Have you ever received a letter or email with the words “without prejudice” or “without prejudice except as to costs” on it? Perhaps your lawyer has sent one on your behalf? Do you even know what it means?
It is advantageous for parties to try to resolve that dispute prior to incurring the significant costs and taking on the substantial risks that are involved with litigation. In having those settlement discussions or in making offers of settlement, parties may be disinclined to make admissions or concessions for fear that they may be used against them by the other party. This is where the concept of “without prejudice’ helps.
“Without prejudice” is a common law concept (now covered by statute since the Evidence Act 1995 (Cth) (the Act) was enacted) that communications marked as being “without prejudice” cannot be used by the other party as evidence in Court. This means that parties can speak openly about the matters in dispute without the risk of the other party using that offer against them later.
If you do want to be able to use the communications, you would not mark them as being “without prejudice” – you would want them to remain “open”.
So why the “except as to costs” or “save as to costs” part? Well, the privilege afforded by s131 of the Act that the communications cannot be placed into evidence does not apply to when the Court has to determine who is responsible for the costs of the litigation (ie, after the dispute has been resolved or determined by the court when entering a judgment).
In addition to these “without prejudice” communications, the various Courts have their own rules that provide for formal Offers of Compromise and the like and that govern the effect of not accepting an offer that you otherwise ought to have (the idea being to seek to have the parties really turn their mind to settling, and not wasting their own, the other party’s and the Court’s time and resources).
Ordinarily in litigation, the rule is that the losing party pays the winning party’s costs. The rules operate to change that where formal offers have been made and not accepted.
As an overly simple scenario by way of example, if an offer was made by Party A that Party B did not accept and at the hearing, Party A received a judgment for an amount equal to better than their offer, Party B can be penalized in the form of a costs order for the failure to accept that offer.
Craig Pryor is principal solicitor at McKillop Legal.
This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.