A settlement offer marked without prejudice save as to costs can still affect who pays costs.
“A "without prejudiceA legal principle that allows parties to have settlement discussions without those discussions being used against them later in tribunal proceedings. It only applies where there is a genuine dispute a... save as to costs" offer stays out of the merits, but can be shown to the tribunal on costs after judgment.”
A "without prejudice save as to costs" offer is protected from use on the merits of a claim, but can be produced after judgment on the question of costs. In employment tribunals, this affects costs risk.
- Take any settlement offer expressed as without prejudice save as to costs seriously; refusing it and receiving less at tribunal can support a costs application against you.
- Record your reasons for rejecting any settlement offer, particularly if it is expressed in this way.
- Get advice before rejecting a without prejudice save as to costs offer so you understand the costs risk if the tribunal outcome is less favourable than the offer.
The situation
A party made a written settlement offer which was expressed to be "without prejudice save as to costs". The question was what effect that formula had, and whether it created a different category of protection from a standard without prejudice communication.
What the court found
The Court of Appeal confirmed the distinction between two things. The without prejudice rule protects genuine settlement communications from being used as evidence of the parties' positions. But a "Calderbank" offer, expressed as without prejudice save as to costs, adds something: it can be produced to the tribunal or court after judgment, solely on the question of who should bear the costs of the proceedings.
It cannot be used on the substantive merits of the claim, but it can be used to show that a party refused a reasonable offer and should therefore bear the costs consequences.
Cutts v Head | [1984] Ch 290 | Court of Appeal | 1984