The words “without prejudice” are frequently used and sometimes misused in correspondence involving disputes, by lawyers and non-lawyers.
The term originates from the courts’ view that parties should be encouraged to settle their disputes. Studies show a higher level of satisfaction if parties agree to a settlement as opposed to a judge imposing terms on them. Such settlements usually last longer and hold together better.
The parties save money on lawyers and the legal disputes.
One problem is if one side wrote to the other with a settlement proposal. That could come back to bite them if the matter didn’t settle and went to trial.
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The receiving side could show the letter to the judge, saying the other didn’t believe in his case if he was trying to compromise and settle it.
A system developed where such communications could be off the record and not mentioned if no settlement resulted and the case continued to court. The words “without prejudice” were born in the legal settlement context.
Without prejudice is a sort of shorthand. The offer of settlement contained in the letter is made off the record and if no settlement results, the offering party is not prejudiced by the fact an offer was made.
They have come to mean off the record. If the matter doesn’t settle, then no mention of the offer can be made in a court case.
Generally such letters read: “This letter is made as a compromise proposal and is without prejudice to the offeror’s interests, and is not to be used in the event litigation ensues or continues.”
There is no inherent magic in the words. Slapping the words “without prejudice” on a letter does not automatically mean that the communication is off the record.
There are many Canadian cases stating that a court will look at the true nature and intent of the letter to determine if it’s a settlement offer or something else. Unless it involves a settlement proposal or a reply to one, it can be ruled disclosable even when “without prejudice” appears in the letter.
Many people, including lawyers, think that putting these words on a letter automatically gives it some form of privilege from disclosure. That’s wrong.
You need to be careful in drafting this form of letter, or you may find it displayed in open court. It’s always a good idea to put things you want to keep off the record in a separate letter. There can be no doubt about your intention regarding the letter in such a case.
Rick Danyliuk is a lawyer with McDougall Gauley LLP in Saskatoon.
