The Court of Appeal has ruled that without prejudice “WP” material is inadmissible as an aid to construing a settlement agreement4.

The settlement agreement had been reached following WP discussions. At fi rst instance, Andrew Smith J ruled the WP discussions were admissible, relying on an exception outlined in Unilever v Proctor & Gamble Co, namely that WP communications resulting in a compromise agreement are admissible when the issue is whether the agreement was concluded. We reported on this fi rst instance decision in our October 2009 Update:

Reversing that decision, the Court of Appeal held that the WP material was inadmissible. The general rule against admission of WP exchanges was based on the policy that negotiating parties should not be discouraged by fear of subsequent litigation.

The policy behind the WP rule confl icts with the policy of having the best and most useful evidence available to the court, but that confl ict cannot be resolved merely by saying the latter policy trumps the former. The question is whether the logic of the rule requires the exclusion of the evidence which it is sought to admit. In this case, the Court of Appeal decided that it was more important to preserve the WP principle than to allow it to be breached in order to permit the admission of background facts arguably relevant to construction.