Been through a legal disagreement lately?
You might've heard the phrase "without prejudice save as to costs" tossed around-and if it left you scratching your head, you're not alone.
It's a phrase that sounds complex, but once you understand it, it's actually a smart legal shortcut with real power behind it.
In plain terms, it means you can make a genuine offer to settle without that offer being used against you in court-except when it comes to deciding who should pay legal costs.
That one small exception makes a big difference.
It lets you negotiate freely, but still gives you the chance to show the court you were being reasonable if the other side plays hardball and you end up in a hearing.
Used properly, this phrase isn't just protective-it's persuasive. It can shape how your case unfolds and even who ends up footing the legal bill. That's why lawyers and courts take it seriously.
But here's the thing,
A lot of people, including those in the legal world, get it wrong or use it at the wrong time.
Whether you're dealing with a parenting dispute, a property fight, or a business deal gone sour, understanding when and how to use this phrase can give you an edge that could save you time, stress, and money.
In this article, we break it all down-what the phrase actually means, how it works in practice, and why it's a crucial part of the legal playbook in everything from divorce settlements to business negotiations.
Understanding this concept is crucial for anyone navigating litigation or family law matters, as it can directly impact both the outcome of a dispute and the court's decision on who should bear the legal costs.
At Unified Lawyers, our experienced team of family lawyers has assisted hundreds of clients across Australia in resolving disputes through skillfully drafted settlement communications, including Calderbank offers that utilise this key phrase.
In this article, we unpack the phrase's legal meaning, its practical application, and how it functions under Australian law-particularly in the realms of family and civil litigation.
Understanding 'Without Prejudice Save as to Costs
Legal Meaning and Usage :
The phrase "without prejudice" is used in legal correspondence to indicate that a statement or offer is being made during settlement discussions and should not later be presented as evidence in court.
The intent is to foster open and honest dialogue without the fear that proposals or concessions could be used against a party if negotiations break down.
When the additional words "save as to costs" are added, the communication retains its confidentiality for the purposes of the main hearing, but can be brought to the court's attention when the issue of legal costs is being determined.
This exception is designed to deter parties from rejecting reasonable offers without justification.
This form of settlement communication is commonly referred to as a Calderbank offer.
It differs from a formal offer of compromise under court rules, such as those under Part 20 of the Uniform Civil Procedure Rules 2005 (NSW), because it doesn't need to meet strict procedural requirements.
Yet, it can still have significant cost consequences.
When to Use This Phrase :
Using "without prejudice save as to costs" is most appropriate when making a genuine and reasonable offer to settle a legal dispute.
This phrase can be utilised at various stages of a matter, including before legal proceedings commence, during alternative dispute resolution (ADR) processes such as mediation or arbitration, or even while litigation is actively underway.
In practical terms, this type of offer is a strategic way to present a compromise, encourage settlement, and place cost pressure on the other party.
It's particularly relevant where one party seeks to avoid the expense and uncertainty of a court hearing, yet still wants to protect their position if the case progresses to trial.
Including this phrase in correspondence effectively alerts the other side that, while the contents of the letter cannot be relied upon in the hearing itself, they may be used in a costs application if the offer is unreasonably refused.
The phrase is especially relevant in a variety of legal contexts, including :
- Family law disputes, such as parenting arrangements or property settlements, where courts encourage resolution outside of courtrooms but may penalise parties who reject sensible offers.
- Civil litigation matters, including contractual disputes, tort claims, defamation, and debt recovery, where early resolution is often in the financial interests of all parties.
- Commercial disputes, particularly those involving long-term business relationships, where preserving goodwill may be as important as the legal outcome.
- Employment law cases, where both employers and employees may wish to resolve matters discreetly and cost-effectively, avoiding the delays and publicity associated with tribunal hearings.
Including this phrase not only communicates a willingness to resolve the matter amicably but also creates a protective legal mechanism.
If the matter proceeds to trial and the party who rejected the offer ends up with an outcome less favourable than what was proposed, the court may find that party acted unreasonably and make an adverse costs order against them.
In essence, a "without prejudice save as to costs" letter is a powerful tool that combines legal protection with strategic influence.
It allows parties to propose settlement terms with confidence, knowing that even if the offer is not accepted, it may later serve as a basis to recover legal costs.
Implications in Legal Proceedings :
Courts in Australia exercise significant discretion when it comes to awarding legal costs.
A key factor in exercising that discretion is the conduct of the parties throughout the litigation process, especially in relation to settlement offers.
One of the most potent tools for influencing a court's costs decision is a Calderbank offer made using the phrase "without prejudice save as to costs".
When a party puts forward such an offer and it is unreasonably rejected, the court may consider this during the costs determination phase.
The rationale is that the legal system encourages settlement and discourages parties from dragging matters to trial unnecessarily-especially when a fair and sensible resolution was available earlier.
This approach upholds the principle that parties should not be rewarded for obstinacy or for failing to properly engage with reasonable offers.
To trigger potential cost consequences, the Calderbank offer must clearly outline the proposed terms and include a statement that the letter is "without prejudice save as to costs".
This signals that while the offer cannot be used during the trial on the merits, it can be shown to the court later to support an argument for a favourable costs order.
If the offer is more favourable than the final judgment or court orders received by the rejecting party, and the rejection lacked sound justification, the court may penalise that party by ordering them to pay :
- Their own legal costs
- The legal costs of the other party from the date the offer was made onwards
This cost-shifting mechanism is not automatic, but it carries significant weight. Courts assess whether the offer was reasonable in light of the circumstances, whether it allowed adequate time for consideration, and whether the recipient responded in good faith.
In family law proceedings, cost orders are generally uncommon, as parties are usually expected to bear their own costs.
However, under Section 114UB(2) of the Family Law Act 1975 (Cth), the court may award costs if the Court is of the opinion that there are circumstances that justify it in doing so, including where a party has behaved in a way that unnecessarily escalated the dispute-such as rejecting a fair Calderbank offer.
Courts are particularly inclined to award costs where the conduct involved prolonging proceedings, causing avoidable delays, or placing undue burden on the court and the other party.
Therefore, a well-drafted "without prejudice save as to costs" letter not only provides protection during negotiations but also acts as a strong tactical move, potentially shifting the financial burden of litigation onto a party who acts unreasonably.
Examples and Case Law References
A foundational case in this area is Calderbank v Calderbank [1975] 3 All ER 333, a UK decision which gave rise to the practice of making settlement offers outside formal procedural rules.
Australian courts have adopted and refined this principle.
Notable Australian cases include :
- Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) VSCA 298 :The Victorian Court of Appeal set out six guiding factors for indemnitycosts awards after a Calderbank offer is unreasonably refused.
- PelAir Aviation Pty Ltd v Casey (No 2) NSWCA 92 : The NSW Court of Appeal ordered indemnity costs from the date the respondent rejected a sensible Calderbank offer, underscoring the cost risk of stubborn litigation.
These decisions illustrate that unreasonable rejection of a settlement offer can have real consequences when it comes to costs-even in jurisdictions like family law, where such orders are traditionally rare.
For more legal context and access to the judgments, see AustLII.
Strategic Use in Family Law & Civil Disputes
Family Law :
In family law disputes-such as property settlements or parenting plans-parties are encouraged to settle disputes amicably. The Family Law Act 1975 (Cth) allows for costs orders in cases where a party has acted unreasonably.
In family law disputes, the Court has wide-ranging powers to make an order as to costs.
In fact, the Court has the power to make an order as to costs on its own initiative in addition to upon an application being made by parties to the proceedings for an order as to costs.
Where parties to family law disputes are already engaged in family law proceedings in Court, this adds an additional layer of supervision on the the parties to conduct themselves in the proceedings in a reasonable way, lest they open themselves up to a costs order either by way of an application being made by the other party, or even the Court on its own initiative if the Court holds the view that that party's conduct has been particularly unreasonable.
Additionally, where a Court is considering what costs order (if any) should be made, the Court must have regard to certain factors in determining a costs order.
One such factor is whether a party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer.
Accordingly, if a party makes a Calderbank offer, marked "without prejudice save as to costs", and the other party rejects it without proper justification, the court may view this behaviour as unreasonable.
That can open the door to a costs order, even in matters where parties usually bear their own expenses.
Example :
In a parenting matter, one parent offers a generous visitation schedule in a Calderbank letter. If the other parent rejects it unreasonably and the final court order mirrors the original offer, the rejecting parent may be ordered to pay costs.
Civil Disputes :
In commercial and civil litigation, cost efficiency is critical. Businesses often use these offers to prompt early resolution and mitigate financial risks.
By making a strong offer accompanied by the phrase, businesses can later argue that the opposing party should bear the legal costs if the matter proceeds unnecessarily.
The strategic use of "without prejudice save as to costs" can :
- Demonstrate a party's reasonableness
- Influence judicial discretion in costs
- Apply pressure on the opposing party to settle promptly
Common Misunderstandings
Misconception 1 : "Without prejudice" means it's always private
This is not entirely true. While "without prejudice" protects settlement communications from being used during a hearing, the phrase "save as to costs" allows the document to be disclosed in costs proceedings. It's a deliberate exception that should be clearly understood.
Misconception 2 : Only formal offers count
False. Calderbank offers-even though they are informal and made outside formal procedural frameworks-can carry substantial weight. Courts regularly rely on them when making cost decisions.
Misconception 3 : It doesn't apply in family law
Incorrect. The Family Law Act 1975 (Cth) and accompanying Rules provide scope for costs orders where parties act unreasonably. "Without prejudice save as to costs" letters are a valid and strategic part of negotiation in these cases.
Misconception 4 : It guarantees a costs order
Not necessarily. The court has discretion. A Calderbank offer must be:
- Clearly expressed
- Reasonable in its terms
- Genuine in intention
- Capable of being accepted
If these conditions aren't met, the court may disregard the offer.
FAQ's
1. What does "save as to costs" actually
mean?
It means that while the communication remains confidential for most purposes, it can be shown to the court when legal costs are being assessed. The goal is to help the court decide whether a party behaved fairly and reasonably in rejecting the offer.
2. Does "without prejudice save as to costs" mean the
letter can be shown in court?
Yes-but only during the costs assessment phase, not during the main hearing or trial.
3. Can this be used in family law only?
No. It is used widely in civil, commercial, employment, and family law matters throughout Australia.
4. What happens if a Calderbank offer is rejected?
If the court finds the offer was reasonable and the rejecting party acted unreasonably, the court may order that party to pay legal costs, either partially or in full, depending on the circumstances.
5. How is it different from a without prejudice
letter?
A "without prejudice" letter is entirely shielded from court proceedings. A "without prejudice save as to costs" letter becomes admissible only on the question of costs, giving it a hybrid legal status.
6. Can I draft such a letter myself?
While possible, it is not recommended. Incorrect use of the phrase or failure to properly structure the offer could undermine its legal effect. It's best to consult an experienced solicitor to ensure the offer achieves the intended legal and strategic outcomes.
How Unified Lawyers can help
Strategic settlement offers like "without prejudice save as to costs" letters can be pivotal in resolving disputes effectively and protecting your legal position-especially when cost recovery is at stake.
Whether you're dealing with a family law matter, commercial dispute, or civil litigation, the proper use of these offers requires insight and expertise.
At Unified Lawyers, our Sydney-based legal team specialises in dispute resolution and negotiation strategy.
We regularly advise clients on drafting and responding to Calderbank offers, ensuring each communication is not only legally sound but also tactically advantageous.
We understand that timing, tone, and legal framing are critical in achieving the desired outcome. That's why we take a tailored approach-working closely with clients to prepare clear, persuasive settlement offers that maximise their leverage while preserving their rights on costs.
Our firm has successfully represented clients in hundreds of matters where the use of "without prejudice save as to costs" communications influenced the final resolution and shifted the cost burden onto the opposing party.
We also collaborate with barristers and other legal experts to present the strongest possible argument for costs orders if settlement efforts are unreasonably dismissed.
If you're facing a dispute and want to strengthen your legal position while encouraging early resolution, get in touch with Unified Lawyers today.
We'll guide you through the process, help you avoid legal pitfalls, and support you in achieving a fair, cost-effective outcome.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
