Without prejudice privilege, sometimes described as the “without prejudice” rule, is a type of privilege relating to the conduct of litigation which is designed to protect the communications made between parties with a view to settling the dispute and avoiding the need for court proceedings. The privilege prevents those communications from being shown to the court or used against one of the parties in the event that such a settlement is not achieved.
The purpose of the rule or policy is therefore to encourage people to try to settle their cases or their differences which might lead to court proceedings, rather than litigating them. Parties can therefore negotiate on the basis that anything said or written in their negotiations, however relevant to the case, cannot be passed on to the judge unless both parties agree. Prefacing a discussion with the words “without prejudice” or putting it on a letter, creates the protection; but it is the fact of negotiation that creates the privilege.
In the case of Rush & Tompkins Ltd v Greater London Council  AC 1280, 1299, Lord Griffiths explained the rule as follows:
“The ‘without prejudice’ rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. …
The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence ‘without prejudice’ to make clear beyond doubt that in the even of the negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase ‘without prejudice’ and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.”