.

Some Other Practical Points

Without prejudice protection is not absolute and, in some exceptional cases, a court can lift the protection and admit the communication as evidence. The exclusionary rule is easier to understand and apply in a two-party situation than it is in a three-party situation – see Hollander QC on “Documentary Evidence in Hong Kong” (18–027 to 18–032) and Briggs & Ors v Clay & Ors [2019] EWHC 10 (Ch).

Where a party intends to make a communication on a without prejudice or “without prejudice save as to costs” basis, express intentions should be made clear and labels/markings are important – although, not decisive (Sternberg Reed v Harrison [2019] EWHC 2065 (Ch); Poben Consultants Ltd v Clearwater Bay Golf & Country Club).

Where without prejudice communications are appended to (or incorporated by reference in) a settlement agreement they are unlikely to keep their without prejudice status (BGC Brokers LP & Ors v Tradition (UK) Ltd & Ors [2019] EWCA Civ 1937). Settlement agreements are confidential but once executed they are no longer without prejudice.

Legal practitioners and their clients find themselves conducting business in an increasingly contentious environment, in which the true status of many communications is likely to assume a higher profile as parties seek to resolve their differences.

Jurisdictions: 

Senior Consultant and Accredited Mediator, RPC

Senior Consultant, RPC