28 Jun 2012
Thoughts on Clay v Lenkiewicz Foundation by Tony Allen, Solicitor, mediator and senior consultant to CEDR
This article first appeared in the New Law Journal 21 June 2012 (161 NLJ 1288) www.newlawjournal.co.uk
An article in last September’s NLJ asked if mediators can be legally trusted, and this needs an answer. During a mediation of a reasonable provision claim from an artist’s estate, the mediator brought to the claimant the defendants’ offer of a cash sum plus one of the deceased’s painting, saying that the painting had been professionally valued at £80,000 ‘if sold at auction’, producing a written valuation obtained by the defendants the previous day. The offer was accepted by the claimant “in reliance on the mediator’s representation that the valuation was a market valuation”.
However the valuation was for insuring the cost of purchasing a similar painting if lost or destroyed, rather higher than market value, so the claimant started fresh proceedings, seeking damages over the allegedly material misrepresentation which induced the mediated settlement.
The new proceedings settled before trial, but the parties apparently agreed to disclose what happened during the mediation. The claimant asserted that the mediator had actual or apparent authority as agent to make representations for the defendants who should be bound by any error. The defendants denied authorising the mediator to represent that the valuation indicated its market value, though accepting that the mediator was given the valuation (purpose unspecified) with other papers. The mediator declined to become involved. So could the claimant succeed against the defendant even if the mediator was not authorised to communicate this (mis)representation, perhaps as the defendants’ agent with apparent authority?
Any legal discussion on this would be lengthy and disputatious. Though someone can be agent for both parties (e.g. solicitors and perhaps estate agents) there is no authority on the status of mediators as agents, nor any really comparable legal role. Mediators almost always contract (by reference to their Code of Conduct) to be impartial and neutral, and to respect confidentiality with each party in private. Some decisions on analogous situations suggest that contracts can be rescinded because of innocent misrepresentation by an agent, even if the principal did not know it was made. There is a contrary authority on deceit, with the same standard applying to remedies for negligent misrepresentation under s.2(1) of the Misrepresentation Act. Can the mediator be sued, by representor or representee? This litigation field day would inevitably involve evidence of private meetings between mediator and each party to prove such allegations and mediation confidentiality would be seriously undermined.
So instead of debating agency law - ignoring such puzzling unanswered questions in Clay over what the valuation said it was, why it was given to the mediator if not to disclose it, and why the claimant accepted her “opponent’s” valuation (by definition a mere opinion) when caveat emptor applied - how can such a situation be avoided or handled better?
Firstly, mediators must be scrupulous about what they may convey and how. When asked or allowed to disclose a document for the first time to another party, a mediator must always be sure that disclosure is authorised, asking whether the other party is entitled to photocopy and retain it, and then make no unauthorised assertion as to its provenance or import. Any suggestion (as reported in Clay)of reliance on “the mediator’s representation” must be challenged. Any representation of fact is the other party’s and carriage by the mediator adds no authenticity to it. If any doubt arises in the mediator’s mind from the recipient’s reaction to such information, the mediator must return to the other party and seek clarification, even if embarrassingly it involves admitting unauthorised disclosure or framing of that information.
Mistakes in this area could constitute breach of the mediator’s duty of care which, if damage caused by such breach were provable, can give rise to a claim against the mediator by a disadvantaged party. Every party is undoubtedly entitled to believe implicitly that, when a mediator brings information or a proposal from one party to another, such a communication is fully authorised by the sender. Whether or not that is technically a matter of agency, it is certainly a proper professional standard for all involved in mediation to require.
Secondly, the simplest solution is to recite any material fact or representation upon which either party relies in the preamble to the settlement agreement . If the true value of the painting here was so crucial, it is remarkable that reliance on the valuation was not recited in the settlement. Discussions when drafting the settlement would have revealed any problems. Settlement agreements are always admissible in evidence for the court to construe and enforce, despite emerging from normally inadmissible negotiations. With proper recitals, the judge can easily rule on any representation relied upon without being invited behind the veil of mediation confidentiality, an undesirable journey still fraught with legal controversy. Legal advisers should insist upon proper recitals where reliance on significant facts and representations lie at the heart of settlement, since they must satisfy themselves that their clients can easily access a remedy if the facts turn out to be untrue. These two steps will ensure that mediators and mediation will remain entirely trustworthy.
26 Apr 2013
May set to be busy month for CEDR
Mediator Skills Training - Fast Track – 5 June 2013
Certificate in Advanced Negotiation - Module 1/3 – 25 July 2013
Mediator Skills Training - International – 19 August 2013
Certificate in Advanced Negotiation - Module 1/3 – 12 September 2013