Insight
Without Prejudice: What It Means and When It Protects You
21 Sep 2026
In short
"Without prejudice" means a communication is a genuine attempt to settle a dispute and cannot later be used in court as evidence of an admission. It only works where a real dispute exists and the communication is genuinely aimed at settlement — the label alone does not create the protection.
Next step: If you are negotiating a settlement, see commercial disputes or read our guide to Calderbank offers.
"Without prejudice" is one of the most used and most misunderstood phrases in Australian commercial correspondence. It is not a magic incantation that hides anything you put underneath it. It is a rule of evidence that protects genuine settlement negotiations — and it works only when the substance of the communication actually is a settlement attempt.
What does "without prejudice" mean?
Without prejudice means the communication is made as part of a genuine attempt to settle a dispute, and so cannot be tendered in court or arbitration as evidence of an admission by the party who wrote it. The purpose is commercial: parties should be able to make concessions to resolve a dispute without those concessions being used as weapons if the dispute is not resolved.
The protection comes from the common law settlement-negotiation privilege and, in most Australian proceedings, from section 131 of the Evidence Act 1995 (Cth) and its state equivalents, which makes evidence of communications in connection with an attempt to negotiate a settlement inadmissible.
When the label actually works
Three conditions generally need to be met:
- There is a genuine dispute. You cannot make an ordinary commercial negotiation privileged by labelling it. If there is no dispute — just a deal being done — the protection does not attach.
- The communication is a genuine attempt to settle. Substance beats form. Courts look at what the letter or email is really doing, not at the heading.
- It is not within an exception. The statutory exceptions are real and regularly applied.
Conversely, a letter that is a genuine settlement offer is protected even if it is not labelled. The words help signal intention; they are not the source of the privilege.
Without prejudice vs "without prejudice save as to costs"
| Wording | Effect | Typical use |
|---|---|---|
| Without prejudice | Inadmissible on liability and on costs | Open settlement discussion, early negotiation |
| Without prejudice save as to costs | Inadmissible on the merits, but can be shown to the court on costs after judgment | A Calderbank offer, designed to expose the other side to adverse costs if they reject a reasonable offer |
| Open letter (no label) | Fully admissible | Letters of demand, notices, anything you want the court to see |
The distinction matters commercially. If you want your reasonable offer to influence a costs order later, it must be "without prejudice save as to costs" — see our guide to Calderbank offers.
Exceptions: when a without prejudice communication can still be used
Section 131(2) of the Evidence Act sets out a list of exceptions. The ones that bite most often in commercial matters are:
- Where the parties consent to the evidence being adduced.
- Where the communication is relevant to determining whether a settlement was actually reached, or what its terms were.
- Where the evidence is needed to contradict evidence already given about the negotiations.
- Where the communication was made in furtherance of a fraud, offence or an abuse of power.
- Where a party would suffer a misleading impression if the communication were excluded.
- Unlawful threats, or communications that amount to unconscionable conduct, are not shielded by the label.
Common mistakes Australian businesses make
- Heading everything "without prejudice". Putting it on an invoice, a demand or a routine commercial email achieves nothing and can undermine you — a demand you want to rely on should be open.
- Mixing protected and unprotected content in one email. Keep the settlement offer in a separate, clearly marked communication from operational or contractual notices.
- Assuming it hides admissions from the other side. The other party still reads it. It is inadmissible in evidence; it is not confidential from your counterparty, and it shapes how they value the dispute.
- Making threats under the banner. Threatening conduct is an exception, and improper threats can create their own liability.
- Using it on a without-notice basis in correspondence with regulators. The privilege is about settling disputes between parties; it does not restrict a regulator's statutory powers to compel information.
Practical drafting guidance
- Put "Without prejudice" (or "Without prejudice save as to costs") at the top of the communication, in the subject line and the body.
- State expressly that the letter is a genuine attempt to resolve the dispute.
- Make the offer specific — amount, timing, what is released, whether it is inclusive of costs, and how long it stays open.
- Say whether the offer is conditional on a signed deed of settlement and release.
- Send separate open correspondence for anything you may need to rely on — notices of breach, requests for documents, limitation-period protection.
Frequently asked questions
What does "without prejudice" mean in Australia?
It means the communication is a genuine attempt to settle a dispute and cannot be used in court as evidence of an admission. It comes from the common law and from section 131 of the Evidence Act 1995 and its state equivalents.
Does writing "without prejudice" make an email confidential?
No. It affects admissibility in proceedings, not confidentiality. The recipient reads it, can act on the commercial information in it, and can use it in the limited situations the legislation allows.
Can a without prejudice offer be used to prove a settlement was reached?
Yes. One of the express exceptions is where the communication is relevant to whether a settlement was concluded and on what terms. This is why accepted offers frequently end up in evidence.
What is the difference between "without prejudice" and "without prejudice save as to costs"?
The second form lets the court see the offer after judgment when deciding costs. It is how a Calderbank offer puts costs pressure on the other side while keeping the offer out of the merits hearing.
Do I need a dispute before I can use "without prejudice"?
Generally yes. There must be an existing or reasonably anticipated dispute. Labelling an ordinary commercial negotiation does not attract the privilege.
Negotiating a commercial dispute?
Settlement correspondence is where disputes are usually won or lost, and where costs exposure is created or avoided. Contact Envision Legal for a fixed-fee review of your settlement strategy and correspondence before you send it.
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