Oceanbulk Shipping & Trading SA v TMT Asia Ltd & Ors

Without-prejudice communications made during negotiations resulting in a settlement agreement may be admitted to determine the agreement’s terms and meaning, provided they would otherwise be admissible. The privilege does not justify excluding relevant evidence of the contractual background merely because the negotiations were conducted without prejudice. The same evidence may be used on other issues, including remoteness of damages and estoppel, where relevant. The court must still apply the ordinary rules governing admissibility and contractual construction, and should scrutinise the evidence for probative value. Exceptions to the without-prejudice rule remain narrowly controlled because the rule encourages parties to settle disputes.

The claimant and defendants were parties to freight forward agreements and subsequently entered into a written Settlement Agreement after disputes arose over unpaid settlements and continuing exposure under the agreements.

The claimant sought to strike out parts of the defendants’ pleading and obtain a declaration that evidence of the negotiations leading to the Settlement Agreement was inadmissible because the negotiations were without prejudice. The defendants sought to rely on the negotiations to construe the Settlement Agreement, resist the claim for damages as too remote, and advance an estoppel case concerning the parties’ understanding of the transactions.

1. Without-prejudice status. The relevant communications and meetings were without prejudice. A communication need not bear that label where the circumstances show that the parties were negotiating to settle a dispute. The 10 June 2008 email was privileged insofar as it made proposals intended to resolve a difference arising in the solicitors’ settlement negotiations; the absence of an express label was not decisive.
2. Scope of the privilege. The without-prejudice rule is founded on both party agreement and public policy. It is broad and exceptions must not be readily extended. It protects the substance of negotiations, not merely identifiable admissions.
3. Construction of the Settlement Agreement. Evidence of without-prejudice negotiations is admissible to establish whether a settlement agreement was concluded and what its terms were. It is also admissible to determine the meaning of those terms. The distinction between identifying terms and interpreting them may be fine, and there was no cogent reason to draw it. Justice favoured admitting relevant evidence of the contractual context, subject to the ordinary rules in Prenn v Simmonds and Chartbrook Ltd v Persimmon Homes Ltd.
4. Other issues. The defendants could plead and prove the negotiations insofar as relevant to remoteness of damages and assumption of responsibility. They could also rely on them to support a relevant estoppel, consistently with Unilever plc v Proctor & Gamble Co and Hodgkinson & Corby Ltd v Wards Mobility Services Ltd.
5. The claimant had not waived privilege by failing to raise the issue in the case-management list of issues. The strike-out and declaration sought by the claimant were refused. Further submissions were invited on the precise amendment and case-management consequences.