It's important that disputing parties be able to seek a settlement without the fear that good-faith offers might, subsequently, harm their cause. Using the phrase, "without prejudice" ensures that the offer to which the phrase is attached may not be tendered as evidence later: The offer becomes "privileged." (The Australian Taxation office provides some concise advice on this.)
Recently, I sent an email to a human resources officer recounting the problematic treatment of a member. At the end I made a "without prejudice" offer of settlement. The officer, seemingly uncomfortable with the claims about the treatment, advised in reply that he was "treating [my email] as a being “Without Prejudice” in its entirety."
It doesn't work that way.
The "without prejudice" proviso only relates to offers of settlement in negotiations, and not to statements of fact or to confessions. You wouldn't gain protection by saying, for example, "Without prejudice, I just burnt down the chancellery."
In the USA, by contrast, it's generally accepted that arbitrators shouldn't consider earlier offers of settlement as evidence — a simpler approach. (The phrase is used by Americans, but usually in the context of judgements and whether defendants may be subject to further litigation.) ▪
When nations grow old, the arts grow cold
and commerce settles on every tree.
—William Blake (1757-1827)
