An Explanation of Privileged, Without Prejudice, and Without Prejudice Save As to Costs Documents

An Explanation of Privileged, Without Prejudice, and Without Prejudice Save As to Costs Documents

This article will provide a brief explanation of the meaning of ‘Privileged Documents’, ‘Without Prejudice Documents’ and ‘Without Prejudice As To Costs Documents, and will examine the effects that such documents have.

A)  Privileged Documents

Privileged documents are letters, documents and similar communications that one party is not required to disclose to another party during the disclosure and inspection process of an arbitration or court action, and normally refer to communications between one party and its legal advisors or representatives. These are also commonly referred to as documents subject to professional legal privilege or litigation privilege.

Professional legal privilege refers to rules of evidence that allows a party to litigation to withhold disclosure of certain documents which may be relevant to a dispute. The rules exist to protect the inviolability of the lawyer-client relationship which allows clients to disclose to their lawyers details of their doings, without fear that any information so disclosed will subsequently be used against them or otherwise in litigation.

All the parties to a litigation suit are compelled by law to disclose all documents which they may rely upon and also which may be damaging to their case. There are very limited grounds in which documents may be withheld, one being that the document is protected by legal privilege. It can often be a bone of contention as to whether a document is indeed privileged and it is fairly common that the parties seek the courts to resolve an issue as to whether documents are privileged or not. In such circumstances it is possible to lose the privilege status of a document, and in the event this happens, the document would have to be disclosed to the other parties. As such, it is important to have a solid understanding of how the rules of privilege operate and how to retain privilege in communications and the like.

Section 126 of the Evidence Act 1950 states that no ‘…. advocate shall at any time be permitted, unless with his client’s express consent, to disclose any communication made to him in the course and for the purpose of his employment as such advocate by or on behalf of his client, or to state the contents or condition of any document with which he has become acquainted in the course and for the purpose of his professional employment, or to disclose any advice given by him to his client in the course and for the purpose of such employment…’

Although the Act appears to refer to all communication this is not the case as the courts have ruled that for a document to obtain protection under legal advice privilege it must be a confidential communications between the solicitor and his client or vice versa as is the case at common law.

Where a client voluntarily published or otherwise makes available such potentially privileged communications to others outside the confidentiality setting then the court will deem the document no longer confidential thus the legal privilege will be lost.

Similarly where privileged documents are disclosed in interlocutory court proceedings the documents again would no longer be considered confidential and again lose their legal privilege.


B)  Without Prejudice Documents

Without Prejudice document are documents that specifically relate to negotiations genuinely aimed at a settlement between parties in a dispute. Such communications which are part of a genuine settlement attempts should be clearly marked Without Prejudice at the top of the letter. The courts have held that the principle of privilege can protect all communications be they offers or counter offers which form part of a chain of communications between the parties (subsequent and previous to the communication marked Without Prejudice). Therefore, it is not necessary that every letter be marked Without Prejudice if it is clear that the communication is intended to be part of the settlement negotiations, however it is advisable that the documents are indeed marked Without Prejudice to avoid protracted argument later.

Accordingly the fact that documents are marked Without Prejudice, does not grant them privileged status and protect them from disclosure unless they are intended to be part of a genuine settlement attempt.

Without Prejudice correspondence as a rule remains Privileged even after a compromise has been reached between the parties and is generally inadmissible in any subsequent litigation on identical subject matter whether between the same or indeed different parties. Where the negotiations between the parties has been successful and the Without Prejudice correspondence forms a part of, or has been incorporated into a binding contract the correspondence may be produced to prove that such a contract has been executed between the parties in the event that, one party does not comply with the terms of the settlement, and the other party seeks to enforce it through litigation.

C)  Without Prejudice Save as to Costs

When an offer is made and has been marked Without Prejudice Save as to Costs then the document remains a privileged document as with a document marked Without Prejudice but remains so only the arbitral hearing has reached its decision.

In respect of arbitration, where a Defendant believes that there is some merit in the Claimant’s claim, but not as much as the Claimant claims, then the Defendant may make a without prejudice save as to costs offer to the Claimant. If the Defendant sets his offer to the Claimant at the right level, this affords him some protection from liability for the Claimant’s legal costs assuming that the amount which is awarded to the Claimant by the arbitral hearing falls below that which was contained in the Defendants Offer.

Similarly the Claimant may submit to the Defendant a without prejudice save as to costs offer on the grounds of attempting settling the dispute with the minimum of cost and wasted resources. The fact that the offer made on a without prejudice save for costs basis protects the Claimant from being compromised legally by any admission made by them in attempting to reach a settlement. Where the Defendant rejects the offer the arbitral hearing awards a sum which is indeed higher than the amount offered by the Claimant then the liability for the Claimants costs will fall on the Defendant.

It maybe that both parties elect to submit offers on this basis. Whether it be the defendant, the Claimant or both parties who submit offers the arbitral board will not be told about the offer or offers until after it has made its decision on the liability.

This tactic that can be used to reach out of hearing settlement and also acts as a most effective pressure point by instilling in the other party a concern that a large claim for legal fees will need to be borne if the offer of settlement is not accepted. It should be realised however that the tactic is in effect a double-edged sword and by pitching an offer high or low runs the risk of:

1)   The other party accepting the offer and resolving the matter on better terms than they may have achieved through the arbitration process.

2)   The other party rejecting the offer and being awarded an amount far in excess of the amount offered thus leaving the party making the offer exposed to the other parties legal fees.

The making of an offer on a without prejudice save as to costs basis if often referred to as a Calderbank Offer after the 1975 English case of Calderbank v Calderbank.