Admissibility Of A 'Without Prejudice' Acknowledgement Of Debt In A Court Room During Litigation Proceedings

It is common for a debtor (defendant) to submit correspondence to its creditor (plaintiff) and mark it as "without prejudice", wherein the debtor acknowledges its indebtedness to the creditor and further proposes a settlement offer to the creditor.

Although not stipulated in any specific statute, it is a general practice in South African Law that "without prejudice" correspondence made by one party to another in an attempt to negotiate settlement of a dispute or a debt is inadmissible in a court room and therefore a party to the proceedings cannot use such correspondence as evidence. Our courts have, however, recognised limited exceptional circumstances in terms of which the courts may allow without prejudice correspondence or statements which are made during settlement negotiations to be admissible as evidence- these include acts of insolvency, limited instances of estoppel, fraudulent misrepresentation and threats.

The SCA in the case of KLD Residential CC v Empire Earth Investments 17 (Pty) (1135/2016) [2017] ZASCA 98 3 All 739 SCA; 2017 (6) SA (6 July 2017), introduced prescription as a further limited exceptional circumstance in terms of which it would be acceptable for the Court to allow without prejudice negotiations to be admitted as evidence in a court room. The SCA stated as follows: "Where an acknowledgement of indebtedness is made by a debtor to a creditor, even in without prejudice settlement negotiations, the acknowledgement may be admitted in evidence for the sole purpose of interrupting the running of the prescription period in terms of section 14 of the Prescription Act 68 of 1969."

Section 14(1) of the Prescription Act 68 of 1969 provides that that running of prescription shall be interrupted by an express or tacit acknowledgement by the debtor. Section 14(2) provides that if the running of prescription is interrupted as contemplated in subsection (1), prescription shall continue to run afresh from the day on which the interruption takes place.

The SCA in KLD Residential CC v Empire Earth Investments stated that the "rationale underlying section 14 of the Prescription Act is that where there is an acknowledgement of liability, there is no uncertainty on the part of the debtor as to the existence of the debt." The Court furthermore referenced statements made by other Judges in the following cases:

In Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1984 (A) Grosskopf AJA said that "where the debtor...