Correspondence between parties during settlement negotiations marked ‘Without Prejudice’ encourages litigants to settle their dispute, safe in the knowledge that anything written or said during that period will not later be admitted as evidence. A recent decision by the UK Supreme Court has reduced the efficacy of the ‘Without Prejudice Privilege’.

In certain circumstances it may later become necessary to present evidence in relation to the negotiated agreement and ‘Without Prejudice’ correspondence can be examined by the court. The courts recognise a limited number of exceptions to the rule, developed to deal with such situations. For example, it is accepted that such correspondence is admissible where it is required to show that an agreement should be set aside for misrepresentation or fraud.  

In the recent case, the parties entered into settlement negotiations on a ‘Without Prejudice’ basis. An agreement was formed but a dispute arose in relation to the interpretation of one of its terms.

The Supreme Court decided that the current exceptions to the rule should be extended to include an ‘Interpretation Exception’. It was determined that evidence of any facts or circumstances forming part of the ‘factual matrix’ or surrounding circumstances may now be examined, where such facts would assist the Court in interpreting an agreement, regardless of whether the relevant correspondence or statements were ‘Without Prejudice’.

This is a huge in-road into ‘Without Prejudice’ privilege. Although merely persuasive and not binding on Irish courts, Irish law and UK law in this area are broadly similar. The decision will no doubt have an impact the next time the matter is considered in Ireland. It is a stark warning to parties engaged in a settlement negotiation that both sides must analyse and be certain of all elements of an agreement, to avoid further proceedings whereby ‘Without Prejudice’ correspondence will be examined as evidence and parties will be bound by the contents.