Understanding ‘Without Prejudice’ in Divorce Mediation – DTSW

without prejudice offer to settle
  • “without prejudice”, prevents the substance of the letter or discussions from being used in a court case on the issue.
  • What matters most is the content of the document and the intention behind the communication.
  • The rule exists to give people confidence and trust in the ADR settlement process.
  • There are other variations that parties may use

Without prejudice offer to settle

In the course of settlement discussions or during the ADR process, parties often wish to speak sincerely and make a good faith attempt to settle. This is because, in most circumstances, reaching a settlement means compromising on some hard positions. It may even mean admitting that the other party was right in certain respects.  But such admissions or compromises can be harmful to your case if you eventually decide to proceed to court. This is why there are certain rules that protect the rights of parties and prevent their admissions from being used against them in court. The “without prejudice” rule is one of these rules.  What does the rule mean and how does it apply during the ADR process (aka Mediation) ? This article explains all you should know about the rule. 

What does without prejudice mean?

“Without prejudice” is a legal term that essentially means “without loss of any rights”. It is a declaration by one party that what they are saying, doing or agreeing to do is not intended to affect their full legal rights later on, should they decide to insist on them.  You may see these words marked at the top of a letter or mentioned at the start of negotiations to resolve a pending dispute. Apart from the personal intention of a party leveraging on this rule, the law also gives effect to the rule.  When a letter is marked, or discussions are understood to take place, “without prejudice”, it prevents the substance of the letter or discussions from being used in a later case on the issue. This means if settlement negotiations fail and a lawsuit is filed, neither party can give evidence on the “without prejudice” discussions in court.  The rule exists to give people confidence and trust in the ADR settlement process. Due to the relatively high cost and time-consuming nature of litigation, it is desirable for people to settle their differences amicably. For them to effectively do this, they must be able to speak and discuss candidly, with a genuine attempt to settle.  Sometimes, achieving a settlement may mean acknowledging that you may have been wrong in certain respects. This is called an “admission” in law and it can be damaging to a person’s case is the issue eventually gets to court. To encourage people to settle amicably and avoid the consequences of such admissions, the “without prejudice” rule protects the negotiations from being given as evidence.  There are specific conditions for the rule to apply in settlement discussions in Canada though. These are as follows: 

  • There must be a dispute between the parties, in the form of an existing or contemplated lawsuit; 
  • The communication that is marked “without prejudice” must have been made in order to try and settle the dispute; and 
  • The intention must have been to expressly exclude the communication from financial disclosure in any later lawsuit. 

What happens if “without prejudice” is absent on a document?

Generally, the “without prejudice” rule is not just about words. It is the content of the communication that determines if the rule applies. If the communication forms part of a genuine attempt to settle, and there is a clear intention to exclude financial disclosure, then the rule may still apply. It would not matter that the party failed to expressly mention that it was “without prejudice”.  The opposite also applies though. Marking a document as being “without prejudice” does not necessarily mean the rule will apply. As mentioned above, what matters most is the content of the document and the intention behind the communication.  While failing to include the words will not necessarily deprive you of the benefit of the rule, it can lead to even more disputes. It may cause confusion as to the true intent behind the communication, and the other party may insist they have a right to give evidence on those matters in court.  As a result, it’s often best to include the rule outright or any other variations if you intend to exclude the financial disclosure. 

Are there variations to the “without prejudice” rule?

Yes, there are many different ways a party can take advantage of the rule. A common variation is “without prejudice save as to costs” – also called a Calderbank Offer. When this is used, it means that the party intends to exclude financial disclosure of the communication or any admissions made pursuant to it. But the party also reserves the right to refer to those communications when the court is making a decision as to costs.  Costs refer to an order usually made by a court at the end of a lawsuit. It is common for a court to order a party to pay the costs of litigation of another party. This is usually the case where one party had a really bad case and should not have gone to court, or where they unnecessarily prolonged the lawsuit. The court awards costs in order to compensate the innocent party for bearing the inconvenience of the lawsuit.  When a document is marked “without prejudice save as to costs”, it means a party wishes to be able to show the court that they were willing to settle. They can use the communication to persuade the court that they acted reasonably, either to persuade the court not to award costs against them or to make an award in their favour.  There are other variations that parties may use. This can include a reservation of rights, notices, or other variations in rights. There is no real requirement as to a definite form, so long as the intention is clear and it was made as part of a genuine attempt to settle. 

When will the “without prejudice” rule fail to apply?

There are certain exceptions to the “without prejudice” rule. When these exceptions apply, the court may allow the communications to be given as evidence in a lawsuit. But this is often for very limited purposes. Some of these exceptions include: 

  • Public interest: The rule may not apply where public interest demands. An example of this situation is where the communications include evidence that a crime was committed or is about to be committed. 
  • Misrepresentation, fraud or undue influence: If the communication includes evidence of impropriety such as misrepresentation, fraud, undue influence, perjury or blackmail, the rule may not apply. 
  • Preventing overcompensation: Compensation, in lawsuits, is designed to put a plaintiff in the position they would have been if the wrong they are complaining of never happened. As a result, if the application of the rule may mean a plaintiff is grossly overcompensated, the court may set it aside. 
  • Later disagreement as to terms of settlement: In some instances, the communication protected by the rule may actually lead to settlement. But dispute may arise as to the real terms of the settlement. In such cases, the court may suspend the rule in order to see the actual content of the settlement communications and resolve the dispute. 
  • Agreement of the parties: Finally, the rule can be suspended whenever the parties agree. 

Final Thoughts

Navigating the complex landscape of divorce and settlement discussions requires a genuine attempt to understand and respect the legal rights of all parties involved. The “without prejudice” (WP) rule, a virtually magical quality in the construction context of settlements, plays a critical role in this process. It encourages parties to engage in open settlement discussions, fostering a safe environment for genuine settlement discussions and proposals. The WP rule, under its supposed aegis, allows parties to make concessions, counter offers, and even admit certain facts without the fear of these words being used against them in court. It’s an extreme example of how the law promotes settlement over costly dispute resolution proceedings. However, it’s important to remember that the rule is not just about the words “without prejudice”. It’s about the intention behind the communication dealing with the settlement offer and the particular circumstances surrounding it. In practical terms, the WP rule is a tool that can be used to encourage settlement and avoid the superstitious obsession with the potential misuse of words in the eventual record of court proceedings. It’s instantly clear that the rule has its limitations and exceptions, but in general, it serves a vital public policy purpose by encouraging parties to make genuine attempts to settle. The WP rule, however, is not a shield for libelous statements or a tool to hide the truth everlastingly. Courts, in their final decision, can pierce the veil of the WP rule in extreme circumstances, such as when there’s evidence of fraud or misrepresentation. In conclusion, the WP rule is a powerful tool in settlement negotiations, but like any tool, it must be used wisely and appropriately. It’s always recommended to seek professional guidance when engaging in such settlement negotiations to ensure your rights are protected and your actions are in line with the law.

At DTSW:

We understand that you’re navigating through a challenging period in your life. The complexities of divorce and settlement discussions can often feel overwhelming. That’s why our team of Family mediators and Certified Divorce Financial Analysts at Divorce The Smart Way (DTSW) is here to guide you through this process. We recognize the importance of open and sincere communication during these times. Our team is committed to creating a safe and supportive environment for you to express your concerns and explore potential solutions. We believe in the power of mediation and its ability to transform difficult situations into opportunities for growth and understanding. Our team is not just here to help you reach a settlement; we’re here to ensure that you understand every step of the process. We’ll help you understand the financial implications of your decisions and ensure your rights are protected throughout the process. We’re here to empower you to make informed decisions that will shape your future. We know that every situation is unique, and we’re ready to tailor our approach to meet your specific needs. Whether you’re at the beginning of a dispute or already engaged in settlement discussions, we’re here to help. Don’t navigate this journey alone. Reach out to us and let us guide you through this challenging time. We invite you to Schedule a Get Acquainted Call with our team. In this call, we can discuss your situation, answer your questions, and determine how our services might benefit you. Don’t leave your future to chance; understand your rights and make informed decisions. Contact us today to get started.
 

 

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About the Author:
Ken Maynard CDFA, Acc.FM

I assist intelligent and successful couples in crafting rapid, custom separation agreements that pave the way for a smooth transition towards a secure future. This efficient process is achieved in about four meetings, effectively sidestepping the excessive conflicts, confusion, and costs commonly linked to legal proceedings. Clients have the flexibility to collaborate with me either via video conference or in-person through a DTSW associate at any of our six Greater Toronto mediation centers, located in Aurora, Barrie, North York, Vaughan, Mississauga, and Scarborough.

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