The Gazette 1991

g a z e t t e

april

1991

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

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,

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

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