Have you received a letter marked “without prejudice”? Or been made an offer on a “without prejudice basis”? For example, a settlement agreement when you are leaving your job will be marked “without prejudice”, until it is signed by both parties and becomes binding on both parties.
Calderbank offers of course derive their name from the English Court of Appeal decision in Calderbank v Calderbank3 which approved the practice of making offers of compromise expressed to be ‗without prejudice‘ but reserving a right to refer to the document on the question of costs.4 Originally thought to be confined to matrimonial. An example of a defendant's Calderbank letter setting out an offer to settle (also known as a non-Part 36 offer to settle or a Part 44 without prejudice save as to costs offer), with integrated drafting notes. Rent review Calderbank offer. A Calderbank offer is a letter, expressed as 'without prejudice save as to costs', which contains an offer to the other party in the review inviting it to settle without taking the arbitration further. The letter must set out all terms to settle the dispute, principally rent and costs. Jeff’s lawyer sends this as a letter to Lucy’s lawyer and writes that it’s to act as a Calderbank Offer. Lucy refuses, as she is seeking $100,000 in the proceedings. The matter proceeds to trial and Lucy receives $20,000. Jeff is able to claim costs as the amount Lucy was awarded in the trial is less than what he offered her earlier.
What does this mean, though?
Jan 07, 2018 The Calderbank letter derives from an English family law case, Calderbank v Calderbank. In this case, an offer was made “without prejudice except as to costs”. The purpose of this wording was that reference could be made to the letter in respect of costs if the offer was not accepted.
Let’s take a look, shall we?
The Without Prejudice Rule
The Without Prejudice rule/principle is one which states that statements made orally or in writing and marked “without prejudice” with a view to settling a dispute will normally not be admissible in evidence against the party who makes the statement or writes the letter.
It is similar to an “off the record” conversation you may have heard of in various circles eg journalism.
The reason this principle is accepted and encouraged is that it is widely regarded as a good thing that parties to a dispute will attempt to settle their differences rather than going to Court on every occasion. Thus, there is a clear public policy justification for the rule.
Any concession offered in a without prejudice letter cannot be referred to later on if the matter is not settled and it goes ahead to Court. Therefore, if I owe you a disputed debt of €100,000 and you offer, in a without prejudice letter, to accept €70,000 in full and final settlement, and I do not accept this offer you can pursue me for the full €100,000 in Court and I cannot refer to your previous willingness to accept €70,000 as evidence that I do not owe you €100,000.
This liability of €100,000 must be disputed by me, though. If I accepted I owed the €100,000 but was merely looking for a discount then I cannot rely on the Without Prejudice label as there is no dispute about the debt or the amount owed.
Where a party makes a without prejudice the response to that offer, regardless of the content, is also privileged as the entire totality of that correspondence is privileged.
The Without Prejudice Label
Marking your correspondence “without prejudice”, however, does not mean it is truly without prejudice; your letter must have been part of an attempt to settle the dispute and there must have been legal proceedings in being or being contemplated by one of the parties. Using the label will not give any protection if the correspondence is not a genuine attempt to settle a dispute.
Thus, another way to think of without prejudice correspondence, which will have the protection later on, is without prejudice correspondence which makes some type of concession. If it does this then it is clear it is an attempt to settle the dispute.
A without prejudice letter is the opposite of open correspondence.
An open letter may contain an offer, for tactical reasons in litigation, to settle a dispute. This letter will be relied upon in Court to influence the Judge when it comes to awarding costs at the end of the hearing and if such a letter is written it should be made clear that it is open.
Two Without Prejudice Labels
There are two without prejudice labels in use:
- Without prejudice
- Without prejudice save as to costs
The Without Prejudice save as to costs letter is a Calderbank letter (learn more about Calderbank letters here). This type of without prejudice correspondence can only be referred to when the question of costs is being considered by the Court at the end of the trial.
Exceptions to the Without Prejudice Rule
There are exceptions to the rule:
- When the communications demonstrate the fact of a concluded settlement agreement
- To help interpret a settlement agreement
- To provide evidence to have a settlement agreement set aside on the basis of fraud, misrepresentation
- Where the communications are evidence of perjury or blackmail or other serious impropriety.
Summary
The rule applies to written and oral communication, and must be a genuine attempt to settle a dispute. It is the substance of the correspondence that counts, not the label, and this will be assessed objectively.
It is open to the parties where there is no dispute, for example in relation to property purchase/sales, that all correspondence will be without prejudice/subject to contract until there is a binding contract in place. This is the practice in conveyancing in Ireland.
Without prejudice correspondence attracts joint privilege which means that it can only be waived with the consent of both parties.
A Plaintiff might sue you for $50K in circumstances where you admit that you owe $20K, but no more. If you are a Defendant in these circumstances, you might dig your heels in and 'refuse to pay a cent' until proceedings are finished. Unfortunately, at the end of the case, the judge might order you to pay the twenty thousand dollars, PLUS another $20K in costs. It was very expensive to defend that case. To reduce the risk of orders for COSTS, you can an offer to pay the $20K, in an offer that is confidential until the end of proceedings. If the Plaintiff gets less than your settlement offer, you can then tender your offer and say:
The Plaintiff should have accepted my offer. By refusing my offer, the Plaintiff wasted the Court's time, and incurred unnecessary legal costs, and inflicted costs upon me for no good reason. The Plaintiff should pay ALL MY COSTS, since the date of my offer'.
This sort of offer is known as a 'Calderbank Offer'. In Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 the Victorian Court of Appeal judge Callaway JA said: 'The correct approach is to treat the rejection of a Calderbank offer as a matter to which the Court of Appeal should have regard when considering whether to order indemnity costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rules as to costs. The test to be applied is whether the rejection of the offer was unreasonable in the circumstances.' Make your offer 'reasonable' - a generous compromise. It doesn't hurt to add some explanation as to why the Plaintiff should take the money and run, before costs escalate further. Here is a template which you might adapt to your own proceedings.
Calderbank Letter Template Outline
Defendant's Offer to Settle - 'Calderbank Offer' to reduce the risk of orders for COSTS.