Articles

1 Jul 2008

Mediation: protection by privilege and confidentiality?

A review of Cumbria Waste Management and another v Baines Wilson

This article by Tony Allen of CEDR was first published in the New Law Journal, 15 May 2008

Following closely on the saga of the Bournemouth Airport car park in Earl of Malmesbury v Strutt & Parker [2008] EWHC (TCC) comes another case dealing with the confidentiality of the mediation process, namely Cumbria Waste Management Ltd and Lakeland Waste Management Ltd v Baines Wilson [2008] EWHC 786 (QB), heard in the Birmingham Mercantile Court by HHJ Frances Kirkham.  In Malmesbury, the Earl strangely conceded (along with his opponents) that the judge should hear the offers that each had made to the other at the mediation.  As a direct result of that, Jack J found that the Earl’s position at the mediation had been wholly unreasonable, and based part of his adverse costs sanction package on that.  It is fundamental to that decision that it was not the judge who peered uninvited behind the veil normally drawn over without prejudice offers exchanged at mediations, but both parties who invited him there by specifically waiving any privilege.  However, Cumbria and Lakeland v Baines Wilson deals with a case where one party at a mediation would not waive privilege.

There had been two mediations, in fact, with different mediators, both cases being defended by DEFRA and arising out of the 2001 foot and mouth outbreak (presumably the waste requiring management included diseased cattle carcasses).  Cumbria sued DEFRA for £4.5 million but settled at mediation for £3.9 million.  Lakeland sued DEFRA for £1.72 million but settled through mediation for £1.4 million.  Both were based on standard CEDR Model Agreements.

Both Cumbria and Lakeland had instructed solicitors Baines Wilson (BW) to advise and negotiate on the service agreements between DEFRA and themselves, and they now brought proceedings against BW alleging professional negligence which had caused them to lose the difference between their invoiced claims (plus presumably interest) and the settlements which emerged from the mediation, asserting that they had been reasonable to settle, but that the discounts they had been forced to concede were as a result of BW’s negligent advice.

BW sought disclosure of a wide range of documentation relating to the mediation, and it is this that is the subject of the judgment of HHJ Kirkham.  The essential issues were:

(1)  whether disclosure could be ordered contrary to one party’s wishes by virtue of an exception to “without prejudice” privilege; and

(2)  whether the confidentiality provisions of the mediation agreement also (and separately) precluded disclosure at the behest of one of the mediation parties.

Cumbria and Lakeland took a neutral stance over disclosure (perhaps wisely thinking that to protest too much might be misinterpreted as a sign of weakness over what might be disclosed), but DEFRA opposed it, arguing that it might reveal generally their attitude to claims of this kind when there are a number similar such cases confronting DEFRA.  In appearing in these proceedings DEFRA expressly declined to waive its asserted privilege and its right to confidentiality.  The judge was shown the mediation agreements but no documentation claimed to be privileged.

Both mediators reportedly took the view that the privilege belonged to the parties and not to them, though the second mediator said that she would normally counsel against the parties agreeing to share such matters with the court (advice clearly not tendered in the Bournemouth airport case).  She also drew attention to the fact that the disclosure sought was so broad as to encompass any notes made by the mediator or by parties in private mediation sessions.

BW argued that it was unfair on them to have no access to documents relating to the terms on which the claims by Cumbria and Lakeland were compromised with DEFRA if the former were seeking to claim that BW were liable for the shortfall through negligence.  In terms of the confidentiality clause in the CEDR form of agreement, BW argued that it was both novel and wrong to assert that A and B can validly contract for confidentiality so as to exclude C from seeing documents, when C has a proper interest in seeing them.  As to without prejudice privilege, BW argued that this had been waived when it was asserted by Cumbria and Lakeland that it had been reasonable for the to settle on discounted terms.

Judge Kirkham reviewed the main authorities on these points, looking particularly at Muller v Linsley & Mortimer [1996] 1 PNLR 74, which on the face of it was decided on very similar facts.  She held however that in Cumbria it was the defendant (DEFRA) which was seeking protection from disclosure and not the claimants, a situation not discussed in Muller.  She therefore refused to find that DEFRA had lost without prejudice privilege about what happened at the mediation.

Interestingly, she went on to consider the extent and force of the confidentiality provision in the mediation agreement, not a topic covered by direct authority in relation to mediation confidentiality.  The main source material for the debate on this was Toulson & Phipps’ textbook on confidentiality (with some passing references to Rush & Tomkins v Granada Television [[1989] AC 1280).  She relied on a passage which stated:

Mediation and other forms of dispute resolution have assumed unprecedented importance within the court system since the Woolf reforms of civil procedure.  Formal mediations are generally preceded by written mediation agreements between the parties that set out expressly the confidential and “without prejudice” nature of the process.  However, even in the absence of such an express agreement, the process will be protected by the “without prejudice” rule set out above”.

HHJ Kirkham found that on both grounds of ‘without prejudice’ privilege and based on contracted confidentiality as between the parties, it would be wrong to order disclosure of the mediation documents.  In particular, she wanted mediators to be free to conduct mediations without fear that their notes might be disclosed to others.  She saw this as an exception to the general rule that confidentiality is not a bar to disclosure of material to a court.

This is a bold decision and reinforces the security of what goes on at mediations which has apparently been under investigation in several recent decisions such as Brown and Rice v Patel [[2007] EWHC 625 (Ch), Chantry Vellacott v Convergence Group [[2007] EWHC 1774 and the Malmesbury case.  So far as I am aware, all previous cases where mediation content has been reported to a judge have involved specific waiver of privilege by the parties, for better or worse.  What Cumbria suggests is that courts might indeed be prepared to find that there is a special mediation privilege worthy of judicial protection because the parties (and the mediator) formally contract in writing to keep the mediation process confidential.  The judge in Brown v Rice and Patel doubted whether such a privilege yet exists, but Cumbria suggests that it might.  Muller may still act as something of a brake on that, though this concerned informal “without prejudice” correspondence rather than a formal mediation.

One related but unresolved point relates to the fact that “without prejudice” protection almost certainly belongs only to the parties and not to the mediator.  But the mediator also signs up to the confidentiality clause ion the mediation agreement.  Might therefore a mediator have to be consulted before any disclosure is made of what transpired at a mediation?  In SITA v Watson Wyatt [[2002] EWHC 2025 and 2401 (Ch), the parties purportedly waived privilege to report to the judge (for different manifestations of self- interest) what a mediator was alleged to have said at a mediation, a decision that I criticised at the time. Does Cumbria suggest that this should never happen in future?  I am sure that confidentiality will and should never be used to conceal wrongdoing by a mediator, but short of this it is hard to see why a mediator should not receive the benefit of acting confidentially in that sensitive role as much as the parties, remembering that there are two levels of confidentiality operating at a mediation offered for the benefit of the parties – overall confidentiality of the process, and confidentiality of private meetings with each party during the process. 

This is going to be a continuing debate before judges at first instance, with doubtless a future opportunity for the Court of Appeal to give further guidance.  Judicial instincts on the whole rightly seem to be that the mediation process is deserving of protection from undue scrutiny.

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