In Hossaini v EDS Recruitment Ltd, the UK Employment Appeal Tribunal applied the rule that correspondence marked “without prejudice” cannot be used to deprive a litigant of its costs. The Appeal Tribunal’s judgment serves as a reminder that litigants should label correspondence “without prejudice save as to costs” (or send open correspondence), if they want to be able to rely on that correspondence on the question of costs.
The judgment concerned Mr Hossaini’s appeal against (1) the decision by the Employment Tribunal to reject his claim of discrimination and harassment (on the basis of race and religion/belief) and the costs award in favour of the respondents; and (2) the Tribunal’s refusal of his reconsideration application.
In pursuing his substantive appeal, Mr Hossaini successfully sought to adduce new evidence in support of his claim. Applying the test in Ladd v Marshall, the Appeal Tribunal concluded that the new evidence would probably have had an important influence not only on the factual issues in dispute but also the issue of credibility, because the new evidence revealed that the respondents may have doctored evidence that had been before the Tribunal. The Appeal Tribunal was also satisfied that the evidence was credible and could not have been obtained with reasonable diligence for use at the Tribunal hearing.
Having regard to the Appeal Tribunal’s conclusion that the new evidence would probably have had an important influence on the Tribunal’s substantive decision, the Appeal Tribunal also concluded that the Tribunal’s costs award had to be revisited. Even if that was incorrect, the Appeal Tribunal further observed that the material upon which the Tribunal had concluded that Mr Hossaini’s conduct in negotiating a settlement had been unreasonable (and therefore that the costs award was warranted) had been marked “without prejudice" but not "without prejudice save as to costs”. Therefore, Mr Hossaini’s appeal against the costs award would be allowed in any event.
The Appeal Tribunal’s judgment referred to the rule laid down in Walker v Wisher — as applied in Reed v Reed — that correspondence marked “without prejudice” is not admissible when considering the question of costs, since to admit such correspondence would undermine the basis upon which it takes place.