Without prejudice communications: how to properly protect settlement discussions

‘Without prejudice’ wording turns up everywhere: perhaps in a tense email exchange with a supplier, an HR grievance, or a commercial stand‑off where both sides are testing the waters on a settlement. In scenarios like this, we often see people label their correspondence ‘without prejudice’ in the hope it will keep negotiations ‘off the record’.

That assumption is where problems often start. Without prejudice protection is conditional, not automatic. Used properly, it gives both sides space to explore settlement frankly and can help parties resolve disputes earlier. However, it can easily be used improperly, and that can actively weaken your position.

In this article, we’ll explain what ‘without prejudice’ means, when the rule applies, where it does not, and how to use it correctly.

What does ‘without prejudice’ mean?

‘Without prejudice’ is a form of legal protection that can protect genuine settlement discussions from being used in future litigation. Communications covered by the rule usually can’t be relied on as evidence. This can allow you to speak openly, and make offers or concessions, without fear that those statements will later be used against you if negotiations fail. However, simply marking communications as ‘without prejudice’ does not automatically convey ‘without prejudice’ protection.  

When the without prejudice rule applies

For the without prejudice rule to apply, two conditions must be met.

1. There must be an existing dispute

There must be an existing dispute or a reasonable expectation that there will be. Legal proceedings do not need to have started to meet the criteria for without prejudice protection.

2. The communication must be part of a genuine attempt to settle

The communication must genuinely be aimed at resolving the dispute. Simply setting out your case or criticising the other side will not attract protection if there is no real attempt to negotiate or compromise.

When the without prejudice rule does not apply

Even if communications might otherwise qualify for protection under the without prejudice principle, there are some circumstances where communications can lose this protection. This can include scenarios where there is serious wrongdoing, such as fraud, dishonesty or blackmail, or where the court needs to consider whether a binding settlement was reached by virtue of without prejudice communications.

What does “without prejudice save as to costs” mean?

‘Without prejudice save as to costs’ offers (often shortened to WPSATC or called ‘Calderbank’ offers) are a specific variation of the without prejudice rule.

These communications can be shown to the court after judgment but before a costs determination to attempt to persuade the court that a particular an award of costs ought to be made. The aim is to encourage reasonable settlement behaviour. If you refuse a sensible offer unreasonably, the court may reflect that in its decision on costs.

When to make a without prejudice offer

Deciding whether to make a without prejudice offer or stick to open communication is a strategic decision. Timing, objectives, leverage and costs all matter.

Making a without prejudice offer is often a sensible option when you can identify the dispute and the issues clearly, you want to test your opponent’s resolve or there are good commercial reasons for settling.

More caution may be needed if you are not yet in a dispute, you are still gathering facts or if the issues in dispute and your exposure are still unclear.

What to do if you receive a without prejudice offer

If you receive a without prejudice offer, there are a few things you should consider before taking any further action:

• Remember it is a settlement offer and may contain positions taken for negotiation leverage. A valid without prejudice offer does not constitute a formal admission.
• If an offer is marked ‘without prejudice save as to costs’, consider the potential consequences of refusing it unreasonably, especially if the likely outcome is within a similar range.
• Determine the appropriate means of responding — if you need to respond on liability or evidence, do so in an open letter (separately) and reserve the without prejudice channel for settlement proposals.

‘Part 36’ offers

It is noted above that an offer which is made on a ‘without prejudice save as to costs’ basis and which is refused by the receiving party can be considered by the court in any costs determination after judgment. Parties to a dispute are also able to make a special kind of ‘without prejudice save as to costs’ offer based on the framework set out at Part 36 of the Civil Procedure Rules. These are known as ‘Part 36 offers’ and when properly structured in compliance with the rules, carry a specific set of costs consequences for parties.

The proper structure and consequences of Part 36 offers are complex and are outside the scope of this article, save to say that if you are considering making a Part 36 offer or if you receive an offer which purports to be one, you should immediately seek legal advice.

Without prejudice vs open correspondence

When you enter into settlement negotiations, deciding on whether and when to contact the other side on a without prejudice or open basis is a key tactical decision.

Open correspondence includes any letter, email or other communication which is not a genuine without prejudice communication. It is ‘open’ as it can be referred to openly in court.

Businesses often send a few open letters to opponents after disputes arise and before involving lawyers. It is crucial to ensure that the content of those first few letters is carefully controlled. This is because the trial judge will often carefully consider these letters, and your opponent’s lawyers will do so as well; a well-crafted letter may persuade your opponent’s lawyer to advise them to concede the dispute.

In practice, it’s usually best to use a mix of without prejudice and open correspondence together, depending on what each communication seeks to achieve. However, you should take expert advice if you intend to do so, as it’s not always easy to strike the correct balance.