With Or Without Prejudice? - Exceptions To The 'Without Prejudice' Rule

In the recent case of Oceanbulk Shipping & Trading SA v TMT Asia Ltd and others [2010] UKSC 44, the Supreme Court has created a further exception to the general rule that communications protected by without prejudice privilege are inadmissible in court.

What is without prejudice privilege?

Without prejudice privilege is, broadly, a rule of evidence which applies to exclude communications aimed at settlement of a dispute, whether made orally or in writing, from evidence in litigation between the parties. The rationale behind the rule is to encourage parties to settle their disputes by enabling them to speak openly to each other in settlement negotiations, without fear that what they say might be subsequently used in court against them if the settlement negotiations fail. For the without prejudice rule to apply, there must be:

A dispute: however it is not essential that litigation has been either commenced or threatened. In Framlington Group Ltd and Axa Framlington Group Ltd v Barnetson [2007] EWCA Civ 502 it was held that the crucial consideration is whether, in the course of negotiation, the parties contemplated, or might reasonably have contemplated, litigation if they could not agree terms. Negotiations genuinely aimed at settlement of the dispute: it cannot apply where the parties have merely asserted their case or criticised the other side's case. Substance over form: whether or not a communication is labelled "without prejudice" is not determinative of the question of whether without prejudice privilege applies. The courts will always consider substance over form and conduct an objective analysis of the communication in the context in which it was made. However, correct labelling is important since the "without prejudice" label might indicate that a document was intended to be used in negotiations. Similarly, a failure to use the label may indicate that the document was not so intended and place the onus on the party asserting privilege to establish that the communication was in fact made without prejudice. The rule applies to exclude relevant communications from evidence in subsequent proceedings between the same parties in relation to the dispute and between different parties to the dispute (for example, in tripartite litigation where X has settled with Y but not Z, X's without prejudice communications with Y would nevertheless be inadmissible in the proceedings against Z). It also applies to exclude relevant communications from...