Probably the best thing about mediation is its confidentiality. The hope is that both parties will feel comfortable and secure enough to be as frank as possible and to disclose as much as possible.
From a legal point of view the law protects what is discussed in mediation using two approaches:
- without prejudice privilege
Looking At my ‘Agreement to Mediate’ (which you can see on my website or download from here) you will see that clause 5 provides that a) every person involved in a mediation is obliged to keep confidential all information arising out of the mediation including any settlement details and b) that the mediation is conducted on the same privileged basis as ‘without prejudice’ negotiations in an action in the courts or similar proceedings. Everyone has to sign this before the mediation proceeds.
Parties want to feel confident that a) if they make concessions in mediation (both sides invariably do) in order to achieve a compromise settlement – these concessions cannot be used to their detriment in litigation later on if a deal cannot be done and b) clients also want to know that the mediator is also contractually bound not to disclose the details of parties’ discussions or any compromises suggested-basically to maintain confidentiality.
What is confidentiality?
There is no agreed definition of what confidentiality means. In EU cross-border mediation which is governed by regulation, there is a provision for confidentiality. In Scottish family law which is governed by statute there is also a provision for confidentiality.
There is no statutory provision in commercial/civil mediation, and no statutory definition of confidentiality to turn to.
We can say that confidentiality in mediation is
- a) contractual;
- b) all the participants know what it means and what it looks like; and
- c) everyone goes into mediation expecting it to be observed.
But-confidentiality is not absolute
Sometimes courts will (in England at any rate) compel disclosure of information that parties have agreed is confidential if it is in the interests of justice to do so, especially if there is unfinished business arising out of the mediation.
Legal expenses in England following mediation
In the case of Carleton & Others v Strutt and Parker (A Partnership)  EWHC424 (QB) it was decided that if a party participates in a mediation but takes an unreasonable position (gross exaggeration in this case) in that mediation, they will be in the same position as someone who unreasonably refuses to mediate, and can be punished in the legal expenses award. In this case a mediation took place following a trial on liability, where the plaintiff was largely successful. The plaintiff claimed damages in the sum of £87 million. The mediation did not result in settlement. After a hearing in court on quantum, the sum claimed was found to be a gross exaggeration and therefore unreasonable. Damages were awarded of approximately £900,000. The plaintiff’s legal expenses were reduced by 32% to 68%. The court looked at what had been discussed at the mediation and confidentiality was put to one side.
Veracity of settlement
See my Agreement to Mediate, clause 6. For a mediation settlement to be contractually binding and therefore enforceable it must be reduced to writing and signed by all participating parties. In the case of Tim Brown (trustee in the bankruptcy of the estate of Jane Rice) v Stephen Rice & others  EWHC 625 (CH), the dispute being mediated did not settle. An offer was left on the table and the plaintiff tried to accept this the following day. The defendant sought a declaration that there was no settlement, because the agreement had not been reduced to a written agreement contemporaneously; and she succeeded. Again, the court looked at what happened in a confidential negotiation. The moral is: Always reduce your mediation agreement to writing on the day.
Mediators are sometimes compelled to give evidence
In Farm Assist Limited (in liquidation) v Secretary of State for DEFRA  EWHC 1102 (TCC) the plaintiff brought proceedings against the defendant to set aside a settlement agreement arising from mediation on the grounds of economic duress. The mediator was cited as a witness and called in aid the Agreement to Mediate which provided that the mediator could not be called on to give evidence. (See my Agreement to Mediate clause 8 -parties will not call on the mediator to give evidence or produce documents). The mediator contended that their evidence was confidential. The court decided that the contractual provision could not exclude economic duress and evidence about whether the agreement was entered into under such or not. This always reminds me of Winfra v the Earl of Orkney reported by Stephen Woolman, now Lord Woolman, in his ‘An Introduction to the Scots Law of Contract’ which I had to study in first year at university. You will all recall that the contract in that case was reduced on grounds of force and fear after Winfra was prevailed upon in the first instance to sign the contract on the basis that if he did not, the Earl would cut his head off! The mediator in Farm Assist was obliged to give evidence about economic duress and confidentiality was trumped again.
(I have been involved in a mediation where it became apparent to the mediators that both parties were deliberately trying to mislead each other about debts due by both to a third party. There were active attempts at misrepresentation and bad faith. In that case when the mediators became aware that this was happening, both parties were told in no uncertain terms in confidential caucus that there required to be full disclosure about these matters – otherwise the mediation would go no further. This is a practical example of a case where, had the mediator not acted in such a manner or where parties had persisted without the mediator’s awareness, there would exist the potential for such a contract to be reduced.)
Without prejudice privilege (WPP) in England
In Brown (supra) the judge described mediation as being a kind of assisted, without prejudice, negotiation. Again, see clause 5 of my Agreement to Mediate.
The WPP rule in England operates to exclude negotiations (including mediations and their contents, oral or in writing) which are aimed at settlement from being admitted as evidence, or referred to, at any later proof/trial. That is why all solicitors mark correspondence as being without prejudice. In general, therefore, discussions in mediation to compromise settle a case cannot be used later in court to establish an admission. See Rush & Tompkins v GLC  AC 1280.
It is the WPP rule that allows people to be frank in mediation, knowing that concessions cannot later be used against them. It is arguable that it is WPP that underpins confidentiality in mediation.
WPP in England is not absolute
See Unilever v Procter & Gamble Co  1 WLR 2436. WP communications can be admitted into evidence ~:
1) where it is necessary to establish whether they led to a concluded settlement (Brown supra) or
2) where it is necessary to establish whether there has been misrepresentation or fraud, undue influence or a n other clear impropriety, or
3) where it is necessary to show, regardless of whether or not settlement is reached, that one party was intended to and did in fact follow a clear statement of fact made by the other party, which thereby leads on to an argument about deliberate procedural delay, acquiescence or personal bar (estoppel in England).
Ferster v Ferster  EWCA 717– is an example of unambiguous impropriety which included blackmail delivered via a mediator in a mediation leading to the WPP being lifted.
Family Housing Association v Michael Hyde and Partners  1 WLR 3544 is an example of when one party makes a clear statement of fact in WP negotiations intending the other party to rely on it, which they do. In such circumstances, that statement may be put in evidence to raise an argument of personal bar, because it would be unfair to allow the party making the clear statement to hide behind the cloak of WPP.
The WPP rule in Scotland
I make reference here to an excellent and informative article written by John MacKenzie, solicitor advocate of Shepherd and Wedderburn LLP dated 15 May 2017 which you can find in the Journal online edition, in which he contrasts the law of Scotland on without prejudice with the law in England. These are quite different, and the protection afforded in Scotland to such communications is narrower than that in England. What follows is in part a summary of parts of John’s article.
The Scottish position is discussed in the case of Daks Simpson Group plc v Kuiper 1994 SLT 689. In this case it was argued that because a letter was written without prejudice, its contents could not be looked at and could not be used to constitute an admission.
In Daks Lord Sutherland said ‘The general principle underlying the rule is that if offers, suggestions, concessions or whatever are made for the purposes of negotiating a settlement, these cannot be converted into admissions of fact…. ‘Without prejudice’ in my view means, without prejudice to the whole rights and pleas of the person making the statement. If, however, someone makes a clear and unequivocal admission or statement of fact, it is difficult to see what rights or pleas could be attached to such a statement or admission, other than perhaps to deny the truth of the admission which was made. I see no objection in principle to a clear admission being used in subsequent proceedings, even though the communication in which it appears is stated to be without prejudice. I would adopt what is said by Lord Wylie in Watson Towers…’.
In Watson Towers v McPhail 1986 SLT 617, Lord Wylie said ‘These terms do not, in my view, infer a hypothetical admission or concession for the purpose of securing a settlement but a statement of fact. The use of the expression ‘without prejudice’ does not in my view protect the letter from subsequent use as an admission of fact.’
As John points out, Lord Sutherland’s reasoning in Daks was expressly approved in the Inner House case of Richardson v Quercus 1999 SC 278 by Lord Johnston.
As John summarises, it seems that WPP in Scotland covers correspondence, concessions or statements made with a view to trying to achieve settlement, but that does not prevent that same correspondence (or statement of fact or admission?) being referred to either in subsequent litigation, where there is a clear admission or statement of fact, or in relation to the question of expenses.
What is the implication for mediations in Scotland?
As mediators we ask parties/their agents to produce to each other, and to us, a Mediation Statement setting out their synopsis of the legal dispute from their position, both in relation to matters factual and legal. If such statements contain a clear statement of fact or an admission, they may be admissible-notwithstanding the fact that the mediation is contractually agreed to be on a without prejudice basis. Likewise, any correspondence sent by the parties to each other and the mediator is capable of being looked at in the same way. Caveat Auctor!
How does that contrast with the English rule on WPP?
Back to John. The difference in principle is clearly enunciated by Lord Hoffmann in the House of Lords case Bradford and Bingley v Rashid [ 2006]1 WLR 2066 paragraph 13, when he discusses the Scottish exception to the without prejudice rule:
‘This limitation on the scope of the without prejudice rule, confining it to admissions which can be construed as made hypothetically rather than without qualification, is not limited to the use of these admissions or acknowledgements under section 29 (5) or its Scottish equivalent. It is entirely general. As such, I think that, with all respect to the Scottish judges… it goes too far. There is nothing in the modern English authorities to encourage a dissection of correspondence or, still worse, conversations, to ascertain whether admissions of fact were made hypothetically or without qualification. It has frequently been said that the purpose of the rule is to encourage parties engaged in settlement negotiations to express themselves freely and without inhibition. It is well established that the rule applies to any genuine attempt in negotiation, whether or not the communications are expressly said to be without prejudice, and I think it would be most unfortunate if the law introduced a new requirement that parties should preface anything they said with a standard disclaimer that any admissions of fact were to be taken to be hypothetical and solely for the purposes of negotiation.’
Again, per John, the law in England on WPP is summarised in the case of Vestergaard Frandsen v BestNet Europe Ltd (2015) 1 Costs LR 85 by Iain Purvis QC, sitting as a deputy judge in the Chancery Division.
‘The (WPP) rule rests on two foundations:
1) the public policy of encouraging litigants to settle their differences rather than litigate them to a finish- Lord Griffiths, Rush & Tompkins v GLC  AC 1280 at 1299.
2) the express or implied agreement of the parties that communications in the course of negotiations marked without prejudice should not be admissible in evidence if, despite the negotiations, a contested hearing ensues-per Walker LJ in Unilever v Procter & Gamble  1 WLR 2436 at 2442.
3) There is a strong public policy justification for denying the ability to rely on a without prejudice communication at any stage in the proceedings, including in the assessment of costs (!). (There is a whole stream of judicial authority in England where the expression ‘without prejudice save as to costs’ is discussed and consideration given as to what documents, correspondence or conduct can be looked at and we’re not going to go into that today. It’s something that is peculiarly English and doesn’t really have a counterpart in Scottish law).
It is clear that the WPP rule in Scotland, on the face of it, offers narrower protection than its counterpart in England, which appears to be far broader. Proceed with caution particularly in relation to any documents produced for the mediation both in terms of thinking about statements of fact and admissions. Notwithstanding the fact that the mediation is conducted contractually on a without prejudice basis it is possible that such documents may become admissible subsequently.
I have been referring to English cases in relation to exceptions to confidentiality and without prejudice in mediation because I have not been able to find any Scottish cases with regard to mediation that are in point. I am not suggesting that English cases would be binding in Scotland but simply looking to them in the absence of Scottish decisions.
This article is the Copyright of Paul Kirkwood, MNCRS, January 2019. Paul is a director of www.MNCRS.co.uk – Mediation, Negotiation and Conflict Resolution Services.