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A question of privilege in the mediation process

by Philip McMullan on 09 Aug 2016


The mediation process, by its very nature, requires confidentiality to work. Parties in dispute need to be confident that they can discuss their case frankly and robustly in the hope of reaching agreement; at the same time, they want to reserve their right to pursue further legal redress in the event of the failure of the process.

The confidentiality of the mediation process stems at common law from the without prejudice privilege of all settlement discussions – with exceptions to be discussed further below. In addition, a well-drafted mediation agreement will also contain confidentiality clauses to ensure extra protection for the parties during the process.

Such clauses have been relied on in the past to provide injunctive relief for one party, as well as allowing the mediator to enforce the confidentiality obligation against one of the parties attempting to break it. In a real sense then, confidentiality is the bedrock of the mediation process.

The Ferster v Ferster decision

So the Court of Appeal's recent decision in Ferster v Ferster, upholding Rose J’s decision at first instance, that an email, sent during the mediation (by the mediator), did not attract without prejudice privilege is certainly worth examination. The facts of the case were exceptional. The appellant's email contained a revised offer to settle at a higher price. The revised offer was made on the basis of the respondent’s "wrongdoing" (an alleged undisclosed off-shore bank account) and continued to make various threats about the consequences if the respondent did not accept the offer – including threats of criminal proceedings, to his livelihood and to his family. The full judgment can be found here.  

There are a number of potential exceptions to the without prejudice privilege rule – including where no actual dispute exists sufficient to allow the privilege to arise, or the court has to look at discussions between the parties to decide whether or not a binding settlement has been reached.

In the present case, both the first instance and appeal court were satisfied that the conduct of the party seeking to rely on the without prejudice privilege fell under the unambiguous impropriety exception. Unambiguous impropriety in this context can be described as serious misbehaviour such as uttering threats of violence or amounting to blackmail, applying economic duress, or other conduct amounting to a demonstration of serious bad faith.

JAMS panellist, Charles Gordon, comments

Charles Gordon, a highly respected mediator and arbitrator with JAMS International and former Head of Insurance, Insolvency and Restructuring at DLA Piper, observes that Ferster v Ferster is an interesting decision which contains important lessons for mediators.

"Although the facts were exceptional, it does demonstrate that there are circumstances in which the communication of a settlement offer in a mediation may be disclosed," he says.

"It is clear that a communication which contains an admission or assertion which is contrary to a pleaded case would not fall within the exception. But, suppose that the admission was quite contrary to something stated in a witness statement. This could, in a clear case, amount to an acknowledgment that the witness was ready to commit perjury in order to win the case. Such conduct might fall within the exception."

Charles goes on to advise that mediators are clear with parties from the outset to avoid this sort of situation arising and to be careful about their own role in facilitating communication which could potentially fall within the exception.

He says:  "Mediators need to be clear with parties that:

"1. There is an exception to mediation privilege in respect of conduct which amounts to ‘extreme impropriety’, which is likely to be conduct that is, or borders on, the criminal. This could be something that will lead to perjury or obstructing the course of justice.

"2. Mediators need to be very careful about their own role in passing on such communications and should avoid being the conduit of such communications.

"3. It is unlikely that such conduct will come completely out of the blue and mediators should be very alive to developments or comments in private discussions which could be headed in this direction. In extreme cases, this might involve terminating the mediation before a line is crossed in order to preserve the confidentiality of what has gone before.

"4. Perhaps mediators take the all-embracing mediation privilege a bit too lightly in view of understandable encroachments on it by the courts, and should take a bit more time during and before the mediation in drawing parties' attention to the very rare circumstances in which it can be lost."

It is certainly true to say that Ferster v Ferster is a case which turns on its own facts but mediators are advised to read the judgment to understand fully how the confidentiality of proceedings can potentially be compromised by the behaviour of one of the parties.

Philip McMullan is a writer and researcher.

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Topics: ADR, Mediation

Philip McMullan

Written by Philip McMullan