South Africa: The Double-Edged Sword Of "Without Prejudice" Offers

A judgment stemming from the High Court of South Africa, Limpopo Division, Polokwane serves as a timely reminder that a "without prejudice" offer, if not drafted or approached properly, can interrupt the prescription of a claim.

Facts of the case

The plaintiff instituted action against the defendant for the injuries she suffered from a helicopter crash caused by the defendant's helicopter colliding with wires on 6 October 2015. At the time of the crash, the plaintiff was a minor and only reached the age of majority on 8 February 2019. Notably, summons was served on the defendant on 20 July 2022.

Issue(s) for determination

The defendant defended the action and raised a plea of prescription, pleading that the plaintiff's claim prescribed on 8 February 2020, one year after the plaintiff attained the age of majority. The parties agreed to separate the issue of the special plea of prescription from other issues for determination.

During the trial, the plaintiff sought to introduce a "without prejudice" offer that she had previously rejected. She argued that the offer had interrupted the prescription period. In response, the defendant objected to the introduction of the offer, arguing that it would be prejudiced by its introduction since the plaintiff had failed to plead the interruption of prescription in her pleadings as they stood at trial.

Legal position

Generally, "without prejudice" offers cannot be used as evidence in court. This rule encourages parties to resolve their disagreements independently, aiming to avoid the expenses and delays associated with lengthy legal proceedings. Despite the general rule, as is often found in the law, there are exceptions. One such exception is dictated by public policy, which allows "without prejudice" offers to be admissible as evidence in demonstrating acts of insolvency.

KLD Residential CC v Empire Earth Investment 17 (Pty) Ltd 2017 (6) SA 55 (SCA) introduces another exception, albeit under strict circumstances. Lewis JA writing for the majority said: "Where acknowledgments of liability are made such that, by virtue of s 14 of the Prescription Act, they would interrupt the running of prescription, such acknowledgments should be admissible, even if made without prejudice during settlement negotiations, but solely for the purposes of interrupting prescription. The exception itself is not absolute and will depend on the facts of each matter. And there is nothing to prevent the parties from expressly or impliedly ousting it in their discussions".

Evidence before the Court

Upon receiving the defendant's "without prejudice" offer, the plaintiff's attorneys wrote a letter to the defendant's attorneys expressing their satisfaction with the development and their confidence that the matter would be settled out of court. The negotiations between the parties progressed, leading to an agreement to appoint an orthopaedic surgeon to conduct a medico-legal examination of the plaintiff. The cost for the expert was to be shared equally between the parties. The plaintiff underwent the examination in May 2021. Throughout, the defendant's attorneys stressed they were exploring a commercial settlement and the negotiations should not be seen as an admission of liability. These discussions lasted until June 2022, when, on 21 June 2022, the defendant notified the plaintiff that all claims against it had prescribed on 8 February 2022.

The Court's findings

The judge found that although the defendant consistently asserted there was no admission of liability in the settlement negotiations, their behaviour implicitly indicated the contrary. For more than a year, the defendant engaged in negotiations with the plaintiff, fostering an expectation of settlement, only to abruptly announce that the plaintiff's claim had prescribed. On the other hand, the plaintiff did not plead that the "without prejudice" offer had interrupted prescription, but raised it for the first time in her heads of argument. Taking this into account, the judge ruled that admitting the defendant's "without prejudice" offer into evidence would disadvantage and prejudice the defendant. Resultantly, the defendant's objection was upheld.

Lessons learnt

Defendants, like insurers, make "without prejudice" offers on a daily basis. It is essential for them to expressly clarify that those offers do not interrupt the prescription period of claims. They should also take care to make it clear that any offers are made without any admission of liability and to ensure their behaviour does not imply the contrary. This is crucial to prevent the offers from being treated as an exception to the general rule regarding the inadmissibility of "without prejudice" offers, as illustrated in the KLD case discussed above. On the other hand, plaintiffs should ensure that all the material facts upon which their claims are based are pleaded in a clear and concise manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.