Wakilii

East African Underwriters v Civil Aviation Authority (Civil Appeal 8 of 2002)

Court of Appeal · [2003] UGCA 12 · 2003 Appeal Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from High Court ruling entering judgment on admission under O.11 r.6 of the Civil Procedure Rules
Decision
Appeal partly allowed; judgment on admission upheld but interest rate reduced from 45% to 20% per annum

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal held that letters written 'without prejudice' were admissible to determine whether a binding agreement arose from settlement negotiations. Applying Tomlin v Standard Telephones, the court found that where a proposal in such a letter is accepted, a complete contract is established despite the 'without prejudice' heading. The appellant's letters clearly admitted liability to settle the respondent's claim under the performance bond, so judgment on admission was properly entered. However, the trial judge's award of interest at 45% per annum, unsupported by reasons and exceeding commercial rates of 20–25%, amounted to a miscarriage of justice and was reduced to 20%. The appeal was allowed only on the interest rate.

Outcome

Appeal partly allowed; judgment on admission upheld but interest rate reduced from 45% to 20% per annum

Facts

The appellant, an insurance company, executed a performance bond with the respondent (Civil Aviation Authority) in favour of Busy Bee International (U) Ltd (BBI), an airline operator. Under the bond, the appellant undertook to pay the respondent 10 million shillings if BBI defaulted on paying for landing, control and navigation services rendered by the respondent. The respondent rendered services worth over 12 million shillings for flights in July and August 1999. BBI issued cheques which were dishonoured. The respondent notified both BBI and the appellant. When BBI took no steps to make good the cheques, the respondent sought recovery from the appellant under the bond. In subsequent correspondence, including letters dated 22 October 1999 and 16 December 1999 marked 'without prejudice', the appellant agreed to settle the claim. The respondent filed suit and an application under O.11 r.6 for judgment on admission. The trial judge held the letters admissible and entered judgment for 10 million shillings with interest at 45% per annum.

Issues

  1. Whether the trial judge was right to find that the appellant had admitted indebtedness where the admission was contained in letters written 'without prejudice'.
  2. Whether letters written 'without prejudice' were admissible to determine whether a binding agreement existed between the parties.
  3. Whether the award of interest at 45% per annum was unreasonably high.

Orders

  • Appeal allowed only to the extent of the rate of interest.
  • Interest rate reduced from 45% to 20% per annum.
  • Appellant to pay two-thirds of the respondent's costs of the appeal.

Rules and key headnotes

Evidence — 'Without Prejudice' Communications — Admissibility to Determine Existence of Binding Agreement
Letters written 'without prejudice' are admissible where it is not possible to determine, without examining them, whether a binding agreement was reached between the parties during settlement negotiations.
Contract Law — Settlement Negotiations — Formation of Binding Contract from 'Without Prejudice' Correspondence
Where a proposal contained in a 'without prejudice' letter is accepted, a complete contract is established, and the letter, though written 'without prejudice', operates to alter the old state of affairs and establish a new one.
Civil Procedure — Judgment on Admission — Order 11 rule 6 CPR
Where a party's correspondence contains a clear and binding admission of indebtedness, judgment may properly be entered on admission under Order 11 rule 6 of the Civil Procedure Rules, and grounds depending on evidence do not arise.
Civil Procedure — Award of Interest — Discretion and Appellate Interference
An award of interest is a matter of the trial court's discretion, and an appellate court may interfere only where a wrong principle was applied or where the rate is so unreasonably high or low as to amount to a miscarriage of justice; an unexplained rate exceeding commercial rates justifies interference.

Legislation cited (1)

  • Civil Procedure Rules O.11 r.6

Cases cited (3)

  • Tomlin v Standard Telephones and Cables Ltd [1969] 3 All ER 201
  • Sietco v Noble Builders (U) Ltd (Civil Appeal No. 331 of 1995)
  • Harbutt's Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

East African Underwriters v Civil Aviation Authority (Civil Appeal 8 of 2002) [2003] UGCA 12 (27 November 2003)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.