Cutts v Head

A party may make a without prejudice save as to costs offer which remains inadmissible while liability is determined but may be considered after judgment when costs are decided. The practice is not confined to matrimonial financial proceedings. It is available generally where the claim involves relief beyond a simple money claim and payment into court is not the appropriate procedure.

The ordinary rule protecting unqualified without-prejudice negotiations remains intact. The qualification is effective because it preserves that protection on the merits while encouraging reasonable settlement. It does not ordinarily replace a payment into court in a simple claim for debt or damages.

The plaintiff succeeded substantially in an action concerning rights of access over the defendants’ land to his fishery. Foster J nevertheless awarded him only half his costs because the defendants had established claims for damages which offset the plaintiff’s damages.

Before trial, the plaintiff made a December 1980 compromise offer headed without prejudice. It expressly reserved the right to place the offer before the judge on costs if it were not accepted. The offer was more favourable to the defendants than the eventual result, but Foster J refused to consider it when deciding costs.

The appeal therefore raised whether a qualified without-prejudice offer could, without the offeree’s consent, be considered after judgment solely on the issue of costs.

1. Disposition. Lord Justice Oliver and Lord Justice Fox allowed the appeal. The plaintiff was entitled to rely on the qualified offer when costs were determined. The costs order below was varied so that he received half his costs up to 31 December 1980 and all his costs thereafter.
2. The without-prejudice rule. The rule protects settlement discussions from disclosure while the merits remain to be decided. Walker v Wilsher (1889) 23 QBD 335 remained applicable to an unqualified without-prejudice offer. It did not decide the effect of an offer which expressly reserved use only after judgment on costs.
3. Qualified offers. The juridical basis of the protection includes both public policy and the parties’ implied convention. Public policy favours settlement. A clearly qualified offer preserves the protection required for the determination of liability, while exposing an unreasonable refusal to appropriate costs consequences. The established professional practice, together with the reasoning in Calderbank v Calderbank [1976] Fam 93 and Computer Machinery v Drescher [1983] 3 A.E.R. 153, showed that the conventional meaning of the words could be modified in that way.
4. Scope and caution. The procedure was available in all appropriate civil proceedings, not only matrimonial cases. It did not, however, make a Calderbank offer a substitute for payment into court where the claim was a simple money claim and that procedure was available. In such a case an offeror seeking the ordinary costs protection should normally make a payment into court.

• Court of Appeal: Allowed the plaintiff’s appeal on the general costs order and varied it: [1984] Ch 290.
• High Court of Justice, Chancery Division (Foster J): The plaintiff substantially succeeded in the access dispute, but was awarded only half his costs. Foster J declined to consider the qualified without-prejudice offer on costs.