If you think that as long as a letter is headed with the words 'without prejudice' it's off the record, you could find it haunts you in court
"WITHOUT PREJUDICE" were the words standing out in bold capitals at the top of a letter I read the other day. It contained an indignant rejection by a client of his architect's claim for fees, an elaborate counter-claim regarding poorly performed work, and a parting shot to the effect that the architect was a fool to bring the claim in the first place. But the "without prejudice" privilege didn't hide the fact that the client hadn't a snowball's chance in hell.

Confusion abounds over those mystical words, "without prejudice". The object, of course, is that the document should not be used in evidence against its author. It is a common misconception that, unless you attach those words to every communication, then, by alternative deduction, your every letter, fax, email and disgruntled mumble will be terminally prejudicial to your case.

Now, we all have haunting memories of some foot-in-mouth person to whom that rule does apparently apply, and fate's cruel hand seems to place them inevitably on our own side of the table. But do we really have to hide behind the "without prejudice" banner at the slightest hint of disagreement, sending a "without prejudice" fax to arrange a "without prejudice" meeting to discuss the matter on a "without prejudice" basis? Sometimes it is only ourselves we are fooling.

It is worth reflecting for a moment on the reason why the "without prejudice" privilege exists in the first place. It is intended to encourage settlements. If parties felt their every word were cast in stone, then frank discussion with a view to settlement would only be for the very brave or the very foolhardy. Therein lies the key: for the privilege to attach, the communication must be with a view to settlement.

If it is not, you can plaster your communication with "without prejudice" to your heart's content, but to no avail. If you later decide that version B of your story would be considerably more plausible, you may find to your horror that version A, like Banquo, reappears to haunt you just when you least want to see it – in court. Misunderstanding the "without prejudice" rule can be very dangerous.

So what qualifies as a communication "with a view to settlement"? This is really a matter for the court to decide and it does so on a commonsense basis, taking account of all the circumstances of the case and the content of the communication itself. There is a common misconception that the communication must propose the final settlement terms. In fact, all it has to be is a step towards the settlement goal.

You can’t waive the ‘without prejudice’ privilege just because your letter could be useful to your case after all

Again, contrary to popular conception, there is no need to mark the correspondence "without prejudice" provided it genuinely attempts settlement, although it is advisable to mark it out in advance to help avoid subsequent dispute over its purpose.

Yet another myth is that if one piece of correspondence attracts the "without prejudice" privilege, then so will all correspondence thereafter.

If you want to be sure your settlement negotiations remain privileged, you should keep separate any subsequent non-settlement correspondence.

Think hard before claiming the privilege. It is a joint one. This means you can't waive it just because you later decide that your letter was, in fact, a rather good one and could be quite useful to your case. The other side has to agree (unless, for example, they have behaved unsportingly and the court decides to give them a kick in the shins).

There is one area where even the courts seem to be rather at sea as to the extent of the without prejudice rule: multiparty claims. If A sues B, who in turn claims a contribution from C, precedent varies as to whether C can use as evidence "without prejudice" communications between A and B. So, if you do find yourself in the shoes of C, it is probably worth having a shot at introducing the "without prejudice" communication, but do not be surprised if the court gives you short shrift and throws it out.