Without Prejudice (WOP) in Credit Hire: What It Means and When It Applies
"Without prejudice" means a communication is a genuine attempt to settle a dispute and therefore cannot be shown to the court as evidence of admission if the case goes to trial. It is a legal privilege, not a courtesy: used properly it lets parties negotiate settlement of rate, period and impecuniosity without committing themselves at trial, used loosely it creates confusion about what is admissible and undermines settlement attempts.
This guide explains what WOP actually does, how it differs from "Without Prejudice Save as to Costs" (WPSATC), and how both interact with Part 36 offers in UK credit hire litigation.
What "Without Prejudice" actually means
The without prejudice rule is a rule of evidence. It protects statements made in a genuine attempt to settle an existing dispute from being put before the court as admissions. The leading authority is Rush & Tompkins Ltd v Greater London Council [1989] AC 1280, which confirmed that the rule exists to encourage parties to speak freely during settlement discussions.
The label "Without Prejudice" on the top of a letter is shorthand. The substantive test is whether the content amounts to a genuine settlement communication. A letter that argues liability without making any concession is not protected merely because someone wrote WOP at the top, and a settlement offer is protected even if the label was forgotten.
WOP vs WPSATC
"Without Prejudice" and "Without Prejudice Save as to Costs" are two different things and confusing them causes real problems on costs arguments.
- Without Prejudice (WOP) — fully privileged at every stage of the litigation, including costs. The court never sees it unless both parties waive privilege or one of the recognised exceptions applies.
- Without Prejudice Save as to Costs (WPSATC) — privileged during the liability and quantum stages, but can be shown to the court on the question of costs after judgment. This is the Calderbank formulation, named after Calderbank v Calderbank [1976] Fam 93.
If you want the offer to drive a costs consequence later, it has to be WPSATC or Part 36. A pure WOP offer cannot be used to argue costs.
Where Part 36 fits in
Part 36 of the Civil Procedure Rules is a self-contained settlement code. A compliant Part 36 offer is treated as Without Prejudice Save as to Costs, but with stronger and more predictable consequences than a Calderbank offer. If a claimant beats its own Part 36 offer at trial, the defendant typically pays indemnity costs, enhanced interest of up to 10% above base rate, and a 10% additional amount on the judgment sum (CPR 36.17).
In credit hire, this matters because the recoverable hire and storage figures often sit close to the offers being exchanged. A well-pitched Part 36 offer from the claimant on a disputed BHR or impecuniosity file is one of the strongest tools available to drive a clean settlement.
Common mistakes in credit hire correspondence
- Marking every letter "Without Prejudice" as a default. The privilege only attaches where the content is a genuine settlement attempt.
- Mixing open argument and WOP offers in the same letter. Split them so the privileged content is unambiguous.
- Sending what is meant to be a Calderbank offer marked only "Without Prejudice". Without "Save as to Costs", the offer cannot be deployed on costs.
- Replying to an insurer's WOP letter on an open basis. The reply itself can lose privilege unless it is also clearly marked WOP.
- Quoting WOP correspondence in an open letter or pleading. This invites an application to strike out and a costs penalty.
When WOP protection can be lost
The courts will look behind the label in narrow circumstances:
- To decide whether a binding settlement was actually reached.
- Where the privilege is being used as a cloak for impropriety, such as a threat that goes beyond settlement.
- On questions of estoppel, delay or rectification.
- Where both parties expressly waive privilege.
The leading authorities on the exceptions are Unilever plc v Procter & Gamble Co [2000] 1 WLR 2436 and Ofulue v Bossert [2009] UKHL 16. The threshold is high; the court's starting position is that WOP material stays out.
Practical handling on a credit hire file
On a typical credit hire file, keep three correspondence streams clearly separated:
- Open correspondence for substantive arguments on rate, period, need, mitigation and impecuniosity. This is what the court will see.
- Without Prejudice correspondence for exploratory settlement discussions you do not want surfaced at any stage.
- Without Prejudice Save as to Costs or Part 36 offers for offers you want to deploy on costs if the case goes to trial.
CreditHire Assist's TPI Correspondence Analyzer respects this separation. Privileged offers are flagged on the file but never paraphrased into open replies. Substantive replies are grounded only in open correspondence and verified UK authority.