Generally, a “without prejudice” letter is a
privileged document that specifically relate
to negotiations genuinely aimed at a
settlement between parties in a dispute. It is
settled law that letters written without
prejudice are inadmissible.
In the case of Malayan Banking Bhd v Foo
See Moi [1981] 1 LNS 95; [1981] 2 MLJ
17, Chang Min Tat FJ (as he then was) in
delivering the judgment of the Federal Court
held as follows:
“It is settled law that letters written without
prejudice are inadmissible in evidence of the
negotiations attempted. This is in order not
to fetter but to enlarge the scope of
negotiations, so that a solution acceptable to
both sides can be more easily reached. But it
is also settled law that where the
negotiations conducted without prejudice
lead to a settlement, then the letters become
admissible in evidence of the terms of the
agreement, unless of course the agreement
has become incorporated in another
document which would then be the evidence
of the agreement.”
The leading authority on the issue is found
in the House of Lord’s decision of Rush &
Tompkins Ltd v Greater London Council
and Another [1989] 1 AC 1280. It was
decided by a strong bench comprised of
Lord Goff of Chieveley, Lord Oliver of
Alymerton, Lord Bridge of Harwich, Lord
Brandon of Oakbrook and finally, the author
of the judgment, Lord Griffiths. This portion
of his Lordship’s decision is of interest:
“The rule applies to exclude all negotiations
genuine 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. I cannot
therefore agree with the Court of Appeal
that the problem in the present case should
not be resolved by a linguistic approach to
the meaning of the phrase “without
prejudice”. I believe that the question has
to be looked at more broadly and resolved
by balancing two different public interests
namely the public interest in promoting
settlements and the public interest in full
discovery between parties to litigation.
Nearly all the cases in which the scope of
the “without prejudice” rule has been
considered concern the admissibility of
evidence at trial after negotiations have
failed. In such circumstances no question of
discovery arises because the parties are well
aware of what passed between them in
negotiations. These cases show that the rule
is not absolute and resort may be had to the
“without prejudice” material for a variety
of reasons when the justice of the case
requires it. It is unnecessary to make any
deep examination of these authorities to
resolve the present appeal but they all
illustrate the underlying purpose of the rule
which is to protect a litigant from being
embarrassed by any admission made purely
in an attempt to achieve a settlement. Thus
the “without prejudice” material will be
admissible if the issue is whether or not the
negotiations resulted in an agreed
settlement…”
In the High Court decision of Oh Kuang
Liang v Associated Wood Industries Sdn
Bhd [1995] 2 CLJ 961, Abdul Malik Ishak
J heard an application by the Respondent
(Associated Wood) to strike out an affidavit
affirmed by the Applicant. The gist of it is as
follows:
“…Tan deposed in his affidavit that the
“without prejudice” letters between
solicitors are inadmissible as they were said
to be privileged. Tan took particular
objections to two letters (dated 28 January
1994 and 6 April 1994) which he singled out
and which clearly bore the “without
prejudice” labels on them; he too took
exceptions to the other three letters which
equally bore the “without prejudice” tags
on them. There was only one letter dated 26
February 1994 which did not carry the
“without prejudice” label.”
In coming to his decision, Abdul Malik
Ishak J stated as follows (at page 965
paragraphs a–f):
“I am of the considered view that the
“without prejudice rule” applies generally
to exclude all negotiations genuinely aimed
at settlements whether oral or in writing
from being given in evidence. A prudent and
competent solicitor will always be on guard
and will always label any negotiating
correspondence with the words “without
prejudice” – to make known and to make
clear beyond doubt that in the event the
negotiations fell through, they are not to be
referred to at the subsequent trial. I think
the correct approach to resolve the
“without prejudice rule” would be by
balancing two different public interests,
namely, the public interest in promoting
settlements, on the one hand, and the
public interest in full discovery between
parties to litigation, on the other.
I have done some research and I have
discovered that nearly all the cases where
the scope of the “without prejudice rule”
has been considered concern the
admissibility of evidence at trial after
negotiations have failed. It is quite obvious
that in these situations no question of
discovery arises because the parties are well
aware of what had transpired between them
in the negotiations. It is not incorrect to say
that the underlying purpose of the “without
prejudice rule” is to protect a litigant from
being embarrassed by any admission made
purely in an attempt to achieve a settlement.
Lindley LJ, held in Walker v. Wilsher [1889]
23 QBD 335 at 337, that the without
prejudice material will be admissible if the
issue is whether or not the negotiations
resulted in an agreed settlement and this
point seems to have been applied in Tomlin
(supra). I must at once sound a warning that
Walker v. Wilsher (supra) is not an authority
for the proposition that if the negotiations
succeed and a settlement is concluded the
privilege is thrown to the wind, having
served its purpose. On a proper reading of
Walker v. Wilsher (supra), I would have
thought that there it was held that it was not
permissible to receive the contents of a
without prejudice offer on the question of
costs and no question arose as to the
admissibility of admissions made in the
negotiations in any possible subsequent
proceedings. Cutts v. Head (supra)
propounds the principle that in certain
circumstances the without prejudice
correspondence may be looked at to
determine a question of costs after judgment
has been given.
In Re Daintrey, ex p Holt [1893] 2 QB 116;
[1891-4] ALL ER Rep. 209, the Court
refused to allow the “without prejudice
rule” to exclude an act of bankruptcy and
in Kitcat v. Sharp [1882] 48 LT 64, the
Court too refused to be bound by the
“without prejudice rule” when its purpose
was to suppress a threat if an offer is not
accepted. I am of the view that the
exceptions referred to in these cases should
not and must not be allowed to whittle down
the protection given to all 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. If
the compromise fails, the maker should not
be held accountable and the admission of
the facts made for the purpose of the
compromise should not be received in
evidence. I am not prepared, to borrow the
words of Ormrod J, in Tomlin (supra) to lift
the umbrella of “without prejudice” for the
applicant. Rain or shine, that umbrella
should remain.”
Be that as it may, the “without prejudice”
rule is not absolute. Throughout the years,
there are a number of exceptions to the
“without prejudice” rule, that had been
pronounced and acknowledged by the
Malaysian courts.
In the case of MKC Corporate & Business
Advisory Sdn Bhd v Cubic Electronics
Sdn Bhd & Ors [2015] 11 MLJ 775,
Hadhariah Syed Ismail J stated:
“[36] In Unilever’s case the instances
given where without prejudice letters were
admitted in evidence are:
(a) letters containing a threat is
admissible to prove that a threat was made;
(b) a without prejudice letter containing
a statement which amounted to an act of
bankruptcy is admissible to prove that the
statement was made;
(c) evidence of the negotiations is also
admissible to show that an agreement
concluded between the parties during the
negotiations should be set aside on the
ground of misrepresentation, fraud or undue
influence; and
(d) one party may be allowed to give
evidence of what the other said or wrote in
without prejudice negotiations if the
exclusion of the evidence would act as a
cloak for perjury, blackmail or other
unambiguous impropriety.
[37] Applying the law to the facts of this
case. The three without prejudice letters
wrote by the first defendant is a proposal by
them to the plaintiff to replace the tenancy
agreement with a new agreement with less
area tenanted to the plaintiff. Similar
proposal was repeated thrice and was
rejected by the plaintiff. There was no
negotiation to replace the agreement, to
begin with. The negotiations is only on the
issue of when full vacant possession can be
delivered. These letters show the first
defendant had deceit the plaintiff into
believing that the tenancy agreement is still
exist and valid as late as 18 March 2011.
Otherwise, the first defendant could not
have asked for replacement. The fact that
the first defendant had entered into a sale
and purchase agreement dated 3 January
2011 and a tenancy agreement dated 3
January 2011, both with the third defendant
and the first defendant also knew that the
third defendant had entered into a tenancy
agreement dated 3 January 2011 with the
fourth defendant clearly show there could
not be any negotiation to replace the
tenancy agreement. The first defendant’s
proposal is a sham. How could there be
negotiations when the plaintiff did not even
know its rights has been taken away. The
first defendant has misrepresented to the
plaintiff that 1,234,197 sqft is intact when it
is not. It is clear to me that the first
defendant cannot use the without prejudice
label to hide what they wrote when they
have deceit the plaintiff. In the
circumstances, I hold the three without
prejudice letters dated 1 February 2011; 16
February 2011 and 18 March 2011 are
relevant and admissible to prove the
deceitful act of the first defendant. I admit
these letters as evidence.”
The same position is accepted and amplified
by the court in the case Gumusut-Kakap
Semi-Floating Production System (L) Ltd
v Sabah Shell Petroleum Co Ltd [2017]
MLJU 877, whereby Lee Swee Seng J
stated:
“[194] The privilege that may arise from the
cloak of without prejudice must not be
capitalized to present a picture contrary to
what had passed between the parties.
McFadden v Snow (1952) 69 WN (NSW) 8
concerned a situation where the claimant
had made an incorrect assertion and
representation to the Court, and therefore
the respondent had to produce and refer
the Court to the without prejudice
correspondence. An objection was taken to
this by the claimant and the Court held
against the claimant. At p. 9, col. 2 and p.
10 col.1 it was explained as follows:
‘Mr. Hicks strenuously objected to this
tender on the ground that the letter was
expressed to be without prejudice. It
admittedly was not answered by the
claimant, Mr. McFadden. It appears to me
that I must admit this letter to disprove the
statement in the affidavit which I have
underlined that the claimant had received
no reply to his letter. The alleged failure to
receive a reply is highly significant for the
purpose of establishing an admission (by
silence) on the part of Miss Jobson that she
had surrendered her tenancy and that the
claimant as landlord had accepted the
surrender whereby the tenancy would be
extinguished by operation of law.
… …
The privilege that may arise from the cloak
of “without prejudice must not be abused
for the purpose of misleading the court and
on that ground I admitted the letter to
negative the inference that otherwise might
quite erroneously have been raised in
claimant’s favour.’
[195] The exception to this rule on
“without prejudice” communication
founded on public policy was also referred
to in Pitts v Adney (1961) 78 WN (NSW) 886
at p. 889, col. 1 as follows:
‘It is of importance that the rule protecting
from disclosure, discussions taking place in
an endeavour to put an end to pending
litigation should, in general, be applied. But
it is, after all, a rule based upon public
policy. It cannot be permitted to put a party
into the position of being able to cause a
Court to be deceived as to the facts, by
shutting out evidence which would rebut
inferences upon which that party seeks to
rely.’
[196] Likewise in Unilever plc v The
Procter & Gamble Co. [2001] 1 All ER 783
at Held: p. 783 j; p. 791 j; 792 c – d the
same principle was stated as follows:
‘…However even in situations to which the
without prejudice rule undoubtedly applied,
the veil imposed by public policy might
have to be pulled aside, even so as to
disclose admissions, in cases where the
protection afforded by the rule had been
unequivocally abused.
Nevertheless, there are numerous occasions
on which, despite the existence of without
prejudice negotiations, the without prejudice
rule does not prevent the admission into
evidence of what one or both of the parties
said or wrote.
…
Apart from any concluded contract or
estoppels, one party may be allowed to give
evidence of what the other said or wrote in
without prejudice negotiations if the
exclusion of the evidence would act as a
cloak for perjury, blackmail or other
‘unambiguous impropriety’”
[197] Our local authority on this point is
the case of MKC Corporate & Business
Advisory Sdn Bhd v Cubic Electronics Sdn
Bhd & Ors. [2015] 11 MLJ 775 at p. 807 H
– I where it was observed as follows:
‘It is clear to me that the first defendant
cannot use the without prejudice label to
hide what they wrote when they have
deceived the plaintiff. In the circumstances,
I hold the three without prejudice letters
dated 1 February 2011; 16 February 2011
and 18 March 2011 are relevant and
admissible to prove the deceitful act of the
first defendant. I admit these letters as
evidence.’
[198] There is no need for the Plaintiff to
hit the alarm button as the disclosure and
use of the ‘without prejudice’ materials is
confined to the sole purpose of the said
disclosure, namely, to rebut an erroneous,
misleading or false version of events or
facts presented to the Court. The disclosure,
as evident above, is confined to the
materials before the court, and there is no
general waiver or enquiry into the wider
scope of the ‘without prejudice’
communications.”
On the issue of “without prejudice”, the
High Court in the Gumusut-Kakap’s case
then held:
“[201] The Defendant’s position that the
Plaintiff was pretty aware of the sum being
discussed as the warranty claim for
contractor defects was further buttressed by
the Plaintiff’s own document exhibited by
the Plaintiff themselves in Exhibit SBM-11
in Enclosure 80/81 at p 379. The Plaintiff
may not agree with the sum, or that the sum
may be subject to further discussions or
change, but this does not detract from the
fact that the Plaintiff had knowledge of the
sum and that parties were not discussing in
a vacuum or without reference to amounts
claimed. The top left hand corner of the
document dated 28.5.2016 is marked as
“MISC”, which is the holding company of
the Plaintiff. It shows at the top left hand
corner the defects warranty amounts being
claimed by the Defendant.
[202] Amongst the sums stated therein
with regards the defects warranty claims by
the Defendant is stated a sum of
USD36,200,038.84, which sum corresponds
to the sum stated in the Plaintiff’s letter
dated 19.8. 2016 at Enclosure 100 exhibit
SBM-5 pages 1-3.
[203] I am constrained, in the light of the
evidence adduced, to agree with the
Defendant that the allegation by the Plaintiff
that the call on the Bank with regards the
Bond was premature, unjustified and
unsustainable is therefore wholly
unfounded. Even if one were to accept for
the purpose of argument that the
Defendant must produce all reasonable
and properly documented direct costs
incurred in carrying out such remedial
works, any dispute as to what is reasonable
and what is sufficiently supported by
documents are mere contractual disputes
that do not come near to unconscionable
conduct lacking in bona fides or for that
matter, something more sinister as in
pricking one’s conscience.
…
[205] The Plaintiff having agreed to
provide a Bond upon the above said terms,
is bound thereby. Whilst one may look at
the Underlying Contract to ascertain if any
conduct of the Defendant may be
fraudulent or unconscionable, one must be
able to appreciate that mere contractual
disputes, not uncommon where remedial
works are concerned, should not be
elevated to the level of unconscionability
and thus denuding it of its commercial
currency and efficacy. Neither can the right
of the Defendant to make a call on the Bond
be dependent upon the Defendant proving
conclusively the reasonable and properly
documented costs in this case and much less
is it dependent on agreement or consent of
the Plaintiff as to the Defendant’s defects
warranty claims with respect to the defects
work.”