WITHOUT PREJUDICE

The Connotation and Usage

It has been seen that the term, “without prejudice”, is often used in communications and correspondences between two parties. The term "without prejudice" has been defined in Black's Law Dictionary as follows:

“Where an offer or admission is made 'without prejudice', or a motion is defined or a bill in equity dismissed 'without prejudice', it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except in so far as may be expressly conceded or decided”.

Judicial Interpretation

The meaning of this term in communications and correspondences has been the subject matter of examination by the Courts in India, in a catena of judgments. This article, examines  a few of such judgements to understand the connotation of usage of the term “without prejudice” in communications and correspondences.

The Supreme Court of India, in Chairman and M.D., N.T.P.C Limited Vs Reshmi Constructions, Builders and Contractors[1] relied on several judgments of Courts of United Kingdom to interpret the meaning of the term “without prejudice” when used in communication between two parties. In the present case, certain bills in respect of work done by the respondent were disputed. In a letter addressed to the appellant, it was specifically stated by the respondent that all bills, undertakings etc., were signed by the respondent without prejudice to its rights on account of such bills, undertakings. While commenting on the term without prejudice, the Supreme Court observed that:

“Even correspondence marked as without prejudice may have to be interpreted differently in different situations”

The Supreme Court took into consideration the following observations made in English case laws in respect of the term “without prejudice”:

“What would be the effect of without prejudice offer has been considered in Cutts v. Head and Anr[2]. wherein Oliver L.J. speaking for the Court of Appeals held:

In the end, I think that the question of what meaning is given to the words "without prejudice" is a matter of interpretation which is capable of variation according to usage in the profession…."

Yet again in Rush & Tompkins Ltd. v. Greater London Council and Anr.[3]:

The rule which gives the protection of privilege to 'without prejudice' correspondence 'depends partly on public policy, namely the need to facilitate compromise, and partly on 'implied agreement' as Parker LJ stated in South Shropshire DC v. Amos [1987] 1 All ER 340 [1986] 1 WLR 1271. The nature of the implied agreement must depend on the meaning which is conventionally attached to the phrase 'without prejudice'.

The classic definition of the phrase is contained in the judgment of Lindley LJ in Walker v. Wilsher[4].

'What is the meaning of the words "without prejudice"? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.”

Since the main issue under consideration in the aforementioned case was whether the dispute between the parties with regard to the bills could be referred to arbitration, as per the terms of the agreement entered into between them, the Supreme Court observed that any final decision to be made in the present case shall be so made after taking into consideration the context in which the appellant had used the term “without prejudice” in its letter to the appellant.

In the case of Tarapore and Company VsCochin Shipyard Ltd., Cochin and Anr[5], there was a dispute between the parties regarding an award made by an arbitrator under the terms of an agreement entered between the parties. One of the contentions raised by the respondent was that in its letter to the appellant by which the respondent agreed to refer the dispute to the arbitrator, it was stated in clear terms that the reference is being made without prejudice to the position of the respondent, as adopted in the letter, meaning thereby ‘without prejudice’ to its rights to contend that the claim of the appellant is not covered by the arbitration clause.  The Supreme Court, in respect of this contention of the respondent, observed as follows:

“In the context in which the expression 'without prejudice' is used, it would only mean that the respondent reserved the right to contend before the arbitrator that the dispute is not covered by the arbitration clause… Apart from the technical meaning which the expression 'without prejudice' carries depending upon the context in which it is used, in the present case on a proper reading of the correspondence and in the setting in which the term is used, it only means that the respondent reserved to itself the right to contend before the arbitrator that a dispute raised or the claim made by the contractor was not covered by the arbitration clause. No other meaning can be assigned to it. An action taken without prejudice to one's right cannot necessarily mean that the entire action can be ignored by the party taking the same. In this case, the respondent referred the specific question of law to the arbitrator. This was according to the respondent without prejudice to its right to contend that the claim or the dispute is not covered by the arbitration clause.

The Supreme Court, finding no merit in the aforesaid contention of the respondent, held that the respondent cannot be allowed to contend to the contrary on the plea that it had referred the claim/dispute to the sole arbitrator without prejudice to its right to contend to the contrary.

Conclusion

The observations of the Courts, as cited above, clearly indicate that the meaning of the term “without prejudice” varies on a case to case basis, depending on the context in which it is used. The interpretation given to the term by the Courts above is specific to situation / context in which it is used. Therefore, no common connotation can be granted to the term, “without prejudice”. The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal Hyderabad. [1] AIR 2004 SC 1330 [2

] (1984) 2 WLR 349

[3] (1988) 1 All ER 549

[4] (1889) 23 QBD 335

[5] AIR 1984 SC 1072