In a dispute between members of a homeowners association the plaintiff addressed a letter to the defendant stating that “This is an open letter, the purpose of which is to make proposals for the settlement of the matter as contained in paragraph 12 below”. The court held that despite the reference to it being a “open letter” it was in fact a without prejudice settlement offer which could not be disclosed without the defendants’ consent.
There is no particular magic in the words “without prejudice” in a letter. The substance of the communication will be considered to determine if it forms part of genuine negotiations for the settlement of a dispute. If the letter forms part of genuine settlement negotiations made without prejudice to the rights of the person making the offer, and without acknowledging any liability, it is protected from disclosure without the consent of both parties. It is not the intention of the person writing the letter that is decisive, but rather whether the communication is made without prejudice to the rights of the parties if the offer should be refused. Where a settlement offer is made in this manner, it invites the other party into privileged settlement discussions. The offer creates an opportunity for both parties to engage frankly without fear that the content of their communications will be disclosed. They engage in the discussions knowing that if the negotiations fail they will be entitled to proceed with their claim or defence in full.
The letter in the present matter was clearly an offer to enter into settlement negotiations. It was accordingly protected from disclosure without the consent of the defendant and the plaintiff was not permitted to use it in the proceedings to their perceived advantage.
Offers of settlement should be referred to as offers of settlement, marked “without prejudice”, not contain an admission of liability, and invite the other party to engage in communications to settle a disputed claim.
