“I will see you in court!” For many this is the way to approach all disputes. However, settlements are sometimes the most effective way to end a matter quickly, thereby avoiding the cost and difficulty of litigation. For many, this useful avenue is one of litigation’s best kept secrets. What is lesser known is how to engage in good faith negotiations without it later compromising your legal position should they fail.

Pre-Litigation Negotiations

The litigation process can be a long and winding one. To avoid that, parties may settle their disputes before a claim is even brought.

However, those parties who engage in prelitigation settlement discussions expect that any admission or compromise that they make to settle a matter amicably will not be used against them if proceedings are later brought.

The law recognises and protects those discussions under what is known as Without Prejudice Privilege. This precludes the receiving party from disclosing, without the consent of the sending party, any communication which is aimed at settling a disputes. This includes preventing a party from relying on any such communication as evidence in court.

Due to the broad protection given to these communications, the law sets up parameters for what it considers “without prejudice”. Ordinarily, such communications would be marked with those words, but the label is not determinative of whether the privilege attaches. If proceedings are subsequently brought and the parties disagree as to whether their earlier communications were actually without prejudice, the court will need to examine the substance of the communication to determine if it is truly without prejudice.

In order for without prejudice privilege to exist, the communication must be written in the context of a dispute or negotiations to settle a dispute. The paramount question is whether the parties have a dispute. Simply put, there must be a contested position between the parties regarding a particular subject matter. Additionally, parties should be careful to mark the correspondence “without prejudice” to indicate that they intend it to be covered by the privilege.

For example, A claims that B has breached its contract by failing to deliver goods on time, and B denies this, contending that delivery was impossible because A prevented access to the location where the goods were to be delivered. In that case, a dispute exists between A and B regarding whether the contract has been breached. A writes to B and says that instead of pursuing B for the full amount, they will accept a lesser sum in settlement of the dispute. If the matter proceeds to court and A sues for more than they were willing to accept in their offer, B generally cannot rely on A’s previous “without prejudice” correspondence to say that A is not entitled to the amount claimed.

The same is true if B were to write to A, maintaining that B was not responsible for any breach of contract but expressed a willingness to pay a certain amount to settle the dispute. In that situation, if the discussions fail and the matter proceed to court, A cannot, if all the requirements of without prejudice communications are met, use B’s correspondence as an admission of liability.

The purpose of this protection is so that parties feel free to communicate openly and facilitate the amicable resolution of their matter without needing to resort to court.

Settling During Proceedings

Settlement offers can still be made after a claim is filed. Those offers may take the form of standard “without prejudice” communications but may also be made as what is known as a “Part 35 Offer”. The strategic value in making a Part 35 Offer is that there are certain consequences which attach if a party rejects a reasonable offer if it meets the necessary requirements.

A Defendant may recover those costs incurred after the offer expires from a Claimant who is awarded less than 85 per cent of the offered amount or if the court determines that the Claimant was unreasonable in not accepting the offer. This is useful because the Defendant may be entitled to recover this portion of his costs although he has lost.

Where it is the Claimant that makes the offer, if the Defendant does not accept it and the court awards equal to or more than the amount offered in settlement or if the Defendant acted unreasonably in not accepting the offer, the court may award interest on damages at a rate of up to 20 per cent per annum which is higher than the standard rate of 6 per cent.

Practical Considerations

There are certain practical considerations when making “Without Prejudice” Settlement Communication or Part 35 Offers.

For Without Prejudice Communication:

• Insofar as is practicable, communicate in writing;

• Ascertain if there is a dispute between you and the other party or if you are in negotiations of a dispute; and

• Mark your communications “without prejudice”.

For Part 35 Offers, the offer must be:

• written;

• marked “without prejudice” and the offeror should reserve the right to disclose it after judgment is given for the purposes of determining the allotment of costs or interests;

• indicate a deadline for accepting the offer which must be at least 21 days after the date the offer is made;

• served on the offeree and all other parties to the proceedings; and

• kept from the court until after the issue of liability is settled.

Conclusion

The protection that attaches to all properly written “without prejudice” communication including Part 35 Offers is essential for allowing parties to engage comfortably in settlement discussions. Settlements may be one of litigation’s best-kept secrets, and it is one worth taking advantage of.

Ronaldo Richards is an Associate at Myers, Fletcher and Gordon and a member of the firm’s Litigation Department. He may be contacted at ronaldo.richards@mfg.com.jm or through the firm’s website www.myersfletcher.com.

This article is for general information purposes only and does not constitute legal advice.