Cutts v Head

A settlement offer made without prejudice may expressly reserve the right to disclose it after judgment on costs. This procedure extends beyond matrimonial proceedings to claims involving relief for which payment into court is inappropriate. Without prejudice protection rests partly on public policy and partly on agreement. An express costs reservation can modify its conventional operation while preserving protection on the substantive issues. An unqualified without prejudice offer remains protected on costs unless both parties consent to disclosure.

Excluding an admissible qualified offer can amount to an error of principle in exercising the costs discretion. Such an offer should not ordinarily be treated as a substitute for payment into court where that procedure is appropriate.

Oliver Alfred Sidney Cutts claimed rights of access over land occupied by the defendants, Albert Head and George Edward Head, to his fishery. He sought declarations, injunctions and damages. The defendants counterclaimed for declarations and damages for trespass. Foster J. substantially upheld the access claim, but imposed restrictions and a repair obligation. The damages awarded on the claim and counterclaim cancelled each other out. The defendants were ordered to pay half the plaintiff’s costs.

The defendants conceded on appeal that the restrictions and repair order had been made without jurisdiction. The remaining dispute concerned costs. Before trial, the plaintiff had offered terms more favourable to the defendants than the eventual result. His letter was marked without prejudice but expressly reserved disclosure on costs. Foster J. had refused to consider it.

The Court of Appeal initially rejected this costs challenge. Before its order was drawn up, it reopened the issue following further authority and information about professional practice. The central question was whether an express costs reservation made the offer admissible outside matrimonial proceedings.

Appeal allowed unanimously. Oliver and Fox L.JJ. held that the settlement letter was admissible on costs despite the defendants’ objection. The earlier judgments rejecting this part of the appeal were withdrawn.

1. Per Oliver and Fox L.JJ., without prejudice protection rests partly on public policy and partly on express or implied agreement. Public policy encourages frank settlement negotiations by protecting them from use on the substantive issues. Once those issues have been determined, disclosure of an expressly qualified offer on costs does not undermine that protection. Exposure to costs after refusing a reasonable offer may encourage settlement.

2. Per both Lords Justices, Walker v. Wilsher concerned unqualified without prejudice correspondence. Its rule remained applicable to such correspondence. It did not decide whether an offer could expressly reserve disclosure on costs. Established professional usage demonstrated that the conventional operation of the words could be modified by a clear reservation made when the offer was communicated.

3. Per both Lords Justices, the procedure suggested in Calderbank v. Calderbank was available beyond matrimonial proceedings. Oliver L.J. stated its availability where the dispute involved more than a simple money claim for which payment into court was appropriate. Fox L.J. likewise rejected restriction to the Family Division. Both relied on analogous procedures involving payments into court, sealed arbitration offers and Admiralty offers. The guidance in Computer Machinery v. Drescher supported general availability, although it was obiter.

4. Per Oliver L.J., excluding the letter was an error of principle permitting interference with the costs discretion. The defendants could have obtained everything to which the litigation ultimately entitled them, together with an additional payment, by accepting the offer. The plaintiff should therefore receive all his costs after a reasonable period for acceptance. Fox L.J. agreed with the resulting variation.

5. Per Oliver L.J., with Fox L.J.’s express agreement, a qualified offer should not be regarded as a substitute for payment into court where payment in was appropriate. Ordinarily, a defendant resisting a simple money claim must support the offer with an actual payment into court to obtain that protection. Oliver L.J. expressed his view on equivalent costs consequences provisionally.

The costs order was varied to award the plaintiff half his costs up to 31 December 1980 and all his costs thereafter. The earlier allowance of the appeal concerning the costs of speaking to the minutes remained undisturbed. The appeal was allowed with costs. Legal aid taxation of the appellant’s costs was directed. Leave to appeal to the House of Lords was refused.

• Court of Appeal: On 7 December 1983, allowed the appeal and varied the trial costs order. Its earlier rejection of the general costs challenge on 12 October 1983 was withdrawn before the order was drawn up. The earlier allowance concerning the costs of speaking to the minutes remained effective. Leave to appeal to the House of Lords was refused.
• High Court, Chancery Division: Foster J., on 22 July 1981, substantially upheld the plaintiff’s access claim, awarded equal damages on the claim and counterclaim, and ordered payment of half the plaintiff’s costs. He refused to consider the qualified without prejudice offer. The defendants conceded on appeal that the restrictions on access and the repair obligation had been imposed without jurisdiction.