It is commonly believed that documents marked ‘without prejudice’ must not be read by a third party. In fact, it all depends on what they say
Here is a case from the High Court about that badge “without prejudice”. Those badged letters cause havoc when they get into adjudication bundles. The adjudicator must avert their gaze, shield their eyes and put on rubber gloves before they extract a letter or memo or email so badged. Why? Because the letter may be “privileged”: that is, not to be seen by anyone other than the addressee. Actually the without prejudice badge often doesn’t have any effect at all. “Dear Sir, without prejudice, the bricks will be delivered next week.’” “Dear Sir, without prejudice, where the hell is your cheque?” Got the idea?
A company called Cipla wrote a without prejudice letter to the Schering Corporation telling it in pleasant terms that Schering’s patents on some of its range were invalid. So Cipla was going to market a product in competition. But not wishing to embark on a confrontational path, it said there might be a commercial solution. It offered to meet and discuss but “if we don’t hear from you, we will begin selling our product”. Schering responded by beginning High Court proceedings to stop patent infringement. It showed the judge Cipla’s letter and he ordered Cipla to stop treading on Schering’s toes. You can’t show a privileged letter to anyone else, said Cipla; the judge ought not have looked at it. It went to the next court up on the legal ladder and complained to it. Now it gets interesting.
It is ever so healthy for people who might be heading towards a dispute to avoid it. So, public policy is in favour of arranging circumstances so that letters of negotiation shall remain strictly entre nous. And if someone objects to the court’s looking at such a privileged document then the court still looks and applies special rules to ask if the document ought to be looked at. Odd? Not really. Judges are gifted with special qualities. They can look at a document, decide it should not be looked at, and “put it out of their mind”.
So, what are the principles that make a letter totally private? First, it doesn’t matter a jot whether the without prejudice badge appears or not. It is merely a factor. The key element is whether the express or implied intention of the words used in the letter amount to an offer to negotiate. So a letter from a niggled contractor to the employer asserting how a contract clause gives it the right to compensation, or the fact that Tuesdays follow Mondays means it can have an extension of time, is not a privileged letter even if badged “without prejudice”. It needs to be, nay must be, a negotiating document. On the other hand, if such a letter asserting “rights” arises out of a background of already commenced negotiations and relates to that background, it has a fair chance of being privileged. More plainly, a letter that, even as an opening shot, puts up a claim and in the same breath offers to take something less in settlement is well within the class of privileged documents.
Judges are gifted with special qualities. They can look at a document, decide it should not be looked at, and ‘put it out of their mind’
The public policy behind all this is to facilitate compromise. The document is looked at to make a reasonable guess as to the intention of person who wrote it and how it would be understood by the person who read it … all within the backdrop or surrounding circumstances or factual matrix of say, the building contract, and the turn of events to which the letter relates.
In the Cipla and Schering case, Cipla’s letter said it had taken legal advice and was confident that Schering’s patent was invalid. But if that is all it had to say there is no privilege, it could simply have entered the market and competed. Ah, but Cipla then indicated it would prefer to avoid a path of confrontation if there was “an alternative commercial solution acceptable to both parties”. That, said the judge, was an indication that Cipla wished to talk. That sniffs of Schering getting something out of negotiations. The letter was a negotiation document and the first judge ought not to have paid it any attention. So his decisions at that hearing were void and of no effect. The “without prejudice” badge was correct this time.
As for adjudicators, they should look out for the badge, then if spotted ask the parties if the document is to be ignored. If one says yes and the other no, ask a lawyer to take a look and a sniff, use the Cipla test and advise …