The use of the legal disclaimer ‘without prejudice’ is a signifier that communications, documents, or admissions (oral or written) will not be used for prejudicial purposes. However, the simple inclusion of this term will not always attract the protection – the court will make a discretionary determination based on the circumstances.
‘Without prejudice’ encourages parties in dispute to try and reach a settlement, by allowing them to be as free and open as possible about their position, without the risk of their words and actions being used against them. Parties can make concessions and compromises in negotiation or pre-trial communications without taking on the risk of this being used against them later.
Section 131 of the Evidence Act 1995 (Cth) excludes parties from relying on evidence of settlement negotiations, and encourages the parties to a dispute to try to settle the matter before or during litigation without fear of being held accountable for possible concessions made during the negotiation process, or without the settlement negotiations detrimentally affecting their case.