The litigation practitioner must be schizophrenic, rattling the client's sabre while endeavouring to achieve a quick and cheap settlement.

'Without prejudice' negotiations help.

Despite plenty of case law, the ground rules are clear.

'Without prejudice' letters -- they will usually be marked as such, although this is not essential -- will be exempt from discovery (and thus 'privileged') so long as they contain proposals to settle or compromise, or form part of a body of correspondence conducted to that end.

While there is no rule which prohibits the mixing of open and 'without prejudice' material in the same letter, good practice requires that they are separated to avoid edited versions of correspondence having to be prepared for use in court.Sometimes, the writer of a 'without prejudice' letter purports to waive privilege and to introduce the letter into evidence.

This is not permissible.

The privilege attaches for the benefit of all parties.Where privilege is in dispute, the court is entitled to read the relevant documents to dispose of the issue.

Otherwise, privileged documents should not be placed before the court or referred to except where it is contended that a binding agreement has been concluded in negotiations because, in that event, privilege is lost.If an opponent is obdurate, pressure can be brought by making a payment into court or a Calderbank offer.

Broadly, the distinction is that a payment in is appropriate in a money claim while a Calderbank offer is appropriate in a non-monetary claim or in relation to the non-monetary elements of a mixed claim.

Both have the effect of putting the other side at risk as to costs.

A Calderbank letter should be marked 'without prejudice save as to costs' with the words 'of the taxation' added where appropriate.

Do remember that payments in cannot be accepted in cases automatically referred to arbitration under CCR order 19, r 3 but a Calderbank offer can be made.The costs consequences of an unaccepted Calderbank offer are less certain than those of an unaccepted payment in.

It follows from the nature of the claims where Calderbank offers can be made that it may be difficult to measure the value of the order made against the value of the offer.

Consider, for example, an action for declaratory relief as to the true position of a contested boundary! Calderbank offers are probably at their best and most commonly used in matrimonial cases and taxations but, with taxations, they will be ineffective if the receiving party has been legally aided.

Unfortunately, rules of court on Calderbank offers are inconsistent.

Where the CCR apply, there is a requirement to file an offer in a sealed envelope (Ord 11 r 10(2)).

By virtue of FPR 2.63 this requirement does not apply to an ancillary relief case.

Watch out! Certain other family proceedings are governed not by the FPR but by the CCR such as applications for financial relief under legislation other than the Matrimonial Causes Act 1973, proceedings under the Inheritance (Provision for Family and Dependants) Act 1975 and applications under the Trusts of Land and Appointment of Trustees Act 1996.Settlement negotiations are well on the way to becoming compulsory in most f orms of litigation.

In ancillary relief cases, the pilot scheme's financial dispute resolution appointment is designed to progress negotiations and counter offers are to be copied to the court for perusal of the judge who conducts the appointment.

Outside the scheme, many courts have for some years directed pre-hearing appointments with the same aim.

As with the pilot scheme's dispute resolution appointment, discussions are privileged and the conducting judge will be disqualified from hearing the substantive application if no settlement is brokered.

The Woolf reforms will encourage stays of actions to promote negotiations and require judges and the parties to consider the availability of ADR processes.

Parties unwilling to step outside the adversarial arena may have to say why and be penalised in costs.The direction of the wind of change is plain.

Litigators must become negotiators and a firm grasp of the art of persuasion allied with the law of privilege is essential to their armoury.