16
Mar
2025

When it comes to settlement negotiations, lawyers often talk about the “without prejudice” principle — a term that, whilst common in legal circles, can sometimes be a bit of a mystery for those outside the profession. So, what does it really mean, and why should we care about it?

To answer that, we need to go to the landmark case: Calderbank v Calderbank (1975). This case not only cemented the “without prejudice” principle in Australian law but also illustrated just how powerful a tool it can be in resolving disputes. So, let’s take a closer look at what this principle is all about, and how it might affect you in a legal context.

What does “without prejudice” actually mean?

The phrase “without prejudice save as to costs” can be used in written or verbal communication to another party in an attempt to genuinely resolve a dispute.

Costs, of course, refer to the fact that at the end of (civil) legal proceedings, one party will be required to pay the legal costs of the other party.

An offer made on this basis cannot be disclosed to the Court during the substantive hearing of a matter but may be considered when determining legal costs at the conclusion of the proceedings.

The primary purpose of a “without prejudice save as to costs” offer is to encourage parties to settle disputes before hearing without making admissions as to liability or giving any concessions, reducing potentially unnecessary litigation expenses.

The Calderbank case

This case was heard in 1975 and involved a matrimonial dispute in which the husband, Mr Calderbank, appealed against a financial order made in favour of his wife, Mrs Calderbank. Prior to the hearing, Mrs Calderbank made a written settlement offer that her husband ultimately rejected. The case proceeded to trial, and the court awarded Mrs Calderbank a sum similar to what she had originally proposed in her offer of settlement.

Mrs Calderbank then sought an order for her legal costs, arguing that her earlier offer had been reasonable and that Mr Calderbank’s refusal to accept it had unnecessarily prolonged litigation. Ultimately, the Court found that Mr Calderbank had unnecessarily prolonged the proceedings by refusing a reasonable settlement offer from Mrs Calderbank, therefore, a costs order was made in her favour.

This case established the legal principle that if a party does not accept a reasonable early settlement offer from the other party, the party’s rejection of the offer can influence the court’s determination of who should pay costs.

Exceptions to the rule

While Calderbank offers are widely recognised and utilised, there are some exceptions to their application. Courts may disregard a Calderbank offer in cases where:

• The offer was not made in good faith.
• The terms of the offer were unclear or unreasonable.
• There are public policy considerations that outweigh cost penalties.
• The rejecting party had valid legal reasons for proceeding to trial.

The Calderbank case remains highly relevant in modern litigation, offering an effective mechanism to encourage settlement and manage legal costs. Whether you are considering making or responding to a Calderbank offer, understanding its implications can considerably impact your legal strategy. Seeking legal advice early in the process can help you navigate settlement negotiations effectively and mitigate potential cost risks.

Disclaimer

The content of the Anderson Boemi Lawyers website is provided for information purposes only. The contents of this website do not constitute legal advice and should not be used as such. Formal legal advice should be sought in particular matters. If you have a particular matter you need legal advice for, or you have any questions about our disclaimer please contact our office on (02) 9653 9466.