Are “Without Prejudice” offers truly without prejudice?

In the world of legal settlements and debt negotiations, the term “without prejudice” has often been used to signify an offer or agreement that cannot be admitted or revealed in court proceedings. However, recent insights from legal rulings raise questions about the true nature of these agreements. PJ Veldhuizen, Managing Director of Gillan and Veldhuizen attorneys, sheds light on the matter.

In a recent statement, Veldhuizen stated, “Both individuals and corporations must understand the implications of ‘without prejudice’ offers when you are proposing to settle debts. While they may seem protective, they can inadvertently make you vulnerable, especially if you admit an inability to pay immediately.”

The Supreme Court of Appeal has weighed in on this matter, ruling that a debt settlement negotiation, marked as ‘without prejudice,’ may not earn privilege under certain circumstances. Public policy considerations come into play when there’s clear evidence of an inability to pay the debt immediately.

Veldhuizen elaborates, “Let’s say an individual owes a debt and proposes a settlement arrangement, acknowledging that they can’t make an immediate payment but can pay in instalments over several months. While correspondence may be marked as ‘without prejudice,’ admitting an inability to pay the immediate debt can be seen as an act of insolvency. This admission can potentially lead to a sequestration application in the case of an individual or trust. Additionally, in the case of a company, although it cannot commit an act of insolvency, an application for liquidation can be filed based on the company’s admission that it cannot pay its debts as and when they fall due.”

In essence, making an offer to pay off a debt can have unintended consequences in the eyes of the law.

Veldhuizen advises individuals, trusts and companies to exercise caution when entering without prejudice financial correspondence.

In all legal agreements between parties, there are inherent vulnerabilities. Veldhuizen stresses the importance of taking proper advice to consider all possible scenarios that have the potential to lead to significant legal complications.

As individuals and businesses grapple with debt settlements and negotiations are high, it becomes imperative to seek legal guidance to understand the nuances of ‘without prejudice’ offers and how they may impact their financial future.

Ends

About PJ Veldhuizen

B PROC (UNISA) CERT. TAX (UNISA) LLM (UCT) MBA (UNISA) F. INST. D OELP (OXFORD)

PJ graduated with a BProc from UNISA in 1997 and went on to achieve an LLM and MBA while building the practice, which he started in 1999 with Joan Gillan. He is a specialist in commercial dispute resolution and corporate law advisory.

PJ has accepted several ministerial appointments including being appointed to the Directorate of Market Abuse a division of the erstwhile Financial Services Board, Chairperson of the Tax Board, Member of the Companies Tribunal, Member of the Financial Services Tribunal, Member of the FICA Appeal Board and a Member of the BBBEE Commission. He is the firm’s Managing Director and an accredited commercial arbitrator and mediator:

• Certification in commercial mediation from Conflict Dynamics in South Africa and CEDR in the UK.
• Certification in advanced mediation of complex disputes from Harvard Law School.
• Certification in commercial mediation from PABASA.
• Commercial Arbitration and Mediation Panel – AFSA & Conflict Dynamics (South Africa) and Abu Dhabi Global Markets Arbitration Centre (UAE).

PJ also holds several non-executive directorships (“NED”):

• Chair of the Cape Town Stadium SOC.
• Vice Chair of the Western Cape Blood Service NPC, Chair of the Social & Ethics Committee, Chair of Risk & Governance Committee.
• NED of SAIT, Chair of Audit & Risk Committee.

About Gillan and Veldhuizen

Gillan and Veldhuizen Inc., co-founded by Joan Gillan and PJ Veldhuizen in 1999 is a boutique law firm offering personal and professional, specialised legal services focusing primarily on corporate and commercial law, dispute resolution and conveyancing.

In 2022 Gillan and Veldhuizen Inc. formed an association with the Phatshoane Henney Group (PHG), the largest group of independent law firms in South Africa to expand our corporate and commercial, specialist services to our clients and to position ourselves for growth.

We are fully BBBEE compliant and currently hold a level 4 scorecard. We are 26% black-owned with PHG having taken up a stake in the firm – this scorecard is a work in progress and we strive to reach a level 3 which is evidenced by our current hiring policy with a focus on employment equity.

Website:         www.gvinc.law.za

Facebook:     https://www.facebook.com/GillanVeldhuizenInc/

Twitter:            @GillanVeldhuizenInc

LinkedIn:         https://www.linkedin.com/company-beta/2585548/

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Phone:            021 701 1890