The words "without prejudice", which are sometimes marked on business correspondence, are not new to those of you who have worked with insurance and claims cases.

Alternatively, even the words, "Privileged report" would be helpful to demonstrate the true purpose of the correspondence.

"Without prejudice" is used to earmark documents relating to all negotiations genuinely aimed at a settlement between the parties. The effect of the remark is to make the document "privileged". This means that a party cannot be required to disclose it in the relevant stages of the litigation. The rule protects a party from being embarrassed by any admission of fact or contentious statements made purely in an attempt to achieve an amicable settlement.

Therefore, any communication intended to be part of a settlement attempt must be clearly marked "without prejudice" at the top of the letter, fax, or e-mail.

However, it would be a mistake to think that once the correspondence is marked "without prejudice", the writer can always go back on what he has said. "Without prejudice" correspondence containing a valid offer and acceptance can form a binding contract or settlement agreement. Evidence of the agreement (even "without prejudice" documents) can be shown to the court by the party who wishes to enforce it (if, say, the other side does not comply with the terms of the settlement).

As said above, a privileged document can be protected from being disclosed in the court proceedings. The doctrine of privilege in respect of civil litigation exists to enable a legal advisor to investigate a case without the fear of prejudicing a client's interest. All correspondence between a legal advisor and his client is privileged, provided that the communication is for the purpose of giving legal advice or assistance, or is a matter that may be litigated. An incident report, for example, may be privileged if it is prepared after an incident likely to give rise to litigation proceedings solely for the purpose of obtaining legal advice and is addressed to the sender's legal advisors or insurers.

We therefore recommend that accident reports be endorsed with the following words:

"Confidential report for the information only of the company's legal advisors prepared solely for the purpose of obtaining professional advice in proceedings pending, threatened or anticipated."