Litigation – going through the full court process – can be stressful, time-consuming, and expensive. It's often in everyone's best interest to try and reach a settlement beforehand. This involves negotiation, where parties communicate, make offers, and try to find a middle ground.

However, imagine trying to negotiate if every suggestion or concession you made could be brought up later in court as proof you admitted fault or weakness. Nobody would want to negotiate freely! This is where the 'Without Prejudice' rule comes in.

'Without Prejudice' (WP): Creating a Safe Space for Negotiation

• What it means: When a communication (whether it's a letter, email, or even a conversation) is marked or stated to be 'Without Prejudice', it generally means it cannot be shown to the judge as evidence in the ongoing court case. It's like putting a temporary shield around that part of your negotiation.
• The Purpose: The core idea is to encourage open and honest settlement discussions. Parties can explore options, make concessions, and propose compromises without fearing that these attempts to settle will backfire and be used against them if negotiations fail and the case proceeds to a hearing. You can put forward a lower offer than you think you might get in court, simply to try and get the matter resolved quickly, without worrying the judge will see that offer as evidence your claim isn't actually worth more.
• Legal Basis: In New Zealand, this principle is rooted in common law but also finds recognition in the Evidence Act 2006 (specifically Section 57, which deals with settlement negotiations and mediation).  

• When does it apply? The magic words "Without Prejudice" aren't foolproof. For the protection to apply, the communication must be part of a genuine attempt to settle the dispute. You can't just slap "Without Prejudice" on a letter containing threats or unrelated statements and expect it to be protected. There needs to be a real dispute and a real attempt to negotiate a resolution.
• Exceptions: Like most legal rules, there are exceptions. The WP shield can sometimes be lifted if, for example:
  • The communication itself proves a settlement was actually reached.
  • It contains misrepresentation, fraud, or undue influence.
  • It includes threats.
  • There's a need to explain delay in proceedings.
  • The communication is needed to decide a question of costs (this leads us to the next concept!).

'Without Prejudice Save As To Costs' (WPSATC): Adding Teeth to Offers

This is where things get a bit more strategic.

• What it means: A communication marked 'Without Prejudice Save As To Costs' has a dual nature.
  1. Like a standard WP communication, it cannot be shown to the judge before they make a decision on the main issues of the case (the 'substantive' issues – who owes what, who gets what property, etc.).
  2. However, once the judge has delivered their judgment on those main issues, the WPSATC communication can be shown to the judge specifically when they are deciding who should pay the legal costs of the proceedings.
• The Purpose: This type of offer is designed to put pressure on the receiving party to seriously consider settling. It acts as a warning: "Here's a reasonable offer. If you reject it, push on to court, and end up getting an outcome that's worse than this offer, we will show this offer to the judge and argue that you unreasonably prolonged the dispute, and therefore you should pay a larger portion of our legal costs incurred after you rejected this offer."
• Connecting to Costs: In New Zealand courts, the usual rule is that the 'loser' pays some costs to the 'winner'. However, the amount of costs is discretionary. A judge can adjust costs based on various factors, including how the parties conducted themselves and whether reasonable settlement offers were rejected. A WPSATC offer is a key tool for influencing that costs decision.  

The Calderbank Offer: The Origin Story

You'll often hear WPSATC offers referred to as 'Calderbank offers'. They are essentially the same thing in practice, but 'Calderbank' refers to the origin of the principle.

• History: The name comes from a 1975 English Court of Appeal case, Calderbank v Calderbank. This was a matrimonial dispute (what we'd now call relationship property). Mrs. Calderbank made an offer to Mr. Calderbank during negotiations, stated to be 'without prejudice'. He rejected it. She ultimately received slightly less at the court hearing than she had offered him. However, the normal court rules at the time for making formal offers that could affect costs (called 'payment into court') didn't quite fit matrimonial cases.
• The Innovation: Mrs. Calderbank argued that Mr. Calderbank's unreasonable rejection of her earlier, better offer meant he should bear some of her legal costs. The Court agreed. They established the principle that a party could make a written 'without prejudice' offer, explicitly reserving the right to refer to it on the issue of costs after judgment. This created a mechanism to encourage settlement and penalise unreasonable refusal to settle, even outside the formal 'payment into court' system.
• Purpose Solidified: The Calderbank decision recognised the public interest in encouraging settlements and avoiding unnecessary litigation. It gave parties a tool to protect themselves on costs if they made a reasonable attempt to settle which was ignored or unreasonably rejected.  

How Calderbank/WPSATC Offers Work in Practice (Especially Relationship Property)

Relationship property disputes under the Property (Relationships) Act 1976 are a prime area where these offers are used. Emotions can run high, and costs can escalate quickly.

• Making the Offer: A party (let's say Party A) believes they have a strong case but wants to avoid a lengthy court battle over dividing assets. Party A's lawyer might send a letter to Party B's lawyer. This letter will be clearly marked "Without Prejudice Save As To Costs". It might say something like:
  • "Without Prejudice Save As To Costs: Our client offers to settle all matters of relationship property division by paying your client the sum of $150,000 within 14 days, in full and final settlement. This offer remains open for acceptance until 4:00 pm on [Date]. Should this offer be rejected and our client achieve a result equal to or better than this offer in Court, we reserve the right to refer to this letter on the question of costs."
• Receiving the Offer: Party B now has a decision to make. They need to carefully assess, with their lawyer's advice:
  • Is the offer reasonable compared to what they might realistically achieve in court?
  • What are the risks and costs of continuing to court?
  • What are the potential costs consequences if they reject the offer and do worse?
• The Costs Argument: Imagine Party B rejects the $150,000 offer, insisting they are entitled to $250,000. The case goes to a full hearing. The judge decides that the fair division results in Party B receiving only $120,000.
  • After the main judgment is delivered, Party A's lawyer will present the WPSATC offer letter to the judge.
  • They will argue that Party B acted unreasonably by rejecting an offer significantly better than the court's final award. They'll argue Party B should pay a larger share of Party A's legal costs, particularly those incurred from the date the offer expired.

Key Requirements for an Effective Calderbank/WPSATC Offer:

For an offer to carry weight when it comes to costs, it generally needs to:

1. Be Clearly Marked: State "Without Prejudice Save As To Costs".
2. Be Clear and Precise: Set out the exact terms of the offer – what is being offered, what claims it covers. and be reasonably capable of acceptance.
3. State a Time Limit: Give the recipient a reasonable period to consider and accept the offer. 14 days is common, but it depends on the complexity.
4. Clearly State the Consequence: Mention that the offeror intends to rely on it for costs if it's rejected and the recipient fails to achieve a better outcome.

Important Considerations:

• Court's Discretion: A Calderbank/WPSATC offer doesn't automatically guarantee you'll get costs if it's beaten. The court always retains discretion. It will consider whether the offer was genuinely reasonable at the time it was made, and whether the rejection was unreasonable in all the circumstances.  

• Clarity is King: Ambiguity in the offer can weaken its effect.
• Get Advice: Making or responding to these offers involves strategy. Always get advice from your lawyer. They can help assess the reasonableness of an offer and advise on the potential risks and benefits.

In Summary

• 'Without Prejudice' (WP) communications protect genuine settlement negotiations from being used as evidence on the main issues in court, encouraging open discussion.  

• 'Without Prejudice Save As To Costs' (WPSATC) or 'Calderbank' offers are also protected WP communications regarding the main issues, BUT they can be shown to the judge after judgment specifically to influence the decision on legal costs.  

• Their purpose is to encourage reasonable settlements by creating a potential cost risk for parties who unreasonably reject fair offers.
• These tools are particularly valuable in complex and potentially costly disputes like relationship property matters