THE LEGAL IMPLICATION OF THE USAGE OF “WITHOUT PREJUDICE” IN BUSINESS LETTERS VIZ-À-VIZ SETTLEMENT OF DISPUTES

BY: PAUL OMOBHUDE, ESQ.

 

CONTENT

• Introduction.
• Meaning of “without prejudice” rule
• Meaning of business letters
• Merits of business letters
• Comparative statutory provision of “without prejudice” rule in Nigeria, America and India
• Case law on modern day approach to the “without prejudice” rule
• The implication of the usage of “without prejudice” in business letters and settlement of disputes
• The distinction between “without prejudice” and other labels such as “without prejudice save as to cost” and “subject to contract”
• Conditions for upholding “without prejudice” rule
• The relationship between “without prejudice” and “admission”
• The relationship between “without prejudice” and “relevancy”
• Exemptions to the “without prejudice” rule
• Documents/Letters that should not be marked “without prejudice”
• Conclusion

 

INTRODUCTION

In the course of engaging in commercial activities, disputes may arise wherein the disputing parties may elect to settle the dispute amicably or through litigation.

In an attempt to amicably resolve commercial disputes, parties may admit liabilities or divulge information in business letters or other communications captioned “without prejudice”. When a letter is marked “without prejudice”, any fact admitted or information divulged in such letter is merely for the purpose of settlement. Hence admission or information contained in such letters/documents must be accorded privilege and protected from being used to the disadvantage of parties in the event that the matter proceeds to court.

The rationale for inserting “without prejudice” in such letters proposing settlement ground or negotiation is that in the event that settlement breaks down, the initiator of such a letter will not be at a disadvantageous position wherein his settlement proposal is held out against him as admission of liability.

 

MEANING OF “WITHOUT PREJUDICE” RULE

Without prejudice (“WP”) is a common-law concept and a form of legal privilege with the aim of enabling parties attempting to settle to negotiate freely.

Black’s law Dictionary {11^th Edition} defines “without prejudice” as “without loss of any rights; in a way that does not harm or cancel the legal rights or privileges of a party”.

In Acmel {Nig} Ltd. v. F.B.N Plc {2014} 6 NWLR {Pt. 1402} 158 at 163, Ratio 1, the Court held that “Without prejudice” connotes without loss of any right; in a way that does not harm or cancel the legal rights or privileges of a party.

In the early case of Re River Steamer Co: Exparte Mitchell’s Claim, {1871} LR 6, CH.App 882, the words “without prejudice” was explained thus: “I make you an offer, if you do not accept it, this letter is not to be used against me” or they are tantamount to saying, I make you an offer which you may accept or not, as you like; but if you do not accept it, my having made it, is to have no effect at all”.

MEANING OF BUSINESS LETTERS

A business letter is a letter from one person, company or organization to another, or between such organizations and their customers, clients, or other external parties.

The overall style of letter depends on the relationship between the parties concerned. Business letters may convey information, such as request for direct information or action from another party, order for supplies from a supplier, pointing out a mistake by the letter’s recipient, direct/request the recipient to apologize for a wrong, or convey goodwill.

 

 

A BUSINESS LETTER MUST  

1. Be properly dated.
2. Contain the addresses of the recipient and writer.
3. Contain a clear and unambiguous heading/title {subject matter}.
4. Clearly introduce the writer and state on what basis the writer is writing.
5. Clearly state the demands or proposal the letter is conveying.
6. Be promptly signed by the writer.

 

MERITS OF BUSINESS LETTERS

• Letters provide evidence of what is contained in it and exact copies can be retained;
• Same communication may-be made to a number of persons at a time;
• Letters allow the writer ample time for proper thinking and planning, so the subject matter can be presented in a systematic and logical way;
• The ideas conveyed in letters are clear and free from ambiguity.

 

COMPARATIVE STATUTORY PROVISION OF “WITHOUT PREJUDICE” RULE IN NIGERIA, AMERICA AND INDIA

Below are the relevant statutory provisions in support of the legality of “without prejudice” rule in Nigeria, America and India.

Nigeria: Section 196 of the Evidence Act, 2011 

“A statement in any document marked “without prejudice” made in the course of negotiation for settlement of a dispute out of Court shall not be given in evidence in any civil proceedings in proof of the matters stated in it.”

United States of America: Rule 403 of the Federal Evidence Rule

“The Court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

India: Section 23 of the Indian Evidence Act

“In civil cases, no admission is relevant, if it is made –

1. Upon an express condition or
2. Under circumstances from which the Court can infer that the parties agreed together –

That evidence of it should not be given”

 

CASE LAW ON MODERN DAY APPROACH TO THE “WITHOUT PREJUDICE” RULE.

1. Unilever Plc v. The Procter & Gamble Company [2000] 1 WLR 2436, CA

The case of Unilever Plc v. The Procter & Gamble Company provides the modern standard to the admission or exclusion of “without prejudice” communication in evidence.

In this case, the Appellant/Claimant sought a declaration of non-infringement of the Respondent/Defendant’s patent. The Defendant had made a claim of right and threatened to bring infringement proceedings during a “without prejudice” meeting between the parties. The Claimant on the basis of the Defendant’s threat instituted an action against the Defendant and amongst other things contended that “without prejudice” privilege only applies to anything said during negotiation and did not extend to assertions of rights or threats of proceedings. The Court struck out the suit for being an abuse of Court process and on the ground of inadmissible statement as the statements being relied on by the Appellant/Claimant were statements made by the Respondent/Defendant during negotiation.

 

1. Jadesimi v Egba(2003) 1 NWLR (pt. 827) Page 1

Another classical case which strongly supports the application of the “without prejudice rule” in Nigeria is the case of Jadesimi v Egba

The facts of the case are:  After the death of Chief F.S. Okotie-Eboh on 15^th January 1966, the 1^st and 2^nd Appellant together with the Respondents, applied for grant of letters of administration to administer the estate of the deceased who they believed died interstate. Shortly after the grant, it was discovered that the deceased had made a will wherein, he bequeathed his personal estate to the 1^st Appellant. On the strength of this discovery, the 1^st Appellant filed a suit at the High Court of Lagos State to prove the will, the Court held the will to be valid, dissatisfied, the Defendant at the trial Court appealed to the Court of Appeal who set aside the decision of the trial Court. The 1^st Appellant was dissatisfied with the decision of the Court of Appeal and then Appealed to the Supreme Court, while the case was still pending at the Supreme Court, the 1^st Appellant wrote a letter without prejudice to the 1^st Respondent {her Solicitor} initiating settlement with her siblings. Shortly after reaching an agreement to distribute the deceased estate using an agreed formula, the Supreme Court delivered its judgment in favour of the 1^st Appellant. Consequent upon the Supreme Court’s decision, the 1^st Appellant rescinded on the earlier agreement with her siblings, as a result, her siblings {the 2^nd – 4^th Respondents} instituted a suit at the trial court mandating the 1^st Appellant to honour the agreement.

At the trial Court, the 1^st Appellant contended that the letter initiating the settlement that culminated in the agreement was written by mistake, misrepresentation and that same was written without prejudice and therefore inadmissible. The trial Court in refusing the 1^st Appellant’s contention held that the letter initiating settlement was tendered to prove that the 1^st Appellant actually initiated the settlement and that the letter did not contain any admission against the maker and was therefore admissible. The Court held the agreement was enforceable. The 1^st Appellant’s appeal to the Court of Appeal was dismissed on same ground.

 

THE IMPLICATION OF THE USAGE OF “WITHOUT PREJUDICE” IN BUSINESS LETTERS AND SETTLEMENT OF DISPUTES

“Without prejudice” when used in a letter/document or during settlement of dispute precludes such letter/document, information divulged and liabilities admitted in such a letter/document from being admissible in evidence against the maker.

The doctrine encourages parties in dispute to amicably resolve disputes between them by putting all their cards on the table to aid easy resolution of dispute without the fear of being held at a disadvantageous position if the matter proceeds to court.

In Nigeria, the importance of the doctrine was richly espoused by the Court in Jadesimi v Egbe {Supra} Ratio 4 where the Court held thus:

“Although the rule of evidence which bars the admission of statements made “without prejudice”in evidence is of common law origin, the statutory authority for its application in Nigeria is section 25 of the Evidence Act. Consequently, in applying the rule, it is the provision of section 25 of the Evidence Act that the Nigerian Court must use as a guide and not the principle of common law. The doctrine of “without prejudice” does not exist under our law independently of the provisions of section 25 of the Evidence Act.” 

Note: The doctrine or principle will apply even when such document/letter is not so marked, what is important is that it was made in the course of negotiation in an attempt to settle dispute between parties. – Joe Iga & Ors. V. Ezekiel Amakin & Ors. {1976} 11 SC.1}  

 

THE DISTINCTION BETWEEN “WITHOUT PREJUDICE” AND OTHER LABELS SUCH AS “WITHOUT PREJUDICE SAVE AS TO COST” AND “SUBJECT TO CONTRACT”

 

WITHOUT PREJUDICE SAVE AS TO COST

“Without prejudice save as to cost” rule has the same privilege with the “without prejudice” rule, except that letters/documents with the label “without prejudice save as to cost” are admissible only in determining the issue of costs.

It often operates by reason of contract/agreement where parties in settlement agree that the cost of proceedings should be borne by one of the parties.

 

SUBJECT TO CONTRACT

“Subject to contract” when used in a letter/document connotes that such letters/documents are not binding, unenforceable and cannot be relied on until the contract is formally made or until parties negotiating the contract formally signs the contract. Therefore, the wordings in a “subject to contract” letter/document prevents negotiation or agreements between parties from being legally binding until they are included in a valid {formal} contract.”

In Acmel {Nig} Ltd. v F.B.N Plc {2014} NWLR {Pt.1402} Page 158 at Page 166, Ratio 7,  the Court held that the phrase “subject to contract” is one which makes it clear that the intention of the parties is that neither of them is to be contractually bound until a contract is signed in the usual way”

 

CONDITIONS FOR UPHOLDING WITHOUT PREJUDICE RULE

The mere fact that any document/letter has been marked “without prejudice”, does not automatically disqualify such document from being admissible in evidence. The crucial test which the Court must consider when presented with letters/documents marked “without prejudice” is stated in the case of Jadesimi v Egbe {Supra} page 10, Ratio 5 as follows:  

1. The marked letter/document must have been made in the course of negotiation or settlement of dispute between parties. – Section 196 Evidence Act, 2011.
2. The document must contain an admission against the maker. In Jadesimi v Egbe {Supra} Ratio 5, the Court held that the 1^stAppellant’s letter to her solicitor marked without prejudice was admissible in evidence as same merely contained an instruction from the 1^st Appellant to her Solicitor as to what to be done on her behalf and does not contain an admission against the 1^st
3. The document must be in such circumstances from which the Court can infer that parties intended that evidence of it should not be given.

Note; that any document captioned “without prejudice” where there is no dispute or settlement on going is admissible in evidence as the Court will disregard the caption for an attempt to subvert justice – Jadesimi v Egbe {Supra} Ratio 6

 

THE RELATIONSHIP BETWEEN “WITHOUT PREJUDICE” AND “ADMISSION”

Admission means owning up to a fact. Section 20 of the Evidence Act, 2011, defines admission as a statement, oral or documentary, or conduct which suggests any inference as to any fact in issue or relevant fact in issue.

“Without prejudice” rule is an exception to the principle of admission.

Generally, by provision of Section 123 of the Evidence Act, 2011 facts admitted need no further proof, except facts which need to be proven other than by admission. However, though facts have been admitted by a person and ought to be held out against him, Section 196 Evidence Act, 2011 operates to shield the maker of the statement from being held liable to any admission made in a document in negotiation.

 

THE RELATIONSHIP BETWEEN “WITHOUT PREJUDICE” AND “RELEVANCY”

Relevancy governs admission of documents in evidence in Court. Section 1 of the Evidence Act 2011 provides that only facts which are relevant to the facts in issue are admissible in evidence. However, where there is an existence in law which will render that fact though relevant inadmissible such fact becomes inadmissible.

For example, in Kubor v. Dickson, {2013} 4NWLR {Pt. 1345} 534 at 577-587, Paras D-E, the Court held that computer-generated evidence though relevant to the fact in issue will become inadmissible where it does not comply with section 84 of the Evidence Act, 2011 which governs the admissibility of computer-generated evidence

Hence, facts though relevant and admissible may be excluded by virtue of the “without prejudice” rule in Section 196 of the Evidence Act, 2011.

Also, Section 26 of the Evidence Act, 2011 provides that: “In civil cases, no admission is relevant if it is made either upon an express condition that evidence of it is not to be given or in circumstance from which the Court can infer that the parties agreed together that evidence of it should not be given.”

Comparatively, in the United States of America, Rule 402 of Federal Rules of Evidence, “Relevant evidence is admissible unless any of the following provides otherwise: the United States Constitution; a Federal Statute; these rules; or other rules prescribed by the Supreme Court”

 

EXCEPTIONS TO THE “WITHOUT PREJUDICE” RULE

In the case of Unilever Plc v. The Procter & Gamble Company [2000] 1 WLR 2436, CA, the Court established several exceptions to the inadmissibility of Documents/letters marked “without prejudice” and some of them have been equally adopted by the Nigerian Courts.  

Documents/Letters marked “without prejudice” may still be admitted in evidence notwithstanding the fact that they so mark for the following reasons:

1. The document does not contain an admission, neither was it made in an attempt to settle a dispute or contemplation of a proceeding {litigation or ADR} – Section 196 of the Evidence Act, 2011.
2. Where the party who relies on the without prejudice rule is not a party to the document marked “without prejudice” –  Nwadike v. Ibekwe {1987} 4 NWLR {Pt. 67} 718 at 736. This exception is akin to the principle of privity of contract, as only parties to a contract an sue and enforce it.
3. Where it is tendered to prove that the document was made and not  to prove the matter stated in it or prove the admission of the maker – In Jadesimi vs. Egbe [Supra}, Ratio 7, the Court held that “a statement made without prejudice is admissible to prove that it was made and not to prove an admission by its maker”
4. In the case of Underwood v Cox {1912} 4 DLR 66the Court held that: “Documents/letters marked without prejudice are admissible in evidence when the purpose is to show that settlement or agreement concluded was reached by misrepresentation or fraud or undue influence”
5. Without prejudice communication whether concluded or not, on which a party is intended to act and does act are admissible as giving rise to estoppel. In Hodgkinson & Corby Ltd. v. Wards Mobility Services {1997} FSR 178, 191, the Plaintiff had an agreement with the Defendant on which the Defendant acted. The Court held that the Plaintiff was estopped from bringing an action against the Defendant even though the offer was made during a “without prejudice” communication because the Defendant had acted with respect to the offer contained therein.
6. Without prejudice, communications are admitted in evidence where the communication would act as a cloak for perjury or other criminal offences.
7. Without prejudice, communications are admitted in evidence in order to explain apparent delay or acquiescence in suits where the other party has a preliminary objection that the suit is statute-barred.

 

DOCUMENTS/LETTERS THAT SHOULD NOT BE MARKED WITHOUT PREJUDICE

1. Letters of demand.
2. Petition to law-enforcement agencies, disciplinary bodies and tribunals.
3. General commercial letters which are not in any way related to the settling of disputes. For example, letters of offer granting a loan facility should not be tagged “without prejudice”.
4. General commercial contracts.
5. Deed of Assignments, mortgages, or transfer of title.
6. Prenuptial agreements.

 

RECOMMENDATIONS

• In settlement of disputes, it is advisable that parties when making an offer which may or may not be accepted by the other party to title such letters “without prejudice” so that such letters will not be held out against the offeror.
• When engaged in a “without prejudice” communication, parties must be careful not to inadvertently or advertently waive the privilege that attaches to “without prejudice” communication by subsequent conduct or communications. Waiving the ‘without prejudice’ protection is in law referred to as ‘waiver’ and it has the implication of creating legal estoppel wherein the person who has waived his right is forbidden from further exercising same. In C. & C.B. Dev. Co Ltd. v Min. E.H. & U.D. {2019} 5 NWLR {PT. 1666} Page 484 at Page 491, Ratio 12, the Supreme Court of Nigeria held that:

“If a person with full knowledge of the rights, interest, profits or benefits conferred upon or accruing to him by and under the law, intentionally decides to give up all or some of them, he cannot be heard to complain afterwards that he has not been permitted to exercise his right, or that he has suffered by his not having exercise his rights. In such circumstance, he would be held to have waived his rights and consequently estopped from raining the issue subsequently.”  

• In the event the “without prejudice” might be admissible, parties can go further to execute a Non-Disclosure Agreement (NDA) to protect their rights. A Non-Disclosure Agreement restricts parties to the agreement from disclosing vital information protected under the NDA.

 

CONCLUSION

The need to establish a strong business relationship between disputing parties spurs parties in dispute to attempt out of Court settlement, so as to achieve a win-win situation. Hence, “Without prejudice” though a legal provision, is also backed by a public policy which is that parties in dispute should feel free to communicate for purpose of settlement.