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Litigation | Without Prejudice – A New Exception To The Rule | Parslows Jersey Lawyers

With courts increasingly backlogged, one of the cornerstones of the new Civil Procedure Rules in 1999 was 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. In simple terms, these cannot be given in the case as evidence by the other party should the matter proceed to litigation in order to gain a more favorable 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, those such 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 [2010] UKSC 44.

Exceptions

The exceptions that existed prior to Oceanbulk Shipping are stated below: –

  •  Where preventing the giving of the statement in evidence would act to cover-up ‘unambiguous impropriety’. This is of particular relevance if, say, the evidence would show criminal behavior such as fraud or blackmail;
  •  in cases where the court is being asked for directions in a matter where it has oversight of, e.g., an insolvency. In such circumstances the general principle is that the court needs to be apprised of all relevant information;
  • where an agreement should be set aside due to misrepresentation, such ‘without prejudice’ evidence can be given to prove this;
  • to prove whether or not an agreement between the parties has actually been reached, in the event that one party claims no settlement was actually reached;
  • where there is a delay in a case, the court may require that evidence be produced that genuine settlement negotiations have been undertaken;
  • if there are no public policy grounds that would justify excluding the evidence; and
  • where rectification of an agreement is required – it may be necessary to establish clearly the stage at which an agreement was reached and this may require the remedy of rectification.

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 a decision taken by the Supreme Court in the UK, it is clear that 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.

How Parslows can help

Parslows litigation team advise on all areas of litigation.

For further information please do not hesitate to call 630530 or email us on litigation@parslowsjersey.com

The information and opinion expressed in this briefing does not purport to be definitive or comprehensive and are not intended to provide professional advice. For specific advice, please contact Parslows, We are not responsible for, and do not accept any responsibility or liability in connection with, the content of this document or any reliance upon it

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