What does ‘without prejudice save as to costs’ mean?

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Where does the phrase ‘Without Prejudice Save as to Costs’ come from?

“Without prejudice” can be one of the most abused and misunderstood legal phrases, but it is also a vital legal tool designed to assist parties in settling their disputes prior  to court. The term refers to the legal privilege that is attached to communication whilst negotiating a settlement. While negotiating settlements, disputing parties may add the label “without prejudice” to communications. If communications are marked with this phrase they cannot be used as evidence in court by the opposing party, as it protects and restricts such communication from being admissible in court. 

How far does it benefit parties to a dispute?

As a result of using the label, parties can openly communicate about disputing matters without risk of the opposing party scrutinising  information in their favour, communicating candidly and exploring their options for settlement. The scope of this privilege is an issue that has caused dismay among practitioners, and it has developed to allow litigants to explore their settlement options. 

When will Without Prejudice not apply?

The without prejudice protective label cannot be used to avoid liability completely. It will not apply:

  • In commercial negotiations 
  • In cases where the communication includes illegal, fraudulent or misinterpretive comments or it is not genuine 
  • For material that has already been exchanged with consent 
  • Where it is clearly expressed that the communication is not confidential. 

In addition, the Court may decide that the privilege is granted to some parts of a document and allow the remainder that is not for the purpose of negotiating a settlement to be submitted as evidence. 

How is Without Prejudice to Costs used?

Communications that are labelled “without prejudice save as to costs” are an exception to the privileged invoked by the protective phrase that upholds accountability of the parties to the dispute. Here, the court can look at evidence with the “without prejudice” protective label to decide who should pay for the legal costs of the proceedings once they have concluded. The term “without prejudice save as to costs” means that this protection applies until the court delivers a judgement, and after this process the court may use their communications to decide how to award costs. 

What is the difference between Without Prejudice and Without Prejudice as to Costs?

There is a distinction by common law in Computer Machinery Co v Drescher [1983] 1 WLR 1379 between the two kinds of offers; “without prejudice” and “without prejudice save as to costs”, in which  the latter type has an additional advantage of preventing the offer from being inadmissible on costs, assisting the court in making a just order of costs. The Evidence Act 1995 (Cth) s 131 also provides that the protective label is waived when determining liability for costs. 

About Without Prejudice Save as to Costs 

The phrase “without prejudice” invokes a principle of privilege and  confidentiality between parties and encourages a genuine exchange of information stating wants and needs in the negotiation without fear of being disadvantaged by it in proceedings. “Without prejudice save as to costs” is a communications phrase meaning the standard without prejudice protection applies until after the court delivers judgement. It refers to the correspondence or communication containing offers or negotiations of settlement which can be brought to the court after a decision is handed down which can be used to decide costs. 

Following the judgement the court will make a decision on awarding legal costs. Adding “without prejudice save as to costs” encourages cooperation and reasonable behaviour between the parties, so that they can avoid being liable for costs after the matter is decided in court. The unsuccessful party usually pays the opposing party’s legal costs and the court may use the evidence with the label “without prejudice save as to costs” to determine the costs. Here, the court will take into consideration if the parties made attempts to reach a settlement before taking the matter to court, and take any unreasonable or un-cooperative actions into the equation during settlement communications to determine the amount in costs. 

What is an example of using Without Prejudice as to Costs?

If a party made an offer of settlement in a letter marked “without prejudice save as to costs”, and if the offer is not accepted and so they receive the least beneficial outcome, they may use the letter in court to argue that they made a reasonable offer and thus they are entitled to a greater sum in legal costs. This is because the party with the reasonable offer should not have to bear the cost incurred as a result of the rejection. Making a reasonable offer and acting cooperatively during settlement evidently assists parties in recovering their legal costs after the judgement. 

Types of Communications 

Types of communications where this can commonly be seen includes; emails, letters, offers sent during negotiations, oral or written communications between the parties. Communications in court can be labelled as ‘open’ communications. In addition, the court will look at the surrounding circumstances of a matter to determine if a communication is “without prejudice” in situations where it is not expressly added to a letter or a conversation. 

How do I Apply Without Prejudice to Costs?

The term “without prejudice save as to costs” should be stated clearly at the top of any written communication, the title of an email or at the beginning of any oral correspondence. This will grant confidentiality for the party sending the letter and also retain their right to bring the letter to the arbitrator when determining liability for the costs of the proceedings. It is important to note that the protection only applies to genuine settlement negotiations and dispute resolution options including mediation and court proceedings. 

Overall 

The privilege attached to the term “without prejudice” is an important legal phrase to assist parties to settle their disputes, as they are able to make negotiations without their words being used against them later on. However, “without prejudice save as to costs” is an exception which allows these confidential communications to be taken into consideration to decide legal costs, by taking into account reasonable offers being made during settlement. 

These methods of communication are useful for parties involved in disputes, and it is important that they are used correctly so that they do not incur more problems during proceedings. Without prejudice save as to costs upholds accountability and serves as a reminder that parties should be aware of limitations to the without prejudice approach, and situations where the confidential information exchanged in negotiations may be used in future litigation. 

If you require further assistance with using the terms without prejudice or without prejudice save as to costs, Legal Kitz can direct you with your next step. Our Legal Kitz business specialists can assist with ensuring that your concerns are addressed, and can provide you with advice that is tailored to your situation. You can book a free 30-minute consultation via our website.

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