Date 1 December 2010
Many businesses understand the without prejudice rule and regularly engage it to ensure that any negotiations to settle disputes are protected from subsequent disclosure in any court proceedings which may ensue. There is a list of well established exceptions to the rule which has recently been extended by the Supreme Court in Oceanbulk Shipping & Trading SA v TMT Asia Limited & Others [2010] UK SC44. The practical effect of the new exception is that the rule will not prevent evidence of without prejudice negotiations being used to assist in the interpretation of the true construction of any settlement which arises out of those negotiations if there is a subsequent dispute as to what the settlement actually means. Whilst the decision should not deter without prejudice negotiations, and they will almost certainly remain the medium by which the vast majority of commercial disputes are resolved, anyone embarking on them should bear in mind the fact that anything they say or do in the negotiations could subsequently be referred to in evidence if there is an argument about the scope of any deal which is done.
Practical pointers to bear in mind when you are negotiating in light of this are to consider whether or not there are any matters which you would not want raised in evidence at a later stage. If there are, avoid making any statements of facts or admissions in relation to them. For example, admissions can be avoided by making it plain that any settlement which is reached will be on the basis that liability is not admitted. Alternatively, before negotiations commence try to agree (and preferably record in writing) if and when statements made during the negotiations can be referred to if there is a subsequent dispute to the meaning of the settlement. Finally, during negotiations themselves, if there is any doubt in your mind as to the meaning of any part of the settlement raise this before you conclude terms to minimise the risk of any dispute arising in the first place.
If you would like more information or advice relating to a specific matter, please do not hesitate to contact Simon Walsh on 01727 798085 or by email at simon.walsh@salaw.com or any member of the Commercial Dispute Resolution team.
© SA LAW 2010
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