New guidance clarifies use of the ‘without prejudice’ rule


A recent Privy Council judgement has provided clarification on confusing use of the ‘without prejudice’ rule during a dispute regarding a construction contract final account negotiation.

The ‘without prejudice’ rule permits the parties to a dispute to make a genuine offer to settle an on-going dispute, without the offer being raised in court as evidence against the party making said offer. The purpose of the rule is to enable parties to communicate openly without the concern that the statement will be used against them, encouraging parties to settle disputes amicably and without the need for a court or tribunal to make a judgement.

However CMS Law-Now observe that the phrase ‘without prejudice’ is often misunderstood and misused in relation to construction disputes, where a party often uses the phrases to seek to reserve their right to take a different position in the future.

The facts of this case concern a dispute between A&A – a construction contractor working on an oil rig, and the Petroleum Company of Trinidad and Tobago (PCTT), regarding the value of variations, when seeking to agree a final account.  PCTT objected to their letter from 2008, which was stated to be ‘without prejudice’, being included in evidence at the High Court as part of the litigation to resolve the dispute.

The Privy Council (which comprises members of the UK’s highest court) decided the letter was admissible as evidence.  It observed that the letter formed part of the formal process required by the contract between the parties to reach an agreement of a value for the works performed. Importantly, it was not a genuine offer to settle the dispute.  Therefore whilst the letter was stated to be ‘without prejudice’, the court decided otherwise, meaning that the letter was admissible in court as the rule didn’t apply.

Matthew Golightly, Associate Director – Claims & Technical, Brunel Professions said: “This decision in this case is a useful reminder of the protection actually provided by stating that correspondence is “without prejudice”, along with the limitations of the same. Our own experience mirrors that of CMS Law-Now in that we often see the statement misused, in circumstances where it may not provide the protection the author of the correspondence desired.”

The Privy Council judgement is available on its website.  Commentary by CMS Law-Now provides a detailed explanation of the ‘without prejudice’ rule and this case.  The case is also reported on by 3 Hare Court. is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK.  Click here to get a quote or call 0345 450 1074 to speak to a broker.