An exception to the rule

The recent Supreme Court ruling in Oceanbulk Shipping & Trading SA v TMT Asia Ltd and others [2010] UKSC 44, [2010] All ER (D) 250 (Oct) has widened the exceptions to the long established principle that “without prejudice” communications are not admissible in evidence. However, as shown below, the judgment has merely widened the limited exceptions to the without prejudice rule (the Rule)—the underlying principle to encourage free discussion during settlement negotiations remains. 

Oceanbulk: background facts

The parties’ original dispute related to a series of forward freight agreements. The parties entered into without prejudice negotiations which resulted in a settlement agreement. Subsequently a dispute arose about the construction of one of the terms of the agreement. There was no issue as to the existence of the terms of the settlement agreement. The parties agreed that all terms were accurately recorded and neither party was seeking rectification of the agreement.

The issue between the parties was whether TMT was entitled to rely