The term “without prejudice” has for a long time been part of our law in South Africa and has been used to encourage parties to settle litigious disputes, while being able to divulge things they would not normally have divulged in the fear that the information provided or conversations had could be used against them at a later stage.

The term will often be used by attorneys on letters or other communications. By inserting the term on the communication, the communication (whether it relates, for example to a conversation or an admission), will automatically be identified as being privileged and the party involved will not be waiving any of his or her legal rights by providing the communication.

There was one known exception to the above in that that if a person made an admission of insolvency, the admission may be admissible. However, subsequent to a recent Supreme Court of Appeal ruling, there now appears to be a second exception to the above.

On 6 July 2017, the Supreme Court of Appeal (“SCA”) handed down its judgement in the case of KLD Residential CC (“KLD”) and Empire Earth Investments 17 (Pty) Ltd (“Empire”) (“KLD Case”). The SCA in handing down its judgement had to consider whether or not sufficient grounds existed for a letter, which had been prepared by an attorney and marked “without prejudice”, could be admissible and used to interrupt prescription.

In South Africa the Prescription Act provides for contractual and delictual debts to be extinguished after three years from the date of when they became due. Prescription may, in certain circumstances, be delayed or interrupted. Section 14 of the Prescription Act provides for prescription to be interrupted by an acknowledgment of liability by the debtor and, if interrupted, to start running afresh from the date of interruption.

The SCA held (quite surprisingly to many) in the KLD Case 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 “without prejudice” during settlement negotiations.

Taking the above exceptions into account, parties need to be very certain of the content in all without prejudice disclosures made when attempting to settle a dispute or litigious matter.

 

Dingley Marshall Inc

January 2018