One of the cornerstones of the way Courts approach disputes is that parties should be encouraged to seek to resolve any disputes via alternative routes, such as mediation and negotiation. To encourage this, certain communications between the parties, which are genuinely aimed at achieving settlement, whether made in writing or given orally, are deemed as being sent without prejudice.
Protection in negotiation
In simple terms, without prejudice correspondence cannot be given in the case as evidence by the other party, should the matter proceed to litigation, in order to gain a more favourable settlement. This protection allows parties to make offers and statements that they might otherwise opt against, without such being used against them at any full trial.
It is important to note that correspondence may often be headed with the words ‘without prejudice subject to costs’. In such cases, relevant statements and correspondence may be given in evidence after the main judgment is given in the case when the Court is adjudication on costs.
Naturally, there are exceptions to this rule; these are obviously limited, as an extensive list of such exceptions would mean that parties would have to continuously consider whether any statement they were making could in fact be adduced in court, thus undermining the very basis for the rule. In a unanimous decision, the Supreme Court added a fresh exception in the case of Oceanbulk Shipping v TMT  UKSC 44.
The exceptions that existed prior to Oceanbulk Shipping are stated below: –
The Oceanbulk Shipping case
In simple terms, following certain agreements between the parties (specifically ‘Froward Freight Agreements’) TMT owed at least $40m to Oceanbulk with significant further potential exposure. Pursuant to this, the parties decided to enter into negotiations in an attempt to come to a mutually satisfactory resolution. Naturally, due to the possibility of matters ultimately ending up before the Court, the parties carried out such negotiations on a without prejudice basis. The parties arrived at a settlement and drew up a written agreement recording such.
The litigation in the instant case arose subsequent to an allegation by Oceanbulk that TMT had broken the agreement, and the dispute centred on a matter of interpretation of certain clauses. To support their case, TMT wished to raise statements made during the negotiations as evidence in favour of their interpretation. The Court held that it is permissible to refer to such evidence for the purpose of establishing what was agreed. In reaching the decision, the Court considered that, even though such negotiations were without prejudice, as they ultimately resulted in a contract being formed it is necessary that evidence of such negotiations can be given, in order to interpret the resulting contract.
Effect in Jersey
Whilst this is a decision taken by the Supreme Court in the UK, Jersey will in general follow developments in the English law, as regards matters that are communicated without prejudice. Whilst it remains to be seen how this exception will develop, practitioners involved in any such attempts at settlement, which may ultimately be subject to the jurisdiction of the Royal Court, would do well to bear this new exception in mind, and to consider the fact that they cannot rely on the without prejudice rule to withhold evidence that may point to an unfavourable interpretation of the contents of any agreement that is made between parties.
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