This is a Federal Court Landmark case on the admissibility of a without prejudice letter.
Facts of the Case
The Appellant (Malayan Banking Bhd) had obtained a judgment in default (JID) dated 17.07.1970 against the Respondent (Foo See Moi) for a sum of $674,539.53 with interest. If follows by a few correspondences expressed to be without prejudice between the parties and there was an agreement whereby the Respondent should pay a total of $850,000.00 in full settlement.
The material terms were:
The Respondent shall pay a sum of $700,000.00 on or before 30.07.1975.
The Respondent shall the balance sum of $150,000.00 on or before 30.09.1975.
If the Respondent failed to make the payment, Appellant shall treat the terms of this settlement as null and void. The balance of the whole judgment shall immediately fall due and payable to the Appellant.
The Respondent had paid a sum of $800,000.00. Then, Respondent through his solicitor’s letter dated 26.11.1975 inform the Appellant that encountered some problem and they are unable to pay the remaining $50,000.00. The Appellant had given the Respondent time but Respondent still failed to make the payment. Hence, on 10.05.1978, the Appellant rescinded the settlement agreement and demanded the outstanding balance of the JID dated 17.07.1970 together with interest in accordance with the terms of the JID. The outstanding balance as at 31.12.1977 was $187,401.10.
To enforce the JID dated 17.07.1970, the Appellant had applied for a leave from the High Court. The High Court rejected their application. Thus, the Appellant appealed.
It was contended by the Respondent that the judgment debt had been fully settled by the Appellant agreeing to accept a sum of $750,000.00 which he had paid. It was proved to be untrue from the correspondences between the parties. There was an objection to admit these without prejudice correspondences in the High Court but where not raised in the Federal Court.
Judgment of the court
Since there is an amicable settlement reached between the parties, the correspondences can be admissible in court to prove the terms of the settlement.
The Court held:
“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. 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 Court also found that the amount claimed by the Appellant was in accordance with the JID and the JID is still enforceable. Thus, the Court allow the appeal with costs here.
Principles of the Case
Without prejudice letter can be admissible in Court once the negotiation leads to a settlement.