Court allows appeal; correspondence did not waive limitation defence despite settlement discussions.

THE SUPREME COURT

Keane C.J.

Murphy J.

McGuinness J.

64/2000

BETWEEN:

DESMOND RYAN

Plaintiff

.v.

MICHAEL CONNOLLY AND ANNE MARIE CONNOLLY

Defendants

JUDGMENT delivered the 31st day of January 2001 by Keane C.J.

This case raises again an issue which has concerned the courts on a number of occasions, i.e. the circumstances in which a

defendant should not be permitted to rely on a defence under the Statute of Limitation which would otherwise be available to him.

The facts are largely not in dispute. The plaintiff, who was riding his motor bicycle at the time, was involved in a collision with a motor

car, the property of the first named defendant, at Furbo Bridge in Co. Galway on the 26th April 1995. The plaintiff sustained injuries in

the collision and his motor bicycle was damaged. On the 23rd May, 1995, his solicitors wrote to the first and second named defendant

claiming that the accident was the result of her having driven out from a side road in front of the plaintiff and stating that he was

claiming damages against her. She was asked to pass the letter on to her insurers.

The latter - Hibernian Insurance - wrote on the 11th July 1995 to the plaintiff’s solicitors a letter headed “without prejudice”. The

remaining letters from them to the plaintiff’s solicitors in the sequence of correspondence which followed were, with one exception,

similarly headed. In the letter of 11th July, the insurance company raised a number of queries with the plaintiff’s solicitor, such as the

negligence alleged against their insured, the injuries alleged to have been suffered by the plaintiff, an estimate for repairs to the

motor bicycle etc. The letter ended:-

“On receipt of your reply and when our own investigation has been concluded, we shall advise you immediately as to our

decision on liability. The above requests are made without prejudice to liability on our insured’s part.”

The plaintiff’s solicitors replied on the 1st September 1995 giving the information requested. Arrangements were also made for a

medical examination by the insurance company’s doctor of the plaintiff.

On the 9th July, 1996, the insurance company wrote to the plaintiff’s solicitors as follows:-

“With regard to the above matter we refer to previous correspondence and confirm that we have obtained a medical report

on your client.

“We have concluded the damage claim direct with your client’s insurers, Norwich Union.

“Please advise if you are in a position to discuss settlement at this time.

“We await hearing from you.”

The plaintiff’s solicitor replied on the 24th July 1996, stating that they were awaiting an appointment for an up-to-date medical report

and, as soon it came to hand, would be in touch with the insurance company.

On the 13th March 1997, the insurance company wrote to the plaintiff’s solicitors as follows:-

“With regard to the above matter we refer to previous correspondence.

“Please advise if you are interested in discussing the case with us at this time.

“We look forward to hearing from you.”

No reply was apparently received to that letter and they wrote again on the 30th October 1997 as follows:-

“We refer to the above and to previous correspondence in connection with same.

“Could you please advise if you are in a position to meet for settlement discussions at the October Galway High Court or

alternatively the February 1998 Galway High Court.”

There was also correspondence between the insurance company and the plaintiff’s solicitor concerning an abortive medical

examination, which it is unnecessary to refer to in detail. On the 27th January 1998, the insurance company wrote as follows:-

“Could you please advise if you are in a position to meet for discussions at the forthcoming Galway High Court.”

That letter was apparently also not replied to and they wrote again on the 2nd July 1998 as follows:-

“Could you please advise if you are in a position to meet for without prejudice talks at the forthcoming Galway High Court

sessions.

“We have tried to phone your office on a number of times in relation to this matter but have been unable to get through.”

It should be noted that, at the stage when that letter was written, the limitation period of three years within which proceedings had

to be instituted under the Statute of Limitations, 1957, had expired.

On the 30th April 1999, the plaintiff’s solicitors wrote to the insurance company and asked them to nominate a solicitor to accept

service of proceedings. These proceedings were then instituted by way of a plenary summons on the 11th December 1998. A

statement of claim was delivered on the 11th June 1999 and in their defence delivered on the 14th July 1999, the defendants pleaded

that the action was now statute barred by virtue of the provisions of s. 11 (2)(b) of the Statute of Limitations 1957 (as amended). In

addition to a joinder of issue, the plaintiff’s reply contained the following plea:-

“(3) Without prejudice to the foregoing the conduct and representations express and implied of the defendants herein, their

servants or agents, from the time of notification of the motor collision of the 26th April 1995 up to the commencement of

proceedings herein by plenary summons dated 11th December 1998 caused and induced the plaintiff to refrain from issuing

proceedings within the period prescribed by statute.

“(4) By reason of the aforementioned conduct of the defendants, their servants or agents, the defendants are estopped from

relying on the provisions of the Statute of Limitations 1957 as pleaded.”

A preliminary issue was then directed to be tried as to

“whether the plaintiff’s claim herein is or is not statute barred by virtue of the provisions of s. 11 (2)(b) of the Statute of

Limitations 1957 (as amended).”

That issue was heard by Kelly J. in the High Court. He said that he considered that the essential issue which he had to determine was

not whether the action was statute barred - it clearly was - but whether the defendants were precluded from standing on their legal

rights by virtue of the circumstances which arose in this case. He determined that issue in favour of the plaintiff and the defendants

now appeal to this court from his judgment and order.

In an affidavit which was before the High Court, Mr. Dalton, the solicitor for the plaintiff, said that the correspondence from the

insurance company indicated to him that the plaintiff’s material damage claim had been concluded with his insurers directly and that

the defendants’ insurers were anxious to engage in settlement discussions. Mr. Dalton said that he had at all times considered this

case to be one that would be settled with the insurance company once he was in a position to meet with them and that in those

circumstances he refrained from issuing proceedings within the time prescribed by the statute. He said that a climate had been

created by the defendants’ insurers in which settlement of the case was anticipated when all the parties were ready to meet.

Two issues arose in the High Court and again in this court. The first was as to whether, given that virtually all the letters emanating

from the insurance company on which the plaintiff rely were headed “without prejudice”, this correspondence was privileged and could

not be taken into account by the court. The second was as to whether, assuming the court was entitled to have regard to the

correspondence, the circumstances were such as to preclude the defendants from maintaining the plea under the statute.

As to the first issue, the law is thus stated in Halsbury’s Laws of England (Fourth Edition, Vol. 17, para. 212):-

“Letters written and oral communications made during a dispute between the parties, which are written or made for the

purpose of settling the dispute and which are expressed or otherwise proved to have been made ‘without prejudice’ cannot

generally be admitted in evidence.”

It is clear that this rule has evolved because it is in the public interest that parties should be encouraged, so far as possible, to settle

their disputes without resort to litigation. If parties were in the position that anything they said or wrote in the course of

negotiations, even when expressly stated to be “without prejudice” could subsequently be used against them, they would

undoubtedly be seriously inhibited in pursuing such negotiations. That is how the rule was explained in Cutts .v. Head, ([1984] Ch.

290) and it is clear from that and other authorities that the presence of the heading “without prejudice” does not automatically

render the document privileged. In any case where the privilege is claimed but challenged, the court is entitled to look at the

document in order to determine whether it is of such a nature as to attract privilege.

The rule, however, although firmly based on considerations of public policy, should not be applied in so inflexible a manner as to

produce injustice. Thus, where a party invites the court to look at “without prejudice” correspondence, not for the purpose of holding

his opponent to admissions made in the course of negotiations, but simply in order to demonstrate why a particular course had been

taken, the public policy considerations may not be relevant. It would be unthinkable that the attachment of the “without prejudice”

label to a letter which expressly and unequivocally stated that no point under the Statute of Limitations would be taken if the

initiation of proceedings was deferred pending negotiations, would oblige a court to decide, if the issue arose, that no action of the

defendant had induced the plaintiff to refrain from issuing proceedings.

It follows that, in a case such as the present, the court is entitled to look at the “without prejudice” correspondence for the purpose

of determining whether the circumstances were such that the defendants should not be allowed to maintain their plea under the

Statute of Limitations.

That brings me to the second issue. In Doran .v. Thompson Ltd. (1978) IR 223, a decision of this court, Griffin J. said:

“Where one party has, by his words or conduct, made to the other a clear and unambiguous promise or assurance which was

intended to affect the legal relations between them and to be acted on accordingly, and the other party has acted on it by

altering his position to his detriment, it is well settled that the one who gave the promise or assurance cannot afterwards be

allowed to revert to their previous legal relations as if no such promise or assurance had been made by him, and that he may

be restrained in equity from acting inconsistently with such promise or assurance. The representation, promise or assurance

must be clear and unambiguous to found such an estoppel: see Bowen L.J. at p. 106 of the report of Low .v. Bouverie. (1891)

3 Ch. 82.”

Applying that general principle to the category of cases in which a defendant may be held to be precluded from relying on a defence

otherwise available to him under the Statute of Limitations, the learned judge added:

“If the defendants’ insurers had made a clear and unambiguous representation (in the sense I have explained) that liability was

not to be in issue, and the plaintiff’s solicitor had withheld the issue of proceedings as a result, I would have held that the

defendants were estopped from pleading the Statute of Limitations.”

In an earlier passage, Griffin J. had pointed out that, for the principle laid down in Low .v. Bouverie to apply, it was not necessary

that the representation should be one “positively incapable of more than one possible interpretation”. A party seeking to rely on the

principle cannot, in other words, rely on a strained or fanciful interpretation of the words used: he must show that it was reasonable

in the circumstances for him to construe the words used by the other party in a sense which would render it inequitable for that party

to rely on the defence under the Statute of Limitations.

I would make one further comment on the statement of the law in Doran .v. Thompson. The fact that a defendant has expressly and

unambiguously conceded the issue of liability in a case will not necessarily of itself make it reasonable for the plaintiff to assume that

he can defer the institution of proceedings beyond the limitation period. Where an insurance company within days of the accident

accepts that no issue on liability arises - e.g. in the case of a passenger wearing a safety belt - but for some reason the subsequent

negotiations become dormant, the plaintiff may well find himself unable to rely on the principle under consideration if he permits the

limitation period to expire without instituting proceedings. In the absence of a statement by the insurance company from which it was

reasonable to infer that, in the event of proceedings not being instituted within the limitation period they would refrain from relying on

a defence under the statute, there seems no reason in principle why the insurance company should be subsequently precluded from

relying on such a defence.

On any view, however, it is clear that a plaintiff who seeks to rely on the law as laid down in Low .v. Bouverie and Doran .v.

Thompson must be in a position to satisfy the court that there was a clear and unambiguous representation by the defendants that

liability would not be in issue from which it was reasonable for the plaintiff to infer that the institution of proceedings was

unnecessary. The issue that arises on this appeal is as to whether the High Court was correct as a matter of law in holding that in

this case the principles to which I have referred applied.

I have already summarised the relevant evidence on affidavit of Mr. Dalton, the solicitor for the plaintiff. In his judgment, the learned

High Court judge had this to say about that evidence:-

“It therefore seems clear that the plaintiff’s legal advisers did in fact infer as a result of that correspondence that the Statute

of Limitations would not be raised against them. The net issue which I have to decide is whether it was reasonable to so infer.

If it was, then it would follow that the attempt on the part of the defendant’s insurers to raise the Statute of Limitations

would be inequitable.”

I cannot, with respect, accept that the first sentence in that passage accurately summarises what Mr. Dalton said in his affidavit.

With commendable restraint, he went no further than saying that the correspondence indicated to him that the insurance company

were anxious to engage in settlement discussions. He may well have been justified in anticipating that the case would be settled but

there was no justification for inferring, and he does not claim to have inferred, that the defence under the Statute of Limitations

would not be relied on, if the case was not settled and proceedings were not issued within the limitation period. The insurance

company were undoubtedly interested in having negotiations for a settlement with the plaintiff’s solicitor, but I can find nothing in the

correspondence to indicate that they were effectively treating the case as one in which any defence on liability was being

abandoned, still less as one in which they would regard the institution of proceedings as superfluous and would not raise the Statute

of Limitations as a defence if, for any reason, proceedings were instituted outside the limitation period.

In this court, Mr. Henry Abbott, S.C., on behalf of the plaintiff, relied strongly on the letter of the 9th July in which the insurance

company informed the plaintiff’s solicitor that they had concluded the damage claim direct with the plaintiff’s insurers. It is, of course,

well known that insurance companies, in cases where the owners of two vehicles involved in a collision are comprehensively insured,

dispose of the claims arising from the damage to the vehicles on what is sometimes called “a knock for knock” basis. It may be that

that was what the insurance company were conveying to the plaintiff’s solicitor in their letter of the 9th July. What is certain is that

the mere fact that the damage to the plaintiff’s motor bicycle had been dealt with by agreement with his insurance company - and

the implication that it could, as a result, be excluded from any settlement negotiations or any claim in proceedings - could not, on any

view, have been reasonably construed as an unambiguous indication by the defendants that liability in respect of the plaintiff’s

personal injuries claim was being conceded. A fortiori, it could not be read as a representation that, in the event of proceedings being

instituted by the plaintiff at a later stage outside the statutory period, no defence under the Statute of Limitations would be raised.

It has to be pointed out that, in cases such as this, the expense which a plaintiff’s solicitor incurs on his client’s behalf in issuing a

plenary summons in order to prevent the statute running is comparatively small: the consequences, by contrast, of refraining from

issuing proceedings can be extremely serious.

I would allow the appeal and substitute for the order of the High Court an order determining that the defendants are not precluded

from relying on a defence under the Statute of Limitations, 1957.