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Oliver L.J said at page 305,

Now, it is certainly the case…that the use of the words “without prejudice” as a cover for negotiations and with no reservation of the sort suggested in Calderbank v. Calderbank [1976] Fam. 93 , 106 has today the same consequences as it had in 1889 when Walker v. Wilsher, 23 Q.B.D. 335 , was decided. Thus, it cannot be contended that the meaning of the expression has changed.

The answer to the question whether, accepting that meaning, it is yet open to a party taking advantage of the protection afforded by the use of the formula to qualify its operation must, I think, therefore be sought in an analysis of the underlying basis for the protection and the practice of the courts generally in relation to its application….

That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy.

It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings.

They should…be encouraged fully and frankly to put their cards on the table. If, however, the protection against disclosure rested solely upon a public policy to encourage out-of-court settlement of disputes, Walker… is not readily intelligible…

…One is, therefore, compelled to seek some additional basis for the decision in Walker…and it is, as it seems to me, to be found in an implied agreement imported from the marking of a letter “without prejudice” that it shall not be referred to at all.

Edited for ease of reading. Emphasis added.

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