OCEANBULK SHIPPING & TRADING SA V TMT ASIA LTD

[2010] EWCA Civ 79, Court of Appeal (Civil Division), the Right Honourable Lord Justice Ward, the Right Honourable Lord Justice Longmore and the Right Honourable Lord Justice Stanley Burnton, 15 February 2010

Procedure - Shipping - Settlement agreement - Without prejudice communications - Whether evidence of "without prejudice" communications and discussions admissible in a dispute about the interpretation of a written settlement agreement - Estoppel

This was an issue in relation to two actions concerning a number of Forward Freight Agreements (FFAs) between the claimant and the defendant. The claimant and the defendant had been variously the buyer and the seller in relation to the FFAs. Some of these FFAs were "sleeved", that is, they had for commercial reasons been concluded between these parties but were back-to-back (but not coupled) with other identical transactions with third parties. There were monthly payments to make under the agreements and Oceanbulk in June 2008 presented TMT with an invoice which it did not pay. The parties concluded settlement agreement positions. TMT failed to exercise any of the options under the agreements with the effect that, by September, it was instead Oceanbulk which owed TMT money. Oceanbulk claimed in these proceedings that TMT had not complied with the settlement agreement, causing it a loss. An issue arose as to the construction of the settlement agreement, whereby TMT argued that in the course of negotiations, Oceanbulk had made representations that should be admitted in evidence. The relevant fact according to TMT was a representation made by Oceanbulk in the course of negotiations that all or most of the FFAs made by Oceanbulk with counterparties were originally sleeved and continued to be so at the time of the settlement negotiations. Importantly, the relevant fact was said to be that the representation was made, not that the fact said to have been represented was true. Oceanbulk said that, if those representations as to sleeving were made, they were made in the course of negotiating the settlement agreement and were expressly or impliedly made in the course of "without prejudice" discussions and subject to privilege. The issue for determination was whether without prejudice discussions can be given in evidence in support of arguments about construction if they arguably establish a fact which is arguably part of the background to or the matrix of the contractual agreement. The judge at first instance had held that evidence of the without prejudice exchanges was admissible. TMT appealed.