Neutral Citation Number: [2009] EWHC 1946 (Comm)
Case No: 2008-1061
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29/07/2009

Before :

MR JUSTICE ANDREW SMITH
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Between :

	OCEANBULK SHIPPING & TRADING SA	Claimant	
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	TMT ASIA LIMITED & 3 OTHERS	Defendants	

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Alistair Schaff QC and James Willan (instructed by Hill Dickinson LLP) for the Claimant
Bernard Eder QC and James Leabeater (instructed by Ince & Co) for the Defendants 

Hearing dates: 23 and 24 July 2009
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Judgment

Mr Justice Andrew Smith : 

1.	This litigation is between the parties to a written agreement dated 20 June 2008 (the “Settlement Agreement”), and this hearing is about whether the defendants (who are various companies in a group and to whom I refer without distinction as “TMT”) are entitled to rely upon and adduce evidence of exchanges between the parties before it was concluded.   TMT say that they are entitled to do so because the exchanges are relevant to the proper interpretation of the Settlement Agreement and to their contention that the damages claimed by the claimants (to whom I refer as “Oceanbulk”) are too remote to be recoverable, and they give rise to an estoppel against Oceanbulk.   Oceanbulk assert that evidence of them is not admissible because they were conducted “without prejudice”, that is to say they took place when there was a potentially litigious dispute for the purpose of settling it.   TMT say that, in so far as this is so, in the circumstances of this case justice nevertheless requires that evidence of them should be admitted.
2.	This issue comes before the court because Oceanbulk are applying to strike out a part of TMT’s pleading based upon the controversial exchanges, oppose a proposed amendment to the pleading whereby TMT would introduce the allegation of estoppel and seek a declaration that “evidence of the negotiations conducted ‘without prejudice’ … is inadmissible, absent mutual waiver”.
3.	The background to this litigation need not be explained in great detail.     It comprises two actions and both concern freight forward agreements (or freight forward swap agreements) – I shall refer to them as “FFAs” - made between Oceanbulk and TMT: one action is about FFAs that remained open until various dates in 2008, the 2008 FFAs; that other is about the 2009 FFAs, which remain open until a date in 2009.     The FFAs incorporate standard industry terms, the details of which are not relevant for present purposes.   In essence the parties speculate against movements in the freight market, and the party who is the “seller” under a FFA makes a profit if the market drops below the contract rate, and the “buyer” makes a profit if the market rises.   Under some of the FFAs Oceanbulk are the seller, carrying the contract rate upon the speculation, and TMT are the buyer carrying the market rate; and in others the roles are reversed.
4.	The FFAs between the parties provide for monthly cash settlements of the net amounts due between them based on a comparison between the contract rates and the market rate then prevailing.    If a party defaults upon payment of a monthly settlement, the other party is entitled to give notice to terminate all outstanding FFAs.
5.	Sometimes a party to a FFA takes an “opposite position” against another market participant and thereby has some protection against market movements in respect of open freight contracts that he has bought or sold.     The expression “sleeved” is used to describe some trading in FFAs.   Mr. Alistair Schaff QC, who represented Oceanbulk, explained that:
““Sleeving” is an arrangement by which one party (party B) will, at the request of another party (party A), enter into a specific FFA trade with a third party (party C) and party B will then replicate that position back-to-back with party A.  The usual reasons for such an arrangement are that (i) party C would not be willing to trade with party A (e.g. because of perceived counterparty risk) and/or (ii) party A does not wish to reveal to the market that he is seeking that position, e.g. because he is concerned that he will move the market.  However, once the contracts have been concluded then (absent e.g. an agency arrangement), the two contracts are independent and each party acts as a principal: the contracts do not necessarily remain ‘coupled’.”
I can accept Mr. Schaff’s description for present purposes although I make no finding about what the expression means: that might be an issue at the trial.    
6.	Oceanbank plead that of the 63 FFAs that they concluded with TMT in 2008 only 11 were “sleeved” in the sense explained by Mr Schaff, but Oceanbulk’s position under a further 43 FFAs was protected by “opposite positions” with other counterparties.   TMT are not in a position to accept or to refute this.   
7.	On 2 June 2008, when the freight market was high, Oceanbulk presented TMT with an invoice for US$40,524,271.64, being the amount due in respect of the monthly settlement for May 2008.    TMT did not pay it.     There were discussions between the parties (to which I shall refer in more detail) about the outstanding amount, and they resulted in the Settlement Agreement.    In outline, the Settlement Agreement (i) suspended accrued and future payment obligations under the FFAs; (ii) made provision for monthly payments of US$12.5 million to Oceanbulk in respect of TMT’s exposure under the FFAs; and (iii) required the TMT companies by 30 June 2008 to transfer to Oceanbulk or their nominee about 9.5 million shares in Star Bulk Carriers Corp.      Clause 5 of the Settlement Agreement provided as follows: 
“In respect of FFA open contracts between TMT Interests and [Oceanbulk] for 2008, the parties shall crystallise within the ten trading days following 26th June 2008, as between them, fifty per cent of those FFA’s at the average of the ten days’ closing prices for the relevant Baltic Indices from 26th June 2008 and will cooperate to close out the balance of 50 per cent of the  open FFA’s for 2008 against the market on the best terms achievable by 15th August 2008.”
8.	Oceanbulk complain in these proceedings that TMT did not comply with the Settlement Agreement in that they delayed in transferring the shares, defaulted in paying the monthly instalments and, most relevantly for present purposes, did not take steps to “close out” FFAs.    From about July 2008 there was a dramatic fall in the market, and as a result, whereas Oceanbulk claim that if the FFA’s had been closed out in mid-August 2008 they would have “locked in” a profit of some US$47 million, in fact the FFAs have been exposed to falling freight rates in the last quarter of 2008, so that they would owe TMT about US$86 million under the open FFAs.
9.	The parties dispute the meaning of clause 5, and in particular the words “co-operate to close out … against the market”.    TMT say that they mean that: 
“(1) [TMT] would (if Oceanbulk so requested) assist Oceanbulk to agree fixed figures payable by Oceanbulk to counterparties to close out Oceanbulk’s Opposite Market Positions;
(2) Oceanbulk would then close out Oceanbulk’s Opposite Market Positions;
(3) Thereafter the FFAs between Oceanbulk and [TMT] would be crystallised at rates to be agreed.”
Oceanbulk say that the words are concerned only with the parties closing out their bilateral positions under the FFAs and nothing to do with Oceanbulk’s positions as against third parties.
10.	The reason that TMT wish to rely upon the negotiations leading to the Settlement Agreement can best be shown by setting out this passage of the Re-amended Defence and Counterclaim: 
“(i) In the negotiations leading to the signing to the Settlement Agreement Mr. Pappas of Oceanbulk represented to Mr. Nobu Su of the Defendants that the swap agreements Oceanbulk had entered into with the Defendants were “sleeved” transactions and it was in reliance upon that representation that the Defendants agreed to clause 5 of the Settlement Agreement: by that representation both parties understood that in respect of each swap agreement Oceanbulk held with the Defendants, Oceanbulk held an opposite position with other participants in the FFA market (“Oceanbulk’s Opposite Market Positions”) – in particular, Cargill – so that the liabilities the Defendants had to Oceanbulk under the 2008 FFAs were equal in amount to liabilities Oceanbulk had to counterparties on equivalent swap agreements;
(ii) The words “co-operate to close out… against the market” arose out of the parties’ negotiations leading up to the Settlement Agreement and in particular in the light of Mr. Pappas’s representation that his swap agreements with [TMT] were “sleeved" …”.
11.	Thus, while Mr. Bernard Eder QC, who represented TMT, made clear that TMT argue that their construction in any case gives the words of clause 5 their natural meaning, TMT also contend that the parties’ understanding articulated in exchanges before the Settlement Agreement provides important contractual context that informs its interpretation.   I was referred to Chartbrook Ltd v Persimmon Homes Ltd, [2009] 3 WLR 267 in which Lord Hoffmann said (at para 42) of the “exclusionary rule” preventing evidence of negotiations from being admitted in evidence: 
“The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant.  It does not exclude the use of such evidence for other purpose: for example, to establish a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel.   These are not exceptions to the rule.  They operate outside it”.    
Oceanbulk, while reserving their right to invoke the “exclusionary rule” at trial, accepted for present purposes that, unless the exchanges were without prejudice, evidence of them would be admissible to inform the issue about the construction of the Settlement Agreement.     
12.	Secondly, TMT say that the exchanges are relevant to their contention that the damages claimed by Oceanbulk are too remote to be recoverable.  Again, it is convenient to set out the relevant part of TMTs pleading: 
“… it was or should have been in the parties’ reasonable contemplation that closing out of the 2008 FFAs left the risk of the market rising and the benefit of the market falling on [TMT] but no risk or benefit on Oceanbulk because Oceanbulk was (until completion of the closing out process) protected by Oceanbulk’s Opposite Market Positions; accordingly, the loss which Oceanbulk seeks to claim … is too remote and/or is not loss for which [TMT] had assumed responsibility.”
(The reference to assumption of responsibility reflects the analysis of recoverable damages for breach of contract of Lord Hoffmann  - with whom Lord Walker agreed – and Lord Hope in Transfield Shipping Inc v Mercator Shiipping Inc., (The “Achilleas”), [2008] UKHL 48.) 
13.	Furthermore, TMT seek to rely upon the evidence about the exchanges in order to argue that “Oceanbulk is estopped from denying that the [FFAs] Oceanbulk had entered into with [TMT] were “sleeved” arrangements”; or possibly their contention is rather (at least in part) that Oceanbulk are estopped from denying that, when the Settlement Agreement was made, the parties’ understanding was that the FFAs were “sleeved” arrangements.   As I have indicated, this allegation of estoppel gives rise to TMT’s application to amend their pleading. 
14.	The exchanges between the parties leading to the Settlement Agreement were these.   On 1 June 2008 Mr. Petros Pappas of Oceanbulk sent to Mr. Nobu Su of TMT an email in which, referring to the settlement that Oceanbulk claimed in respect of the May 2008 positions, he wrote:
“I am in my house looking at the FFA payments [Oceanbulk] has to make to various counterparties and I realized that we will be expecting from you around $40.5 million on Friday.   This is a huge amount by my standards and it will be very important to pay us timely so that we don’t face cash flow problems.  Most of this position is in any case due to sleeves we did for you when you asked us in the past in order to assist.”
15.	According to the evidence of Ms. Carrie Angell of Ince & Co, TMT’s solicitors, (which I accept) on 5 June 2008 Mr. Su and Mr. Simon Spark of Ince & Co attended a meeting in the Hague with Mr. Pappas and other representatives of Oceanbulk.   Ms Angell describes it as a “private commercial meeting to discuss payment of the May 2008 Settlement Sums”, and, according to Ms Angell, Mr. Pappas stated that he had “sleeved Nobu’s own trading” at Mr. Su’s request. On 7 June 2008 there was a further meeting in Athens between Mr. Pappas and Mr. Su, attended by Mr. Spark.     At those meetings TMT sought to persuade Oceanbulk to forbear from exercising their full contractual rights under the FFAs.   Oceanbulk do not contend that evidence about the exchanges before and on 7 June 2008 is inadmissible because they were conducted without prejudice or for any other reason (subject to relevance and their right to invoke the “exclusionary rule” at trial).   
16.	On 9 June 2008 Hill Dickinson, Oceanbulk’s solicitors, sent to Ince & Co by email a letter marked “Strictly private & confidential. Without prejudice.  Subject to contract”.    It referred to “various exchanges in relation to the possibility of reaching an agreement to defer further action by [Oceanbulk] against [TMT] in respect of May FFA debts and the amounts which will become due on the June settlement date.    Concern has also arisen as to the continued exposure for the balance of the relevant FFAs”.   It then referred to the “essential agreement” reached between the parties and attached a “first draft setting out the basic structure of an agreement which could lead to a standstill, for the time being, in this matter”.    The last paragraph said, “Our clients wish to resolve this matter immediately and we think that the basic terms need not be controversial or lead to protracted negotiation”.   On 11 June 2008 Ince & Co sent Hill Dickinson, in an email marked “without prejudice”, a marked up draft of the proposed agreement with suggested revisions.  There is no dispute that these exchanges were without prejudice.
17.	In the meanwhile Mr. Pappas sent to Mr. Su an email on 10 June 2008 which was not expressed to be without prejudice.   Oceanbulk say that the email, or at least the relevant part of it, is nevertheless protected as being sent to negotiate a settlement of a potentially litigious dispute and in the context of without prejudice correspondence between the solicitors.   TMT dispute this.
18.	The email dealt with two matters: under the heading “loans on VLCCs”, Mr Pappas apparently suggested banks who might be approached for loans by Mr Pappas and Mr Su.    This part is not obviously concerned with any dispute or potential litigation, although Mr Schaff submitted that the inference is that it was related to the agreement that the lawyers were seeking to put together.   
19.	The other matter was the “FFA debt”.   The particular significance (or at least a particular significance) that TMT attach to this communication is that it referred to $40.5 million being paid by Oceanbulk on behalf of TMT: that is to say, it referred to Oceanbulk paying “on behalf of TMT” the same amount as Oceanbulk were said by Mr Pappas on 1 June 2008 to be expecting to receive from TMT by way of the May settlement, and so, it is said, contributed to TMTs understanding from Oceanbulk that all the FFAs were “sleeved”.   I should set out this part of the email: 
“I understand from our lawyers that you said that you would not like to transfer the 6 million of your Star Bulk shares to me but only to pledge them as we had discussed.  Let me however expand on this issue so that you can understand my position.  The spirit of our discussion was that (a) you will definitely secure me for the cash that you have not paid for the May 2008 FFA contracts and may not be able to pay for the June 2008 FFA contracts and, (b) that you promise not to dispose of the balance of your Star Bulk shares so that you are able to cover me for subsequent payment difficulties.  This was the essence of what we agreed upon as good friends and then $40.5 million was paid on your behalf against zero receipts.  Do not forget that you only informed me one day prior to due payments of your inability to perform and that OBST was therefore put in a huge cash flow strain in order to meet its obligations.
The problem that now arises is that a pledge passes on something less than full rights and we might therefore be exposed.  For that reason I am saying that it is much better security for us if you transfer the shares with our obligation to sell them back to you at a price fixed on the day of the transfer.   YOU LOSE NOTHING FROM IT BUT YOU SECURE YOUR FRIEND.  I therefore assume that you don’t have a problem with it.  Unless if you think it is correct that everyone else gets cash or first mortgage on the 3 vessels and the friend that helped you gets nothing in substance.
This, at the end of the day, does not differ materially or in principle from what we have discussed.  
Please confirm that you are therefore ok with this arrangement and that the lawyers can proceed on that basis.”
20.	Mr Eder argued that the focus of this passage is upon the continuing discussions between Mr Pappas and Mr Su, and just as Oceanbulk accept that their exchanges before 9 June 2008 may be adduced in evidence, so too this email is admissible.   I am unable to accept that argument: although Mr Pappas referred back to the earlier discussions, in this part of the email Mr. Pappas was, as I read it, making proposals to solve a problem about security that had arisen between the solicitors in their exchanges about the proposed agreement: his purpose was to resolve that difference between principals so that the solicitors could proceed with their work.    What Mr Pappas wrote was part of the negotiations that were being conducted between the solicitors expressly on a without prejudice basis.   The inference is that this part of Mr Pappas’ e-mail was similarly without prejudice and implicitly intended by the parties to be so.
21.	I need hardly add that the fact that the communication was not marked without prejudice is not in itself a reason that the communication is not protected by the privilege, unless, which is not the case here, the inference is that there was no intention that the communication should remain confidential.   As Lloyd J put it in David Instance v Denny Bros Printing Ltd, [2000] FSR 869, 880, “... the rule does not depend upon the formality of using the label without prejudice if it is clear that parties are seeking to negotiate to settle a dispute”.  
22.	I recognise that this conclusion might mean that only part of the email is privileged, but I do not consider that to be a remarkable conclusion.   If the status of both passages should be taken to be similar, I would conclude that the whole email was without prejudice.
23.	On 19 June 2008 there was a meeting in London to negotiate the Settlement Agreement.   It was attended by, among others, Mr Pappas and Mr Su, and also by both parties’ solicitors, Hill Dickinson and Ince & Co.      The meeting was reconvened on 20 June 2008, again attended by Mr Pappas, Mr Su and the solicitors.   The meetings on the two days lasted for more than 12 hours.   According to Ms Angell, “Mr Su and Mr Pappas discussed at length going jointly to Oceanbulk’s counterparties (eg Cargill) to fix Oceanbulk’s liability to them.   Mr Su and Mr Pappas eventually agreed (as one option) that 50% of the positions between Oceanbulk and TMT would be determined at a fixed price and that they would co-operate together to close out the balance of Oceanbulk’s counterparties”.     
24.	There is no evidence that these meetings were expressly stated to be being conducted on a without prejudice basis.    However, Ms Angell’s evidence about the meeting on 19 June 2008 is that Mr Spark assumed that it was without prejudice because there were lawyers present and the lawyers had been recently before the meeting communicating on a without prejudice basis towards negotiating an agreement; and it is not disputed that this was a correct understanding.   Similarly, I infer, the meeting on 20 June 2008 was privileged.       This is in accordance with the belief of Mr. David Pitlarge, a solicitor in Hill Dickinson, whose statement is in evidence.
25.	The principle that communications between parties to a litigious or potentially litigious dispute for the purpose of resolving it are not generally admissible in evidence is based both upon the (express or implicit) agreement of the parties and also upon the public policy explained by Oliver LJ in Cutts v Head, [1984] Ch 290, 306: “It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that could be said in the course of such negotiations ... may be used to their prejudice in the course of the proceedings”.     This explanation was cited with approval by Lord Griffiths in Rush & Tompkins v GLC, [1989] AC 1280, 1301, a decision of the House of Lords that established that without prejudice communications do not lose their privileged status because the parties conclude an agreed settlement.   Lord Griffiths said (at p.1301C/D) “... as a general rule, the “without prejudice rule” renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement”.   It is not, as I understand it, disputed, and in my judgment it could not properly be disputed, that the current litigation between the parties is connected with the same subject matter as the Settlement Agreement and the exchanges leading to it.     I add that, although Lord Griffiths referred to “proof of any admissions” being inadmissible, it is now clear from Ofulue v Bossert, [2009] 2 WLR 749 that the protection is not confined to what can be identified as a distinct admission: Lord Rodger (at para 43) and Lord Neuberger (at para 89) cited what had been said by Robert Walker LJ in Unilever plc v Proctor & Gamble Co, [2000] 1 WLR 2436, 2448/2249: 
“… to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties … “to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts”.  Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers … sitting at their shoulders as minders.”
26.	Lord Griffiths in the Rush & Tomkins case (loc cit) made it clear that the rule that evidence of without prejudice exchanges is inadmissible is not “absolute and resort may be had to the “without prejudice” material for a variety of reasons when the justice of the case requires it”. Nevertheless, the policy reasons for the rule require the courts to be careful not readily to allow exceptions to the rule.   This was emphasised by the House of Lords in Ofulue v Bossert, (loc cit): it suffices to cite the observation of Lord Hope (at para 2) that “the court should be very slow to lift the umbrella unless the case for doing so is absolutely plain”, and the statement of Lord Walker (at para 57), “As a matter of principle I would not restrict the without prejudice rule unless justice clearly demands it”.  
27.	In Unilever plc v Proctor & Gamble Co, (loc cit), Robert Walker LJ (with whom Simon Brown LJ and Wilson J agreed), having recognised that the exclusionary rule had “a wide and compelling effect” (at p.2443H), described what he said were among the most importance instances in which the rule does not prevent the admission of evidence of what one or both of the parties said or wrote in without prejudice exchanges.    The first three are, I think, relevant for present purposes, and Robert Walker LJ describes them as follows:
“(1)  … when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible.  ….  
(2)  Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence.  …
(3)  Even if there is no concluded compromise, a clear statement which is made by one party to negotiations and on which the other party is intended to act and does in fact act may be admissible as giving rise to an estoppel.  That was the view of Neuberger J. in Hodgkinson & Corby Ltd. v Wards Mobility Services Ltd., [1997] F.S.R. 178, 191 and his view on that point was not disapproved by this court on appeal.”
28.	Although the first exception that Robert Walker LJ identified was expressed in terms of whether a settlement agreement was concluded, it would, to my mind, make little sense for the law to admit evidence about this without also admitting evidence about what the terms of a settlement agreement were.   Mr Schaff, rightly in my view, accepted that evidence from without prejudice exchanges is admissible in order to identify them.     He contended, however, that this exception does not extend to evidence about the proper construction and meaning of a settlement agreement reached after without prejudice exchanges.    
29.	I am unable to accept this submission.   First, the distinction between identifying the (express and implied) terms of an agreement and interpreting them is often a fine one.   The court seeks to give effect to the parties’ evinced intention but often the reasoning whereby it does so can be seen and classified either as the identification of an implied term or an exercise in contractual construction.   I can see no cogent reason, either of public policy or of any other kind, that evidence of without prejudice exchanges should be admissible to identify terms but inadmissible as to the meaning of the terms: in many cases it would be difficult to apply such a distinction.
30.	Secondly, Mr Schaff’s submission is contrary to the judgment of Stanley Burnton J in Admiral Management Services Ltd. V Para-Protect Europe Ltd., [2002] EWHC 23 (Ch), [2002] 1 WLR 2722.     In that case, proceedings had been stayed by consent under a Tomlin order pursuant to an agreement that the defendants paid a sum by way of agreed damages in satisfaction of the claimant’s claim except a claim to sums specified in a paragraph of the order.  That paragraph provided that certain issues should be to a judge for determination, namely:
“… 1.1 whether the sums of £120,000, and/or £67,500 and/or £6,500 claimed by the claimant for work done by employees within its forensic department and by Andrea Cumming and by a consultant as part of its costs of the claim and/or of any proceedings within this claim and/or occasioned by the application on 20 September 2000 and adjourned to 22 September 2000 constitute costs in whole or in part properly recoverable by the claimant subject to detailed assessment of those costs or 1.2 if the same do not constitute costs in whole or in part properly so recoverable, whether the same may be claimed in whole or in part against the defendants as damages subject to assessment of damages.”
31.	There was a dispute about the meaning of paragraph 1.2: whether the expression “the same”  restricted the claim to the costs of the employees’ work so that any claim for loss of revenue or of profits was outside the scope of paragraph 1.2, or whether “the same” referred simply to “the sums of £120,000 and/or £67,500 and/or £65,000”.     The defendants wished to rely in support of their argument for the former interpretation upon a without prejudice letter that had been sent by the claimant’s solicitors to the defendants in the course of the negotiations leading to the Tomlin order.    Stanley Burnton J concluded that they were entitled to do so (at para 71 and 72):   
“… in the case of a settlement made in without prejudice correspondence, the correspondence, although privileged when sent and received, is admissible in the event of a dispute as to the terms and meaning of the settlement, on the same basis that any correspondence in which a contract is made is admissible.  In such cases, the correspondence is not adduced in order to evidence an admission made by a party in a without prejudice communication, but in order to ascertain whether an agreement or what agreement has been made between them.  However, when an agreement has been reduced to a formal document, antecedent correspondence is in general only admissible if it is sought to rectify the agreement or if it is expressly or impliedly referred to in the agreement.  A difference between an antecedent proposal and the final agreement may be due to a mutual failure to set out in the agreement the terms agreed between the parties, in which case rectification may be available.  But it may be due to an intended or incidental difference between the earlier proposal and the final agreement, in which case the earlier proposal is irrelevant to the effect or meaning of the formal agreement.  Antecedent without prejudice correspondence leading to a formal written contract will therefore in general be inadmissible for two reasons: privilege and irrelevance. 
72.  In the present case, the settlement agreement between the parties is contained in a formal document, namely the order.  It is not suggested that the order falls to be rectified.  However, paragraph 1.1 of the order refers to sums claimed by the claimant, and thus refers to a claim by the claimant for the sums referred to having been made.  It follows, in my judgment, that the claim may be considered in order to determine the content of the claim, notwithstanding that it was put forward in a document that was sent as a without prejudice communication.  The letter of 31 October 2000 is admissible for two reasons: for the reason given below, it is clear that the letter made the claim referred to in the order and is therefore impliedly referred to in it; and secondly it is not sought to adduce it in order to put in evidence an admission made by either party.  Effectively, by referring to the claim in the order, the parties waived any privilege attached to the document containing the claim.”
Mr Schaff submitted that, while Stanley Burnton J was right that without prejudice correspondence is admissible in the event of a dispute about the terms of the settlement agreement, he was wrong that it is admissible in the event of a dispute as to its meaning.   
32.	The discussion about whether the correspondence was being adduced in order to evidence an admission must now be read in light of Ofulue v Bossert (cit sup), but I do not consider that this undermines the point that evidence of exchanges, although privileged when they took place, is admissible in the event of a dispute as to the meaning of the settlement.    I reject, at least as being too broad a statement, the view expressed in Passmore on Privilege (2006) 2nd Ed para 10.057 that “settlement negotiations are not … admissible to aid the construction of the compromise agreement to which they gave rise”.    
33.	Thirdly, evidence of without prejudice exchanges is admitted for the purpose of determining whether a written agreement should be rectified.    Since this is so, it should also be admitted (so far as the exclusionary rule in Prenn v Simmonds allows) to inform the interpretation of the written agreement.   In many cases in which a party seeks rectification, he also relies upon the same or closely related evidence to advance an argument that the contractual context shows that the written agreement did, properly understood, record the parties’ intended agreement so that rectification is unnecessary.    
34.	Fourthly, and importantly, in my judgment the interests of justice require the meaning of a settlement agreement to be ascertained by reference to the without prejudice exchanges.    The law generally admits evidence of the contractual context, by way of background facts known or taken to be known to both or all the parties, because it is recognised that such information assists in ascertaining the parties’ (objectively evinced) intention.   It undeniably follows that, if the court is deprived of such evidence in the case of settlement agreements following without prejudice exchanges, it will be the less well equipped to discern the parties’ intentions and the less likely to construe the contract in accordance with them.    
35.	It is not unusual in litigation about contracts for parties to adduce, or to seek to adduce, evidence about the contractual context and the shared knowledge and understanding of the contracting parties, that in fact throws little light upon the contract’s meaning and is of little or no assistance to the court.    That cannot, in my judgment, affect the question whether in principle  evidence of without prejudice exchanges is admissible, although it underlines the need to scrutinise the more carefully whether in any particular case evidence of without prejudice exchanges is probative before admitting it.    If it is probative, it would be neither right nor practical to require that it pass some higher test of probative value because it is evidence of without prejudice exchanges.     Nevertheless I add that, if it be relevant, my assessment is that in this case the evidence upon which TMT seek to rely is potentially of significant probative value and might possibly be crucial upon an issue of construction that is central to these proceedings.   One illustration of this is reference in the email of 10 June 2008 to US$40.5 million being paid by Oceanbulk “on [TMT’s] behalf against zero receipts”.
36.	I therefore conclude that evidence of the without prejudice exchanges is admissible to the extent that it would be admissible had the exchanges not been without prejudice.      It might be that the court will need to rule in accordance with Prenn v Simmonds, [1971] 1 WLR 1381 and Chartbrook Ltd v Persimmon Homes Ltd, (loc cit) precisely what parts of the exchanges are admissible and what are not: I am not able on the basis of the information before me to reach a more specific conclusion about that.
37.	For similar reasons I consider that TMT are entitled to plead and prove the without prejudice exchanges in relation to the remoteness of damages claimed by the Oceanbulk.    Indeed, Mr Schaff accepted that if the exchanges are properly introduced in evidence as relevant contractual background, they may be considered by the court, so far as relevant, upon other issues. 
38.	In reaching this conclusion I do not overlook Oceanbulk’s submission that if the court does not strike out the paragraphs of TMT’s pleading in which they assert what was said in without prejudice exchanges and TMT are not prevented from advancing their arguments based upon them, the preparations required for trial will be much increased and the trial will be extended.   It is said there were at least six witnesses present during the discussions on 19 and 20 June 2009, and that, “The trial will become a blow-by-blow account of many hours of negotiations”.    I am unconvinced of this: it is not clear to what extent there will be any relevant dispute between the solicitors and others present at the meetings about what was said, and the trial judge will be able to exercise control to prevent the exchanges being explored in unnecessary detail.   Nor do I overlook Mr Pitlarge’s suggestion that, if evidence of the solicitors’ and the parties’ discussions on 19 and 20 June 2008 is before the court, Hill Dickinson and Ince & Co might be unable properly to continue to act for their clients, but again the position about this is far from clear on the information before me.   In any case, none of this, in my judgment, is a proper reason to preclude TMT from presenting the case that they wish to advance and to adduce admissible evidence in support of it.
39.	TMT also submitted that Oceanbulk waived any entitlement to assert that evidence of the without prejudice exchanges is inadmissible.   Before the Case Management Conference on 24 April 2009 TMT had on 25 March 2009 served in their Re-amended Defence and Counterclaim that referred to the negotiations leading to the signing of the Settlement Agreement.    However Oceanbulk and Hill Dickinson did not raise their objection to the admissibility of the evidence at the CMC, notwithstanding the List of Issues put before the court included the issue whether it was represented to Mr. Su during the negotiations of the Settlement Agreement that the FFAs were “sleeved”.   TMT contend that thereby Oceanbulk unambiguously indicated that “the issue should be decided by the Court rather than shielded from the Court by reliance upon without prejudice privilege”.
40.	I am unable to accept this submission.    The purpose of a list of issues is to present to the Court the differences between the parties on the pleadings in a document that will assist the Court in the management of the case.     There is no need for it to include every point of difference between the parties on the pleadings: indeed, this is generally undesirable to include more than is useful for case management purposes.   Still less is it necessary or desirable to include every point that might be taken about the admissibility of evidence.     It would defeat the usefulness of the list of issues if it could be used to mount arguments such as that of TMT.    I reject the submission that by not requiring the list of issues to include a question about the admissibility of the without prejudice exchanges Oceanbulk evinced an intention to waive any right that they had to object to the admissibility of evidence about them.
41.	I come briefly to TMT’s application to amend their pleading to allege that “Oceanbulk is estopped from denying that the swap transactions Oceanbulk entered into with [TMT] were “sleeved” transactions”; and to rely in support of this plea upon representations made by Oceanbulk inter alia in the without prejudice exchanges.    I consider that TMT are also entitled to rely upon them if they seek to assert any relevant estoppel against Oceanbulk: see the second of the exceptions to the exclusionary ruse identified by Walker LJ.  As Neuberger J said in Hodgkinson & Corby Ltd. v Wards Mobility Services Ltd., [1997] FSR 178,191: 
“Although, of course, contract and estoppel are quite separate concepts, it appears to me logical and consistent that, if “without prejudice” correspondence can be looked at to see if it gives rise to a contract, then such correspondence can also be looked at to see if it gives rise to an estoppel.”
42.	I shall invite further submissions about the precise wording of the amendment that TMT seek to make, and about other case management issues that arise in light of this judgment.