WITHOUT PREJUDICE DEVELOPMENTS

According to Sarah Cook of ACID Accredited law firm DMH Stallard, “The High Court has confirmed that without prejudice exchanges can be admissible in Court to help identify and determine the meaning of terms contained within settlement agreements”.

Many ACID members are familiar with the term “without prejudice” but the legal implications of its use are not always clear-cut. A common misconception is that marking something “without prejudice” means the Court will never get to see it. That is not necessarily right.  Only documents and negotiations which contain genuine attempts to settle disputes are protected, whether or not they are marked without prejudice.  This prevents fraud and misrepresentation from being hidden under the cloak of the without prejudice rule.  But it doesn’t stop there.

In order to arrive at a fair outcome in the case of Oceanbulk Shipping & Trading AS v TMT Asia Limited and 3 others the High Court had to consider whether without prejudice exchanges leading to a settlement agreement were admissible.  Oceanbulk alleged TMT had defaulted on a without prejudice settlement agreement and owed it $40.5 million.  TMT alleged that, due to a complicated transaction known as “sleeving”, where companies hedge their position on future freight prices, the amount owed to Oceanbulk was significantly less.  Evidence of the parties’ discussions regarding sleeving was identifiable from without prejudice negotiations. The Court found that evidence was admissible to identify the terms of the agreement and their meaning. 

BirkbeckSarahcpSarah Birkbeck, a Partner of DMH Stallard LLP, comments: “This is not a surprising outcome and negotiating parties should always be cautious about what they say to each other and remember the context in which discussions are taking place”.So whilst the without prejudice rule remains in place, negotiations should be conducted with the  possibility of admissibility in mind, if it could help resolve any ambiguity that arises in an ensuing settlement agreement.

Sarah Birkbeck DMH Logo 

 

Oceanbulk Shipping & Trading SA v TMT Asia Limited & 3 Others [2009] EWHC 1946 (Comm)

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