Problem: I am a commercial manager for a specialist contractor, and we are currently in dispute over a final account with a client who is the main contractor on a new build that was completed in late 2022.
I have had a couple of meetings with my opposite number and some progress is being made on some of the items in dispute, but we are still tens of thousands of pounds adrift from our respective positions, and I can see this matter ending up either in adjudication and / or court.
I want to try and avoid any formal dispute resolution as this involves time and of course money, and hence I would like to make an offer to settle. However, although I am aware of making an offer under the banner of ‘Without Prejudice’, I do not really understand what it actually means. Could you therefore enlighten me of what I should be doing?
Response: Offers to settle are privileged documents and there are 3 types:
- Without prejudice (“WP”);
- Without prejudice save as to costs (“WPSATC”); and
- Part 36.
WP means that the settlement offer is without prejudice to the party’s right to initiate or continue litigation (or some other form of dispute resolution), and the WP letter cannot be tendered as evidence in any proceedings – not even if the case proceeds to judgement; hence the judge will not see the WP offer. WP communications are good when a party is in negotiations, as you are at present.
WPSATC (known as a Calderbank offer after a case in the English Courts in the 1970’s), means that if the case proceeds to judgment (in litigation, or a decision in arbitration), the offer can be relied on in court when determining which party will pay the costs of the proceedings. For example, whether the unsuccessful party should pay costs at all if it made a reasonable offer, or whether a successful party should have its costs paid on an ‘ordinary’ basis (known as the standard basis), or an ‘indemnity’ basis (in which case all reasonably incurred costs are awarded). In this respect, Calderbank offers are not dissimilar to Part 36 offers (which I briefly explain below), which exist within civil litigation [only], although Part 36 offers are applied much more rigidly and without the same degree of discretion. The court has complete discretion to decide what weight should be given to a WPSATC when considering costs. Features of a Calderbank offer are:
- Marked “without prejudice save as to costs”;
- states the offer is made in accordance with the principles of Calderbank;
- is clear, precise and certain in its terms and is capable of acceptance;
- states clearly the time in which the offer must be accepted and provides a reasonable time for acceptance;
- provides reasons why the offer should be accepted; and
- states clearly that if the offer is rejected that the offer will be relied on for an application for indemnity costs.
A Part 36 offer is much more strict and only applies to litigation (as part of the Civil Procedure Rules (“CPR”)), intending to put a lot of pressure on the other side to settle. Essentially, CPR Part 36 is a detailed rule which is designed to encourage settlement.
Bearing in mind that you are still in the early stages of trying to agree your account, I would suggest that a simple WP communication would suffice, but if not accepted and the matter rumbles on, you should then consider making a Calderbank offer. That said, when you believe that you have reached the stage that you should make a Calderbank offer (or even a Part 36 offer), I strongly recommend that you seek expert advice.
Good luck with your negotiations.
© Michael Gerard 2023
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Solicitor, Chartered Builder & Registered Construction Adjudicator, and is a director at Michael Gerard Law Limited, a solicitors practice regulated by the SRA.