India: Privilege To ‘Without Prejudice' Communications: International Perspective

Introduction

The term "without prejudice" plays an imperative role in commercial contracts, as it provides protection to the party from the admissions/contradictions made in the written correspondence in a manner that no rights or privileges are waived or lost.

The Black's Law Dictionary defines 'without prejudice' as:

In addition to the aforesaid definition another classic definition of the phrase 'without prejudice' is contained in the judgement of the Court of Appeal (UK) in Walker v. Wilsher¹ wherein Lindley, L.J. in his judgement defined the phrase as follows:

The term "without prejudice" is used extensively in business ecosystems as it allows parties to speak freely, and securely and ensures admissions made in pursuance will not be used against the author in a determinantal manner.

In India, the word 'without prejudice' derives its footing from Section 23 of the Indian Evidence Act, 1872 wherein, it is laid down that no admission is considered to be relevant if made either upon the express condition that the evidence of it is not to be given or the circumstances leading the court to believe that the parties agreed together that the evidence of such admission shall not be given.

The article discusses that the word "without prejudice" does not act carte blanche against all liabilities of the parties, as globally, the Courts have neither shied away from carving exceptions to this protection nor from extending the privilege in an implied manner wherever necessary.

Implications of expressed 'without prejudice.'

The courts have assumed wide discretion in analyzing the implications of expressed 'without prejudice.'

In the case of Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders and Contractors², the Hon'ble Supreme Court of India while determining the effect of correspondences marked as 'without prejudice' held that.

The Hon'ble Court further went on to hold that:

The court in India and outside have continued to give the effect that "without prejudice" correspondence has to be evaluated on surrounding facts.

Implications of implied 'without prejudice.'

The House of Lords in the case of Rush & Tompkins v. Freater London Council³ held that the nature of the communication is a relevant factor to examine the privilege and waiver. The plaintiff, in this case, was a construction business that had engaged in 'without prejudice' talks with the Respondent.

The dispute between the parties was founded on a common cause of action, it was extended to another party, who demanded disclosure of the substance of these conversations as well. They were thus protected by the 'without prejudice' privilege. It was also held that just labelling documents as 'without prejudice' is insufficient to draw protection, just as the lack of the word is insufficient to renounce such privilege.

Thereafter, the England and Wales High Court in an intriguing case, in Sternberg Reed Solicitors v Harrison⁴ made a unique distinction between communications expressly made on a "without prejudice" basis and those which are treated as "without prejudice" impliedly.

In the instant case, the arbitrator while resolving matters of costs, assumed that he had the discretion to take into evidence, "without prejudice" correspondence between the parties.

The Court went on to rule that the correspondence that the arbitrator took into account was implied "without prejudice" correspondence. Though, it was not labelled "without prejudice," but was produced as part of a compromise effort. Such letters, the court determined, could not be considered on substantive grounds but might be included when calculating costs.

The court held that the arbitrator committed an error of law, however, the letter impliedly "without prejudice" may not be granted protection, for all purposes and was admissible on the question of costs.

The court's conclusion that correspondence made expressly "without prejudice" is not admissible on problems of costs is not unexpected, unless it is marked "without prejudice save as to costs" or the right to refer to the letter for that purpose is otherwise reserved.

In the author's opinion, the Indian Supreme court has recognized implied "without prejudice" in M/s Peacock Plywood Pvt. Ltd. v. The Oriental Insurance Co. Ltd.⁵ wherein it extended the privilege to entire correspondence even though each of the documents was not marked as "without prejudice". However, there are no instances wherein the courts have extended such partial protection. Although it is not uncommon that Arbitrators have extensive discretion when it comes to costs, the established English law principles on without prejudice privilege should have nonetheless restricted what evidence of the parties' correspondence is admissible by the Tribunal.

Conclusion

The courts internationally have not provided 'without prejudice' privilege to parties as an absolute cloak to hide any communication between parties.

However, in certain circumstances, the courts have extended the privilege to communication not marked as 'without prejudice' wherein the intent of the parties is reflected through surrounding circumstances.

The privilege by the courts, in either case, is not treated as carte blanche for parties to extort or gain unduly advantage, interestingly, in the case discussed above, the court managed to extend it to substantive issues and not cost. Although the development and clarity of the same are at the nascent stage the judgement provides an overly balancing approach by extending the limited privilege to impliedly 'without privilege' communication and leaves the wide decision-making powers to the wisdom of the Tribunal.

Footnotes

1. (1889) 23 QBD 335

2. (2004) 2 SCC 663

3. [1989] AC 1280.

4. [2019] EWHC 2065 (Ch)

5. (2006) 12 SCC 673

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.