Supplement 2004, paragraph 14.204.1, explaining that the theory "that all admissions in the course of negotiations towards settlement are protected by a privilege based on public policy" is "now universally accepted in Canada", following the British Columbia Court of Appeal decision in Middlekamp v. Fraser Valley Real Estate Board (1992) 96 DLR (4th) 227 (although one can find earlier authority adopting Wigmore's different theory in Kirschbaum v. "Our Voices" Publishing Co. [1971] 1OR 737, to which Lord Sutherland referred in Daks Simpson Group plc v. Kuiper); (b) as regards Australia, Cross on Evidence (Australian Edition) (J. D. Heydon) (2004) paragraphs 25350 and 25375, where the exception is explained as limited to statements of fact that have "no reference at all to the dispute" or are not "reasonably incidental to [the] negotiations"; and Law of Privilege (McNicol) (1992) pages 477-478, submitting that "future courts should be careful not to restrict without prejudice privilege too much" under this test, and concurring with Lord Griffiths' comments concerning Waldridge v. Kennison; and (c) as regards South Africa, The South African Law of Evidence (formerly Hoffmann and Zeffertt, now Zeffertt, Paizes and Skeen) page 617, where the exception is said to be even more narrowly limited to "admissions that are quite unconnected with or irrelevant to the settlement". In Kapeller v. Rondalia Versekeringskorporasie van Suid-Afrika Bpk 1964 (4) SA 722 (T) (mainly reported in Afrikaans, but summarised in Zeffertt, Paizes and Skeen at page 617), Viljoen R was able to distinguish a clear admission by a motor insurer as to liability in respect of a motor accident from the without prejudice negotiations which followed on that basis regarding quantum, and so to treat the admission as restarting the limitation period. I can understand that line of reasoning. But the Scots cases appear on their facts to me to go considerably further. However, I think it preferable to say no more about the scope of any exception, until a case arises where it falls squarely for determination on the facts.
93. The other, more limited half-way possibility, supported by my noble and learned friend Lord Hoffmann, invokes and seeks to build on his observations in Muller v. Linsley and Mortimer at pages 79F-80A to the effect that (with the one possible conventional qualification relating to costs, to which I have referred) the rationale of the without prejudice rule is directed solely to circumstances where a statement made without prejudice is proposed to be used as an admission in relation to the subject-matter of dispute. The possibility involves distinguishing between the use of Mr Rashid's admission as an acknowledgment to avoid any limitation problem and its use as an admission to prove liability on the merits at trial. In Belanger v. Gilbert [1984] 6 W.W.R. 474, 476, (British Columbia Court of Appeal) (cited in Evidence in Canada at paragraph 14.226), one of the three members of the court, Lambert JA, supported this distinction, saying:
"In my opinion it is possible for a letter to be considered as a "without prejudice" letter and inadmissible in evidence in relation to its contents about the flow of settlement negotiations either on liability or quantum, but at the same time for the same letter to be admissible in evidence for the exclusive purpose of s.5 of the Limitation Act. It is not necessary to decide that question on the facts of this case, and I explicitly do not do so."
In support of this distinction, the argument is no doubt that a debtor who makes an unqualified admission in the course of without prejudice negotiations for the compromise of a dispute is, in effect, encouraging the creditor not to commence proceedings, so that, while it would be wrong to treat the admission as prejudicing the debtor on the merits, it would be equally wrong to allow him to take the benefit of time gained in negotiations when it came to a limitation issue. On the other hand, an acknowledgment may, in this country, be made before or after the date when the limitation period would otherwise expire (a date which may itself also be open to argument in some cases), and it may be said that the public policy in allowing parties to negotiate freely would be undermined if, during any negotiations, they had to keep an eye open for the possible impact on limitation of any admissions they were without prejudice prepared to make. The argument that a creditor may in such a context be encouraged not to commence proceedings may also be said to have a certain circularity, on the basis that a creditor engaging in without prejudice negotiations should always keep an eye on the limitation position for the very reason that the negotiations are without prejudice. However, since the suggested distinction between the different effects (on the merits and on limitation) of one and the same admission were not explored in any detail before us, perhaps for good reason, I think it again best to say no more on the point.
94. For the reasons I have given, I agree that this appeal should be allowed.
Appeal allowed.
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