THE MEANING AND PURPOSE OF "WITHOUT PREJUDICE" COMMUNICATIONS
Article by listed attorney: NICOLENE SCHOEMAN
Definition and purpose
The term ‘without prejudice’ means without any loss or waiver of rights or privileges  and is generally used during (settlement) negotiations.
The phrase indicates that a particular aspect of the negotiation — which may be a conversation or letter, a concession or admission — is made for purpose of settlement while retaining the legal rights of the person involved. In other words, they do not waive their legal rights by delivering the contents of the letter, discussion or admission. 
According to Reinecke (The Legal Practitioner’s Handbook on Costs), the term is used to make it clear that the without prejudice settlement offer should encourage parties to make genuine attempts to settle disputes. The without prejudice privilege protects their discussions and concessions from being subsequently, and in most cases, detrimentally disclosed in court. 
This saves litigants time and the expense of litigation.
Requirements of the without prejudice privilege
For the without prejudice privilege to apply and to protect communications or information from being used in court, the following must be present:
i) an admission or statement must be made,
ii) in the course of settlement negotiations,
iii) [as a] genuine attempt to settle the dispute (in other words it cannot be used to conceal facts or evidence and so obstruct justice ). 
The without prejudice privilege will protect subsequent and even previous letters in a chain of correspondence so it may not be necessary to mark every letter or document.  However it may be advisable to do so regardless.
When does the privilege fall away?
If a settlement is reached after without prejudice negotiations and a party fails to honour its terms, then the negotiations can be admitted as evidence in court of breach of the settlement agreement.
A without prejudice offer during settlement negotiations cannot be an admission in court by the party making it. The offer is only admissible if the parties are required to prove that an offer of settlement was made at all.
In support of this, in a case in the former Transvaal Provincial Division (TPD) (now called the North Gauteng High Court if seated in Pretoria and the South Gauteng High Court in Johannesburg)the court held that:
“Negotiations conducted without prejudice, are of course, designed to resolve disputes between the parties and if the negotiations result in a settlement then logically evidence about settlement and the negotiations leading up to it should be available to the trial court because the whole basis of the non–disclosure has fallen away”. 
This means that in some instances without prejudice communications can become admissible evidence in court, losing their privilege regardless of whether or not all documents have been marked accordingly.
A more pressing problem arises when a communication aimed at settlement deals with other issues as well. In this case the privilege only covers the part of communication containing the admission or concession aimed at settlement. 
Another statement or admission within the correspondence can be quite irrelevant to settlement negotiations, which means that statement will not be entitled to privilege and therefore not protected as such.
This is often a very technical distinction, which is very dangerous.
When negotiating settlement of any dispute it is important to obtain the advice and guidance of an attorney to avoid making statements that may later be used against you in court.
Nicolene Schoeman, Schoeman Attorneys (Cape Town)
Tel: 021 425 5604
 http://legal-dictionary.thefreedictionary.com/without+prejudice: accessed 16/01/2012.
 Reinecke 2011: 130.
 Kurtz and Co v Spence and Sons 1887 57 LJ CH 238 at 241.
Reinecke 2011: 131.
Reinecke 2011: 130 - 131.
 Meyer v Provincial Department of Health and welfare and others – judgement of Mavundla (J) on 27 January 2006 –TPOD case number 9092/05.
 Reinecke 2011: 132.