“Without Prejudice” Communications

An interesting decision was handed down by the English House of Lords last week dealing with “without prejudice” communications.  We’ve all seen them before, the letter from a lawyer or from someone on the other side of a dispute that has near the top the words “Without Prejudice”.  The absence of the words are not determinative of anything nor are the presence of the words.  To give you an example, I have been dealing with several self-represented individuals in different lawsuits who have taken to the habit of adding “Without Prejudice” to absolutely everything they send to me simply because they have no idea what the words are used for and my attempts to educate them have clearly fallen on deaf ears.  The mere fact that the words are there doesn’t automatically turn a document that would otherwise be admitted into evidence into a prohibited document.  Similarly, the fact that the words are missing doesn’t turn a letter seeking to settle the dispute into an admissible document at trial.

The courts have a vested interest in having as many lawsuits settle as possible.  It’s not that the judges want to be out of a job, but the reality is that the courts are backlogged enough as it is – and that’s with well over 90% of all lawsuits settling!  If they didn’t settle, just think of how bad things could get.  So, the courts support the concept of settling as much as they can.  One way of doing this is to try and permit the parties to a lawsuit to enter into settlement negotiations without the fear that if they say X, Y or Z that some or all of this may come back to haunt them if a settlement cannot be reached and the matter does go on to trial.  As such, statements made in the context of settlement negotiations are privileged and cannot be put into evidence at trial.  This is said to be partly based on public policy and partly based on either an express or implied agreement among the parties to the negotiations.

There are, however, some suggested exceptions to this principle.  For example, suppose that I was in a lawsuit with you about a contract and in the course of negotiating a settlement you happened to mention in a without prejudice letter that a Hollywood celebrity was a thief.  Could the celebrity sue you for defamation based on the letter?  Some cases suggest that this could be the case since that portion of the letter had absolutely nothing to do with the balance of the letter that was trying to settle the contractual dispute.  The House of Lords has not definitively upheld this exception and, rather, reading the various decisions, it would appear that any such exceptions will be extremely limited.

In this particular case, a dispute arose between neighbouring landowners and a lawsuit arose.  In this first lawsuit, the appellants alleged that the respondents were improperly on their property and the respondents defended on the basis of an alleged lease (or assignment of a prior lease).  That lawsuit “died on the vine” and never went to trial.  However, during the settlement negotiations, an admission was made in a “without prejudice” letter in which one of the parties was admitted to be the owners of the property.  Subsequently, a new dispute arose between the same parties and the one party that made the admission argued that she had become the owner of the property due to adverse possession.  Under England’s law, the time for adverse possession stopped running if there was an admission of ownership.  If the letter was allowed into evidence, it would show that the time had stopped.  However, if it was not allowed into evidence, then there was nothing to stop the limitation period from running, as it had, and thus adverse possession would be granted.

What comes clear from the decision is that the English judges have very forcefully re-affirmed the power of the without prejudice rule and they have taken to task those who would try to import even minor exceptions to the rule.  Moreover, they have indicated a strong intention to remain committed to the rule notwithstanding the U.S. courts’ desire on occasion to make exceptions to the rule.  My expectation is that the Canadian courts will follow the House of Lords’ lead in this area of the law.

Therefore, if you find yourself in discussions with a customer or a supplier, etc. regarding a dispute, it would be helpful to put the words “Without Prejudice” on the letter.  Whatever you say will hopefully not come back to bite you in the rear end.  However, I would suggest that you do not go too far in any such statements.  But, whatever you do, please, I beg you, don’t start putting it on every darned letter – or if you’re going to do that, just don’t send make me the recipient of the letters as I’m getting enough of them already from others. ;-)

CALC

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