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WITHOUT PREJUDICE AND PUBLIC POLICY

 

Lay people frequently use the words “without prejudice” in disputes freely believing that there is some mysterious wizardry that protects them from action by the recipient. Often this backfires and the author finds out too late that he or she has made admissions that are admissible in subsequent proceedings.

 

Generally speaking, in the event of a genuine dispute and a subsequent and genuine attempt to resolve or settle a matter under the protection of a without prejudice proposal, the proposal will be inadmissible in Court.

 

In 2015 our Supreme Court of Appeal (SCA) restated the law, that one exception to such exchanges being inadmissible would be a letter constituting an acknowledgment that the author is insolvent.

 

Public policy dictates that insolvency proceedings involve the public interest. As a result a confidential admission cannot be privileged as it offends public policy. The admission of insolvency could be admitted in evidence.

 

There is a second exception that arises with prescription.

 

The general without prejudice rule offers a debtor an opportunity to resolve any dispute with his creditor and avoid litigation, in a confidential setting, where should the talks fail, any admissions cannot be used against the offeror (save for the two exceptions addressed in this article).

 

Many litigants have learned the hard way that when a claim has prescribed, (time barred), it has become extinguished in law, and it is no longer payable by the debtor. This brings certainty to the debtor and places an obligation on a creditor to take action timeously.

 

Can a without prejudice offer to settle a debt that interrupts the running of prescription, make available to the debtor a subsequent defence that the claim has prescribed after he/she made a without prejudice offer?

 

It was held in the SCA that a creditor can rely on the without prejudice admissions solely for the purpose of interrupting prescription. The remainder of the letter specifically any talk of quantum, would remain protected.

 

This raises some concerns in that parties in negotiations need to reach agreement prior to such negotiations that the exceptions will apply.

 

Should any party find themselves in such a situation they should immediately seek advice from a qualified professional to avoid potentially bad news.

 

Contributor:  DAVE RANDLES - (Senior Executive Consultant) Commercial, Litigation & Matrimonial Law - (Umhlanga Office) E-mail: randles@tmj.co.za Tel: 031 566 2207

E-mail:  randles@tmj.co.za

Tel:  031 566 2207