Litigation & ArbitrationDemand Letters and the Legal Connotations of ‘Without prejudice’

09/06/2022

What is a Demand Letter?

A demand letter is a formal notice demanding that the addressee perform a legal obligation on specific terms and within a specified time. The letter gives the recipient a chance to perform the obligation without being taken to court.[1] Order 3 Rule 2 (d) of the Civil Procedure Rules, 2010[2] provides that all suits instituted by presenting a Plaint to the court, are to be accompanied by a demand letter, before action.

Despite the allusion to the mandatory nature of the demand letter by the Civil Procedure Rules when instituting a suit, there are circumstances where the demand letter is not advisable. These are when seeking Anton Pillar Orders or Mareva Injunctions from the Court.

In both circumstances, the injunctions are sought ex parte without notice to the defendant, who may dissipate the injunction’s subject matter or remove the same, from the court’s jurisdiction. Prior notice to the defendant in such circumstances would otherwise beat the efficacy of the injunction.

A demand letter is a formal notice demanding that the addressee perform a legal obligation on specific terms and within a specified time.

Meaning of Without Prejudice

The legal phrase “without prejudice” typically comes into play when discussions of demand letters arise. The Courts in Millicent Wambui v Nairobi Botanica Gardening Limited[3] discussed that the use of the term ‘without prejudice’ is used by parties as a means to enable offers and counter offers to be made to settle disputes or claims without fear that the said letters would later be used by the opposite party as an admission of liability in the ensuing lawsuit.

The phrase imposes upon the communication, an exclusion of use against the party making the statement in subsequent court proceedings. Admissions, concessions, or statements made by parties in the process of trying to resolve a dispute cannot be used against that party if the dispute is not resolved thus resulting in litigation.

The same position is reiterated in the Evidence Act of Kenya[4] which provides that in civil cases, no admission may be proved if it is made either upon an express condition that evidence of it is not to be given or in circumstances from which the court can infer that the parties agreed together that evidence of it should not be given.

A party making a ‘without prejudice’ offer does so on the basis that they reserve the right to assert their original position if the offer is rejected and litigation ensues.[5]

What can Case Law tell us about “Without Prejudice”?

The use of the legal phrase is founded on its importance in public policy.

In Ongata Rongai Total Filling Station Ltd vs. Industrial and Commercial Development Corporation Nairobi[6] Kimaru J, relying on Unilever vs. Proctor & Gamble[7] stated that “The ‘without prejudice rule’ is a rule governing the admissibility of evidence and is founded on the public policy of encouraging litigants to settle their differences rather than litigate them to a finish… that 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.

The other basis or foundation of without prejudice communication 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 ensures. It is therefore a general rule, that communication between parties to a suit, made on a “without prejudice” basis will not be admissible in evidence.[8]

The same issue of inadmissibility of without prejudice communication was discussed and reiterated in the cases of Ocean bulk Shipping and Trading SA V TMT Asia Limited and 3 Others[9] and Rush and Tompkins Ltd V Greater Landon Council [10] where the courts stated that any admissions made or positions taken on a “without prejudice” basis during negotiations, will normally not be admissible in evidence when the negotiations do not result in any agreement or settlement.

On the other hand, where such “without prejudice” negotiations result in a new agreement that alters the old state of affairs and establishes a new one, a new complete contract is established and evidence of such new agreement will be admissible even though it was reached from “without prejudice” negotiations.[11]

It is, however, important to note that without prejudice communication may be expressly signed to be on a “without prejudice” basis or it may be inferred from the circumstances in which it was made, that the parties agreed or intended it should not be given in evidence. Therefore, the fact that such communication does not contain the phrase ‘without prejudice’ does not preclude it from the privilege afforded to such communication. [12]

Summarily, the use of without prejudice communication is seen to be a privilege that is jealously guarded by the courts, of which otherwise, parties and their legal advisers would find it difficult to narrow down issues in dispute or to reach amenable out of court settlements.

[1] Pursuing Justice for All, Kenya.

[2] Civil Procedure Rules, 2010 Order 3 Rule 2 (d)

[3] Millicent Wambui v Nairobi Botanica Gardening Limited,[2013] eklr

[4] Section 23 (1), Evidence Act of Kenya, 2010

[5] Millicent Wambui v Nairobi Botanica Gardening Limited [2013] eklr

[6] Ongata Rongai Total Filling Station Ltd vs. Industrial and Commercial Development Corporation Nairobi (Milimani) HCCS No. 219 of 2007 (OS)

[7] Unilever vs. Proctor & Gamble [2001] 1 All ER 783

[8] Ongata Rongai Total Filling Station Ltd vs. Industrial and Commercial Development Corporation Nairobi (Milimani) HCCS No. 219 of 2007 (OS)

[9] Oceanbulk Shipping and Trading SA V TMT Asia Limited and 3 Others [2010] UKSC 44

[10] Rush and Tompkins Ltd V Greater Landon Council [1989] AC 1280.

[11] Walker V Wilsher [1889] 23 QBD 335.

[12]Guardian Bank Limited v Jambo Biscuits Kenya Limited [2014] eklr.

 

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