Developments in Law - Not so without Prejudice

Without prejudice, is a legal jargon used to refer to offers, correspondence or otherwise submissions made between parties which are intended to be inadmissible as evidence in Court. The principle underlying why such submissions can be expected during legal proceedings are penned through the words of Court “It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings.”

This however does not give parties lee-way to place the words “Without Prejudice” onto any letter and accept that it can never be seen by a Court. There has come about recent scrutiny on the use, and at times abuse, of the without prejudice rule.

The Appeal Court through the judgement of KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd gave an order whereby even letters written without prejudice, intended for purposes of settlement, can be used by a party to litigation to prove that there was an interruption in the period of prescription. This effectively meaning that where a letter sent provides an admission of liability, solely for the purpose of prescription being refreshed, a party may use it in Court.

Further considerations have been penned through Court proceedings where the Courts have found the “without prejudice” nature of letters will not safeguard them from being used in Court, for the following reasons:

Exceptions for Bad Faith & Misrepresentation – Where letters and communications contain fraud, misrepresentation, or undue influence a it can be argued that such communications should not be protected by the without prejudice rule.

Admissibility in Costs Disputes: In certain instances the “without prejudice” communications can be considered when the Courts award costs in favour of a litigant. Each instance would be considered on its own facts, particularly if a litigant in a good faith manner made offers of settlement and which were unreasonably rejected. A litigant is, of course, always free to make a communication admissible with prejudice, if it was presented by that litigant themselves.

Substance Over Label – Merely marking a communication as “without prejudice” is no longer sufficient—courts assess whether the content genuinely aims at settlement.

Acts of Insolvency – As summed up through the Court case of ABSA Bank Ltd v Hammerle Group, communications provided which, even on a without prejudice basis, is admissible in evidence as an act of insolvency. Where a party therefore concedes insolvency, public policy dictatesthat such admissions of insolvency should not be precluded from sequestration or winding up proceedings, even if made on a privileged occasion.

The outcome of the judgements reflect that even through genuine attempts of settlement of disputes, a litigant should be averse to what they communicate. Care must be taken to ensure that no communications could later be used against you in Court.