Are Mediations really confidential?

16 May 2017

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Mediations are becoming increasingly popular as an alternative method of dispute resolution. As a firm we take part in mediations on a weekly basis and regularly recommend that clients consider attempting mediation, usually on a commercial basis to avoid the costly and lengthy process that often goes hand in hand with litigation. One additional benefit to mediation is that the content and outcome is confidential and therefore kept out of the public domain. This allows parties to make concessions and encourage openness amongst those at the table without the fear of these discussions becoming public knowledge or making their way before a Court if the discussions do not result in a settlement.

However, the recent decision of the English Courts in Savings Advice Ltd v EDF Energy Customers Plc [2017] EWHC B1 (Costs) has highlighted how parties may not be completely protected by privilege in a mediation when correspondence relating to same is marked ‘without prejudice save as to costs’. This English case serves as a helpful reminder about ensuring confidentiality is fully documented in any settlement agreement and marking correspondence accordingly.

Summary

This case involved one party suing another for approximately £1 million in a commercial agent dispute. The claimant had taken out after the event insurance.

Mediation took place in May 2015 during which the defendant indicated its costs. All email communication involving the defendant’s costs were marked ‘without prejudice save as to costs’.

The parties agreed the claimant’s base costs but disputed the insurance premiums that the claimant sought to recover. The defendant certified their costs but the insurance policy also provided that the insurer reserved the right to carry out a detailed analysis of what the defendant’s approximate costs might be if the defendant did not provide the information. The insurer ultimately used the information included in the mediation emails which referred to the defendant’s costs.

The defendant sought to argue that the insurer’s calculation was inadmissible on the basis it had used confidential and privileged information from the mediation.

The court found that the email statements of the defendant’s costs were purely factual and that ‘without prejudice privilege’ existed to protect the disclosure of admissions or concessions made in negotiations, not statements of pure fact. The court also found that the use of confidential information for the purposes connected with the mediation was permissible under the mediation agreement and that the emails headed ‘without prejudice save as to costs’ indicated that they were admissible for that purpose.

The court found costs information had to be admissible to work out a consequence of subsequent settlement and that costs information forming statements of fact could be distinguished from other documents.

How can parties to a mediation overcome the difficulties this case has presented?

Whilst this decision will not necessarily be followed in future cases, parties should note the limitations placed on ‘without prejudice’ communications in the context of a mediation and ensure communication is marked correctly, i.e ‘without prejudice’ rather than ‘without prejudice save as to costs’. Parties should also note this in any mediation agreement and detail precisely in the mediation agreement the extent to which the parties are to be bound by confidentiality. Furthermore, if there is any doubt about the confidentiality of costs information during mediation or in correspondence leading up to or after a mediation, a note should be made that those figures are only being used for the purposes of achieving settlement.

If you have any questions about how we can assist you with mediation please do not hesitate to contact Lucy Clarke.

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