In the recent High Court case of Pentagon Food Group Ltd v B Cadman Ltd [2024] EWHC 2513 (Comm), HHJ Tindal, sitting as a High Court Judge, considered the existence and scope of ‘mediation privilege’.

BACKGROUND

This case was the third piece of litigation between the same parties over an industrial unit – Portland House. Mr B Cadman set up the defendant company B Cadman Limited (BCL) in the 1960s and, in 2004, set up a pension scheme for BCL and associate companies. In 2016, Portland House was sold to Mr B Cadman, Mrs D Cadman and Ms F Cadman (the Cadmans) as trustees of the aforementioned pension scheme. BCL was not an owner of Portland House at any time. The third claimant, Mr Kha,n is the CEO of the first and second Claimants, who rented Portland House from BCL.

In 2017, there was a fire at Portland House. The Cadmans, on behalf of the pension scheme, brought a claim against Pentagon Food Group Limited (Pentagon) for unpaid rent. This was settled at mediation in 2019.

In 2021, BCL brought a claim against Pentagon on the basis of ‘trespass by fire’, alleging that Pentagon deliberately or negligently started the fire. This was settled by mediation in January 2022 (the Mediation).

In May 2022, The Claimants brought a claim against BCL for specific performance of the terms of the settlement agreement reached in January 2022. The germane term of the settlement being paragraph 3:

“Khan Estates Limited will, as soon as reasonably practicable, enter into a contract for the purchase from BCL of the freehold property of Portland House.”

PARTIES POSITIONS

The Claimants sought to enforce the terms of the settlement, namely the sale of Portland House, on the basis that this was an express contractual term that the Defendant breached. The Particulars were later amended to add a claim for misrepresentation and breach of an implied term. The Claimant sought to rely upon discussions that took place in the Mediation as evidence of the intentions and representations of the parties in reaching a settlement.

The Defendant, who was never a proprietor of Portland House, denied all of the allegations. Its defence was that it “agreed to cause the building to be sold to the second claimant, KEL, an obligation which it discharged ...”, not that it was the legal owner of Portland House.  (my emphasis added)

HHJ Tindal considered: (1) are BCL's statements in its Particulars of the Fire Claim and its conduct in the mediation actionable at all? (2) what was the proper interpretation of the express terms of the Settlement, and was there a breach of them? (3) should the pleaded terms be implied in the Settlement contract, and if so, was there a breach of them? (4) was there an actionable misrepresentation by or on behalf of BCL? (5) the common issue of causation of loss.

This article considers point one – the admissibility of the Mediation statements as part of an actionable claim.

It is worth noting that evidence during these proceedings came from Mr Khan on behalf of the Claimant and Ms Cadman on behalf of the Defendant, both Mr and Mrs Cadman having died in May 2023 and May 2024, respectively.

THE MEDIATION

Prior to the Mediation, the parties signed a pre-mediation agreement. Clause 8.1 stated:

“Every person involved in the mediation will keep confidential all information arising out of or in connection with the mediation, including but not limited to communications relating to the setup and scheduling of the mediation, the discussions had leading up to and at the mediation and the terms of any settlement, unless otherwise agreed by the parties in writing, but not including the fact that mediation is to take place or has taken place or where disclosure is required by law, to prevent physical harm to self or others or to implement or to enforce terms of settlement or to notify their insurers, insurance brokers and/or accountants.”

The Mediation took place at the height of the COVID-19 pandemic. The parties attended remotely. Mr Cadman had difficulty using the technology so Ms Cadman attended via video link, called Mr Cadman and put her mobile by her laptop so he could hear and be heard.

Mr Khan’s evidence of the mediation was that “no issue was raised at all by BCL as to why the building could not be sold at the agreed price and terms to KEL. It was at the very early stage in the mediation that I put forward a proposal to purchase the building at a price to be agreed in settlement…. I had no reason to believe that BCL was not in a position to sell the building. It was being expressly represented to us that BCL was able to sell the property to us. I was induced to settle the BCL claim on those terms…. If I knew that BCL was not able to sell the building, then I would not have entered into that agreement."

Ms Cadman was candid that her father, Mr Cadman, treated himself, his company BCL (of which he was the director and a shareholder along with Mrs Cadman) and the pension scheme, as really all one and the same. This gave credence to Mr Khan’s mistaken belief that BCL was indeed the owner of Portland House and, therefore, able to enter into a contract for its sale.

The factual basis of the claim, therefore, hinged on the admission of the Mediation evidence.

RULING

In considering whether statements made in the Mediation were admissible, HHJ Tindal considered the principles of judicial proceedings immunity set out by Lewison LJ in Singh v Reading BC [2013] EWCA Civ 909 at [66]:

“(1) The core immunity relates to the giving of evidence, and its rationale is to ensure 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 say in court.

(2) The core immunity also comprises statements of case and other documents placed before the court.

(3) That immunity is extended only to that which is necessary in order to prevent the core immunity from being outflanked.

(4) Whether something is necessary is to be decided by reference to what is practically necessary.

(5) Where the gist of the cause of action is not the allegedly false statement itself but is based upon things that would not form part of the evidence in a judicial enquiry, there is no necessity to extend the immunity.

(6) In such cases, the principle that a wrong should not be without a remedy prevails.”

HHJ Tindal found that Mr Cadman likely instructed counsel to draft pleadings in the name of BCL, on the understanding that BCL owned Portland House.  The judge found that there was a misrepresentation by Mr Cadman as to who owed Portland House; however, “It is only its invocation and use as a cause of action in itself, as opposed to part of the evidence proving that cause of action, which falls within the core immunity.”

The judge next considered the ‘without prejudice rule’ as per Rush & Tompkins v GLC [1989] AC 1280 and Oceanbulk Shipping v TMT [2010] 3 WLR 1424 (SC). Per Lord Clarke at [22], “[T]he without prejudice rule is not limited to two-party situations or to cases where the negotiations do not produce a settlement agreement…[I]n general the rule makes inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made with a genuine intention to reach a settlement and admissions made to reach a settlement with a different party within the same litigation are also inadmissible, whether or not settlement is reached with that party.” Following this, HHJ Tindal concluded that the without-prejudice rule could be relied upon by the defendants.

He next considered the exceptions per Robert Walker LJ in Unilever v Procter & Gamble [2000] 1 WLR 2436 at pgs. 2444-5 and found that three exceptions applied here, namely: 

(2) Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the grounds of misrepresentation, fraud, or undue influence

(4) the exclusion of the evidence would act as a cloak for perjury, blackmail or other 'unambiguous impropriety'

An additional exception per Lord Phillips in Oceanbulk Shipping v TMT [2010] 3 WLR 1424 (SC) – “When construing a contract between two parties, evidence of facts within their common knowledge is admissible where those facts have a bearing on the meaning that should be given to the words of the contract. This is so even where the knowledge of those facts is conveyed by one party to the other in the course of negotiations that are conducted 'without prejudice'. This principle applies both in the case of a contract that results from the without prejudice negotiations and in the case of any other subsequent contract concluded between the same parties.”

The judge then considered the relevance of mediation with reference to academic discussion of a separate “mediation privilege” and the matter of Brown v Rice [2007] EWHC 625 Ch, in which counsel stated, “It may be in the future that the existence of a distinct mediation privilege will require to be considered by either the legislature or the courts, but that is not something which arises for decision now”. The judge concluded that a more enhanced form of 'mediation privilege' beyond traditional 'without prejudice privilege' is not a supported proposal, 'without prejudice privilege', which can be enhanced by the parties' mediation contract and conduct. These can even be raised by the mediator if they are called upon to give evidence, even if the parties both waive 'without prejudice privilege': Farm Assist v DEFRA [2009] EWHC 1102 (TCC).

CONCLUSION

This was a rare occasion in which “mediation privilege” was considered by the higher courts and an indication that, whilst not yet considered a distinct form of legal privilege, it seems likely that the law will develop in this direction.