Summary and implications

Mediation can be a successful method of resolving construction and engineering disputes. It is supposed to be a confidential process allowing the parties to discuss their respective positions openly and candidly. But an increasing number of cases have demonstrated that those who mediate might later find their conduct subject to the court’s scrutiny.

Three things you should note:

  • what you say or do during a mediation will not necessarily remain a confidential and private matter;
  • the court will be prepared to investigate your mediation if there are questions as to whether a binding settlement has been agreed or whether one party should pay costs because of its conduct at the mediation;
  • the mediator may be compelled to give evidence about what was said and done during your mediation.

A confidential process

The parties to a dispute should always be encouraged to settle their differences without resorting to litigation. They should not have to be concerned about whether anything said in an attempt to reach a settlement might be held against them in later proceedings. This key principle applies to mediation.

The fact that participants assume that mediations are confidential, and feel able to fully and frankly put their cards on the table, probably explains why mediation is so successful. A 2009 survey, supported by the Technology and Construction Court, found that the majority who used mediation said that it resulted in settlement.

‘Confidential’ means two things

Mediations are typically confidential for the following reasons:

  • the process is a type of ‘without prejudice’ discussion
    • there is a general rule that written or oral communications made in a genuine attempt to resolve a dispute may not be admitted in evidence. For this reason, every proper mediation will be treated as being on a without prejudice basis, regardless of whether the participants have used that expression. To put things beyond doubt, mediation agreements often include a clause confirming the without prejudice status.
  • mediation agreements usually include a confidentiality clause
    • irrespective of any without prejudice status, mediation agreements usually include a clause that requires confidentiality to be maintained in relation to all matters connected with the mediation.
    • a confidentiality clause will typically only allow exceptions where the parties agree that confidentiality can be waived, or where there might be a statutory obligation to disclose.

The start of the trend?

Despite the concepts of without prejudice communications and confidentiality clauses, privacy is by no means guaranteed.

The Court of Appeal has issued a judgment* setting out a number of circumstances in which the without prejudice rule would not protect a party from having its conduct at a mediation scrutinised by the court. They include questions as to whether the parties have entered into a binding settlement agreement, or whether a settlement agreement should be overturned due to misrepresentation, fraud or undue influence.

These principles have been applied in a number of subsequent disputes.

Related item:

* Unilever Plc v Procter & Gamble [2000] 1 WLR 2436

The next significant case

In a 2007 case* the court had to decide whether a dispute had settled following a mediation. The dispute had not settled during the course of a 13 hour mediation. But one party said that the other had left an offer on the table, which it decided to accept the following morning. The court said that it was entitled to look into what was said during the mediation, and dismissed any suggestion that the process should be kept confidential.

Related item:

* Brown v Rice [2007] All ER (D) 252 (Mar) Examining conduct at mediations

Examining conduct at mediations

In another 2007 case* the court said that it was entitled to take into account the offers that each party had made during a mediation when deciding whether to award one party the costs of having participated in an unsuccessful mediation.

Related item:

* Chantrey Vellacott v Convergence Group plc [2007] EWHC 1774 (Ch)

The interests of justice are more important than confidentiality

In May 2009, the Technology and Construction Court issued one of the most recent, and significant, judgments dealing with questions of confidentiality attaching to the mediation process*.

The claimant had started court proceedings against Nabarro’s client, DEFRA. The two parties had resolved a dispute at a mediation some years earlier, and entered into a written settlement agreement negotiated by the claimant’s lawyers. The claimant wanted the court to decide that the settlement was not binding. DEFRA said that there was nothing wrong with the settlement.

Related item:

* Farm Assist Limited (in Liquidation) v Secretary of State for Food Environment and Rural Affairs [2009] EWHC 1102 (TCC)

This was a continuation of the trend and it was another example of the type of case where the court would consider it necessary to investigate what happened at a mediation.

The court had to decide whether the mediator should give evidence at the trial.

  • The mediator did not want to give evidence. The mediator had co-signed the mediation agreement, which contained a confidentiality clause. On that basis, the mediator argued that mediators were entitled to insist that confidentiality be preserved.
  • DEFRA took the view that if the court was going to review the mediation, it would help the court if the mediator, as an entirely neutral participant in the process, gave evidence.
  • The claimant did not support the attempts to have the mediator give evidence at the trial.

In circumstances where the claimant had called into question the mediation process, the court decided that the interests of justice outweighed the mediator’s right to rely on the confidentiality clause. As a result, the court said that the mediator should give evidence. Following this particular hearing, the claimant chose to discontinue its claim.