"Without prejudice" protects settlement proposals
Because of the incredible expense and degree of uncertainty involved in trials, lawyers will usually make many attempts to settle a case before it heads to trial. Although settlement efforts can take many forms, the cheapest is correspondence: the exchange of letters setting out the terms on which the lawyer's client would be prepared to settle the case.
As a general but not invariable rule, settling a file means finding a compromise between the parties' positions, which means that neither party gets everything he or she is looking for. Someone who is asking for sole guardianship might compromise and agree to an order for joint guardianship as long as he or she has the children's primary residence; someone who is asking for 70% of the family assets might compromise and agree to take half the family assets as long as spousal support is paid for a certain number of years.
Now, although compromise might be necessary for settlement, the position a party takes to achieve settlement is rarely the position that the party takes at trial. At trial, the person seeking sole guardianship is still going be demanding sole guardianship, and the person after the majority of the family assets is still going to be after the majority of the family assets. But if this is the case, which it usually is, people need a way to communicate settlement proposals without affecting their positions at trial. In other words, if you're suing for twelve 1972 Ford Pintos, you need to be able to propose settlement for six 1972 Ford Pintos and three 1973 Ford Pintos without being held to that position at trial.
This is where "without prejudice" letters come in. Marking a letter "without prejudice" protects the contents of the letter from being disclosed; the letter is being sent without prejudice to the party's position at trial.
To be clear, however, just marking a letter "without prejudice" isn't going to automatically exclude the letter from use at trial. To be excluded, the letter must actually contain a settlement proposal; as our Court of Appeal said in a 1984 case called Belanger v. Gilbert, "not all letters so marked are to be held inadmissible." In another appeal case, Schetky v. Cochrane, from 1918, the court set out what was required to protect "without prejudice" letters:
"... the rule which excludes documents marked 'without prejudice' has no application unless some person is in dispute or negotiation with another, and terms are offered for the settlement of the dispute or negotiation...
"... before the privilege arises two conditions must exist, viz.: (a) a dispute or negotiation between two or more parties; and (b) in which terms are offered"
A "without prejudice" letter that meets this test cannot be put into evidence, whether at trial or as an exhibit to an affidavit.
To be even more clear, it is only the parts of "without prejudice" letters proposing settlement that are protected. A letter that talks about the number of Ford Pintos required to achieve settlement as well as setting hearing dates and the colour of the author's pants, can certainly be be put into evidence about the hearing dates and the author's pants, as long as the portion dealing with the Pintos is blocked out.
Costs
Proper "without prejudice" letters can't even be put into evidence to argue costs after trial, unless the letter contains a statement saying that the author intends to reply on the letter for the purpose of arguing costs. The English Court of Appeal summarized this point in a 1984 case called Cutts v. Head:
"...the court is able to examine and consider such correspondence, where the offeror, in the body of the correspondence in issue, expressly reserves the right to bring the letter to the notice of the judge on the issue of costs after judgment."
(Letters like these are sometimes called Calderbank letters, in reference to the 1975 case from the English Court of Appeal which authorized this narrow exception, Calderbank v. Calderbank.)
Subsequent letters not marked "without prejudice"
Interestingly, the protected status of "without prejudice" settlement proposals also applies to letters written in reply to such proposals that aren't marked "without prejudice." Halsbury's Laws of England says this at volume 15, paragraph 728 of the third edition:
Where the privilege exists, it covers not only the particular letter itself, but also all subsequent parts of the same correspondence on both sides, notwithstanding that they are not expressed to be “without prejudice," unless there is a clear break in the chain of correspondence to show that the ensuing letters are open. Moreover, where a letter offering terms, but not stated to be “without prejudice” is followed by another saying that the communications between the parties are to be “without prejudice” the former letter is protected."With prejudice" letters
"With prejudice" letters are different than "without prejudice" letters. Such letters not only deny any claim of protection from production to the court, they say that the letter will be produced to the court.
Of course, because marking a letter "with prejudice" doesn't make the contents of the letter any more true, or any more compelling and persuasive to judge who reads it; in fact, it's not entirely clear what is achieved by marking a letter "with prejudice" apart from expressing the author's conviction about the importance or accuracy of the contents.
To put it another way, any letter not marked "without prejudice" is "with prejudice" by definition, in the sense that there's nothing stopping the letter from being shown to the court.
Summary
- "Without prejudice" letters allow people to discuss settlement proposals without worrying that their proposals will be held against them later.
- The phrase "without prejudice" only protects settlement proposals. Marking your laundry list or any other communication "without prejudice" isn't going to stop the document from being used in court.
- The parts of a "without prejudice" letter that don't talk about settlement can be used in court, as long as the parts which do talk about settlement are blocked out.
- If a "without prejudice" letter is going to be used to argue costs down the road, the letter needs to say so or it can't be used to argue costs.
