Without Prejudice Letters: When & How Can They Be Admissible In Malaysian Court?

What is a Without Prejudice (“WP”) Letter you ask?

Well, it is literally a letter with a small part somewhere on the document labelled “WITHOUT PREJUDICE”.

A) What does that mean?

In legal terms, “Without Prejudice” means ‘without detriment to the legal rights’ of the party initiating the WP communication. In practice, a WP letter or communication is done between parties who embark on an attempt to resolve the case or dispute between them without admission of liability. Meaning to say, the Defendant in a Suit will make a genuine offer to settle the matter but this offer for settlement cannot be construed as an admission to the claim by the Plaintiff.

This sort of looks like one party saying:

“Hey man, I’m not saying I did it…..but…. I am willing to pay RMxxxx or do xxxx to settle this dispute, but again… I am not saying I did it.”

As a general rule, WP communications are strictly confidential and cannot be used against the maker in the court of law. Chang Min Tat FJ delivering the judgment of the Federal Court in MALAYAN BANKING BHD V. FOO SEE MOI [1981] 2 MLJ 17 lucidly laid down the law in these words:

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 the negotiations, so that a solution acceptable to both sides can be more easily reached.

There are however exceptions to this rule.

Exception 1 : When the WP Negotiations conclude in a Settlement

In DUSUN DESARU SDN BHD & ANOR v. WANG AH YU & ORS [1999] 2 CLJ 749, his Lordship Abdul Malik Ishak J discussed the issue of documents or letters with the label “without prejudice” and the question as to when a document would lose its privilege status. His Lordship answered as follows:

” … once the settlement is negotiated successfully and the matters finalised completely, then the document will lose its sting as a privilege document because its purpose is now complete and at an end (Knappa v. Metropolitan Permanent Building Society Association [1888] 9 LR (NSW) 468; 5 WN (NSW) 27; and South Shropshire District Council v. Amos [1987] 1 All ER 340)…. “.

Hence, the privilege will be lost only when the settlement is completely and successfully negotiated i.e. resulting in a binding agreement/contract between parties. A breach of which will allow the innocent party to rely on the WP letters/communications in a court of law.

Exception 2 : Waiving of Privilege by both Parties

The Singapore High Court in A-B CHEW INVESTMENTS PTE LTD V. LIM TJOEN KONG [1989] 2 CLJ 1109 held:

“I am also of the view that the privilege has in any case been waived by the defendant. It is clearly established that the privilege can be waived with the consent of both parties: McTaggart v. McTaggart[1940] p. 94. The privilege may be waived by the person entitled to claim it, either expressly or by allowing evidence to given of matters in respect of which privilege might have been claimed: para. 235 Halsbury’s Law(4th Edn.,) Vol. 17.

It is abundantly apparent from the exchanges in the affidavit filed that both parties have delved at considerable length on the contents of the negotiations and have referred to matters which would otherwise be privileged.“

In the Dusun case, it was further held that a waiver of privilege can be deduced by conduct as well:

As with the other forms of privilege, waiver may be implied by conduct (Trade Practices Commission v. Arnotts Ltd [1989] 88 ALR 69). There was thus a waiver on the part of the plaintiffs of the privilege shield when they first introduced the “without prejudice” letter in encl. 4. This was my judgment and I so hold accordingly. To hold otherwise would be perverse and against the great mass of authorities.

Not an Exception : What if the Letter is not marked as WP?

In Rush & Tompkins Ltd v. Greater London Council [1989] 1 AC 1280, the House of Lords ruled that genuine negotiations with the sole object of settlement are protected from disclosure whether or not the “without prejudice” label has been expressly employed in the negotiations.

The ‘without prejudice’ 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.