Can you rely on what is said during settlement negotiations?

In the course of business there will inevitably be times when disputes arise.

Perhaps a delivery deadline was missed, a professional service wasnt up to scratch, or a contract was not being adhered to. A few discussions and a meeting about the problem may resolve matters and, a commercial solution, if one can be found, is often the cheapest and quickest way to move on.

However, if the matter does end up going legal, to what extent can you rely on your earlier discussions?

You might want to rely on those discussions because the other party accepted a degree of fault. Alternatively, you might not want the content of those discussions to be referred to by the other side because your legal position is stronger than the position you adopted in negotiations. The question is, were those discussions without prejudice or not?

What does without prejudice mean?

If a conversation, meeting, or letter is without prejudice it means that neither party can rely on the content of that conversation, meeting, or letter in court when arguing over liability or the costs of litigation.

What is deemed to be without prejudice?

This is not so easy. Just because you state a meeting to be without prejudice does not necessarily mean that your words are protected. Even a letter headed without prejudice could potentially be referred to if the content of the letter does not contain anything of a settlement nature.

Equally, you may attend a meeting with the other party to openly discuss the problem, and still find that ultimately you cannot rely on what was said in court.

What matters is how the conversation or meeting is viewed objectively by the court rather than the terminology that is or is not used. In the recent case the Court of Appeal took a broad view as to what is deemed to be without prejudice. In this case a defendant litigant in person met with her opponents solicitor to discuss the case and how it was progressing. The meeting was not stated to be without prejudice and as such the claimant sought to rely on admissions made at that meeting at trial.

The Court of Appeal held that a meeting will be without prejudice if it ought to have been seen by both parties as negotiations genuinely aimed at settlement and that the court will consider what would have been obvious to an outside observer, regarding the discussions objectively and in the round.

Top tips

If you are in a potential dispute and intend to speak with the other party, it may be useful to bear the following in mind:

- decide beforehand, how you would like the meeting to be treated;

- make your intentions clear to the other party at the outset. If the meeting is going to be without prejudice, confirm that in writing before you get there;

- keep a note of what was discussed at the meeting and on what basis the meeting took place;

- be careful with the terminology you are using and understand the limits of its protection - to be a without prejudice meeting it needs, objectively, to be a genuine attempt at resolving the problem;

- just because the words without prejudice are not used, does not necessarily mean that you can later rely on the discussions;

- if you are concerned about how to protect your position, speak to a solicitor before the meeting

Author
Laura Heeley is a solicitor in the commercial litigation team at Wright Hassall LLP

Laura Heeley
Wright Hassall LLP