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Confidentiality – Seamless or a Thing of Shreds and Patches?

June 28, 2020

Introduction

What happens at a mediation stays in the mediation (except so far as necessary for enforcement of the settlement). So mediators are taught and so they inform the parties. And that is emphasised in any Agreement to Mediate (the Garden Court standard Agreement contains a confidentiality clause which includes five sub-clauses). Confidentiality applies to the transactions between the parties, obviously to the members of each party’s team and to communications between each party and the mediator (unless authorised) and in relation to the world outside including the court room in perpetuity.

However, a recent case illustrates the variety of occasions when confidentiality may not apply.

The case

It is Berkeley Square Holdings Ltd v Lancer Property Asset Management Ltd [2020] EWHC 1015 (Ch) Roth J (1st May 2020). Briefly, an offshore company claimed against its previous asset managers the proceeds of payments made by it to the defendants as a result of fraud. The company claimed it had not known about the payments made until shortly before the proceedings. The defendant company wanted to rely on passages in its position statement in a (successful) mediation some five years before in which the payments had been referred to. So the issue before the court was whether those passages were admissible. (The issue at the mediation had been over the amount of the defendant’s management fees).

The result

Roth J, in a thorough examination of the case-law, helpfully set out the exceptions to the without prejudice (WP) or confidentiality rule (para 43 of the judgment). He focussed on that which applied when a claimant wanted to rely on what was said in confidential/WP negotiations in order to establish that fraud or misrepresentation had led to the agreement or because the absence of disclosure would act as a cloak for perjury, blackmail or “unambiguous impropriety (the latter to be applied in the clearest cases).

Both these exceptions expressly related to instances in which the party seeking disclosure was doing so in order to show there had been fraudulent or similar conduct. In this case the defendant was seeking disclosure to support its case that there was no fraud. In effect, what was sauce for the goose was sauce for the gander. As the defendants argued “It cannot be right that without prejudice communications can be referred to in order to undermine an apparently valid compromise but not to uphold it.” (para 51).

The learned judge agreed, holding ‘the statements here are admissible either under the exception properly interpreted or by reason of a small but principled extension of it to serve the interests of justice” (para 52).

The other exceptions

There were other exceptions set out in the judgment. They were not referred to as the only ones but as “the most important instances”. They were:

evidence of communications to show that a settlement had been reached or whether its terms had been correctly recorded;
evidence of a statement which gave rise to an estoppel even if no settlement is reached (as it would be unconscionable once a party had relied on the estoppel not to be allowed to give evidence of it);
evidence which explains delay or acquiescence in pursuing a claim limited to that issue;
where one of the parties uses the fact of the settlement in support of its claim in entirely separate proceedings (usually but not necessarily against an entirely different party) and the claim would not be “fairly justiciable “ without disclosure because, as the judge said, there would be a “serious risk that the court would be misled”;
evidence of the factual matrix which emerged during the negotiations and which would enable the correct construction of the agreement (paras 44-46 and 89 (iii)).

It is to be noted that none of these exceptions would overturn the settlement itself.

Conclusion

In essence, this case is an example of the legal maxim “fraud unravels all”. It would plainly be unfair to allow disclosure of evidence of fraud but to refuse to allow disclosure which rebuts an allegation of it. Agreementsto Mediate enable lawful exemptions and, as the judge observed, the operation of the law would do so in any event. What the case does demonstrate however is that the occasions when confidentiality can be over-ridden may be rather more elastic than previously thought, though still restricted.

 

Garden Court Mediation

Garden Court Mediation