Privilege update - two new decisions from the UK

Two recent English cases have further addressed legal privileges discussed in two previous Brief Counsels: the operation of "without prejudice" communications and the ambit of legal professional privilege.

These decisions are significant and are likely to be considered in due course by the New Zealand courts.

The cases

The cases in point are: Oceanbulk Shipping & Trading SA v TMT Asia Ltd & Ors [2010] UKSC 44 (27 October 2010) in which the UK Supreme Court confirmed that regard may be had to without prejudice communications in interpreting contracts, such as a settlement agreement, and R (on the application of Prudential PLC and Anor) v Special Commissioner of Income Tax and Ors [2010] EWCA Civ 1094 (13 October 2010) in which the English Court of Appeal declined to extend legal professional privilege to chartered accountants giving legal advice on tax matters. Oceanbulk This decision involved a full bench of seven judges, instead of the usual five. The basic facts were that the two parties had entered into settlement negotiations on a without prejudice basis, including two full days of meetings culminating in a written settlement agreement. There was no issue between the parties around the existence or terms of the settlement agreement, and the case did not involve an application for rectification. There was, however, a dispute between the parties as to the true construction of one of the terms of the agreement. The question for decision was whether it is permissible to refer to anything written or said in the course of the without prejudice negotiations as an aid to the interpretation of the agreement. All seven judges agreed that background facts communicated between the parties as part of without prejudice negotiations are admissible for the purposes of interpreting any settlement agreement resulting from the without prejudice negotiations. The lead judgment was given by Lord Clarke, with whose judgment five of the other judges joined. Lord Phillips gave a separate concurring judgment. Lord Phillips' judgment consisted of a single paragraph, but it summarised the reasoning nicely (at [48]):

The principle to be derived from this appeal can be shortly stated. When construing a contract between two parties, evidence of facts within their common knowledge is admissible where those facts have a bearing on the meaning that should be given to the words of the contract. This is so even where the knowledge of those facts is conveyed by one party...