11 February 2021

Without Prejudice Communications: When there is more than meets the eye


Introduction

Without prejudice communications can be useful as it encourages parties to settle a dispute without unduly comprising their position. However, the mere labelling of any communication as “without prejudice” does not automatically cloak such correspondence with this privilege. Many a times, courts have found that communications explicitly marked as “without prejudice” are not to be regarded as such. When this happens, the recipient of these so-called without prejudice communications will also be entitled to rely on the same admissible evidence in court, and this may have an adverse impact on the other party’s case.

Legal principles on without prejudice communications

The rationale behind the without prejudice rule is to encourage parties to negotiate and settle their disputes out of court, by allowing parties to put all their cards on the table fully and frankly, knowing that they will not be embarrassed or compromised by any admission made in an attempt to achieve settlement.

As alluded to above, a piece of communication will not fall under the without prejudice rule simply because it is marked as such. Instead, the following elements will have to be satisfied:

  • the communication was made at a time when there was an existing dispute between the parties;
  • legal proceedings in relation to the dispute had commenced or were contemplated;
  • the communication was made in a genuine attempt to further negotiations to settle the dispute; and
  • the communication was made with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties.

Further, it is not strictly necessary for the communication to be marked as “without prejudice”. As long as it is clear from the surrounding circumstances that parties were genuinely seeking to compromise and settle the dispute, the court will be prepared to treat the communication as one that is protected by without prejudice privilege.

The requirement of an existing dispute between the parties

The first element which has to be satisfied is the communication must have been made at a time when there was an existing dispute between the parties. If the dispute is on how to satisfy the admitted liability, it is unlikely that the party will be able to invoke without prejudice privilege. One example would be communications relating to letters of demand. If, in response to a letter of demand, a party does not contest the debt owed but merely offers to pay a lesser sum to settle the matter, the response will not be regarded as being protected by without prejudice privilege. This is because liability to pay the debt is not disputed.

In the recent case of Secretary for Justice v Wong Lai Yin and others [2021] HKCFI 162, the Hong Kong Court of First Instance (” CFI “) had to deal with the specific issue of whether there was an existing dispute between the parties at the time the alleged without prejudice communications were issued. In deciding this issue, the CFI held that the court will adopt an objective approach to ascertain the intention of the author, as would be understood by a reasonable recipient. In this regard, evidence of the actual intention of the author is irrelevant. The court is also entitled to consider all the surrounding circumstances prior to, at the time of, and subsequent to the sending of the without prejudice communication insofar as they shed light on the issue of whether there is an existing dispute.

The CFI also clarified that the mere assertion of one’s right does not amount to a dispute. Instead, the court will have to look at what the party did or say and, equally importantly, what the party did not do or say.

In this case, the District Land Office (” DLO “) claimed that the 1st Defendant was unlawfully occupying government land, and demanded for the unlawful occupation to be ceased before January 2016. The 1st Defendant’s solicitor responded with a without prejudice letter (“Letter”), stating that the 1st Defendant’s family had been occupying the government land for many years, without any further elaboration. The 1st Defendant also asked for a tenancy of the government land at nominal rent, but what was conspicuously missing from the Letter was the express denial of the government’s alleged right over the land, and the omission to assert any possessory right over the government land.

Interestingly, the CFI remarked that the court will be prepared to assume that the marking and the involvement of lawyers would prompt a reasonable person observing the events to consider the possibility that the communication in question would be related to negotiations, and that the intention for the communication to not be disclosed in any future litigation.

However, notwithstanding the above, the CFI, as a reasonable observer, noted that from the content of the Letter, it cannot be said that the 1st Defendant was disputing the government’s right. While the 1st Defendant’s solicitors did not expressly admit to the government’s entitlement to the land in the Letter, the fact that there was no expressive denial of the government’s right showed that the 1st Defendant had no intention to dispute that entitlement. Instead, the 1st Defendant was merely asking for an indulgence from the DLO to stay on the government land for a while longer. The CFI also found that there was no reason why the 1st Defendant had to allude to a claim for adverse possession by highlighting that he has occupied the land for many years, instead of simply stating it explicitly. Accordingly, the Plaintiff was allowed to rely on the Letter issued by the 1st Defendant’s solicitors to pursue her case.

Conclusion

Simply marking any communication as “without prejudice” does not guarantee or confer immunity on the said communication. The communication in question can still be scrutinized by the court. This case serves as a timely reminder that it is important for parties and solicitors to craft without prejudice communications with due care and consideration. In particular, it is crucial to assert one’s position in relation to liability from the outset, with clear and precise language. Otherwise, a party’s ability to assert without prejudice privilege may be compromised, which could possibly lead to far-reaching implications on the strength of a party’s case.

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Category: Article