The emphasis on settlement of cases before the issue of proceedings or at any point before trial is very much part and parcel of the Civil Procedure Rules from their inception in England & Wales. The courts are fully aware of their powers to disallow a party’s costs for failing to mediate the resolution of a case and otherwise saving on wasted court time and legal costs.
Marking a letter “Without prejudice – save as to costs” has traditionally been a way to ensure that a party can make an offer without that offer coming to the attention of the trial judge who might otherwise get a glimpse into how that party viewed the merits of the case; an offer to settle a case for £1,000 which has been issued at court for £60,000 may well indicate that one party did not truly believe in the strength of their evidence. It is a matter of public policy that parties should be able to engage in meaningful and realistic settlement discussions without eroding how the trial judge will view their case.
However, as highlighted in a recent case of Jones v Tracey [2023], care must still be exercised when relying on the phrase “without prejudice – save as to costs” in a letter sent to the opposing party.
In particular, the costs judge in Jones laid down some points to distinguish correspondence which is truly without prejudice and that which is not:
• The starting point for the court is the manner in which the letter is drafted. It will normally be the case that the writer of a letter can be taken to have intended to mark a letter in a particular way or otherwise to have intended to write an open letter. However, if it is clear from the context that a letter was intended to be open, or without prejudice or without prejudice as to costs, it will be treated as such.
• In some cases, the true nature of the letter will be obvious such as a letter that falls within a chain of communications of a particular type. Commonly a letter which is not marked ‘without prejudice’ that falls within a chain of communications in the context of settlement negotiations will be treated as being without prejudice unless the opposite intention is obvious. The converse may also be true.
• …the true nature of the communication must be established objectively without regard to evidence of subjective intention and the right approach is to consider how a reasonably minded recipient would regard the letter.
Accordingly, it is important to remember that without prejudice correspondence will only have the effect of not being disclosable to the trial judge if it is truly directed at resolving the case; a letter that merely hints at the possibility of Alternative Dispute Resolution or Mediation will not truly be considered to have the consequence of being without prejudice – whether those words appear on the letter or not.
The judge in Jones also demonstrated that the mere refusal to mediate does not automatically disqualify the successful party from claiming their costs following on from cases such as Dunnett v Railtrack Plc and Halsey v Milton Keynes General NHS Trust which were seminal cases in highlighting the importance of mediation and costs recovery. These cases stop short of making mediation compulsory given that this would otherwise infringe on Article 6 of the European Convention on Human Rights. However, costs sanctions are still available if the refusal to mediate is not justified. In Jones, there were grounds as to why the Claimant was not denied their costs:
“I have concluded that the claimant’s conduct was not such as to warrant a deduction from his costs. In reaching that conclusion I have in mind in particular (a) the fact that the claimant made most of the running in relation to settlement (b) the third defendant’s behaviour in her conduct of the claim and (c) the strong merits of the claim which either were known or should have been known to the third defendant and (d) the late stage at which the third defendant expressed a willingness to engage in ADR. Although the claimant did not explain his position in April and May 2023 it would not have been unreasonable to have concluded that the additional cost of mediation was not warranted. I do not consider that on the facts of this case it can be said that silence on the part of the claimant amounted to a refusal to undertake mediation (or some other form of ADR).”