Settlement and alternative dispute resolution 

The great majority of civil disputes that reach a court never reach a final trial. They end earlier, through settlement — a negotiated resolution the parties agree to themselves — or through some other form of alternative dispute resolution (ADR), most commonly mediation. Understanding settlement and ADR is not an optional extra to civil procedure; for most real disputes, it is how the dispute actually ends.

Why settlement and ADR matter

Trial is expensive, slow, and carries risk for both sides: even a party with a strong case can lose, or can win an outcome not worth what it cost to obtain. Settlement allows parties to control the outcome themselves, tailor a resolution trial could not deliver (such as an apology, a payment plan, or an ongoing commercial relationship), and avoid the cost, delay and uncertainty of a contested hearing. Courts have strong institutional reasons to encourage settlement too: scarce judicial resources are better used on disputes that genuinely need adjudication. Consistently with this, Australian courts increasingly encourage, and in some circumstances require, parties to attempt some form of ADR before or during a proceeding — commonly mediation, where an independent third party helps the parties negotiate, but without the power to impose an outcome, as a judge would. Some courts also offer or require other processes, such as case appraisal or conciliation, particularly in specialist jurisdictions.

Mediation and other ADR

Mediation is facilitative: the mediator assists communication and helps the parties explore options, but does not decide the dispute or impose a result — any resolution must be agreed by the parties themselves. This distinguishes mediation from arbitration, in which an independent arbitrator does decide the dispute, usually in a binding way, under a separate process the parties have agreed to (whether by contract or by referral). Because mediation depends on parties speaking candidly about the strengths and weaknesses of their position, its usefulness depends heavily on participants being able to negotiate freely without what they say being used against them later — which is where without-prejudice protection becomes essential.

Without-prejudice privilege

Communications genuinely made in a bona fide attempt to settle a dispute are protected by without-prejudice privilege: they cannot generally be put before the court as evidence of an admission, and cannot be used to establish that a party conceded liability or the weakness of its case simply because it was prepared to negotiate. The policy is straightforward — if settlement offers could be used against the party making them, parties would stop making them, and the practical incentive to settle disputes early would be badly undermined. The privilege belongs to both parties to the negotiation, and it generally has to be waived by both, or falls away in defined circumstances, such as where the communication is later relied on to prove that a concluded settlement agreement was actually reached. In the uniform evidence jurisdictions those circumstances are set out by statute, and one of them matters directly here: the exclusion does not apply where the communication is relevant to determining liability for costs².

Offers of compromise and costs consequences

A distinct mechanism sits alongside, and interacts with, without-prejudice negotiation: a formal offer of compromise made under the rules of court, or an equivalent offer made outside those rules — often called a Calderbank offer, after Calderbank v Calderbank [1976] Fam 93¹ — expressed to be open for acceptance and reserved on the question of costs. These offers are usually not simply without-prejudice — they are typically expressed as "without prejudice save as to costs," meaning they cannot be shown to the trial judge on liability, but can be produced after judgment on the question of costs. The consequence is powerful: if a party rejects a reasonable offer and later fails, at trial, to do better than that offer would have given them, they may be exposed to an adverse costs order — commonly, having to pay the other side's costs from the date the offer expired, sometimes on a more punitive costs basis. This creates a genuine incentive to evaluate settlement offers seriously rather than reflexively rejecting them, because the ultimate financial outcome of "winning" at trial can be worse than accepting a sensible offer earlier.

Two Australian decisions matter more than the English original. In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [2005] VSCA 298³ Warren CJ, Maxwell P and Harper AJA rejected the notion that a refused offer creates a presumption of indemnity costs, holding that the authorities point to "an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to a special costs order". Unreasonableness of the rejection is what must be shown.

Agosti & Agosti [2021] FedCFamC1F 72⁴ is useful for a different reason: Wilson J records what the original case actually held — "[i]n Calderbank, Cairns LJ held that the wife was entitled to her costs" — and that the costs device now bearing its name was treated in Cutts v Head as dictum, not as the holding. Cite the modern Australian authority for the principle, not the English case for a rule it did not lay down.

Applying this in a problem question

1. Identify whether a communication was genuinely part of a bona fide attempt to settle — that is what without-prejudice privilege protects, not every statement made during a dispute.
2. Distinguish mediation (facilitative, non-binding unless a settlement is reached) from arbitration (a binding third-party decision).
3. Check whether a formal offer of compromise was made, and on what terms, including whether it was reserved on the question of costs.
4. Compare the ultimate trial outcome against the rejected offer to assess likely costs consequences.
5. Remember settlement is not a lesser outcome procedurally — for most disputes it is the normal way a proceeding actually ends.