'WITHOUT PREJUDICE' NEGOTIATIONS HELD TO BE ADMISSIBLE

The issue before the Supreme Court in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] BLR 1 was whether facts which (a) are communicated between the parties in the course of without prejudice negotiations and (b) would but for the without prejudice rule be admissible as part of the factual matrix or surrounding circumstances as an aid to construction of an agreement which results from the negotiations, should be admissible in evidence. The Supreme Court concluded that such evidence should be admissible as a further exception to the principle that statements made in the course of without prejudice negotiations are not admissible in evidence.

The facts

The facts of this case are not concerned with the construction industry and so can be set out very quickly (given that our interest in the case lies in three broader issues raised by the case). The parties entered into settlement negotiations on a ‘without prejudice’ basis. The negotiations resulted in the conclusion of a settlement agreement. A dispute then broke out between the parties as to the meaning of a term of that agreement. The defendant sought to rely on two statements by, or on behalf of, the claimant in the course of the ‘without prejudice’ negotiations for the purpose of establishing the meaning of the term. The claimant submitted that the defendant was not entitled to refer to such evidence on the ground that it was inadmissible.