Naidoo v Marine & Trade Insurance Co Ltd

• Jurisdiction: South Africa
• Judge: Trollip JA, Muller JA, Hofmeyr JA, Joubert JA and Trengove AJA
• Judgment Date: 30 May 1978
• Citation: 1978 (3) SA 666 (A)
• Hearing Date: 08 May 1978
• Court: Appellate Division

Trollip JA:

This appeal concerns the questions whether certain parts of correspondence written "without prejudice" were admissible in evidence, G and if admissible, whether they created an estoppel. The questions arose in this way.

On 24 November 1971 a motor car driven by one F Cupido collided with appellant, a pedestrian, in a Cape Town street, causing him bodily injuries. On 10 December 1971 he sued respondent, a registered insurance H company, for a substantial amount of compensation for those injuries. He alleged that the collision was caused by Cupido's negligence and that, at the time of the collision, respondent was the insurer of the motor car under the provisions of the Motor Vehicle Insurance Act then in force, Act 29 of 1942. Respondent denied those allegations, and in particular pleaded that, prior to the collision, its insurance of the motor car under the Act had terminated in terms of s 17 (1) (d) thereof, in that the owner (E Zoutenberg), to whom that insurance had been issued, had prior to the collision disposed of the motor car and transferred his ownership of

Trollip JA

A it to Cupido. Appellant, in his replication, put respondent to the proof of those allegations, and, in the alternative, pleaded that in any event respondent was estopped from denying that the motor car was insured by it at the time of the collision. The estoppel was founded on the allegations that respondent, in writing certain letters to appellant, had represented that the motor car was still insured by respondent at the relevant time, thereby causing appellant to act to his detriment by suing it for compensation. (It became common cause that this detriment was that, by the time appellant became aware of this defence, any claim that he might have B had against the MVA Fund for his injuries had become prescribed.) In respondent's rejoinder it admitted writing the letters but pleaded that they were written "without prejudice" and "in the course of bona fide negotiations " for the settlement of the dispute about respondent's liability for compensation arising out of the collision and were consequently "privileged" and could not be "used in evidence or proved" C against respondent. It also contested the alleged estoppel.

At the commencement of the trial the parties requested, and the Court a quo (BROEKSMA J) agreed, that the issues raised by the alleged estoppel should be determined first and separately from the other issues raised on D the pleadings. For this limited purpose appellant was prepared to concede that respondent's insurance of the motor car had terminated before the collision. The trial proceeded on that basis. Respondent's counsel formally objected to the relevant letters being admitted in evidence, but conceded that they could be put before the trial Judge for his determination of their admissibility. That concession was correctly made E (see Brauer v Markow and Another 1946 TPD 344 at 348; In re Daintry; Ex parte Holt (1983) QB 116). In the end the trial Judge rule that the letters were wholly inadmissible. In consequence, on these preliminary issues, he held in respondent's favour that the plea of estoppel had not been proved. Thereafter appellant formally admitted that respondent's insurance of the motor car had terminated before the collision, as alleged F by respondent in its plea, and, at the request of both parties, the Court a quo then ordered that appellant's claim be dismissed with costs.

Appellant has appealed to this Court against the Court a quo's judgment on the inadmissibility of the letters and its consequential order dismissing G his claim with costs. He contended that those parts of the relevant letters allegedly admitting or representing that the motor car was still insured by respondent at the time of the accident were admissible in evidence, despite the letters having been marked "without prejudice", and that such admissions or representations duly established the alleged estoppel. Mr Farlam for appellant, however, conceded that, if we held that the letters were wholly inadmissible, the Court a quo's decision that the H alleged estoppel had not been proved as correct.

At the outset I shall deal with some preliminary matters which will clear the way to the consideration of the real nub of the problem. Mr Farlam kindly furnished us with a photostat copy of an article. " 'Without Prejudice' Communications - Their Admissibility and Effect", by David Vaver of the Faculty of Law, University of Auckland, published in vol 9 (1974) of the University of British Columbia Law Review at 85. It contains a comprehensive survey and discussion of the history of the subject

Trollip JA

and the leading English and Commonwealth decisions. I found it most useful and enlightening. He points out at 88 that one of the first reported uses A of the words "without prejudice" in their present sense was by Lord MANSFIELD in England in the 18th century when he said, apropos of offers to compromise litigation not being regarded as admissions of liability, that:

"it must be permitted to men 'to buy their peace' without prejudice to them, if the offer did not succeed; and such offers are made to stop litigation without regard to the question whether any thing or what is due."

B The origin and rationale for the "without prejudice" rule was therefore public policy (see also Taylor on Evidence 12th ed at 500). By 1850, Mr Vaver says, at 90, the importance of indicating expressly that an offer of compromise was not intended as an admission was realized by lawyers, and the practice of qualifying negotiations, especially if written, by words such as "without prejudice" had become prevalent. Indeed, he adds, the C practice had become so well-known by then that it was satirized by Dickens in his "Bleak House" by the celebrated "without prejudice" proposal of marriage made by the lawyers' clerk, Guppy, to Esther Summerson. Wigmore on Evidence 3rd ed also mentions this literary incident in vol 4 at 28.

D Since 1950 the use of these words as a protective formula has been greatly extended creating new problems concerning their scope and effect (Vaver at 91), especially the precise extent of the protection afforded by them. For instance, they are not infrequently now used on a written communication or other document, not in order to settle any prospective or pending litigation or dispute, but for some other purpose, such as trying to

E reserve the writer's rights. For reasons that will presently emerge we need not consider the legal effect of such use of the words, for the question does not arise in the present case. It suffices to say that such use does not render the communication or document inadmissible in evidence, for public policy does not require it to be so protected; it is F admissible, but the legal effect, if any, of the words will have to be decided by the Court in the light of all the circumstances (cf Vaver at 164). Again, the parties to a dispute or their representatives may sometimes expressly agree that their verbal or written negotiations for G settling it shall be "without prejudice". And Courts have also sometimes held that a tacit agreement to that effect may be inferred from the failure of one party to bilateral settlement correspondence to object to the other party's marking his letters "without prejudice" (see Vaver at 98). Whether such an inference is warranted in the present case, or, if it is, whether an agreement of that kind is another reason, additional or alternative to that of public policy, for rendering the evidence of the negotiations inadmissible, or whether it affords wider protection for the H negotiations than would otherwise apply, need not be decided here either. The reason is that respondent, in its rejoinder and argument, based its case, not on any such agreement, but solely on the ground that public policy rendered the relevant letters inadmissible since they were written in the course of bona fide negotiations for the settlement of the...