Settlement Communications

A settlement is the compromise or resolution of a claim or dispute, reached before or after a claim is brought in Court.

In seeking to resolve a dispute, a party may make a settlement offer to another party on:

  • a without prejudice basis;
  • a without prejudice save as to costs basis; or
  • an open letter

There are important distinctions between these types of communications, and the type of communication has an effect on a party’s ability to place the communications in evidence before a Court.

Without prejudice

Both written correspondence and oral communications can be made on a “without prejudice” basis, if the substance of the document or statement comprises a genuine attempt to settle a dispute.

Making a statement “without prejudice” means that it cannot be produced before the Court as evidence – particularly of any admissions or concessions. This is consistent with s67C of the Evidence Act (SA) 1929 which provides that evidence of communications made in connection with an attempt to negotiate the settlement of a civil dispute is not admissible in any civil or criminal proceedings, subject to a few exceptions.

The public interest in encouraging full and frank settlement discussions, and avoiding litigation if possible, provides the rationale for this principle.

However, merely labelling a communication “without prejudice” does not necessarily attract the protection – it is the substance of the communication that attracts the protection, so the communication itself must contain a genuine attempt to resolve the dispute.

Without prejudice, save as to costs

Written correspondence made on a “without prejudice save as to costs” basis, sometimes called a Calderbank offer, when made in a genuine attempt to settle a dispute may be put before the Court as evidence but only in relation to a decision about the parties’ liabilities for costs orders. This is consistent with the exception at s67C(1)(d) of the Evidence Act (SA) 1929.

These communications cannot be placed before a Court for any other reason, and as such, can only be evidence before the Court when the substantive proceedings have been finalised.

Such communications can provide a tactical device in settlement negotiations, as they encourage the careful consideration of the terms of settlement proposed, given that rejection of a reasonable offer without improving on it at trial could result in an adverse costs order.

Open communications

Sometimes a party will send an “open letter” offering to settle a dispute or inviting the other party to engage in alternate dispute resolution (usually a mediation).

Badging the correspondence as an “open letter” clearly demonstrates that the party sending it intends that the letter is to be admissible in Court, again in accordance with the exception at s67C(1)(d) of the Evidence Act (SA) 1929.

This can be done for tactical reasons, usually to shift the cost risk of litigation, but also to encourage participation in alternate dispute resolution by calling attention to the fact that the other party’s refusal to engage in settlement negotiations may be brought to the attention of the Court.

PGC Legal can advise you on the resolution of your dispute, and the tactical benefits of settlement offers made on a without prejudice, without prejudice save as to costs or on an open letter basis. If you need advice, please contact Peter CharatsisBrenton Priestley or Ashlee Provis by email or on (08) 8221 6162.

The advice above is general in nature.  You should seek specific legal advice which has regard to your specific circumstances.