Contractor ordered to repay $11m to Petrotrin

A CONTRACTOR has been ordered by the Appeal Court to repay $11,138,519.00 to former state-owned Petrotrin in a landmark ruling which explored the meaning of "without prejudice" usually placed in letters when people negotiate to settle disputes.

The "without prejudice" rule encourages free discussions without resorting to litigation, in the knowledge that anything said or documents used, would not prejudice either party in court action if talks break down.

A&A Mechanical Contractors and Company Ltd worked on Petrotrin's Block Station #4 in the Soldado Main Field for $26.8 million. That was in 2004 but Petrotrin required additional works and upon completion, A&A sued for payment on the value of the variations.

Petrotrin alleged violation of provisions in the contract, contending that the additional works fell within the scope of the work. But A&A relied on a Petrotrin letter admitting to values of aspects of the variations for $7,291,961.81. Petrotrin contended its letter was "without prejudice" – a privileged document inadmissible at trial.

The judge did not agree the Petrotrin letter should be so be designated, having regard to two meetings between the parties from which the letter emanated. He ruled for A&A.

Petrotrin appealed and Justices Alan Mendonca, Gregory Smith and Judith Jones, delivered written judgments. Attorney Praksh Deonarine and Vijai Deonarine represented Petrotrin while Alvin Fitzpatrick SC, argued the appeal for A&A.

Agreeing with Smith, Mendonca said that despite Petrotrin's letter not marked "without prejudice," the rule could still apply if it was clear that A&A and Petrotrin were negotiating to reach a compromise.

He said, "Whether a communication is without prejudice, is to be determined objectively having regard to the surrounding circumstances. The meetings led to the June letter which outlined where the parties had reached in their effort to resolve their dispute. In those circumstances, the June letter, in my judgment, is a without prejudice communication and accordingly, is privileged and inadmissible. The trial judge should not have relied on it to arrive at his award in respect of all the other variations."

Jones adopted the view that the public interest in the case required that the veil imposed by the "without prejudice" rule, be pulled aside and the Petrotrin letter admitted into evidence. However, she agreed with Mendonca and Smith, that the case be remitted back to the High Court for retrial.

Petrotrin's appeal was allowed and the judges ordered that the case be remitted for retrial which is to proceed without reference to the "without prejudice" letter and meetings between the parties towards a settlement.

They ordered that the sum of $11,138,519.00 be repaid to Petrotrin.