KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd

• Jurisdiction: South Africa
• Citation: 2017 (6) SA 55 (SCA)

KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd
2017 (6) SA 55 (SCA)

2017 (6) SA p55

Citation	2017 (6) SA 55 (SCA)
Case No	1135/2016; [2017] ZASCA 98
Court	Supreme Court of Appeal
Judge	Lewis JA, Tshiqi JA, MBHA JA, Fourie AJA and Schippers AJA
Heard	July 6, 2017
Judgment	July 6, 2017
Counsel	A de V la Grange SC (with CR Cilliers) for the appellant.; RJ Howie for the respondent.

Flynote : Sleutelwoorde

Evidence — Privilege — Legal professional privilege — Scope — Without prejudice rule — Exceptions — Acknowledgment of liability made in settlement offer admissible in evidence for limited purpose of interrupting prescription — Prescription Act 68 of 1969, s 14.

Evidence — Admissibility — Without prejudice rule — Scope — Exceptions — G Acknowledgment of liability made in settlement offer admissible in evidence for limited purpose of interrupting prescription — Prescription Act 68 of 1969, s 14.

Prescription — Extinctive prescription — Interruption — By acknowledgment of liability H — Without prejudice communications — Acknowledgment of liability made in settlement offer admissible in evidence for limited purpose of interrupting prescription — Prescription Act 68 of 1969, s 14.

Headnote : Kopnota

The without prejudice rule, a part of South African law, provided that, generally speaking, statements, including admissions of liability, made in an attempt I to settle litigation between parties, were inadmissible in subsequent litigation between them. The sole issue in the present matter was whether our law should recognise an exception to such rule, such that an acknowledgment of liability made in a settlement offer by a debtor, and thus 'without prejudice', may nonetheless be admitted in evidence for the limited purpose of interrupting prescription within the meaning of s 14 of the Prescription J

2017 (6) SA p56

Act 68 A of 1969. This was an appeal against the court a quo's [*] refusal to recognise such an exception on the grounds that there was no compelling reason of public policy to limit the protection afforded by the rule in the manner sought.

In approaching the question in issue, the SCA recognised that there were competing policy considerations involved (see [3]). On the one hand, there B was the policy underlying the without prejudice rule, ie that it was in the public interest that parties to disputes should be encouraged to avoid litigation, which usually entailed expense, delay, hostility and inconvenience, by resolving their disputes amicably in frank discussions without the fear that if negotiations failed, admissions made by them in the course of negotiating may be used against them subsequently (see [8] and [19]). C On the other hand, there was the policy underlying s 14 of the Prescription Act. One of the principal reasons for extinctive prescription was to provide certainty to a debtor. However, where the debtor acknowledged liability, thereby removing any uncertainty, the reasons for providing the protection of the prescription period fell away. Hence s 14. It aimed at protecting the creditor, and recognised that it was in the public interest that a debtor who D acknowledged his or her debt, and so induced the creditor not to have immediate resort to litigation, should not be able to claim that his or her debt had prescribed because the creditor held his or her hand. (See [13], [16], [23] and [36].)

The SCA, in arriving at its conclusion, sought to achieve a balance between the public interests concerned (see [37]).

Held, E that the exception should be recognised. It properly served the policy interests underlying both s 14 of the Prescription Act and the without prejudice rule. The exception allowed for the prevention of the abuse of the without prejudice rule, and ensured the protection of a creditor. The admission remained protected insofar as proving the existence and the quantum of the debt concerned. This exception however was not absolute F and would depend on the facts of each matter. And there was nothing to prevent the parties from expressly or impliedly ousting it in their discussions. (See [39].)

Appeal accordingly upheld (see [40] – [41]).

Schippers AJA, dissenting, held, that the exception as contended for could not be recognised as it would contradict the public policy and contractual foundations G of the without prejudice rule, and was at odds with the rationale as expounded in South African and English case law (see [43] and [94]).

Cases cited

Southern Africa

Absa Bank H Ltd v Chopdat 2000 (2) SA 1088 (W): referred to

Absa Bank Ltd v Hammerle Group 2015 (5) SA 215 (SCA): discussed and dictum in para [13] compared

Attorney-General, Transvaal v Botha 1994 (1) SA 306 (A): dictum at 330I applied

Johannesburg Metropolitan Municipality v Gauteng Development Tribunal and Others 2010 (6) SA 182 (CC) (2010 (9) BCLR 859; [2010] ZACC 11): I referred to

2017 (6) SA p57

Kapeller v Rondalia Versekeringskorporasie van Suid-Afrika Bpk 1964 (4) SA 722 (T): A referred to

KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd 2016 (5) SA 485 (WCC): reversed on appeal

Land and Agricultural Development Bank of SA t/a Landbank v Master of the High Court and Others [2006] ZASCA 70: referred to

Lynn & Main Inc v Naidoo and Another 2006 (1) SA 59 (N): referred to B

Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1984 (1) SA 571 (A): applied

Myathaza v Johannesburg Metropolitan Bus Services (Soc) Ltd t/a Metrobus and Others [2016] ZACC 49: referred to

Naidoo v Marine & Trade Insurance Co Ltd 1978 (3) SA 666 (A): discussed and distinguished C

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): referred to

Road Accident Fund and Another v Mdeyide 2011 (2) SA 26 (CC) (2011 (1) BCLR 1; [2010] ZACC 18): dictum in para [8] applied

Uitenhage Municipality v Molloy 1998 (2) SA 735 (SCA) ([1998] 1 All SA 140): referred to. D

England

Bradford & Bingley plc v Rashid [2006] 4 All ER 705 ([2006] UKHL 37): discussed and compared

In re Daintrey, Ex parte Holt [1893] 2 QB 116: referred to

Muller v Linsley & Mortimer [1994] EWCA Civ 39 ([1996] PNLR 74): E referred to

Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] 4 All ER 1011 ([2011] 1 AC 662; [2010] 3 WLR 1424): referred to

Ofulue v Bossert [2009] UKHL 16: referred to

Rush & Tompkins Ltd v Greater London Council [1988] UKHL 7 ([1989] AC 1280; [1988] 3 All ER 737): referred to F

Unilever plc v Proctor & Gamble Co [2001] 1 All ER 783 ([2000] 1 WLR 2436): referred to.

Legislation cited

The Prescription Act 68 of 1969, s 14: see Juta's Statutes of South Africa 2016/17 vol 1 at 2-863. G

Case Information

A de V la Grange SC (with CR Cilliers) for the appellant.

RJ Howie for the respondent.

An appeal from the Western Cape Division of the High Court, Cape Town (Rogers J sitting as court of first instance), reported sub nom H KLD Residential CC v Empire Earth Investments 17 (Pty) Ltd 2016 (5) SA 485 (WCC).

Order

1.

The appeal is upheld with the costs of two counsel. I

2.

The orders of the court a quo in subparas (a) and (b) of para 66 of the judgment are set aside and replaced with the following:

'(a)

The issue identified in para 3.1 of the stated case is determined in favour of the plaintiff.

(b)

The special plea of prescription is dismissed with costs, including those of two counsel.' J

2017 (6) SA p58

Judgment

Lewis JA (Tshiqi JA, Mbha JA and Fourie AJA concurring):

[1] The issue before us on appeal raises a novel question of law. That is, whether an acknowledgment of indebtedness by a debtor, embodied in a letter written for the purpose of settling litigation, and thus 'without-prejudice', may nonetheless be admitted in evidence for the limited B purpose of showing that the period of prescription has begun to run afresh in terms of s 14 of the Prescription Act 68 of 1969.

[2] The matter came before the Western Cape Division of the High Court by way of a stated case. The question of law posed was put thus C by the appellant:

'Does (or should) our law recognise an exception to the without-prejudice rule (otherwise known as settlement or negotiation privilege), to the effect that such inadmissibility rule is not applied where the only purpose for which reliance is placed on a communication otherwise covered by the rule is to prove an acknowledgment of liability interrupting prescription as contemplated in s 14 of the Prescription D Act . . . ?'

Rogers J considered that there was no such exception, but granted leave to appeal against his decision to this court.

[3] E The facts are largely common cause, and the only issue before us is whether the common law should recognise the exception for which the appellant argues. This is a matter entailing competing policy considerations underlying the without prejudice principle, and the law of prescription, and I shall deal with them in due course. It is necessary first to describe the factual matrix and the communication that is argued by F the respondent to be privileged even for the purpose of proving an acknowledgment of liability interrupting the running of prescription in terms of s 14 of the Prescription Act.

Factual background

[4] G The appellant, KLD Residential CC (KLD), in an action against the respondent, Empire Earth Investments 17 (Pty) Ltd (Empire Earth), alleged in its particulars of claim that it had been given a written mandate in November 2006 to market erven in a new property development, and to receive commission on sales of which it was the effective cause. H Commission was alleged to be payable once transfer of each property was passed to the buyer. KLD alleged that it was the effective cause of 99 sales referred to in a schedule to the particulars. It...