What "Without Prejudice" Actually Means (and What It Doesn't)

"Without prejudice" is one of those phrases that circulates in business disputes and settlement negotiations with a confidence that sometimes exceeds the understanding behind it. Slapping those two words on a letter does not automatically protect everything in it. Here is what the rule actually does, why it exists, and how to use it correctly.

The purpose of the rule

The without prejudice rule exists to encourage parties in a dispute to negotiate freely without fear that their settlement discussions will be used against them at trial. Without it, every concession in a negotiation — every acknowledgement that the situation is complicated, every offer made to move things forward — could be presented to a judge as evidence of weakness or admission. That would chill settlement negotiations entirely. The rule removes that risk: communications made in a genuine attempt to settle a dispute are not admissible as evidence in court proceedings.

What it actually protects

Without prejudice protection covers communications — written and oral — that form part of a genuine attempt to resolve an existing dispute. Two elements must be present: an actual dispute, and a genuine attempt to settle it. The label is not the test. Marking a letter "without prejudice" does not, by itself, make it protected. If the letter is not actually part of settlement negotiations — if it is ordinary business correspondence, a demand letter with no offer attached, or a complaint that is not a genuine attempt at resolution — the label does not convert it into something it is not. Equally, the absence of the label does not destroy the protection: if it is clear from context that communications are settlement negotiations, they may be protected even without the explicit label.

The variant that matters in practice: "without prejudice save as to costs"

Standard without prejudice correspondence cannot be shown to the judge either during the trial or on the question of costs. That means an offer you made and the other side rejected is hidden from the judge entirely — including when they are deciding who should pay the legal fees. "Without prejudice save as to costs" is different. Correspondence labelled this way stays off the table during the trial itself, but can be shown to the judge after judgment when deciding costs. This matters because the judge's costs discretion is wide — and an unreasonable refusal of a reasonable offer is precisely the kind of conduct they take into account. If you are making a settlement offer and you want it to have teeth on costs — to be able to point to it after trial and say "we offered £X at an early stage and they refused" — use "without prejudice save as to costs", not plain "without prejudice".

Part 36: the without prejudice offer with built-in costs consequences

A Part 36 offer is the formal, structured version of a without prejudice save as to costs offer under the Civil Procedure Rules. It must be in writing, state that it is made under Part 36, specify a period of at least 21 days for acceptance, and be a genuine offer to settle. The consequences of beating a Part 36 offer at trial — if you are the claimant — are substantial: indemnity costs, enhanced interest on the judgment sum and the costs, and an additional 10% uplift on the amount awarded. If a defendant makes a Part 36 offer and the claimant fails to beat it at trial, the claimant pays the defendant's costs from the date the relevant period expired — even though the claimant won. Part 36 is the mechanism that gives settlement strategy real commercial weight. For a wider view of resolving a dispute without a trial, see our guide to mediation vs litigation.

Common mistakes

• Marking everything "without prejudice". Routine business correspondence, formal demands, and letters threatening legal action are not settlement negotiations. Mislabelling them creates confusion and may not attract protection.
• Assuming the label is conclusive. It is not. If challenged, the court looks at the substance and purpose of the communication.
• Using "without prejudice", not "save as to costs". If you want costs consequences from an offer, the additional four words are essential.
• Making admissions you do not intend. The rule protects the communication from being used in court — it does not stop the other side knowing what you said.

Bonsai Law advises businesses on settlement strategy, Part 36 offers and commercial disputes in England and Wales. Before you send — or respond to — settlement correspondence, talk to us about how to protect your position.