“Without Prejudice”

ITIC is often involved in disputes between a Member and his principal or some other party. It is also common for Members to become involved in efforts to resolve disputes between their principals and other parties. A common post fixture function for shipbroking firms is the resolution of disputes that may have arisen during, and after, the performance of a charterparty. This is largely a matter of commercial negotiation but brokers may sometimes undertake small arbitrations on behalf of their client. Liner agents may also be involved in handling claims made against their principals.

A consideration that may arise during attempts to resolve any of these disputes is the use of the phrase “without prejudice”. It is, obviously, beneficial to encourage parties to settle their differences without the need for a trial. It would also be impossible to have frank and open discussions in those negotiations regarding the merits and possible settlement of a dispute, if any admissions made, or concessions granted, could then be used in a subsequent trial or arbitration. The law therefore allows some exchanges between the parties, or their representatives, to be excluded from the rules of disclosure. These exchanges include communications between legal advisers and their clients and exchanges between the parties which have been made on a “without prejudice” basis.

The main requirement for the communication to be “without prejudice” is that it is made in relation to the settlement of a dispute. This does not mean that litigation or arbitration must have been commenced when the communication is made. When handling a claim a Member should use the phrase in appropriate circumstances, but the omission of the words does not automatically mean that an individual document becomes open or disclosable. This is especially true if it is part of a series of exchanges bearing the qualification “without prejudice”.

It is equally true that the mere fact that a document bears the words “without prejudice” does not give it that status if it is not part of settlement negotiations. It is always important to consider whether it is desirable that a communication should be made on an open or “without prejudice” basis. A common technique is to write two letters, one containing the formal position and a second on a “without prejudice” basis transmitting any settlement offer.