DIVISION: IN THE HIGH COURT, ACCRA
DATE: 22ND MAY, 1961
BEFORE: OLLENNU J.
NATURE OF PROCEEDINGS
RULING on an application by the defendants to stay legal proceedings because of arbitration clauses
contained in policies of insurance.
COUNSEL
E. Akufo-Addo (with him Swaniker) for plaintiff – respondent.
E. N. P. Sowah for defendants-applicants.
JUDGMENT OF OLLENNU J.
The plaintiff’s claim is based upon two policies of insurance in which the plaintiff is the insured and the defendant-company the insurers. The defendant-company entered an appearance but have not yet filed a statement of defence.
Clause 18 of the first policy is as follows:
“If any difference arises as to the amount of any loss or damage such difference shall independently of
all other questions be referred to the decision of an arbitrator, to be appointed in writing by the parties in
difference, or, if they cannot agree upon a single arbitrator, to the decision of two disinterested persons
as arbitrators, of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party. In case either party shall refuse or fail to appoint an arbitrator within two calendar months after receipt of notice in writing requiring an
appointment, the other party shall be at liberty to appoint a sole arbitrator; and in case of disagreement
between the arbitrators, the difference shall be referred to the decision of an umpire who shall have
[p.254] of [1961] GLR 252
been appointed by them in writing before entering on the reference and who shall sit with the arbitrators
and preside at their meetings. The death of any party shall not revoke or affect the authority or powers of
the arbitrator, arbitrators or umpire respectively; and in the event of the death of an arbitrator or umpire,
another shall in each case be appointed in his stead by the party or arbitrators (as the case may be) by
whom the arbitrator or umpire so dying was appointed. The costs of the reference and of the award shall
be in the discretion of the arbitrator, arbitrators or umpire making the award. And it is hereby expressly
stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.”
Clause 14 of the second policy is in the same terms as clause 18 supra.
By reason of those arbitration clauses in the said policies, the defendant company have moved the court to stay proceedings of the suit on the grounds that the dispute had not been referred to an arbitrator or to arbitrators. The application was made under section 5 of the Arbitration
Ordinance,1(1) which provides as follows:
“5. If any party to a submission, or any person claiming through or under him, commences any legal proceedings in any Court against any other party to the submission, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to such legal proceedings may at any time after service of the writ of summons and before the date fixed for hearing apply to that Court to stay the proceedings; and that Court or a Judge thereof, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission, and that applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings.”
In opposition to the defendants’ application the plaintiff filed an affidavit contending that this is not a
proper case in which the court can stay proceedings. In support of his contention the plaintiff exhibited to his affidavit some correspondence which passed between him and the defendants prior to the institution of the suit. The first of the said correspondence, exhibit NMJ1, written by the defendant company, is marked “Without Prejudice”. It also appears from the body of the fourth letter, exhibit NMJ4, that it too was written without prejudice; therefore the other two letters exhibit NMJ2 and exhibit NMJ3 which form part of the set of correspondence on the subject must themselves be deemed to have been written without prejudice.
Counsel for the defendant company urged the court to reject the affidavit and the correspondence exhibited thereto on the grounds that the said correspondence having been made without prejudice are protected and cannot be received in evidence against a party as admissions. Counsel for the plaintiff on the other hand submitted that the subjects of the said correspondence are not the matters in dispute in the present application and therefore are admissible even though they have been marked “Without
Prejudice”. Both counsel referred the court to Phipson’s Evidence (9th ed.), pages 233-4, where the subject is discussed.
The law as I understand it, is that letters written during bona fide negotiations or attempts to settle or
compromise a dispute cannot, on the
[p.255] of [1961] GLR 252 grounds of public policy, be given in evidence as admissions; Paddock v. Forrester,2(2) Oliver v. Nautilus Steam Shipping Co. Ltd.3(3) If it were not so, attempts at extra-judicial settlement of disputes will not have favourable consideration by parties, as it will expose them to risks of being trapped by their opponents and operate to their own detriment. But that protection which the law affords to letters written without prejudice does not extend to independent facts admitted during the
negotiation for a settlement; Kurtz v. Spence,4(4) Watt v. Watt,5(5) Waldridge v. Kennison.6(6) In
other words, letters marked “Without Prejudice” cannot be admitted to prove admissions made on the
actual subject of a dispute which the parties negotiated to settle and in connection with which settlement or attempted settlement they wrote the letter expressly or impliedly offering compromise;
but written admissions or statements of facts made in the course of the settlement, which do not directly or by necessary implication have bearing on the subject-matter of the dispute, are admissible, even though the correspondence in which they were made are clearly marked “Without Prejudice”:
see Phipson’s Evidence, (9th ed.) pages 233-4 and the cases cited above.
Therefore for the court to be able to determine whether or not the substance or the particular
correspondence which the plaintiff relies upon to sustain his opposition to the motion is the same as the matter in dispute between the parties in this motion, the court must look at the letters with particular reference to the main topic, as well as to independent matters, if any, dealt with in them.
Now this application for stay of proceedings has been brought on the grounds that a dispute exists
between the plaintiff and the defendant as to quantum of loss or damage payable by the defendants to
the plaintiff under the two policies, which dispute by virtue of clause 18 of the first policy and clause 14 of the second policy should have been referred by the parties to arbitration, and that dispute not having been so referred to arbitration, cannot in law be sued upon. That being the point of the motion, if the correspondence marked “without prejudice” is shown to be correspondence entered into on the basis that the liability of the defendants was not in dispute, then, clearly, offers of compromise of the amount of the loss or damage made in that correspondence will not be admissible.
Now a close study of the correspondence in question reveals that up to the time the suit was instituted no dispute had as yet arisen as to the amount of loss or damage suffered by the plaintiff; and that is so,
because the defendants had all along denied liability. Therefore the dispute with which the correspondence was concerned was as to the defendants’ liability under the two policies and not as to quantum of damage or loss which the defendants are liable to pay the plaintiff.
[p.256] of [1961] GLR 252
The letters further show that the offers made “without prejudice” are offers of ex gratia payments by
the defendants to the plaintiff , and to no other issue. But in those same letters there appeared categorical statements by the defendants on quite a different and distinct matter, namely the defendants’ primary liability under the two policies; in other words, a dispute as to whether or not
circumstances exist which should make the defendants liable to reimburse the plaintiff for loss,
whatever that loss or damage may be; for without such liability on the part of the defendants the question of the amount payable cannot arise. Quite clearly therefore that correspondence is admissible in this motion and I accordingly rule that the correspondence, exhibits NMJ1, NMJ3 and NMJ4, is admissible.
Now clause 18 of the first policy and clause 14 of the second policy cannot invoke the application of section 5 of the Arbitration Ordinance,7(7) unless the defendants have first of all admitted liability under the two policies, and the sole outstanding dispute is the amount of the damage or loss payable by the defendants to the plaintiff. If liability is denied expressly or by necessary implication, then no dispute can possibly arise as to quantum or loss. The main question therefore is: Have the defendants
taken the first step which could eventually lead to a dispute as to quantum? In other words, have they
ever admitted liability generally on the policies to bring themselves into a situation of dispute with plaintiff as to the extent of their said liability? To ascertain whether or not they have, we must look at the correspondence exhibited to the plaintiff’s affidavit. In exhibit NMJ1 the defendants said inter
alia:
“whilst we are not at this stage able to admit liability, since at the time of writing the cause of the Fire is
still unknown . . .
In view of the foregoing you will appreciate that any claim under Loss of Profits Policy No. 104, should
we later admit liability . . .”
And in exhibit NMJ4 the defendants stated as follows, among other things:
“Further to our letter dated 9th of February, we are instructed by our clients to state that at no time had
they accepted liability for any loss occasioned by the fire which occurred on the premises. Our Clients of
course are not liable in the sum of £16,300 claimed by you or any part thereof. In spite of the fact that
our Clients rejected liability as aforesaid…”
These passages when read together with the whole of the correspondence, show a positive and categorical denial by the defendants of the fundamental liability.
Under the relevant clauses of the two policies, the only dispute to be referred to arbitration is
“differences as to amount of any loss or damage”. Therefore if the suit before the court were for determination of a dispute as to the amount payable to the plaintiff by the defendants as damage or loss the plaintiff suffered in consequence of the accident, the plaintiff claiming a certain figure as the damage of loss he suffered from the accident, and the defendants, while admitting liability,
contending that the amount of the loss or damage is not as high as the plaintiff represents it to be, the suit would be one which the court could properly stay by virtue
[p.257] of [1961] GLR 252
of section 5 of the Arbitration Ordinance. In the present suit, although specific amounts are claimed by the plaintiff as the amounts of the damage or loss he has suffered from the accident, the real essence of the dispute is whether or not he has suffered any loss or damage at all which could make liability of the defendants under the two policies mature.
That dispute between the parties cannot form the subject of arbitration in terms of the arbitration clauses in the two policies, and so there will be no legal justification for staying the proceedings. The application for stay is therefore refused with cost fixed at 25 guineas.
DECISION
Application dismissed.
