71 / 462
g a z e t t e
april
1991
That the words only retain their
e f f ect wh i le negotiations are
con t i nu i ng is clear f r om the
judgment of Murphy J in
Holland -
v- McGi/l
(1990).
16
" . . . in the hnonth of October
and into early November
negotiations took place with a
view to resolving the differences
that had arisen between them in
relation to the litigation which
was then pending. The corres-
pondence relating to those
nego t i a t i ons was
marked
" w i t hout prejudice" and was
without prejudice. However, the
letter of 10th November which
was tendered in evidence was
admitted by me because it was
clear that the negotiations were
at an end from that letter".
But at what stage will a court
hold t hat l i t i ga t i on was in
contemplation? Is the applicable
test objective or subjective? As will
be seen below, it is submitted that
the operative test is that the
privilege is entirely dependent on
the intention of the offeror to rely
on it, such intention being within
the reasonable contemplation of
the offeree.
(b) Statements must be made
bona fide.
An a t t empt to abuse t he
protection given will lead to the
exercise of the court's discretion in
a manner which is unfavourable to
the offeror. This is illustrated in
Re
Daintrey
(1883).
17
Here a debtor
sent a letter, expressed to be
without prejudice, to his creditor
stating that he was suspending
payment of his debts. This letter
was held to be admissible in
evidence to prove an act of
bankruptcy as the letter was
"one which from its character,
might prejudicially affect the
recipient whether or not he
accepted the terms offered
thereby".
Thus, the communication must
be a genuine a t t empt
at
settlement. As explained by Fox
L.J. in
Cutts -v- Head
(1984).
18
" . . . wh i l st t he ordinary
meaning of "w i t hout prejudice"
is w i t hout prejudice to the
position of the offeror if his offer
is refused, it is not competent to
one party to impose such terms
on the other in respect of a
document which, by its nature,
is capable of being used to the
advantage of that other".
It should further be noted that the
courts tend to exercise their
discretion against affording the
usual protection which these words
bestow if the compromise proposal
is accompanied by threats or other
inequitable conduct. This point is
further considered at (d)
infra.
(c) Where an offer is accepted,
"w i t hout prejudice" protection is
lost. Without prejudice communica-
tions are only rendered inadmissible
if the offer contained therein is not
accepted.
19
To this end, the courts
will have to look at the communi-
cations between the parties as a
preliminary step in determining
whether or not such an agreement
has been concluded.
Two distinct situations must be
considered in this context
(i) partial settlements and
(ii) subsequent litigation between
one of the parties to the settlement
and a third party relating to a similar
cause of action.
(i)
PARTIAL SETTLEMENTS
A and B are in dispute and
negotiations for a settlement com-
mence. B makes an offer which
cons i s ts of a mu l t i p l i c i ty of
elements some of wh i ch are
acceptable to A and others which
are not. B.'s communications are
expressed to be without prejudice
but, as stated above, these words
only provide protection where the
negotiations fail and the privilege is
lost if settlement is reached. To
what extent will the parts which
are accepted lose the without
prejudice protection if A agrees to
them? The courts have decided this
by investigation whether a binding
agreement has resulted between
the parties on the separate issues
in question (in which case pro-
tection is lost in relation to those
issues agreed upon) or whether the
elements of the offer were so
interlinked that rejection of one
term means rejection of all so that
the without prejudice privilege
continues to attach to the whole?
This issue was discussed in
Tomlin
-v- Standard
Telephones
and
Cables Ltd.
(1969)
20
where t wo
matters, namely liability and
quantum were separately under
negotiation.
Here, the plaintiff suffered an
accident at work. In subsequent
negotiations between the plaintiff
and the defendant employer, the
extent of the latter's liability, as well
as the quantum of damage, was
discussed. Agreement was reached
that liability should be equally
apportioned but settlement efforts
"The courts have decided
. . . whether a binding agree-
ment has resulted between the
parties on the separate issues."
were unsuccessful on the issue of
quantum. The plaintiff's solicitors
confirmed by letter the 50 / 50
agreement on liability. References,
on the part of the defendant
employer, to the agreement on
liability were headed " w i t h o ut
prejudice" but did not refute the
plaintiff's letter. The defendant
sought to have the question of
liability re-opened before the court
on the basis that the offer of
settlement as to liability was
inadmissible having been made
without prejudice and, further, that
the negotiations regarding liability
and quantum were inextricably
linked so that partial final settle-
ment on one issue alone was not
possible. The Court of Appeal held
against the defendant employer.
The protection of the words was
lost once agreement was reached
and the court could look at the
co r r espondence in order to
determine if there had been such
agreement. Here the correspond-
ence disclosed a binding agree-
ment on the question of liability
and, thus, insofar as an agreement
had been reached, the words
" w i t h o ut prejudice" lost their
effectiveness. Danckwerts L.J.
referred to the dictum of Lindley
L.C.J, in
Walker -v-
Wi/sher
(1889).
21
" . . . they
mean
w i t h o ut
prejudice to the position of the
writer of the letter if the terms
he proposes are not accepted. If
the terms proposed in the letter
are accep t ed a comp l e te
contract is established and the
letter although written without
prejudice operates to alter the
old state of things and to
establish a new one".
Thus, the words were held not to
be effective to prevent disclosure to
the court of a partial settlement
51