Communicating on ‘Without Prejudice’ basis?
Dear Readers,
We often receive emails, letters or documents bearing ‘without prejudice’, and some of us even use it in our correspondence or draft documents without adequately understanding its usage and effect. Essentially, the phrase ‘without prejudice’ protects such documents from being used as evidence in Court. Yet, parties privy to such documents rely on the same in Court, which is ordinarily resisted based on the protection afforded. Since there is an exception to every rule, this protection also can be lost in some scenarios.
‘Without Prejudice’ provides a protective privilege to the author of a document from any admission or acknowledgement therein being used as evidence against him/her in Court. It’s based on the public policy of putting an end to litigation by encouraging parties to freely negotiate and settle their differences without the fear of it being used against them.
The lawmakers have embodied this privilege under Section 23 of the Indian Evidence Act, 1872, relevant excerpt below –
“23. Admissions in civil cases, when relevant.—In civil cases, no admission is relevant, if it is made either upon an express condition that evidence of it is not to be given, or under circumstances from which the Court can infer that the parties agreed together that evidence of it should not be given.”
Suppose parties want to settle their disputes, one party sends, without prejudice, draft settlement terms to the other, wherein a part amount is admitted. If the parties agree upon and sign the terms, the dispute ends, and the privilege shall cease. If the terms are not approved, parties continue to litigate in Court, and the privileged protection continues. In the latter scenario, permitting a party to use the settlement terms in Court and assert its claim based on the amount admitted therein would be inequitable and unfair. Hence, evidence of such a negotiation is not permitted in Court.
In the landmark ruling of Peacock Plywood’s case [2006 12 SCC 673], the Apex Court explained the scope and contours of protection afforded by ‘without prejudice’. It held that –
(a) Correspondence will be protected by without prejudice privilege if it is written as a genuine attempt to compromise a dispute between the parties
(b) Correspondence need not bear ‘without prejudice’ if surrounding circumstances and the body of negotiation correspondence indicates that parties were seeking to settle the disputes
(c) Correspondence merely bearing ‘without prejudice’ will not be protected if negotiations were not for the purpose to genuinely settle the dispute. This situation may arise when there are no ongoing negotiation talks or ‘without prejudice’ is used in a context having no relevance to negotiation or settlement talks.
The term ‘without prejudice’ can have varied interpretations and meanings based on its professional usage. Suppose a contractor is pressurized by its employer to sign a certificate recording that no further dues are payable towards the contract, and the contractor does sign it but with the following condition ‘without prejudice to my rights and claims against the employer’. In this scenario, without prejudice is not used in the context of negotiation or settlement but in a different context.
So when parties agree to a set of things, merely marking on the document ‘without prejudice’ would be of no consequence. However, if the material indicates that negotiations are in progress and there is no finality, the document marked ‘without prejudice’ cannot be considered by the Court without the consent of the parties (as held by the Bombay High Court in Oberoi Constructions case [2008 SCCOnline Bom 102] and Sanjay Agarwal’s case [2016 SCCOnline Bom 10368])
Next time you send a document marked as ‘without prejudice’, check whether you will be afforded protection based on the context and circumstances in which you use the phrase.
Until we meet again, stay hungry – stay foolish.
Regards,
Harsh