When commercial disputes first arise, the natural inclination
for the parties is often to attempt to resolve matters between
them, without involving lawyers at an early stage. Instructing
lawyers is often seen as a last resort. Amongst other things,
parties to a dispute are often concerned that instructing
solicitors gives the impression that the business relationship with
the other party has broken down irretrievably.
Whilst many disputes will be capable of resolution without the
involvement of lawyers, care should be taken in any correspondence
sent with a view to settling a dispute. If matters can't be
resolved amicably and recourse to the courts is required, the other
party to the dispute may attempt to rely on the content of
correspondence sent during this period.
Some people make the mistake of assuming that including the
words "without prejudice" in correspondence provides a
magical shield which protects all statements made from being relied
upon in court at a later date.
In fact, the extent to which without prejudice clauses protect
the contents of a communication is not entirely settled in Scots
Law. There is a line of authority which suggests that an
appropriately drafted without prejudice clause only renders
inadmissible concessions which are made for the purposes of
negotiation and not clear statements of fact. The distinction
between these two categories of statement is not always easy to
Case Law Example
In the 1994 case of Daks Simpson Group Plc v Kuiper the Pursuer
company claimed that a former director had received commission from
customers, which he had retained for himself and had not accounted
for to the company. An admission was made during a meeting between
the parties and their solicitors that the director had received
secret commission in excess of £600,000.
After the meeting, the company's solicitor wrote to the
director's solicitor with a schedule of payments that they
alleged the director had received. The director's solicitor
responded indicating that, whilst the schedule was exaggerated in
some respects, sums in excess of £600,000 were due to the
company. The letter was concluded with a "without
prejudice" clause. On the basis of the letter, the company
asked the court for judgment against the director for the sum that
he admitted to be due. The director argued that the letter had been
sent on a "without prejudice" basis and that,
accordingly, its terms could not be relied upon in the context of
the court action. However, the judge granted judgment and offered
the following guidance on the issue of without prejudice
"If offers, suggestions, concessions or whatever are made
for the purposes of negotiating a settlement, these cannot be
converted into admissions of fact... if however someone makes a
clear and unequivocal statement of fact, then there could be no
objection in principle to that admission being used in subsequent
proceedings, even though it was made in correspondence stated to be
MacRoberts are happy to give advice to clients during the early
stages of negotiating disputes. In particular, we can review any
correspondence which you propose to send to the other party to a
dispute. We can also advise on the wording of a without prejudice
clause, if appropriate. This may assist in preventing statements
made during early negotiations from prejudicing the case, should it
eventually reach the courts.
The material contained in this article is of the nature of
general comment only and does not give advice on any particular
matter. Recipients should not act on the basis of the information
in this e-update without taking appropriate professional advice
upon their own particular circumstances.
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