High Court considers without prejudice privilege in the mediation context
In Pentagon Food Group Ltd and others v B Cadman Ltd [2024] EWHC 2513 (Comm) (Pentagon Food Group), the High Court found that a party to a settlement agreement reached through a mediation was liable for misrepresentation and breach of agreement. The court considered whether a bespoke ‘mediation privilege’ was required and provided helpful guidance on the existing exceptions to without prejudice privilege.
Background
The case concerned an industrial property known as ‘Portland House’ (the Property) and followed a string of disputes regarding the Property between the defendant in this case, B Cadman Ltd (BCL), and a commercial tenant, Pentagon Food Group Ltd (Pentagon). Most recently, a claim was brought by BCL against the current claimant, Pentagon (the Fire Claim). The Fire Claim was settled by way of settlement agreement following mediation in January 2022 (the Settlement). A third party, Khan Estates Limited (KEL), was also party to the Settlement.
The current case concerned one paragraph of the Settlement which essentially stated that KEL would purchase the Property from BCL. However, shortly after entering into the Settlement, Land Registry searches confirmed that that BCL was not the legal owner of the Property, and that it was instead owned by the trustees of its pension scheme.
Issue to be determined
Unable to reach an agreement as to the transfer of the Property, the claimant filed the current proceedings seeking damages under the Settlement for (i) breach of express and/or implied terms, and/or (ii) misrepresentation.
The decision
Mediation privilege
The court started by exploring whether to recognise a so-called ‘mediation privilege’ when assessing the admissibility of the evidence filed, some of which came from the mediation and the Settlement.
Mediation privilege is a proposed extension of without prejudice privilege, which would, for example, prevent an ADR mediator from being compelled to give evidence on the mediation process. This form of the privilege would be absolute, in that it cannot be waived even where both parties agree.
In view of the case law and commentary addressing a mediation privilege, the Judge ‘respectfully agreed’ with the conclusion that the importance of ADR does not justify what is essentially an upgraded form of without prejudice privilege with narrower exceptions.
The Judge stated that a mediation privilege has not, ‘at least yet’, been established in the case law as distinct from without prejudice privilege. The Judge noted that mediation is a particularly clear example of without prejudice privilege, which can be enhanced by the parties’ mediation contract and conduct by the imposition of superadded duties of confidentiality.
Misrepresentation: the misrepresentation Unilever Exception 2
The Court considered the admissibility of any representations made during the Fire Claim mediation, in the context of ‘judicial proceedings immunity’. This immunity covers the giving of evidence, ensuring ‘that persons who may be witnesses in other cases in the future will not be deterred from giving evidence by fear of being sued for what they said in court’ (Lewison LJ in Singh v Reading BC [2013] EWCA Civ 909).
The Judge determined that the Fire Claim Particulars of Claim, and statements made within this, clearly fell under the protection of this immunity and therefore could not on their own amount to an actionable claim for misrepresentation. However, they could still form part of the evidence that proves such a cause of action as contextual documentation to the Settlement or misrepresentation claim.
The court then went on to consider the admissibility of the representations in the context of privilege, concluding that, in the first instance, BCL could rely on the ‘without prejudice rule’ against KEL, Mr Khan of KEL, and Pentagon. This would have essentially rendered the representations inadmissible.
However, the court relied on a ‘bespoke exception’ to without prejudice privilege: the ‘Unilever Exception 2’. This exception provides that ‘evidence of negotiations is also admissible to show an agreement apparently concluded between the parties during the negotiation should be set aside on grounds of misrepresentation, fraud or undue influence’ (Unilever v Procter & Gamble [2000] 1 WLR 2436).
On this basis, the Judge determined that the representations were admissible.
Key takeaways
Despite recognising the ‘undoubted enhanced importance of mediation’ in recent years, the High Court’s decision in Pentagon Food Group has confirmed that the importance of ADR does not yet justify an enhanced form of ‘mediation privilege’ that goes beyond traditional without prejudice privilege (with narrower exceptions).
In view of the Judge’s ruling and obiter comments on the exceptions to without prejudice privilege, when engaging in ADR, parties should keep in mind whether it is desirable in their specific circumstances to enhance the confidentiality provisions in the mediation contract. As seen in this decision, statements made during a mediation can be admissible as evidence to determine what terms should be implied into a settlement agreement, or in the context of a claim for (even negligent) misrepresentation.
With thanks to Jasmine Battersby for her assistance in preparing this post.