If you can settle a dispute by agreement rather than risking litigation, that is generally a good thing. In most cases a dispute can be formally settled without needing the court's/tribunal's approval. In some types of cases you might still need the court/tribunal to make an order but, even then, if all known affected parties reach agreement, that makes the court/tribunal process much easier and less expensive.
Get advice from a barrister about how strong your case is and about what kind of settlement is reasonable
It is ultimately up to you what settlement terms to offer or agree to, but advice from a barrister will help you decide. If a barrister advises that you have a strong case for claiming £100,000, you might perhaps settle for £90,000 but you normally don't want settle for £10,000.
It is possible for an offer to be made in a form which, if accepted, is immediately and irrevocably binding on the parties. If you want to make such an offer, get a barrister to make sure it is correctly worded and watertight and deals with costs in the appropriate way (e.g. are you offering to pay the other side's legal costs, are you expecting them to pay your costs, or is each side to bear its own costs). If you want to accept such an offer get advice from a barrister before replying.
Often many offers and counter-offers are made. If you got a barrister to draft each one that would be quite expensive. But if you head an offer (or response to an offer) "subject to contract" it means that if accepted it is still not binding but is, at that stage, only agreement in principle. You can then pay for a barrister to draft the final precisely detailed agreement which will be binding when signed by both parties.
In other words, having initially obtained advice from a barrister on the strength of your case, you can then compose your own "subject to contract" offers, and responses to offers, thus saving fees, and paying for a barrister to draft a binding agreement only once agreement has already been reached "subject to contract".
If you compose your own offers and responses you would normally head them "without prejudice" as well as "subject to contract" (see below for what "without prejudice" means) so you would word it like this:
WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
I would like to make the following offer to settle this matter...
If you agree I will ask my barrister to draft a detailed formal agreement which, when signed by both parties, will be binding.
NOTE An oral offer which is accepted can in some circumstances be a binding agreement even before anything is put in writing. In order to make sure this does not happen, start the conversation by saying "This is without prejudice and subject to contract"
Parties may want to settle but be concerned that if they make an offer, and it is not accepted and the matter proceeds to trial, the fact that they have made an offer may subconsciously influence the judge against their case. Because the courts and tribunals prefer parties to settle if they can, there is actually a legal rule - the without prejudice rule - which means it is possible to make and respond to offers in a way which will never be seen by the trial judge. So if you head offers, and responses to offers, "without prejudice and subject to contract" you can compose them yourself without being concerned that a judge will see what offers you have made or the perhaps inexact way you phrase them.
Like all legal rules, there are exceptions to the rule that a judge cannot see without prejudice offers and responses. For example if a party used without prejudice correspondence as a cover for making improper threats, protection might be lost. Protection may also be lost if you go beyond the purpose of seeking a settlement and start to make admissions (about who owns land, or about whether money is owing, for example). It is also important to keep without prejudice correspondence separate from ordinary "open" correspondence: you should not reply directly to open correspondence with without prejudice correspondence because it might be held that your reply, even though headed without prejudice, was really an open reply. Keep open and without prejudice correspondence in separate threads. Likewise keep without prejudice and without prejudice except as to costs correspondence in separate threads.
These are offers which are not seen by the trial judge until after the judge has given judgement (i.e. announced who wins). After that they can be seen by the judge and may affect the costs order the judge subsequently makes. In many (not all) court and tribunal cases the judge normally orders the loser to pay most of the legal costs of the winner but a without prejudice except as to costs offer can affect the normal costs order.
Example: You start a court case, claiming £100,000, in late January. In early February the other party makes a without prejudice except as to costs offer of £95,000. You do not accept that offer. At the trial in November, you win, but not completely, and the judge decides you are owed £93,000. The judge might then order the other party to pay your legal costs but only up to February, and order you to pay your opponent's costs incurred from February to November, on the basis that you ought to have accepted the £95,000 offer in February because it is more than you eventually got at trial.
Because without prejudice except as to costs offers may (eventually) be seen by the judge it is important to ask a barrister to draft them. If you have been negotiating on a without prejudice and subject to contract basis without success, it can be important to ask a barrister to put your final offer in a without prejudice except as to costs offer without too much delay because it is only the without prejudice except as to costs offer which will be seen by the judge when considering costs orders, not the earlier without prejudice and subject to contract correspondence.
Note about terminology: A without prejudice except as to costs offer is sometimes called a without prejudice save as to costs offer or occasionally it may be called a Calderbank offer. In court cases subject to the Civil Procedure Rules, offers are normally in the form of Part 36 offers. A Part 36 offer is a particular type of without prejudice except as to costs offer.
A Mediation is a meeting, usually lasting half a day or a day, attended by the parties and their barristers, and conducted by a professional mediator whose fees are shared between the parties. You can suggest a mediation to the other side at any time and, if they agree, you can find a mediator at www.directaccessportal.co.uk Because of the cost of the mediation it would not be worthwhile unless both parties are prepared to consider compromise, and if you propose a mediation, and the other side agree, that almost certainly means they are serious about trying to reach a settlement. Mediations generally have a high success rate.
Everything said in a mediation is "without prejudice" (the trial judge can be informed that there has been, or that has not been a mediation, but if there was a mediation the judge cannot be told anything about what happened at the mediation itself) but, if the mediation is unsuccessful, there is nothing to stop you, if you wish, asking a barrister to draft a without prejudice except as to costs offer repeating the offer you made in the mediation and that offer can then be seen by the judge when considering costs orders, in the usual way.
A table giving basic facts about different types of offer can be found here.
Some practical matters
As well as heading any offer or response appropriately - e.g. WITHOUT PREJUDICE - it is usual to give any PDF file containing the offer/response a file name which also indicates its status such as 2016-09-15 Letter Smith to Jones (WOP) This helps to prevent anyone accidentally including the offer among documents put before a judge - e.g. in a Trial Bundle. Likewise when offers/responses are sent by email it is usual to include in the subject field an indication of the status of the communication.
It is good practice to head each offer and response without prejudice, without prejudice except as to costs, etc. as appropriate but even if not headed like this an offer might still be regarded as "without prejudice" simply because it is an attempt at settlement, so if you want to make an open offer (i.e. an offer which can be shown to a judge even before judgment) you should, for the avoidance of doubt, actually head the offer with the words OPEN OFFER.
The above explanation of the law relating to settlement negotiations is only an overview and in order to be reasonably concise I have had to leave some details out - details which are likely to affect what the law would say about your own situation. So please do not rely on the above but contact me for advice
This page was lasted updated in October 2016 Disclaimer