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Jean-Yves Gilg

Editor, Solicitors Journal

Best behaviour

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Best behaviour

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As courts increasingly look at the behaviour of parties during mediation proceedings, clients should be advised to cooperate fully and practitioners should ensure they take detailed notes and be prepared to give evidence, say John Bramhall and Mercedes Castillo

The recent decisions in the cases of Farm Assist Ltd (In Litigation) v the Secretary of State for the Environment, Food and Rural Affairs (No. 2) [2008] EWHC 2079 (TCC) and Roundstone Nurseries Ltd v Stephenson Holdings Ltd [2009] EWHC 1431 (TCC) (transcript available on Lawtel) have shown how the English courts are increasingly prepared to look at the conduct of the parties during mediation proceedings. Given that mediation and other methods of alternative dispute resolution (ADR) are increasingly important in the context of the pre-action protocols under the Civil Procedure Rules, solicitors should be aware of the effect that these two decisions are likely to have in the way parties approach mediation and ADR.

Giving evidence

The Farm Assist Ltd case is a very good example of how the courts are prepared to look at what happens in a mediation. Indeed, the mediator was asked to give evidence to the court as to events that had taken place during the mediation.

DEFRA brought proceedings against Farm Assist Ltd (FAL) in relation to the way FAL had handled the foot and mouth epidemic in 2001. The parties attended a mediation during which a settlement agreement was entered into on 25 June 2003. The mediator was a partner in a City firm. FAL then sought to set aside the settlement agreement on the basis that it had only agreed to enter into it at the mediation because it was under economic duress.

The question arose as to whether the mediator could be asked to give evidence as to events that had taken place during the mediation. None of the parties in the case objected to the mediator giving evidence and, indeed, they wrote a joint letter to the mediator asking whether she had retained any notes or documents from the mediation which she could disclose and whether she had any factual or other recollection of the same.

The mediator initially responded by stating that as the mediation had happened some years back and that it had settled on the same day, she did not have any recollection and could not help the parties. Having checked her files, she also confirmed that she had no contemporaneous notes that could assist the parties. As a result, DEFRA then served a witness summons on the mediator asking her to attend at the trial of the action. The mediator applied to have the witness summons set aside or varied in accordance with CPR Rule 34.3 on the basis that (1) her evidence was subject to express provisions of confidentiality and non-attendance pursuant to the settlement agreement signed by all parties; and (2) in any event the evidence was confidential and/or legally privileged and/or irrelevant.

The court concluded as follows:

  • With regards mediation and confidentiality, there was a confidentiality provision in the settlement agreement. The mediator could enforce this provision and the court would generally uphold that confidentiality. However, on the facts of this particular case, the court decided it was necessary in the interests of justice for the mediator to give evidence and the court would therefore permit that evidence to be given or produced.
  • As to whether the mediation proceedings were covered by without prejudice privilege, privilege existed between the parties but it was not a privilege that could be claimed by the mediator. The parties were entitled to and indeed had waived that privilege.
  • As to whether there was any other form of privilege that could attach to documents that were produced by a party and shown to the mediator, the party that had produced a particular document would retain that privilege and this would not be waived by disclosure to the mediator or by waiving the without prejudice privilege.
  • The court decided that the mediator should give evidence as to what had been said in the mediation. The main issue in the proceedings was whether or not there had been economic duress on one of the parties and the evidence of the mediator would form a central part of FAL's case. The court needed to ascertain what had been said or done.
  • As to the mediator's comments that she had no recollection of the detail of the mediation, the court held that it was often the case that memories were refreshed when documents were produced and the witness had had the opportunity to focus on the events afresh. As the witness summons had been issued in good faith in order to obtain the mediator's evidence, the court held that, as a general rule, the witness summons should not be set aside just because a witness claimed not to recall the matters being raised.
  • As the mediation agreement only prevented the mediator from appearing as a witness in proceedings concerning the underlying dispute, calling the mediator to give this evidence would not be contrary to the express terms of the mediation agreement.

Late cancellation

In the case of Roundstone Nurseries Ltd, Stephenson Holdings Ltd built a concrete floor slab for Roundstone Nurseries Ltd at their nursery premises in Chichester in 2002. The concrete floor slab was defective. It was unclear whether there was a contract between Stephenson and Roundstone or whether Stephenson were sub-contracted by Bridge Greenhouses Ltd which had in turn contracted with Roundstone in respect of the nursery.

Roundstone commenced proceedings in the TCC against Stephenson (but not Bridge) on 2 April 2008. Due to limitation issues, the relevant pre-action protocol was not complied with by the parties, and a stay was applied for to enable them to comply.

A date was set for a mediation between the parties but the legal representatives for Stephenson informed Roundstone at very short notice that they would not be attending the mediation. They argued that as Bridge had refused to attend the mediation it would be a pointless exercise for all concerned. Following expiry of the stay, Roundstone entered judgment in default of defence. Stephenson applied to have the judgment in default set aside and Roundstone in response sought an order that Stephenson pay the costs thrown away on an indemnity basis as a result of Stephenson's late withdrawal from the mediation.

The judgment in default was set aside. However, in regard to the costs thrown away on the mediation, the court held that, as a matter of principle, the costs incurred in complying with the pre-action protocol may be recovered as costs 'incidental' to any subsequent proceedings pursuant to section 51 of the Supreme Court Act 1981.

The judge concluded that the mediation was viewed by the solicitors as an integral part of the parties' agreed attempt to comply with the pre-action protocol. There was no agreement that the costs of the mediation would be borne by each party regardless of the outcome.

There was also no agreement that either party could not subsequently seek to recover the costs as part of the pre-action protocol process. The court decided that, in principle, the costs thrown away on the mediation may be recoverable as costs incidental to the litigation. It was a matter of discretion to decide the extent to which these costs could be recoverable.

The judge concluded that Stephenson had been wrong to cancel the mediation at such short notice. The reasons given by the judge were:

  • The mediation was agreed as part of the pre-action protocol process and Stephenson was therefore obliged to participate in it.
  • Without the mediation there was no way in which the pre-action protocol requirement for a without prejudice meeting between Stephenson and Roundstone could be fulfilled.
  • The mediation had been fixed before there was any question of inviting Bridge to participate and should have gone ahead even without their involvement. Stephenson had identified Bridge as a potential party to the mediation as early as June 2008. It was not unreasonable for Bridge not to participate in the mediation because of the late service of Stephenson's expert report. It was, however, not appropriate for Stephenson to unilaterally cancel what would have been the completion of a pre-action protocol process. The judge therefore decided that Stephenson should pay the costs thrown away by the late cancellation of the mediation.

All those involved in mediation or other forms of ADR should be aware that the courts are increasingly prepared to look behind what has happened in the course of parties' attempts to settle a matter. This should serve as an alarm bell to those involved in mediation or other forms of ADR.

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