THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 1135/2016

In the matter between:

KLD RESIDENTIAL CC                                                                           APPELLANT

and

EMPIRE EARTH INVESTMENTS 17 (PTY) LTD                                 RESPONDENT

Neutral Citation:  KLD Residential v Empire Earth Investments (1135/2016) [2017]
ZASCA 98 (6 July 2017)
Coram:
Lewis, Tshiqi and Mbha JJA and Fourie and Schippers AJJA
Heard:
9 May 2017
Delivered:    6 July 2017
Summary:  Where an acknowledgment of indebtedness is made by a debtor to a
creditor, even in without prejudice settlement negotiations, the acknowledgment may
be admitted in evidence for the sole purpose of interrupting the running of the
prescription period in terms of s 14 of the Prescription Act 68 of 1969.

___________________________________________________________________

ORDER

On appeal from: Western Cape Division of the High Court, Cape Town (Rogers J
sitting as court of first instance), reported sub nom KLD Residential CC v Empire
Earth Investments 17 (Pty) Ltd 2016 (5) SA 485 (WCC).
The appeal is upheld with the costs of two counsel.
The orders of the court a quo in subparagraphs (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.‟
___________________________________________________________________
JUDGMENT

Lewis JA (Tshiqi and Mbha JJA 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 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 by the appellant:

„Does (or should) our law recognize 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 Act . . . ?‟
Rogers J considered that there was no such exception, but granted leave to appeal
against his decision to this court.

[3] The facts are largely common cause, and the only issue before us is whether
the common law should recognize 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 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] 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. 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 was entitled,
it said, to R2 147 million in commission, due on transfers registered on dates ranging
between October 2008 and November 2009. KLD issued summons for payment of
the commissions in June 2013.

[5] In a special plea, Empire Earth pleaded that, save for one sale after 2009, the
registration dates were more than three years before the summons was served, and
that the claims for commission had become prescribed. In its plea on the merits,
Empire Earth alleged that KLD itself was in breach of various terms of the contract
such that any amount that was due by it fell to be reduced. Empire Earth had already

commenced action against KLD in respect of various claims, and asked that
judgment be postponed until those claims had been adjudicated.

[6] KLD replicated to the special plea, alleging that on 29 July 2011, Empire
Earth‟s then attorneys, Webber Wentzel, had written to KLD‟s then attorneys,
acknowledging that it owed commissions in the sum of R2 105 960. This, it was
alleged, had interrupted the running of prescription in terms of s 14 of the
Prescription Act, and the prescription period had begun to run afresh on the date of
the letter. KLD‟s claim for commission had not become prescribed, it averred.

[7] The parties‟ respective claims were consolidated in September 2013. It was
agreed that a stated case would be put to the court, and that the issue set out earlier
was to be determined. The letter is central to the argument and I shall set out its
terms in so far as relevant fully. It should be recorded, however, that both in the court
a quo and in this court, KLD accepted that the letter was written without prejudice to
the rights of the parties, in the course of settlement negotiations. That concession
was in my view rightly made. KLD also conceded that Rogers J had correctly found
that an admission of part of a liability is sufficient to interrupt the running of
prescription.

[8] KLD also accepts the finding of Rogers J that the law governing the legal
question asked in the stated case is the English law of evidence as at 31 May 1961,
as provided for in s 42 of the Civil Proceedings Evidence Act 25 of 1965. As
Rogers J found, subject to specific legislation or any constitutional imperative, the
law of evidence in England at the relevant date had long adopted the without
prejudice rule – that statements, including admissions of liability, made in an attempt
to settle litigation between parties are inadmissible in subsequent litigation between
them. The rule is based on policy grounds: parties to disputes should be encouraged
to avoid litigation, which usually entails expense, delay, hostility and inconvenience,
by resolving their disputes amicably in frank discussions without the fear that if
negotiations fail, admissions made by them in the course of negotiating may be used
against them subsequently. It should be said that the rule has long been part of
South African law as well, and I shall discuss the authorities in this regard later.

[9] However, as I have indicated, KLD does take issue with the finding by
Rogers J that there are no compelling reasons of public policy to limit the protection
afforded by the without prejudice rule so as to recognize an exception to it for the
purpose of interrupting prescription. This, as I have said, is the only issue on appeal.

The letter in question
[10] The letter, written on 29 July 2011, was addressed by Empire Earth‟s then
attorneys, Webber Wentzel, to Jooste Leidig attorneys, who were acting on behalf of
KLD, which was trading as Seeff Properties, and referred to as „Seeff‟. It read (the
precise punctuation is not reproduced here):
„1 As you know, our client [Empire Earth] instituted a claim against Seeff on 20 November
2007 for the payment of certain amounts for which Seeff is indebted to our client.
2 Certain monies have now become due and payable to Seeff by our client. These are
comprised of commissions to which Seeff has become entitled in terms of the agreement
dated 27 November 2006 and the extension thereof dated 23 March 2007, (collectively “the
agreement”) entered into between our client and Seeff.
3 We remind you that in terms of the agreement Seeff would become entitled to a four per
cent commission for each successful sale which Seeff effected, upon transfer of the sold
property. For your convenience we include under cover hereof a list of the properties sold by
Seeff which were successfully transferred to the purchasers.
4 Accordingly Seeff has become entitled to commission in the amount of R2 105 960,
including Vat.
5 By virtue of the operation of set-off this amount has been reduced by the following
amounts for which Seeff is indebted to our client: . . .‟
There followed a list of four claims not all of which were in fact liquidated and were thus not
capable of set-off. That is of no consequence here.
„6 From the aforegoing, it is apparent that Seeff‟s indebtedness to our client amounts to
R1 023 625.45.
7 Accordingly, we include under cover hereof a cheque for R1 082 334.55 including Vat
(being R2 105 960 commission less the total indebtedness of R1 023 625.45) in full and final
settlement of any and all claims that Seeff may have against our client, and of the litigation
forming the subject matter of case number . . . .‟

[11] The cheque was not banked. KLD accepts that the entire letter was written
without prejudice, in an attempt to settle the disputes between it and Empire Earth,
and that no part of it would ordinarily be admissible for the purpose of proving the

amounts owed, if any. It accepts that the acknowledgements of liability in paras 2
and 4 of the letter would ordinarily be privileged. It nonetheless argues that the policy
considerations underlying s 14 of the Prescription Act were not sufficiently taken into
account by Rogers J and that too much weight was given to the policy underlying the
without prejudice rule.

The policy underlying s 14 of the Prescription Act
[12] The section reads:
„Interruption of prescription
(1) The running of prescription shall be interrupted by an express or tacit
acknowledgment of liability by the debtor.
(2) If the running of prescription is interrupted as contemplated in subsection (1),
prescription shall commence to run afresh from the day on which the interruption
takes place or, if at the time of the interruption or at any time thereafter the parties
postpone the due date of the debt, from the date upon which the debt again becomes
due.‟

[13] One of the principal reasons for extinctive prescription is to provide certainty
to a debtor – after a period of time when the creditor has been inert, the debtor
should have certainty as to whether or not a debt is still owed. The three-year period
over which prescription runs is regarded as being enough time for the creditor to
enforce the obligation, and conversely, if it is not enforced within that time, the debtor
may be certain that the obligation has ended. The debtor is protected save where the
reasons for the principles underlying prescription fall away and the protection of a
creditor is justified.

[14] This is clearly explained in Murray & Roberts Construction (Cape) (Pty) Ltd v
Upington Municipality 1984 (1) SA 571 (A) at 578F-H where Grosskopf AJA said:
„Although many philosophical explanations have been suggested for the principles of
extinctive prescription . . . its main practical purpose is to promote certainty in the ordinary
affairs of people. Where a creditor lays claim to a debt which has been due for a long period,
doubts may exist as to whether a valid debt ever arose, or if it did, whether it has been
discharged. . .  . The alleged debtor may have come to assume that no claim would be
made, witnesses may have died, memories would have faded, documents or receipts may
have been lost, etc. These sources of uncertainty are reduced by imposing a time limit on

the existence of a debt, and the relevant time limits reflect, to some extent, the degree of
uncertainty to which a particular type of debt is ordinarily subject (s 11 of the Act).‟

[15] The justifications for extinctive prescription are also to be found in Road
Accident Fund v Mdeyide [2010] ZACC 18; 2011 (2) SA 26 (CC) and Myathaza v
Johannesburg Metropolitan Bus Services (SOC) Limited t/a Metrobus & others
[2016] ZACC 49 paras 28 to 30. In Mdeyide, Van der Westhuizen J said (para 8):
„This Court has repeatedly emphasized the vital role time limits plays in bringing certainty
and stability to social and legal affairs and maintaining the quality of adjudication. Without
prescription periods, legal disputes would have the potential to be drawn out for indefinite
periods of time bringing about prolonged uncertainty to the parties to the dispute. The quality
of adjudication by courts is likely to suffer as time passes, because evidence may have
become lost, witnesses may no longer be able to testify, or their recollection of events may
have faded. The quality of adjudication is central to the rule of law.‟
See generally as to the justifications for extinctive prescription G B Bradfield
Christie’s Law of Contract in South Africa 7 ed (2016) 561; M M Loubser „Towards a
theory of extinctive prescription‟ (1988) 105 SALJ 34 and M M Loubser Extinctive
Prescription (1996) pp 22-24.

[16] Section 14 of the Prescription Act, on the other hand, serves the purpose of
protecting the creditor. As this court said in Murray & Roberts (at 578H-579A):
„The same considerations which provide a justification for extinctive prescription also
suggest that limits should not be immutable. . . . Moreover, s 14 of the Act provides that the
running of prescription is interrupted by an express or tacit acknowledgment of liability by the
debtor. The reason is clear – if the debtor acknowledges liability there is no uncertainty
about the debt.‟
The court continued (at 579D-E):
„It will thus be seen that that there are two general principles which protect a creditor against
the effects of extinctive prescription. The first is the basic requirement of certainty which
underlies extinctive prescription. Where the debtor removes all uncertainty by acknowledging
liability, or the creditor does so by instituting and prosecuting legal proceedings, the running
of prescription is suitably adapted.‟

[17] The second principle discussed by this court in Murray & Roberts was that
underlying s 13 of the Prescription Act, which delays the completion of prescription

where it is difficult or undesirable for the creditor to claim performance (for example,
where the debtor is a minor, or out of the country).

[18] Given that s 14 of the Prescription Act protects the rights of the creditor, does
that protection fall away if the acknowledgment of debt is made without prejudice?
The question requires a consideration of the other, competing, policy, which is that
admissions made in the course of negotiating a settlement should not be admitted in
proceedings between the creditor and the debtor.

The policy underlying the without prejudice principle
[19] The policy, as I indicated earlier, is to promote the settlement of disputes
without resort to litigation, and was discussed at length by Trollip JA in Naidoo v
Marine & Trade Insurance Co Ltd 1978 (3) SA 666 (A). Referring (at 674A-B) to a
statement made by Lord Mansfield in the 19th century 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‟, Trollip JA said that the origin and the rationale for the without
prejudice rule was public policy.

[20] In Naidoo the respondent, a third party insurer, wrote a number of without
prejudice letters to the attorney of Mr Naidoo (the plaintiff), admitting that it was on
risk as the insurer of the negligent driver. Settlement negotiations failed and in
subsequent proceedings the insurer denied that it was the negligent driver‟s insurer.
Naidoo, in his replication, asserted that the insurer was estopped from denying the
admission. The trial court found that the correspondence was inadmissible as the
letters were written without prejudice to the insurer‟s rights. This court upheld the
finding. Trollip JA, finding that the letters had been written without prejudice, said (at
677B-D):
„[S]uch correspondence, once respondent objected to its being adduced in evidence, was
wholly inadmissible. The rationale of the rule is public policy: parties to disputes are to be
encouraged to avoid litigation and all the expenses (nowadays, very high), delays, hostility,
and inconvenience it usually entails, by resolving their differences amicably in full and frank
discussions without the fear that, if the negotiations fail, any admissions made by them
during such discussions will be used against them in the ensuing litigation.‟

[21] Rogers J in the court a quo considered that he was bound by Naidoo. KLD
contends on appeal that Naidoo is distinguishable in that it was not concerned with
the competing policy considerations underlying the provisions of the Prescription Act
but only with the application of the without prejudice rule. In my view that is correct.
In his consideration of English cases dealing with acknowledgments of liability and
the without prejudice rule, Rogers J alluded to the tension between competing policy
considerations. But he did not fully consider the policies underlying the rules of
prescription.

The tension between competing policies and principles
[22] The tension between competing policies is recognized and discussed in
Bradford & Bingley plc v Rashid [2006] UKHL 37; [2006] 4 All ER 705. There the
respondent had mortgaged property to the appellants. He was unable to meet his
payment obligations. He admitted in correspondence that he owed them money but
asked for more time in which to pay. The House of Lords came to the unanimous
conclusion that the admissions were not made without prejudice. The five law lords
who wrote speeches differed in their approaches to the question whether there
should be an exception to the without prejudice rule in the case of an
acknowledgment of liability made without prejudice, but their statements in this
regard were all made obiter. However, all the speeches acknowledged that there are
competing policies at play.

[23] Lord Walker said in Bradford (para 38) that there were two public interests
engaged in the appeal.
„There is the interest in encouraging the settlements of disputes so as to avoid (or at least
shorten) litigation; . . . but it is also in the public interest that a debtor who acknowledges his
debt, and so induces his creditor not to have immediate resort to litigation, should not then
be able to claim that the debt is statute-barred because the creditor held his hand.‟
Lord Hoffmann, in criticizing the approach of the Court of Appeal in Bradford, said (para 3)
that it, and the judge a quo, took a „rather one-sided view of the matter‟. He continued:
„[T]hey looked only at encouraging the debtor to be open with his creditor without fear of
what he said being used against him. But it takes two to negotiate and there is also a public
policy in encouraging the creditor not to initiate legal proceedings. The acknowledgment rule
plays an important part in furthering this policy because it means that a creditor, negotiating
on the basis that his debt has been acknowledged, can proceed with the negotiations and

give time to pay without being distracted by the sound of time‟s winged chariot behind him. It
is also unfair that a debtor who does not dispute his indebtedness should be able to ask for
time and use that indulgence to rely on the statute.‟

[24] Lord Mance, on the other hand, expressed concern about the difficulty of
dissecting admissions of liability for admissibility from the balance of without
prejudice discussions. Parties to a dispute would not be able to speak freely if they
had to monitor every sentence to avoid making an acknowledgment of liability that
would subsequently be admissible in litigation (para 91). He referred in this regard to
the judgment of Walker LJ in Unilever plc v The Proctor & Gamble Company [2000]
1 WLR 2436; [2001] 1 All ER 783.

[25] Lord Mance referred also to the decision in Kapeller v Rondalia
Versekeringskorporasie van Suid-Afrika Bpk 1964 (4) SA 722 (T) where the court
was able to distinguish a clear admission by a motor vehicle insurer from the without
prejudice negotiations that followed as to the quantum. But Lord Mance was not
willing to recognize any exception for the purpose of limitation since the issue did not
arise in Bradford.

[26] Indeed in Naidoo, this court said that any admissions that are unconnected
with settlement negotiations are not protected by the without prejudice rule. The
admission in Kapeller was of such a nature. The admission in Naidoo was not. And
in this matter, KLD accepted that the admission of the debt was not separable from
the negotiation about settlement.

[27] In Ofulue & another v Bossert [2009] UKHL 16 the law lords refused to admit
an acknowledgment of title (the court was dealing with acquisitive prescription) in
letters written without prejudice despite the argument that there was no admission of
fact, just an acknowledgment of the claimants‟ title.
Lord Neuberger said (para 101):
„[T]he argument that there is a special exception to the without prejudice rule for
acknowledgments for the purpose of s 29 [of the Limitations Act 1980] derives no support
from any of the other opinions expressed in this House in [Bradford] . . . For my part at any
rate, I do not accept that the argument is justified. I do not consider that there is any

significant public policy element in the acknowledgment provisions of the 1980 Act, save in
so far as it can be said that any statutory provision carries with it an element of public policy.‟
Lord Neuberger accepted the view in Bradford, expressed by Lord Walker, (para 43)
that „the policy underlying the without prejudice rule seems to me to outweigh the
countervailing policy reason for lengthening the period‟ of limitation through an
acknowledgment.

[28] Referring to the opinions in Bradford, and to the policy considerations that
compete, D T Zeffertt and A P Paizes The South African Law of Evidence 2 ed
(2009) p 702 suggest that a „robust‟ solution to „the kind of problem that arose in
Bradford . . . might  . . . be to allow the reception of communications for the purpose
of determining whether the debt had prescribed but not for other purposes on the
basis that this best serves the resolution of the competing policies that the privilege
accommodates.‟ That is the exception for which KLD now contends.

[29] Rogers J in the court a quo, on the other hand, accepted the approach of the
English cases although he pointed out that he was not bound by them. He said that
there are no compelling reasons of public policy to limit without prejudice protection
and „I am fortified in that view by the fact that no such exception has been
recognized in English law‟.

The exception to the without prejudice rule contended for
[30] KLD argued in the court a quo that the judgment in Absa Bank v Hammerle
Group [2015] ZASCA 43; 2015 (5) SA 215 (SCA) is authority for the proposition that
South African law recognizes that there are exceptions to the without prejudice rule.
In that matter, in response to a letter of demand written by the bank, Hammerle had
stated in a letter that it „would like to make a settlement proposal‟ but that it was
„struggling to turn the business around‟ and was „unable to make any meaningful
profit in the business‟. Counsel for Hammerle apparently conceded at the outset of
the hearing that it was commercially insolvent and unable to pay its debts. Mbha JA
stated (para 7) that the concession was „well made‟.

[31] In his view, the contents of the letter constituted not only an unequivocal
acknowledgment of indebtedness but also showed that Hammerle was unable to pay

its debts and was commercially insolvent. The question that had to be determined
was whether these admissions were protected by the without prejudice rule and
were thus inadmissible.

[32] Mbha JA said (para 13):
„It is true that, as a general rule, negotiations between parties which are undertaken with a
view to a settlement of their disputes are privileged from disclosure. This is regardless of
whether or not the negotiations have been stipulated to be without prejudice. However, there
are exceptions to this rule. One of these exceptions is that an offer made, even on a „without
prejudice‟ basis, is admissible in evidence as an act of insolvency. Where a party therefore
concedes insolvency, as the respondent did in this case, public policy dictates that such
admissions of insolvency should not be precluded from sequestration or winding-up
proceedings, even if made on a privileged occasion. The reason for the exception is that
liquidation or insolvency proceedings are a matter which by its very nature involves the
public interest. . . . It follows that any admission of such insolvency, whether made in
confidence or otherwise, cannot be considered privileged.‟
The court referred to two decisions in which this exception had been explained and
recognized: Absa Bank v Chopdat 2000 (2) SA 1088 (W) and Lynn & Main Inc v
Naidoo & another 2006 (1) SA 59 (N). The policy is discussed fully in Lynn Main
paras 23 to 30, with reference to Chopdat.

[33] This court in Hammerle considered in any event, however, that the
admissions of indebtedness and insolvency were not made without prejudice, since
there were no negotiations for the purpose of settlement (para 14). It concluded that
the plea of prescription could not be sustained because of the unequivocal
admission of liability. Rogers J in the court a quo was unable to discern whether the
exception recognized in Hammerle in para 13 was the reason for the finding that the
plea of prescription could not be sustained, or whether it was because the admission
of commercial insolvency was not made without prejudice. He considered
nonetheless that that exception was different because of the public interest element.

[34] In my view nothing turns on whether the dicta of Mbha JA in para 13 of
Hammerle are obiter or the reason for the finding. The insolvency exception has
been approved by this court and applied in the Chopdat and Lynn Main cases. The
question before us is whether there should be another exception to allow for

admissions of liability, made without prejudice, where the debt would otherwise
prescribe.

[35] KLD argues that there is no authority that precludes this court from deciding
that, for policy reasons, where an acknowledgment of indebtedness is made in the
course of without prejudice discussions, it should be admissible for the limited
purpose of interrupting the running of prescription. As Hammerle shows, the without
prejudice rule is subject to at least one exception, for reasons of public policy.
Another exception should be recognized, KLD argues, based on the policy that an
acknowledgment of liability protects a creditor from a debtor who is certain as to the
existence of the debt and his or her liability, and the debtor should not be permitted
to escape the obligation because the admission was made in the course of
negotiations to settle a dispute.

[36] I referred earlier to the rationale underlying s 14 of the Prescription Act: where
there is an acknowledgment of liability, there is no uncertainty on the part of the
debtor as to the existence of the debt. As Grosskopf AJA said in Murray & Roberts at
579D-E (above), where the debtor removes uncertainty by admitting liability, the
running of prescription is „suitably adapted‟. This accords with the views expressed in
Bradford – it is in the public interest that a debtor who acknowledges his debt, „and
so induces his creditor not to have immediate resort to litigation‟, should not be able
to claim that the debt has prescribed because „the creditor held his hand‟ (Lord
Walker para 38 and Lord Hoffmann para 3).

[37] And as Lord Hope said in Bradford, there is a balance to be struck between
the public interest in prolonging the prescription period when there has been an
acknowledgment of liability, and the public interest in preventing statements made in
the course of negotiations being used at trial as admissions of liability. He stated
(para 34):
„It would be bizarre if a claimant who had been dissuaded from taking proceedings time and
time again both before and after the expiry of the limitation period by prolonged
correspondence which contained repeated statements that liability was admitted, and which
sought to negotiate only on the matter of quantum, was to be deprived of his claim on
limitation grounds when negotiations broke down simply because the admissions were made

in letters which contained proposals as to the amount that was to be paid in settlement of
that liability. This suggests to me that there is something wrong with an absolute rule that will
always exclude an admission made in the course of negotiations from being relied upon as
an acknowledgment for the purposes of the 1980 Act.‟

[38] The example given by Lord Hope is not directly in point, for it deals with the
Kapeller situation when an admission of liability is made, and negotiations that follow
are purely in respect of quantum. And in any event in Bradford the court found that
the admissions were not made without prejudice. It is accepted in this matter that the
admissions in question were without prejudice. The point that Lord Hope makes,
however, is that there should not be an absolute rule.

[39] I consider that the exception contended for is well-founded. 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 purpose 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. What the exception
allows for, as I see it, is the prevention of abuse of the without prejudice rule, and the
protection of a creditor. The admission remains protected in so far as proving the
existence and the quantum of the debt is concerned. It is not, as Empire Earth
suggested in argument, a question of the without prejudice rule trumping
prescription. It is a question of recognizing that both s 14 of the Prescription Act and
the without prejudice rule protect policy interests, and recognizing an exception so
that both interests are properly served.

[40] I consider therefore that the appeal should be upheld with the costs of two
counsel, and the question in the stated case be answered in favour of KLD. That
question, as framed in KLD‟s heads, reflecting the actual terms of para 3.1 of the
stated case, is repeated here for the sake of clarity: „Does (or should) our law recognize
an exception to the without prejudice rule . . . to the effect that such general 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 Act 68 of 1969?‟

[41] Accordingly:
The appeal is upheld with the costs of two counsel.
The orders of the court a quo in subparagraphs (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.‟

_________________
C H Lewis
Judge of Appeal

Schippers AJA dissenting:
[42] There is a single issue in this appeal: whether an acknowledgment of liability,
made without prejudice in a written offer of settlement, may be admitted in evidence
for the purpose of interrupting prescription within the meaning of s 14 of the
Prescription Act 68 of 1969 (the Prescription Act).1 My colleague, Lewis JA, has
answered this question affirmatively, holding that such acknowledgment justifies an
exception to the without prejudice rule because it „allows for . . . the prevention of
abuse of the without prejudice rule, and the protection of a creditor‟, and that

1 Section 14 of the Prescription Act reads:
„(1) The running of prescription shall be interrupted by an express or tacit acknowledgement of liability
by the debtor.
(2) If the running of prescription is interrupted as contemplated in subsection (1), prescription shall
commence to run afresh from the day on which the interruption takes place or, if at the time of the
interruption or at any time thereafter the parties postpone the due date of the debt from the date upon
which the debt again becomes due.‟

recognising such an exception would properly serve the policy interests of s 14 of the
Prescription Act and the without prejudice rule.2

[43] In my opinion such an exception would negate the without prejudice rule,
which operates to encourage parties to a dispute to settle their differences amicably
in full and frank discussions, and „to exclude all negotiations genuinely aimed at
settlement whether oral or in writing from being given in evidence‟.3

[44] The appellant (KLD) accepts - as it must - that by virtue of s 42 of the Civil
Proceedings Evidence Act 25 of 1965 (an object of which is to state the law of
evidence in regard to civil proceedings) the law to be applied is the English law of
evidence as at 31 May 1961.4 In my view, the court a quo was correct in holding that
the English cases do not permit an acknowledgment of liability in a genuine offer of
settlement, as evidence of an interruption of time running against a claimant under
the provisions of the English Limitation Act 1980 (the Limitation Act).

Facts
[45] The basic facts may be simply summarised. On 27 November 2006 the
respondent (Empire) and KLD, an estate agent also known as Seeff Properties,
entered into a written agreement (the agreement). In terms of the agreement, KLD
was given a mandate to market and sell erven in a residential property development
by Empire in Croydon, Western Cape (the development); commission was payable
once the relevant purchaser took transfer; and KLD undertook to contribute to the
media advertising and marketing costs of the development.

[46] In November 2007 Empire sued KLD in the Western Cape High Court under
case number 16844/07, for payment of R428 000 in respect of media advertising and
marketing costs, and R35 889 being expenses which Empire had incurred in the
administration of sales. While this action was pending, by letter dated 29 July 2011,

2 Judgment of Lewis JA para 39.
3 Lord Griffiths in Rush & Tompkins Ltd v Greater London Council [1988] UKHL 7, [1989] AC 1280,
[1988] 3 All ER 737 at 2.
4 Section 42 of the Civil Proceedings Evidence Act, 1965 reads:
„The law of evidence including the law relating to the competency, compellability, examination and
cross-examination of witnesses which was in force in respect of civil proceedings on the thirtieth day
of May, 1961, shall apply in any case not provided for by this Act or any other law.‟

Empire‟s attorneys made a written offer of settlement to KLD‟s attorneys (the
Letter).5 The Letter referred to Empire‟s action against KLD under case number
16844/07, and stated that KLD was entitled to commissions in a total sum of
R2 105 960 under the agreement, and that it was indebted to Empire for marketing
costs, expenses incurred in the administration of sales by KLD, and legal costs
totalling R1 023 625.45. The Letter concluded with the following offer of compromise:
„Accordingly we include under cover hereof a cheque for R1 082 334.55 including VAT
(being R2,105,960.00 commission less the total indebtedness of R1,023, 625.45) in full and
final settlement of any and all claims that Seeff may have against our client, and of the
litigation forming the subject matter of case number 16844/2007.‟

[47] It is common ground that the Letter was a without prejudice offer of
settlement, and that KLD did not deposit the cheque of R1 082 334.55 and thus
rejected the offer.

[48] In June 2013 KLD instituted an action against Empire for R2 147 million,
being commissions on the sales of 99 erven in the development set out in a
schedule to KLD‟s particulars of claim. The commissions were earned on the
registration dates specified in the schedule. Save for one sale to Mr Werner Grift (the
Grift sale), the registration dates specified in KLD‟s schedule range from October
2008 to November 2009.

[49] KLD‟s summons was served on 26 June 2013. Empire delivered a special
plea of prescription in which it alleged that KLD‟s alleged right to commissions
became due on the registration dates specified in KLD‟s schedule; that except for the
Grift sale, those registration dates were more than three years before the service of
summons; and that KLD‟s claims to commissions had thus prescribed.

[50] In its replication to the special plea, KLD alleged that in the Letter, Empire‟s
attorneys, acting as Empire‟s authorised representatives, expressly acknowledged
that KLD had become entitled to payment of commissions totalling R2 105 960. This,
so KLD alleged, was an acknowledgment of liability which interrupted prescription as
contemplated in s 14 of the Prescription Act.

5 The Letter is quoted in para 10 of the judgment of Lewis JA.

[51] In the court a quo, KLD accepted that it could reasonably have ascertained
the facts giving rise to its commission claims not later than 30 days after the relevant
dates of transfer. Thus prescription began to run before 25 June 2010, save for the
Grift sale. And it is not KLD‟s case that it delayed in instituting its claim against
Empire because it understood that, by making the offer of compromise in the Letter,
Empire acknowledged that it was liable for commissions as contemplated in s 14 of
the Prescription Act.

[52] The issue came before the court a quo in the form of a stated case as
envisaged in rule 33 of the Uniform Rules of Court. The parties agreed that the
Letter, which they attached, was sent and received by their authorised
representatives. They recorded that there were two issues for determination, which
would dispose of the special plea: (a) whether the Letter, regardless of its
admissibility for any other purpose, was admissible as evidence of an interruption of
prescription as contemplated in s 14 of the Prescription Act; and (b) whether,
assuming that the Letter was admissible for that purpose, it did in fact interrupt
prescription.

The without prejudice rule
[53] The without prejudice rule operates to render evidence inadmissible. The
directly relevant authority for this proposition is Rush & Tompkins,6 in which Lord
Griffiths said:
„The “without prejudice rule” is a rule governing the admissibility of evidence and is founded
upon the public policy of encouraging litigants to settle their differences rather than litigate
them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver LJ in
Cutts v Head [1984] Ch 290, 306:
“That the rule rests, at least in part, upon public policy is clear from many authorities,
and the convenient starting point of the inquiry is the nature of the underlying policy.
It is that parties should be encouraged so far as possible to settle their disputes
without resort to litigation and should not be discouraged by the knowledge that
anything that is said in the course of such negotiations (and that includes, of course,
as much the failure to reply to an offer as an actual reply) may be used to their
prejudice in the course of the proceedings. They should, as it was expressed by
Clauson J in Scott Paper Co v Drayton Paper Works Ltd (1927) 44 RPC 151, 156, be

6 Rush & Tompkins Ltd v Greater London Council fn 1 at 2.

encouraged fully and frankly to put their cards on the table. … The public policy
justification, in truth, essentially rests on the desirability of preventing statements or
offers made in the course of negotiations for settlement being brought before the
court of trial as admissions on the question of liability.”
The rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in
writing from being given in evidence. A competent solicitor will always head any negotiating
correspondence “without prejudice” to make clear beyond doubt that in the event of the
negotiations being unsuccessful they are not to be referred to at the subsequent trial.
However, the application of the rule is not dependent upon the use of the phrase “without
prejudice” and if it is clear from the surrounding circumstances that the parties were seeking
to compromise the action, evidence of the content of those negotiations will, as a general
rule, not be admissible at the trial and cannot be used to establish an admission or partial
admission.‟

[54] In Unilever, 7 Robert Walker LJ noted that aside from being based in part on
the public policy of encouraging parties to negotiate and settle their disputes out of
court, a second basis of the without prejudice rule „. . . is in the express or implied
agreement of the parties themselves that communications in the course of their
negotiations should not be admissible in evidence if, despite the negotiations, a
contested hearing ensues‟. Hoffmann LJ in Muller,8 observed that „[i]n some cases
both of these justifications are present; in others, only one or the other‟.

[55] Without prejudice communications are normally inadmissible in their entirety.
In Unilever,9 Robert Walker LJ explained why this is so:
„. . . I consider that this court should, in determining this appeal, give effect to the principles
stated in the modern cases, especially Cutts v Head, Rush & Tompkins and Muller.
Whatever difficulties there are in a complete conciliation of those cases, they make clear that
the without prejudice rule is founded partly in public policy and partly in the agreement of the
parties. They show that the protection of admissions against interest is the most important
practical effect of the rule. But to dissect out identifiable admissions and withhold protection
from the rest of without prejudice communications (except for a special reason) would not
only create huge practical difficulties but would be contrary to the underlying objective of
giving protection to the parties (in the words of Lord Griffiths in Rush & Tompkins at p 1300)

7 Unilever Plc v The Proctor & Gamble Company [2001] 1 All ER 783, [1999] EWCA Civ 3027 para
17, [2000] WLR 2436.
8 Muller & Anor v Linsey & Mortimer [1994] EWCA Civ 39; (1996) PNLR 74.
9  Unilever fn 7 paras 35 and 36.

“to speak freely about all issues in the litigation both factual and legal when seeking
compromise and, for the purpose of establishing a basis of compromise, admitting
certain facts”.
Parties cannot speak freely at a without prejudice meeting if they must constantly monitor
every sentence, with lawyers . . . sitting at their shoulders as minders.‟

[56] There are, however, occasions when the without prejudice rule does not
prevent the admission in evidence of what parties said or wrote. Robert Walker LJ in
Unilever,10 set out and explained eight such instances. The most important of these
are where the negotiations are said to have resulted in a contract, an estoppel, or a
misrepresentation, or where they are invoked „. . . as a cloak for perjury, blackmail or
other “unambiguous impropriety”,‟ or an explanation for delay. In Rush & Tompkins11
Lord Griffiths referred to Daintrey12 as authority for the proposition that a court will
not permit the without prejudice rule to be used to exclude an act of bankruptcy; and
said that the admission of an independent fact in no way connected with the merits
of the cause is admissible even if made in the course of settlement negotiations. The
UK Supreme Court has recognised an exception to the rule in terms of which:
„facts identified during without prejudice negotiations which lead to a settlement agreement
of the dispute between the parties are admissible in evidence in order to ascertain the true
construction of the agreement as part of its factual matrix or surrounding circumstances‟.13

[57] Important for present purposes, is the observation by Robert Walker LJ in
Unilever,14 with reference to an article by Professor David Vaver, published in the
University of British Columbia Law Review in 1974:15
„It is apparent that none of the exceptions to the public policy rule involves the disclosure of
admissions bearing on the subject matter in dispute, at any rate unless the expression
“admission” is given a substantially wider meaning than it usually has in the law of evidence.
. . . Conversely, however, I respectfully doubt whether the larger residue of communications
which remain protected can all be described as admissions (again, unless that expression is
given an unusually wide meaning). One party‟s advocate should not be able to subject the

10 Unilever fn 7 para 23.
11 Rush & Tompkins Ltd fn 6 at 3.
12 In re Daintrey, Ex Parte Holt [1893] 2 QB 116.
13 Oceanbulk Shipping & Trading SA v TMT Asia Ltd & Ors [2010] 4 All ER 1011, [2011] 1 AC 662,
[2010] 3 WLR 1424 paras 30, 46 and 47.
14 Unilever fn 7 para 25.
15 D Vaver ‘Without Prejudice’ Communications – Their Admissibility and Effect Vol 9 (1974) UBCLR
85.

other party to speculative cross-examination on matters disclosed or discussed in without
prejudice negotiations simply because those matters do not amount to admissions.‟

[58] In our law the public policy foundation of the without prejudice rule was
affirmed by this court in Naidoo.16 Trollip JA, referring to the same article by Vaver,17
said:
„ … [O]ne of the first reported uses of the words “without prejudice” in the 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 anything or what is due.‟”18
Trollip JA went on to say:
„The rationale of the rule is public policy: parties to disputes are to be encouraged to avoid
litigation and all the expenses (nowadays very high), delays, hostility, and inconvenience it
usually entails, by resolving their differences amicably in full and frank discussions without
the fear that, if the negotiations fail, any admissions made by them during such discussions
will
be
used
against
them
in
the
ensuing
litigation.
(Kapeller
v
Rondalia
Versekeringskorporasie van Suid-Afrika Bpk 1964 (4) SA 722 (T) at 728F-G; Schmidt
Bewysreg at 420; Hoffman SA Law of Evidence 2nd ed at 155; Vaver at 94.) Often such
admissions are classified or described as being “privileged” communications. That is an
accurate but convenient label provided one always remembers that their admissibility or
otherwise [is] not necessarily governed by the same considerations as are applicable to
privileged communications (Vaver at 105; Hoffman (supra at 155)).‟19

[59] As in the case of English law, our law recognises that in some instances
without prejudice communications may be admitted in evidence. In Naidoo it was
held that admissions unconnected with or irrelevant to settlement negotiations are
not covered by the rule and are admissible in evidence.20 Trollip JA referred to
Kapeller’s case,21 in which it was found that according to the parties‟ intention and

16 Naidoo v Marine & Trade Insurance Co Ltd 1978 (3) SA 666 (A).
17 Vaver fn 15.
18 Naidoo fn 16 at 674A-B.
19 Naidoo fn 16 at 677C-D.
20 Naidoo fn 16 at 678H-679A.
21 Kapeller v Rondalia Versekeringskorporasie van Suid-Afrika Bpk 1964 (4) SA 722 (T) at 792A-D.

discussions, the admission of liability in question was made independently of and
separately from the settlement negotiations and was therefore admissible.

[60] But Naidoo makes it clear that our courts must apply the without prejudice rule
as expounded by the English courts:
„According to various statutes in South Africa our Courts are in effect enjoined to apply the
“without prejudice” rule as developed and expounded by the English Courts. I emphasize
this here because, as will presently appear, the judicial and other views expressed in the
USA and Commonwealth countries other than the UK appear to differ from the English view
on a particular aspect of the rule that is crucial to the present case. If that is so, then
undoubtedly the English view must prevail. The reason is that questions relating generally to
the admissibility of evidence, which includes “without prejudice” communications, are now
governed by s 42 of our Civil Proceedings Evidence Act 25 of 1965.‟22

[61] In my view the position is no different under the Constitution, by virtue of item
2(1) of Schedule 6 thereto. It reads:
„All law that was in force when the new Constitution took effect, continues in force, subject
to-
(a) any amendment or repeal; and
(b) consistency with the new Constitution.‟23

[62] In Naidoo,24 Trollip JA said that the House of Lords has not yet pronounced
authoritatively on the content of the English rule. It has since done so in Ofulue,25 as
regards an issue akin to the one in this case: an acknowledgment or admission in a
letter written without prejudice with a view to settling proceedings, cannot be relied
upon so as to interrupt time running against a claimant under the provisions of the
Limitation Act.

[63] The relevant facts in Ofulue can be shortly stated. In 1989 Mr and Mrs Ofulue,
the registered owners of property, instituted proceedings against Mr Bossert and his
daughter in the high court for possession of their property, on the grounds that they

22 Naidoo fn 16 at 677E-H.
23 City of Johannesburg Metropolitan Municipality v Gauteng Development Tribunal & others [2010]
ZACC 11; 2010 (6) SA 182 (CC); 2010 (9) BCLR 859 (CC).
24 Naidoo fn 16 at 678E.
25 Ofulue & Anor v Bossert [2009] UKHL16, [2009] 3 All ER 93, [2009] 2 WLR 749.

were the owners, and the Bosserts trespassers. In their defence the Bosserts
admitted the Ofulues‟ title, but denied their right to possession on the basis that the
lease of an erstwhile tenant had been assigned to them, and that they had carried
out substantial work to the property on the understanding that they would be granted
a 14-year lease. In the course of these proceedings, on 14 January 1992 the
Bosserts, through their solicitors, wrote a without prejudice letter to the Ofulues‟
solicitors, stating that the Ofulues were at most entitled to arrear rental for six years,
and setting out their assessment of the value of the property and the work carried out
to it. The letter concluded with the following sentence: „In these circumstances, our
client would be willing to make an offer of £35 000 to your client for the purchase of
the property‟. The Ofulues rejected this offer.

[64] Nothing happened as regards the proceedings brought by the Ofulues for
nearly ten years and they were automatically stayed under the provisions of the
English Civil Procedure Rules. In 2002 the Ofulues applied to lift the automatic stay.
Ms Bossert (whose father had passed away) opposed the application, which was
refused and the proceedings were struck out. In 2003 the Ofulues issued fresh
proceedings against Ms Bossert for possession of the property. Ms Bossert then
claimed that she had obtained title to the property by adverse possession, and that
she and her father had been in uninterrupted possession, as trespassers, for more
than 12 years before the 2003 proceedings had been initiated. To refute this
contention, the Ofulues sought to rely inter alia on the Bosserts‟ acknowledgment of
their title during that 12 year period, in the without prejudice letter of 14 January
1992.

[65] Consequently, one of the issues that had to be decided was whether the letter
of 14 January 1992, written without prejudice in order to settle the earlier
proceedings, could be relied on as an acknowledgment of liability under s 29(2) of
the Limitation Act. In terms of that provision, „[i]f a person in possession of the land
. . . acknowledges the title of the person to whom the right of action has accrued . . .
the right shall be treated as having accrued on and not before the date of the
acknowledgement‟. It was argued that an acknowledgment which satisfies the
requirements of s 29(2) is an exception to the without prejudice rule, and that public
policy justified such acknowledgment.

[66] The Court of Appeal decided that the letter could not be relied on as an
acknowledgment, because it was written without prejudice with a view to settling the
earlier proceedings.

[67] A majority of the House of Lords (4:1) agreed and dismissed the appeal. The
majority, on the authority of Rush & Tompkins and Unilever, concluded that the
without prejudice letter of 14 January 1992 could not be invoked as an
acknowledgment interrupting time running against a claimant under the provisions of
s 29(2) of the Limitation Act. The basic reason was that to do so would undermine
the effectiveness of the without prejudice rule as an encouragement to parties to
speak freely when negotiating a compromise of their dispute, without having to worry
that what they say may be used against them subsequently.

[68] Lord Hope put the matter thus:
„I think that the public policy basis for not allowing anything said in the letter to be used later
to her prejudice provides Ms Bossert with all she needs to defeat the argument that the
implied admission that it contains can be used as an acknowledgement against her in these
proceedings. The essence of it lies in the nature of the protection that is given to parties
when they are attempting to negotiate a compromise. It is the ability to speak freely that
indicates where the limits of the rule should lie. Far from being mechanistic, the rule is
generous in its application. It recognises that unseen dangers may lurk behind things said or
written during this period, and it removes the inhibiting effect that this may have in the
interests of promoting attempts to achieve a settlement. It is not to be defeated by other
considerations of public policy which may emerge later, such as those suggested in this
case, that would deny them that protection.‟26

[69] Lord Rodger was of the opinion that the without prejudice rule is actually a
privilege forming part of the general law of evidence and is based on public policy.
Whilst the courts have recognised certain exceptions to the privilege when the justice
of the case required it, the question was whether creating such an exception in the
circumstances would be consistent with the overall policy behind the rule. He
concluded that it would not, and that there was a significant danger that the

26 Ofulue fn 24 para 12.

effectiveness of the rule as an encouragement to parties to speak freely, would be
undermined if admissions of independent facts were allowed in evidence.

[70] Lord Walker took the view that as a matter of principle, the without prejudice
rule should not be restricted unless justice clearly demanded it. He said that the
letter of 14 January 1992 was undoubtedly connected with the possession
proceedings that the parties were trying to settle, and that „the recognition of an
exception for an acknowledgement under section 29 of the Limitation Act 1980 would
whittle down the protection given to the parties to speak freely‟.

[71] Lord Neuberger‟s opinion was to the same effect. He summed up the position
as follows:
„I entirely agree with . . . Lord Rodger of Earlsferry . . . that it is open to your Lordships to
create further exceptions to the rule, and in particular the sort of admission identified by Lord
Hoffman in Rashid [2006] 1 WLR 2066, para 13 and by Lord Scott in this case. However, I
also agree with him, and indeed with Lord Hope and Lord Walker, that it would be
inappropriate to do so, for reasons of legal and practical certainty. To uphold such an
exception in this case would run counter to the thrust of the approach of Lord Griffiths in
Rush & Tompkins [1989] AC 1280 and of Robert Walker LJ in Unilever [2001] 1 WLR 2436,
and would severely risk hampering the freedom parties should feel when entering into
settlement negotiations.‟27

[72] With those principles in mind I return to the facts of this case. In my view, to
allow an admission against interest of the kind sought by KLD, would fly in the face
of the underlying rationale for the without prejudice rule, and would create legal and
practical uncertainty. Viewed objectively, as it must be,28 the Letter plainly was a
without prejudice offer of compromise to bring an end to the litigation that Empire
instituted, and to avert future litigation by KLD. That is precisely why Empire
acknowledged that KLD was entitled to commissions. The protection of this
acknowledgment is the most important practical effect of the without prejudice rule.

[73] I cannot put the point better than Lord Rodger did in Ofulue:29

27 Ofulue fn 24 para 98.
28 Naidoo fn 16 at 675B.
29 Ofulue fn 24 para 39.

„In Rush & Tompkins [1989] AC 1280, 1300F-G, he [Lord Griffiths] went out of his way to
emphasise that the exception in Waldridge v Kennison (1794) 1 Esp 42 “should not be
allowed to whittle down the protection given to the parties to speak freely about all issues in
the litigation both factual and legal when seeking compromise and, for the purpose of
establishing a basis of compromise, admitting certain facts.” In my view there must indeed
be a significant danger that allowing in evidence of admissions of “independent facts” would
undermine the effectiveness of the rule as an encouragement to parties to speak freely when
negotiating a compromise of their dispute. As was said many years ago,
“If the proper basis of the rule is privilege, is there any logical theory under which the
court can, by methods akin to chemistry, analyze a compromise conversation so as
to precipitate one element of it as an offer of settlement and the other as an
independent statement of fact? Would not the layman entering into a compromise
negotiation be shocked if he were informed that certain sentences of his conversation
could be used against him and other sentences could not?” ‟30

[74] The necessity of admitting certain facts so as to achieve a compromise and
the practical difficulty of admitting in evidence those facts, is illustrated by this very
case. What of the remaining content of the Letter, if the acknowledgment of liability
for commissions were to become admissible in evidence? Could it exist
independently of the acknowledgment? I think not. The acknowledgment has a direct
bearing on the subject matter in dispute. It cannot be detached from the offer of
compromise in the last paragraph of the Letter. Indeed, the Letter is meaningless
without the offer of compromise of which the acknowledgment of liability forms an
integral part. It seems to me that on any view, the acknowledgments in paras 2 and 4
of the Letter that KLD was entitled to commissions, as was held in Naidoo, „. . . were
not merely reasonably incidental to . . . settlement negotiations, they were actually
part of them.‟; and cannot be said to be unconnected with, or to fall outside the ambit
of, the offer of compromise in the Letter.31 It should therefore not be admissible in
evidence against Empire.

[75] It is thus hardly surprising that in Ofulue, Lord Neuberger held that to uphold
an exception to the rule that an acknowledgment in a without prejudice letter is
admissible to stop time running against a claimant under the provisions of the

30 J E Tracey Evidence - Admissibility of Statements of Fact made during Negotiation for Compromise
(1935-1936) 34 Michigan Law Review 524 at 529.
31 Naidoo fn 16 at 680G-681A.

Limitation Act (an exception of the kind sought by KLD), would run counter to the
thrust of the approach in Rush & Tompkins and Unilever, and „. . . would severely
risk hampering the freedom parties should feel when entering into settlement
negotiations‟.32

[76] For these reasons, the submission by Mr La Grange, who with Mr Cilliers
appeared for KLD, that Naidoo is distinguishable because it did not involve the
interruption of prescription, is quite wrong.

[77] What all of this shows, is the practical difficulty that arises when dissecting out
identifiable admissions from without prejudice communications. But it also shows
that to do so, particularly in the circumstances of this case, would render the
operation of the without prejudice rule nugatory and meaningless.

[78] Lord Hope made the point more forcefully:
„If converting offers of compromise into admissions of acts prejudicial to the person making
them were to be permitted no attempt to compromise a dispute could ever be made.‟33

[79] So, the Letter was a bona fide attempt to compromise the dispute between
Empire and KLD in case number 16844/07 and to avoid the litigation by KLD, which
at that stage had not yet commenced. It contains statements and an offer genuinely
made with a view to settling disputes. Had that offer of compromise been accepted,
that would have brought an end to Empire‟s case and KLD would not have brought
its claim for commissions. As such, the Letter, in my view, falls under both the public
policy and implied agreement justifications for the without prejudice rule: parties are
encouraged to settle their disputes out of court; and they impliedly agree to the
consequences of offering to negotiate without prejudice - that what they say will not
be used against them subsequently.34

[80] This being so, it cannot be suggested that the Letter constitutes some sort of
„abuse‟ of the without prejudice rule, to justify an exception of the kind sought by
KLD. There has been no „unambiguous impropriety‟ on the part of Empire, either

32 Ofulue fn 24 para 98.
33 Ofulue fn 24 para 2.
34 Hoffmann LJ in Muller & Anor fn 8; Unilever fn 7 para 18.

generally or in claiming the benefit of the rule and by raising prescription. This, a
fortiori in light of the following facts. The period of three years within which a claim
must be brought under the Prescription Act, as the court a quo rightly observed, is
generous. When the Letter was sent, KLD‟s claim had not yet prescribed. Its inertia
has given rise to the issue in this case. There is nothing to suggest that KLD‟s delay
in bringing its claim was because Empire had acknowledged its liability for
commissions. And there was nothing that prevented the parties from agreeing that
the running of time would be suspended whilst KLD considered the offer of
compromise in the Letter.

[81] In these circumstances, I consider that the without prejudice rule should not
be restricted to permit KLD to rely on the Letter as an acknowledgment of liability
interrupting prescription.

[82] Any such restriction, in my opinion, would be one of principle and cannot
depend on the facts of a particular case.35 It must mean that whenever liability is
acknowledged in a without prejudice offer of compromise, prescription can never be
raised as a defence. The consequence of this surely must be the effective exclusion
of the without prejudice rule in these circumstances: there would be no point to
attempt to compromise a dispute. The only alternative would be an attempt at
settling a dispute without full and frank discussions, with parties monitoring every
sentence to guard against admissions, and lawyers sitting at their shoulders as
minders. In Bradford,36 Lord Hoffmann said that guardedness in without prejudice
negotiations would be novel:
„It has frequently been said that the purpose of the rule is to encourage parties engaged in
settlement negotiations to express themselves freely and without inhibition. It is well
established that the rule applies to any genuine attempt at negotiation, whether or not the
communications are expressly said to be without prejudice, and I think it would be most
unfortunate if the law introduced a new requirement that the parties should preface anything
they said with the standard disclaimer that any admissions of fact were to be taken to be
hypothetical and solely for the purposes of the negotiation.‟

35 Ofulue fn 24 para 56.
36 Bradford & Bingley Plc v Rashid [2006] UKHL 37, [2006] 4 All ER 705, [2006] 1 WLR 2066 para 13.

[83] This is quite apart from disputes that will arise when, for example, a party
disavows making an admission in the first place, or there is a dispute about the
meaning
of
certain
statements,
during
without
prejudice
discussions
or
communications, which a court will have to determine on a balance of probabilities.
Such practical difficulties, of course, do not arise if effect is given to the rationale for
the without prejudice rule.

[84] The submission on behalf of KLD that the exception that it seeks to the rule is
clear, easy to apply, has no side-effects and will not restrict the scope of the rule, is
therefore unsustainable.

[85] KLD also submitted, on the authority of Naidoo, that the rule may be departed
from in exceptional circumstances, which leaves room for the potential recognition of
a distinction between an admission and the mere fact that an admission had been
made. In other words, an acknowledgement of liability in a without prejudice
communication should be admissible not to establish its truth, but as proof of the fact
that it was made. Then it was submitted that there is a public policy rationale for the
exception in the speech of Lord Walker in Bradford,37 namely that it is in the public
interest that a debtor who acknowledges his debt and so induces his creditor not to
resort to litigation, should then not be able to claim that the debt is statute barred;
and that the exception was in effect recognised by this court in Hammerle.38

[86] These submissions are likewise unsustainable. The first is based on a
misreading of Naidoo. As was said in that case, the purpose for which a party wishes
to adduce a without prejudice communication is all-important, since it may be
admitted in evidence in exceptional circumstances to prove, for example, that it
contains a threat, an act of insolvency or other matters that it would be contrary to
public policy to protect it from being admissible.39 No such exceptional
circumstances exist in this case. One is again driven back to the principle in Naidoo
and the English authorities, in particular, Ofulue, referred to above: the without
prejudice rule applies to any genuine attempt at settlement of a dispute and

37 Bradford fn 35 para 38.
38 Absa Bank Ltd v Hammerle Group [2015] ZASCA 43; 2015 (5) SA 215 (SCA).
39 Naidoo fn 16.

admissions forming part of such attempt are covered by the rule.40 In the words of
Lord Mance in Bradford:41
„The existence of a dispute and of an attempt to compromise it are at the heart of the rule
whereby evidence may be excluded (or disclosure of material precluded) as “without
prejudice”.‟

[87] The difficulty with the argument that an acknowledgment in a without
prejudice communication should be admissible as a fact, rather than for the truth of
its contents, was neatly stated by Lord Walker in Bradford:
„An acknowledgment of a debt is in its very nature an express admission (just as a payment
on account is an implied admission) of the existence of a debt. To say that it does not matter
whether the admission is true or false . . . seems to me rather unreal. Few debtors would see
any advantage in making a false admission of debt. . . . Just as the law would be
complicated and distorted by a rule which protected only “qualified” or “hypothetical”
admissions, so it would in my opinion tend to be complicated and distorted by a rule under
which one and the same statement was admissible as an acknowledgment for the purposes
of section 29(5) of the Limitation Act 1980, but not as an admission against interest. It would
not, as I see it, be relying on the distinction between testimonial and non-testimonial use, but
on a more elusive distinction between different types of testimonial use.‟42

[88] Lord Brown made the point even more tersely:
„In acknowledgment cases . . . the statements are sought to be adduced in evidence as
admissions. Indeed, it is only as admissions that they are relevant as acknowledgments.‟43

[89] In my opinion Bradford does not support the argument that public policy
dictates that a debtor who acknowledges his debt in a without prejudice
communication, should not be able to claim that the debt is time barred, to the
contrary. The issue in Bradford was whether admissions by a mortgagor in default
that he was liable for the outstanding amount, were admissible in subsequent
proceedings by the mortgagee for the arrears. The only question was whether those
admissions, as distinct from an offer in negotiations with a view to compromise of a
disputed liability, were covered by the without prejudice rule. The House of Lords

40 Naidoo fn 16 at 680G-681A.
41 Bradford fn 35 para 81.
42 Bradford fn 35 para 42.
43 Bradford fn 35 para 67.

held that they were not. The mortgagor was simply asking for time to pay. Lord
Brown said that it was impossible to regard the correspondence in question as
constituting „negotiations genuinely aimed at settlement‟ or „an attempt to
compromise actual or impending litigation‟.44

[90] The argument that there is a public policy rationale for the exception does not,
in my view, bear scrutiny, for the reasons advanced above. It also ignores the fact
that in Bradford, Lord Walker agreed with Lord Brown that the policy underlying the
without prejudice rule outweighed any countervailing policy reason for lengthening
the period of limitation through a written acknowledgment of liability. In fact, Lord
Brown said that there are sound policy reasons for having limitation periods in the
first place - disputes should be litigated before they become too stale.45

[91] Similar policy reasons underlie the Prescription Act. Thus in Uitenhage
Municipality, Mahomed CJ said that one of the main purposes of the Act is to protect
a debtor from old claims against which it cannot effectively defend itself because of
the lapse of time.46 This court has held that the main practical purpose of the Act is
to promote certainty in the ordinary affairs of people; and that sources of uncertainty
such as whether a valid debt arose or has been discharged, or an assumption by a
debtor that no claim would be made, are reduced by imposing a time limit on the
existence of a debt. Uncertainty about the existence of a debt is removed when the
creditor takes judicial steps to recover the debt. Likewise, there is no uncertainty
about a debt when the debtor expressly or tacitly acknowledges liability for it, and for
this reason a creditor is not required to interrupt prescription by instituting legal
proceedings for the recovery of the debt.47

[92] This, however, in my opinion, does not mean that an acknowledgment of
liability, made without prejudice by a debtor, should excuse the creditor from
instituting proceedings to recover the debt within three years, for the following
reasons. First, s 14 of the Prescription Act does not permit such a construction,
having regard to its wording, the context in which it appears, its purpose and the

44 Bradford fn 35 para 73.
45 Bradford fn 35, Lord Brown para 75, Lord Walker para 43.
46 Uitenhage Municipality v Molloy 1998 (2) SA 735 (SCA) at 742I-743A.
47 Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1984 (1) SA 571 (A) at
578F-579A.

material known to those responsible for its production.48 If the legislature wanted
without prejudice acknowledgements of liability to interrupt prescription, it could have
said so. Second, this interpretation is buttressed by the presumption that the
legislature does not intend to alter the common law - the without prejudice rule -
unless it is clear from the language of the statute that the object is to alter or modify
it.49 Nothing in the Prescription Act suggests such an object. And third, there is
simply no need to allow the admission in evidence of a without prejudice
acknowledgment of liability to interrupt prescription. As Lord Neuburger observed in
Ofulue,50 where a debtor acknowledges liability and so induces the creditor not to
institute proceedings, the creditor can rely on such acknowledgment as founding an
estoppel - one of the exceptions listed in Unilever.

[93] KLD‟s submission that the exception for which it contends was in effect
recognised by this court Hammerle, can be dealt with briefly. It has no merit. The
holding in Hammerle that a without prejudice communication containing an act of
insolvency is admissible in evidence, is not new.51 The exception was recognised in
Naidoo.52 The public policy grounds for allowing the insolvency exception stand on a
wholly different footing from an acknowledgment under a limitation statute, as
recognised by Lord Neuberger in Ofulue:
„An acknowledgment under section 29 operates only as between the parties to and by whom
the acknowledgment is made (and their privies), whereas a person‟s act of bankruptcy has
an impact on all the creditors and potential creditors of that person. Although not mentioned
in the judgment of Vaughan Williams J [in Daintrey], it appears to me that there is therefore a
pretty strong case for saying that the public interest in ensuring that an act of bankruptcy can
be referred to and acted on as such, should outweigh the public interest in the without
prejudice rule being observed.‟53

48 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593
(SCA) para 18.
49 Attorney General Transvaal v Botha 1994 (1) SA 306 (A) at 330I, Land and Agricultural
Development Bank of SA t/a Landbank v Master of the High Court & others (352/05) [2006] ZASCA
70; [2006] SCA 68 (RSA) (30 May 2006) para 58.
50 Ofulue fn 24 para 100.
51 Hammerle fn 37 para 13.
52 Naidoo fn 16 at 681B-C.
53 Ofulue fn 24 para 102.

Conclusion

[94] In my opinion, the recognition of the exception sought would contradict the
public policy and contractual foundations of the without prejudice rule. The exception
is at odds with the rationale for the rule as expounded in Naidoo and by the English
courts. I would therefore dismiss the appeal with costs.

___________________
A Schippers
Acting Judge of Appeal

APPEARANCES

For the Appellant:
A de V La Grange SC (with him C R Cilliers)
Instructed by:
Hannes Pretorius Bock & Bryant, Somerset
West

c/o MacGregor Stanford Kruger, Cape
Town

Van Wyk & Preller, Bloemfontein

For the Respondent:

R J Howie
Instructed by:
Matthew Walton & Ass Inc, c/o Harold Gie
Attorneys, Cape Town

Honey & Partners Inc, Bloemfontein