In order for correspondence to be truly “without prejudice”, it must meet the following criteria:

• It must be a genuine attempt at settlement;
• The correspondence must be made in the context of resolving a dispute; and
• The correspondence must clearly state that it is made “without prejudice”.

The inadmissibility at Court of “without prejudice” communications should not always be assumed. While the general rule is that communications meeting the above criteria of “without prejudice” correspondence is inadmissible at Court, there are exceptions to the rule, such as:

• If the communication includes an admission relevant to different, unrelated matters;
• If the communication contains evidence of fraud, misrepresentation, or undue influence;
• Where there is an acknowledgment of debt; and
• Where there is an acknowledgment of insolvency

Acknowledgment of Insolvency

In the case of Absa Bank v Hammerle Group (205/14) [2015] ZASCA 43, the Court held the following regarding the use of without prejudice correspondence in matters of insolvency:

“It is true that as a general rule, negotiations between parties which are undertaken with a view to a settlement of their disputes are privileged from disclosure. This is regardless of whether or not the negotiations have been stipulated to be without prejudice. However, there are exceptions to this rule.

One of these exceptions is that an offer made, even on a ‘without prejudice’ basis, is admissible in evidence as an act of insolvency. Where a party therefore concedes insolvency, as the respondent did in this case, public policy dictates that such admissions of insolvency should not be precluded from sequestration or winding-up proceedings, even if made on a privileged occasion. The reason for the exception is that liquidation or insolvency proceedings is a matter which by its very nature involves the public interest.”

Acknowledgment of Debt – Interruption of Prescription

This was similarly held in the case of Absa Bank Ltd v Chopdat 2000 (2) SA 1088 (W) at 1092H-1094F, wherein the Court held the following: 

“[A]s a matter of public policy, an act of insolvency should not always be afforded the same protection which the common law privilege accords to settlement negotiations.

…

In this case the respondent has admitted his insolvency. Public policy would require that such admission should not be precluded from these proceedings, even if made on a privileged occasion”

Another exclusion pertains to the interruption of prescription, where a party acknowledges a debt during “without prejudice” settlement negotiations. The Supreme Court of Appeal in the case of KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd [2017] ZASCA 98 held that where an acknowledgment of liability is made, by virtue of section 14 of the Prescription Act, prescription would be interrupted and such acknowledgments should be admissible, even if made during “without prejudice” settlement negotiations.

Bearing the above in mind, it is important that you approach “without prejudice” negotiations with the utmost care and consideration. It is advisable that you consult with a legal professional prior to sending or responding to any correspondence marked as “without prejudice”.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.