The High Court has held that statements made in a “without prejudice” mediation paper were admissible as they were to be used to rebut allegations of fraud, by showing that the claimants had known about, and approved, the transactions said to constitute the alleged fraud: Berkeley Square Holdings v Lancer Property Asset Management Ltd  EWHC 1015 (Ch). Continue reading
A recent Court of Appeal decision has highlighted the need to exercise caution when referring to privileged material in settlement agreements.
The court held that the claimant was not entitled to withhold from inspection communications that had been incorporated into a settlement agreement with one of five defendants. That was despite the fact that, at the time they were made, those communications had been protected by the without prejudice rule, and potentially also litigation privilege (on the basis that the claimant’s dominant purpose in conducting those communications was to collect evidence against the other defendants): BGC Brokers LP v Tradition (UK) Ltd  EWCA Civ 1937.
The decision is unsurprising in finding that communications incorporated into a settlement agreement thereby lost their without prejudice status. It has long been established that, where a settlement agreement is concluded by the acceptance of a without prejudice offer, the offer ceases to be protected by the without prejudice rule since it forms part of the contract. It seems logical that the same should be true of without prejudice communications incorporated into a settlement agreement. Of course, where a settlement is reached at a mediation (which was not the case here), recording the agreed terms in a settlement agreement will not usually result in loss of the without prejudice protection that applies to the substance of the mediation discussions that constituted the offer and acceptance (as distinct from the agreed terms themselves). However, this decision highlights that without prejudice communications that are expressly incorporated or referred to in a settlement agreement (by, for example, including warranties that statements made during the mediation were truthful and accurate) may lose that protection.
It is also unsurprising that any litigation privilege in the communications should have been lost as a result of their being incorporated into the settlement agreement. The Court of Appeal’s reasoning on this issue may, however, be seen as more novel. The court accepts that the dominant purpose of the original communications may have been to collect evidence, but says that was not the purpose of incorporating them into the settlement agreement, and therefore litigation privilege does not apply. Ordinarily, though, the rule is “once privileged, always privileged” unless privilege is waived or confidentiality is lost – at least insofar as legal advice privilege is concerned (see this post). The present decision may suggest that the same is not true for litigation privilege. As a practical matter, therefore, parties should exercise caution in using material that is subject to litigation privilege for any purpose apart from its original purpose of obtaining advice or information for use in litigation.
Read more on our Litigation Notes blog here.
A recent Court of Appeal decision has given rise to concern regarding the extent to which litigation privilege is available to protect an organisation’s internal deliberations on its settlement options in a dispute.
In WH Holding Ltd v E20 Stadium LLP  EWCA Civ 2652 (outlined here) the Court found that litigation privilege applies only to documents created for the dominant purpose of obtaining advice or information/evidence in relation to litigation, and not the conduct of litigation more broadly. As a result, the privilege did not apply to emails between a company’s Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute.
The decision causes real practical difficulties for commercial parties, exposing an awkward gap in the protection afforded to documents prepared for the purpose of settling a dispute.
On 6 March, the Civil Justice Council held a workshop to discuss the recommendations made in its interim report on ADR, which was subject to consultation late last year. The interim report addresses concerns regarding a perceived underuse of ADR within some sections of the civil justice system and suggests a variety of possible corrective measures. The proposals include a power for the court to determine whether costs sanctions should be imposed for unreasonable conduct relating to ADR (such as an unreasonable refusal to mediate) not only at the end of a case, as currently, but during the matter when the decisions regarding ADR are taken.
Jan O’Neill has published a post on Practical Law’s Dispute Resolution blog in which she questions how realistic the suggestion of “midstream” assessment of parties’ conduct relating to ADR would be in practice. She suggests that many of the concerns expressed in the report as to the underuse of ADR are not relevant to many larger, complex claims, and urges the working group to tailor any final recommendations to the specific courts or dispute types for which the evidence suggests they are needed and practicable.
The Court of Appeal has recently applied the rarely invoked "unambiguous impropriety" exception to without prejudice ("WP") privilege, to find that a written settlement offer conveyed through a mediator following an unsuccessful mediation was not protected by WP: Ferster v Ferster  EWCA Civ 717.
Communications in connection with a mediation (including when the mediator acts as a conduit for negotiations after the mediation) will of course normally be protected by WP privilege. However, one of the narrow exceptions to the WP privilege is where the communication involved some 'unambiguous impropriety', in the sense of an attempt to abuse the protection afforded by the privilege. In the present case, the Court of Appeal found that correspondence conveying a settlement offer on behalf of the claimants constituted an unambiguously improper threat against the defendant in the nature of blackmail and, as such, was not protected.
The decision serves as a reminder that WP privilege cannot be used as a cloak for impropriety. It also underlines the fact that there is a distinction to be drawn between the use of proper leverage in the context of settlement discussions and the making of improper threats. The courts will take a dim view of the latter. Read more commentary on the decision here.
Julian Copeman, a Herbert Smith Freehills partner and accredited mediator with CEDR (the Centre for Effective Dispute Resolution), recently published an article in Solicitors Journal addressing whether litigating parties are required to attempt ADR in the UK. He charts developments from the Woolf reforms to Lord Justice Jackson’s proposals, and explores key judgments in relation to refusals to mediate and disclosure of mediation documents and information. Julian concludes that ADR is correctly a consensual process, whereby judicial encouragement rather than compulsion to undertake ADR is the preferred course.
Click here to download a copy of the article, which was first published by Solicitors Journal in Litigation Focus on 25 September 2012, and is reproduced with their kind permission (www.solicitorsjournal.com).
With the Chinese courts under increasingly heavy case loads, use of “judicial mediation” continues to be encouraged by all levels of the Chinese courts as a means of effective case management. Although mediation and “judicial mediation” both have long histories in China, foreign parties may find judicial mediation in China very different from what they expect. This is because unlike common law jurisdictions, judicial mediation in China is not strictly speaking an ADR mechanism, but rather an integral and important part of PRC litigation procedure. Chinese judges will often undertake dual roles, with the same judge acting as both mediator and the ultimate adjudicator in the same litigation.
Mainland China disputes specialists May Tai and Damien McDonald discuss judicial mediation and how best to prepare for it. Continue reading
Mediation is one of the cornerstones of the Civil Justice Reform in Hong Kong, and has now become a fixture in civil proceedings. Despite the judicial emphasis on mediation, there is a perception that many parties are not yet comfortable with using documents and passing information to each other as part of the mediation process. With the introduction of legislation that expressly protects the confidentiality of communications that are made not only in the course of but also for the purpose of mediation, it is hoped that litigants will make better use of the mediation process with the comfort that such statutory protection exists. Continue reading
In an effort to provide a legal framework for conducting mediation in Hong Kong, the Mediation Task Force has recently announced that it aims to introduce the Mediation Bill into the Legislative Council towards the end of 2011. The Bill will primarily define the meaning of mediation and will cover important issues such as confidentiality and privilege in mediation. Continue reading