What Does “Without Prejudice” Mean In New Zealand Law?

If you run a small business, sooner or later you’ll probably have a dispute you want to resolve quickly (and without it turning into a full-blown legal headache).

That could be a disagreement over an unpaid invoice, a tricky supplier issue, a customer complaint that’s escalating, or even an employment dispute.

In many of these situations, you’ll hear the phrase without prejudice - usually slapped on the top of an email or letter. But what does it actually mean in New Zealand law, and when should you use it (or avoid it)?

Below, we break down what “without prejudice” means in a practical, business-owner-friendly way, including how the rules work in New Zealand, common mistakes we see, and how to use it properly when you’re trying to negotiate a settlement.

What Does “Without Prejudice” Mean In Plain English?

At a high level, without prejudice is a label used when you’re communicating for the genuine purpose of trying to settle a dispute.

The main idea is simple:

• You can make settlement offers freely (including compromises you might not want repeated later), and
• Those communications generally can’t be used against you in court or a tribunal as evidence of admissions or liability.

This encourages people to negotiate honestly. If every settlement email could later be quoted back in legal proceedings, most parties would never make realistic offers.

So Is It A Magic Phrase?

No - and this is where small business owners can get caught out.

Writing “without prejudice” at the top of a message doesn’t automatically protect it. What matters is the substance and context of the communication:

• Is there an existing dispute (or a dispute clearly brewing)?
• Are you genuinely trying to negotiate a settlement?
• Is the communication part of “settlement negotiations” rather than ordinary business correspondence?

If the answer is “yes”, it’s much more likely the communication will be treated as protected settlement negotiations.

How Does “Without Prejudice” Work Under New Zealand Law?

In New Zealand, the protection around settlement discussions is often referred to as the without prejudice rule (sometimes described as “without prejudice privilege”).

In practical terms, it’s a combination of:

• a long-standing common law principle that genuine settlement negotiations should generally be kept from the decision-maker, and
• specific Evidence Act 2006 rules that can make certain settlement communications inadmissible in civil proceedings.

The underlying policy is the same: parties should be able to negotiate a compromise without fear that their settlement attempts will be used against them later as proof of liability.

The Evidence Act 2006 And Settlement Negotiations

New Zealand’s Evidence Act 2006 contains provisions that can exclude evidence of settlement negotiations in civil proceedings (including offers to settle and related communications), subject to exceptions.

For business owners, the key practical takeaway is:

• If you’re genuinely trying to resolve a dispute, you can often have a “commercial conversation” about settlement without every sentence becoming evidence later.

That said, protection is not absolute. There are situations where without prejudice communications can still become relevant (we cover the major exceptions below), and the exact approach can vary depending on the forum (for example, what happens in court may differ from what happens in an employment process).

Why This Matters For Small Businesses

Small businesses often don’t have the time (or budget) for drawn-out disputes. Without prejudice communications can help you:

• Float settlement options without making formal admissions
• Offer partial refunds, credits, or payment plans without “setting a precedent”
• Work towards a written settlement outcome (often a Deed of Settlement)
• Keep negotiations constructive when emotions are running high

When Should You Use “Without Prejudice” In Business Communications?

As a small business owner, you’ll usually use “without prejudice” when:

• There’s a dispute about money owed (e.g. unpaid invoices)
• A customer is threatening a complaint, chargeback, or legal action
• A supplier relationship has broken down and you want to reach an exit arrangement
• A contractor says your business breached the agreement (or vice versa)
• You’re negotiating an employment dispute or exit

It’s also common to use it when you’re discussing the terms of ending a relationship - for example, where you’re considering terminating a contract but want to explore a “clean break” settlement first.

Common Examples Of “Without Prejudice” Offers

Here are settlement-style statements that are often appropriate to make on a without prejudice basis:

• “Without prejudice, we’re prepared to pay $X as a full and final settlement of all claims.”
• “Without prejudice, we deny liability, but to resolve the matter commercially we can offer a replacement unit and a partial refund.”
• “Without prejudice, if you withdraw your complaint, we’ll agree to waive the final invoice.”
• “Without prejudice, we can agree to a mutual termination effective immediately, with no further amounts owing by either party.”

The common thread is that you’re trying to settle, not just “talking about the problem”.

Common Mistakes To Avoid When Using “Without Prejudice”

Using “without prejudice” incorrectly can create confusion, damage negotiations, and sometimes fail to protect you when you expect it to.

1. Using It In Routine Business Emails

If you put “without prejudice” on everyday operational messages (like delivery updates, standard invoice chasers, or scheduling emails), it can look like you’re trying to “game” the system.

Also, if there’s no real dispute and no settlement negotiation, the protection may not apply anyway.

2. Mixing Settlement Offers With Threats Or Non-Settlement Content

Settlement emails should stay focused. If you combine a genuine offer with aggressive threats (or unrelated commercial content), you risk:

• derailing negotiations, and
• creating arguments about what parts of the communication are actually protected.

A cleaner approach is often to separate communications:

• One email that’s “open” (factual, operational, non-negotiation)
• One email that’s “without prejudice” (settlement discussion)

3. Assuming It Protects Dishonest Or Misleading Statements

“Without prejudice” is designed to protect settlement negotiations - not to give anyone a free pass to mislead. If there are issues like fraud or serious misleading conduct, the situation can quickly move beyond ordinary settlement protection.

For example, if your dispute involves alleged misleading statements, it may help to get advice early on how the law treats claims and evidence (including concepts like misrepresentation).

4. Forgetting That You Still Need A Proper Written Outcome

Even if you reach agreement in principle via without prejudice emails, you typically still want to document the final deal properly.

Otherwise, you can end up with disputes about what was agreed, when it takes effect, whether it was “full and final”, and what happens if someone breaches the settlement later.

In many cases, the cleanest way to finalise a deal is a signed Deed of Settlement (especially if you want releases, confidentiality, non-disparagement terms, repayment schedules, or return-of-property clauses).

Are There Any Exceptions? When Can “Without Prejudice” Communications Be Disclosed?

Yes - and this is important. “Without prejudice” doesn’t create an absolute blanket of secrecy.

While the details depend on the forum and the facts, here are common situations where without prejudice communications can become relevant:

1. To Prove A Settlement Was Reached

If one party says “we settled” and the other says “no we didn’t”, a court may need to look at communications to decide whether a binding settlement exists and what its terms are.

This is one reason it’s smart to clearly confirm when negotiations switch into an agreed deal, and to formalise the outcome in writing.

2. “Without Prejudice Save As To Costs”

You may also see: “without prejudice save as to costs”.

This is commonly used (often as a “Calderbank” style offer) where parties want the negotiation to stay private during the dispute, but allow the offer to be shown later when the court is deciding who should pay legal costs.

In plain English, it’s a way of saying:

• “You can’t show this offer to the decision-maker on liability,” but
• “You might be able to show it later on costs, to argue the other side acted unreasonably by refusing it.”

This can be a useful strategic tool, but it needs to be used carefully. For example, some tribunals and employment processes don’t deal with costs in the same way as the courts, so the practical value of a costs-based offer can vary.

3. Improper Conduct

If communications involve serious misconduct (for example, threats that cross the line, blackmail-type conduct, or other improper behaviour), protection may not apply in the same way.

The threshold and analysis can be complex, so if negotiations are getting heated, it’s a good time to get legal advice before you hit send.

4. Where A Law Or Process Requires (Or Strongly Protects) Confidentiality

Depending on the type of dispute and forum, there may be specific rules about confidentiality and what can (and can’t) be disclosed.

This comes up a lot in employment matters. In New Zealand, for example, Employment Relations Authority mediation is generally confidential, with separate statutory confidentiality settings that can sit alongside (and sometimes be stronger than) the usual without prejudice approach. If you’re managing an employee dispute, it’s worth speaking with an Employment Lawyer early so you don’t accidentally undermine a proper process.

Practical Tips: How To Use “Without Prejudice” Properly In Emails And Letters

If you want to use without prejudice communications well (and avoid confusion), here’s a practical approach that works for many small businesses.

1. Make Sure There Is A Dispute (Or A Clear Potential Dispute)

Without prejudice protection is about settling disputes. If your email is just “business as usual”, the label won’t do much.

If you’re not sure whether something counts as a dispute yet, a good rule of thumb is:

• If you can reasonably see this ending in a formal complaint, legal claim, or threatened action, you’re probably in “dispute territory”.

2. Label It Clearly (But Don’t Rely On The Label Alone)

A clear subject line helps, for example:

• Subject: “Without Prejudice – Settlement Proposal”

Then make the content clearly about settlement:

• State your position briefly (e.g. deny liability / explain your view)
• Make the offer (the number, the action, the timeline)
• State that it’s made to resolve the dispute
• Consider adding an expiry date to the offer

3. Keep Your “Open” Facts Separate

Sometimes you need to send factual information that you’re comfortable standing behind in a legal process (like payment records, delivery dates, or contract clauses). If so, keep that in a separate “open” email or letter, and use without prejudice communications for the negotiation part.

If you’re unsure what should be “open” versus “without prejudice”, getting a quick contract review can help you understand your actual rights before you start negotiating.

4. Don’t Accidentally Create A Binding Agreement Mid-Negotiation

This is a big one.

Even without prejudice negotiations can sometimes result in a binding agreement if both sides clearly agree on all key terms and act on it.

To avoid confusion, it can help to use language like:

• “This is a proposal only and is subject to a formal written agreement being signed.”

And when you do reach agreement, it’s often best to move quickly to formal settlement documentation (again, commonly a Deed of Settlement).

5. Think About The Wider Legal Risks (Not Just The Dispute)

A settlement isn’t only about money. You might also need to deal with:

• Confidential information and IP (e.g. returning documents, deleting files)
• Non-disparagement or public statements
• Ongoing service obligations or warranties
• Payment timing, default interest, or what happens if someone doesn’t follow through

For example, if you’re resolving an issue involving internal conduct or business operations, you might also want to tighten your Workplace Policy settings so the same issue doesn’t come up again.

Key Takeaways

• Without prejudice is used for genuine settlement negotiations, helping you make offers to resolve a dispute without those communications generally being used against you later.
• Simply writing “without prejudice” on an email doesn’t automatically protect it - the communication needs to be part of a real attempt to settle a dispute.
• It’s best to keep settlement discussions separate from “open” factual communications, so you don’t create confusion about what can be relied on later.
• There are exceptions, including where the court needs to decide whether a settlement was reached, and in some cases where offers are marked “without prejudice save as to costs”.
• Once you reach agreement, document it properly (often in a Deed of Settlement) so you’re not relying on messy email chains to prove what was agreed.
• If you’re negotiating a higher-risk dispute (especially involving employment issues, alleged misleading conduct, or significant sums), it’s worth getting tailored legal advice before you make offers or admissions.

If you’d like help handling a dispute or preparing settlement documents so your business is protected from day one, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.