A term that without prejudice: What is it and when should you use it?

Recently, the Dubai Cassation Court issued a seismic ruling, one that went relatively unnoticed to the wider community, but one that set tongues wagging in the legal community.

Case DCC 486/2024 held that ‘without prejudice’ communications are not, in fact, evidence. In addition, the Court held that without prejudice grants rights to the parties and allows the parties immunity from such communications from being used in court as evidence.

This is a new development for the UAE and one that has the ability to change how cases are handled. Settlement in UAE cases was always approached with caution, because communications could and were used as evidence, irrespective if ‘without prejudice’ is stated. DCC 486/2024 does have the ability to change that, although it must be noted that the UAE does not have a binding law of precedent, only a persuasive one.

That being said, what is ‘without prejudice’ and when should it be used?

Common law lawyers will be very familiar with ‘without prejudice’ but one of the things we have seen often is letters, sometimes from lawyers, from one party to the other headed ‘without prejudice’. It seems that many are of the view that by simply throwing the label ‘Without Prejudice’ onto anything and everything offers you some kind of shield of protection and makes everything privileged and inadmissible.

That is a fundamental mistake.

Without prejudice is one of the most overused and in many instances, incorrectly used, statements. So, what exactly is without prejudice, when should you use it and what protection, if any, does it offer?

Firstly, labelling a letter ‘without prejudice’ does not necessarily mean that it will be considered as such. Alternatively, failing to label something without prejudice does not automatically mean that it will not be privileged.

The starting point as to whether without prejudice should be used is to firstly understand the context in which you seek to use it. If there is a bona fide attempt to resolve a dispute, then the without prejudice rule may apply. If there is no bona fide attempt to resolve, then it doesn’t matter how many times you put without prejudice on something, the rule will not apply - it’s that simple.

Many assume that without prejudice only applies if there is litigation on the horizon, which is partly correct. There is no requirement for litigation to be about to proceed or threatened, merely the reasonable contemplation of the parties that litigation may result if terms cannot be agreed. In any event, there must be a genuine, bona fide dispute and not just sabre rattling.

Once the starting point is established, namely that you have a genuine dispute and you are genuinely seeking to resolve that dispute, then everything said in the course of the negotiations, whether expressed in writing or verbal, is covered by the without prejudice privilege, regardless if you state, expressly or otherwise, that the communications are without prejudice. It must be noted that the courts will view the subject matter objectively in order to establish whether the communication was indeed without prejudice. Nevertheless, it is best practice to label such communications ‘without prejudice’, especially if you are seeking to add the ‘without prejudice save as to costs’ element.

Without prejudice does not only apply to the party making the statement or starting the negotiation. It applies to both parties, assuming the communication is covered by without prejudice privilege. Many seem to think that if you make an offer that is without prejudice but any counter offer is not, especially if the communication is not labelled as such. That is a common mistake and wrong, as the totality of the communications are without prejudice.

Sometimes you will see ‘without prejudice, save as to costs but what exactly does this mean? It means that the court will be able to see the communication, but only for the purpose of deciding costs. In other words, communications labelled “without prejudice save as to costs”, or whose content clearly and unambiguously indicates that they may be shown to the court at the costs stage, may be relied upon if a settlement offer was unreasonably refused.

Whilst ‘without prejudice save as to costs’ may be encountered within the DIFC/ADGM courts, as these courts adopt a common law approach to proceedings, it is unlikely to offer similar protections within the Mainland courts at this time. Recently, we have seen Mainland courts award legal representation costs, but such cases appear to have been distinguished upon their merits.

Horizons & Co, in a case led by Partner Areen Jayousi, successfully recovered AED 200,000 in legal costs. In that matter, the recovery of costs was possible because the underlying services agreement expressly provided that, if legal action became necessary to recover unpaid sums, the distributor (defendant) would be liable for all reasonable collection and legal costs. The court relied on this contractual provision and accepted the claimant’s engagement letter and supporting documentation as evidence of the costs incurred.

Accordingly, whilst provision for recovery of legal costs is possible in Mainland courts, albeit in limited instances, extending this to include ‘without prejudice save as to costs’ provisions which would involve later discussions, possibly made on a unilateral basis, is potentially a step too far currently but it is certainly worth keeping an eye on such developments.

Conclusion

Case DCC486/2024 is a welcomed judgement that may bring parties to a dispute to the table in an attempt to seek resolution via settlement, something that was not the ‘go to’ position when dealing with onshore litigation. That is not to say parties will instantly default in seeking to negotiate because it takes time for such principles to be adoptive in practice, but the fundamental foundation for that to happen is now in place.

Nonetheless, whilst the concept of ‘without prejudice’ is relatively new in UAE onshore legal matters, it is still advisable to follow the tried and tested rules that have served the common law jurisdictions well, when dealing with ‘without prejudice’.

The main take aways from without prejudice communications are as follows:

1. Is there a dispute?
2. Are the parties genuinely seeking to resolve the dispute?
3. Consider whether ‘with prejudice’ is really required. If there is no dispute or no genuine attempt to resolve a dispute, then consider challenging communications labelled ‘without prejudice’.
4. Make sure that you use the correct label or even if the label is required.
5. Remember, a waiver of the privilege is only possible if BOTH parties expressly agree and be on the lookout, because you could waiver inadvertently.
6. Whilst labelling something without prejudice is not a prerequisite to gain the privilege, get into the habit of labelling but do so with due care and consideration. If there is no genuine attempt to resolve a valid dispute, then the label will not grant anything.
7. Avoid labelling everything ‘without prejudice’ or ‘off the record’ in the vain hope it will be covered, because it won’t help unless there really is a genuine attempt to resolve a genuine dispute.