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Exception to without prejudice rule

Written by Paul Bicknell on 01 December 2010

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What is the Without Prejudice rule?

Correspondence that is Without Prejudice ("WP") are those which are a genuine attempt to settle a dispute. Such correspondence is privileged and therefore cannot be put before the court as or in support of evidence as to admissions against the other party which made the same.

On looking at correspondence marked without prejudice Lindley LJ stated in Walker v Wilsher (1889) 23 QBD 335 at 337: "I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one."

Oceanbulk Shipping & Trading SA (Respondent) V TMT Asia Ltd & Ors [2010] UKSC 44

Background

The dispute in the proceedings concerned a number of freight forward agreements. Parties agreed settlement by written agreement. A dispute arose as to the construction of a term under the agreement.

Issues

TMT appealed against a decision that evidence of without prejudice communications with Oceanbulk could not be adduced as to assist the court on the construction of the term under the agreement. The issue was whether the court should, as an exception to the without prejudice rule, allow a party to rely on facts shown in the without prejudice communication between parties.

Held

The court found that there was no reason why such information cannot be adduced to aid the court in the interpretation of the settlement agreement.

The court found: "this question should be answered in the affirmative...".

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